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The New Depression

The business and political elite are flying blind. This is the mother of all economic crises. It has

We are living through a crisis which, from the collapse of Northern Rock and the first intimations of the credit crunch, nobody has been able to understand, let alone grasp its potential ramifications. Each attempt to deal with the crisis has rapidly been consumed by an irresistible and ever-worsening reality. So it was with Northern Rock. So it was with the attempt to recapitalise the banks. And so it will be with the latest gamut of measures. The British government – like every other government – is perpetually on the back foot, constantly running to catch up. There are two reasons. First, the underlying scale of the crisis is so great and so unfamiliar – and, furthermore, often concealed within the balance sheets of the banks and other financial institutions. Second, the crisis has undermined all the ideological assumptions that have underpinned government policy and political discourse over the past 30 years. As a result, the political and business elite are flying blind. This is the mother of all postwar crises, which has barely started and remains out of control. Its end – the timing and the complexion – is unknown.

Crises that change the course of history and transform political assumptions are rare events. The last came in the second half of the 1970s, triggered by the Opec oil price spike and a dramatic rise in inflation, which marked the end of the long postwar boom. Its political consequences were far-reaching: the closure of the social democratic era, the rise of neoliberalism, the discrediting of the state, the embrace of the market, the undermining of the public ethos and the espousal of rampant individualism. For the next 30 years, neoliberalism - the belief in the market rather then the state, the individual rather than the social - exercised a hegemonic influence over British politics, with the creation of New Labour signalling an abject surrender to the new orthodoxy.

The modalities of this present crisis are entirely different. Extreme as they may have appeared to be at the time, the economic travails of the 1970s were progressive rather than cataclysmic. The old system did not hit the wall, but became increasingly mired and ineffectual. What swept the social democratic era away was not the force de frappe of an irresistible crisis but that it was accompanied by the steady rise of a new ideology and political force in Thatcherism - and Reaganism in the United States - and its victory in the 1979 general election.

In contrast, the financial meltdown of 2007-2008 demolished the neoliberal era and its assumptions with a suddenness and irresistibility that was breathtaking. The political class, from New Labour to the Conservatives, is standing naked. They are still clinging to the wreckage of their old ideas while acknowledging in the next breath that these no longer work. The financial crisis is a matter of force majeure; political ideas and discourse change much more slowly, even when it is obvious that the old ways of thinking have become obsolete. Meanwhile, there is no political alternative waiting in the wings, refining its radical ideas in think tanks ready to storm the citadels of power as there was in the 1970s, notwithstanding the fact that think tanks are now far thicker on the ground. Instead, it has been the mainstream which senses that neoliberalism no longer works, fatally undermined by events and, ultimately, the author of its own downfall. This crisis will have the most profound and far-reaching political consequences and will in due course transform the political landscape, but it remains entirely unclear in what ways and when that might be.

In all these senses the financial meltdown has far more in common with the Great Depression than the Great Inflation. When the financial crisis consumed Wall Street in 1929 and proceeded to undermine the real economy, engulfing Europe in the process, it was not accompanied by a radical shift towards Keynesianism, but rather a reassertion of sound finance orthodoxy, followed in due course by the adoption of protectionism. The political mainstream as represented by Labour's Ramsay MacDonald and Philip Snowden and the Conservative Stanley Baldwin all sang from the same hymn sheet. Only Keynes and a faction of the Liberal Party enunciated a plausible alternative. Eventually a programme of fiscal deficits and public works was pursued by Franklin D Roosevelt in the United States, but in Britain Keynesianism was not properly embraced until rearmament and the approach of war. Indeed, it was not until 1945 that the combined legacy of war and the Depression belatedly resulted in a fundamental political realignment and the birth of the social democratic era.

The Grim Reaper has finally spoken:

a boom pumped up by credit steroids and a bust that takes us back to the 1930s

Since the financial meltdown dramatically intensified in September 2008, Gordon Brown has managed to ride the economic storm rather more successfully than the Conservatives, or, for that matter, than Tony Blair would have done. It is Vincent Cable, the Liberal Democrats' econo­mics spokesman, however, who has indubitably emerged as the political sage, unafraid of confronting neoliberalism's shibboleths, demonstrating a clarity of mind and the political courage to tell things as they are, in a way that has escaped all other prominent politicians. Although Brown was the economic architect of the past decade and was responsible, more than anyone else, for its excesses and was shaping up to be a rather disastrous Prime Minister, he displayed last autumn, at least initially, an agility of mind and nimbleness of foot that defied the expectations of those who believed he was capable of neither. He revelled in the sense of purpose and vision offered by the crisis, seemingly prepared to jettison the thinking that had imbued his previous decade as chancellor.

But Package Part I, widely hailed at the time and imitated elsewhere, proved woefully inadequate, and the financial system remains frozen. Meanwhile the waters are rising up the Good Ship UK, threatening to transform the banking crisis into a fiscal and currency crisis. It seems unlikely that, if that should happen, Brown will survive the next election.

Even if it does not happen, Brown faces a serious problem about his own past role, because Britain’s crisis has been greatly exacerbated by the soft-touch regulation, easy credit, runaway house inflation and overexpansion of financial services over which he presided and for which he is accountable. So far he has refused to admit or accept responsibility for his actions – he initially had the temerity (or foolhardiness) to argue that the UK was better placed than other countries to deal with the credit crunch, even though it has become abundantly clear since that the very opposite was the case. So while Brown remains in denial, the plausibility of his new turn, and his understanding of what is entailed, must be seriously doubted.

Indeed, after its initial boldness, the government now seems trapped by its past actions and its former ways of thinking. Brown's failure to accept the need to nationalise the banks suggests the limits of his new-found political courage, and his inability to embrace the logic and imperatives of the new situation. He is still a prisoner of his old timidity and his conversion to the neoliberal cause. It is his good fortune that the Cameron Conservatives have been hugely wanting in their response to the financial meltdown. Having spent his first years as leader of the opposition seeking to reassure the country of his centrist credentials, David Cameron, at the first whiff of gunfire, has turned on his heels, rejected Keynesianism and, at the very moment when events have shown Thatcherism to be deeply flawed and historically out of time, headed back to the Thatcherite womb of sound finance, arguing that a government must balance its books and that deficit financing, Keynesian-style, is reckless and irresponsible.

But all this, it must be said, is the small change of politics. The crisis threatens in time to sweep away the political world as we know it and those who fail to grasp its magnitude and meaning. Far more is at stake than the fortunes of a few leaders, be their name Brown or Cameron. Who knows where things will be this time next month, let alone next year or, indeed, in 2012? The financial meltdown now rapidly plunging the western world into what increasingly looks like a depression is the first great crisis of globalisation. There was plenty of warning. The Asian financial crisis of 1997-98 proved a salutary lesson about the dangers posed by huge capital movements that were subject to precious little regulatory control. Three economies capsized (South Korea, Thailand and Indonesia) and others stood on the brink.

There were other earlier warning signs, notably Mexico in 1995, when GDP fell by 9 per cent and industrial production by 15 per cent, following a run on the peso. These crises were blamed on the immaturity and fecklessness of national governments - in the case of east Asia on so-called crony capitalism (which, incidentally, prompts the question of how we should describe Anglo-American capitalism) - which the International Monetary Fund obliged to engage in swingeing cuts in public expenditure as a condition of their bailouts.

Yet what if such a crisis were to be no longer confined to the peripheries of global capitalism but instead struck at its heartlands? Now we know the answer. The crisis has enveloped the whole world like an uncontrollable virus, spreading from the US and within a handful of months assuming global proportions, at the same time mutating with frightening speed from a financial crisis into a fully fledged economic crisis. In so doing, it has undermined the foundations on which the present era of globalisation has been built, namely scant regulation, the free movement of capital, a bloated financial sector and immense reward for greed, thereby bringing into question the survival of globalisation as we now know it.

Enormous international flows of unregulated capital have capsized the international financial system - with disastrous consequences for the real economy - in a manner akin to the effect of a roll-on, roll-off ferry shipping too much water. We can now see the cost of free-market capitalism and light-touch regulation. Iceland may provide an extreme example of the consequences of the credit crunch but it also illustrates the dangers facing the more vulnerable economies, the UK included, in a deregulated world where the market rules: a small, open economy; a large, internationally exposed banking sector; an independent currency that is not a serious global reserve currency (of which there are only three); and limited fiscal strength. These propositions have constituted the core economic beliefs - from Thatcher and Lawson to Blair and Brown - that have informed policymaking over the past three decades and without which, it was claimed ad nauseam, an economy could not succeed. Heavy-handed regulation and an overbearing state would serve only to frighten off capital and condemn a country to slow growth, stagnation and global marginality. Now we know the fallaciousness of these claims and the consequences of "letting the market decide".

Like Iceland, albeit not as extremely, Britain has been living in a fool's paradise. A failure to regulate the banks and other financial institutions in any meaningful fashion allowed bankers to behave in a grossly irresponsible and avaricious fashion; a boom that was made possible only by a government-enabled credit binge in which people borrowed recklessly; a bloated financial sector that grew to represent over 8 per cent of the total economy and which was found to have been built on foundations of sand; an overvalued currency that made manufacturing exports uncompetitive and thereby resulted in an unnecessary and counterproductive contraction in the manufacturing sector which must now be reversed; an absurd belief that boom and bust had been banished for ever, allowing the banks to turn a blind eye to the inflating of various asset bubbles and display a profound ignorance of the history of capitalism; a persistently chronic current account deficit that can no longer be compensated for by inward capital flows; monstrous salaries for those at the top of the financial and corporate tree, which were justified in terms of a trickle-down effect that remained a chimera, and as the reward for risk which was, in fact, a reward for greed and failure; growing inequality, which was justified in the name of a more competitive economy accompanied by declining social mobility in the cause of an open and flexible labour market; and, finally, the mushrooming of what can only be described as systemic corruption on a mega-scale as the state ignored the gargantuan abuses of those who ran the banks and other financial institutions, while regulatory authorities willingly colluded in their excesses.

This is the sad story of the New Labour era.

The ultimate cost of this debacle as yet remains unknown. What began as a financial crisis is threatening, as the government seeks to bail out a bankrupt financial sector, to become a currency crisis, with foreign investors concerned about the effects this might have on the value of sterling, and perhaps even worse, ultimately a sovereign debt crisis, with growing doubts about the UK’s financial viability. Until there is some end in sight to the financial crisis, and a line can be drawn under the banks’ indebtedness, we will not know the answer to these questions. One thing is clear, however: whatever the limitations of the social democratic era, it was never responsible for such an all-enveloping and cataclysmic crisis as the one that the neoliberal era – and the Thatcherites and New Labour – have managed to produce. After all the boasting about the virtues of the Anglo-American model of capitalism, the Grim Reaper has finally spoken: a boom pumped up by credit steroids and a bust that takes us back to the 1930s.

There are two key aspects to this crisis: national and global, with the latter promising to be rather solutions are concerned, we are in uncharted territory, with close to zero interest rates, a Keynesian-style fiscal boost that may prove inadequate to the task and could well fail, a hugely indebted financial sector that threatens to leave us with an enormous future tax burden and a greatly expanded national debt. All of this, furthermore, must be addressed in the context of an open-market regime which is very different from those of previous eras, and which could render Keynesian-style national solutions ineffectual. What would greatly assist any national recovery is a co-ordinated global response to the crisis; in other words, global co-operation at the highest level. This cannot be ruled out, but it would be a brave person that would bet on it. It was exactly the lack of international co-operation that bedevilled recovery in the 1930s and eventually led to the Balkanisation of the world into regional currency and trading blocs.

The most important single question in this context is the relationship between the US and China. Will the Obama administration be able to resist the slippery slope of creeping protectionism? Will arguments over the revaluation of the Chinese renminbi be resolved amicably? If the answer is in the negative, then the global outlook will be very bleak indeed and so, also, as a result, will be the prognosis for national recoveries. Indeed, the prospects would look disturbingly like those of the 1930s, with growing international antagonism and friction and a continuingly intractable crisis at a national level, with only the very slowest of recoveries.

Around the world there is growing evidence by the week of a resort to national solutions at the expense of others: measures to subsidise industries that are in severe difficulties; the Buy American clause that was inserted by the House of Representatives into Barack Obama's latest package (though since weakened); the industrial action in Britain against foreign workers; the withdrawal of banks to their national homes; the attack by Timothy Geithner, the US treasury secretary, on China as a currency manipulator. No Rubicon has been crossed but the warning signs are clear. A retreat into protectionism and beggar-thy-neighbour policies will deliver the world into a second Great Depression.

So what will be the political effects of the financial meltdown? Some are already evident. Just as the Great Inflation of the 1970s played to the tunes and concerns of the right, with its invocation of the market, the New Depression suggests the opposite, the inherent limitations of the market and the indispensability of the state. Indeed, the speed with which the neoliberal refrains and invocations have unravelled has been breathtaking. The single most discredited aspect of the social democratic legacy was nationalisation, and yet the government, with the most extreme reluctance, has been obliged to nationalise Northern Rock and partially nationalise the Royal Bank of Scotland and the merged Lloyds TSB and HBOS. Who would have ever imagined, at any point during the past 30 years, that no less than the financial commanding heights of neoliberalism would have ended up in the hands of the state, with precious little opposition from anyone except a few disgruntled shareholders? Even now, however, the Labour government, still trapped in the ideological straitjacket of New Labour and displaying extreme timidity in the face of powerful vested interests, which has always been a New Labour characteristic, is running scared of the inevitable logic of the situation, namely that all the high-street banks should be taken into public hands until the mess is sorted out. Anything else leaves the public responsible for all the debts and risks, while the banks continue to be answerable to the very different interests of their shareholders. But such is the fury and depth of the crisis that this scenario is highly likely.

The state is experiencing an extraordinary revival. The credit crunch is the most catastrophic example of market failure since 1945. It became almost immediately obvious to wide sections of society that there was only one institution that could potentially sort out the mess: the state. Far from being a rational distributor of resources, the market had proved the opposite. Far from bankers and financial traders embodying the public interest, they have been exposed as irresponsible and dangerous risk-takers whose primary motivation was voracious greed. If trade unionists and the nationalised industries were the demons of the 1970s, bankers and the financial sector have assumed the mantle of public enemy number one in the late Noughties. In fact, the irresponsibility of bankers, and the damage they have inflicted on the economy, hugely exceeds anything that the unions could possibly be held responsible for in an earlier era. Meanwhile, the fallen heroes of the pre-Thatcher era, most notably Keynes, are duly being exhumed, restored to their rightful position, and pored over for their ability to throw light on the present impasse and what might be done; if the recession turns into a depression, Marx will once again become required reading.

This political shift is not just a British phenomenon, but a more general western one. The most striking feature of President Obama's inaugural speech was the way in which it embraced and legitimised African Americans for the first time in American history. But it also had another powerful theme, namely its invocation of the public interest and public service. After decades during which American political discourse has been dominated by the language of individualism and the market, it came as a shock to hear a US president articulate a very different kind of philosophy, renouncing private greed in favour of the public good. Obama's election can in part be seen as a response to the failure of the neoliberal era, as well as of Bush's neoconservative agenda; certainly his election represents a remarkable shift to the left in US politics, in contrast not just to Bush, but every recent US president, including Reagan, Bush Sr and Clinton. That Obama is the first African-American president also represents a remarkable redrawing of the political landscape. There is no more powerful - nor difficult - way of redefining society or to embrace a new form of representivity than to include a racial minority that has been excluded.

This brings us finally to what might be the longer-term global consequences of the crisis. Again, we are inevitably stumbling around in the dark because so much depends on whether the recession metamorphoses into a fully fledged depression and in what way and shape the world eventually emerges from the debacle. That said, two key points can be made. First, the credit crunch signals the demise of the Anglo-American, neoliberal model of capitalism, which has exercised a hegemonic influence over western capitalism and been the blueprint for globalisation since 1980. Because of its catastrophic failure there seems very little chance of its resurrection. The process of recovery - whenever that might be - will be accompanied by an overriding concern to ensure that the events of 2007-2009 are not repeated in the future, just as happened in the US in the 1930s with the strict regulatory framework that was introduced for the banks after their comprehensive failure in 1929. This will include the search for a new global regulatory framework that controls and constrains international movements of capital, as well as strict controls over the financial sector at a national level. A new set of political priorities - and with it a new political language - will be born.

Meanwhile, the influence and prestige that the US, and to a far lesser extent Britain, have enjoyed will vaporise in the same manner as their neoliberal model. Their 30-year project has failed and they will be obliged to pay the price in their reputation and the esteem in which they are held. The countries of the former Soviet Union and the casualties of the Asian financial crisis that were forced to swallow the neoliberal medicine will have good reason to feel aggrieved and resentful. The west has been forthright in accusing the non-western world of corruption. The financial meltdown suggests that the west has been guilty of huge hypocrisy. Systemic corruption has lain at the heart of the western financial system. An entirely disproportionate and extortionate level of bonuses has ensured the enormous enrichment of top executives in the financial sector, all in the name of reward for success, when in fact it was the reward for failure. In addition, we have had the collusion of the credit-ratings agencies; a regulatory system characterised by its failure to act as any kind of constraint; and governments that ensured the continuation of this web of relationships and applauded its achievements. The corruption was on a breathtaking scale as evidenced by the size of the bailouts required to rescue the banks. It will be difficult for western governments to make these kinds of accusations of others in the future. That Obama represents such a voice of hope will help to mitigate the inevitable ill-will towards the US, but this should not be exaggerated amid the euphoria surrounding developments in Washington.

The second point is more far-reaching. It is doubtful whether we can still describe ourselves as living in the American era or, indeed, the Age of the West. If not yet quite over, both are certainly drawing to a close, and it seems likely that the effect of the financial meltdown will be to accelerate the rise of China as a global power. The contrast between the situation in China and that in the US could hardly be greater, even though it has been partially obscured by the depressive effect of the western recession on Chinese exports and on China’s growth rate. While the US economy is contracting, China’s grew at roughly 9 per cent in 2008 and is projected to grow at about 6 per cent in 2009. Its banks, far from bankrupt like their US counterparts, are cash-rich. China enjoys a large current account surplus, the government’s finances are in good order and the national debt is small. This is a crisis that emanates from the US and whose impact on China has been essentially indirect, through the contraction of western markets. It is the American model that has failed, not the Chinese.

One of the factors that intensified the Great Depression, and indeed was part cause of it, was Britain's growing inability to continue in its role as the world's leading financial power, which culminated in the collapse of the gold standard in 1931. It was not until after the war, however, that the US became sufficiently dominant to replace Britain and act as the mainstay of a new financial system at the heart of which was the dollar. The same kind of problem is evident now: the US is no longer strong enough to act as the world's financial centre, but its obvious successor, namely China, is not yet ready to assume that mantle. This will undoubtedly make the search for a global solution to the present crisis more difficult and more protracted.

Martin Jacques's new column will be published fortnightly in the New Statesman. His book "When China Rules the World: the Rise of the Middle Kingdom and the End of the Western World" will be published in June (Allen Lane, £25)

the global downturn in numbers


    IMF prediction for global growth in 2009 - worst since WWII

    Up to 40 million

    Number of people who will lose their jobs this year, according to the International Labour Organisation


    Total pledged by the US alone towards solving the crisis


    Proportion of GDP pledged by the G7 and BRICs countries towards fixing the crisis (1.5% this year)


    Number of US properties that received a default notice or were repossessed in 2008. In the UK, 45,000 homes were repossessed - another 75,000 are expected to be taken in 2009


    Number of major global banks which collapsed, were sold or were nationalised during 2008


    Number of European companies expected to fail this year; an additional 62,000 are expected to fail in the United States. These figures represent record levels of insolvency


    Increase in UK company failures between late 2007 and late 2008


    Drop in level of Chinese exports during January


    Current UK interest rates (down from 5% in October 2008). In the US, rates have fallen to between 0 and 0.25%

How the crisis unfolded

13 September 2007 Run on Northern Rock begins when it is revealed that the bank has requested emergency support from the Bank of England

21 January 2008 FTSE suffers worst falls since 11 September 2001

February 2008 Northern Rock nationalised

17 March 2008 JP Morgan Chase takes over the US investment bank Bear Stearns

12 July Mortgage lender IndyMac collapses - second biggest US bank in history to fail

9 August 2007 European Central Bank pumps ?95bn into banking market

7 September Financial authorities step in to rescue Fannie Mae and Freddie Mac

9 September Bradford & Bingley becomes second British bank to be nationalised

15 September Lehman Brothers files for bankruptcy

16 September AIG, biggest insurance firm in the US, receives $85bn rescue package

3 October 2008 US government announces $700bn Troubled Assets Relief Programme

8 October UK launches its first bank bailout plan, making £50bn available

October 2008 Iceland's banks collapse. IMF extends £1.4bn ($2.1bn) loan a month later

24 November Alistair Darling announces a temporary cut in VAT from 17.5 to 15 per cent

23 January 2009 UK enters recession

28 January US Congress passes Barack Obama's $819bn stimulus package

5 February UK Monetary Policy Committee votes to cut interest rates to 1 per cent - the lowest in over three centuries

Michael Harvey

Martin Jacques is a journalist and academic. He is currently a visiting fellow at the London School of Economics Asia Research Centre and at the National University of Singapore. Jacques previously edited Marxism Today and co-founded the think-tank Demos in 1993. He writes the World Citizen column for the New Statesman. His new book on the rise of China, When China Rules the World, will be published in June.

This article first appeared in the 16 February 2009 issue of the New Statesman, The New Depression

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Burning the earth: Isis and the threat to Britain

Nearly 14 years on from the start of the so-called war on terror, the global jihad movement is deepening and expanding.

It was never supposed to be like this. For a period, in late 2011, it seemed as if the so-called war on terror was won. The United States had killed two of al-Qaeda’s most important figureheads: Osama Bin Laden and the American-Yemeni preacher Anwar al-Awlaki. Peaceful uprisings across North Africa suggested that a new, more democratic era was emerging in the region. Respectable commentators, who do not ordinarily lean towards hyperbole, regarded the decade-long struggle against that most ambiguous of abstract nouns – “terrorism” – as being over. “Al-Qaeda played no role in the Arab spring,” wrote Peter Bergen, a contributing editor of the New Republic, “and hasn’t been able to exploit in any meaningful way the most significant development in the Middle East since the collapse of the Ottoman empire.”

The Syrian jihad has changed all that. The threat now emerging from Islamic State in the new Middle East is unprecedented for two reasons. The first relates to the sheer scale of mobilisation in Syria and Iraq. What IS has achieved is remarkable. Not only has it carved out a proxy state but it has mobilised the largest volunteer army of Sunni foreign fighters in recent history. Consequently, the threat facing Britain and the West is not just that much broader than previous iterations, but it has also been extended by at least a generation.

The second reason is the creation of newly ungoverned spaces in which individuals can learn bomb-making skills and also acquire combat experience. This is significant when analysing the number of failed plots in and against Britain over the past 14 years. Just two weeks after the London bombings of 7 July 2005, another series of bombs was placed on transport networks but failed to explode. Nearly two years later, on 29 June 2007, bombs were placed outside a nightclub in the Leicester Square area of central London; the next day, an explosive-laden Jeep was driven into Glasgow Airport. The following year, an attempt was made to bomb a family restaurant in Exeter.

In each of those instances terrorists had evaded the security services and placed explosive devices in public areas. Only good fortune born of incompetence saved lives. Back then terrorists were mostly unable to visit hot spots such as Yemen, Somalia and Pakistan’s tribal areas in order to learn their trade undetected. Instead, they relied largely on the internet to make crude and improvised devices. But in June 2012, with political unrest on Europe’s doorstep, Jonathan Evans, the then director general of Britain’s Security Service, baldly noted, “parts of the Arab world have once more become a permissive environment for al-Qaeda”.

Evans was speaking before IS morphed into the beast it has become today, the datedness of his remarks demonstrating just how fast events in the region have spiralled out of control. To appreciate just how grave the situation has become, consider Nasser Muthana, the young British fighter with IS who in July 2014 tweeted a picture of a bomb-making factory with the caption: “So the UK is afraid I come back [sic] with the skills I’ve gained.”

It was precisely this threat that Andrew Parker, who succeeded Evans as the head of the Security Service, spoke about last month in his Lord Mayor’s Defence and Security Lecture.

“The threat we are facing today is on a scale and at a tempo that I have not seen before in my career,” Parker said. In the past year the Security Service has thwarted six attacks in the UK and several more overseas. The attack on a Tunisian beach in June killed 30 British holidaymakers, demonstrating just how diversified the threat to both our citizens and our interests is becoming. This will only intensify in the coming years.

It now looks increasingly likely that IS has also carried out its first act of international terrorism by bombing a Metrojet flight en route from Sharm el-Sheikh in the Egyptian Sinai to St Petersburg in Russia. IS’s Sinai branch claimed responsibility for the atrocity, although its claims have not yet been categorically proven. If true, however, there are profound implications, not least that IS will have demonstrated its ability to bypass airport security procedures, whether for passengers or for staff.

Western airlines have long been an obsession of jihadists. Last Christmas, al-Qaeda in the Arabian Peninsula issued a call for attacks on British Airways and easyJet in response to what it described as the British government’s “arrogance”. American and French airliners were also identified as potential targets.

A senior official told me that in the lead-up to the 2012 Olympics, British intelligence officers assured the Prime Minister that the Games would be free from terrorism. Were Britain to host the 2016 Games the intelligence assessment would be very different. This is telling – the Syrian civil war was already in full swing by the time of the London Games, but it did not, at that stage, pose a significant threat to our national security.

In the early phases of the war, the terrorist threat to the West appeared to be in decline as jihadists made their way to Syria to fight the regime of President Bashar al-Assad. There was little interest in carrying out attacks at home. A naive romanticism surrounded these early fighters. The Guardian’s George Monbiot compared them to volunteers in the Spanish Civil War. British fighters I was interviewing at the time seemed to appreciate this. One man from London with whom I developed a long-standing relationship even asked me to thank Monbiot on his behalf. “It really helped the mujahedin,” he said. This man epitomised the optimism of the early wave of fighters, who could not understand why they were considered a security threat. “Why is the gov [sic] calling us security threat and terrorists akhi [brother]?” he asked. He was sincerely bemused.

Nasser Muthana, the fighter who later boasted about his bomb-making skills, was also keen to reassure the government that Islamic State posed no threat. “Mi6 believe 300 Brits have returned to the UK . . . and how many terror attacks have they done? 0!!” he wrote. “We aren’t interested in you. We want Khilafa [the caliphate].”

The change in IS’s posturing towards the West came after the declaration of the caliphate in late June 2014. From that point the group adopted a more belligerent and expansionist policy, with the first edition of its English-language magazine promising to conquer Rome and defeat “crusaders” around the world.

Its fighters became more brazen. They cheered the beheading of western hostages and boasted of planning attacks in the West. There is a rationale for this: the caliphate cannot have static borders and must be territorially expansionist. Its duty is to confront the West and subjugate it to Islam.

Jihadist fighters believe they need a state ruled by a religiously sanctioned amir (leader) before waging wars of conquest. Without such an authority in place, offensive jihad cannot take place, because the group’s primary aim is to acquire and then amalgamate new territory under Islamic rule.

By contrast, defensive jihad requires no official sanction. Instead, jihad in this instance arises naturally, in response to external events such as invasion or occupation. Indeed, the Syrian jihad grew out of precisely these circumstances – an inevitable response to months of brutal repression after Bashar al-Assad tried forcibly to suppress peaceful protesters.

The distinction between offensive and defensive forms of jihad was popularised in the early modern era by Abdullah Yusuf Azzam, a Palestinian warrior-scholar who led the Arab contingent of mujahedin against the Soviet Union in Afghanistan in the 1980s. Azzam argued that offensive wars are of less importance than defensive ones. The latter, he insisted, are fard al-ayn (an individual obligation), under which every Muslim is personally obliged to remove the source of belligerence. Wars of conquest are only fard al-kifayah (collective responsibility): an obligation that is communally satisfied provided someone undertakes it.

“It is a duty of the amir to assemble and send out an army unit into the land of war once or twice every year,” Azzam wrote. “Moreover, it is the responsibility of the Muslim population to assist him, and if he does not send an army he is in sin.”

For the members of IS, this, as much as anything else, explains their change in approach from June 2014 onwards.


One of the main problems for Islamic State at present is how to project power while trying to fight offensively. Like any military force, the group wants to achieve a competitive edge over its adversaries but realises it cannot achieve this technologically. Consequently IS has dev­eloped another approach – an asymmetry of fear – through which it has cultivated a reputation for brutality and barbarism that it hopes will act as a deterrent.

To achieve this, the group releases films of its acts of extreme violence, presented to the world as if each were a new offering from Stanley Kubrick or Quentin Tarantino. The strategy has proved remarkably effective. Shortly after the Jordanian pilot Muath al-Kasasbeh was captured in December last year (the following month, he was filmed being burned to death in a cage) the United Arab Emirates withdrew from coalition air raids against IS targets. The corollary was clear: the UAE would not expose its pilots to the risk of capture.

The Kurds have so far proved highly resilient against the advance of IS. As a result, the level of violence perpetrated against captured Peshmerga fighters has slowly increased as IS tries to intimidate its soldiers into acquiescence. One recent release is among its most barbarous yet. It begins with the (by now sadly) familiar scene of captured men, all wearing matching overalls, being forced to kneel in a line. A knife-wielding executioner delivers his message of foreboding before the captives are pushed to the floor and beheaded.

The depressing familiarity of these videos has eroded their potency. Not so for the Kurds. To restate IS’s nihilistic relentlessness, this video was intended to shock more than any other that had come before. The captured Kurds had their throats only partially cut by the executioners, who then used this opening physically to rip their heads off. The agonised captives are seen writhing in agony as their heads are yanked in tearing, jerking motions.

The violence spawned by Islamic State is not whimsical: there is always an underlying message or a rationale behind it. Tactics such as the horrific treatment of captured fighters has produced results in the past, as in 2014 when IS marched on Mosul. The Iraqi army melted away, abandoning posts and fleeing for refuge. Quite simply, no one was prepared to risk capture.

This approach derives from a well-established strategy first pursued by al-Qaeda in Iraq – from which IS grew. In the years immediately after the 11 September 2001 attacks, senior al-Qaeda theorists debated how the movement could endure the “war on terror” and emerge victorious. Two divergent views emerged.

The first came from Abu Musab al-Suri, a Syrian who argued that the global jihad movement would find it difficult to secure the kind of political sanctuary it had enjoyed under the Taliban. This would make it harder to maintain a centralised command-and-control structure, or to run training camps. Instead, he argued for a more diffuse approach, through which al-Qaeda would inspire individuals in the West to conduct random acts of terrorism: “lone-wolf” or “self-starter” terrorism.

Arguing against al-Suri was Abu Bakr Naji (widely believed to be the pen name of the Egyptian jihadist Mohammad Hasan al-Hakim). Naji wanted al-Qaeda to adopt a scorched-earth policy: more brutal attacks, more nihilism, more death. He believed the jihad movement’s adversaries could be scared off by its fighters making the cost of participation unacceptably high. Jihad, he argued, “is nothing but violence, crudeness, terrorism, frightening [others] and massacring”. He recognised that such an approach would invariably result in significant loss of Muslim life, too – the very constituency in whose name he claimed to act – but dismissed any concerns about this with blithe indifference. Yes, people would lose their parents and their children but “such is war and the masses must become accustomed to it”, he surmised.

Successful military leaders from Islamic antiquity “knew the effect of rough violence in times of need”. This shaped Naji’s views about how al-Qaeda should proceed. Islam’s historic warriors had not been harsh without reason – “How tender were their hearts!” he wrote – but they were nonetheless compelled to act with severity because they “understood the matter of violence” and “the nature of disbelief and its people”. It was this reading of Islamic history and jurisprudence that led him to conclude that “we must burn the earth under the feet of the tyrants so that it will not be suitable for them to live in”.

The strategy of deterrence was set. “It behoves us to make them think one thousand times before attacking us,” Naji said.


Abu Musab al-Suri succeeded in convincing al-Qaeda’s central leadership – then based in Afghanistan and Pakistan – to adopt his approach. This was also embraced by al-Qaeda in the Arabian Peninsula (based in Yemen), which then, principally through its English-language magazine Inspire, began to urge attacks in the West by “lone wolves”. Stephen Timms, the Labour MP for East Ham, was a notable victim of this strategy. In May 2010, he was stabbed in the stomach at a constituency open surgery by Roshonara Choudhry after she downloaded Inspire and decided to “punish” Timms because he had voted in support of the 2003 invasion of Iraq.

In Iraq, however, the situation was different. There, fighters relished the prospect of a direct confrontation with the US and its partners. They adopted Naji’s approach and wanted to turn the entire country into a barbaric and brutalised canvas. Under the stewardship of its first leader, Abu Musab al-Zarqawi, al-Qaeda in Iraq pursued a bruising course of action: attacking coalition forces in Iraq, provoking a sectarian war with the Iraqi Shias, and targeting western societies through terrorism.

Unencumbered and unchecked, Islamic State has now taken Naji’s vision to its extreme extent. One of the unintended consequences of his philosophy is its ability to create powerful bonds of camaraderie and solidarity among its practitioners. Much has been written of the way IS creates a sense of brotherhood among émigrés who join the group: yet this aspect is often overlooked. The diminution of anyone external to the group as “other”, coupled with the perpetration of extreme acts, has a profoundly unifying effect for those on the inside.

As such, there is little room for empathy or compassion for their former fellow British citizens. Consider this message published on social media by Raphael Hostey, a young Mancunian who travelled to Syria in October 2013. “Today’s Jumah Khutbah [Friday sermon] was about Britain,” he wrote, “and how Dawlatul-Islam [Islamic State] will come to them and kill them, enslaving their women and children.”

Ali Kalantar, a then 18-year-old from Coventry who had been studying for his A-levels before he joined IS, expressed similar sentiments. Having told his parents he needed money to buy a laptop for school, he booked a circuitous route to the front line to evade the security services, flying from Birmingham to Frankfurt and then on to Istanbul before travelling to Syria by land. “I can’t wait for the day we fight [Americans] on the ground,” he wrote. “Kill their mens, slave their womens [sic], orphan their kids.”

It isn’t only male fighters who revel in the sadism of IS justice. Khadijah Dare, a convert from Lewisham, in south-east London, who migrated to Syria with her husband, cheered the beheading of the American journalist James Foley in August 2014. “UK must b shaking up ha ha,” she wrote on Twitter. “I wna b da 1st UK woman 2 kill a UK or US terrorist!” Dare had previously posted pictures of her infant son carrying an AK-47 assault rifle.

Although it might seem counterintuitive, western female migrants are often among the most vociferous purveyors of violent content online. Whereas their husbands are able to fight on the front lines, these women at times feel frustrated by their inability to make a direct contribution towards the war effort. Trying to radicalise others through the internet and inspire attacks at home provides one way of assuaging this need. To that end, one western female who goes under the name of “Bint Mujahid” warned: “Live in fear. Sleeper cells and lone wolves are indetectable [sic]. And they will strike again, when you least suspect it.”

Gauging the extent and potency of this kind of threat is a difficult task. The best academic literature on the security risk posed by irregular volunteer fighters returning from conflict suggests that between 11 and 25 per cent of them become terrorists. There is limited solace in this. Yes, history suggests that most of those fighting in Syria and Iraq will not become terrorists at home, but there are two important caveats to consider. The first is that most will die in combat. The second is that, given the sheer scale of mobilisation in Syria and Iraq, even if you use conservative estimates, an exceptional number will still go on to present a substantial security risk.

If 750 Britons have made their way to the conflict, between 83 and 187 can be expected to pose some form of security challenge when they return. This represents the threat from returnees only. Terrorist attacks such as the 2014 Sydney café siege and Ottawa shooting were carried out by individuals who had otherwise wanted to join Islamic State but had been unable to do so.


The US and UK are both increasingly looking towards drone technology to mitigate the threat from IS. It is unclear just how many western fighters have been killed in drone strikes, but the Conservative government is believed to have agreed on a “kill list” of British citizens.

Abu Rahin Aziz, a former credit controller from Luton, was killed in early July this year after being targeted by the US military. Although it is not known whether the request for the strike came from British officials, Aziz, in the hours before his death, had been using social media to make threats against US interests. Specifically, he had warned that IS would attack the United States on 4 July.

A few days before that, Aziz had been looking forward to the tenth anniversary of the 7/7 terrorist attacks in London. He hoped there would be more violent incidents, and boasted that IS would attack the UK, citing Covent Garden, Territorial Army offices and MPs as potential targets. And he named Theresa May, the Home Secretary, as an “enemy of Islam”.

Yet it is not just US drones that are targeting British citizens fighting for IS. In August, David Cameron took the unprecedented decision of authorising an RAF drone strike against Reyaad Khan. The 21-year-old was once a straight-A student from Cardiff who aspired to become a politician, and even Britain’s first prime minister of south Asian ethnic origin.

Like many of the young men who join IS, Khan revelled in its sadism. He boasted about executing prisoners, claimed to have participated in beheadings and warned he would become a suicide bomber. When he later tried to direct a plot to kill the Queen, David Cameron gave the order for the first targeted strike against a British citizen. Another Briton, Ruhul Amin from Aberdeen, was killed alongside him.


At the same time as RAF drones were killing Khan, the US struck against Junaid Hussain, a Birmingham-born computer hacker previously jailed for breaking into Tony Blair’s email account. He claimed to lead Islamic State’s “cyber caliphate”, an online army of hacktivists who, among other things, had hacked the US Central Command Twitter account.

All of these men tried to inspire attacks at home using both the internet and instant messaging services on smartphones, such as WhatsApp, Kik messenger, Wickr and Surespot. These play an important role in connecting IS fighters with those who cannot physically migrate to the caliphate.

Just last month, a 15-year-old boy from Blackburn was given a life sentence after pleading guilty to terrorism offences, so becoming Britain’s youngest terrorist. He had been in frequent contact with an Australian fighter, Abu Khaled al-Cambodi, who introduced him to an IS supporter in Melbourne, Australia, called Sevdet Besim. The Blackburn boy (who cannot be named for legal reasons) then began urging the 18-year-old Besim to behead a police officer during the Anzac Day celebrations, at the military parade to commemorate the first major battle fought by Australian and New Zealand forces in the First World War.

Evidence of the plot emerged following intercepted communications between the men – an issue that came into sharp relief on 4 November when Theresa May presented a draft of the Investigatory Powers Bill to parliament. Under surveillance plans being proposed by the government, details of the internet activity of everyone in the country would be stored for a year.

Concerns persist about the proposed legislation despite the Home Secretary’s attempt to create a framework of regulatory oversight while also limiting the amount of data that is captured. Much of this boils down to a debate about precisely what kind of society we want, given the need to balance civil liberties against security. The bill has been significantly watered down since May first began to formulate it, with the provision of what the independent reviewer of terrorism legislation, David Anderson QC, calls “a powerful, outward-facing super-regulator”. Judges will now have the power to block operations authorised by the Home Secretary.

Yet, for all the talk of oversight and regulation, there is much in the bill to cause alarm. One of the provisions would require companies to help the intelligence agencies hack personal devices. To that end, there has been much discussion of banning instant messaging services such as WhatsApp and iMessage, or at least the technology within them that allows for encryption.

All of this rather misses the point. Easily accessible platforms such as Twitter, Facebook and Instagram were wildly popular among jihadists operating in 2013 but have since largely lost prominence. This is the result, in part, of the social media companies actively pulling terrorist content from their own platforms; however, it is far from being the chief cause. More importantly the jihadists have lost confidence in those platforms and are migrating to new services such as Telegram.

Herein lies the challenge for Theresa May: not only has the technology already moved on but, as events in the Levant demonstrate, the threat now facing the West is diversifying, deepening and becoming ever more sophisticated. It is also a threat that has proved to be resilient and committed: having endured nearly 14 years of a so-called war on terror, global jihadism is stronger than ever.

Islamic State has captured this spirit of resolute defiance perfectly. Whenever its name is called, supporters chant: “Baqiya wa tatamaddad” – “lasting and expanding”.

Shiraz Maher is a contributing writer for the New Statesman and a senior research fellow at the International Centre for the Study of Radicalisation at King’s College London

Now listen to Shiraz discussing this piece on the NS podcast:

Shiraz Maher is a contributing writer for the New Statesman and a senior research fellow at King’s College London’s International Centre for the Study of Radicalisation.

This article first appeared in the 12 November 2015 issue of the New Statesman, Isis and the threat to Britain