Politics & Paranoia

 Below is the text of a talk I was supposed to give at Hull University – but didn’t. For reasons unknown the event was cancelled. Since the arrangements were done by e-mail and I didn’t meet the man organising it, nor know his full name, if he continues to ignore my e-mails I may never find out why the plug was pulled. When discussing what I would talk about I suggested I write something and send it to him. His initial reaction to reading it was ‘Terrific’ but then communication ceased. My guess is that someone in his department – he’s a student doing War and Security Studies, and such departments are never a million miles from the Ministry of Defence, even if they aren’t funded by it – took offence at my proposed text.
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I was a student here from 1971-74 doing a social science degree; but more importantly, between 1976 and 1982 I was on the dole much of the time and spent most of my days in the library here, educating myself in post-war history, American history, what was available then about the intelligence services – almost nothing – and the post-WW2 geopolitical order; centrally the Cold War and American imperialism. Looking at the reading list for the intelligence and national security component of this course, what struck me was that almost none of its literature existed when I was here. As an academic subject most of this course is recent. I have read a few of the books on the list and none of the academic articles. What could I say on a subject of whose content I have read so little?

I have done what anybody would do: I looked at the literature and found a way to use it as a platform for something I am interested in. And that is this country’s relationship with the United States: Because that relationship is one of the central features of this course, although it is probably never stated as such. (I may be wrong about this: I have only seen a sketch of the course content.) Britain’s military, intelligence and foreign policy organisations are more or less integrated into and subservient to their American counterparts. In boxing weight terms we are talking about a British flyweight and an American super heavy weight.

From the American point of view Britain has been useful first as being what George Orwell called Airstrip One in the 1940s, and Duncan Campbell called the unsinkable aircraft carrier in the 1980s, for the US Air Force. Secondly, after the early 1960s when US banks began moving their money out of America to avoid taxation and President Kennedy’s attempts to regulate their activities, Britain became the offshore banking centre of choice for Wall Street. And thirdly, Britain has been useful as diplomatic cover for American power. For sixty years Britain has ‘stood by’ its ally, through the slaughter in Vietnam, half a million dead Indonesians, military coups all over south America in the 60s and 70s, hundreds of thousands of deaths in Guatemala, El Salvador and Nicaragua in the 1980s, right up to supporting it while it killed somewhere between half a million and a million Iraqis. Britain has been a bomber base, a tax avoidance centre for US banks and a diplomatic fig leaf of ‘international support’.

In 1962 Dean Acheson, who had been US Secretary of State from 1949-53, when the post-WW2 order was being built, said that Britain ‘has lost an empire and has not yet found a role.’ This is always quoted as being a great profundity. In fact it was just nonsense. In 1945 America became the new school bully and after Suez Britain became the school bully’s best friend. That has been this country’s chief international role. Being the bully’s friend has its upside – you don’t get hit – but it is basically a degrading role, characterised by public grovelling and private bad-mouthing. Which is what the Brits do to the Americans: they say nothing in public until the Americans fuck-up and then they mutter in the corner about the dumb, incompetent, cowboy Yanks, as they did most recently over the debacle in Iraq.

You may be thinking that I am anti-American. Not so: but I am anti American foreign policy. America as a country is wonderful in many ways. Almost all of the culture which influenced me growing up in the 60s and 70s – books, movies, music – was American. But not straight white bread, American. Not Time magazine, suburban, button-down, American. My heroes were black or beats, or musicians: Jazz, r and b, blues. Mailer, Baldwin, Kerouac, Ginsberg. John Lee Hooker, Buddy Guy, Miles Davis, John Coltrane. The other America.

I have done the great American road trip three times: rented cars and just driven. In total my partner and I have spent 8 weeks driving round rural America, staying in motels, eating in diners and drinking in the nearest bars. The Americans you meet while doing this are exactly the friendly, open people the books tell you about. But the Americans you meet in a bar out in Carizozo, New Mexico or Sundance, Wyoming, mostly know nothing about and care nothing about American foreign policy. Indeed, most of them know nothing about and care nothing about foreign anything. The last time I saw a figure, only 13% of Americans had a passport. In American bars you cannot discuss American history (because the locals know little and what they do know is generally nonsense), American politics (ditto) and American foreign policy (ditto). (But then this would be true of peasants anywhere, and in rural America what you are meeting are essentially peasants.)

After 9/11 there was a number one hit song by one of America’s country music stars, Alan Jackson, which included the lines ‘I watch CNN but I’m not sure I can tell you The difference between Iraq and Iran’; and I’m sure he and the vast majority of the white Americans who bought the single or heard it on the radio didn’t know the difference. And didn’t care. Of course the Bush administration used this ignorance to attack Iraq while hinting that Iraq was behind 9/11. Never mind that Iraq was a secular national socialist state and Bin Laden a fundamentalist Muslim. Who knew that out there in backwoods South Dakota, right?

I have always been anti-American foreign policy. My parents were in the Communist Party until the Soviet invasion of Hungary in 1956; and I grew up in a climate in which the instinctive reaction to any foreign policy issue was: the Soviets are right and the Americans are wrong. It took me until I was well into my twenties to shed that instinctive pro-Soviet reaction. But the other half of the reaction, the anti-American one, I have not shed. Because it is correct: the Americans were usually in the wrong. In part this is axiomatic: imperialism is always wrong. In my view good imperialism is a contradiction in terms. The historical truth is that since WW2, when America became the world’s dominant power, apart from the famine in China in the late 1950s, most of the corpses in this period have been created by America, its allies, its proxies, or as a result of America’s meddling in the politics of other societies. Difficult thought this is to grasp for those of us living in this little island, after 1945 the US set out to monitor, surveil and, where necessary, regulate the entire non-communist world.

Because the UK and the US are allies, these simple historical facts are excluded from this society’s public understanding of the world, its public discourse, if you like. And, I would guess, it is excluded from courses such as this one. A module titled ‘British defence and security policy’s role in supporting global slaughter, subversion and terror ‘– which is what US foreign policy has largely been about since WW2 – is not a module you will find in many British universities. People who talk like this do not often get invited onto Newsnight. To talk as I am doing is to be ‘an extremist’.
All of which raises the obvious question: why have this country’s political, media, military and intelligence elites supported the path of subservience, of being America’s flunkeys.
A number of factors are visible, though how you would calculate their relative weight I don’t know.

First, there is the mutual history. Less than a hundred years ago the American foreign policy establishment and the British foreign policy establishment were interlinked through a set of networks created after WW1: the British end was the elaborated Round Table network, the American end the Council on Foreign Relations. This is the origins of the so-called ‘special relationship’. While these networks declined in significance in the 1930s, the Anglo-American link was renewed during WW2 and carried on into the Cold War years and the creation of NATO under US leadership.

Second, as the British armed forces have not been powerful enough since the end of the Second World War to defend the international capitalist order in which British overseas investments are located, the British state tagged along with the Americans who did have the muscle to police the non-communist world. This is even more true now than it was in, say, the late 1950s.

Third, as the US developed global electronic surveillance systems which the British state could not match, our secret servants came to rely on US-generated intelligence.

The fourth reason the UK is subservient to the US, is that a large part of the City of London is now owned by American banks, banks which British politicians have been afraid to regulate lest they unplug their computers and take them elsewhere. This may change as the current crisis unravels.

And fifthly, and this may now be the most important factor of all, British state personnel and politicians individually benefit from the link with the Americans.

Here is the late Hugo Young’s notes on a conversation with the late Robin Cook, when Cook was foreign secretary in the first Blair administration. Young asked Cook why the British government supports the US so slavishly.

‘ Because of the Ministry of Defence’s fanatical determination to keep close to the Pentagon. They will never do anything that puts that relationship out of line. The truth is that it is the pivot of all military careers and a great deal of decision-making. Any military officer who has ambitions, has to keep close to the Pentagon, because he needs to serve in NATO. The US and the UK have dominated serious appointments in NATO for years, for this reason. It is the driving priority of the MOD to keep it that way. They do not think in terms of national interest, but of both MOD interest and the American interest.’

And talking about the bombing during the war after the break-up Yugoslavia, Young comments:

‘Cook . . . always had to be asked for target approval for each new bombing raid. Sometimes he tried to say no. Each time the MOD pleaded the terrible consequence of displeasing the USA. From the USA’s point of view, we gave them cover. They could always say we were doing it too.’

The striking thing to me is how banal this is. There is no theory of the world here. If you are a British general, diplomat, politician, by virtue of being America’s gopher, you get to hang around the top table and play with the big boys in a way that – say – their Italian equivalents never do.

You may have noticed that the stick the Americans wave at British politicians who look like they might disobey US instructions or create embarrassment is the threat of cutting the Brits off from the US intelligence feed. Now, what the British state can actually do with this intelligence, we don’t know. Given the toy-town nature of our armed forces these days – the Royal Navy has more admirals than ships for example – my guess would be, not very much. The British armed forces today could not, for example, re-fight the 1982 war with Argentine: there are not enough British-flagged ships left to transport the troops and material to the South Atlantic.

To my knowledge since Suez in 1956 the British state has refused only twice to do what the Americans wanted. In 1965-66 Harold Wilson refused to send British troops to Vietnam, despite heavy pressure from President Johnson and threats to halt US support for sterling. (This was back in the days when currencies had fixed exchange rates and states had to spend their reserves, if necessary, defending that rate.) Wilson refused for two reasons that I am aware of. The most pressing was that had he sent UK troops to Vietnam there would have been massive problems with the left-wing of the Labour Party in and outside parliament. And in those days this mattered. The second reason was suggested by the former SIS officer Anthony Cavendish, who told me twenty years ago that Maurice Oldfield, when deputy chief of SIS, had warned Wilson not to get embroiled in Vietnam. Oldfield had served as an SIS regional head in the Far East in the middle 1950s when the French were driven out of Vietnam and seems to have acquired a more rational appreciation of the situation there than the Americans did.

After 1966 the counter-intelligence section of the CIA, headed by the loony James Angleton, came to believe that Prime Minister Harold Wilson was a Soviet agent; and CIA counter intelligence was the ultimate source of much of the disinformation and smears about him and those around him in the middle 1970s. This may have been pay back for Wilson’s temerity in refusing to bend.

It is said, by Professor Richard Aldrich amongst others, that in 1973 Prime Minister Edward Heath refused to allow the Americans to use British bases in Cyprus for intelligence gathering during the Yom Kippur war between Israel and some of its Arab neighbours; and that this resulted in a temporary halt in the US signals intelligence flow to the UK.

Heath was defeated two years later in a leadership contest by Margaret Thatcher, whom the Americans had been cultivating and promoting since 1967 as a potential leader of the Conservative Party. (And we know this from declassified State Department files.) This may have been pay back for Heath daring to defy the Americans.

Is Britain then just an American colony? Not in any conventional sense of colony. At any rate, if we have been colonised, we have done it to ourselves. But if we ask how much independence does the UK government have? The answer has to be, We don’t know. The British state apparently gets most of its intelligence from the US, and most of its weapons systems, notably its nuclear weapons, which are also controlled by the US.

The day I wrote some of this a former British intelligence officer, Crispin Black, wrote in the Independent on Sunday of the ‘special relationship syndrome’ which affects British politicians and state officials and noted that:

‘The Joint Intelligence Committee, the military, the intelligence services, the mechanisms that control our “independent” nuclear deterrent are all heavily “penetrated” by American influence. It is almost impossible for a British minister to make a decision on a range of national security and foreign policy subjects without the US being involved at every level. The UK’s national security infrastructure runs on US software which we have happily installed.’

The UK’s economic independence is constrained by its membership of the World Trade Organisation and IMF, both controlled by the Americans, and by the demands of the City of London, now largely owned by American banks. Most of our popular culture is imported from America, along with the central economic and cultural concepts which are in our politicians’ heads: no bigger fans of all things American have there been than Messieurs Brown and Blair following in the footsteps of Margaret Thatcher. Brown and Blair, like Thatcher, enjoyed several freebie trips to the US from the US State Department while they were rising politicians.

Since Suez in 1956 no UK government has ever tried to find out how much real independence we have. The curious thing to me in all this is how little political interest there is in this. We have UKIP, the United Kingdom Independence Party – but does it refer to freedom from America? Not that I can see. It is solely focused on the EU. And, with the exception of a handful on the Labour left, an even smaller handful on the left of the Lib-Dems, and a few on the Tory right, there are no MPs that I am aware of who are pursuing this.

In this society, influence can often be measured by the amount of media noise being created. But it can also be measured by the silence around certain subjects. By that standard, subservience to America is one of our society’s great no-go areas.

I was walking to the pub last night, thinking about the economic crisis, and it struck me that part of the problem was that the British economic system, the bit the government tries to control, had been set-up with only one alarm system: it had been created so that alarm bells went off when inflation began to rise.  Economic policy thinking between the years between 1974 and 1997, when New Labour took control, had been dominated by the fear of inflation getting out of control as it did between 1972 and 1976. The Monetary Policy Committee under New Labour had been tasked to worry only about inflation. All the other indicators – the money supply, the external trade deficit – were all subservient to inflation. And in the old system that didn’t matter because a rising money supply would produce inflation (too much money chasing too few goods pushing up the prices) and so would a rising external deficit as the value of sterling fell and pushed up the price of imports.
      But neither of these two things happened.  The ever growing trade deficit didn’t push down the value of sterling because the foreign currency traders didn’t care about the deficit, only about the relative earnings on money deposited in sterling.  The ever-increasing money supply, or credit formation, didn’t cause inflation because the Chinese and Indian economies were producing very cheap – increasingly cheap – goods, which didn’t push up the retail price index.  So the system trundled on, ever increasing credit formation and an ever growing trade deficit producing little inflation, except in the price of houses, and that wasn’t included in the inflation index.

Well now, as they say in East Yorkshire where I live: here I am being skewered by my own writing.
In his response to my earlier blog item, Harry_w centrally points out:
“Over the course of New Labour’s decade, high interest policy described in the [Ramsay] article changed towards a cheap money policy which propelled rampant asset price inflation, and the collapse of that bubble has prompted bipartisan support for state intervention to prop up market values (esp. housing). Externally, these market interventions have been balanced by a passive devaluation of sterling of around 30%.”
This is true. The article of mine which is being quoted was written in 1998 and things have changed. And the story of how we got there is interesting.
In the early days of New Labour and the ‘freedom’ given to the Bank of England to set interest rates (and the duty to maintain the government’s inflation rate policy) it did seem clear that the Bank of England would take the orthodox road: keeping interest rates relatively high (compared to the euro zone and the dollar), producing two consequences: (relatively) high interest rates which would keep domestic inflation down by depressing domestic demand and maintaining enough unemployment too keep wages from rising; and keeping import prices low via an overvalued currency. This was the stability – that is price stability – so highly prized by Chancellor Brown.
This was Brown believing he had to show the electorate that Labour had learned the lessons of the mid-1970s and would never again be the party of inflation; and Brown believing he had to show the City that he had accepted the supply-side arguments from his mentors at Harvard University in his visits to America in the early 1990s: that there was nothing to be done in the global economy except maintain price stability and try to make the workforce employable through education and training.
All of which could be represented thus: the City wanted comparatively high interest rates to attract money to London (and make domestic loans profitable); and the ‘fight against inflation’, using interest rates, was the rationale which produced that end.
What nobody foresaw in 1998 was the circumstances which produced the current mess.* Brown’s policy – the City’s policy – was based on the assumption, learned in the 1970s, that the basic tendency against which the economic system has to guard was inflation. (The rejection of Keynes which the arrival of monetarism in the 1970s signified was the shift from the fear of deflation and depression to the fear of inflation.)
* But with the emergence of the economies of the developing world in the 1990s, notably China and India, and their production of cheap manufactured goods, and with the trade unions smashed in the 1980s, the threat of inflation disappeared and what we might call the Primark effect occurred: imports were cheap and in some cases getting cheaper.
* With no threat of cost inflation, the Bank of England was obliged to embark on a policy of cutting interest rates. This encouraged people to borrow. Unencumbered by any controls on their lending, the banks enthusiastically encouraged people to borrow, as well as creating and trading every more complex ‘derivative’ financial instruments, CDOs etc.
* With Labour unwilling to allow local authorities to build houses, and the private and housing association sectors unable to build enough houses to meet the demand (which was being increased by immigration, notably from the enlarged EU), house price inflation continued.
* As housing costs had never been included in the central indices of domestic inflation this did not figure on the headline inflation figure. For those in jobs and owning houses (which was 70% of the population by 2000), the house provided the collateral for loans from banks and building societies and the consumer boom of the last few years began in earnest.
Thus the British economy was on its way towards one trillion pounds sterling of personal debt – about one year’s gross domestic product.
It was also running an ever increasing external trade deficit which didn’t seem to matter. In the 1960s and 70s such a deficit would have sent the value of the pound down – the international value of the currency rose and fell with trade deficits and surpluses – but with the advent of computerised currency trading in the 1980s, currency dealers, the people who determined the international value of currencies, were less interested in the existence of trade surpluses or deficits than they were in the relative rates of return offered by currency holdings. As long as London was offering – say – 0.1 of a US cent more than other currencies on deposits, who cared about the trade deficit? The currency trading desks of the world’s banks – many of them in London – began driving the world economy.

Steady Eddie blows the gaff
W

 I haven’t blogged for a while because…..because the only item on the agenda is the financial fuck-up and I’ve been preoccupied trying to read about and make sense of it. (The Internet is wonderful and terrible at the same time: more than enough information rapidly becomes far too much information.) But here some more or less random thoughts on the present chaos.1. None of this is a surprise. The mountain of debt encouraged by central bankers in American and the UK was bound to topple over at some point. Bubbles always burst. Lots of people have been sounding loud warnings but to little effect.

5. In the country the one step the government could have taken but didn’t to loosen up the housing market was to pump money into the remaining mutual building societies.

6. I knew the world had changed when Gordon Brown talked of nationalising Bradford and Bingley. When Northern Rock was more or less nationalised, that N word was studiously avoided by Brown and Darling. I presume the change of vocabulary has been prompted by polling which tells them that the punters like nationalisation again (at least where the security of their deposits is concerned).

7. The mess is entirely the fault of the politicians: they set the rules by which the moneylenders operate.

And so, with barely a flicker of interest from the UK’s economics journalists (page 15 in The Guardian), on Tuesday 14 July the Brown government abandoned the central plank in its economic policy: viz. that the Monetary Policy Committee (MPC) of the Bank of England would keep inflation at or below 2% by using interest rates. On 14 July the governor of the Bank of England announced in the Bank’s annual report that the MPC had not raised interest rates as the inflation rate rose recently because to do so would have required a ‘large increase in interest rates with such a severe impact on output and employment that it would have risked inflation falling well below the target further out.’

The second half of that sentence is pure horseshit – a feeble excuse with which the governor, Mervyn King hopes to persuade commentators not to notice that the policy is kaput. Let us unpack this.

The policy of keeping-inflation-down-with interest-rates worked (when it worked) in two ways: higher interest rates depressed the economy, transferring money from the citizens who had debts to the moneylenders who owned the loans (if more income goes into loan repayments less gets spent on goods), and creating unemployment (the poor spend less). Falling demand pushes down prices through the normal supply and demand market mechanism. Higher interest rates also push the price of imports down because higher interest rates push up the value of sterling and imports get cheaper. (Speculators want to put their money into sterling if it has a higher return that its rivals, such as the dollar and the euro.)

The economists (and the politicians in their thrall, such as G. Brown) like to pretend this is scientific and such, but how much of an interest rate rise will produce this or that much of a reduction in inflation one year? two? down the road is all guess work. They just know that putting up interest rates will eventually reduce price rises in the economy.

In the current situation there is another factor at play. For whatever reason the economists and their politicians have lumped together all price increases as ‘inflation’. In fact this is not true: some price rises, such as the recent increases in world raw material prices are just …..price rises and are beyond the control of this (or any) government. Strictly speaking, inflation is what we get when too much money is chasing too few goods. (Hence the famous dictum of the monetarist economists of the 1970s and 80s that inflation is always a monetary phenomenon; and thus the Thatcher government’s failed attempts to ‘control the money supply’.)

In this society the best recent example of inflation has been the housing market where an uncontrolled frenzy of credit creation has pushed up – inflated – house prices to absurd levels. (Conveniently housing costs are mostly not recorded in the government’s index of consumer prices.) What we have in the world economy now and for the foreseeable future is too many people chasing scare commodities, notably oil and cereals.

The belief that you can control domestic inflation in an increasingly globalised economy solely with domestic interest rates was an absurdity from the getgo and this government was only able to get away with it for so long because the massive expansion of the Chinese and Indian economies flooded the West with cheap goods which kept down the consumer price index, the measure of inflation.(While doing massive damage to Western economies, but hey, that’s the wonder of globalisation!)

Those economies’ demands for raw materials is now putting up prices all over the world, rises in basic commodity prices will cause further price rises in the production/consumption chain and most of us in this country (and all over the world) are going to get poorer; and there is nothing this government can do about it.

And so we arrive at one of the central questions: do messrs. Brown and Darling understand any of this? Did then Chancellor of the Exchequer Brown understand this when he handed over control of interest rates to the Bank of England on his second day in office and abandoned any attempts to control the British economy? Since we have no information on this I can only guess; and my guess would be that having been taught ‘the magic of the market’ nonsense by academics at Harvard in his summer holidays while Shadow Chancellor in the 1990s, Brown really did believe that the bankers had a magic lever they could pull which would control inflation and everything else could be safely left to the market.

(Darling’s views on economics are a blank, as far as I’m concerned. He has written no books or pamphlets on the subject and what he believes – who knows?) Your guess is as good as mine as to the stories they are telling themselves these days as the British economy goes into recession.