Repercussions, Part 1

While forecasting society's future is notoriously imprecise, subject to any number of unexpected contingencies, it's nevertheless possible and useful to try and analyze the present dynamics and tendencies. Particularly in a crisis situation, with a number of other important dynamics in play, it's imperative to understand how various tendencies will interact with each other. In that regards, the financial crisis is only one among a number of other significant events.

The most obvious of these, and one of the most significant in the long-term, is the decline of US hegemony. While its decline has been pronounced for decades now (in one sense, it's been declining since the end of WWII), it's now clear that the US is no longer a dominant actor in the way it has been for so long. That's not to deny that it's still the most powerful actor, but it is no longer capable of dictating the world order - a capacity that defines the hegemon. Militarily, it's spread thin, mired in two insurgency wars in Iraq and Afghanistan. Russia feels confident enough to attack Georgia without worrying about NATO or American reprise. Iran continues to diplomatically antagonize America and the EU, knowing full well that a military strike is virtually impossible. And even North Korea has suddenly become uncooperative in its nuclear disarmament. Economically, the US is still the most powerful actor, but with a severe recession on the horizon, China and India are likely to gain ground despite their own relatively minor recessions. Which also leads to an important social aspect - American has lost its status as a model (even if it was an imposed model). The financial crisis has signaled the final death toll on the neoliberal project, and American long ago lost its moral standing. Around the world, American is seen as an imperial aggressor, making cooperation with other governments more difficult.

So one of the prime questions for American leaders, in the near future, will be to choose whether to forcefully retain their hegemonic status, or whether to accept the new multipolar world and aim for cooperation. If McCain should win, there's no doubt what option he would choose. Obama, on the other hand, is an unknown. In the debates and in many discussions, he's come across as a typical liberal hawk, willing to use force for intervention and 'humanitarian' purposes - a stance which lends itself quite easily to forcefully maintaining a hegemonic status. Yet, at the same time, he's made significant overtures to the UN and multilateralism, as well as emphasizing the need to tackle international problems at a non-military level. In addition, the perverse nature of the American system is such that Obama is forced - in order to be electable - to pay dues to America's hawkish attitude. A position that advocated diplomacy, foreign aid, multilateralism, and support for the UN would be portrayed as wildly naive. My personal hope is that Obama is playing the game, and that his liberal hawk position is mostly a structural necessity - one that won't be carried out if he becomes president. Only time will tell though.

The more immediate effect of the decline of America is a domestic issue resulting from its conjunction with two other events - the financial crisis and the election campaign. As is readily apparent, the Republican campaign has decided to whip up whatever racist support it can, in the desperate hope to win the election. The narrative being constructed officially is that Obama pals around with terrorists and supports supposedly radical groups like ACORN. These official narratives, of course, play on the already established viral memes about Obama being a Muslim or having a radical black theology. The one dynamic in play then, is the desperation of the McCain election campaign, pushing subtly racist stories into the mainstream. The other dynamic is the financial crisis, which Republicans are attempting to tie to ACORN, as well as the CRA - which they then associate with Democratic policies. ACORN and CRA, on the other hand, are both closely associated with poverty and minority issues. The end result being that because of the Republican's causal logic for the financial crisis, numerous conservatives are beginning to believe that minorities are ultimately the ones responsible for the current economic turmoil. This explanation of the crisis, widely reported in the conservative media, forms a positive feedback loop with the repeated fears about Obama - basically setting up a framework for minority scapegoating and racist outbursts. The important question will be whether this mobilization of racism is sustained through various mechanisms, or whether it dissipates once the heat of the election campaign has died down. Given that, historically, crises have often instigated the search for a responsible minority, it's quite possible that, given enough repetition and given the right diffusion mechanisms, the generalized scapegoating of minorities will become widespread in America. We're already seeing numerous instances of this at McCain's rallies, and the Republican machine is implicitly supporting it, knowing full well it's their only chance at re-election. The answer here, it seems to me, is for the leftist project to develop a counter-narrative, placing the blame squarely at the feet of another minority group - namely the wealthy, risk-taking individuals actually responsible for the current financial crisis. A scapegoat is almost inevitable, so it's just a matter of what group is popularly selected to flesh out the content. Moreover, this narrative has the added benefit of raising class issues again, as well as tapping into the intuitive anger over things like AIG's $440,000 spa vacation. (Seriously, WTF??) As K-Punk has repeatedly argued, the politics of resentment can be a powerful tool.

Internationally, the effects of the financial crisis play out on a number of important levels, and when all is said and done, it's quite likely that the global order will be radically changed. The first effect I've already alluded to - namely American's declining status simultaneously implies the rise of counter-powers - China being the prime candidate, but the EU (if it survives in any meaningful sense), India, Brazil, and Russia are also likely to play more significant roles. Militarily, it's not clear that the rise of a multipolar world will lead to more conflict, although historically that has typically been the case. China's military has not been focused on offensive capacity, instead preferring to spend a minimal amount necessary to ensure a viable defence. Russia, despite the incident with Georgia, is unlikely to try and exert much force, particularly since the Georgian war spooked investors and contributed to recent economic problems. The wildcard is again the US, and it'll depend on whether they decide to make some last ditch effort to retain hegemonic control, or whether they are capable of being self-aware of their own decreased power.

Besides drastic shifts in the balance of power, the second significant change resulting from the current crisis is a likely re-thinking of global governance structures - particularly the governance of financial flows. The IMF, World Bank and G7 have so far been largely impotent in trying to stop this crisis. As I write this, the G7 meeting has finished and the document produced suggests that it could be a viable plan - although Paul Krugman has some hesitations about it, and even the G7 ministers are unsure whether it will work. The IMF and World Bank, meanwhile, are set to meet this weekend, and will hopefully hammer out a plan of their own to try and deal with the crisis. But the speed is too quick and the size of the crisis just too big for these governance systems to deal with. Global, coordinated action is required, but with the exception of the rate cut, has largely been missing. A new global system will be constructed in the wake of this crisis, but as to what it'll precisely look like, I'll leave to the experts. Along with the financial governance structure, the EU will also likely undergo important changes. The stresses are already being felt, as countries teeter between coordinated action as a single political entity, and reverting to nationalist 'beggar thy neighbour' policies. If the latter occurs, it's almost certain that the EU will dissolve in all important respects. On the other hand, if they can manage to cooperate in the face of this crisis, it could push them towards even further integration, effectively strengthening the EU system. Again, only time will tell.

The third and final international effect of the crisis will be an ideological shift. Free market capitalism is discredited, much in the same way that communism was discredited in the wake of the USSR's collapse. The general effect will be a shift to the left - obviously for leftists, but also for the right, who must now re-construct a viable ideology distinct from neoliberalism and distinct from the leftist position. Strictly speaking, though, it's never been the case that neoliberal proponents believed capitalism could be entirely unregulated; private property rights, basic financial regulations, guarantees of contracts, the securing of cheap labour, etc. have all required heavy government intervention. This means that what we are seeing now is not the downfall of some abstractly pure form of free market capitalism; it's rather the making manifest that intervention is only for a particular group and not for universal benefit. Intervention has always existed, but predominantly in such a way that it disappeared into the background, becoming an always already-given structural feature. We simply exist in a world where property rights and contracts are guaranteed. As Zizek notes, "the real dilemma ... is what kind of State intervention?" Careful observers have always noted that government interventions have sustained the wealthy and powerful, yet at a mass level, this largely went unacknowledged. Besides, so long as my share of the pie is expanding, who wants to rock the boat? What was made blatantly manifest with the bailout plan was that government intervention was primarily there to save the wealthy and elite who were part of entities 'too big to fail'. What the bailout and the current crisis have hopefully killed is any idea of 'unregulated capitalism' - capitalism is and always has been a system formed on the basis of intervention and numerous institutions that regulate the capacities of individuals. The question is not regulation or deregulation, but de/regulation for who? Intervention can be for the benefit of the masses, yet this is only a secondary and derivative capacity - one that only becomes available once intervention has secured the capitalist framework. What is interesting about the past 8 years (and is perhaps unsurprising considering the party in charge) is that this secondary capacity went largely unused in America. Real wages have stagnated, while commodity prices have soared (food and oil, most notably). Consumption has managed to rise, but only through a vast increase in personal debt. In other words, in the midst of a huge economic boom, most Americans were left out. And now, if the crisis is as bad as most commentators seem to believe, these same Americans will be forced to bear the largest portion (if not all) of the burden.

One hypothetical question is whether state intervention is even the right term to use. What is really required is not state intervention, but rather an international intervention - a coordinated effort by multiple states to act as one agent intervening, not in national economies, but precisely in the global economy itself - a global rate cut, or a global capitalization of banks. Perhaps a simple terminological distinction, but also perhaps a sign of what is required for managing global capitalism. This is far more speculative, but if it's true that some truly global institution with real authority (i.e. not subject to member states' whims - a necessity, considering the speed of financial crises) is required, then that is not only a significant step forward for global governance, but also for having effectively installed a political authority with power over the global economy (i.e. something suspiciously like global socialism). It's highly unlikely that such an institution will come about, but then again, a month ago I would never have guessed I'd hear Republicans seeking to nationalize banks... Crises call for responses far outside one's typical ideological comfort level.