Financial looters run riot, and there's rebellion in the air

PUBLISHED : Saturday, 27 August, 2011, 12:00am
UPDATED : Saturday, 27 August, 2011, 12:00am


Widespread riots, arson and looting across London and other English cities sent shockwaves around the world. As far away as Japan, people were asking if Britain was safe any more, and one German politician suggested moving next year's Olympic Games to Germany.

British Prime Minister David Cameron blamed street gangs and opportunistic looters and declared that criminality would be punished. Magistrates and judges duly obliged. The dust settled.

What happened in Britain is part of the continuing decline of the West, evidence of which can also be seen in the politics and the economics of the US, continental Europe and Japan. Cartoonists on both sides of the Atlantic put a different spin on the English riots, depicting financiers in swanky stretch limousines driving away with bags of cash to the applause of politicians, while hooded looters steal, through broken shop windows, a single pair of sneakers or a television set.

Cameron conceded that he had a job ahead to tackle '120,000 most troubled families' in a 'social and security fightback' against what he termed the 'slow-motion moral collapse' of Britain. Former prime minister Tony Blair rushed to deny that Britain was in a state of moral decline, and tried to brush aside any connections between the looting on the streets and the high salaries of bankers. He would, wouldn't he, since it was he who, following Margaret Thatcher's damage of British industry, boosted London's role as the centre of a supposedly winning service economy.

It should be worrying that high financial salaries on both sides of the Atlantic are accompanied by a sense of entitlement with no understanding about what is going on in the rest of the economy.

Western economies, including Japan's, are in a mess and marked by slow growth, unsustainable levels of debt, an overpaid overclass, a growing underclass and a massive army of unemployed. Yet some people have never had it so good. Corporate profits in the US are at record levels of almost US$1.7 trillion. Multibillionaire Warren Buffett urged the government to stop coddling the super-rich.

The reaction among many of Buffett's peers was that if he wanted to pay more tax, the US revenue had a gift window allowing him to do so. As former investment banker William Cohan noted, while Main Street US suffers from rising unemployment, 'the financial industry is dancing a jig after paying itself about US$150 billion in compensation in 2010'.

The economic mess is compounded by head-in-the-sand politics. In the US, the Republican Party has been captured by the right wing, which wants to curb the economic powers of the White House and cut the entitlements of the underclass. Rick Perry, the governor of Texas, increasingly favoured to challenge Barack Obama for the presidency next year, wants to repeal the 16th amendment to the US Constitution that gives the federal government income taxation powers.

In Germany, Chancellor Angela Merkel stubbornly rejects any initiative to help hard-pressed southern European members of the euro zone, declaring that they must reduce their debts. She conveniently forgets that Germany's rise as the world's second-biggest exporter was helped by profligate euro zone spenders.

The clear message is that without unexpected help or the rise of a politician with imagination, the social strains and the daily toil of surviving will increase the risks of an uprising by the underclass in Britain or elsewhere.

Andrew Sheng last week expressed on this page the poetical wish that, 'Today, at the height of the Western financial crisis, only China can save capitalism.' I wish that too, but fear it is wishful thinking. For all its soaring success, China accounts for less than 10 per cent of global gross domestic product, whereas the US and European Union countries together account for about half. So as the West slows down, China's export model will look increasingly fragile.

And there is no indication that the rulers in Beijing are yet interested in playing a global role or understand the implications and restrictions on domestic freedoms of such a role.

Kevin Rafferty was editor of independent daily newspapers during annual meetings of the IMF and World Bank