There is a systemic crisis. We are more than four years into the crisis that began in the summer of 2008. Four years into the Depression that began in 1929 was 1933, the year Hitler came to power. So far this crisis has not claimed any democratic regime in the developed world. The bailouts have so far prevented a collapse of credit, production and employment as was seen in the early 30s in Europe and America. Meanwhile the Huffington Post reports that US median incomes have fallen by 7% in real terms in the last decade - this is a dramatic decline in historic terms. The real term fall in UK incomes is comparable to the early 1920s and late 70s.
Another parallel with the 1930s is that while the western economies are in crisis, the economies of developing countries are benefiting from high commodity prices and undergoing rapid development - in Latin America, Russia and north Asia in the 1930s. Today it is happening across Asia, Africa and south America. In the 30s communism and fascism were all the rage, today the non-orthodox models are variations on state capitalism, from Chinese market communism to Venezuela's 21st century socialism. It's ironic that despite China's stellar growth, it seems incapable of breaking free of dependence on western consumers - the rulers of China are in no hurry to start redistributing wealth away from big quasi state companies to the masses. Gradually more social security is introduced, but the country sits on £2 trillion in western bonds - effectively the unpaid debts of the consumers who buy its mass products. Globalisation was supposed to allow countries to specialise in what they were best at - which turned out to be making stuff that the workers can't afford in China and borrowing money to buy stuff made somewhere else in the West. The one thing that neoliberal capitalism cannot do is put money into the pockets of ordinary people. Quantitative easing? No problem. Redistribution - never. Postwar welfare capitalism did this more successfully than anything before or after. It foundered in the inflation and rightwing shift of the late 70s. The neoliberalism that replaced it promised universal wealth but ended up creating a mega-rich 1 percent and a gradually vanishing middle class. It can't last.
Democracy is in crisis too, as the Occupy movement signifies, although with the possible exception of Greece, it is not seriously under threat. What Occupy, the Indignados of Spain and assemblies of Greece pose is the possibility of a more protaganistic democracy where people, rather than professional politicians, set the terms of the debate. Cynicism about the ability of the system to respond to our economic problems is widespread. In the West our version of representative democracy seems to mainly represent the interests of money, while in the Arab world people are demanding basic democratic rights. There is no trend back toward authoritarianism in any region, although it is still entrenched in Russia, China and central Asia.
The 'debt crisis' of the West - Europe and USA - is actually a financial and economic crisis of capitalism. In place of economic growth and real income growth, we had 15 years of debt growth. Now we have public and private debt crisis. The only long term way of solving a debt crisis is to grow your way out of it - or to default on your debts. In the 1930s, it was rearmament and war that allowed the western economies to emerge from a decade long depression. The market was unable to self-correct - proving its economic theorists wrong and giving a huge boost to Keynsian and socialist economics. That war caused so much destruction that the next 20 years allowed for growth out of the rebuilding of the countries affected. We may yet stumble into another global conflict - perhaps starting with an attack on Iran. A war would allow governments to intervene in the economy to drive growth - but it could also lead to catastrophe, as it did for Germany in 1945. The Bible advocated a Jubilee every 50 years when all onerous debts were cancelled and people could start again. We are moving toward the point where a Jubilee for debt-based finance capitalism will be unavoidable.
Another parallel with the 1930s is that while the western economies are in crisis, the economies of developing countries are benefiting from high commodity prices and undergoing rapid development - in Latin America, Russia and north Asia in the 1930s. Today it is happening across Asia, Africa and south America. In the 30s communism and fascism were all the rage, today the non-orthodox models are variations on state capitalism, from Chinese market communism to Venezuela's 21st century socialism. It's ironic that despite China's stellar growth, it seems incapable of breaking free of dependence on western consumers - the rulers of China are in no hurry to start redistributing wealth away from big quasi state companies to the masses. Gradually more social security is introduced, but the country sits on £2 trillion in western bonds - effectively the unpaid debts of the consumers who buy its mass products. Globalisation was supposed to allow countries to specialise in what they were best at - which turned out to be making stuff that the workers can't afford in China and borrowing money to buy stuff made somewhere else in the West. The one thing that neoliberal capitalism cannot do is put money into the pockets of ordinary people. Quantitative easing? No problem. Redistribution - never. Postwar welfare capitalism did this more successfully than anything before or after. It foundered in the inflation and rightwing shift of the late 70s. The neoliberalism that replaced it promised universal wealth but ended up creating a mega-rich 1 percent and a gradually vanishing middle class. It can't last.
Democracy is in crisis too, as the Occupy movement signifies, although with the possible exception of Greece, it is not seriously under threat. What Occupy, the Indignados of Spain and assemblies of Greece pose is the possibility of a more protaganistic democracy where people, rather than professional politicians, set the terms of the debate. Cynicism about the ability of the system to respond to our economic problems is widespread. In the West our version of representative democracy seems to mainly represent the interests of money, while in the Arab world people are demanding basic democratic rights. There is no trend back toward authoritarianism in any region, although it is still entrenched in Russia, China and central Asia.
The 'debt crisis' of the West - Europe and USA - is actually a financial and economic crisis of capitalism. In place of economic growth and real income growth, we had 15 years of debt growth. Now we have public and private debt crisis. The only long term way of solving a debt crisis is to grow your way out of it - or to default on your debts. In the 1930s, it was rearmament and war that allowed the western economies to emerge from a decade long depression. The market was unable to self-correct - proving its economic theorists wrong and giving a huge boost to Keynsian and socialist economics. That war caused so much destruction that the next 20 years allowed for growth out of the rebuilding of the countries affected. We may yet stumble into another global conflict - perhaps starting with an attack on Iran. A war would allow governments to intervene in the economy to drive growth - but it could also lead to catastrophe, as it did for Germany in 1945. The Bible advocated a Jubilee every 50 years when all onerous debts were cancelled and people could start again. We are moving toward the point where a Jubilee for debt-based finance capitalism will be unavoidable.
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