Show Hide image

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

    0.5%

    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

    $9.7trn

    Total pledged by the US alone towards solving the crisis

    3.6%

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

    2.3m

    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

    14

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

    200,000

    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

    52%

    Increase in UK company failures between late 2007 and late 2008

    14%

    Drop in level of Chinese exports during January

    1%

    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

Andre Carhillo
Show Hide image

The decline of the Fifth Republic

With the far right and far left surging in the run-up to a defining presidential election, the French seem intent on blowing up the political establishment.

On a cold Saturday evening in late February, cycling back to my flat in southern Paris, I accidentally ran into a pack of lads on a rampage. They were turning over bins, kicking over expensive motorbikes parked on the street, and obviously looking for someone to fight.

It wasn’t the first time that I’d seen this sort of thing, even in this relatively gentrified part of the city. Usually the best course of action is to stop, let them swarm past and allow the police to do their job. But on this particular night, although I could hear the buzz of a police helicopter above us, there were no officers on the ground. As I nervously became aware of this, one of the lads, no more than five yards away, looked at me and screamed: “T’es qui toi?” (“Who the f*** are you?”). His mates turned and gathered round. Now panicking, I saw that he was pointing a screwdriver at me.

I pelted down the street, heart racing as the young men followed me, so shocked that when I reached my apartment building I twice tapped in the wrong entry code. It was only once indoors, now safe but genuinely scared and sweating, that I understood what had happened.

This was a gang from one of the local ­cités – council estates – that border this part of Paris. They had been flushed out of their normal dens, where they deal in weed and mess about, by police using helicopters and unmarked cars, and were now taking their revenge on these unfamiliar surroundings. When they saw me, a tall, white, male figure, watching in the dark on my bike (stupidly the same dark blue as a police bike), they assumed I could only be one thing: a police spotter. In other words, their most hated enemy.

In the past few weeks, in Paris and across France, there has been a new and special danger in being identified by such gangs as a lone policeman. This is because the ever-present tensions between police and the youth of the cités have become particularly acute following the so-called Affaire Théo. On 2 February in Seine-Saint-Denis, north-east of Paris, four police officers violently attacked an innocent black man, identified only as Théo. The assault was caught on camera and allegedly involved the man’s “rape” with a telescopic baton.

The details of the case caused widespread outrage, right up to the highest level of ­government. In the banlieue, the suburbs where many young people feel excluded from mainstream French life, some felt a desire for revenge. And though their anger related to a specific incident, it was in keeping with the emotions sweeping across France, at all levels of society, in the lead-up to the first round of this year’s presidential election on 23 April.

***

France is in a state of political disarray. This much was obvious during the first live “great debate” on 20 March, organised by the television channel TF1, featuring five front-runners for the presidency.

Probably the greatest loser on the night was François Fillon of the centre-right party les Républicains, who served as prime minister from 2007 to 2012. Fillon has gone from being a sure favourite to outsider in the presidential contest, following allegations of dodgy financial dealings. Most damagingly, a formal judicial investigation has been launched into reports that he paid upwards of €800,000 of taxpayers’ money to his wife and other family members for jobs they didn’t actually do. Fillon, who denies any wrongdoing, has also been accused of failing to declare a €50,000 loan from a French businessman in 2013 (which he has since repaid). He held himself in check during the debate, trying to look dignified and presidential, but he has become the object of scorn from all sides, including his own.

Benoît Hamon, the candidate for the Parti Socialiste (PS), the party of the outgoing and discredited president, François Hollande, did not perform much better in the debate. Hamon identifies with the far left and green wings of the PS and favours a basic income, the legalisation of cannabis, and euthanasia. He resigned from Hollande’s government in 2014 claiming that the president had abandoned socialist values. But at every public appearance Hamon still looks surprised to be in the race. Although he has positioned himself as the “anti-Hollande” candidate – no surprise, as Hollande has the lowest polls ratings of any French president – even Hamon’s supporters concede that he has no reach outside the party faithful, and his dismal poll ratings reflect this.

In recent weeks, Jean-Luc Mélenchon, a veteran left-winger and now leader of his own party, France Insoumise (“Unsubmissive France”), has surged in the polls. He has been compared to Jeremy Corbyn but is more like George Galloway, in that he can be trenchant and biting and speaks fluently without notes. Some of his views – anti-EU, anti-Nato, pro-Russia – are close to those of Marine Le Pen, the leader of the far-right Front National (FN). The candidate of the centre or centre-left is Emmanuel Macron, a 39-year-old former investment banker and protégé of Hollande, under whom he served as minister of the economy, industry and digital data. Macron broke with the PS in 2016 to set himself up as an independent candidate with his new movement, En Marche! (“onward”). He presents himself as a voice of moderation and common sense. He defends the EU and the eurozone and is an unashamed liberal globaliser. But Macron is also hard to love: his enemies claim that he is self-serving, an opportunist who cannot be trusted, and, worse, that he lacks experience of high office. On television he can be vain and testy – as was the case when he came under attack from Marine Le Pen, during the TF1 debate.

In many ways, Macron was a gift to Le Pen. She accused him of being out of touch and of not knowing what he was talking about. Even non-FN supporters, who didn’t necessarily agree with her views on security and immigration, conceded that Le Pen was the most convincing speaker. As I was told by a neighbour with an impeccable PS background, it was as if she was the only politician on the night of the debate in charge of what she believed. Le Pen’s popularity increased as a consequence.

So is it now possible to think the unthinkable: that Marine Le Pen could triumph not only in the first round of the presidential election but in the second as well? If that happens, not only would she become the first female president of France but she would transform French politics and further destabilise the European Union.

***

When I put this to Jean-Pierre Legrand, the leader of the Front National in Roubaix, a town of 90,000 inhabitants in the north of France, he shook his head. He wishes Le Pen well but fears that in the second round the mainstream parties will gang up and back whoever her opponent is. “This is what always happens,” he told me. “This is why so-called French democracy is actually a form of dictatorship. You can never really get your hands on power. It belongs to an elite, people like Emmanuel Macron.”

Legrand, 69, has been a supporter of the FN for decades. He smiles a lot and can be witty, but he also likes talking tough, like the hard-headed factory boss he used to be. He admires the way Le Pen has reinvented the party, shedding some of the old-school neo-Nazi trappings. But he is also faithful to, maybe even nostalgic for, the old FN of her father, Jean-Marie Le Pen, who reached the second round of the 2002 presidential election (he lost to the centre-right Jacques Chirac). So I asked him if he was not really a democrat but, like Le Pen père, basically a fascist. “I am not afraid of being called a fascist, or even a Gaullist,” he said. “But all I really believe in is order and authority. And that is what France needs now.”

I had come to Roubaix because it is officially the poorest town in France. It is also, according to most media reports, one of the most troubled. It’s not far from Paris – just over 90 minutes on a fast train – but when you get there it feels like a different, distant place. The train station is scruffy and there is little sense of the usual Gallic civic pride; the stroll down the main boulevard to the Grand Place is drab and quiet, unlike in most French towns.

Roubaix has a large immigrant population, mainly from North Africa but comprising more than 60 nationalities. It has a reputation as a refuge for illegal migrants making for Calais and then the UK, and as a hotbed of Islamist radicalisation. In May last year the conservative news weekly Valeurs actuelles described Roubaix as “le Molenbeek français”. The magazine was referring to the suburb of Brussels where several of the terrorists and sympathisers involved in the November 2015 attacks on Paris, which killed 130 people, including 89 at the Bataclan concert hall, grew up.

Legrand and his FN colleague Astrid Leplat offered to show me around the town, just as they had done with the writer from Valeurs actuelles. The article was criticised by the local newspaper La Voix du Nord as depicting a fantasy version of France conjured up by the FN. I was aware of this argument, but also keen to take up the offer of a tour: it was a rare chance to see an ordinary French town through the eyes of the FN.

I quite liked Roubaix. With its sooty terraced houses, empty textile mills, iron bridges and dirty canals, it reminded me of Salford in the 1970s. The town is neatly laid out even if the streets are scruffy. It is also busy with small businesses – Arabic-language bookshops, kebab houses and tea shops, as well as traditional French cafés and bistros. It looked no more menacing than Bradford or Rusholme in Manchester.

Legrand is proud of Roubaix, or at least of what Roubaix used to be, and has chosen to live here rather than in nearby Lille. Having been a blue-collar worker, too, he admires the noble ambitions and graft of the people who built the town. These were the original indépendants – the aspiring working class, much cherished by the FN, who believe in the values of hard work and public service. But Legrand told me that when he looks at the streets today he sees not the cluttered life of 21st-century, multicultural France but what he called “conquered territory”.

There are problems in Roubaix: 45 per cent of the town’s residents live below the official French poverty line of €977 a month. Describing the local poverty, Legrand used the term “misère”, a word that also translates as “wretchedness”. The unemployment rate is high (40 per cent in parts of town) and on a typical weekday afternoon there are many young men sitting around with nothing to do.

As we drove through some of the tougher areas, Legrand pointed out so-called Salafist mosques, most of them shielded from the streets by the high walls of disused factories. It is these places, unknown and unvisited by outsiders, which have given Roubaix its reputation for radicalism.

It is true that in the recent past Roubaix has produced many extremists. The most notorious is Lionel Dumont, a former soldier who is white and working class, and is viewed as the leader of radical Islam in the French prison system, where he is serving a 25-year sentence for terrorism offences that include trying to set off a car bomb during a G7 meeting in Lille in 1996. Islamists such as Dumont are, in effect, beyond the control of the penal authorities because French laws forbid the monitoring of prisoners on grounds of race or religion. One frustrated director of prisons in the Paris region complained to me that the French penal system was “the real engine room of radicalisation”.

The main reason why Roubaix has produced so many terrorists – including Mehdi Nemmouche, the gunman who fired the shots at the Jewish Museum in Brussels in May 2014 that killed four people – is not immigration, as the Front National would have it, but geography. This part of France is depicted in the media as “a security black hole”, partly because of its proximity to the Belgian border. You can drive into Belgium from Roubaix in ten minutes, as I did with Legrand; the border is just a roundabout and unmonitored. The French and Belgian intelligence services are minutes away from each other but do not share information or collaborate properly. This allowed some of the terrorists who led the 2015 Paris attacks to escape after the killing spree.

***

Crossing the border to Belgium, you notice that the roads are lined with gleaming new warehouses belonging to Amazon and other technology companies. ­Roubaix suddenly seems like a ruin from the early 20th century. It must be difficult for its people not to feel trapped and abandoned – by the French elite to the south and the new economy to the north.

“If you live in Roubaix it is hard to feel connected to the rest of France,” said Hélène Robillard, a junior civil servant. I had come across her in the centre of town. She was leading a group of young women, merrily banging tambourines, blowing whistles and chanting slogans outside one of the
offices of the local council. They were striking against work conditions at the council, but having a laugh, too, in the best Made in Dagenham style.

I asked the women about the film Chez nous (This Is Our Land), which had been released only a few weeks earlier and was playing to packed houses across France. Set in a fictionalised town much like Roubaix, it tells the story of a young woman, Pauline Duhez, a nurse who is seduced into joining the FN and standing for a seat on the council. As she learns the party’s true positions, she becomes disillusioned and angry. The film ends with Pauline returning to the socialist values of her unemployed father, a former steelworker, culminating in a family trip to watch a game featuring the local football team Lens.

The women protesting with Robillard were all determinedly anti-FN. Those who had seen the film were full of enthusiasm. “It is our real life,” said one of them, laughing. “It shows our true values – not fascism, but football, beer and chips.”

Like Pauline in the film, the FN’s Astrid Leplat is a nurse. Jean-Pierre Legrand explained to me that this was why she had been hand-picked by Marine Le Pen to stand
as a regional councillor. The party has adopted a policy of recruiting fonctionnaires (civil servants), especially those who work in the health and support services. This is partly to demonstrate that the FN has left behind its neo-Nazi origins and is now the party of everyday folk, but also to undermine PS dominance of the public services.

When I asked Leplat why she supported the FN, she said that she had witnessed the disastrous effects of repeated budget cuts on hospitals, with overstretched departments and increasingly run-down facilities. “The Front National are there to protect us,” she said.

Leplat told me she hadn’t seen Chez nous and that she probably wouldn’t, because it would upset her. There were also political reasons why she didn’t want to see it: it had been financed with public money from Hauts-de-France, the northern region that covers Roubaix, as well as the television companies France 2 and France 3. When I pointed out that most French cinema relies on public subsidy, she argued that the film’s release had been deliberately timed to undermine the February launch of the FN’s presidential campaign.

“How else can this be explained?” she said. “The Front National is always persecuted by the establishment elites in culture and politics.”

***

Back in Paris, as part of a documentary I was making for BBC Radio 4, I interviewed Émilie Dequenne, the actress who plays Pauline in Chez nous, and the film’s director, Lucas Belvaux. We met at the production company’s office just off the rue du Faubourg Saint-Honoré in the swish heart of Paris – a corner of the city that couldn’t be further removed from the streets of Roubaix. But both Dequenne and Belvaux are intimately connected with the region and the northern working-class life, because they grew up near the Franco-Belgian border and still have family ties there. I asked them whether the FN had a point about the film.

“The film is not ambiguous,” Dequenne said. “It is clearly a warning about being ­seduced by the far right. But it also has lots of [different] ambiguities. The main character, Pauline, is a good person, and not stupid. She wants to help people. She thinks that this is not the case with the main pol­itical parties. So she is attracted by a party that seems to care.”

“I agree it is a warning,” Belvaux said. “We are not yet a fascist country, but I do fear that this could happen.

“There are big social and cultural divisions in France. Not everybody who will vote for the Front National is a bad person, but there are many angry people in this country who feel hurt and damaged. When this is the case, fascism can arrive much more quickly than you think.”

Until now, voting for the FN has been a sign of protest, historically a safety valve for releasing discontent. Whenever the FN has got near to victory, right and left have come together as a bloc to exclude it from power. This is what happened in 2002, of course, when Jean-Marie Le Pen, the then leader of the FN, made it through to the second round of the presidential elections. Jacques Chirac won the run-off with 82 per cent of the vote, despite accusations of corruption. The rallying cry across all non-FN political lines was: “Vote for the crook, not the fascist!” Yet there is no guarantee that this will happen again, because Marine Le Pen has successfully reinvented and rebranded the FN, making it more acceptable to mainstream voters.

Even if Marine loses, there is another danger. If those French parties of the left and right which historically have been strongest continue to implode, there will be a new constituency of voters who in future will be “homeless”. Even if Macron wins – having blurred the lines between right and left – he will disappoint at some stage. When this happens, those who supported him may not find their way back to the established parties, thus opening up an avenue to power for the far right. Sylvain Bourmeau, an associate professor at the École des Hautes Études en Sciences Sociales in Paris, told me that this was part of the Front National’s long-term strategy.

The withering of a historically strong party has already happened in the UK, where voters’ movement to Ukip and the SNP has undermined, if not destroyed, Labour as a national force. Marine Le Pen has already voiced her admiration for Ukip for “breaking the mould”. However, it is important to remember that the FN is not “populist” in the way that Ukip, or indeed Donald Trump, is. Nor are Roubaix and the north of France the same as the “rust belt” of the United States.

Rather, the present conflicts in France are ideological, with roots in the antagonisms and turmoil of French history. The FN’s ultimate goal is to get rid of the present French Republic – the result of the “mistake” of the “liberal revolution” of 1789. In other words, the promise of liberté, égalité, fraternité is to be replaced by an “awakening”, which would lead to a “national movement”: that is, the rebirth of the French nation. The FN is not just about racism, immigration or identity: it wants to send French history into reverse gear.

That is how high the stakes are, and why the coming elections are the most important in France since the Second World War. There is a generalised tension right now – the tension that I encountered on my bike on my own street in southern Paris – which sometimes finds expression in gang violence, anti-police riots and even terrorism, all fuelling the rise of the FN.

For all the polls, signs and omens, it is ­impossible to predict the election result. Whatever happens in the coming weeks and months, with the old political certainties melting away, it seems more than ever that France is set on a long and unstoppable journey into darkness. L

Andrew Hussey is the author of “The French Intifada” (Granta Books). He lives in Paris. His documentary “Culture, Class and Le Pen” will be broadcast on BBC Radio 4 on 24 April (8pm)

This article first appeared in the 20 April 2017 issue of the New Statesman, May's gamble

0800 7318496