The nostalgia industry

Hanging around outside the conference of Britain’s governing Labour party, I was handed a leaflet declaring that the “crisis of capitalism” was upon us. A nostalgic glow came over me. It brought back fond memories of a time when Marxism was fashionable and capitalism’s nemesis was always just around the corner. Alas, like the many Millennial sects who have predicted the end of the world once too often, most Marxists seem to have drifted off and will probably miss the coming Apocalypse.

You have to go back a long way to find a time when capitalism faced its previous systemic crisis. We are not talking about mere 1970s-style crises here; a difficult time but one where the fundamentals held steady. We have to look back almost beyond living memory; indeed, before John McCain was born. Now, that’s what I call ancient history.

The Great Depression brought us financial misery and political upheaval and led, indirectly, to the Second World War. When crisis hits, some people go for the familiar and secure; others turn to extremes. There is no way of telling with certainty which way it will fall.

The problem with historical parallels is that they only work with hindsight. Predicting the future involves more than a little guesswork even if it is wrapped up in learned analysis. If by chance some would-be dictator sporting a dodgy mustache should show up blaming the global financial crisis on a Zionist conspiracy, we might hope that the Europeans would be more sensible this time than to elect him into office. The omens are not good, however; last week, 29% of Austrian voters gave their support to two far-right parties, a combined total that matched the support of the Social Democratic Party and surpassed that of the conservative People’s Party.

It would be easier to predict and face up to events if it was only one crisis but what we are faced with now is a convergence of crises. The global financial crisis is only part of a wider story of political, social, demographic and environmental upheaval. Stop me if I’m beginning to sound like a Marxist, but I am left wondering where the contradictions of capitalism will take us next.

There is, first and very obviously, a financial and economic crisis. When Congress is forced to discuss a $700 billion rescue package to bail out the banks, it sounds like the Wall Street Crash once more. This time it is to be hoped that intervention will stem the tide of collapse but it is clearly worrying. In international terms, the dollar’s position as the world’s reserve currency has been under threat for some time. What if China starts offloading its huge dollar reserves? What if the oil-rich states of the Middle East start trading oil in euros? The US has held the line so far but the twin budget and current account deficits in the United States make it vulnerable to decisions by other countries.

The optimistic scenario is to suggest that economic crises have a ‘corrective’ function in capitalism. It is too bad if your job goes or you lose your house as part of the corrective mechanism but ultimately there is some truth in this. The question is really whether Western capitalism, now fat and complacent, can withstand the force of its lean and hungry competitors in Asia. This is particularly a question for Europe with its years of low growth, high social spending and excessive regulation. Are we seeing in this dénouement a glimpse of the process by which the East will supplant the West?

Second, there are multiple crises in international relations. It is beginning to feel like a new Cold War when we see Russia’s increasingly aggressive behavior toward its neighbors and its threats to the West to keep out. One of the lessons of the Cold War was that other areas of the world became the scene for proxy conflicts between the superpowers. At the same time, the West was compelled to prop up unpalatable regimes purely to avoid them coming under Soviet influence. As the Russians seek to recover their hegemony over Eastern Europe and the Caucasus, Cold War politics may resurface once more.

Despite progress toward democracy and liberalization in many parts of the world, there are still too many states that harbor terrorists and pose a threat to their neighbors and to us. At the top of the list is Iran, aggressively pursuing nuclear weapons, but Pakistan could be an even bigger headache if it falls to a Taliban-style regime.

One would hope that the European Union could somehow become a force for positive change but it is too hopelessly divided on foreign and security policy and too often fails to stand alongside the United States. As the EU is divided, so too the West as a whole is divided.

Third, there is a longer term social and demographic crisis in much of the West that is eating away at society. Our populations are aging, particularly in Europe. As Mark Steyn has observed, the extended vacation from reality that has been Europe’s elaborate welfare system is going to plunge into a crisis of affordability. Put simply, Europe will have a decline of people of working age relative to pensioners, which means falling revenues and rising costs.

The problem, as many have observed, can be partially resolved by immigration, but that only provides temporary respite and may in any case dry up as Europe’s economic prospects wither relative to those in Asia. Moreover, the growth of the Muslim population in Europe coincides with fears that Europe’s liberal institutions are being challenged by radical Islamists who are opposed to the fundamental values of the West. Societal stagnation beckons.

Fourth, there is an energy and environmental crisis. While the US Congress blocks further oil production off the coast and in parts of Alaska, the US pays out $700 billion a year to foreign oil producers. These include some of the most authoritarian regimes in the world. Europe’s increasing reliance on Russian oil and gas makes it difficult for many EU states to criticize Russia, hence the EU’s cap-in-hand approach to Russia’s intervention in Georgia. The West’s ability to intervene to stop Iran developing nuclear weapons is partly crippled by fears of what a major military conflagration in the Middle East would do to oil prices and hence the world economy.

Energy security is a vital issue, not merely because it makes Western states dependent upon their potential adversaries, but also because many Western states are facing the likelihood of severe shortages of supply. Opposition to nuclear power has stalled the development of nuclear energy in states like Germany and Britain, yet these countries need nuclear energy more than ever now because they are also committed to tackling CO2 emissions. That brings us to global warming.

Ah yes, we had almost forgotten global warming amidst the other crises. There are a lot of skeptics who dispute the causes of global warming as well as possible responses, but few doubt that there is a warming trend. If the trend continues then at the very least we can expect profound effects on agricultural production and migratory patterns, leading to famine and social conflict, and some predict vastly more dire consequences.

Policy responses have so far been inept. The ill-judged subsidies which have seen arable land turned over to biofuel crops, a policy that has helped cause rocketing food prices, will hardly (so it is claimed) even dent the prospects of global warming. Governments that wish to tackle CO2 emissions will have to embrace nuclear energy but the responses have so far been underwhelming.

There is, lastly, a more profound potential crisis over the horizon. It is not yet a crisis but it could become one. This crisis goes to the heart of what America’s place is in the world and how it works to uphold the values of freedom, democracy and human rights. I would call this crisis a crisis of faith; not religious faith in this instance, but about America’s belief in itself. It is expressed in the view that America should not engage with the world but should instead retreat into itself; the view that says that American workers can’t compete in the globalized world or that the US can’t win in Iraq.

The greatest threat to America now would be a loss of nerve. The British suffered a collapse of confidence after the Suez debacle in 1956, though in truth Suez was not the cause of Britain’s impotence but only its confirmation. The sense of defeatism and compromise in Britain’s Foreign Office has never gone away despite the efforts of leaders like Thatcher and Blair. A confident America, with support from its allies, can still be the world’s leading power. A defeatist and isolationist America, by contrast, could only bring about the ultimate crisis of the West that would engulf us all.

So here are the stakes if you are even mildly of an apocalyptic persuasion: a collapse of Western economic power, civil strife, famine, environmental degradation, a return to the Cold War and a politically impotent West. For the politically inclined, there has not been a more exciting (or dangerous) time for decades. It almost makes me wish I were a Marxist.