What a hollowing out looks like

Monday, 28 November 2011 

For most of this year the global financial markets have been giving their verdict on the political classes of Europe and the US – and it’s a sell. The financial crisis has locked together a political crisis with an economic one, exposing political classes with neither the ability to inspire confidence nor mobilise support for austerity.

At the core of the economic problem is the growing uncompetitiveness of the US and Europe, especially relative to Asia, and for which the political classes on both sides of the Atlantic have no solution. So it is more convenient to blame the financial system for the mess when in reality it was covering it up. That is why, while blaming the financial system, both European and US governments are frantically trying to rebuild it.

This propping up by the financial system is centred on two great axes. The first is the propping up of US debt by China (and Japan), with the US relying on the coincidence of interest with a Chinese Communist Party that would rather deal with foreign capital than face the threat from their own. The second is Germany’s pumping credit to its European neighbours under the guise of a currency union that makes its own industries more competitive than a realistic currency arrangement would. While German politicians preach frugality at home, their export-driven economy relies on the maintenance of precisely the opposite in the rest of Europe.

The dragging of a developing economy like China’s into a central global economic role makes it difficult for the US to counterpose itself to it, and ask others to as well, in a way that was much more possible with an isolated Soviet Union. This is nothing so simple as China having the potential to be an economic rival to the US, as some talk about; something that is a long way off, if it happens at all. But that right now China is playing a central role in propping up the debt of a country that only a few months ago was toying with default. It virtually guarantees that any attempt by Obama to build an alliance in the region on containment of China will not only be incoherent, but has the potential to cause more problems than it solves.

Yet if the US’s political problems from the financial arrangements are in the possible future, Europe’s are happening now. The turning of the banking crisis of 2008 into the sovereign crisis in 2011 in the Eurozone has brought the political weakness of the governing classes in Europe to the fore, culminating in the replacement of the respective right and left governments of Italy and Greece with a technocrat model.

Politicos, and especially the anti-EU crowd, like to talk up the anti-democratic nature of these governments. What they omit is that such a move only came after the domestic process had already hollowed out, with governments of both left and right incapable of commanding enough social support for an austerity program with which they themselves had no problem. When Greek Prime Minister Papandreou proposed a referendum on the cuts, it wasn’t because he was a democrat, but as a last-ditch attempt to drum up some legitimacy that he didn’t have. If the technocrat governments have no legitimacy, neither do the Parliaments that voted them in.

There is a tendency to see this as no more than the interim measure it is being proclaimed as, but that would be to underestimate what is happening to the political system in Europe. If neither the left nor right have the ability to provide the answers when they are most needed, during an economic crisis, it undermines their ability to claim credibility during any other time as well. This is a body blow to the European body politic from which it is hard to see how it will recover.

That such an overt erosion of the two party system is happening in Europe is especially ironic given that for years, left commentary, especially in the liberal press in the UK, have been banging on about the rise of far right extremism. Raising the far right bogeyman is something that has ebbed and flowed to varying degrees of hysteria over the years, probably reaching a height when Le Pen got to the second round of the French Presidential election in 2002. Yet far from there being a solid right base from which such a far right could gain its own momentum, what we are seeing now in Europe is what is happening in 2011, not 1933, with the social bases of both the left and the right draining away.

The scaremongering about the far right by the left is merely a crasser example of the way both sides of the political divide have used each other to prop themselves up. But both sides are increasingly struggle to be justified in their own terms, rather than scare us about the other, and so are caught in an ever diminishing dialectic to the end point we see in Rome and Athens.

In Australia, as usual, things are clearer. Our technocrat government of 2007 – 2010 came through an electoral reaction to the exhaustion of the programmes of both major parties, rather than supranational edict. The attempt by the parties to take back the leadership from the ‘Party Thieves’ and pretend its “game on” again, has only reaffirmed it.

While the Golden Age of the Technocrat has passed, the two party system revived last year is definitely past its sell-by date. For the time being at least, the fault line will remain with the former Prime Minister whose relative popularity has been revived by his dumping on the back of the widespread recognition that the ALP v Coalition ding-dong has had its day. His speech on the weekend has at least removed the pretence that any return to the leadership would simply be a poll-driven matter, but is around the same political issue that saw him dumped last year. This is not about giving more voice to the dwindling membership of the ALP, but the destruction of the power bases that actually run it.

Posted by The Piping Shrike on Monday, 28 November 2011.

Filed under International relations, State of the parties

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10 responses to “What a hollowing out looks like”

  1. kymbos on 28th November 2011 8:45 pm

    If I understand your point, you see the inability of the Left or the Right to provide coherent answers to the Euro financial crisis as revealing their fundamental inadequacies – their hollowness?

    But doesn’t this suggest there is a solution that they are just missing? What is it? These are massive, some would say insurmountable problems – you can be as in touch with your base as you like, they’ll still be huge problems.

    It seems to me that you view the major political parties everywhere as broken, and every circumstance simply reaffirms your preconception. Every failure is a confirmation of their brokenness. Every success fleeting, on the inevitable path to failure.

    I just see politics in action. Nothing works perfectly – all solutions are imperfect compromises, as we muddle along.

  2. Riccardo on 28th November 2011 9:10 pm

    Kymbos, your unspoken assumption is that this ‘democracy’ somehow works, and its reputation needs protecting, despite its increasingly obvious flaws.

    What happens if ‘ideal’ government is merely a technical question, with experts called in to develop it, and vague levels of consultation with everyone else to give it legitimacy?

    Old Harry Lee never acted on his instincts, one of which was that some people don’t deserve the vote – they are simply uneducated or stupid and lack the reasoning skills required to make an informed vote (which is the only type of vote worth having).

    Our system, as is often lamented, ensures an informed vote for party A can be cancelled out by an uninformed vote for party B. Rudd goes on Rove. Pollies do dances in Parliament to make the news. That Kelly woman in Lindsey electorate hands out leaflets purporting to be from an islamic organisation – and she wouldn’t have done it if it didn’t work.

    If we are going to keep the franchise time to restrict it again – will keep the bogans on their toes, keep the apathetic off the electoral rolls and improve the quality of debate.

    And time for PJK to run again.

  3. The Piping Shrike on 28th November 2011 10:45 pm

    I’m not making a comment about the politics here, or on democracy, except to say that we need as much as possible. It is merely just to point out that the reason why technocrat governments were installed in Greece and Italy was because the parties on the left and the right could no longer command enough social support to bring in the cuts. Not of course that they have any problems with doing so and so supported a technocrat government to do the biz.

    The financial crisis has revealed the lack of social base of left and right in Europe as an objective fact – just as Rudd’s greater polling popularity compared to either Gillard or Abbott does in Australia.

  4. corymbia11 on 29th November 2011 9:19 am

    A technocrat government was “installed” in Greece because of a process of hollowing out of social support for other political brands?

    There’s quite a different picture being drawn at When the Crisis Hit the Fan for example (a blog dedicated to answering the inaccurate reporting of what’s happening in Greece). And, please, let’s pose one fact amongst the opinion: it’s not a “technocrat” government, it’s purportedly one of “national unity”.

    In a country that has had its fair share of military control (occupation) the resurgence of political parties of “retired” army officers, LAOS and the like, might cause some consternation; these resurgences also give an impression that some political players don’t agree with, or are completely blind to the “hollowing out” thesis.

    In turn, this might also suggest, given the fairly recent history of Greece and Europe at large, that these same folk just could not give one stuff about such theses; the purported “hollowing out” (or more accurately, disaffection) rather suits their larger purposes.

    And scaremongering about the far right is crass? Goodness me, there’s just no basis whatsoever, in history, or recent events to support any such “crassness” is there? Only “lefties” would be concerned about the far right; as to the rest of us (regardless of our political stripe)the injunction: Move On – There’s Just Nothing to See Here, seems to be the Order of the Day.

  5. The Piping Shrike on 29th November 2011 11:06 am

    Scare-mongering about the far right is crass if it just boils down to the crass argument that it is what can happen when times get tough and that because it happened in the past it could happen again – without looking at the specific conditions of now on the remote possibility that with this economic crisis something new might actually be happening.

  6. Dr_Tad on 2nd December 2011 7:37 am

    Hi TPS.

    I know I’m one of the “crass” “scaremongers” (see my piece on Norway coming out on The Drum today), but here I wanted to ask a question about your analysis of the economic crisis.

    You write: “At the core of the economic problem is the growing uncompetitiveness of the US and Europe, especially relative to Asia, and for which the political classes on both sides of the Atlantic have no solution.”

    I’m wondering what you think is the root cause of the this “uncompetitiveness”? I’m also not sure where you locate the financial crunch and the accumulation of debt in longer run economic developments.

    Just asking, because it’s not clear to me from your brief sketch here.

  7. Dr_Tad on 2nd December 2011 7:38 am

    PS It would be tres cool if you could rejig your WordPress so one could subscribe to individual comment threads that one has posted in!

  8. The Piping Shrike on 2nd December 2011 10:22 am

    Oh, god. I’m not tecchie but will try.

    On the competitiveness, I would see the long-running underlying cause being the normal mature state of the economic cycle in US and Europe relative to the newer stage of the cycle in Asia. This disparity has been increasingly managed through the expansion of credit through the financial system.

    One consequence of the decline of labour, er, inflexibilities over the last thirty years is that capital market management has moved to the centre of the government policy. This is what I understand you see as neo-liberalism and others see as deregulation, but I don’t see it like that.

    To facilitate the expansion of credit, the financial system has been liberalised at the international level, but has seen increased regulation at the institutional level. I think what we are seeing now is restructuring in the financial system as it adjusts to the unwinding of some of the stabilisers that existed in the financial system for most of the last century. This restructuring has been complicated by the coincidence of the unwinding of political arrangements around organised labour, the old left-right.

    So I would expect greater government intervention in the capital markets but coinciding with, and accelerating the further unravelling of traditional political relationships (such as is now happening in Europe). In some ways I think China is a good test case for some of the developments we may see in the future, with the intimate relationship between the technocrat state and the financial system.

  9. Riccardo on 5th December 2011 9:08 am

    In the end we have to understand what Left-Right paradigm is ‘for’ and remember it didn’t always exist like that.

    The European reformation predated the Left-Right and was about local vs Roman sovereignty, disguised as a dispute about religious idols and books.

    In one sense it was a practical overhang of an issue 1000 years old at that point, the fealty of local kings and princes to a distant Roman emperor/pope. Except by 1500 we already see the rise of professional administrators behind the monarchs. Hence Machiavelli.

    The Left Right thing emerged as agriculture became industrialised, then the emergency of the industrial revolution, and the replacement of feudal payment systems of crops and tithes and so on with wages and profits. This then required a split of payments where the market was not enough to deliver. The establishment also reconfigured itself away from bishops and large landholders to administrators and industry bosses, some of whom had previously been excluded for religious reasons.

    Now the Left-Right thing is finally having time called on it, and not a day too soon. The poor will always be with us, but they will have Fair Work Australia thanks to St Julia. The rich, as Menzies reminded us, will continue to look after their own interests regardless of what government does.

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