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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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How the United Nations should respond in the age of global dissent

Three former UN insiders on the future of the world's most ambitious organisation. 

US President Donald Trump is ardently embracing a toxic form of messianic nationalism, while demeaning those who oppose him as corrupt, and dishonest enemies. His "America First" chant is creating severe international tension, promoting extremism - within and outside the US - and undermining the homeland security that he has so insistently pledged to enhance.

Trump seems determined to implement policies and practices that could signal the weakening of democracy, and possibly even herald the onset of fascism. His programme to deport undocumented immigrants and to exclude all visitors from six designated Muslim majority countries is illustrative of a regressive and Islamophobic outlook.

The groundswell of popular dissent is vibrant and worldwide, from Romania to South Korea, Gambia to Brazil, from the UK to the Ukraine. Trump is dangerously exploiting the frustration of citizens with the political establishment, which is unprecedented in its depth and breadth. The umbilical cord that connects those governing with those governed is becoming dangerously stressed. The digital revolution is endowing governments with horrifying capabilities for oppression and control but it is also enhancing the ability of the citizenry to mount resistance and mobilize opposition forces.

UN charter law and power politics

As UN veterans, we recall and affirm the preamble to the UN Charter that reads “we the peoples” - not we the governments! The trust of people in their governments to work for social and economic progress and to prevent war has dramatically weakened, if not disappeared.

The prediction made by the Mexican delegate at the founding of the UN in 1945 that “we have created an institution which controls the mice but the tigers will roam around freely” seems truer today than at the moment of its utterance. The UN Security Council’s permanent members – China, France, Russia, the UK and the US – indeed "roam around freely" lacking respect for international law or the authority of the UN, once more pursuing their respective nationalist agendas without any pretence of accountability. These countries are also the major consumers and exporters of military hardware, facilitating both militarism and "merchants of death".

The international war supposedly being waged against political extremism and terrorism has predictably deteriorated into a series of horrific wildfires and slaughter. Wars that should never have happened, neither the overt ones in Afghanistan, Iraq, Libya and Syria nor the partially covert ones in Yemen, Somalia, and a range of other countries in Africa and Asia have brought peace or stability, but a series of unspeakable ordeals of human suffering. Old struggles have been magnified while new ones have been created.

The US tiger, aged as it is, displays the most serious signs of political amnesia. Unilateralism and exceptionalism have just been reaffirmed as cornerstones of the current US worldview. The announced $54bn increase of the US defence budget is justified by Trump with the argument that "we must win wars again".

In contrast, the great majority of the other 192 UN member states have given notice that they clearly prefer a multilateral model premised on the equality of states and international co-operation. President Xi of China at the last Davos meeting of the global neoliberal elite gave voice to this more benign vision of world order.

The so-called "West" - the US, Canada, the EU including the UK -  is made up of 800m people, or a mere 12 per cent of the global population. These Westerners need to come to terms with growing de-Westernisation, a natural outgrowth of globalisation in all sectors of life.

Wise global leaders would respond by seeking an immediate realignment of international relations with a commitment to the promotion of principles of convergence, cooperation, and compromise. The objective would be a new world order based on mutual benefit, sustainability, prudence as well as a demilitarizing ethos.

The UN Security Council is the most important venue for making such an undertaking happen. It is here that bilateral and multilateral diplomacy takes place in a global setting. The primary goal remains to prevent the emergence of a world in which drones replace diplomats and inequality continues to undermine wellbeing.

The UN and civil society

The peoples of the world are confronted by a series of challenging global developments. Tectonic political changes are taking place in the US, Europe, and Asia, along with unresolved crises in the Middle East, Africa, and South Asia, and the formidable speed and effects of easternisation. Prospects for a politically effective UN, and most especially a robust UN Security Council, seem bleak - but hardly impossible. Globalisation potentially supports innovative expressions of multilateralism that are more oriented than in the past towards the global and human interest. The 2015 Paris Agreement on Climate Change is illustrative of such a hopeful turn.

The UN and Trumpism

It is our hope that Trumpism will not succeed in relegating the United Nations to a fringe role. The Mexicans refuse to pay for the wall that the US President insists on building, the UN will bear the costs of the invisible wall Trump and a subservient Republican Congress seems determined to construct between the US and the UN. If Washington goes ahead with its threats to reduce drastically UN funding and end cooperation with and participation in various UN organs, it should certainly be viewed as a significant setback for both the UN and its current US adversary. While we are confident that the UN as an institution would survive these financial and political setbacks, we are not so sure that Trumpism will long endure.

"Alternative facts" are set forth to demonstrate that the US is making sacrificial and disproportionate contributions to keep the UN alive. Real facts show a different picture: In 2016 the US Federal budget amounted to $3.2trn. The US assessed share of the UN budget of $2.7bn was $594m or 0.0019 per cent of the US federal budget!

At no time have US/UN relations been smooth. During the more than 70 years that they have travelled the same road, there have been many potholes along the way. The US often has been heavy-handed in a manner by which it exerted its influence on the UN’s agenda. It has often used its political leverage to weaken the organisation’s independence. Over the years it has manipulated the selection processes used to fill UN leadership positions. Washington has frequently flexed its muscles by delaying the annual payment of mandatory contributions to the UN budget. The US government has set some terrible examples by repeatedly violating the most fundamental provisions of the UN Charter governing the use of force. It has continuously defied international law in all parts of the world, including wars in Vietnam (1963), former Yugoslavia (1999), Afghanistan (2001), Iraq (2003), and Libya (2011). It has used its veto power in the UN Security Council to shield its allies from justifiable UN censure, while doing its best to punish its enemies with the threat of force.

West-centrism, alliances and UN multilateralism

Polarisation, alliance formation and West-centrism were central to the transformation of NATO from a Cold War arrangement intended to defend Europe from a Soviet attack to an American led global domination project with Europe as the junior partner. In this wider geographic setting the expanding eastern Shanghai Cooperation Organisation (SCO) can be understood as a geopolitical countermove led by China, which also has its own disturbing implications. In the face of these geopolitical initiatives, it becomes clear that the United Nations is being pushed to the outer margins of world politics in precisely those areas of peacekeeping and global security that were regarded as its primary mission when established in 1945.

The new US administration seems likely to fulfill another of President Trump’s ill-considered campaign promises to make a series of moves to weaken multilateral problem-solving even beyond damaging the UN. These dangerous and irresponsible manoeuvres may fail, as many governments around the world fully understand that multilateral diplomacy has become indispensable, and indeed needs to be strengthened to meet the global challenges facing humanity. It is our fervent hope that these governments will mobilise sufficient energy to rescue the UN in this hour of need. Dutch and Belgian authorities give us some slender hope that this might happen. The Netherlands goverment has already agreed to replenish funds if withdrawn by the US from certain international population programmes. Yet this is only a small and suggestive gesture of what must become a groundswell of support for the UN that will be needed to overcome the damage expected to be inflicted by this anti-UN activism of the US.

The politics of populism

What now appears to be a wave of resurgent nationalism around the world contains the potential to become a new internationalism. We have served in many parts of the world under UN auspices and therefore are keenly aware of the widespread anger and sharp demands for justice present among the peoples spread around the entire planet. These discontented multitudes share many of the same goals: peace, equity, an end to corruption, freedom from fear and want, the rule of law, accountability, and above all, a life of individual and collective dignity. In February 2017, during a meeting of the EU heads of government held in Malta, profound anxieties associated with political changes taking place in Washington were addressed. European leaders strongly reaffirmed their joint commitment to common principles and values as the continuing basis for interacting with the United States and the world, and in this way respond to the challenges being mounted by this ultra-nationalist thinking.

We believe that recent developments in Europe, the Middle East, and especially in the United States are reaching a boiling point. Many citizens are outraged and ready to challenge intolerable aspects of the global status quo. More than ever, Immanuel Kant’s wisdom is relevant and needed, especially his admonition to have the courage to use our brain for the construction of a benevolent public reality. In a similar spirit, we are encouraged by Hannah Arendt’s unforgettable reminder that “thinking gives people that rare ability to act when the chips are down!” And act we must.

The urgency of UN reforms and the incoming UN Secretary-General

For the political organs of the United Nations (the Security Council and the General Assembly) to play an influential role in conflict resolution in the 21st century, governments will have to act with resolve to overcome some formidable challenges. Such a resolve must include the renewed political determination by member governments to look afresh at some major UN reform proposals that are now collecting dust on the shelves of the UN Dag Hammarskjold Library in New York.

Let us also not forget that the UN is the most inclusive global institutional body that has ever existed. It is the only place on earth where there are, and can be, no foreigners. The UN therefore is the obvious venue at which to reflect upon how the increasing number of people throughout the world who have become forgotten could be given new and alternative perspectives.

The recently elected UN Secretary-General, António Guterres, if he acts to fulfil his role as the guardian of charter norms and values, including respect for international law, will face a daunting challenge. He will have to be prepared to remind the US administration and other political leaders of major UN members that peace can only be achieved when unilateralism gives way to genuine multilateralism, when monologues are replaced by dialogues, when convergence, cooperation, and compromise prevail, when civil society is respected and allowed to participate within the organisation, when root causes, not just symptoms, are recognised and understood and most importantly, when governmental decision makers, whether from large or small Member states, show respect for international law and are held accountable for their acts.

The peoples of the world need the United Nations more than at any time since 1945, the year the organisation was established “to save succeeding generations from the scourge of war". Only a strengthened, respected, and sufficiently funded UN can provide mechanisms for upholding global and human interest. It must not allow itself to serve any longer mainly as a vehicle for the aggregation of national interests, or worse, as an instrument of power to be deployed by the geopolitical giants, and especially by the United States.

The multiple challenges associated with climate change, nuclear weapons, sustaining biodiversity, and lessening global inequality put the future of civilization at great risk, and even endanger the survival of the human species. At such a time, we can only hope that enough political leaders are alert to this menacing situation, are emboldened by their citizens, and act with resolve and courage to create an alternative future for humanity that is responsive to the claims of peace, justice, sustainability, and community.

More than ever before in human history the peoples of the world are being severely challenged by problems of global danger that can only be solved globally. The best hope of humanity to meet these challenges is to abandon unilateralism and isolationism and instead empower the United Nations to become at last an effective mechanism for the protection of “fundamental freedoms for all without distinction as to race, sex, language, or religion”.

Hans-C. von Sponeck served in the UN from 1968 to 2000, from 1998 to 2000 as the UN Humanitarian Coordinator for Iraq and UN Assistant Secretary-General. Richard Falk is Milbank Professor of International Law Emeritus, Princeton University and served as UN Special Rapporteur between 2008 and 2014. Denis Halliday served in the UN from 1964 to 1998, from 1994 to 1998 he held the position of UN Assistant Secretary-General and UN Humanitarian Coordinator for Iraq.