“Hands up who ruined the world economy, hedge fund billionaires!”
What caused the banks to fail, the markets to fall and the so-called real economy to lurch into recession? As billions are poured into boosting confidence in financial institutions, where will all this end?
Can the global capitalist system really be dealt such a body-blow by sub-prime mortgages? Did greedy Wall Street traders unload a toxic flood of bad debt upon otherwise healthy financial markets?
Can the world ever be the same again?

The Brighton Salon presents Stuart Simpson, financial analyst and journalist, convenor of the Emerging Economies Forum at the Institute of Ideas and author of Debt and Development: Ghana - A Case Study.
Stuart will explain the general situation and answer questions about the crisis before we all consider the ramifications; cultural, political and economic, of the extraordinary events of the past months. The Brighton Salon takes place on Monday 24 November, at Bellebys College, behind Brighton Station next to the Jurys Inn, Brighton, at 7pm. If you would like to be invited to this event, email Dan Travis at dantravis@thebrightonsalonarena.com
The Crisis of Confidence and the Financial Collapse: Event report by Sean Bell
The day The Brighton Salon met to discuss the financial crisis that has seen banks and markets collapse globally and recession set in, British political parties were arguing about fiddling with taxes after the chancellor’s pre-budget report.
TV journalists have been scraping the bottom of the metaphorical barrel of analogies while newspapers have splattered their coverage with increasingly lurid graphics (The Guardian’s colourful blobs take my award for making simple figures particularly uninformative).
Luckily, we had Stuart Simpson to introduce the complexities of world-changing events in a way that required no trimmings to be both informative and interesting.
Below I’ll very briefly outline Stuart’s presentation (no swoopy graphs or charts), but a much more detailed (and reliable) account of his work can be found at www.spiked-online.com/index.php?/site/article/5962
Stuart Simpson on the Economic and Financial Crisis
“Political leaders have approached the crisis as if we can all go back to how it was before”
Stuart started by summarising the events of the seven days leading up to the Salon, which saw further financial instability in the US and elsewhere and signs that the coming recession was deeper and longer. “What will happen in the next ten years?” asked Stuart. Some people have looked at the so-called lost decade in Japan after its financial meltdown and recession of the 1990s and concluded that things may not be so bad. “Japan was still a nice place to live by most standards.”
While the British government was trying to find ways to force the banks to lend the money it had given them, Stuart pointed out that, despite recessions across Europe, in the US and Japan, global growth was still 1.1%. Furthermore, the world economy might not even dip into actual recession. While slower growth rates and decreased world production would mean pain for people in the developing industrial economies such as China and India, these countries were much less reliant on exporting goods. China, for example, only exported about 10% of its production and its growth rate would still be relatively very high despite the slowdown elsewhere.
General economic recession in the west and Japan looms. Most larger companies do not have to borrow from banks but they and many corporations will run into trouble soon because of the general lack of credit. The trade credit insurance market has collapsed. The likelihood is that companies will cease to deliver goods and services to customers whom they fear cannot pay.
The banks realise that they have a social problem in the lack of credit, but they are so extended that they would damage themselves if they attempted to ease their in-house restrictions on lending. Only the power and resources of the state (or states) really have any chance of affecting the situation.
While Alan Greenspan, bankers and property market risk-takers have all been blamed, Stuart said the real culprit in the financial crisis that has gone completely out of control was the changing structure of world production.
At the same time as the west enjoyed a stable period of low growth but expanding commercial and consumer credit for a decade, the migration of the production of goods from the west to the east, or from developed to developing nations, accelerated. And it did so in way that most people would not expect.
Developing nations once relied on capital from the developed nations, who often tried to set social conditions on credit to countries. But in the last ten years those same nations have effectively been lending the west the money to buy their goods. Stuart stressed that he believes development to be a very good thing for developing nations as millions have been improving their living standards and joining the modern world.
The Asian Tigers, fast developing economies in southeast Asia, had a financial meltdown and their currencies crashed in 1997. In those days the developing nations sought funding to develop their productive industries by borrowing from the west. Their debts were paid back to the west in western currencies, especially the dollar, which was one of the reasons that their currencies were vulnerable. After that financial crisis, it made sense for developing nations to try to offset the effects of such debts by making financial transfers in dollars and holding large amounts of those currencies in foreign accounts.
Now the developing nations prop up the financial sector in the west. Because they invest their savings in western financial institutions and government paper, and because their growing economies can generate new wealth, the leading developing country, China, is owed immense sums by the US, Britain and other countries.
The balance of debt has reversed, the west is now a debtor. Owing China is not a problem if the funds received have been invested in the profitable expansion of production. It is a more of a problem when borrowed funds have supported the expansion of the financial sector itself and, particularly in Britain, the public sector.
“Two thirds of new jobs created in the last ten years in the UK have been in the public sector,” said Stuart. Western countries did benefit from the expansion of production in the world, but not by investing in wealth creation. They took the money they had been lent and effectively used it to expand public spending and encourage spending by the public.
“The government sees the situation as a temporary slowdown”
The action taken so far in Britain has avoided the collapse of banking here but it has had a completely different character to the normal fiddling about with fiscal incentives that had passed for government intervention in the good times. Despite the huge rescue packages and theoretical U-turns that the politicians have had to endure, the political attitude is still of fiddling with something that has not really gone all wrong.
Without dealing with the lack of investment in the productive sector of the UK economy, schemes such as the reduction of VAT will have little effect. The government still sees the economy as returning to its former equilibrium. After 15 years of economic growth have ended with financial collapse, we should look to those productive economies that have sustained higher growth and been able to amass capital to lend to the global economy.
What is required now is a genuine and intellectual debate about what realistically needs to be done.
Questions, points from the audience and the ensuing discussion:
So who’s to blame? What about those mortgage lenders and the bankers?
How much gold did the government dispose of before the crisis? What about the costs of the wars?
Why won’t those banks lend out the money they have?
How did the loan defaults in the US lead to the banks collapsing in the first place?
The Great Depression of the 1930s was not overcome by the New Deal but by World War Two – that’s a bit worrying isn’t it?
Can we spend our way out of the recession? If not, it’s almost making it worse to discuss it because you can only talk it down. What are the opportunities for discussing the restructuring of the economy?
With the exception of Iceland, Britain seems to the country most affected by the crisis. Is any other European country as badly placed?
What about the growing population? Isn’t the sheer number of people making things worse?
Stuart said that credit has flowed most to the US, then the UK, Spain and Australia – all the countries with the worst property market problems. Germany does not have a deficit and has been far less exposed than others. Specific to the UK is the expansion of public spending for some 15 years while the rest of the economy languished under a lack of investment. These factors make it particularly exposed.
Stuart declared that the wars being fought do not cost a lot of money compared to the immense sums involved in financial bail-outs. How much wiggle room do we really have is a more complex question. Can we borrow our way out of the trouble caused us by borrowing? With the injections into banks, the debt has effectively moved from the private to the public sector. China has lent the US $400 billion to prop up its Fanny Mae and Freddie Mac (to save the US property market) after ten years of prosperity.
Banks have now become extensions of the state in many ways. Western governments can spend on services but they cannot bail out their own economies. The creditor-debtor relationship remains, with China as the main lender and western countries as the borrowers.
On the New Deal, Stuart pointed out the advantages that the post-war victors had in restructuring the world economy at that time. The economy was destroyed by the war and needed to be rebuilt, so the restructuring of the economy in many ways was a priority. International institutions were created to deal with the problems and these were discussed politically. This provided ways for people to get to grips with the economy and ways for them to participate in discussions about its future.
The Depression of the 30s gave way to inflation in the 70s and then what has been called the moderation until now. The moderation idea was that boom and bust could be overcome and that modest growth would always be possible. Now that is over.
Even the first Industrial Revolution had political engagement with the economy. Today we have seen arguably an even greater industrial revolution across the world but it has not been widely discussed. We do not need participation in discussions about the role of the Bank of England and taxes, but about the different character of the economy and how it has to be changed. We need to improve our understanding of it and participation will not be easy.
Further questions and points from the floor
Keynes has made a comeback in some circles, but surely the solutions to problems of the past make no sense today?
Is it still relevant to talk about ‘capitalism’ when even the Communist leaders in china have adjusted their thinking?
Isn’t it the case that the Chinese people have to save so much because they do not have any social provision from the state?
Could the new leadership of the US under Obama make a difference to the situation?
The risk-aversion and fear of the last 15 years is reflected in the failure to invest during the good times. Could this be an opportunity to reverse some of that cultural negativity?
There have been recessions since the Tulip Riots of the 17th century and ever since. Are recessions avoidable or are they inevitable?
After 64 quarters of growth, we have one quarter of decline. Is the situation really that bad?
Which coping strategies are open to governments? If we need major changes in how things are produced, which with climate change concerns we do, how can this be achieved?
The relationship between the private and public sector has changed with a shift to the public. Privatisation did not work but then neither did the mixed economy. Where next?
China looks like it has a great economy as it is growing, but it doesn’t feel it like while you are there. There are all sorts of economic problems there and the financial crisis makes them worse. How long will it last?
Stuart sums up
You can’t say how long it will last or exactly how bad it will get. Things certainly will become more serious as the crisis spreads from sector to sector. Whatever its problems, China still has more freedom to act in this situation than any western country. It will continue to grow productively, even if exports to the US and the west fall, while also continuing to move from the manufacture of low-value goods to that of high-value goods.
The central question that should inform the discussion is how to manage the benefits of global growth. Development in many parts of the world is a good thing, but growth is still seen as bad thing. Growth should be regarded as positive and not the basis of conflict. China will have a different relationship with the US and the west and we need to start to think about how Britain can benefit and capitalise on the growth of China. It is difficult to see many of the problems being solved while there is no development of the manufacturing sector in the west.
A small population cannot compete in high-value industries, but otherwise population has little to do with the crisis.
The financial services sector is very developed in the UK and it will face severe recession. In the US, Silicone Valley is still productive and an advanced technological industry is an advantage to America, where president-elect Obama at least seems to be taking the situation more seriously than Britain.
We cannot go back to the solutions of the past to problems of the past. The mixed economy and nationalisation were responses to the 60s and 70s and these policies themselves caused serious problems. It would be silly to push aside a category such as capitalism because only a failure to understand how things are produced would lead one to reject that.
There was an unwise government disposal of £4 billion worth of gold bullion, but in the general scheme of thins it does not make a great deal of difference.
Why not an alternative?
We can demand an alternative as the economy falters because, instead of just accepting austerity, we should be asking for more and should not accept sluggish growth as an economic policy. We can get together in response to the crisis and refuse to accept the policies of low expectations.
We are not going to get real demands for change until we decide where we think we should be going with the economy and how it is organised in the future. There is so much more to do than simply react to the latest problem. We will have alternatives when we take an active role in engaging with the future of the economy.
The Brighton Salon would like to thank:
Bellerbys College for once again providing a venue and refreshments; all those who attended this first instalment of what will remain a crucial discussion; and finally, Stuart Simpson. He had no chance of answering every question raised in the discussion but he had a very good go.
This has been a personal account of the event derived from the imperfect memory and rusty shorthand of the Brighton Salon Secretary, Sean Bell. If you feel an important point has been missed, put me right: jo.e.bell@btinternet.com
Media Wars: Military targets are no longer strategic, but newsworthy
“Contemporary warfare is a media spectacle driven by the search for meaning in the West rather than by strategic aims on the ground.”
In his latest book, Media, War and Postmodernity, Phil Hammond argues that Western military operations are now conducted as high-tech media spectacles, more important for their propaganda value than for any more tangible strategic aims. Tracing the development of conflict and the way it has been reported since the end of the Cold War, through the humanitarian interventions of the 1990s to the current War on Terror, Hammond draws together debates from a variety of theoretical perspectives to make a convincing case for understanding contemporary military intervention as an attempt to recapture a sense of purpose and meaning for Western societies.
Dr Hammond will present his ideas for discussion on Wednesday October 22 at 7pm at the University of Sussex (room to be confirmed). For an invitation and further information, email dantravis@thebrightonsalonarena.com
Phil Hammond is the author of Framing Post-Cold War Conflicts (2007) and co-editor of Degraded Capability: The Media and the Kosovo Crisis (2000). He is Reader in Media and Communications at London South Bank University.
Media, War and Postmodernity is available at www.amazon.com
The Brighton Salon made a guest appearance at the University of Sussex with its debating society, DebateUS, as part of the build-up to the Battle of Ideas.
Below I’ll outline Phil Hammond’s introduction and give a brief account of the discussion before rounding off with a recap of Phil’s responses during the debate along with his closing remarks.

Dr Phil Hammond:
The media have become more central than ever to the conduct of warfare. There has been a shift in the role of media in wars compared with the past.
The way that a war is fought has become part of what convinces people that the war needs to be fought. You need good images of the conflict that support the cause for this and also you might equip the soldiers with helmet cameras. The postmodernist Jean Baudrillard said that the first invasion of Iraq had so little to do with any strategic goal on the ground (without even the purpose of regime change) that it did not even happen, that it was a “non-war”.

The political context of wars today are very different from the past, but it seems odd to say that the west is in conflict with itself as it launches attacks on and invades other countries. In the past wars in which Britain took part had some national interest or strategic role and people were invited to support it.
The west no longer believes in itself in the same way and recent wars have become an exercise in a search for purpose. Tony Blaire said in 2006 that the second invasion of Iraq was not about a regime change but a “values change”. The first Gulf War was unsuccessful in setting up any kind of meaning or positive support for a new western mission.
Michael Ignatief said in 1998 that the conflict had not been about saving anyone else but about saving ourselves, in the sense of “saving an image of ourselves as defenders”. From this viewpoint, Afghanis and Iraqis must struggle for democracy because that gives westerners something to believe in.
With many correspondents mystified by the meaning and purpose of that war, subsequent invasions of Iraq and Afghanistan as part of the War on Terror required an even more media-savvy approach from politicians and the military involved. The intent behind arranged pictures of statues of Saddam being pulled down is to illustrate the liberation from a dictator theme of the justification of the war in the first place. Soldiers were seen handing out pots of paint to Iraqi citizens so that they could join in the defacing of portraits of Saddam.

When media required a big gun to be fired, reporters and Iraqi artillery established a going rate for each shell and corresponding lower rates for the discharge of smaller weapons and bullets for the cameras.
The US organised a live televised operation, ‘Night Raid on Kandahar’, carried out by Special Forces, wearing helmet cams and being filmed ‘in action’. It transpired another Special Forces team (not filmed) had already carried out a mission to check it was safe for the media team, rendering the second mission meaningless in military terms, valuable only for its grainy pictures.

Jessica Lynch, an American wounded and missing in action, became a war celebrity when she was ‘rescued’ from a hospital that had already been abandoned by the opposing military forces. She was ‘rescued’ from the doctors and nurses looking after her and one of her ‘rescuers’ thought to bring an American flag to drape over stretcher as she was carried to ‘safety’. Incidentally, there had been a big search for her by Iraqi forces and they were the ones to locate her in the hospital, but were not permitted to ‘rescue’ her.
Stepping back from the Iraq conflict and its strange events, it does appear that the terms in which the war was justified have trapped the anti-war movements within the terms of the discussion set by those proposing the war. If I am right in what I say, the war was posed as a question of conscience, of the risks of not intervening being higher than those of involvement, that could only be opposed on its own terms with the ‘not in my name’ slogan.
Risks, such as the risk of Saddam having weapons of mass destruction (WMDs) or the risk of the terrible destruction of civilian life, were compared as moral imperatives in either proposing or opposing the war. I would like to get away from the moral argument against war.
War has started to be conducted in a way that is self-conscious but that has not made the media reporters any less critical. They could see that claims had been made that people could not quite believe in. But the lack of belief in a western mission can go further. Even on Newsnight, early in the second invasion, it was commented that “even if they found WMDs now, who would believe them?”

A lack of purpose makes any quest to find a purpose incoherent.
George W Bush said; “Mission accomplished!” but the media thought the conflict stage-managed. The military itself was self-conscious about the way it appeared. American flags might appear on some buildings but were quickly taken down as the military did not want to appear as conquerors. The flag, once the symbol and rallying point for people fighting for something they believe in, has become something to apologise for using. The media were asked not to show the soldiers pointing guns or looking too aggressive and warlike.
The “mother of all bombs”, or MOAB, was wheeled in. It is a weapon that can cause huge, underground explosions that can devastate bunkers and defensive complexes deep in the rock, where WMDs might be thought to be hidden. But MOAB was not used in a way that required it to be detonated. The bomb was released on film rather than from a plane, shots of its test drop serving the propaganda effort. The weapon was only used in the media against a propaganda target that did not exist.
The discussion
Questions and observations from the audience particularly centred around the question of whether further military adventures were likely, regardless of their success or otherwise in establishing some kind of purpose. Obama looks ready to downplay Iraq and focus on the war in Afghanistan. However motivated, it seems the possibility of further wars has not run its course.
Another aspect of the discussion was the questioning of Phil’s basic premise that recent wars, from the humanitarian interventions in Bosnia to today’s war on terror, were driven by this postmodern collapse of meaning in the west. Is it only in the west that there has been a crisis of purpose?
Perhaps, suggested others, Phil’s assertion that much has changed in warfare had gone too far. Many imperialist powers have used propaganda and the media for their wars and in support of their objectives, particularly the Nazis. Is there anything essentially different about modern wars in this respect, apart from that there are far more media? Isn’t it the case that the enemy is always demonised in conflicts? Why can’t we morally object to war on the simple basis it kills and maims people? What’s wrong with that?
Phil’s responses and closing remarks
In military terms, because of the justification for wars now, the ideal conflict described by generals in fast and light. A particular objective is envisaged and it would be achieved quickly and efficiently – but no conflict has actually turned out like that.
The attempt to find a purpose or meaning in the west through foreign intervention has not gained mass support. The control of the media in theatres of war did not work either. Where the defining image of the Iraq war was supposed to be the toppling of Saddam’s statue, it has probably became the hooded prisoner whose torture by Americans was filmed on a grunt’s phone.
When the media message cannot be controlled it becomes even more incoherent than it already is.
Even after 9/11 and the subsequent war on terror, the west is very careful to say it is not engaged in a clash of civilisations. The enemy is much harder to define, especially as an ‘anti-Moslem terrorist’ instead of a terrorist Moslem, but it is difficult to say how far this can still carry on.
It was popular in the 1990s to say that the media seemed to control everything but there does seem little evidence to support that view. Foreign policy becomes an arbitrary process in which the rational balance of national interests has little role to play when a war is fought not to conquer but to administer a short sharp cure for a moral problem without getting bogged down – which of course they then do.
The media itself is able to expose some aspects of the real situations in which wars are fought. However, a lack of opposition to wars in general is very noticeable now compared with the past. Unfortunately, it is not possible to be against war on the basis of its immoral cause of death because the war is likely to be justified in that way in the first place, as a military action to prevent worse death.
The wars have perhaps helped to cohere elites behind military action, if not many other people, but there is another problem with invading another country to work out the crisis in values at home. The world order consists first of a few powerful nations and second ofweak nations whose opinions and interests no longer matter. Their sovereignty and the rights of their people are bypassed. Take Bosnia or Kosovo, where the humanitarian wars are long over. The west still directly dominates and dictates who is allowed to win meaningless elections. The west is not just a military power and a cultural influence over the rest of the world. �
The best hope for the future is that a new political vocabulary can be made in the west that can oppose these wars on a basis that can stop them.
Acknowledgements:
The Brighton Salon would like to thank:
All those who came (over 40 of you) and particularly thank all those who stayed until the very end (28 of you)!
The University of Sussex Debating Society, DebateUS, particularly Alexandria and Mara;
The Battle of Ideas for including this event in its run-up to the conference on November 1 and 2 in London (see link on left-hand side);
and lastly, Dr Phil Hammond for a thought-provoking and surprising take on the combination of neo-imperialism and postmodernism. I heartily recommend his book, War, the Media and Postmodernity, available at £17.99 from www.amazon.co.uk.
This report is personal one from Brighton Salon Secretary Sean Bell, who moderated the discussion.
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