From Karl Marx to Francis Fukuyama, ‘thinkers’ have argued that history has a final, stable state that will persist for eternity. This is hardly a recent concept. Throughout history, from the Romans to the Sun King, regimes must have felt that they were at the ‘end of history’, even when they were balancing on the edge of the precipice.
Today people struggle to see past pluralist democracy, a welfare / warfare state, fiat money and central bank hegemony. It is understood that the answer to all society’s problems must be found within this construct – even when a moments reflection will reveal that the origin of the problems lies within the very construct itself.
In Western societies, pluralist democracy is regarded as sacrosanct, an idea so unquestionably right that wars are frequently being fought in its name, like modern day crusades. Though the ideal of one man – one vote is admirable, could it be that some of the problems we face spring from this ideal? Is democracy a stable form of government or are there hidden problems, that are slowly bubbling to the surface? After all, true democracy has maybe a century of history behind it, hardly enough to claim it has stood the test of time.
Democracy cannot be separated from how the 20th century saw the build-up of the welfare state. Huge, bloated public sectors gulping up an ever increasing part of the economy, squeezing the producing parts of the economy and generously handing out the spoils to their clients in special interest groups, paying them to stay silent and not draw attention to perceived ‘injustices’. The few are squeezed to bribe the many. Political parties compete to lavish generous benefits on constituencies in return for their votes. To pay for the party, public debts mount up and taxes rise.
With government debt rising, fiscal policy measures are increasingly difficult to implement (at least until outright financing of government deficits gain mainstream approval), and the responsibility of managing the economy has increasingly been placed with the central banks. Central banks were originally established to issue bank notes collateralized by gold holdings and as lenders of last resort. The last link to gold was abandoned by President Nixon in 1971 and hereafter it has been conventional wisdom that a central bank will implement monetary policy as it sees fit to achieve politically defined goals. Thought few voters appreciate the subtleties of central banking, no-one questions the model. Witness the ridicule US Presidential candidate Ted Cruz faced for raising the idea of a return to the gold standard. In Europe and the UK any mention of sound money is unthinkable.
So are we really at the end of history? Is it unjustifiable to question the construct?
There are signs that things are starting to crumble. Less than 70 years of the welfare state has left Western democracies hugely indebted and relying on central bank bailouts to survive.
Granted, we are unlikely to see a political candidate argue for the abolition of democracy, in that respect the model sort of carries it’s own survival within itself. Currently numerous wars are being fought around the globe to impose democracy. We are far away from anyone questioning the legitimacy of the institution itself. But examples of societies that do not follow the conventional model can be found: witness pre-1997 Hong Kong and present day Singapore – hardly beacons of democracy but arguably some of the most successful societies on the planet. Following a potential complete breakdown of current society, maybe our descendants will adopt a different form of government, having seen how democracy eventually leads to collapse.
While for now we seem stuck with the welfare / warfare state, as the Western democracies increasingly run out of money, a retrenchment of the state can legitimately be hoped for, even before the inevitable collapse of current society. This will not come about because of the will of the people, who will always vote to increase the tax burden on the few to pay for ever more goods for the many. It can only come about out of necessity, either actual bankruptcy or a realisation that that’s the only outcome if the current path is not abandoned – witness Greece, a bankrupt state electing the only party promising an end to austerity, but being forced to accept at least modest measures to attempt to rectify years of mismanagement.
Increasingly, some have started to question the central bank hegemony, though voices of dissent are still only heard from the fringes. As central banks around the globe engage in ever more desperate and extreme measures to rectify the fact that their previous actions did not deliver the hoped for results, the voices of concern will grow. The power possessed by the monetary authorities is immense and we might be a while away from the end game, but the end game will come. Questions of central banking legitimacy are still arcane and obscure subjects that hardly catch the imagination of the average voter, who doesn’t realise the power handed over to (unelected) bureaucrats. It is therefore unlikely that anything but a major crisis and complete bankruptcy of the current model is needed to force change.
And the signs are starting to show. Competitive devaluations, printing of money, banning of cash, demonization of foreigners. Sound familiar? These are all events that in the past have been premonitions of society’s imminent collapse into social unrest, revolution or war. The next step may be sovereign bankruptcies, trade wars, a ‘strong man’ taking over, popular uprisings and even global war. History tells us that history repeats itself. That is the way it will play out this time around also.