Friday, March 27, 2009

Legitimacy, indentity, loyalty

More from John Robb, a powerful and original thinker who's on a roll these days at Global Guerrillas:
JOURNAL: More on Banksters
The real systemic risk we face isn't from a financial seizure. That risk is mild in comparison to the risk of a widespread collapse in legitimacy. Due to excesses (too many to name), legitimacy is rapidly draining from the global financial system and the networked groups that give it their primary loyalty.]…[In recognition of this, nation-states should hold this system at arms length to limit damage to their own legitimacy. Given the constraints on resources faced by nation-states, a plan that would bulk up legitimacy would focus on reorganizing financial institutions (not bailing them out) and repairing the balance sheets of individual citizens (the only group in the chart to the left that is still loyal to nation-states). That isn't happening and the damage incurred from this mistake will be significant.

I keep talking about legitimacy and many of you might wonder just what I mean. In Australia we have a deep faith in our institutions, so that we treat them almost as the air we breath: most of us believe in the impartiality of justice and we also believe that most people in authority are basically people of goodwill even if we sometimes disagree with them and that corruption among public officials is restricted to a few bad apples rather than being systemic. We don't perceive our society as riven by class warfare, or captive to one interest group.

Note that I say perceive. Perceptions are what drive politics. From the beginning of last century there was a very strong perception amongst certain groups of people who labeled themselves as "Communist" or "Socialist" that society and its wealth had been captured by people they labeled "Capitalists". This vision then drove the form of politics in western industrialised countries for most of the century. It finally died, not because one "side" or another "won", but because a generation grew up with a different perception of the world. This is a generation of largely salaried workers, for whom over the last fifteen years, unemployment has been low and consumer goods and leisure activities have fallen in price. They have also become major investors, via superannuation and at one remove, in the stock and property markets and thus in the Western Industrial System as a whole. So politics has changed from a paradigm of "Class War" into a managerial paradigm where political parties have competed with each other on the basis of their economic management credentials.

Now the long boom which began in the 1940's and which had it's smoothest run in the past decade and a half is over. Politicians surfed this wave and took credit for its successes. Their successors will not have that luxury. Those who try to cling to managerialism for their legitimacy and are too closely identified with the financial system will be destroyed and to the extent that the political system as a whole has become identified with economic management and entwined with the financial system it will lose the faith and thus the loyalty of the citizenry. This is what John Robb is talking about in the quote at the beginning of this post. And this is glaringly obvious in the USA where President Obama's economic team charged with fixing the problems are all former senior figures from the financial enterprises which caused the current crash. Their primary loyalties are to their mates, not the average citizen or the democratic system. It is this which may very well destroy the United States.

In Australia the situation is not so extreme, but it is similar. The loyalties of both political parties are to the influential interests who back them, not the nation as a whole. If your job is with a big car company and government policy allows you to keep your job, naturally you are a supporter of that government. But if you lose your job and then see that government spending is directed towards special interest groups to your detriment, loyalties can change very quickly. The mad scramble to re-start the debt-driven consumerism which has got us to where we are is doomed to fail. The resources squandered doing this will be a tax burden for future workers which will be bitterly resented by them. This resentment will be stoked by any perception of a section of society benefiting from the present debacle: those who have seized the opportunity to game the system for their own benefit. John Robb again with Parasitic Predation

Some Boydian logic -- a new construct for decision making -- to brighten your day. Not likely. However, the aim of this brief is not to convince you. Instead, it is to get you thinking in new ways, to challenge assumptions, and spur creativity -- all of which is essential to our collective long term success.

Back in 1974, the long running connection between improvements in worker productivity and wage growth was severed. Median per capita wages for individuals have stagnated since then, replaced with measures of growth in house hold income (two workers instead of one) and growth derived from growing the labor pool (mostly illegal immigration). During this time, the money derived from productivity improvements over the last decades (which would have doubled the incomes of American workers under the post-WW2 to 1974 social contract), was shunted to capital markets under the ideological assumption (seen in Greenspan's thinking) that these markets would make better investments in future prosperity than individuals. That assumption has been proven false. The money was gambled away or spent on lavish increases in the lifestyles of oligarchs and their underlings.

However, it would be bad enough if it ended there, with the realization that two generations of American wealth was squandered by capital markets in a frenzy of excess. It won't. There is increasing evidence that this group of "oligarchs" has ideologically captured all forms of US governance in a situation similar to what we have seen in emerging markets. The situation in the US today, particularly to those that saw it first hand while at the IMF, is very similar to what they saw in past crises in Argentina and Russia (in their view, our situation is worse than Japan). Here's a couple of posts that warrant further reading:

The Quiet Coup by Simon Johnson (the Atlantic)
Re-emerging as an Emerging Market by Desmond Lachman (Washington Post)
Comparing the US to Russia and Argentina by Glenn Greenwald (Salon)

This development has major implications for those of us that think about the future of warfare. The devolution of the US economic system into crony capitalism, replete with the parasitic predation of oligarchs, paints a picture of warfare punctuated by:
rampant crime, rapidly declining military/government budgets, inopportune withdrawals from foreign adventures/development efforts (money for this dries up), corporate armies, deep urban decay, spot starvation/health crises, broad privatization of public goods (theft or fire-sale prices), widespread poverty, etc.

To think that a parasitic oligopoly (akin to Russia's) can't happen here, despite factual evidence to the contrary (trillions of $ given away to bank/hedge funds/etc. without the slightest reform, hope for economic return, or accountability), is a failure of decision making due to doctrinal/ideological rigidity. However, if it's true, a move to the primary loyalties of manufactured tribes (gang, clan, sect, etc.) by a large segment of the population will be almost inevitable. Many of these new groups will both defend and advance their interests through violence.

Whether we like it or not we're caught up in this same system. If we had politicians smart enough to see the danger I would feel a lot happier. But I fear when the dust settles the Federal Government here will also be damaged goods and "Australia" as we now perceive it will be gone forever. We may well drift back to a primary loyalty to our home states. But it also possible that once again we will fall back into a situation of class conflict.

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