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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

    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

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From wars to power ballads: the geopolitics of Eurovision

As the prospect of Brexit looms, the Eurovision song contest can tell us a lot about our place in Europe.

On the night of 14 May, a 92-year-old woman will be sitting somewhere in the Globe arena in Stockholm, amid glitter cannon and hopeful singers dressed in gauze. Her name is Lys Assia, and she was the winner of the first Eurovision Song Contest, held in the Swiss resort of Lugano in 1956. She will be attending this competition as its guest of honour.

In the past few years, “Lys’s List” – the 20 songs Assia believes have a chance of claiming the (cashless) prize and bringing the contest to their country next time – has become a tradition. Perhaps surprisingly, her 2016 selection is led by Malta, the tiny archipelago with a population of 414,000. Less surprisingly, it does not include the UK, a country of 64 million people.

Britain’s relationship with Eurovision is more tortured than anything involving this many sequins has a right to be – halfway between a superiority and an inferiority complex. Our attitude towards the music produced by the rest of the continent
was summed up by the New Yorker’s Anthony Lane in 2010, when he wrote that European pop “‘was all created by the great God of dreck, and Eurovision is his temple”. The problem is this: if the song contest really is just a camp parade of mediocre warbling, interspersed with yokels in twee national costume . . . why can’t we trounce the lot of them?

Even worse for a nation swollen with a maudlin sense of decline, Britain used to do far better. We have won five times in all, trailing behind only Sweden, Luxembourg and France (six) and Ireland (seven). Before 1999, we finished outside the top ten only twice; what screwed us over was the rule change that year which stopped countries having to sing in their national language. (Side note: the 1974 winner, “Waterloo”, which launched Abba’s career, sounds amazing in the original Swedish. It begins: “Jo, jo, vid Waterloo Napoleon fick ge sig . . .”) In all, songs in English have now won 26 times, but Britain hasn’t had a winner since 1997, when it sent Katrina and the Waves, whose earlier hit “Walking on Sunshine” has surely flogged a thousand high-fibre breakfast cereals in its time. We have, however, come last three times since then.

In the year of a Brexit referendum, the parallels between Eurovision and the European Union are too obvious to avoid. Both started small – six nations signed the Treaty of Rome in 1957, and the song contest had seven competitors in 1956. (Britain was not a founder of either, joining the European Community in 1973 and missing the first Eurovision by filing its papers too late.) Both are now bigger than originally envisaged: 52 countries have competed in Eurovision at least once, and today the EU counts 28 members. In the mid-2000s, both expanded east, provoking the same fears about identity and a shift in power. Both have struggled to negotiate where Russia ends and Europe begins. Oh, and both have Byzantine voting procedures, the European Parliament favouring the proportional d’Hondt system, and Eurovision choosing from this year to record the votes of juries and the public separately, rather than combining them before dishing out the points.

Yet there is one big difference. Eurovision has far greater popular appeal. Although only 6.6 million Britons watched last year’s final in Vienna, compared to the 16.5 million who voted in the European Parliament elections in 2014, the winners of the former often have more name recognition. Abba, Céline Dion (drafted in by Switzerland from Canada in 1988 to sing in French), Lordi, Conchita Wurst, Bucks Fizz . . . versus Jean-Claude Juncker, Jeroen Dijsselbloem and Jacques Delors. No contest.

So when did Britain, which once sent Cliff Richard and Sandie Shaw to Eurovision, fall out of love with the contest? And when did the contest fall out of love with Britain? The temptation is to follow the line advanced by the long-term Eurovision commentator Terry Wogan and claim that it’s all political. Countries support their neighbours – Scandinavia and the former Soviet states in particular – and diasporan voters support their home countries. After the former X Factor contestant Andy Abraham, the “singing binman”, came last in 2008, Sir Tel declared that it was “no longer a music contest”. Russia had received maximum points from Estonia, Latvia, Lithuania, Ukraine, Belarus and Armenia (can you spot a theme?) while the UK received just 14 points in total. “Western European participants have to decide whether they want to take part from here on in because their prospects are poor,” Wogan said.

There are many academics who study Eurovision – oh come on, don’t tell me you’re surprised – and they take issue with Sir Terry’s analysis. In an essay titled “‘It’s Just Not Funny Any More’: Terry Wogan, Melancholy Britain and the Eurovision Song Contest” the Canadian critic Karen Fricker attributes Sir Terry’s grumpiness to ­“feelings of unprocessed anger, frustration and loss about the country’s changing relationship to Europe and the rest of the world”.

To Fricker, Wogan’s “increasingly paranoid tales of political voting conspiracies” were unsubstantiated: statistical analyses suggest that neighbour voting, though it undoubtedly exists, does not influence the final choice. Russia’s triumph in 2008 was the result of a “focused, well-researched, and well-funded campaign on the part of Russian political and broadcasting elites to master the codes of Eurovision ­success”, rather than frightened satellite states awarding douze points in the hope of not having their gas supply cut off. If we took the competition more seriously, we would do better. (Insiders are fond of pointing out that Britain’s record of bumping along the bottom of the table was alleviated in 2009 when we entered a song by Andrew Lloyd Webber, a writer with undoubted commercial appeal.) In other words: send for Adele!

The Irish journalist Julian Vignoles, who sat on Eurovision’s ruling body, the Reference Group, agrees. Since televoting began, Germany has given high points to Turkey, and Spain to Romania – reflecting diasporan populations “voting home”. But he points out that some neighbour voting springs from a shared language and culture: a big pop star in Serbia will be known in other parts of the former Yugoslavia.

Vignoles also has harsh words for Wogan: “There has been something of a bias against former communist countries and their efforts at popular music by some Western commentators – a kind of ‘Western chauv­inism’,” he writes in his 2015 book, Inside the Eurovision Song Contest. “This, I believe, is partly a taste issue.”

Whatever the truth, by 2009 Wogan had had enough. He vacated the presenter’s chair – now occupied by Graham Norton – and told a conference of Broadcasting Union bigwigs that the contest should not be “an opportunity to show your neighbours how much you love them. It is about picking the best popular song in Europe.”

It isn’t, though, is it? The Eurovision Song Contest is unavoidably political, because it presumes to rule on what counts as a country, and what counts as Europe. Take the inclusion of Israel, which has long baffled casual viewers. It gets a place because it’s a member of the European Broadcasting Union (EBU), which stretches from Iceland to Egypt and as far east as Azerbaijan.

To get into the EBU, a country must be within the European Broadcasting Area, or a member of the Council of Europe, and it must pay its dues. At present, Palestine and Kosovo do not meet the first of these criteria, and Romania falls foul of the second. (It owes the EBU 16 million Swiss francs – £11.4m – and has therefore been cast out of the 2016 competition.) Syria could enter, but understandably feels it has bigger fish to fry. Lebanon almost entered, once, in 2005, but had to withdraw when its national broadcaster refused to transmit the Israeli entry.

Exactly how thorny the issues involved can be was demonstrated on 30 April, when the venue for this year’s competition in Stockholm accidentally published a draft list of banned flags. The Palestinian flag was not allowed in the arena, it declared, alongside that of the Basque Country, the Welsh dragon and Scottish saltire – and nor was the black flag of Islamic State. Rainbow flags, a popular symbol of the LGBT rights movement, are permitted as a symbol of diversity, but only if they are not wielded “as tool to intentionally make a political statement” (in other words, while booing Russia).

Unsurprisingly, grouping together gay rights campaigners, Isis, Scottish nationalists and Basque separatists managed to upset just about everyone. The document was hurriedly unpublished, but the ban on “regional” flags remains. And the one on Isis.

If you think getting worked up about rectangles of cloth sounds awesomely petty, that’s just the beginning. In 2009 Azerbaijan and Armenia decided that the song contest was the perfect forum for their long-running dispute over the contested Nagorno-Karabakh region. During rehearsals, Azerbaijan complained that the introductory “postcard” to Armenia’s song contained footage of a statue in territory it claims as Azeri; the section was duly removed. Armenia was not beaten that easily: on the night of the final, its presenter read out the results from a clipboard adorned with a picture of the statue.

The fight didn’t stop there. It soon turned out that the Azerbaijani broadcaster, Ictimai Televiziya, had also blurred out the number to vote for Armenia from its terrestrial signal. Then in August that year, the ministry of national security in Baku summoned several Azeri citizens who had voted for Armenia to explain themselves. Eurovision threatened to ban Azerbaijan from the contest, but in the end settled for “undisclosed” damages and a rule change designed to ­suggest that countries probably shouldn’t set their secret police on citizens who vote in unpopular ways.

Talking of unpopularity, it’s probably a good time to mention Russia. That vast state has an uneasy relationship with Euro­vision. On the one hand, it clearly wants the prestige of winning (as it did in 2008) and when it hosted the competition in Moscow the following year the Russian government spent a record €35m. (It recouped only €8.9m in ticket sales, sponsorship and payments from the EBU.) Yet in the past decade, Russia has also brought in draconian anti-gay laws and banned Moscow’s Pride march. This has not gone unnoticed among the competition’s many LGBT fans. And make no mistake: Eurovision is pretty gay. One super-fan told me that when he arrived in Ukraine for the 2005 competition, there were “lots of women sitting on their own in the bar; we assumed they were prostitutes. But by the third night, they had realised they wouldn’t make any money, ­because the men were all gay.” Hence the ban on passive-aggressive rainbow flag-waving and the suggestion that last year’s contest in Vienna deployed “anti-booing” technology to drown out any protests.

Russia’s imperialist ambitions also make it unpopular. In 2008, Vladimir Putin’s government backed the creation of breakaway republics in South Ossetia and Abkha­zia, leading to a short war with Georgia. The next year, Georgia was told to amend the lyrics to its Eurovision entry, “We Don’t Wanna Put In”, after organisers saw through the cunning coded message of its chorus: “We don’t wanna put in/ The negative move/It’s killin’ the groove . . . Put in/Don’t wanna put in.”

***

“War is the continuation of politics by other means,” the Prussian general Carl von Clausewitz once wrote. Defenders of the European Union often point to its success in bringing decades of peace to a troubled continent, but perhaps it’s time to acknowledge that the Eurovision Song Contest has become a continuation of war by other means. The organisers of the competition are never going to succeed in making it apolitical, or “about picking the best popular song in Europe”, because an audience of 200 million people is too big an opportunity for any pressure group to pass up.

In 1956, no one could have predicted that the premier arena for political statements about European identity would be a music contest variously won by a bearded drag queen, a Finnish heavy metal group and a temporarily Swiss Céline Dion, but there you go. Still, no matter how much you hate disco or power ballads, they are infinitely preferable to a ground invasion. We should probably just let the Russians win it every year to keep them happy.

As for who will win this year, an insider tells me to look carefully at Australia, which came fifth in 2015 (I know, I know. Not even the EBU’s definition of Europe stretches that far; it was invited as a “special guest”). I like the idea of Australia taking the prize, for two reasons: a) shipping the whole circus to Sydney next year would be appropriately bonkers; b) a load of academics would have to come up with a grand thesis for What This Says About Being European Today.

The answer to that, I suspect, is that being European is about being part of a club that half a dozen countries are queuing up to join, but Britain regards as vaguely below its dignity. Which is why I’ll be voting Remain in June, even if I wouldn’t vote for our Eurovision entry, Joe and Jake, who appear to be two prepubescents with a guitar and the pained expressions of the severely constipated. And why, frankly, I would like to see Jean-Claude Juncker rock big hair and a sparkly jacket more often.

The Eurovision semi-finals will be broadcast on BBC4 on 10 and 12 May (8pm), and the final on 14 May (BBC1, 8pm)

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 05 May 2016 issue of the New Statesman, The longest hatred