In These New Times

There is no alternative!

Cailean Bochanan

1st May, 2010

The intervention of Mervyn King appears to represent the injection of that note of realism so evidently lacking in the electoral campaign. However, things have gone so far that even our realism is delusional. Is it really the case that some tough decisions, a dose of austerity, can bring us out of this crisis? Alas, the contradictions are just too deep and all our thinking depends on the assumption that what worked in the past will work again. We fail to grasp the uniqueness of our predicament, that it is no longer just a a question of more or less of the same: draconian cuts are no more a solution than was Bush’s mad mantra of endless patriotic spending. Something is coming to an end in Anglo-America and until we have grasped what it is and acquired the humility to face up to it we are just going to be flailing around helplessly.

Only a short time ago things seemed so hopeful: if only the people had the confidence to keep spending, if only the banks would start lending, money would be flowing again and happiness would be restored. Now, there is a discordant note, the recognition of a massive national debt, the burden of which will fall on us. But, can the people really carry this burden? The answer is no: neither in practice nor in principal. In practice because they themselves are hopelessly indebted; in principal because they are indebted to the banks and if New Labour have established any principal at all it is that the banks come first. In other words, a programme of cuts and austerity, aimed at restoring Britain’s creditworthiness can only undercut the banks attempts to recoup their bad debts. Every job lost is a mortgage unpaid, every new tax a credit card payment unmade. An austerity programme will turn the steady trickle of bankruptcies into an avalanche and hasten the next bailout of the hapless banks, a bailout which will be politically almost impossible.

But this hopeless predicament is only the beginning of our woes. A massive percentage of our food comes from abroad as was highlighted during the recent civil aviation stand down: 90% of our fruit and 65% of our vegetables it transpired. In fact, almost everything we consume comes from abroad and we have the rare privilege of paying for all these in pounds. This is actually imperial privilege, one stemming from our predominant position in the world alongside the US, the influence of the City and Wall street and the presence of our armed forces in far flung corners of the globe. It’s a privilege we’ve gone to war to defend and lost. But we’re still counting on it. So our consumer finds the confidence to splash out on a new Korean car. He pays in pounds, which the manufacturer accepts and these pounds, conveniently, find their way back into UK government bonds. Austerity might be a solution were it not for peculiar role we play as consumer of last resort: without our intrepid consumers the recycling of pounds into treasuries comes to an abrupt end. These foreign purchases of our bonds are the major source  our debt funding next to the big insurance companies and pension funds, the same insurance companies and pension funds which hold undisclosed quantities of  AAA rated subprime junk courtesy of Standard and Poor, that paragon of fiscal probity. So although austerity will cut our trade deficit it will also cut funding of our debt.

But surely some action must be taken and if the next government doesn’t do it the IMF will be called in. That may well happen. The problem is that it won’t and can’t solve anything. At the heart of all this is an unfounded assumption or rather a prejudice or  delusion: we continue to believe that Britain is a rich country. The record has to be set strait immediately: Britain is not a rich country. We have the highest level of personal debt in the world, we have a monumental burgeoning government debt incurred largely because our financial sector, the jewel in the crown, is itself bankrupt many times over. We have been deferring current expenditure on infrastructural projects for a generation and no doubt we have arcane financial instruments trapping our local authorities into unpayable debt, Jefferson county style, but we just don’t know about it because there is no investigative journalism left in this most opaque of all countries. We hardly produce anything and our “economy’ consists of serving each other cocktails, giving each other platinum rinses, life coaching one another and generally providing for our every whim. This service economy faces near immediate extinction.

So I’m afraid we really don’t have much going for us. Only the good old pound which we will proudly defend. We will also print out a lot of them, an extraordinary number of them in fact. This surely is the answer. Quantitative easing is easy and will make the crisis seem like a natural disaster, something no politician could have forseen. The pound will fall and suddenly none of our imported goodies will be affordable and what’s left of our industry won’t be able to buy components. We will be in the most staggering stagflation.

The truth is that within the existing mental framework, the policies being envisaged, it doesn’t really matter what we do. It’s a question of doomed if you do, doomed if don’t. We can cut the place to shreds or we can print money like there is no tomorrow. All roads lead to hell.

As I said at the beginning something is coming to an end and we must grasp what it is. What is coming to an end is empire, a privileged position in the world which allows us to prosper at the expense of others. We must recognise this and we must formally wind it up. We must become a nation state like any other. We must cease our wars, military and economic, cease stirring trouble elsewhere and recognise that regime change begins at home. We must put our financial system through bankruptcy and declare national bankruptcy negotiating the terms with our creditors. We must begin the long task of rebuilding our country ravaged by thirty years of Thatcherism. Talking of that august dame, and anticipating vociferous objection to my proposals, an expression comes to mind: there is no alternative!