Legitimatiecrisis 2.0

But let us not play clueless here. Things have been brewing for a while in England. Remember the Vodaphone protests? Or the anti-university fees protests?

So, whatever the initial reason for the uprising in Tottenham, it is clear that many of the countries where austerity policies are being imposed from above on the general population are facing socially explosive situations.

Israel:

“About 250,000 Israelis have marched for lower living costs in an escalating protest that has catapulted the economy onto the political agenda and put pressure on the prime minister, Binyamin Netanyahu.

Netanyahu planned to name a cabinet-level team on Sunday to address demands by the demonstrators, who in under a month have swollen from a cluster of student tent-squatters into a diffuse, countrywide mobilisation of Israel’s burdened middle class.

Israel projects growth of 4.8% this year at a time of economic stagnation in many western countries, and has relatively low unemployment of 5.7%. But business cartels and wage disparities have kept many citizens from feeling the benefit.

“The People Demand Social Justice” read one of the march banners, which mostly eschewed partisan anti-government messages while confronting Netanyahu’s free-market doctrines.

Police said at least 250,000 people took part in Saturday’s march in Tel Aviv, Jerusalem and other cities, a greater turnout than at marches on the two previous weekends.

Demonstrations on such a scale in Israel – which has a population of 7.7 million – have usually been over issues of war and peace. In a Peace Index poll conducted by two Israeli academics, around half of respondents said wage disparities – among the widest of OECD countries – should be the government’s priority, while 18% cited the dearth of affordable housing.”

Chile:

“It began as a series of peaceful protests calling for reform of the Chilean government’s education system, with students staging mass kiss-ins, dressing up in superhero costumes and running laps around the presidential palace. But on Thursday these surreal protests exploded into violence as school and university students clashed with police and seized a TV station, demanding the right to a live broadcast in order to express their demands.

The Chilean winter, as it is being called, appears to have captured the public mood, just as the Arab spring did six months ago.

After a day of street clashes, 874 people had been arrested and department store in the capital was smouldering after being attacked by protesters. Outrage against the rightwing government of Sebastiàn Piñera boiled over, with polls showing he is more unpopular than any leader since the fall of former dictator Augusto Pinochet.

Striking school students led the charge as they tried to march on the presidential palace early on Thursday, only to be thwarted by hundreds of police in riot gear and clouds of teargas. Tucapel Jiménez, a member of the Chilean congress, called for sanctions against government authorities who authorised what he called “brutal repression” by riot police.

“This is unacceptable, the centre of Santiago is a state of siege,” said university student leader Camila Vallejo, tears rolling down her face after being doused in teargas. “The right to congregate has been violated.”

And one must not forget the protests in Greece and Spain as well as the Arab Spring.

What we see is the global civil society rising up against what is clearly exposed as the alliance of the corporate sector (as opposed to small businesses who are as much on the receiving end of austerity policies) and Western governments (along with global governance institutions, the BCE, etc.). What we are are witnessing, to borrow Habermas’s phrase, is a major crisis of legitimation, where governments are blamed for making everybody pay for the failures and excesses of the financial sectors.

It is not just that national government are complying with corporate demands but that they turn repressive in the process leaving the image of the state-as-institution in cahoots with the wealthy and ready to strike at the slightest sign of process or even anticipating trouble through massive surveillance. The message is clear: dissent will not be tolerated as the whole anti-terror apparatus is used not against terrorists but against cyber-dissenters and protesters:

“DOJ indicted 16 alleged hackers today, 14 of whom were purportedly involved in hacking PayPal after it refused to accept payments for WikiLeaks.

(…)

Now, I’m not surprised DOJ indicted these folks. I’m not arguing that, if they did what DOJ alleged they did, they didn’t commit a crime.

But I can’t help but notice that DOJ has not yet indicted anyone for the DDoS attacks–the very same crime–committed against WikiLeaks 8 days earlier than the crime alleged in this indictment.

I’m guessing DOJ has a very good idea who committed that crime. But for some reason (heh), they haven’t indicted those perpetrators.

In fact, I’ll bet you that DOJ also has a better explanation for why PayPal started refusing WikiLeaks donations on December 4, 2010–two days before this alleged crime–than they describe here.

But we mere citizens are privy to none of that. As far as we know–because of choices about secrecy the government has made–a crime was committed against a media outlet on November 28, 2010. That crime remains unsolved. Indeed, DOJ has never made a peep about solving that crime. Meanwhile, today, 14 people were indicted for allegedly committing the very same crime the government–inexplicably, at least according to its public statements–has not pursued.

According to the public story, at least, the rule of law died with this indictment today. The government has put itself–the hackers it likes, if not employs–above the law, while indicting 14 people for the very same crime committed just weeks before those 14 people allegedly committed their crime.”

And this as well:

“In March this year, more than 150 UK activists were arrested while occupying Fortnum & Mason in a protest against tax avoidance. They were held in cells overnight and charged with aggravated trespass. Earlier this month, the charges against all but 30 were dropped, as it emerged the chief inspector at the store had given protesters assurances they would be allowed to leave the store unhindered.

The incident generated widespread fear about crackdowns on the right to protest, against a backdrop of strikes and protests against government cuts. Similar cries have not occurred in the wake of arrests of individuals allegedly linked to the hacker collectives Anonymous and LulzSec in the UK, United States and Europe.

Yet if the criminalisation of dissent is happening anywhere, it is here.

The maximum penalty the Fortnum & Mason activists faced for aggravated trespass is three months in prison. Participating in even the simplest of hacking operations is punishable by up to 10 years in prison in the UK, and up to 20 years in the US.

Since December, Anonymous and LulzSec have engaged in a series of politically motivated hacks, often in support of WikiLeaks, including attacks taking the Visa and Mastercard websites offline in the wake of the WikiLeaks blockade, a hack on security firm HBGary revealing a proposal to Bank of America to discredit hostile journalists and activists, and attacks against the CIA and the UK’s Serious and Organised Crime Agency (Soca).”

And, as any reader of Max Weber knows,the most essential monopoly of the state is that of legitimate physical violence. In order to exercise power, the state must have the ability to force compliance with laws and judicial decisions. Ultimately, then, the state monopoly over physical violence is considered legitimate. For Weber, this is the monopoly that all states have in common and it is a considerable resource as it allows the state to enforce all its other monopolies. In most states, violence is not the main means of governance, especially in democracies but it is a means available nonetheless. Indeed, in most societies, except in rare cases of self-defense, most members of society or groups are not allowed to use physical force against others. Only the state, through its agents and specialized institutions (law enforcement and the criminal justice system,) has the right to arrest, incarcerate or even execute. However, for this monopoly over physical force to be considered legitimate, it must be (1) moderate and controlled, and (2) exercised within the limits of the law. If state violence goes beyond these limits, then, it tends to not be considered legitimate by members of society and to trigger adverse reactions against the excesses of the state. Practices of repression (such as kettling) and secret jurisdiction fail on both count. And without legitimacy, violence is just violence.

And in aligning its interests and policies with that of the financial sector (the “banksters”, for short), the state has chosen a partner that has no more legitimacy and has been exposed in all its dysfunctions. Three examples will suffice:

Will Hutton:

“”No major advanced economy is doing anything to promote growth and jobs,” says George Magnus, a senior policy adviser to investment bank UBS. He is right. Wherever you look, it is an economic horror story. Put bluntly, too many key countries – the UK in the forefront, with private debt an amazing three and half times its GDP, but followed by Japan, Spain, France, Italy, the US and even supposedly saint-like Germany – have accumulated too much private debt that cannot be repaid unless there is exceptional global growth.

(…)

The markets’ reaction is made worse by herd effects – magnified by the many instruments, so-called financial derivatives, that have been invented supposedly to hedge and lower risks but which in truth are little more than casino chips. Long-term saving institutions such as insurance companies and pension funds now routinely lend their shares – for a fee – to anybody who wants to use them for speculative purposes. The financial system has become a madhouse – a mechanism to maximise volatility, fear and uncertainty. There is nobody at the wheel. Adult supervision is conspicuous by its absence.

What is required is a paradigm shift in the way we think and act. The idea transfixing the west is that governments get in the way of otherwise perfectly functioning markets and that the best capitalism – and financial system – is that best left to its own devices. Governments must balance their books, guarantee price stability and otherwise do nothing.

This is the international common sense, but has been proved wrong in both theory and in practice. Financial markets need governments to provide adult supervision. Good capitalism needs to be fashioned and designed. Financial orthodoxy can sometimes, especially after credit crunches, be entirely wrong. Once that Rubicon has been crossed, a new policy agenda opens up. The markets need the prospect of sustainable growth, along with sustainable private and public debt.”

Ha-Joon Chang:

“The debate focuses on how budget deficits should be controlled, with the dominant view saying that they need to be cut quickly and mainly through reduction in welfare spending, while its critics argue for further short-term fiscal stimuli and longer-term deficit reduction relying more on tax increases.

While this debate is crucial, it should not distract us from the urgent need to reform our financial system, whose dysfunctionality lies at the heart of this crisis. Nowhere is this more obvious than in the case of the rating agencies, whose incompetence and cynicism have become evident following the 2008 crisis, if not before. Despite this, we have done nothing about them, and as a result we are facing absurdities today – European periphery countries have to radically rewrite social contracts at the dictates of these agencies, rather than through democratic debates, while the downgrading of US treasuries has increased the demands for them as “safe haven” products.

Was this inevitable? Hardly. We could have created a public rating agency (a UN agency funded by member states?) that does not charge for its service and thus can be more objective, thereby providing an effective competition to the current oligopoly of Standard & Poor’s, Moody’s, and Fitch. If the regulators had decided to become less reliant on their ratings in assessing the soundness of financial institutions, we would have weakened their undue influence. For the prevention of future financial crises we should have demanded greater transparency from the rating agencies – while changing their fee structure, in which they are paid by those firms that want to have their financial products rated. But these options weren’t seriously contemplated.

Another example of financial reforms whose neglect comes back to haunt us is the introduction of internationally agreed rules on sovereign bankruptcy. In resolving the European sovereign debt crises, one of the greatest obstacles has been the refusal by bondholders to bear any burden of adjustments, talking as if such a proposal goes against the basic rules of capitalism. However, the principle that the creditor, as well as the debtor, pays for the consequences of an unsuccessful loan is already in full operation at another level in all capitalist economies.

When companies go bankrupt, creditors also have to take a hit – by providing debt standstill, writing off some debts, extending their maturities, or reducing the interest rates charged. The proposal to introduce the same principle to deal with sovereign bankruptcy has been around at least since the days of the 1997 Asian financial crisis. However, this issue was tossed aside because the rich country governments, under the influence of their financial lobbies, would not have it.

There are other financial reforms whose absence has not yet come back to haunt us in a major way but will do so in the future. The most important of these is the regulation of complex financial products. Despite the widespread agreement that these are what have made the current crisis so large and intractable, we have done practically nothing to regulate them. The usual refrain is that these products are too complicated to regulate. But then why not simply ban products whose safety cannot be convincingly demonstrated, as we do with drugs?

Nothing has been done to regulate tax havens, which not only depriven governments of tax revenues but also make financial regulations more difficult. Once again, we could have eliminated or significantly weakened tax havens by simply declaring that all transactions with companies registered in countries/territories that do not meet the minimum regulatory standards are illegal.

And what have we done to change the perverse incentive structure in the financial industry, which has encouraged excessive risk-taking? Practically nothing, except for a feeble bonus tax in the UK.

A correct fiscal policy by itself cannot tackle the structural problems that have brought about the current crisis. It can only create the space in which we make the real reforms, especially financial reform.”

David Harvie and Keir Milburn:

“Neoliberalism no longer “makes sense”, but its logic keeps stumbling on, without conscious direction, like a zombie: ugly, persistent and dangerous. Such is the “unlife” of a zombie, a body stripped of its goals, unable to adjust itself to the future, unable to make plans. It can only act habitually as it pursues a monomaniacal hunger. Unless there is a dramatic recomposition of society, we face the prospect of decades of drift as the crises we face – economic, social, environmental – remain unresolved. But where will that recomposition come from when we are living in the world of zombie-liberalism?

In the midst of such hopelessness the phone-hacking scandal seemed to offer a moment of redemption, but as the news cycle moves on we are left wondering what effect it will really have.

Hackgate cannot be treated in isolation. Since the financial “meltdown” of 2007-08 we have witnessed similar scenes, and similar outrage, around MPs’ expenses and bankers’ bonuses. We have witnessed not one but two media feeding frenzies around the repression of protest. The first followed the police attack on the G20 protests in 2009 and the death of Ian Tomlinson, with the second erupting around the outing of undercover police officer Mark Kennedy, leading to the unprecedented unmasking of another five undercover police officers acting within the environmental and anti-capitalist movements. The refusal of the Metropolitan police to investigate the full extent of phone hacking is, then, the third scandal revealing the political character of contemporary policing.

The phone-hacking scandal, and particularly the web of complicity revealed in its cover-up, is undoubtedly more significant than some of these other scandals, but positioning it among them allows us to raise a question that has rarely been asked: why now?

The answer is inescapable: we are living through something epochal. These scandals are part of a more general social and economic crisis sparked by the financial crisis. What’s less clear is the exact nature of the relationship between crisis and scandals, and therefore the scandals’ political significance.

Hackgate reveals the mechanisms of a network of corruption whose broad outlines were already understood. What we see, however, is not a distortion of an otherwise functional system but one element of a system that can only operate through such corrupt mechanisms. What we are seeing, through its moment of decomposition, are the parochial arrangements through which neoliberalism was established in the UK.

Neoliberal governance has common traits across the planet. But its instantiation in each country has been shaped by the peculiarities of that country’s history. In each, a different (re)arrangement emerged between sections of the ruling class that would enable the imposition of neoliberal policies on populations that, on the whole, didn’t want them.

Rupert Murdoch, and the tabloid culture he helped to establish, was central to this process in the UK, not least with the defeat of the print unions at Wapping. Other elements of that compact include a Thatcherite Conservative party and a neoliberalised Labour party, a highly politicised police force and, especially after 1986′s big bang deregulation of the stock market, the dominance of finance capital. It is no coincidence each of these elements has been racked with scandal in the past few years.

Neoliberalism, however, requires more than the internal realignment of a national ruling class. Every semi-stable form of capitalism also needs some sort of settlement with the wider population, or at least a decisive section of it. While the postwar Keynesian settlement contained an explicit deal linking rising real wages to rising productivity, neoliberalism contained an implicit deal based on access to cheap credit. While real wages have stagnated since the late 1970s, the mechanisms of debt have maintained most people’s living standards. An additional part of neoliberalism’s tacit deal was the abandonment of any pretence to democratic, collective control over the conditions of life: politics has been reduced to technocratic rule. Instead, individuals accepted the promise that, through hard work, shrewd educational and other “life” choices, and a little luck, they – or their children – would reap the benefits of economic growth.

The financial crisis shattered the central component of this deal: access to cheap credit. Living standards can no longer be supported and, for the first time in a century, there is widespread fear that children will lead poorer lives than their parents. With the deal broken, parochial ruling arrangements in the UK have started to lose coherence.

The scandals, therefore, are symptoms not of renewal but rather of neoliberalism’s zombie status. The scandals represent the zombie’s body decomposing even as it continues its habitual operation.”

It is indeed ironic that neoliberals have been harping for the last three decades on the need for a flexible workforce, for the need for individual adaptation to market diktats against agents of stability (seen as bad and archaic) such as unions and anyone reluctant to embrace the brave new world of work. And yet, neoliberals are the most rigid people in their thinking and policy-making. The policies they demand are always the same, albeit with different names. But whether one calls one’s preferred policies austerity, shock therapy or structural adjustment, it is the same model imposed the world over, with the same disastrous consequences: people on the streets, repressed by failing states whose main functions are now to appease the financial sector through continuation of the Great Risk Shift, cool the mark out, and failing that, good old-fashioned repression (and then, you can use prison labor as the ultimate flexible workforce).

And the article mentioned above does emphasize the role of the cultural and information industries in the neoliberal project as well as its dark underbelly. But what is also striking is the lack of accountability all around while making other people pay in a variety of ways:

As Ian Welsh has mentioned many times, in the US, the only acceptable form of stimulus is military spending. indeed, this matches Michael Mann’s prescient view of the US based on his typology of power: a military giant, an economic backseat driver, a political schizophrenic and an ideological phantom. Hence, there has to be a next war (except, they won’t be called wars because that does not sound very nice) because that is all the political class accepts and understands. File that under the militarization of everything:

“The United States is expanding its role in Mexico’s bloody fight against drug trafficking organizations, sending new C.I.A. operatives and retired military personnel to the country and considering plans to deploy private security contractors in hopes of turning around a multibillion-dollar effort that so far has shown few results.

In recent weeks, small numbers of C.I.A. operatives and American civilian military employees have been posted at a Mexican military base, where, for the first time, security officials from both countries work side by side in collecting information about drug cartels and helping plan operations. Officials are also looking into embedding a team of American contractors inside a specially vetted Mexican counternarcotics police unit.

Officials on both sides of the border say the new efforts have been devised to get around Mexican laws that prohibit foreign military and police from operating on its soil, and to prevent advanced American surveillance technology from falling under the control of Mexican security agencies with long histories of corruption.

(…)

The United States has trained nearly 4,500 new federal police agents and assisted in conducting wiretaps, running informants and interrogating suspects. The Pentagon has provided sophisticated equipment, including Black Hawk helicopters, and in recent months it has begun flying unarmed surveillance drones over Mexican soil to track drug kingpins.”

And in case it’s not clear enough:

“Several Mexican and American security analysts compared the challenges of helping Mexico rebuild its security forces and civil institutions — crippled by more than seven decades under authoritarian rule — to similar tests in Afghanistan. They see the United States fighting alongside a partner it needs but does not completely trust.

(…)

When violence spiked last year around Mexico’s industrial capital, Monterrey, Mr. Calderón’s government asked the United States for more access to sophisticated surveillance technology and expertise. After months of negotiations, the United States established an intelligence post on a northern Mexican military base, moving Washington beyond its traditional role of sharing information to being more directly involved in gathering it.

American officials declined to provide details about the work being done by the American team of fewer than two dozen Drug Enforcement Administration agents, C.I.A. officials and retired military personnel members from the Pentagon’s Northern Command. For security reasons, they asked The New York Times not to disclose the location of the compound.

But the officials said the compound had been modeled after “fusion intelligence centers” that the United States operates in Iraq and Afghanistan to monitor insurgent groups, and that the United States would strictly play a supporting role.”

So, in more and more countries, the nasty mechanisms of the neoliberal state – reduced to its repressive functions on behalf of financial interests – are being exposed, should we really be surprised that the world is catching fire? (Well, except the US for reasons already discussed) It still remains to be seen whether the much-vaunted civil society is up to the challenge.