Friday, March 30, 2012

No "Return to Normality"

The political conventional wisdom in Britain is that the current coalition is an aberration. Sooner or later either the Conservatives or more likely, Labour, will be able to govern alone. This will be-it is argued- a return to politics as usual.

I think this represents a failure of imagination. I also think it underestimates just how difficult the next decade is going to be.

Europe as a whole is already in an economic crisis  which is the equal of the hungry 1930s. It is a crisis that represents a sum of failures, financial, economic and political. The fundamental problems- wrong risk models for banks, wrong levels of leverage in the wider economy and inflexible political policies and institutions- have not been addressed. Despite the best efforts of financial, economic and political leaders, the process of breakdown has continued and is even accelerating. Much that we have taken for granted is now being tested to destruction.

The criticism that has been laid against George Osborne's budget is that it has not provided a plan B- which Labour identifies as abandoning fiscal austerity and creating a targeted stimulus for growth. Yet even this 180 degree turn is simply details- it still fails to address the root of the catastrophe that is bearing down upon us. Osborne's budget is a failure not because of anything it has done, but because it is nowhere nearly radical enough. A tinkering with tax rates is not enough when the tax system is itself a major brake on growth. To take just one example, income tax should be simplified to one, or at most two, rates, with an initial threshold that does not come in until one earns more than average earnings. The intrusive regulatory burden on small business should not be adjusted, it should be lifted altogether. The tax and benefits system should be integrated, and so on.  It is the institutional inertia against these radical but relatively simple measures that underlines the scale of the crisis. Labour's critique of the budget is totally flawed- and the alternatives they offer will fail even more rapidly than the collapsed souffle of Osborne's ineffectual tinkering.

There is a failure of vision, not just in the UK, but across the developed world. The breakdown of social mobility, and the massive increase in the financial benefits of success- no matter how unworthy the cause of that success- and the penalties of failure-not matter how undeserved the causes of that failure- is creating the conditions for a social explosion. The fact is that we have continued the attitudes and behaviour that caused the crisis, in the hope that a recovery will rescue us from excessive debt. In fact inflation has undermined the policy of low interest rates- and the continued freeze in salaries is dropping ever more people into a debt trap from which there is no escape.  In 1981, the UK was in a recession at least partly because of high interest rates, now the low interest rate environment is having an even worse effect- by destroying the value of money. Even those in employment have generally seen a significant fall in their living standards, but the return of a global recession is accelerating the squeeze.

Global growth is under pressure from several factors- energy prices, the Asian slow down and political change in China and the continuing European crisis- all at once. We are coming to a point of no return. The crisis is likely to take the form of a major, radical and irreversible change- the breakdown of the Euro, a political change in China, further upheaval in the Middle East- that will be a systemic breakdown with consequences that are difficult at this point to estimate.

Although the chances of a war, like the Second World War, which came as a consequence of the political breakdown of the 1930s, are perhaps relatively small, I see a failure of vision equal to that of Baldwin and Chamberlain- the leaders of the locust years.

It frustrates me that Nick Clegg- leader of the most visionary party in British politics- has failed to articulate that Liberal vision, even with the best platform to do so in three generations. Much of the economic, social and political model we have built since the 1960s has now broken down. The spectacular implosion of our standards of literacy, of our moral expectations, or of our risk appetite is pushing much of the West into a major decline- an absolute decline, not merely a relative one. In the face of this systemic, existential crisis, the prospect of "politics as usual", while comforting, to a certain sort of mind set is clearly a non-starter. Now, more than ever, we need to look to our fundamental values- and yet Labour, Conservative and, it pains me to say it, Liberal Democrat alike have missed the point.

This gathering crisis is a systemic inflexion point- we need leaders who understand this and articulate a democratic, liberal vision for the future rooted in fundamental philosophical principles. At the moment the critique is being seized -as it was in the 1930s- by populist demagogues and evident frauds like Galloway, Le Pen, and Geert Wilders amongst others.

Doubtless the Liberal Democrats in the UK will pay the political price for the coalition over the course of the next electoral cycle- indeed they are already doing so. However, what happens after that? Labour have no valid alternatives, and neither do the Conservatives alone. In Britain, it is now the responsibility- indeed the duty- of the Liberal Democrats to articulate a radical vision that understands the scale of the challenges ahead and which can therefore begin to meet those challenges. Across Europe, those who believe in the values of freedom and Liberalism also need to articulate their vision far more effectively. For if they do not, the upheaval that will follow the coming breakdown will lead to the same mistakes as the twentieth century- and with potentially even worse consequences for free humanity across the planet.

It will be a grim look-out for the human race, if they must look back at the last sixty years as a golden age.

"Where there is no vision, the people perish".   

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