Generation crunch

They did everything right: studied hard, prettified their CVs with internships, and bounced out of university - only to find themselves the recession's first victims
Patrick Barkham and Polly Curtis
The Guardian, Saturday 10 January 2009
Article history
The bafflement in the voices of young graduates is like that of someone who is suddenly smacked in the face by a friend. Teachers, parents and most of all politicians told them a university education was the key to getting a good job. Careers advisers chivvied them to get work experience. So undergraduates dutifully studied for decent degrees, prettified their CVs with useful internships and bounced out of university last summer. The world, and the job market, was their oyster. And then: thud. They were floored by the sucker punch of recession.
A generation of young people - Generation Crunch, perhaps - is experiencing unemployment for the first time, a sinking, scarring sensation that completely escaped the generation above them. David Blanchflower, the influential economist and member of the Bank of England's monetary policy committee who predicted the recession, believes that 3 million people will be out of work by the end of this year. Of these, more than 1 million are likely to be under 25. The latest labour market survey shows unemployment growing fastest among 18- to 24-year-olds: of the 137,000 rise in unemployment in the three months to October, 55,000, or 40%, were aged 18 to 24. "That scared me and everyone else," says Blanchflower. "A spell of unemployment when you're young has a very different effect than when you're older." Economists such as Blanchflower talk of "permanent scars" against "temporary blemishes": the evidence is that prolonged unemployment permanently damages the young.
Facing a youth unemployment crisis, Gordon Brown has already this week promised £140m to increase the number public and private apprentices by 35,000. It may be harder, however, to help jobless graduates. If the victims of earlier recessions were the millions of skilled manual workers, will bright young graduates bear the brunt of the latest economic crisis?
Last summer Bea Carter, 21, finished her English literature degree and decided to stay in Manchester with her university friends to "live together, like young professionals". She thought it would be fun. "But I'm even struggling to get a job I don't want, let alone one that I do." She settled for a job at a branch of Marks & Spencer's Simply Food. "Working in a supermarket wasn't really what I expected to be doing at all, but since I can't even get admin or office work, I had to take it." A week before M&S announced it was axing 1,200 jobs, Carter's contract came up for renewal. Her managers let it expire. Shocked, she tried registering at temping agencies but was told she couldn't because she didn't have administrative experience. "I always thought my degree would help me in the long-term with a career, but it certainly hasn't helped me with the first step. A lot of agencies don't care if you have a degree, they just want to know that you can type a certain number of words a minute," she says. "Right now, job-hunting for me is about money, not about a career."
Graduates being forced to take non-graduate jobs is not a new trend. The expansion of higher education, driven by the government's target to put 50% of young people into it, has happened too quickly for the labour market. "There are more graduates than ever and there are more graduates now in less vocational subjects from 'less prestigious' universities than there used to be. We have a much higher proportion of social science and arts graduates which is why a third or more of graduates don't get graduate jobs," says Prof Peter Dolton of Royal Holloway, University of London, and the London School of Economics's Centre for the Economics of Education. He says this trend will be exacerbated by the economic downturn. "When you have rising graduate unemployment, the effects are felt worst by graduates of non-vocational subjects and graduates from less prestigious universities. That's going to get even worse in recession."
The crunch on graduates began in earnest in September, according to Mike Hill of Graduate Prospects, the graduate careers service. "In August we were thinking 'things are going well'. By September we were thinking 'oh shit'. Immediate vacancies disappeared," he says. "Graduate recruiters might say they are going to be recruiting but what they mean is very many fewer than last year. Students aren't going to be as cocky."
If things are bad for the class of 2008, they will get worse for the classes of 2009 and 2010, according to Dolton, as traditional big graduate recruiters pull out of the "milk round". According to Graduate Prospects, these recruiters are changing, so while M&S may be laying off workers, Aldi, Asda and Netto are "very actively recruiting". The few openings at conventional recruiters are now desperately competitive: KPMG's 2009 graduate jobs are nearly all taken, months ahead of schedule, as students scramble for the top jobs.
Carl Gilleard, chief executive of the Association of Graduate Recruiters, suggests that young graduates should keep busy. "It's going to be a shock to the class of 2009. But it's far better to consider a temporary job than to sit at home and feel sorry for yourself. Why not do bar work? It involves skills you need for lots of jobs - working with people and perhaps negotiating tricky situations."
This is greeted with hollow laughter by many graduates and undergraduates, who are struggling to pick up the most menial of jobs, let alone something to burnish their CVs. In recent months, Stephen Greatley, 18, a student from Liverpool, has applied for more than 40 holiday jobs to help fund his Oxford University degree and has not found any work. "There was a job advertised at the Royal Mail. The job description warned it was tedious, repetitive work; I applied and didn't hear anything back," he says.
Oliver Brand, 21, graduated from Birmingham University last summer with a high 2:1 in political science. Since then, he has applied for more than 35 jobs and 75 unpaid work placements in advertising and marketing. "I wasn't cocky at uni but I had high hopes for myself," he says. "I was head boy at school, I thought I had quite a lot going for me. I'd always expected a bit of rejection but after the 100th, I thought 'Oh God, what's going on here?'
"I've even found bar work hard to come by now. They want people who can guarantee to work there for a year and I've been honest and said I hope to get a full-time job." As well as seeking work experience, he's joined local job agencies near his home in Somerset. The rewards for all this endeavour? Two weeks' work experience with a London marketing company and occasional cash-in-hand labouring for a neighbour.
It is "completely demoralising," he says. "My mates have found it exactly the same. We're all pretty down. We meet up regularly. All we are doing is trying to find a job every day."
As Blanchflower warns, this demoralising effect could turn into long-term "scarring" if this new generation of unemployed people are out of work for more than a year. There was a sizeable group among the young unemployed in the 1981 recession who were still out of work in their 40s. Studies show that young long-term unemployed people find it difficult to reconnect with stable career jobs. "It's important to get a foothold in the labour market," says Blanchflower. "If you don't get in, life becomes very hard."
Young graduates are hit by a "double whammy" according to David Willetts, the Conservative higher education spokesman: companies freeze recruitment and then there is the last in, first out principle. Recent graduates lucky enough to get work have found themselves turfed out as the recession bites.
Dirren Patel, 25, got a degree in business management from the University of Leicester and quickly picked up work for a City firm specialising in IT mergers and acquisitions. Since being made redundant in September, he has found it "impossible" to find similar work in the City. Living at home with his parents near Woking, Surrey, Patel has been able to take the long view: he is now looking for a graduate job that will start in September. He has 20 months' experience working in the City and he is competing against new graduates with none. He knows 30-year-olds who are applying for entry-level graduate jobs. He says new graduates have very little chance: "2:1s are not worth anything anymore because everyone's got them."
Blanchflower believes more education and training is vital for the young unemployed. But Richard Reeves, director of thinktank Demos, says the government's instinct seems to be to encourage well-qualified (and often heavily indebted) graduates to take on more study (and more debt). Reeves says a government minister recently told him unemployed graduates will probably end up doing master's degrees. "'Let them do master's degrees' is the modern equivalent of 'let them eat cake'," says Reeves. "You just worsen the problem. Doing an MA should not be an economic policy, it should be a broader social policy."
Reeves is not surprised graduates feel angry and betrayed when they have no job to show for years of study after obeying the urgings of the government. "The sell has always been 'go to higher education and you'll get a better job'. The sell should be higher education is a way to expand your horizons, discover more about the world and yourself and help you get a better life, as well as a job," he says. "This vocational assumption is being destruction-tested by the recession."
Have young people funnelled into the higher education factory been misled? "There is a growing debate about the 'return' of a university degree," says Willetts. "The conventional model has been supply for graduates and the number of graduates has risen in happy tandem. But if that falls out of sync then students will ask themselves whether it's all worthwhile."
According to Dolton, the government's target of getting 50% of adults into higher education was based on influential research looking at adult earnings over an entire career. Much of this studied generations born in 1958, and found each year in education over the age of 16 added 15% to earnings. But this, argues Dolton, was an exception: a uniquely privileged generation who enjoyed an elite education and a smooth labour market. To suggest modern degrees would add a similar value - called "rate of return to education" in academic circles - is "errant nonsense" he says. The government assumed further education would boost earnings by 8-15%. "Parents and kids have been sold a lie in the sense that the rate of return to education is not that," says Dolton.
What should be done? Skills minister John Denham is drawing up an action plan to tackle unemployment among 18- to 24-year-olds, which aims to help thousands of graduates. The government needs to act quickly, says Blanchflower. "We don't want these spells of unemployment to get long. A spell of unemployment is bad when young and the longer it is, the worse it is. We want to do everything to prevent it becoming long-term unemployment."
Reeves warns it may prove harder to assist graduates. Keynesian-style public works - generating jobs through public sector infrastructure projects - are ill-suited to most graduates because skills sets do not match. "Would you want someone with a degree in media studies to lag your loft? I wouldn't," says Reeves. If the government wants to create new graduate jobs, it could invest in cultural and creative industries, suggests Reeves, which should be seen as part of the country's infrastructure and as something which would reap profits and economic growth in the future.
If things are tough for young graduates, however, they will only get tougher for less skilled young people. "So far, it looks as if it's the unskilled who are suffering the most. In the short and long term being unskilled is much worse than being skilled," says Reeves. Paul Gregg, a professor of economics at Bristol University, predicts that the number of unemployed graduates will rise "and the length of time it takes them to connect with the labour market will lengthen but they will get in, although with lower wages than in the past."
In other words, graduates will lower their sights and end up taking the jobs of less skilled workers. "Graduates are very mobile. They are more likely to move around to find work," says Ian Brinkley, associate director of the Work Foundation. "For a while at least it's going to look a lot less attractive to go to university. But a degree will still help you get a job if not a well-paid job - and that takes that job away from someone else."
Additional reporting by Huma Qureshi

Manufacturing scacity

Book Review from the December 2008 issue of the Socialist Standard
Green Capitalism. Manufacturing Scarcity in an Age of Abundance. By James Heartfield. www.heartfield.org .2008
James Heartfield is associated with the former Trotskyist (British) Revolutionary Communist Party (RCP) which used to publish Living Marxism (LM) and has moved on considerably since "the collapse of Communism" at the end of the 1980's and the dissolution of the formal RCP organisation in 1997. These days the so-called "LM network" produces the edgy www.spiked-online.com website and organises debates and events under the auspices of the Institute of Ideas and a myriad of propaganda campaigns expedited largely through a robust, sometimes entertaining, and not ineffective style of media entryism.
One area this current has been particularly interested in over the last two decades is in promoting a full-on critique of the reactionary imperatives of the politics of "Environmentalism". In Green Capitalism James Heartfield reminds us that the profit system is essentially a system of rationing, which is now, in certain circles and in a variety of ways, being dressed up as "greenwashing" by Big Business and Governments – as the contemporary ruling elites reinvent scarcity in an age of abundance.
Heartfield rightly presents the capitalist mode of production as an epoch in which the force of human ingenuity has sought to ameliorate the exigencies of life through technical breakthrough with the result that happiness is the condition for most of us in Western societies. I do, however, take issue with the notion that one out of any of the 300 workers at the Lombe silk works on the Derwent in 1721 or the 5000 wage slaves at Arkwright's Mill in Cromford in 1771 woke up for work every day with a sense of unmitigated joy. Whilst those long deceased exploited workers are no longer "variable Capital", my modern-day neighbours don't seem to enthuse much about the conditions of their means of living whilst having a sup on a Friday night in the local pub, either. Nevertheless, the material gains we have made in the interim between the first factories and 21st century capitalism are impressive.
In a summation of capitalist economics Heartfield tackles the neo-classical economists and suggests they were in effect "Rationers by Trade" (my phrase not his) but you get the point. Notwithstanding that, the book opens with a great sense of optimism and opines succinctly upon the gains made by the working class under capitalism. The author explains carefully the concomitant progressive and destructive forces at play within the profit system and hints at transcending towards a more rational form of society founded upon technological progress.
This work sets out to show how modern Environmentalism came about as a consequence of ruling elites ideas about scarcity. Heartfield's argument is that, in Western society, the myth of the "fragile" planet emerged as a consequence of the retreat from production in the original heartlands of industrial capitalism.
Much of the Green Capitalism provides an excellent exposition of the fools' errand of "Environmentalism" and the levers of power behind that aspect of the moribund profit system. Meanwhile, at times the prose is poor and plodding, and some of the referencing is both points-scoring and unnecessary to make the more essential issue clear. Do we really need to be lectured about Trotsky's ideas on production? Some of this stuff would leave the general reader all at sea in very short order. Whilst a final extraordinary point is clearly made: the world population grew from 791 million in 1750 to 5.9 billion in 1999, as a consequence of advances in agriculture, transport, sanitation, industry. Many of that number exist at the level of subsistence – and it should not be that way! So, from an editorial perspective the narrative simply peters out – a bang and a whimper! Where is the alternative?
Notwithstanding that, this book has much to recommend it, not least for cocking a timely snook at both the modern-day misanthropes who see mankind as a plague upon the planet and the long-dead 'dismal scientists' of neo-classical economics who could not comprehend a theory of productive growth through collective endeavour. Heartfield puts a well aimed, populist boot into the modern-day Green Capitalists – Branson, Goldsmith, Charles Windsor, Al Gore, Bill Clinton, Lord (Peter) Melchett, and makes reasoned argument that Western Capitalism has got to go Green for the sake of exploiting new sources of profit.
There is an argument that modern socialists need to take on the Green catastrophists and promote technology and real democracy to face down the spectre of Austerity Capitalism in the 21st Century - in order to kill the pernicious profit system once and for all.
-Andy P. Davies

Capitalism in crisis

The turmoil in global financial markets has finally forced Labour's smug Chancellor Alistair Darling to face up to reality. In a short period of six months, Britain, according to Darling, has gone from being best placed of the G7 major capitalist countries to withstand global economic turbulence (March), to facing an economic downturn that looked set to be more profound and long lasting than initially expected (mid-July), to confronting an economic climate that is 'arguably the worst in 60 years' (end of August). DAVID YAFFE reports on the impact of the financial storm now hitting the British economy.
To prevent the global financial system going into meltdown, over an extraordinary period of ten days from 7 September, the most right-wing neo-liberal US government ever nationalised the two giant mortgage providers Fannie Mae and Freddie Mac; refused to bail out the fourth largest investment bank, Lehman Brothers; helped direct the takeover of investment bank Merrill Lynch by Bank of America and rescued the world's biggest insurer AIG, by lending it $85bn in return for an 80% stake, to prevent it going bankrupt. In addition the world's central banks injected some $550bn into the money markets in an effort to get them functioning adequately again. Finally came a last-ditch US government plan to create a $700bn fund to buy toxic assets – value unknown – from the banks in an attempt to ease the credit crunch. This is a desperate effort to socialise the unsupportable debt of a parasitic and decaying capitalism.
British economy rocked by global financial stormIt is the particular parasitic character of British capitalism – its reliance on the earnings of its overseas assets, particularly its bloated and usurious banking sector, and the ever growing importance of financial and business services in the domestic economy – that makes it the imperialist country most vulnerable to external financial shocks.1 Britain's overseas assets in 2007 were a remarkable £6,486.5bn, 4.7 times its GDP, with 'other investments', predominantly bank loans and deposits by UK banks, 2.74 times GDP – a gigantic usury capital. These assets are exceeded by the UK's liabilities of £6,836.9bn, leaving a net external debt of £350.4bn, 25.4% of GDP. US overseas assets and liabilities, in comparison, are only around the size of its GDP. Despite its net external deficit Britain still has a positive investment income on its international investment account – it shares this feature with the US. However as funding costs for lending to the UK will increase significantly with the credit squeeze, these earnings will fall significantly, with serious consequences for Britain's rapidly deteriorating balance of payments deficit. This deficit will grow and the pound will continue to fall against other currencies, reducing economic growth and the standard of living of the British people.2
Rescuing the banksThe need to defend the interests of Britain's financial sector and the City of London's vast international assets is central to Labour's economic policies and that of any British government in power. The belief, now widespread in sections of the left, that the financial crisis has forced a change in Labour is risible. Larry Elliott believes the 'Prime Minister has belatedly discovered his party's social democratic roots' (The Guardian 20 September 2008). Seumas Milne (The Guardian 25 September 2008) argues 'Ministers such as Yvette Cooper, Ed Miliband, Ed Balls and Douglas Alexander have gone out of their way to attack "greed and excess" in the City and call for tougher regulation and greater boldness'. Brown's promise to regulate the City was a real sign that he 'will throw off the shackles of New Labour' said Derek Simpson, joint General Secretary of Labour's biggest trade union affiliate Unite. Fine words butter no parsnips. Ed Balls, two and a half years ago, was telling us that the government has to fight the City's corner not just in Brussels but in New York, India, China and other centres around the world (Financial Times 23 May 2006). That was confirmed by Gordon Brown in his speech to the Labour conference on 23 September. Brown also said he wanted transparency, responsibility, sound banking and managed risks in financial transactions, with bonuses not based on speculative deals. But he claims this is to ensure 'London will retain its rightful place as the financial centre of the world'. As we said two years ago: 'Any Labour government elected to run British capitalism has to defend the interests of British imperialism and, in particular, take measures to promote the financial interests of the City' (FRFI 194). The rest is hot air.
The Labour government has representatives of the parasitic banking corporations at every level of government, as ministers and advisors directing its social and economic policies and, in the heart of Downing Street itself, running the office of the Prime Minister. City businesses fund Labour-supporting think tanks such as the Institute for Public Policy Research and the Social Market Foundation's policy forums. The payback has been a comprehensive opening up of public sector provision to private firms – estimated to be a £79bn industry. Business minister Baroness Shriti Vadera, a UBS Warburg investment banker, for example, forced through the disastrous £16bn Public Private Partnership financing of the London Underground. The influence of the City is all pervasive. The government will always look after City interests, first and foremost, in its increasingly ineffective efforts to stave off the unfolding crisis.
The Northern Rock crisis broke out just over a year ago and it took five months of frantically searching for a private sector takeover of the bank before the government was forced into a last resort nationalisation in February. Thousands of bank employees lost their jobs while loans and guarantees of around £87bn from the government keep the bank in operation.
The Lloyds TSB £12.2bn takeover of HBOS on 18 September unequivocally demonstrated the government's priorities. HBOS was in deep trouble as its share price plunged around 70% in a week, falling at one stage to 88p, compared with 892p in September 2007. A Northern Rock-style run on the bank could not be ruled out. Its market value had fallen from £32bn a year ago to £7.75bn on 17 September. Yet its total income in the first half of 2008 was £6.5bn. The bank has 22m customers, over 1000 branches and 74,000 employees; it accounts for 20% of the domestic mortgage market and around 16% of the savings market. HBOS has wholesale funding requirements of £278bn which it must renew on the capital markets, 59% of which is relatively short term, lasting less than a year. The credit crunch makes financing these funds increasingly difficult and expensive. In addition its £236.5bn mortgage book is endangered by falling house prices and growing arrears in mortgage payments. This is why its share price plummeted. It was not, as some have made out, primarily the result of short selling by corrupt speculators, but is the result of the financial crisis hitting the capitalist system. The government banning of short selling is a cynical move to win the popular vote. It distracts from the root cause of the financial crisis – the unwinding of the unprecedented debt throughout the British economy (FRFI 204), which can no longer be postponed.
Lloyds TSB offered 0.83 of its share price for one HBOS share, valuing an HBOS share at takeoverat 232p. Cost savings of at least £1bn, the closing of 500 branches of the new bank and the loss of tens of thousands of jobs are being planned. The new merged bank will have links to 40% of homes, a retail deposit base of half the savings market, have around 35% of current accounts, 28% of the mortgage loans, 25% of small business banking, and a huge general insurance and investment business. This is the creation of a banking monopoly.
The government made it clear that it would disregard competition rules to allow this takeover, creating the largest retail banking group in the UK. It regarded a banking monopoly as far preferable to a Northern Rock-style nationalisation. Lloyds TSB chairman, Sir Victor Blank, thought it a 'wonderful' deal and said it was 'landmark day' for the financial services industry. He held out the prospect of using the new group's financial muscle to expand overseas (The Observer 21 September 2008) – a more powerful addition to British imperialism's parasitic banking sector.
Still the financial crisis intensified. On 28 September the government was left with little choice but to nationalise Bradford & Bingley, break up the bank and sell its profitable assets to another banking monopoly, Santander. Can anyone seriously call socialising the debt of failing banks and creating new banking monopolies a return to Labour's 'social democratic roots'?
Heading into recessionThe UK economy finally ground to a halt in June. The pound fell to its lowest level against other currencies for more than 11 years. Gross mortgage lending in August was £21.8bn, down by 36% from a year ago. This deterioration in the housing market will feed back on economic activity, with the banks cutting back their lending and raising mortgage rates. Public finances went deeper into the red with the August deficit at £10.2bn, the worst figure for that month since records began in 1993. With the debt of Northern Rock's nationalisation now brought onto the books for the first time, the national debt has reached 43.3% of GDP, well above the government's 40% ceiling. With the addition of the cost of Bradford & Bingley's nationalisation, the budget deficit this year could reach £110bn, more than two and half times the budget forecast in March. There will be a severe squeeze on government spending.
Unemployment is rising rapidly. The number of claimants rose by 32,000 to more than 900,000 in August. This was the biggest rise since December 1992, having increased for seven months in a row. The total number of unemployed rose by 81,000 to 1.7m, the highest level for nine years. It could reach 2 million before the end of this year. The crisis in the financial sector is worsening the jobs outlook, with 19% fewer job vacancies in the finance and business service sector in the three months to the end of August compared to last year. Redundancies have risen by almost 15% overall and 31% in the construction industry since last year. This situation will rapidly deteriorate as the financial crisis hits home. Inflation has reached 4.7% while real earnings rose 3.5%, so most workers are facing significant pay cuts.
This then is the 'real' economy in which financial services' share of GDP has risen to 9.4% from 6.6% in the mid-1990s and 8.5% in 2005. It accounted for 10.4% of gross value added in 2007 and was the second fastest growing sector of the British economy after oil and gas. 1.04m people work in banking, finance and insurance. The much broader financial and business services sector has grown by 57% since Labour came to power. It accounted for 33% of the gross value added in 2004 and employed more than 6 million people in 2005. Manufacturing has been close to recession throughout the last ten years and its share of GDP is now 13% compared to 21% ten years ago. These are the features of a parasitic and decaying capitalism. The Labour Party is never going to change this but, on the contrary, as the party in power, can only reinforce these developments.
1 See 'Britain: parasitic and decaying capitalism' in FRFI 194 December 2006/January 2007, available online: http://www.revolutionarycommunist.org/frfipages/194.html2 See David Yaffe 'On the road to recession' in FRFI 204 August/September 2008. Online at http://www.revolutionarycommunist.org/frfipages/204/FRFI_204_cri.html

Generation L and its fearful future

By Gideon Rachman
Published: January 12 2009 19:11 Last updated: January 12 2009 19:11
Pop sociologists like to divide people born since 1945 into different groups. There are the baby boomers, there is Generation X, we may even be on to Generation Y by now. But, as far as I am concerned, we are all members of Generation L – that is, L as in lucky.
Those of us born in western Europe or the US have never really experienced hard times. Our parents and grandparents lived through world wars and the Great Depression. We have had decades of peace and prosperity.
Could that change? Perhaps Generation L has just had the luxury of an extended "holiday from history", which is now coming to an end.
There is no doubt that people are panicking. The flow of dire corporate news is so relentless that Boris Johnson, the mayor of London, has complained that: "Spending an hour with the FT is like being trapped in a room with assorted members of a millennialist suicide cult." A CNN poll found that almost 60 per cent of Americans expect the current recession to turn into a depression.
If we had Depression-era economics, would we also get Depression-era politics? That would mean new extremist parties and ideologies, rising nationalism, the growing irrelevance of international organisations such as the League of Nations and the United Nations and – ultimately – war.
Amid all the gloom and the hype, it is worth remembering just how far we still are from the Great Depression – when unemployment hit 25 per cent in the US and 20 per cent in Britain, and hunger and homelessness were commonplace. But the return of mass unemployment is not impossible. Last year, the US experienced its biggest annual job losses since 1945. Imagine the impact on the wider American economy if General Motors and Ford really did go out of business this year.
We are told that our current leaders have learnt the lessons of the 1930s. Ben Bernanke, head of the US Federal Reserve, is a historian of the Great Depression and mainstream economists believe that their discipline has made real progress since the 1930s. Like modern doctors, modern economists have a whole range of new tools available to them that were unknown back then. Economic diseases that would once have proved fatal can now be effectively treated.
That is the theory. But economists largely failed to predict the scale of the current crisis. Since they did not diagnose the disease, there is little popular confidence that they know the cure. What if economics is, actually, at the same level as medicine was when doctors still believed in the application of leeches? Or what if economics has indeed made great progress, but we are facing a new type of economic virus for which we have not yet identified a cure – the H5N1 of economic crises?
A similar question applies to the politics of the current crisis. Does our knowledge of what went wrong in the 1930s make it less likely that we will make the same mistakes again?
There are some worrying signs. At the Group of 20 leading countries' summit in November, all 20 governments solemnly promised to avoid protectionism, which is widely believed to have worsened the crisis of the 1930s. Yet within days of returning from Washington, India and Russia had pushed through new tariffs. One lesson of the 1930s is that international co-operation – so sorely needed in a global financial crisis – can disintegrate in a depression.
In the past, periods of economic dislocation have reliably led to the rise of new radical political and social movements. The only important democracy to have held an election since the collapse of Lehman Brothers last September is the US, and it voted for Barack Obama, a liberal internationalist. But in recent months there have been riots in Russia's far east, in southern China and in Greece.
It is still a huge leap, however, to go from a little light rioting and some international trade tensions to the rampant nationalism and war of the 1930s. For my generation it seems almost unthinkable that we could return to an era of armed conflict between the world's main powers.
But previous generations have felt the same way. In 1911, towards the end of another long period of peace, prosperity and globalisation, G.P. Gooch, an eminent British historian, wrote that: "We can now look forward with confidence to the time when war between civilised nations will be considered as antiquated as a duel."
Some contemporary political scientists take a similar view. John Mueller, an American academic, crunched the numbers a couple of years ago and concluded: "Within a very few years there may be no war at all anywhere in the world."
With bombs whistling down on Gaza as I write, that seems a little premature. But contemporary optimism about the disappearance of war between the world's leading powers may be more sensible than it proved to be in the years before the first world war. It is almost 60 years since American and Chinese forces clashed in Korea.
The balance of terror did not exist in 1914 and it has made war less feasible. But so has the long period of economic integration and increasing wealth that now threatens to come to an end.
Long periods of peace and prosperity, however, are not always terribly interesting. Amid all the economic gloom, I do not think I am alone in feeling an odd excitement at the sense of living in uncertain and historic times. As Philip Larkin, a gloomy British poet, once wrote: "Life is first boredom/Then fear." We have had the boredom. Now it is time for the fear.
gideon.rachman@ft.com

France braced for 'rebirth of violent left'

Despite claims of exaggeration, government reports insist a new generation of extremists will soon launch a wave of sabotage and bombings
Jason Burke in Paris
The Observer, Sunday 4 January 2009
Article history
The French government fears a wave of extreme left-wing terrorism this year with the possible sabotage of key infrastructure, kidnappings of major business figures or even bomb attacks.
Secret French government reports, seen by the Observer, describe an "elevated threat" from an "international European network ... with a strong presence in France" after the radicalisation of "a new generation of activists" in recent years. Senior analysts and experts linked to the government have drawn parallels with the Action Directe group, which carried out 50 or more attacks in the early 1980s. Others cite the example of the Baader-Meinhof gang.
A report by the French domestic intelligence service talks of "a rebirth of the violent extreme left" across Europe that is likely to be aggravated by the effects of the economic crisis. Other secret documents expose alleged links with activists in Italy, Greece, Germany and the UK. "It has been growing for three or four years now and the violence is getting closer and closer to real terrorism," said Eric Dénécé, director of the French centre of intelligence research and a former Defence Ministry consultant.
While some believe such claims to be scaremongering, the present political atmosphere is tense, with many among right-wing President Nicolas Sarkozy's aides fearing a repeat of the violence in Athens last month, when angry and alienated young people and a hard core of violent left-wing extremists rioted for several days, causing significant damage and bringing the city to a halt.
Last week hundreds of fly-posters around Paris called on young people "forced to work for a world that poisons us" to follow the example of their Greek counterparts. "The insurrection goes on. If it takes hold everywhere, no one can stop it," the posters said.
The recent intelligence reports have blamed violent demonstrations against changes in employment law in 2006, often by middle-class young people, for the recruitment of large numbers of new activists.
A series of incidents last year confirmed the fears of French police. In January two activists were arrested in possession of what was alleged to be bomb-making materials. In November nine people were arrested after a lengthy surveillance operation in the central French village of Tarnac, where they had set up a commune. Two of the alleged ringleaders, Julien Coupat, 34, and his partner Yildune Lévy, 25, are still in prison accused of sabotaging high-speed TGV railway lines and "associating with wrongdoers with terrorist aims".
Gilles Gray, assistant director of economic protection of the French domestic intelligence service, spoke recently of "a philosophy that was spreading in Europe". The arrests in Tarnac were "a strong message ... addressed to those who might be thinking about committing similar acts," he said. "We hope that this affair has put a stop for a time to this kind of violent action [and will avoid] a return of Action Directe."
Investigators believe that the arrests at Tarnac provoked "reprisals" in Athens, where the offices of the French news agency Agence France-Presse were attacked with makeshift incendiary devices, and in Hamburg, where the French consulate was daubed with paint.
A claim of responsibility for the sabotage of the TGV lines was, police say, sent to a German newspaper from Hanover and signed "those who have had enough ... in memory of Sébastien", believed to be a reference to Sébastien Briat, a young anti-nuclear militant crushed by a nuclear waste train in eastern France exactly four years before the night of the recent spate of sabotage. Coupat and Lévy had taken part in demonstrations and actions in Germany, the US and the UK.
Coupat has also been accused by investigators of anonymously writing a book, The Coming Insurrection, published by a little known Paris publishing house in 2007. The book, which has been translated into English and posted on US and UK anarchist websites, was found in the possession of three young activists arrested after detonating a bomb in a field. It contains instructions about sabotaging railways and other means of "destroying the power of the police, seizing local political power by the people, and blocking the economy". A statement from the publishing house said the author was "a committee from the subversive tendency".
But some accuse France's right-wing government of both exaggerating and exploiting the left-wing threat. "They are turning my son into a scapegoat for a generation who have started to think for themselves about capitalism and its wrongs and to demonstrate against the government," said Gérard Coupat, father of the alleged ringleader of the Tarnac group.
"The government is keeping my son in prison because a man of the left with the courage to demonstrate is the last thing they want now, with the economic situation getting worse and worse. Nothing like this has happened in France since the war. It is very serious."
Author and researcher Christophe Bourseiller told the Observer the threat was being exaggerated. "Yes, there is a certain renewed level of agitation, but there is a huge difference between deliberately slowing down a few trains without injuring anyone and something like the Madrid bomb blasts," he said. "The Ministry of the Interior has made it look like the Tarnac arrests halted a serious campaign of violence with a huge, huge media operation."
Certainly there is a widespread fear at the ministry in the Place Beauveau of violent protests in the coming months. A powerful and growing movement among schoolchildren forced the tactical withdrawal of wide-ranging reform plans after demonstrations in Lyon led to clashes with the police, mass arrests and the burning of cars.
Trade unions have promised a series of mass stoppages in the coming months. Among a population already made bitter by static salaries, rising prices and structurally high levels of unemployment, the lay-offs and wage cuts that could result from the economic crisis will fuel anger.
"Whether or not the Tarnac group is guilty, there are other groups in France, in Italy, in Germany, which, having lost faith in a political left in disarray, are tempted by violent action and are in a phase of semi-clandestinity," Alain Bauer, a criminologist at the Sorbonne, told the Observer. "With Action Directe and the Red Brigades, there was a first intellectual phase, followed by a radicalisation and then a transition to physical action. Books like The Coming Insurrection are strongly reminiscent of the first phase."
Other similarities include the tactics envisaged and the middle-class, educated profile of most of the activists.

Obama is losing a battle he doesn't know he's in

The president-elect's silence on the Gaza crisis is undermining his reputation in the Middle East
Comments (1077)

Simon Tisdall
guardian.co.uk, Sunday 4 January 2009 15.55 GMT
Article history
Barack Obama's chances of making a fresh start in US relations with the Muslim world, and the Middle East in particular, appear to diminish with each new wave of Israeli attacks on Palestinian targets in Gaza. That seems hardly fair, given the president-elect does not take office until January 20. But foreign wars don't wait for Washington inaugurations.
Obama has remained wholly silent during the Gaza crisis. His aides say he is following established protocol that the US has only one president at a time. Hillary Clinton, his designated secretary of state, and Joe Biden, the vice-president-elect and foreign policy expert, have also been uncharacteristically taciturn on the subject.
But evidence is mounting that Obama is already losing ground among key Arab and Muslim audiences that cannot understand why, given his promise of change, he has not spoken out. Arab commentators and editorialists say there is growing disappointment at Obama's detachment - and that his failure to distance himself from George Bush's strongly pro-Israeli stance is encouraging the belief that he either shares Bush's bias or simply does not care.
The Al-Jazeera satellite television station recently broadcast footage of Obama on holiday in Hawaii, wearing shorts and playing golf, juxtaposed with scenes of bloodshed and mayhem in Gaza. Its report criticising "the deafening silence from the Obama team" suggested Obama is losing a battle of perceptions among Muslims that he may not realise has even begun.
"People recall his campaign slogan of change and hoped that it would apply to the Palestinian situation," Jordanian analyst Labib Kamhawi told Liz Sly of the Chicago Tribune. "So they look at his silence as a negative sign. They think he is condoning what happened in Gaza because he's not expressing any opinion."
Regional critics claim Obama is happy to break his pre-inauguration "no comment" rule on international issues when it suits him. They note his swift condemnation of November's terrorist attacks in Mumbai. Obama has also made frequent policy statements on mitigating the impact of the global credit crunch.
Obama's absence from the fray is also allowing hostile voices to exploit the vacuum. "It would appear that the president-elect has no intention of getting involved in the Gaza crisis," Iran's Resalat newspaper commented sourly. "His stances and viewpoints suggest he will follow the path taken by previous American presidents... Obama, too, will pursue policies that support the Zionist aggressions."
Whether Obama, when he does eventually engage, can successfully elucidate an Israel-Palestine policy that is substantively different from that of Bush-Cheney is wholly uncertain at present.
To maintain the hardline US posture of placing the blame for all current troubles squarely on Hamas, to the extent of repeatedly blocking limited UN security council ceasefire moves, would be to end all realistic hopes of winning back Arab opinion - and could have negative, knock-on consequences for US interests in Iraq, Afghanistan and the Gulf.
Yet if Obama were to take a tougher (some would say more balanced) line with Israel, for example by demanding a permanent end to its blockade of Gaza, or by opening a path to talks with Hamas, he risks provoking a rightwing backlash in Israel, giving encouragement to Israel's enemies, and losing support at home for little political advantage.
A recent Pew Research Centre survey, for example, showed how different are US perspectives to those of Europe and the Middle East. Americans placed "finding a solution to the Israel-Palestine conflict" at the bottom of a 12-issue list of foreign policy concerns, the poll found. And foreign policy is in any case of scant consequence to a large majority of US voters primarily worried about the economy, jobs and savings.
On the campaign trail, Obama (like Clinton) was broadly supportive of Israel and specifically condemnatory of Hamas. But at the same time, he held out the prospect of radical change in western relations with Muslims everywhere, promising to make a definitive policy speech in a "major Islamic forum" within 100 days of taking office.
"I will make clear that we are not at war with Islam, that we will stand with those who are willing to stand up for their future, and that we need their effort to defeat the prophets of hate and violence," he said.
As the Gaza casualty headcount goes up and Obama keeps his head down, those sentiments are beginning to sound a little hollow. The danger is that when he finally peers over the parapet on January 21, the battle of perceptions may already be half-lost.

Israel broke ceasefire by killing six

OPINION: IN JUNE, Israel agreed a six-month ceasefire with Hamas. Until December 27th, no Israeli, civilian or military, was killed as a result of rocket or mortar fire from Gaza.
None. Not one. And there was very little rocket or mortar fire out of Gaza until Israel broke the ceasefire in early November.
Those key facts have been missing from most of the reporting of Israel's slaughter of nearly 300 Palestinians in Gaza, which began on December 27th.
Israel's claim that it had to act in order to protect Israeli civilians from being killed by rocket or mortar fire from Gaza is bogus.
There was another way. It was to maintain the ceasefire. From the point of view of protecting Israeli citizens, the ceasefire was a success. If the Israeli government had the protection of Israeli civilians as its first priority, it would have done its best to have the ceasefire continued indefinitely.
But it didn't. On the contrary, it broke the ceasefire by killing six Palestinians in Gaza on the night of November 4th, while the world was watching the election of Barack Obama.
As a result of this unprovoked assault by Israel, the ceasefire broke down - and rocket or mortar fire from Gaza started again. The ceasefire formally came to an end on December 19th after six months.
Under the terms of the ceasefire agreement, brokered by Egypt, in exchange for Hamas and other Palestinian groups ceasing the firing of homemade rockets and mortars out of Gaza, Israel undertook to end military operations against Gaza and its economic strangulation of Gaza.
Not only did Israel bring the ceasefire to a premature end on November 4th, it failed to live up to its obligations under it to lift its economic embargo.
Even humanitarian supplies continued to be restricted during the ceasefire. As John Ging, the Irish head of UNRWA (United Nations Relief and Works Agency) in Gaza, told The Electronic Intifada on November 25th: "There was five months of a ceasefire in the last couple of months, where the people of Gaza did not benefit; they did not have any restoration of a dignified existence. In fact at the UN, our supplies were also restricted during the period of the ceasefire, to the point where we were left in a very vulnerable and precarious position and with a few days of closure (of the international crossings) we ran out of food."
Even though there was a ceasefire, the people of Gaza continued to be collectively punished contrary to international humanitarian law, in particular, to Article 33 of the Fourth Geneva Convention.
I repeat: Israel's murderous assault on December 27th was not necessary to make its citizens safe from rocket and mortar fire from Gaza. Israel had it within its power to make an agreement with Hamas to extend the ceasefire.
All it had to do was to stick to the terms of the original ceasefire - to end military operations against Gaza and its economic strangulation of Gaza. Then Hamas would have agreed to extend the ceasefire.
David Morrison is political officer of the Ireland Palestine Solidarity Campaign
This article appears in the print edition of the Irish Times