THE VIEW FROM THE BUNKER, JUNE 2011

I've just heard a respected BBC foreign correspondent saying that the biggest problem the Syrian government has is that “it has lost control of the story”. He went on to give a rational explanation for this assessment but I won't bore you with it. What intrigued me was the phrase itself because it seems to flag up the importance of controlling the media and the importance of the image in today's world. We have all seen the power of advertising and the use of publicity to manufacture everything from political parties to 'B' List celebrities.

My question is, what can we do to defend ourselves against this assault? I am often taken to task because I 'harp on the past', not everyone agrees with my contention that we can best understand what is happening in our lives by having a look at what happened in similar circumstances in the past. True, times have changed, the world is a different place and I can understand why people use this as evidence that past circumstances don't apply. Of course, in a way they are right, but my contention is that this doesn't mean that basic principles have changed.

Let me give you one example. I look back to the inter-war period and note that after WW1 the general intellectual feeling was that we needed to return to the palmy days of late Victorian and Edwardian Britain. Sound money, laissez faire economic and social policies with no central control from government. The War Coalition's policy of control of basic industries and investment in rationalisation, though successful, was ditched by 1920, Montague Norman successfully boosted the exchange rate to almost pre-war levels and in the process damaged exports and industry to the point where they started to slide into depression. This wasn't the only reason this happened of course but, with hindsight, we can see that they made things much worse. The same thing happened during the 1930s when another attempt was made to achieve sound money, the disaster of going back onto the gold standard. All this changed during WW2 of course when Keynesian theories of deficit-financed stimulation of key parts of the economy enabled us to get industrial production up to a point where we could repair some of the damage caused to industry in the inter-war years and win the war. Then followed the enlightened reconstruction policies of the Atlee Labour government which by improving housing, social care, health and command of the economy enabled a good start to dragging us out of the hole we were in and incidentally redistributed wealth.

You've got the picture, for the US think Reconstruction, exactly the same process. I transfer this scenario to where we are now. A massive financial crisis caused from 1960 on by the demolition of the controls placed on the financial industry after 1929. The rise of the great capital holders who espoused Friedman Chicago School economic theory because it enabled them to gain control of the flows of capital. Basically, all public money flowed upwards away from the producers with entirely predictable results on income distribution. This blind adherence to monetarism, bolstered by the banks control of the media message that they were too big to be allowed to fail resulted in governments ditching the well understood mechanism of the multiplier effect where money is injected into the economy at low level and allowed to work its magic on incomes, consumption and eventually corporate profit. Instead it was thrown directly to the banks where all it did was support the system that had caused the failure in the first place.

Having spent the capital, any government that took charge had to find a way of attacking the structural deficit. The route that has been chosen by the ConDem coalition is to cut public spending. Allow an ailing economy to depress wage rates and incomes (Far more non-jobs that don't produce a proper living wage) and thus depress consumer spending which is the most important driver of the economy. I pause and look at what I have written. My God I'm boring! I shall stop making my case for what got us to where we are now, I've done enough to make my view clear based on history. The question is what happens next?

I don't know how many of you have read Naomi Klein's splendid book, 'The Shock Doctrine'. If you haven't seen it, seek it out, it's a good read and an entirely convincing thesis demonstrating the use of crisis, whether natural or induced, to modify social and economic systems to produce the desired result, monetarist policies designed to move the capital upwards. Now as I see it this powerful mechanism isn't totally one-way. It was the shock of WW2 allied with the lessons learned in the 1930s that dragged both the US and UK economies away from monetarism and towards the use of capital for reconstruction. No, I'm not advocating another world war to produce the shock but what I am putting forward is that it may be that some shock capable of modifying behaviour comes to our rescue again. It may be that this injection of pain into all levels of the economy could trigger the rethink that we need to get us back on track. So where could this miracle come from?

Remember the Japanese earthquake? Apart from the obvious tragedy of loss of life and damage to the infrastructure it has thrown the economy back into depression and the government is going to have to rethink all its policies to manage recovery. The shock has produced a reaction and changed policy. Think about energy and commodity prices, the imbalance in the world economy we are seeing with the transformation of China (India not far behind), the effects of climate change and world population increase. I'm sure you can think of a few more to add to the list. Politicians tend to think in the sort term and I can detect no evidence that any government is seriously addressing the long term possibility of external shock. The nearest they get to it is asking OPEC to pump more oil as the price inexorably rises. The last quarter's minuscule variation in GDP figures is headline news, not NASA's splendid long term graph of the proportion of carbon dioxide in the atmosphere. I'd argue that the latter is far more important than the former but I haven't got the pressures of political survival and the next election weighing on my shoulders.

To go back to the importance of the message. One of the most depressing aspects of government at the moment is the all consuming importance of spin and 'the message'. Ally this to the oft voiced opinion that 'these matters are too complicated for the electorate to understand' and you begin to get a measure of my frustration. I admit to sounding like Jeremiah and I don't like it but apart from the minutiae of my life, I don't see many reasons to be cheerful once I peer out of the bunker at the wider world. Perhaps I'm just getting old and losing my marbles. I may be wasting my time reading history and drawing lessons from what I see. I could be totally wrong about everything. Perhaps in the words of Desiderata 'And whether or not it is clear to you, no doubt the universe is unfolding as it should'. (Mind you, I never did trust Desiderata, Susi taught me well!) I know of only one way to get an assessment, go public, expose my thinking to my peers and wait for a reaction. Over to you....

SCG/11/06/11


Stanley Challenger Graham




Barlick View
stanley at barnoldswick.freeserve.co.uk