The age of turboparalysis

Why we haven’t had a revolution

15 December 2012

9:00 AM

15 December 2012

9:00 AM

More than half a decade has passed since the recession that triggered the financial panic and the Great Recession, but the condition of the world continues to be summed up by what I’ve called ‘turboparalysis’ — a prolonged condition of furious motion without movement in any particular direction, a situation in which the engine roars and the wheels spin but the vehicle refuses to move.

The greatest economic crisis since the Great Depression might have been expected to produce revolutions in politics and the world of ideas alike. Outside of the Arab world, however, revolutions are hard to find. Mass unemployment and austerity policies have caused riots in Greece and Spain, but most developed nations are remarkably sedate. Scandal and sputtering economic growth appear unlikely to prevent another peaceful transition of power within the Communist party of China. And in the US, the re-election of President Obama and the strengthening of his Democratic party in the US Senate reflect long-term demographic changes in an increasingly non-white and secular American electorate, not the endorsement of a bold agenda for the future by the Democrats. They don’t have one.

In the realm of ideas, turboparalysis is even more striking. On both sides of the Atlantic, political and economic debate proceed as though the bursting of the global bubble economy did not discredit any school of thought. Right, left and centre, the players are the same and so are their familiar moves. Public debate is dominated by the same three groups — market fundamentalists, centrist neoliberals, and mildly reformist social democrats — who have been debating one another since the 1980s. Someone who went to sleep like Rip Van Winkle in the 1980s when Reagan and Thatcher were in power and awoke today would find nothing new in the way of economic theories or political doctrines.

By now one might have expected the emergence of innovative and taboo-breaking schools of thought seeking to account for and respond to the global crisis. But to date there is no insurgent political and intellectual left, nor a new right, for that matter. In the US, the militant Tea Party right, many of whose candidates went down to defeat in this year’s elections, represents the last gasp of the Goldwater-Reagan coalition, not something fresh. The American centre-left under Obama is intellectually exhausted and politically feeble, reduced to rebranding as ‘progressive’ policies like the individual mandate system (‘Obamacare’) and tax cuts for the middle class which originated on the moderate right a generation ago. In Britain, the manifestos of various ‘colour revolutions’ — Blue Labour, Red Tory and so on — have the feel of PR brochures promoting rival cliques of ambitious apparatchiks rather than the epochal thinking the times require.

Why has a global calamity produced so little political change and, at the same time, so little rethinking? Part of the answer, I think, has to do with the collapse of the two-way transmission belt that linked the public to the political elite. Institutions such as mass political parties, trade unions, and local civic associations, which once connected elected leaders to constituents, have withered away in more individualistic and anonymous societies. One result is a perpetual crisis of legitimacy on the part of political elites, who owe their electoral successes increasingly to rich donors and skilful advertising consultants. New political movements are hard to found. At the same time, anachronistic movements can continue to raise funds or entertain audiences, even if, like America’s conservative movement, they lose election after election.

But there is a deeper, structural reason for the persistence of turboparalysis. And that has to do with the power and wealth that incumbent elites accumulated during the decades of the global bubble economy.

In essence, the bubble economy was a dysfunctional marriage of export-driven economies like China, Japan and Germany and debt-addicted nations like the US and many of Germany’s European neighbours. As international trade imbalances built up, from the 1980s to the 2000s, so did the wealth and power of elites who profited from the system, from Chinese Communist princelings with a stake in overbuilt export industries to the financiers of Wall Street and the City of London.


A global economic system that relied on excessive borrowing by consumers, particularly in the US, was bound to grind to a halt when fearful consumers switched from borrowing to saving. But the crash was only the first stage of the adjustment. The second stage is rebalancing. Countries like China and Germany must rely more on domestic consumption; countries like the US and UK must rely less on private consumer debt and shift resources from finance and housing to productive, traded industries.

But these reform agendas, from the downsizing of the overbuilt industrial sectors of mercantilist Asian nations to the pruning of finance in the Anglo-American world, threaten the very interests that profited from the preceding bubble and now glare defensively at a changing world, like Fafnir crouched upon his hoard. In the US, the wealth of the bubble-swollen financial sector has been transmuted into political power via campaign contributions. While Mitt Romney, the candidate of Wall Street, lost his bid for the presidency, the American financial industry overall has been successful in blocking reforms like the nationalising of failed banks (rather than government bailouts with few conditions) and the restructuring of private household mortgage debt. These reforms, along with a dose of moderate inflation and much more aggressive fiscal policies like massive investment in infrastructure, would have helped the economy recover more rapidly. But they would have imposed significant costs on economic elites who have wielded their power to thwart them.

For their part, the masses seldom unite against the classes in democracies because they are divided among themselves. When nations realise that they will be collectively poorer in the future than they had expected, the usual result is not solidarity but rather civil war, by means of ballots and sometimes bullets. Confronted by a crisis like the Great Recession, each section of society uses its political influence to try to maintain its share of the national wealth, while forcing the cost of economic adjustment to others. The rich try to shift adjustment costs to the middle class, who in turn try to pay for their own subsidies and entitlements by cutting the programmes of the poor.

History is sobering, in this regard. The Great Recession, which continues despite a technical ‘recovery’, can be viewed as the third great economic collapse of the industrial era, following the ‘Long Depression’ of the 1870s-1890s and the Great Depression of the 1930s. The earlier two episodes of global economic crisis witnessed setbacks for liberalism, democracy and free trade and the flourishing of illiberal nationalism, racism, imperialism and beggar-thy-neighbour economics. While slow growth combined with national rivalries have not yet engendered anything like the autarkic economics of the earlier two crises, it would be premature to predict the survival of present levels of financial and economic integration in a world that wobbles between feeble recoveries and renewed recessions.

Nowhere is there greater potential for conflict than in the relationship between the two poles of the now-collapsed bubble economy — the US, which specialised in exporting debt to China, and China, which specialised in exporting manufactured goods to the US. Since the Great Recession began, American attitudes toward China have grown strikingly more negative. The much-discussed ‘pivot’ in American strategy away from fighting jihadists in the Middle East and Central Asia towards unnamed great power rivals in East Asia is manifestly a shift toward greater military containment of China.

And in the recently concluded US elections, both candidates competed in promising to protect American producers from unfair Chinese competition. The Trans-Pacific Partnership, from which China is excluded, combines military and trade concerns in a single set of America-centred Asian alliances. Gone is the Clinton-era vision of China as a liberalising and democratising partner of the US in a world of great-power harmony.

The last global depression was brought to an end by the second world war. This time a ‘hot’ war is extremely unlikely and a cold war merely possible. Nevertheless, geopolitics may do what domestic politics has failed so far to do and free the world’s leading countries from ongoing turboparalysis.

The various national systems from which today’s leading global elites benefit, from hyper-industrial Germany to financialised Britain, grew up under the Pax Americana of the late 20th century. The US offered free security, a global currency, and the world’s largest open consumer market to allies — and potential allies — who were encouraged to specialise in non-military roles including industrial production (first Japan and Germany, later China) or finance (Britain and the US). The world order that resulted was well suited to East Asian and German industrialists and American and British bankers.

But while the US will remain the leading global military power for some time, the Pax Americana cannot survive the disappearance of a common Soviet threat and the diffusion of wealth and power to rising giants like China, India and Brazil. If, as many believe, the US will adopt a policy of moderate inflation in the future to help melt away the icecap of its public and private debt, the dollar as a store of value will be less attractive to foreigners. And while a stronger US economy can help promote a global recovery, the days when American consumers powered global economic growth may be past. Indeed, an ageing and increasingly unequal America which is creating chiefly low-wage jobs will have trouble merely maintaining a healthy middle class of its own.

In the long run, regional hegemons, including China and Germany, may be compelled to take on some of America’s duties, from bailing out bankrupt countries to providing regional security. But that would require their political elites to focus less on economic statistics and more on their people and the world. The equivalent in the US would be a rebalancing of economic power and prestige away from financiers towards others — perhaps leaders of the fracking-driven energy renaissance or advanced manufacturing.

In some form or another, profound shifts like these are coming, because, as Mrs Thatcher would have said, There Is No Alternative. Going back to the pre-2008 world is not an alternative. Neither is the present state of suspended animation in politics and policy.

Nothing lasts forever. At some point today’s extended intermission in domestic and world affairs will give way to a new act. But for now the vehicle remains stuck in the ditch, while the wheels continue furiously to spin. The age of turboparalysis goes on.

This article is the from the bumper Christmas issue of The Spectator which (as American readers of this blog may not know) is the best-written and most entertaining magazine in the English language. To sample it for free, download a trial for Kindle, iPad or iPhone by clicking here.

Michael Lind is the author of Land of Promise: an Economic History of the United States and a columnist for Salon.

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Show comments
  • Matthew Whitehouse

    This article alludes so many times to the UK and USA being of the same “econ” make-up. We need a free trade deal with the USA, not that the EU would want that… If we had that, the UK would fast become a powerhouse economy and leave the rest of Europe behind (sans Germaine). The UK has (by far) the 2nd largest Aerospace industry in the world (after USA). These are the same people that were shit on by Labour for a decade (no investment). The UK’s engineering and manufacturing has now diversified in to advanced aerospace / aviation / technology based specialist industries. We just need to be able to deal with the world, but having to wait for the EU to make trade deals is pathetic. William Hague has it SPOT ON: http://goo.gl/lB23r

  • evad666

    Let us not forget the US still retains organizations like DARPA something the UK is lacking since it trashed its own Blue sky areas.
    Here R&D is done by Industry according to Government, that is until industry realises that Government doesn’t do it either.

  • bp294

    Bravo! A truly great and concise summation of the state of affairs.

  • Pa Deuce

    This article is a combination of erudite insight, oblivious ignorance, and utter nonsense.

    The American Republic has been systematically dismantled in four waves: Wilson, FDR, Kennedy/Johnson, and Obama. Each wave has taken us further from the founding principles and freedoms that made the United States of America the strongest and most free nation on earth, and has delivered us into a disintegrating social and economic quagmire.

    Obama is a Marxist psychopath, and like all psychopaths (Lenin, Hitler, Saddam Hussein) Obama will be a charismatic failure, after inflicting massive damages to society and to the economic structure.

    “In the US, the militant Tea Party right, many of whose candidates went down to defeat in this year’s elections, represents the last gasp of the Goldwater-Reagan coalition, not something fresh.”

    The Tea Party is militant and quite revolutionary only in the sense that Jefferson, Washington, and Madison were militant and revolutionary. After the huge Tea Party victory in 2010, the Establishment RINOs hi-jacked the Tea Party and bought the 2012 nomination for their fellow RINO, and the Tea Party members stayed home in the millions, they did not go away. The Tea Party sat this one out, it did not go down to defeat.

    The struggle for the soul of America is not over.

    • EM10

      Excellent post.
      The author Lind presents himself as a objective observer on the scene.
      He is in fact a member of the political elite himself.
      He also spins his gears without much traction.
      The elites did not see what was coming in the 1930’s and for the most part
      they cannot see it now.

      The contract upon which the social welfare state was based is dying.
      Growth has slowed, births are down, populations have aged, and

      American subsidized security can no longer be depended upon.

      The EU plays pretend with itself while unemployment skyrockets
      in Greece, Spain and Italy, and even France and Germany are now in recession.
      There is every sign of Europe heading the way of Japan’s ‘lost decade’ which has now gone on for two. But Europe’s population is not that of homogeneous and obedient Japanese, and social divisions which have been muted so far are bound to become sharper as the shortfall between expectations and results grows wider and wider. Russia is back to its czarist-Soviet self, and Arab jihadi militarism is on the rise. The turmoil in Libya, Syria, Egypt is only the beginning, and Iran may yet trigger a war in the middle east.

      Meanwhile the Obama administration tries to expand the welfare state in the US at the very time when it’s failing most visibly in Europe. This is backward looking and reactionary rather than “progressive,” just as rail is a 19th century technology and wind power is ancient or medieval. The tragedy is that the US could be unquestioned leader of a renaissance of human freedom, technological progress, free enterprise growth and prosperity, if only it could get its fiscal and political house in order. It still has all the components to do this, and I agree that the struggle for soul of America is only just beginning.

      Despite the short term gloom of a likely new recession, stagnant job creation, continued piling on of debt and 4 more years of Obama’s preposterous substitution of discredited agitprop for leadership, the 21st century will not belong to hopelessly unworkable and inefficient ‘planned’ economies. That ship sailed 50 years ago. Human ingenuity keeps driving the world forward despite its clueless elites and muddled masses. And with all its difficulties, America is still better positioned to lead that next wave of progress than any other nation. The seeds of that next wave are being planted now and will come into full view probably only after another financial crisis, and once Obama has passed from the scene and his outdated worldview is completely discredited.

      • razzysmum

        once Obama has passed from the scene and his outdated worldview is completely discredited by a disappointed and chastened electorate.

        ************** There already is a disenchanted and disappointed electorate in the US and UK. The only reason Obama got in again was the same reason Blair got in here… immigration! For Blair a captive vote with their hands out for something for nothing was a certainty…..make everyone a victim to be paid off by the workers and you have it in the bag,

        When that falls on it’s ass there will be trouble like you never saw… the law of unintended (or intended) consequences.

  • http://aallison.com/ Andrew Allison

    Agreed. None of the three tribes of economic “thinkers” recognize that what’s changed is the overall level of debt. Greece is simply a foretaste of what’s coming to all social-democracies. To paraphrase de Tocqueville, democracies endure until their governments start using borrowed money to buy votes.

    • Coppers tell lies all the time

      yes, what an interesting point.

  • Diodotus

    I am surprised to read of a “long depression” between 1870 and 1890. Although it is true that financial panics occurred in 1873 and again in 1893, there was also a financial panic in 1907. To deserve the designation of “depression,” it seems that you must show that economic growth was depressed in the era of the 1870s through the 1890s as compared to, say, the 20 years preceding this era and the 20 years succeeding it. Was it? There may have been some deflation during this time because discoveries of gold did not keep pace with economic growth, but deflation does not necessarily equal depression as it did in the 1930s.
    Otherwise, a very insightful article. One thought that I have on reading it is that perhaps the reason that radical theories promoting political and economic change are so lacking today is because past experience has shown that such theories have been so catastrophic. Neither the general public nor their intellectual leaders have an “ism” that seems to fit our present predicament. Thus, as you say, we must let events work themselves out, responding as best possible on an ad hoc basis.

  • http://twitter.com/btt1943 Boon Tee Tan

    An interesting analogy: The engine roars, the wheels turn, but the car does not budge. One would think the car has hit a strong wall, it simply cannot move.

    In real economic world, powerful politicians and rich bankers/financials constitute the wall. The economy would never move until and unless the wall breaks down. Any chance of this happening in 2013? Rather unlikely. (btt1943, vzc1943)

  • http://www.facebook.com/people/Matthew-W-Hall/1723611491 Matthew W. Hall

    These changes are already happening in the U.S.The scale of new manufacturing in the area of Ohio in which I live is more than I ever imagined I’d see in my lifetime. Factories abandoned a decade ago are being bought and producing actual products. Cars, Pharmaceuticals, jet engines, even 3-d ‘printing’.

  • Mutafe

    This piece, by focussing on elites, continues the failed analysis of the past half-decade. The initial financial crisis occurred because of a commodity boom which meant that people were unable to afford the interest payments on sub-prime mortgages and a natural recession was hit by a barage of debt causing the credit crunch and subsequent choking of the economy.

    The commodity boom and mortgage crises were precipated not by elites but by demand from indidivduals in the economy, this is a bottom up crisis not top down, the reason for the feeble recovery is that public and private debts are sky high and everyone in the developed world is consolidating and paying back what they owe rather than taking on new debt.

    Similarly the primary growth solely of low paid jobs is not an elite driven tactic of suppression but a response to the skillsets cultivated by individuals in the developed world with their moving away from technical subjects; we cannot go on pretending that it’s someone else’s fault, if North East England’s schools had made mandarin compulsory (or the people had shown any skill learning compunction) 20 years ago their unemployment rate wouldn’t be the highest in the country but the lowest in Europe.

    Capitalism won because There Is No Alternative, that is why there are no profound demands to change it, why we need to embrace it and to change our cultures to be able to compete to progress.

  • Eddie

    It’s because most people are not much affected by the world recession – because most people in the UK own their homes and property prices have not yet reduced to their correct level (which they would if the Bank of England and the government stopped propping them up with low interest rates, refusing to tax buy to letters or second home owners, refusing to introduce rent controls, and allowing massive immigration and foreign money to buy up housing stock).
    When/if people’s house prices crash THEN they’ll realise the shit we’re in.
    But for now, it’s I’m Alright Jack. There is LOADS of money out there – mostly gained through property, which is mostly on paper anyway.
    OK so 10% are suffering and use food banks – but most don’t and there are plenty of rich babyboomers out there too who subsidise their kids and grandkids, who really can’t be bovvered wiv politics an ting.

  • LightShaft

    Is it not a truth that the weallth that is now in the hands of a few came out of, or from , the ground for free, ie from lands stolen from indigineous peoles, or by cheap labour ie slavery. Nothing will change untill the wealth is seperated from the new aristocracies..

  • Anthony Makara

    The Financial Crisis of 2008 saw the State bail-out the Private Sector. It also marked the end of unchecked capitalism, although those who believe in absolute free-markets have yet to understand that a time of excess and bounty will never return again in their lifetime. The Crisis itself has yet to translate into a more radical political landscape, yet in Greece we see the disillusionment with Plutocratic-Democracy and the shift towards extremes. The ordinary Greek may well be tempted to trade work and security for abstract notions of free speech and assembly. The Spaniard and Italian likewise. Political forces that address the most basic need of food-on-the-table will win the day. Western politicians and commentators put too much faith in the appeal of Democracy, and pay too little attention to the effects of driving living standards down. As governments scalp the Welfare State they also turn the passive optimist into the radical activist. The Crisis and its effects will be played out over the next generation and I for one expect to see people across Europe start to reject Democracy for political systems that consider work and stability to be the priority. Unless the basic needs of the masses are met the Career-Politicians are going to lose control.


    SKY TV are pig friendly



  • http://twitter.com/davidhaynz David Hay

    A good analysis, which obtusely neglects to mention that the Limits to Growth thesis is the emerging challenge to existing political and economic doctrines.

    Hegel’s dialectical materialism provides a useful model (in this historical moment, at least): the competing ideologies of neo-liberalism, social democracy and market fundamentalism, all represent at “synthesis” of thought, inasmuch as they share the common objective of increasing material growth in output and consumption. The disagreements are wholly about how best to achieve that objective, and on what basis the benefits of growth should be distributed.

    The antithesis arises because the conditions for material growth (on the 20th century model) are rapidly becoming untenable: the material condition is an ever-increasing supply of hydrocarbon energy, and the ethical condition being an obtuse lack of concern for the well-being of future generations on an overheated planet.

    The economic revolution now waiting in the wings will take our focus away from monetarism and price as a mechanism for resource allocation toward the real economy and the ethics of resource rationing – between north and south, between rich and poor, between current and future generations.

    A political revolution will follow, as surely as night follows day: hopefully framed in terms of a global conversation about the survival of the human species, and how best to ensure we maintain peace, security, and a decent quality of life.

    What is preventing this desperately-needed conversation? The media, controlled by global elites, in the interests of maintaining a status quo which has so magnificently rewarded them.

  • Robert Lowrey

    Michael Lind: Sitting right here on my desk is a copy of “Made in Texas”, a great read, described by Gore Vidal on the jacket as “Part Candide, part deTocqueville, Lind is a brilliant guide to the radicals who call themselves conservative, to the ossified who call themselves liberal”. He has apparently lost none of his brilliance. Thank you for saying it loud and clear, Mr. Lind: “Going back to the pre-2008 world is not an alternative”. I’ve been saying that on my blog for years, and in one article you put so succinctly what I’ve been struggling to get across in posts spanning years. Damn you. And THANK you.

  • Robert Lowrey

    Now that Corporations are the new people, the same fate will befall humans that befell the animals that were so much a part of our lives before industrialization. A few, like racehorses and greyhounds, will be bred for their athletic prowess and entertainment value, but most will share the fate of chickens and other livestock, hog-tied in Matrix-like subjugation in the service of a rarefied elite: USA’s War against the Dollar: Ordnung Muss Sein.

    • Kavanna

      Obit mach fry, dude 🙂

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