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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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A nervous breakdown in the body politic

Are we too complacent in thinking that the toxic brew of paranoia and populism that brought Hitler to power will never be repeated?

The conventional wisdom holds that “all that is necessary for the triumph of evil is that good men do nothing”, in Edmund Burke’s familiar phrase; but this is at best a half-truth. Studying the biography of a moral monster triumphantly unleashed on the political and international stage points us to another perspective, no less important. What is necessary for the triumph of evil is that the ground should have been thoroughly prepared by countless small or not-so-small acts of petty malice, unthinking prejudice and collusion. Burke’s axiom, though it represents a powerful challenge to apathy, risks crediting evil with too much of a life of its own: out there, there are evil agencies, hostile to “us”, and we (good men and women) must mobilise to resist.

No doubt; but mobilising intelligently demands being willing to ask what habits and assumptions, as well as what chances and conditions, have made possible the risk of evil triumphing. And that leads us into deep waters, to a recognition of how what we tolerate or ignore or underestimate opens the way for disaster, the ways in which we are at least half-consciously complicit. If this is not to be the silly we-are-all-guilty response that has rightly been so much mocked, nor an absolution for the direct agents of great horrors, it needs a careful and unsparing scrutiny of the processes by which cultures become corruptible, vulnerable to the agendas of damaged and obsessional individuals.

This can be uncomfortable. It raises the awkward issue of what philosophers have learned to call “moral luck” – the fact that some people with immense potential for evil don’t actualise it, because the circumstances don’t present them with the chance, and that some others who might have spent their lives in blameless normality end up supervising transports to Auschwitz. Or, to take a sharply contemporary example, that one Muslim youth from a disturbed or challenging background becomes a suicide bomber but another from exactly the same background doesn’t. It is as though there were a sort of diabolical mirror image for the biblical Parable of the Sower: some seeds grow and some don’t, depending on the ground they fall on, or what chance external stimulus touches them at critical moments.

If what interests us is simply how to assign individuals rapidly and definitively to the categories of sheep and goats, saved and damned, this is offensively frustrating. But if we recognise that evil is in important respects a shared enterprise, we may be prompted to look harder at those patterns of behaviour and interaction that – in the worst cases – give permission to those who are most capable of extreme destructiveness, and to examine our personal, political and social life in the light of this.

***

It would be possible to argue that the anti-Semitism of a lot of German culture – as of European Christian culture overall – was never (at least in the modern period) genocidal and obsessed with absolute racial purity; limited but real possibilities of integration were taken for granted, converts to Christianity were not disadvantaged merely because of their race, and so on. Yet the truth is that this cultural hinterland offered a foothold to the mania of Adolf Hitler; that it gave him just enough of the permission he needed to identify his society’s problems with this clearly definable “alien” presence. In his new book, Hitler: the Ascent, Volker Ullrich compellingly tells us once again that no one could have been under any illusion about Hitler’s general intentions towards the Jews from his very first appearance as a political figure, even if the detailed planning of genocide (lucidly traced in the late David Cesarani’s recent, encyclopaedic Final Solution) took some time to solidify. Yet so much of the German public heard Hitler’s language as the slightly exaggerated version of a familiar trope and felt able to treat it as at worst an embarrassing overstatement of a common, even a common-sense, view. One of the most disturbing things about this story is the failure of so many (inside and outside Germany) to grasp that Hitler meant what he said; and this failure in turn reinforced the delusion of those who thought they could use and then sideline Hitler.

To say that Hitler “meant what he said”, however, can be misleading. It is one of the repeated and focal themes in Ullrich’s book that Hitler was a brazen, almost compulsive liar – or, perhaps better, a compulsive and inventive actor, devising a huge range of dramatic roles for himself: frustrated artist, creative patron, philosopher-king (there is a fine chapter on the intellectual and artistic circle he assembled frequently at his Berchtesgaden residence), workers’ friend, martyr for his people (he constantly insinuated that he believed himself doomed to a tragic and premature death), military or economic messiah and a good deal else besides. His notorious outbursts of hysterical rage seem to have been skilfully orchestrated as instruments of intimidation (though this did not exactly indicate that he was otherwise predictable). Ullrich devotes a fair measure of attention to the literal staging of National Socialism, the architectural gigantism of Albert Speer which gave the Führer the sophisticated theatre he craved. In all sorts of ways, Hitler’s regime was a profoundly theatrical exercise, from the great public displays at Nuremberg and the replanning of Berlin to the various private fantasies enacted by him and his close associates (Göring above all), and from the emotional roller coaster he created for his circle to the dangerously accelerated rate of military-industrial expansion with which he concealed the void at the centre of the German economy.

Theatre both presupposes and creates a public. In the anxiety and despair of post-Versailles Germany, there was a ready audience for the high drama of Nazism, including its scapegoating of demonic enemies within and without. And in turn, the shrill pitch of Hitler’s quasi-liturgies normalised a whole set of bizarre and fantastic constructions of reality. A N Wilson’s challenging novel Winnie and Wolf, a fantasia on Hitler’s relations with Winifred Wagner, culminates in a scene at the end of the war where refugees and destitute citizens in Bayreuth raid the wardrobe of the opera house and wander the streets dressed in moth-eaten costumes; it is an unforgettable metaphor for one of the effects of Hitlerian theatre. Ullrich leaves his readers contemplating the picture of a vast collective drama centred on a personality that was not – as some biographers have suggested – something of a cipher, but that of a fantasist on a grand scale, endowed with a huge literal and metaphorical budget for staging his work.

All of this prompts questions about how it is that apparently sophisticated political systems succumb to corporate nervous breakdowns. It is anything but an academic question in a contemporary world where theatrical politics, tribal scapegoating and variegated confusions about the rule of law are increasingly in evidence. On this last point, it is still shocking to realise how rapidly post-Versailles Germany came to regard violent public conflict between heavily armed militias as almost routine, and this is an important background to the embittered negotiations later on around the relation between Hitler’s Sturmabteilung and the official organs of state coercion. Ullrich’s insightful account of a de facto civil war in Bavaria in the early 1920s makes it mercilessly plain that any pretensions to a state monopoly of coercion in Germany in this period were empty.

Yet the idea of such a state monopoly is in fact essential to anything that could be called a legitimate democracy. In effect, the polity of the Third Reich “privatised” coer­cion: again and again in Ullrich’s book, in the struggles for power before 1933, we see Nazi politicians successfully bidding for control of the mechanisms of public order in the German regions, and more or less franchising public order to their own agencies. A classical democratic political philosophy would argue that the state alone has the right to use force because the state is the guarantor of every community’s and every individual’s access to redress for injury or injustice. If state coercion becomes a tool for any one element in the social complex, it loses legitimacy. It is bound up with the rule of law, which is about something more than mere majority consent. One way of reading the rise of Hitler and National Socialism is as the steady and consistent normalising of illegitimate or partisan force, undermining any concept of an independent guarantee of lawfulness in society. It is the deliberate dissolution of the idea of a Rechtsstaat, a law-governed state order that can be recognised by citizens as organised for their common and individual good. Rule by decree, the common pattern of Nazi governmental practice, worked in harness with law enforcement by a force that was essentially a toxic hybrid, combining what was left of an independent police operation with a highly organised party militia system.

So, one of the general imperatives with which Hitler’s story might leave us is the need to keep a clear sense of what the proper work of the state involves. Arguments about the ideal “size” of the state are often spectacularly indifferent to the basic question of what the irreducible functions of state authority are – and so to the question of what cannot be franchised or delegated to non-state actors (it is extraordinary that we have in the UK apparently accepted without much debate the idea that prison security can be sold off to private interests). This is not the same as saying that privatisation in general leads to fascism; the issues around the limits to state direction of an economy are complex. However, a refusal to ask some fundamental questions about the limits of “franchising” corrodes the idea of real democratic legitimacy – the legitimacy that arises from an assurance to every citizen that, whatever their convictions or their purchasing power, the state is there to secure their access to justice. And, connected with this, there are issues about how we legislate: what are the proper processes of scrutiny for legislation, and how is populist and short-view legislation avoided? The Third Reich offers a masterclass in executive tyranny, and we need not only robust and intelligent counter-models, but a clear political theory to make sense of and defend those models.

***

Theatre has always been an aspect of the political. But there are different kinds of theatre. In ancient Athens, the annual Dionysia festival included the performance of tragedies that forced members of the audience to acknowledge the fragility of the political order and encouraged them to meditate on the divine interventions that set a boundary to vendetta and strife. Classical tragedy is, as political theatre, the exact opposite of Hitlerian drama, which repeatedly asserted the solid power of the Reich, the overcoming of weakness and division by the sheer, innate force of popular will as expressed through the Führer.

Contemporary political theatre is not – outside the more nakedly totalitarian states – a matter of Albert Speer-like spectacle and affirmation of a quasi-divine leader; but it is increasingly the product of a populist-oriented market, the parading of celebrities for popular approval, with limited possibilities for deep public discussion of policies advanced, and an assumption that politicians will be, above all, performers. It is not – to warn once again against cliché and exaggeration – that celebrity culture in politics is a short route to fascism. But a political theatre that never deals with the fragility of the context in which law and civility operate, that never admits the internal flaws and conflicts of a society, and never allows some corporate opening-up to the possibilities of reconciliation and reparation, is one that exploits, rather than resolves our anxieties. And, as such, it makes us politically weaker, more confused and fragmented.

The extraordinary mixture of farce and menace in Donald Trump’s campaign is a potent distillation of all this: a political theatre, divorced from realism, patience and human solidarity, bringing to the surface the buried poisons of a whole system and threatening its entire viability and rationality. But it is an extreme version of the way in which modern technology-and-image-driven communication intensifies the risks that beset the ideals of legitimate democracy.

And – think of Trump once again – one of the most seductively available tricks of such a theatre is the rhetoric of what could be called triumphant victimhood: we are menaced by such and such a group (Jews, mig­rants, Muslims, Freemasons, international business, Zionism, Marxism . . .), which has exerted its vast but covert influence to destroy us; but our native strength has brought us through and, given clear leadership, will soon, once and for all, guarantee our safety from these nightmare aliens.

***

This is a rhetoric that depends on ideas of collective guilt or collective malignity: plots ascribed to the agency of some dangerous minority are brandished in order to tarnish the name of entire communities. The dark legacy of much popular Christian language about collective Jewish guilt for the death of Jesus could be translated without much difficulty into talk about the responsibility of Jews for the violence and poverty afflicting Germans in the 1920s. (Shadows of the same myths still affect the way in which – as recent reports suggest – sinister, vague talk about Zionism and assumptions of a collective Jewish guilt for the actions of various Israeli politicians can become part of a climate that condones anti-Semitic bullying, or text messages saying “Hitler had a point”, on university campuses.)

Granted that there is no shortage of other candidates for demonic otherness in Europe and the United States (witness Trump’s language about Muslims and Mexicans), the specific and abiding lesson of Nazi anti-Semitism is the twofold recognition of the ease with which actually disadvantaged communities can be cast in the role of all-powerful subverters, and the way in which the path to violent exclusion of one kind or another can be prepared by cultures of casual bigotry and collective anxiety or self-pity, dramatised by high-temperature styles of media communication.

Marie Luise Knott’s recent short book Unlearning With Hannah Arendt (2014) revisits the controversy over Arendt’s notorious characterisation of the mindset of Nazism as “the banality of evil”, and brilliantly shows how her point is to do with the erosion in Hitlerian Germany of the capacity to think, to understand one’s agency as answerable to more than public pressure and fashion, to hold to notions of honour and dignity independent of status, convention or influence – but also, ultimately, the erosion of a sense of the ridiculous. The victory of public cliché and stereotype is, in Arendt’s terms, a protection against reality, “against the claim on our thinking attention that all events and facts make by virtue of their existence”, as she memorably wrote in The Life of the Mind. Hitler was committed to the destruction of anything that challenged the simple self-identity and self-justification of the race and the nation; hence, as Ullrich shows in an acutely argued chapter of Hitler: a Biography, the Führer’s venom against the churches, despite their (generally) embarrassingly lukewarm resistance to the horrors of the Reich. The problem was that the churches’ rationale entailed just that accountability to more than power and political self-identity that Nazi philosophy treated as absolute. They had grounds for thinking Nazism not only evil, but absurd. Perhaps, then, one of the more unexpected questions we are left with by a study of political nightmare such as Ullrich’s excellent book is how we find the resources for identifying the absurd as well as for clarifying the grounds of law and honour.

The threats now faced by “developed” democracy are not those of the 1920s and 1930s; whatever rough beasts are on their way are unlikely to have the exact features of Hitler’s distinctive blend of criminality and melodrama. But this does not mean that we shouldn’t be looking as hard as we can at the lessons to be learned from the collapse of political legality, the collective panics and myths, the acceptance of delusional and violent public theatre that characterised Hitler’s Germany. For evil to triumph, what is necessary is for societies to stop thinking, to stop developing an eye for the absurd as well as the corrupt in language and action, public or private.

Hitler: a Biography – Volume I: Ascent by Volker Ullrich is published by the Bodley Head

Rowan Williams is an Anglican prelate, theologian and poet, who was Archbishop of Canterbury from 2002 to 2012. He writes on books for the New Statesman

This article first appeared in the 28 April 2016 issue of the New Statesman, The new fascism