Friday, December 09, 2011

How To Return To Recession

We have been here before, we are at it again. Edmund Burke should stand corrected: However much one reads history, one is doomed to repeat it. The Great Depression was caused by financial excesses followed by protectionism and government inaction: The next one, which is looming around the corner, will be exactly the same. 

David Cameron saved his job, for the moment. He, who wanted to be the hero, walked out of an Europe-wide deal to save the Euro. By doing so, he showed not just the 'bulldog spirit' that he was to show, but 'bulldog brain', but then bulldogs may be offended. He sunk into protectionism, a sort of desperate politics to keep some of his loony backbenchers and out-of-touch colleagues pleased. And, by doing so, he risked two things: First, if the Euro ends up collapsing, a long and potentially bloody depression all over the world; and, second, if the Eurozone countries manage to pull together, a final setting of sun of any British influence over the world. Britain loses either way.

It has always been a difficult thing for Britain, as it punched above its weight, to know how to deal with the world after the empire. The first problem was that the ruling class and its children hardly got over the imperial hangover. The second is that Americans hardly thought much of Britain, despite Britain's attempts to be on the right side, despite the enormous costs that the country had to bear. It was Britain's desperation to be the 51st state, despite its very different social and economic realities from the nation across the pond, which kept it dangling like a sore thumb in the twilight years of nationalism in Europe. And, that made it hard for Britain to reconcile its international image and street realities: Here is a nation with imperial hangover and street riots, the country that gave the world free trade but sunk into protectionism itself, that taught liberalism but ruled by cranky illiberal reactionaries, a country which preaches what it can't practice. Cameron had all these problems, along with some of his own.

Like, he loves the banks. In his vision, Britain is a one square-mile size nation whose economy is kept afloat by bankers who bank their own money in Belize anyway. An economy which is so fragile that a night time parking charge by the Westminster Council, which will affect some super-rich who needs to spend evenings shopping in Oxford Circus or boozing in nightclubs in Piccadilly, would almost destroy it. In his vision, it is a nation which has never grown up to face a globalized world, a world where the movement of capital, information and talent are global and what matters is not how protective you are but how connected. Banks are Britain's problems, not solutions: It sucks away the tiny nations wealth with its 40% profit margin and convert it into a formless bonus, to be spent on Gulf homes, Russian mistresses and Swiss bank balances, and Cameron will indeed do everything to keep this going. Except his fat rich backbenchers, everyone is more or less saying that if Banks go, we don't have to bail them out again and the country can possibly go back to what it did best - making things - but he is too enthralled in his La belle epoch to realize any of this.

The problem with Britain kept out of an European deal is that potentially, this marks the beginning of a new era of European rivalry and decline. We were comfortable with the idea of a benign passing of era kind of decline, but this could be different: It can hit Britain where it hurts, in the job creating industries like manufacturing, and eventually, banks will leave anyway if anyone else, like some mad ruler in a gulf country, will take them. Cameron, in a way, is only a symptom, and not the whole problem: The two Eds of Labour must be happy that they are not at the sharp end. But the British self-realization has once again failed to come through: The sunset of the empire is not going to be hampered by parking charges this time. 

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