June 7, 2005

First salvoes in economic war

Posted in Sunday Business Post ·

One hundred years ago this week, Tsar Nicholas II ingloriously accepted an American initiative to start peace talks with Japan. The Russian Baltic Fleet had just been totally destroyed by the Japanese in the battle of Tusuhima, which was, at the turn of the century, the largest naval battle the world had seen.

In three days, Russia lost 147,000 tonnes of shipping and 58,000 tonnes were captured. Japan lost just 300 tonnes. About 4,830 Russian sailors were killed and 6,000 captured, compared to 117 Japanese killed.

The world looked on in shock as old certainties were turned on their heads. Overnight, Russia, one of the world’s premier naval powers, was destroyed, while Japan, a place most Europeans had never countenanced, announced its arrival as one of the great powers of the new age.

This defeat marked the beginning of 20th century history. Within 17 years, the entire Tsarist regime would be swept away, replaced by the politics of Marx and Lenin, which set the global political agenda for the following century. The crumbling of the Russian empire in the east signalled the end of the age of empires across the globe.

The Hapsburgs and the Ottomans were gone by 1918 and, by the time the Union Jack was taken down from its Dublin Castle flagpole, Britain – the �victor’� in the First World War – had lost more of its pre-1914 territory than vanquished Germany. The first 20 years of the last century were the age of revolution, rebellion and ideology.

The first 20 years of this century will be the same. Over the coming two decades there will be a social upheaval in Europe. It is already beginning. The votes in France and the Netherlands are much more significant than just a rejection of the European constitution. They are the opening salvoes of an economic war that will be global in nature but local in impact.

The first victims will be the metropolitan, liberal, left-wing elite, who have ruled the continent since the student riots of 1968.These people will be put up against the metaphorical wall. They will be swept away in the immediate years ahead and be replaced by a much more reactionary group.

Cosmopolitanism will be replaced by nationalism, domestic will replace foreign, protectionism will come before free trade, and we will have more national barriers, goods and, particularly, people. European countries will adopt a �me first’� policy both among themselves and between Europe and the rest of the world.

The issue was expressed succinctly this week in the New York Times by journalist Tom Friedman. He said that French voters �are trying to preserve a 35-hour week in a world where Indian engineers are ready to work a 35-hour day’�.

Think about it. This is the angst European voters are feeling. We have become accustomed to working less, having more holidays and having a good time, when along come these Indian and Chinese workers who are prepared to undercut us to such an extent that we would impoverish ourselves trying to compete with them.

Instead of seeing that the world is involved in a global battle, our left-liberal elite have decided to put their heads in the sand and pretend that none of this is happening. They now have a choice: either they can meet their electorate halfway and change policies accordingly, or they can ignore the people, listen to their own mates at dinner parties and carryon chastising the common man for not being smart enough to see the utopia that is European integration.

If they do this, they will be swept away. Believe me, they are only listening to themselves. To see this, we can examine the class breakdown of the French voters last week. There is a clear metropolitan versus regional, rich versus poor, educated versus artisan split.

Last Wednesday, the French conservative paper Le Figaro broke down the vote geographically. The vote in Paris was extraordinary. Even though 55 per cent of French voters voted against the EU, not one district (arrondissement) of Paris did. Every single one voted yes. Tellingly, the richest ones voted yes in greatest numbers.

So whereas the slightly shabbier districts voted yes by 52 per cent and 53 per cent, the ritzy 16th – the epicentre of expensive, cosmopolitan France – voted yes by a staggering Ceausescu-esque 80 per cent. A similar, but not so stark, pattern was seen in Holland. The message is clear – only the rich are pro-European.

Why might this be? It’s really simple.

The rich are profiting from globalisation on the continent more than the poor. At least, that is the perception. Take, for example, the unsung hero of the �No’ campaign in France, the demonised �Polish plumber’�.

The invasion of Polish plumbers was seen as emblematic of the problem with enlargement.

Polish plumbers were coming in and competing with French tradesmen and driving down the wages of blue-collar workers across the country.

So we know that French workers are losing out.

But apart from the Polish worker, his family in Katowice and second-hand car salesmen in suburban Lyon, who benefits from this? Well, the white-collar, bureaucratic elite of Paris and other metropolitan centres who buy the now cheaper services of plumbers. So enlargement and globalisation help the rich much more than the poor. They don’t feel the angst, the insecurity, the anger.

This lack of sensitivity can be seen in the elite’s subsequent self-denial across the continent. Editorials are glibly saying it’s no big deal. And, in so far as it is delaying an unnecessary constitution, it is no big deal. But it is an illusion to dismiss the �Non’� as being a mishmash of single issues which present no real threat to the big projects.

So the vote is interpreted as just a bit of anti-immigration or an antipathy to Turkey being in the EU or a sprinkle of French voters who believe that the EU is too American and neo-liberal.

Others said people were simply voting against the establishment and against Jacques Chirac.

Social commentators claimed that the social snobbery of French society played a part and the battle was the ruled and the rulers or the common man versus the anarchists, the sans culottes versus the elite or the insider versus the outsider.

But all these individual issues add up to a strong angst, palpable in the population.

The bottom line from the elites is �business as usual’�. This weekend, German and French bureaucrats are meeting to see how they can salvage Europe, put it back on track and get on with their petty plan of building a new Europe.

Irish politicians are suggesting that we all go out and vote on a document that now has no validity. Spare me. In Britain, the Daily Mail is gleeful at a bloody nose for Brussels. Well, I have news for them: this vote was not about Europe, its constitution or its seat of power. It was about something much greater. It is about the next world war – the economic world war.

Within ten years, if the �business as usual’� political elite don’t see that embracing free trade will impoverish their blue collar workers who are very capable of voting them out, they will be swept away and replaced by nationalists.

You can still be a good liberal and appreciate that Chinese workers at 40 cent an hour are a problem. It is not racist to worry. Get over your 1970s anxiety – it is common sense.

We Europeans are involved in a struggle and, like 1905, the future of the century is on the line.

We can do what the Tsar did and put our head in the sands, just as our liberal elite is doing at the moment, or we can face it full-on and devise a way of protecting our livelihoods. The choice is ours but we don’t have all day to make up our minds.

  1. Brian

    This is the most accurate and frightening analysis you
    have produced to date.
    The European Union needs a complete shake up,Ireland needs
    a new Board of Management.It looks like we are about to
    have have a period of serious turmoil ahead.
    Please print your/our survival plan next week.

  2. Paul Rux, Ph.D.

    David, thank you for this superb analysis. Strategic
    thinking requires questioning assumptions. You have a
    great job in demolishing the assumptions of the Euro-
    elites, whose assumptions are also part of the worldview
    of the elites in the USA. The coming world-wide
    dislocation will sweep away the same kind of elites in the
    USA. I see this on a small scale where I live, Mount
    Horeb, Wisconsin, an exurb eleven miles to the west of our
    state capitol, Madison, Wisconsin. In government circles,
    the official line is we have never had it so good. At the
    same time this official blather permeates the mass media,
    the aver Joe and Jane are losing their jobs to outsourcing
    overseas. Again, what you describe there parallels here.
    We do live in a world economy. I share your concern about
    the looming pauperization of the Irish working persons and
    our American working persons. As you suggest, when the
    explosion comes, it will come from the Right, not the
    Left. As I keep saying, you are one of two (Sir John
    Keegan being the other on military affairs) foreign
    analysts whose insights are worth my reading time. Keep
    up your excellent work!

  3. andypandy

    David, when you say “Within ten years, if the ‘business as
    usual’ political elite don’t see that embracing free trade
    will impoverish their blue collar workers who are very
    capable of voting them out, they will be swept away and
    replaced by nationalists.” you are really talking about
    fascists and you seem to ignore the fact that there is the
    alternative of communism. It’s not dead – that was
    Stalinism, which is not the same thing at all…

  4. Dan Hayes

    Regarding the exposion that will come.The entrenched elites
    will continue to have their collective heads in the sand
    up to and including their very end.They believe that their
    tinker-toy Leviathan is indestructible. Not so. A colleague
    of mine from the former Soviet Union still finds it hard to
    believe in its demise. To her, the system had all the
    hallmarks of solid all-pervading permanence. But it self-
    destroyed with nary a whimper. So too here in the not so
    distant future.

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