Earlier this week I wrote a column, which you can read here, in which I suggested that it won’t be any of the political crises that are erupting around us that will be the defining events of our age, it will be the financial crisis. Why? Because the latter is causing the former.
The banking crisis turned sovereign debt crisis turned banking crisis (and so on) has given us two things almost guaranteed to cause political and social turmoil: quantitative easing (and hence the kind of inflation that exacerbates inequality – more on this in a later blog), and austerity.
However, you could of course say, as some readers have, that to argue it that way around is to miss the first step. Instead, says one reader, Robin Cooke-Hurle, it is the “political and cultural issues which run very deep”. With the benefit of hindsight, only action taken a good decade ago could have headed all this off.
If after the dotcom crash we had kept interest rates at historically normal levels; if we had all actually made even the vaguest of efforts to head towards balanced budgets; and if we had put in place better credit regulations, we would have missed out on a decade of binging, but we’d be in a much better place now.
This is of course entirely true – the real roots of the financial crisis (and hence today’s rolling political crises) lie in the inadequacy of our political process.
I’ve written about this in other blogs, but, as my reader says, “perhaps the true genesis of what is happening lies in the unwillingness of electors to see any trade-off between spending their own money and having public services” something that makes raising the revenue to run a modern welfare state increasingly impossible.
If corporation taxes are raised, corporations re-locate, but if you raise personal taxes or cut spending, you get voted out. It was perhaps attempts to ‘square that circle’ with an explosion of private and public debt (to say nothing of illusory wealth) that led to the financial crisis.
If you want to hear more on all this, you might head for the ERC in London tonight. The failure of politicians and the reasons why they just can’t fix the mess we are in (short answer: because they caused it) is the special subject of Guy Fraser Sampson, and he’ll be speaking there tonight. Click here for details.