27
Threats to the Existing
Global Order: Instability
in the West
Chapter contents
• The US under Obama and Trump 670
• The Consequences of the 2008 Financial Crash and the Problems of Neo-Liberalism
• The Brexit Challenge 680
A. The US under Obama
and Trump
Obama’s Foreign Policy
Barack Hussein Obama, the first Black American
President, defeated Hillary Clinton, wife of former
President Bill Clinton, for the Democratic presidential
nomination in 2008, largely because of his oratorical
skills. He went on to beat the Republican candidate,
John McCain, by a healthy margin; then he appointed
Hillary Clinton to be his first Secretary of State. Obama
inherited a difficult situation, with a brittle economy at
home in the wake of the banking crisis and two major
wars—in Iraq and Afghanistan—abroad. His major
domestic political success in extending health care,
and his attempts to meet the banking crisis by pump-
ing money into the US economy, only contributed to a
worsening of the government’s debt. In turn, this con
tributed to renewed economic uncertainty and helped
675
to ensure heavy Democratic losses in the November
2010 Congressional elections. Abroad, Obama sought
a less unilateralist foreign policy than his predecessor,
including improved relations with the Islamic world,
signalled by his 2009 Cairo speech, which emphasized
the need for dialogue and bridge-building. He had
some successes. In April 2010, he signed a Strategic
Arms Reduction Treaty with Russia, in August 2010 he
was able to announce an end to the US combat mission
in Iraq, and in May 2011 US Special Forces finally killed
Osama bin Laden. In Libya in 2011, he was able to rely
on North Atlantic Treaty Organization (NATO) allies
to carry much of the burden in toppling the Gaddafi
regime. But he decided to deploy additional troops to
Afghanistan in 2009, where the war against the Taliban
proved increasingly intractable (see Chapter 23, E).
Obama beat the Republicans’ Mitt Romney in 2012
to secute a second term in office, now with John Kerry
as Secretary of State. Kerry, a navy veteran who had
opposed the Vietnam War, was previously chair of
 Threats to the Existing Global Order: Instability in the West
the Senate Foreign Relations Committee, had been
Democratic presidential candidate in 2004, and shared
Obama’s preference for both diplomacy over mili-
tary forcé and multilateralism over unilateral action.
Whereas Obama’s first term had been dominated by
retreating from the massive use of military power in
the ‘war on terror’, his second was overshadowed by
his reaction to growing Middle Eastern conflicts after
the ‘Arab Spring’ in the Levant (Al-Sham), particularly
the rise of Islamic State (ISIS) in Syria and Iraq (see
Chapter 24, E). The President was blamed by some
for failing to intervene in Syria earlier to replace the
Assad regime and for backing a predominantly Shi’ite
regime in Iraq that alienated many Sunnis. Other
setbacks included the lack of progress on an Israeli-
Palestinian settlement, the continued failure to cióse
Guantanamo Bay, and increasing tensions with Russia.
Obama had a distinctly frosty relationship with both
Putin and Israel’s Benjamin Netanyahu, without exert-
ing much influence over either. Despite his liberal cre-
dentials, continued involvement in the Middle East
and Afghanistan meant he maintained high defence
spending and a global military presence, provided
arms to authoritarian regimes, and—in a new develop-
ment that reflected a determination to minimize US
casualties—relied far more than Bush on pilotless
‘drones’ to strike at America’s enemies in Pakistán and
elsewhere. These caused thousands of civilian casual
ties and the terror they generated helped aid recruit-
ment for militant groups. Looking back on his record
in 2016, the President deemed his backing for military
intervention in Libya to be his ‘worst mistake’, because
of the failure to plan for political stability once Colonel
Gaddafi was toppled. Nonetheless, Obama had some
diplomatic successes in his second term, notably with
the 2015 deal limiting Iran’s nuclear programme, pro
gress towards the Trans-Pacific Partnership on trade
and, in another success for patient multilateral nego-
tiation, the París climate deal. In July 2015, he also
restored diplomatic relations with Cuba, broken since
1961, and visited the island in March 2016, the first sit-
ting president to do so since the 1920S.
Obama’s time as President generated widely dif-
fering interpretations of his foreign policy. To some
extent, he fulfilled his original intention, set out
in 2008, to reduce America’s dependence on mili
tary power, rely more on diplomatic action and, as
a corollary, to engage in multilateral negotiations,
as with his acceptance of climate Controls, support
for trade deais, and backing NATO action in Libya.
67 1
But he could hardly be said to have made the world
more committed to human rights and the rule of law.
Critics questioned whether he had a strategy at all or,
if he did have certain aims, how seriously he pursued
them. His emphasis on diplomacy rather than forcé,
for example, may have provided a laudable general
aim but, in practice, he oscillated between the use of
forcé—as in Libya or with the use of drones—and a
reluctance to intervene—as in Syria, where Russia and
Irán (two of America’s long-standing rivals) were able
to fill the vacuum. His policy could seem incoherent
to the point of endangering well-established aims,
like the maintenance of US primacy and the promo-
tion of free market, democratic regimes, which had
characterized Washington’s global rhetoric through
the Coid War and after. More sympathetic voices,
however, argued that he was a pragmatist, whose cau-
tion reflected a recognition that America could no
longer shape the world in its own image. The Bush
years had exposed the limits of military power, rather
like Vietnam a generation before, and the US people
themselves were sceptical about paying the price of a
leading role in world affairs.1
T h e Trump Administraron, 2017-18
In a widely unexpected turn of events, the 2016 presi
dential election was won by Donald Trump, who
adopted Ronald Reagan’s promise to ‘Make America
Great Agairí. Democratic candidate Hillary Clinton
secured more popular votes, but Trump had a majority
in the Electoral College; a similar situation had allowed
Bush to win in 2000. In January 2017, Trump became
the first president with no previous experience of gov-
ernment or military Service; rather, he was a billion-
aire property tycoon and reality televisión star. At 70,
he was also the oldest president ever inaugurated, one
year older than Reagan had been. Trump had alienated
sections of his own Republican party with his crude
campaigning style; he also caused concern among
America’s allies, with criticisms of the París climate
accords, free trade agreements, the nuclear deal with
Irán, his scepticism about the valué of NATO (which,
at one point, he dismissed as ‘obsolete’), his praise
of Brexit, and his desire for a cióse relationship with
Vladimir Putin. Much of this was aimed at undoing
policies pursued by Obama. Also disturbing to estab-
lished diplomatic norms was his tendency to express
his opinions forthrightly on Twitter. An early exam
ple was his accusation, tweeted on 2 January 2017, that
672 The Age oí Uncertainty: Chaos and Confusión in a Globalized World, 201 1-18
‘China has been taking out massive amounts of money
and wealth from the US in totally one-sided trade but
won’t help with North Korea’. 2 Another early diplo-
matic step certain to upset Beijing was the suggestion
that he might recognize the independence of Taiwan,
after he accepted a telephone cali from its President.
Among his most controversia! plans, Trump
declared that he would have México pay for a wall
along the US-Mexican border as a way of tackling ¿Ile
gal immigration and drug trafficking; while, as part
of his firm support for Israel, he intended to move
the US embassy from Tel Aviv to Jerusalem, a step he
carried out in December 2017. His criticisms of the
Washington ‘establishment’ included bitter remarks
about the Central Intelligence Agency (CIA)—which,
in the wake of the election result, reported that Russia
had helped to undermine Clinton’s presidential bid.
Trump, upon entering office, made a series of contro
versia! appointments to key posts, for example, Scott
Pruitt, a prominent climate-change sceptic, to head
the Environmental Protection Agency.
Trump seemed determined to pursue an American-
centred foreign policy, including trade protection-
ism, threats to cut overseas aid, and defence based on
nuclear deterrence. In policies reminiscent of 1980S
‘Reaganomics’, he also believed that high defence
spending and domestic job creation through infra-
structure projects could be accompanied by substan-
tial tax cuts, designed to boost growth and encourage
business. This fitted the populist message of his elec
tion campaign, based around patriotism, support for
blue-collar workers, and resentment of the impact of
globalization on the United States. It also reflected a
development already evident under Obama: many
Americans wished to withdraw from a leading role in
world affairs and focus on problems nearer home. Yet,
as it transpired, this did not prevent Trump from pur-
suing a highly active, if changeable and inconsistent,
foreign policy in many respects.
Once in the White House, key decisions disap-
pointed those who presumed that office would
modérate Trump’s approach. Within a few days, he
restated his determination to make México pay for the
proposed border wall, expressed support for the use
of torture against suspected terrorists (although he
later backtracked on these proposals, saying he would
defer to Defense Secretary James Mattis on interroga -
tion matters), and withdrew from the Trans-Pacific
Partnership. Obama had signed the Partnership
agreement in February 2016, after years of complex
negotiations with eleven other countries in East Asia
(Japan, Vietnam, Malaysia, Brunei, and Singapore),
Australasia (Australia and New Zealand), and the
Americas (Cañada, México, Perú, and Chile), who
together controlled a third of world economic output.
As well as boosting trade by ending a range of tariffs,
it was intended to rein in China’s growing influence.
It had already been criticized, however, for benefitting
big business rather than workers and Trump believed
it would harm employment in the US, as firms shifted
investment to other members of the group. After his
withdrawal from the Partnership, the other members
negotiated a new deal, without the US, in March 2018.
Another of Trump’s early executive orders intro-
duced a ninety-day travel ban on immigrants from
seven countries with Muslim majorities—Irán, Iraq,
Libya, Somalia, Sudan, Syria, and Yemen—provok-
ing accusations of Islamophobia and legal challenges
within the US (until the Supreme Court narrowly
endorsed Trump’s action in June 2018). The move also
threatened to undermine US policy in Iraq, driving its
Shi’ite-dominated regime closer to Irán.
Trump himself had no diplomatic experience, ñor
did any of his original national security team or White
House staff. The new Secretary of State was Rex
Tillerson who, like Trump, had a successful commer-
cial background, becoming Chief Executive Officer of
ExxonMobil in 2006. In the late 1990S, Tillerson had
headed Exxon operations in Russia and was seen as
likely to seek better relations with Vladimir Putin. But
he had also backed a US military build-up in Eastern
Europe, was more open to multilateral trade deais than
Trump, and his suitability for the State Department
role had been pressed by sénior Republicans, like
former National Security Adviser Condoleezza Rice.
Trump’s first (and short-lived) National Security
Adviser was a former general, Michael Flynn, who
had served in Afghanistan and Iraq and became head
of Obama’s Defence Intelligence Agency in 2012, but
retired after differences with the administration over
its Syria policy, which he feared was increasing sup
port for radical Islam. Flynn, too, was sympathetic to
improving relations with Russia. The new Secretary
of Defence, James Mattis, was another retired gen
eral, appointed by Obama to head the US Central
Command (with responsibility for operations in
Afghanistan and Iraq) in 2010-13, but critica! of the Irán
nuclear deal. He was, however, a believer in NATO,
in which he held a Command in 2007-9, and was con
cerned about the Russian threat in Eastern Europe.
 Threats to the Existing Global Order: Instabi lity in the West
One unusual, short-lived step by Trump was to appoint
to the National Security Council (NSC) his chief strat-
egist, Steve Bannon, a controversia! representative of
the ‘alternative right’ news media. In February 2017,
Bannon set out the administration’s key aims as includ-
ing not only stronger defence and economic national-
ism, but also the ‘deconstruction of the administrative
State’3 , which seemed to explain why so many Cabinet
members had been critica! of government in the very
areas they now controlled. Bannon was removed írom
the list of principal figures on the NSC in April and, in
August, agreed to leave the White House. He was one
of several key staff to quit in the administration’s first
year and his departure reflected the growing power of
John Kelly, yet another former general, who became
White House Chief of Staff in July 2017.
In February 2017, there were signs Trump might
modérate some of his intentions. He now expressed
support for NATO, while still arguing that European
allies should pay more towards defence, if only to
fulfil NATO’s aim of spending 2 per cent of GDP on
defence. This target was currently met by only 5 of the
alliance’s 28 members, while the US was spending over
3.5 per cent. Mattis made an early visit to allies in East
Asia, to reassure them of Washington’s support. In
the Middle East, Trump himself visited Saudi Arabia,
despite having criticized it in his 2016 campaign. The
new US Ambassador to the UN, Nikki Haley, was criti
ca! of Russia after an upsurge of violence in eastern
Ukraine, while Flynn was forced to resign after less
than a month in post (the shortest term ever served
by a national security advisor) for misleading Vice-
President Pence over talks with the Russian ambas
sador about possibly lifting sanctions against Russia.
The new advisor was Lieutenant General Herbert
McMaster. With Service in the Gulf War, Iraq, and
Afghanistan, he was known as an intellectual general,
having written a book critica! of American policy in
the Vietnam War. But, in what became a regular pat-
tern, the President’s volatility ensured that an appar-
ent step forward was followed by renewed concern
over his intentions.
Concern over Russian meddling in the 2016 elec-
tion persisted, and suspicions over the Trump links to
Moscow were only fuelled when, in May, he suddenly
sacked Federal Bureau of Investigation (FBI) Director
James Comey. The FBI had been investigating Russian
electoral interference since late 2016, but Comey’s
firing led to the appointment of a special prosecu-
tor, former FBI Director Robert Mueller, to look into
673
any possible illegality in the connections between
the Trump campaign and Russian interference in the
presidential election. Concerns over relations with US
allies were rekindled when, in one of his most contro
versia! steps, on 1 June 2017, Trump announced that
America would as promised, quit the París climate
agreement. In the wake of a divisive G-7 meeting, the
Germán Chancellor, Angela Merkel, even said that the
days in which Europeans ‘could rely fully on others’
were passed, suggesting that Washington was now
seen as an erratic rather than reliable partner.
While Trump upset his European allies, his relations
with Russia could hardly be said to have improved. His
wish to spend more on nuclear weapons sat uneas-
ily alongside his initial desire for improved relations
with Putin and this threatened to upset negotiations
on the next Strategic Arms Reduction Treaty (START)
treaty, scheduled to be completed between the US and
Russia in 2018. The negotiations already faced prob-
lems because, while Washington tended to rely on
missiles developed during the Coid War, Putin had
been modernizing the Russian arsenal. Both pow-
ers still had total numbers of missiles that exceeded
the limits set in the last START treaty in 2010. On 27
February 2017, Trump announced a $54 billion increase
in defence spending, to over $600 billion per year. This
was despite America’s massive budget déficit and it
was to be paid for by cuts elsewhere, including on
the State Department and foreign aid budgets, thus
endangering American soft power capabilities. The
increased spending went hand in hand with a more
muscular defence policy abroad, including increased
involvement in Yemen, mainly in the form of air
strikes against al-Qaeda; the deployment of hundreds
of Marines and Special Forces, supported by artillery,
to fight ISIS in Syria; and, in quick succession in April
2017, the despatch of an aircraft carrier to Korea, the
use of a massive ‘MOAB’ bomb against an ISIS base in
Afghanistan, and a cruise missile strike against a Syrian
air base following a government Chemical weapons
attack on rebels.
The latter marked a further downturn in relations
with Moscow, an important ally of the Assad regime in
the Syrian civil war, and this was compounded in July by
an expulsión of diplomáis reminiscent of the Coid War:
in response to US sanctions, pushed by Congress rather
than the White House, against Russian interference in
the 2016 presidential election, Putin told Washington
to reduce its diplomatic staff by no less than 755. This
was a large figure, one designed to match the number
674 The Age of Uncertainty: Chaos and Confusión in a Globalized World, 201 1-18
of Russian diplomáis in America. There was a further
mutual expulsión of diplomáis, which also involved
other members of NATO—28 countries in all, with
more than 150 Russians expelled —in March 2018, fol-
lowing the attempted murder of a former Russian intel-
ligence officer in Britain, using a nerve agent.
Meanwhile, Trump was unhappy with Roben
Mueller looking into links between Russia and his
White House staff, including his family members,
associated with his presidential campaign. But the
President’s insistence that there was no case to answer
did not prevent some former aides facing accusations
of wrongdoing: in December 2017, former National
Security Adviser Flynn pleaded guilty to making false
statements to the FBI. All this made steps towards
improved relations with Russia difficult. Besides,
whatever Trump’s hopes for such an improvement,
in mid-December Flynn’s successor, McMaster, pub-
licly condemned what he called Moscow’s ‘campaign
of subversión’ against the West. Introducing a new
national security policy McMaster accused Russia and
China of being ‘revisionist’ powers and, by implica-
tion, accepted that the US should maintain the exist-
ing world orden Neither was Putin intimidated by
Trump’s nuclear spending: on 1 March 2018, shortly
before his re-election to a fourth presidential term,
the Russian announced his country had a cruise mis-
sile that could fly around the world, illustrating his
speech with a video of an apparent missile attack on
America. In April 2018, there were even fears of a US-
Russian military clash in Syria, when the US, France,
and Britain bombed Chemical weapon sites there. But
there were signs that Trump himself still hankered
after a rapprochement with Russia, not least in June
2018, when he urged that it should re-join the G-7 pow
ers, and he announced plans for a summit with Putin.
Trump’s first State of the Union address in January
2018, delivered in the wake of a raft of tax cuts, prom-
ised to maintain the war against Islamic State (IS), con
demned the ‘depraved’ regime in North Korea, and
criticized ‘bad trade deais’, but also talked of ‘rivals
like China and Russia that challenge our interests’.
Yet, rather than heralding a more consistent policy, it
was followed by more volatility in both foreign pol-
icy-making and foreign policy personnel. In March,
Tillerson and McMaster were both replaced in quick
succession. Each had tried to modérate the President’s
behaviour. The new Secretary of State was a right-
wing Republican, Mike Pompeo, previously Director
of the CIA, a critic of both the Irán nuclear deal
and—a point that might divide him ffom Trump —
Putin’s Russia. McMaster’s successor was John Bolton:
a former Ambassador to the UN under Bush, he con-
tinued to defend the 2003 invasión of Iraq, was known
for hawkish views on Irán and North Korea, but was
another Putin critic. An editorial in the New York Times
feared that the two appointments showed ‘the degree
to which Mr. Trump is indulging his worst nationalis-
tic instincts’.4
These instincts had just been seen in the President’s
sudden decisión to introduce additional tariffs, of
25 per cent on Steel and 10 per cent on aluminium
imports. This was in line with his promises to pro-
tect US jobs and reduce the trade déficit with China
(though China only accounted for about 3 per cent
of US Steel imports); and the need to preserve Steel
production could also be justified on national security
grounds. But Trump’s method of protecting US Steel
production, using unilateral action rather than seek-
ing negotiation via the World Trade Organization,
threatened to begin a global trade war. The President’s
focus seemed mainly on China against which, in
mid-June, he confirmed another $50 billion worth
of tariffs, after accusing it of intellectual property
theft. At that point, the US trade déficit with China
was about $500 billion which, as Trump pointed out,
was the largest ever between two countries. With
the EU, the déficit was about $40 billion. The tariffs
meant a volatile time for the financial markets, who
did not accept the President’s tweeted opinión that,
‘trade wars are good, and easy to win*. The EU and
China both introduced tariffs on a raft of US goods
in response. The issue helped make June’s G-7 sum
mit in Quebec one of the most divisive in history, pit-
ting Trump —who departed early—against the other
Western leaders. But, at a Washington meeting with
the EU Commission President, Jean-Claude Juncker,
in July, Trump seemed more conciliatory hoping to
bring trade barriers down. He showed no signs of
backing down against China, however, against which
he announced further tariffs that month.
The appointment of Pompeo and Bolton was also
followed, on 8 May, with Trump finally withdrawing
from the 2015 Irán nuclear deal, despite Tehran fulfill-
ing its terms. As with his earlier policy towards North
Korea, this was followed over the next few months by
both escalating rhetoric and, in late July, an oífer to
meet Iranian leaders. On 14 May, the new US embassy
opened in Jerusalem, accompanied by Palestinian pro
tests, in which about 60 were killed by Israeli forces.
 Threats to the Existing Global Orden: Instability in the West
Trump also kept up his pressure for higher NATO
defence spending, even telling a summit in July that
Europeans should increase this to 4 per cent of GDP.
Meanwhile, Trump’s tough policy towards North
Korea, even threatening war, seemed to pay off, with
Kim Jong-un’s announcement that he would suspend
nuclear tests. A meeting between the two men—the
first between a North Korean leader and an American
president—in Singapore on 12 June proved a major
media event and saw a mutual commitment to ‘denu-
clearize’ the Korean peninsula, although it was thin on
details of how this would be achieved.
Whatever the volatility and unpredictability of his
short-term decision-making, Trump’s first eighteen
months in office had shown a certain consistency on
such questions as opposition to the nuclear ambitions
of Irán and North Korea, support for Israel, disdain
for multilateral organizations, an emphasis on trade
protectionism, and a more confident use of American
military and economic power. Neither could observ-
ers be surprised any longer by his immunity to criti-
cism. Trump could only provoke concern, however,
with his willingness to damage International talks on
pressing issues like climate change, or his readiness
to ride roughshod over the feelings of traditional US
allies in NATO, while hoping for a better relationship
with Moscow. There was always room for uncertainty
about how seriously some of his declarations should be
taken. His sudden cancellation of the summit with Kim
Jong-un in May 2018, only to go ahead with it a few days
later, was a case in point. It was also unclear how far he
would go in pursuit of aims he was determined upon.
But if his apparent success with Kim gave him greater
confidence, might this lead to damaging actions? Would
he sustain a full-scale trade war with China and maybe
even the EU, for example? Might his policies change,
following the Democrats’ capture of control of the
House of Representatives after the mid-term elections
of November 2018? And, one might ask, why would
anyone make an agreement with Trump, say, on new
international trade arrangements, given his readiness to
abandon agreements to which he took a dislike?
Seventy years after President Harry Truman had
begun delivering Marshall Aid to Europe and rebuild-
ing Japan, Trump appeared set on a very different
course, characterized by unilateralism and protec
tionism. At the same time, the political valúes initially
provided by democratic capitalism’s opposition to
totalitarian communism seemed compromised by a
readiness to work with authoritarian leaders, like Kim
675
and Putin, while criticizing America’s allies. Yet, when
faced by sufficient criticism Trump seemed quite capa-
ble of backing off, as seen most starkly in the wake of
his first bilateral summit with Putin, held in Helsinki
on 15 July. Trump went into the summit after a divi-
sive NATO summit and after even describing the EU
as a Toe’ on trade; yet he not only avoided criticism of
Putin, but even seemed to support the latter’s denials
of intervention in the 2016 US elections. Then, faced
by a hostile reaction in the US, the President claimed
to have been misquoted and stepped back from any
early invitation for Putin to visit America.
B. The Consequences of the 2008
Financial Crash and the Problems
of Neo-Liberalism
In the short term, the financial crash produced some
essentially conservative consequences protecting the
status quo. First, although pensión funds and small
enterprises, along with corporate owners of capital
and the small percentage of the population with enor-
mous individual wealth, all faced problems left by the
crisis, the main burden would be shouldered by indi
vidual taxpayers. The immediate reaction had been
for governments to pursue policies which injected
taxpayers’ money into the undercapitalized banks and
prevented significant losses to investors’ money. Thus,
shareholders and bondholders gained some protec-
tion, reversing the normal operation of capitalism
that penalizes unsuccessful risk takers. Shareholders
of manufacturing companies, or corporations faced
with liquidation, would normally expect to lose their
money if their decisions misfired, but now they found
themselves protected by governments and taxpayers
despite management mistakes.
Thus, while the economic failure of communism
had eventually produced the reforms of Mikhail
Gorbachev in an attempt to rectify the failures, the
failed neo-liberal economic system produced no such
reactions. Western elites were intent on preserving
the essence of neo-liberalism, with failed banks, like
the Royal Bank of Scotland, limiting the loss to share
holders with the provisión of government money, but
eager to preserve the bonus culture and the benefits
it gave to bankers who had overseen the losses in the
first place. The consequence was, therefore, that noth-
ing of major significance was done to reform the Sys
tem that had allowed the financial crisis to happen.
676 The Age of Uncertainty: Chaos and Confusión in a Globalized World, 201 1-18

Perhaps the greatest irony, though, was that massive significant owners of capital increasingly to earn and
State intervention had been necessary to save many use money acquired by both legal and illegal means.
of the self-same ideologues who had, for decades, Since the 1970S, it has no longer been necessary to hide
decried State involvement in the economy. In effect, money away in Swiss bank accounts to retain anony-
banks were ‘feather-bedded’ by States and protected mous ownership. Finally an extensive global system of
from collapse, just as nationalized industries had been tax havens has developed initially dominated by those
protected by government funding before ‘privatiza- under British control from Jersey to Crown Colonies, 5
tion’ took hold. One might have expected a return until the latter were renamed dependent territories
of adequate regulations—this seemed necessary, not in 1981. After 2002, the 14 territories still under the
just desirable—but it was done only in a half-hearted sovereignty of the British Crown were then called
fashion and there was a new bout of evidence of bank- UK overseas territories, but their operations did not
ers breaking the rules in 2012, when crisis engulfed decrease.6 This enabled the very rich, using the dereg-
another major operator, Barclays in the UK. Thus, the ulated financial sector to retain more of their earnings
System has been criticized as ‘corporate socialism’ or by reducing their tax liabilities legally (tax avoidance)
‘socialism for the rich’. or illegally (tax evasión) through the establishment of
shell companies registered in the jurisdictions without
Be that as it may, there is no doubt that a de facto alli-
ance between far right-wing and centre right political income tax.
groups and the richest members of a globalized soci- All these long-term processes had been developing
ety had developed, which accepted an economic ideol- since the reaction against the constraints produced
ogy that had contributed to the crash and influenced by the post-war reductions in economic inequality
the reaction to it. With the growth of the alt-right, to and their effective replacement by the Washington
use US terminology, with its rejection of mainstream Consensus, which was justified by the alleged benefits
politics, and the emergence of populism in Europe, of ‘free markets’. The growth of free market econom
it is based on ensuring that the form that capitalism ics had been assisting the delivery of changes in the
takes benefits the owners of capital more than the international economy that affected its agents and
less well off citizens in paid employment. Built on the institutions and altered the distribution of income
myth of 'markets know best’, which has beguiled neo- between States and the individuáis within them. This
classical economists and the new Keynesians, it has was particularly significant in the wake of the 2008
revealed the significance of the political economy of financial crash and the inadequate, or limited, recov-
neo-liberalism in justifying the relationship of finan- ery from it, despite the indications that neo-liberal
cial transactions to the real world. capitalism had embedded inequality on an increas-
ing and damaging scale. What was uncertain was the
impact of this on social cohesión and stability in both
Neo-Liberalism and Explanations of
the developed and less developed worlds, as the nature
the Crash and its Impact
and location of these changes in international capital
Stagnation after the financial crisis was a reflexión of ism developed.
the redistribution of wealth, and the global influence The workings of the financial world have always
of neo-liberal economics, that produced similar prob- largely been unknown, even to the better educated,
lems to those capitalism had faced during the 1930S, but as the tax incentives and the ease by which shell
but now with significant gains for the owners of capi companies could be established and set up in tax havens
tal. One new phenomenon facilitating this was the glo- have increased, the earnings ratio of capital to labour
balization of capital movements that, beginning even has changed to the benefit of the formen The impact
before the collapse of Bretton Woods, was enabling of globalization exposed high-earning workers in the
capital to move more freely across International bor- developed world to low-wage competition from the
ders. When this international element was added to by less developed world, and—with capital and produc-
the deregulation of important financial sectors, ‘casino tion facilities flowing more freely across the globe —
capitalism’ was allowed to develop. Moreover—and enabled owners of capital to earn and retain greater
epitomized by the City of London’s laissez-faire emer profits. At the same time, media campaigns against
gence at the heart of international finance and money trade unions in the developed world helped reduce
laundering —it was allowing crimináis and other workers’ bargaining power. This became politically
 Threats to the Existing Global Order: Instability in the West
significant, as many wage earners felt left behind by the
wealthier owners of capital, especially with the rise of
prívate equity companies. Manufacturers carne under
increased pressures to be more competitive, and as
their managers and shareholders faced these pressures
on profits and credit after the financial crash, labour
costs tended to be reduced. As little or no real increase
in wages therefore occurred in many countries in
the developed world, lower levels of spending power
helped produce the stagnation after the financial crash.
It became more of an accepted economic feature,
along with the growing disparity in incomes and assets,
even as the richest i per cent in particular continued to
benefit significantly. With the richest 5 per cent in the
developed world also enjoying large income gains, the
gig economy grew, with zero-hours contracts keeping
employment up and wages down, while the austerity
measures reduced public Services and social welfare
provisions. Henee important economic factors were
influencing the rise of developed world populism,
with more extreme right-wing political movements
across Europe from Hungary to Germany and Italy to
Sweden. The connection to the success of Trump in
the US and the European far right is embodiedby Steve
Bannon, the former White House chief strategist and
NSC member, who, since ceasing to advise Trump, is
now devoting time to cultivating links with the leading
lights of such movements in Europe.
After the financial crash, the forces of globaliza-
tion, active since the nineteenth-century revolutions
in communication and transport, have helped to pre
serve a social order, which in the twenty- first century
enables the richest few to increase their wealth sig
nificantly. Althougftchanges in technology have made
the spread of ideas and ideologies more pervasive,
including ‘fake news’, this has been aided by the inter-
national free movement of capital. In the 1960S, when
access to foreign cash was strictly controlled and lim-
ited by governments/ Sigmund Warburg began the
issuing of bonds (which became known as Eurobonds
after Eurodollars) to ensure money could move freely
across borders without any Controls or taxes, and
without paying Swiss bankers to look after any sus-
pect money. Issued in one country (initially at Schipol
Airport to avoid tax, as if issued in the City of London
they faced a 4 per cent tax) and with interest paid in
another country (Luxembourg, again to avoid tax),
ownership of such bonds would eventually be con-
cealed through bearer bonds. Warburg persuaded the
London Stock Exchange to list the bonds, not issued
677
or redeemed there, and the pattern was set of free-
ing up money, previously subject to a charge in Swiss
banks, to earn interest and avoid paying tax. The high-
way to tax havens was opened.8
As establishing shell companies was both cheap and
easy, with neo-liberal ideology portraying the State
in negative terms, money would increasingly leak
offshore to these tax havens, as long as one country
(originally the UK with the City of London) toler-
ated it.9 By the late 1970S and early 1980S, this new era
of ‘financialization’ 10 was taking hold, leading to the
essentially unregulated movement of capital across
international boundaries, often with little or no taxa-
tion being paid.11 Despite the financial crash and the
widening gulf between—and within—countries and
their citizens that neo-liberalism had enhanced, the
expanded financial sector was effectively obscured
under a cloud of austerity. Ostensibly needed to
reduce debt from excessive spending, democracy was
powerless to prevent such misleading information fre-
quently being accepted, and uncertainty surrounds
the extent to which politics in much of the West will
fall prey to extreme political movements of the right.
As in the 1930S, when economic benefits could not be
provided more generally throughout the developed
world, there is now a danger of similar political move
ments gaining power.
A range of explanations can be provided for why
capitalism in general, and its development within par
ticular States, facilitated the financial crash and the sub-
sequent survival of neo-liberalism during a period of
stagnation. Although the decline in economic growth
rates has been a global phenomenon, the explanations
of the crisis and stagnation go beyond the vague and
disputed idea of globalization. Thomas Piketty, after
surveying vast amounts of statistical data in differ-
ent countries (notably US, France, and the UK) over
the period since the eighteenth century, has argued
that without State intervention, for example the New
Deal and the socialism of the Attlee Government, the
development of uncontrolled capitalism will result
in the returns on capital exceeding the rate of return
provided by economic growth and income and out-
put. Henee, reduced growth rates, except in those
States catching up with more advanced economies,
in the long term will average out at less than 2 per
cent. Consequently, inequality is an inbuilt structural
feature of capitalism made worse by its global scale,
which enables wealth to avoid taxation more easily.12
Those who advócate different phases of capitalism,
678 The Age of Uncertainty: Chaos and Confusión in a Globalized World, 201 1-18
like Marx, believe that one such phase is ‘diminish-
ing profit rates’, which produces slow accumulation,
increased stability, and financial turmoil.13 Henee why
the development of neo-liberalism and the restora-
tion of the profit rate leading up to the financial crash
occurred. On the other hand, those concerned with
phases of ‘boom and bust’ like Minsky, while accept-
ing the important role of debt in capitalist success,14
maintain that periods of stable, ‘tranquil’ growth in
capitalism create heightened expectations and the
desire to increase leverage, and as in 2008, produce
instability and the ‘bust’ phase.
Further explanation is required for why, despite the
limited changes it has produced in the politics of many
developed countries, the political choice of austerity
has generally been accepted. The control of the media
and significant misrepresentation, including in the
UK by an allegedly neutral news organization keen to
avoid further antagonizing the government, may have
played a part. Moreover, after the Coid War had led the
West —and its ideological opponents—to engage in all
forms of manipulation and covert practices, lessons
have been learnt as we enter the new ideological era of
‘fake news’. A parliamentary committee, and similar
bodies in the US have been looking into the increas-
ing difficulty of determining the truth from ‘faets’
and ‘alternative faets’. Advances in technology have
facilitated this process and the trivialization of social
media has prepared the ground for the receipt of ‘fake
news’. As the leader of the Western world displays an
unprecedented capacity for disseminating untruths,
foreign governments have been found, by US intelli-
gence agencies, for example, to use IT to disseminate
untruthful Information to influence political voting.
Debt and the Déficit: The Case
of the U K
By 2012, it was clear in Britain, a non-Eurozone State,
where external bail-outs did not require the imposi-
tion of strict austerity, that simply relying only on cuts
would restrict economic growth and recovery. The
Conservative-led government of David Cameron
had planned to achieve debt reduction predominantly
through cuts in public expenditure, as opposed to
increases in taxation. While some economists are keen
to point to a high level of government debt to GDP
as unsustainable, despite such levels of debt—includ
ing Greece’s—being much less than that incurred in
the immediate post-war years, changes in the expo-
nential levels of prívate debt are generally ignored by
mainstream economists, especially as much less data
on it is available. Academics and researchers such as
Bezemer, Hudson, and Keen however, argüe that prí
vate debt levels are important because of their expo-
nential post-war rises which first produced a bubble in
Japan that burst in the 1990S. In the US, and to a lesser
extent in Europe, it was the noughties before such
bubbles burst, having reached unsustainable levels of
growth, and thus caused recessions and stagnation.
In other words, it is debt deflation, as first argued by
Fisher,1’ in the prívate sector, including finance, that
is more likely to produce recessions and stagnation
(the level of demand being determined by debt and
the money in circulation) than high levels of govern
ment debt.
The policies of Cameron and George Osborne had
simply led to growth rates again becoming negative
after the crash. In the US, more thought was given
in 2012, a presidential election year, to allowing for a
mild economic stimulus, although the economy still
faced a slow-down, not helped by the knock-on effeets
of problems in the Eurozone. In both the US and
Britain, the burden of any required déficit reduction
would, to a greater or lesser extent, fall on ordinary
taxpayers because, if public expenditure was signifi-
cantly reduced, it is they who depend most on public
Services. UK debt reduction, often portrayed as nec-
essary, as for households, to live within what is afford-
able, first requires a reduction in the déficit (the gap
between the money raised by the government and
public expenditure). Much less important than the déf
icit, given the very much higher levels of debt in the
past, Cameron was preparad to aid the public confu
sión between debt (on which the banking system has
always been based) and the déficit. In February 2013,
he stated incorrectly that ‘the government was paying
down Britain’s debts’, when they were actually trying
to reduce the déficit as the amount of debt increased.
Rather than with contributions from the high earners
in the banks and financial Service industries, who had
been primarily responsible for the reckless lending in
the financial sector, or owners of capital who would
have been hit by partial defaults, the déficit was to be
reduced by the imposition of what was deemed nec-
essary austerity on the ‘real’ economy. Public sector
workers, in particular, have paid a high price in redun-
dancies and wage restrictions.
 Threats to the Existing Global Orden: Instability in the West
The Spread of Economic Problems
in the Eurozone
In 2012, the Spanish banks had reached crisis point fol-
lowing the bursting of the country’s property bubble
and rising mortgage debts. As there had only previ-
ously been attempts to put patches on the Eurozone’s
problems, in the summer of that year what many
termed (not for the first time) the ‘last chance’ for the
Eurozone was being faced. As the latest crisis engulfed
Spain, the Germán Chancellor, Angela Merkel, sof-
tened her hard-line stance on debt reduction and
European bail-out money. Merkel, for the first time,
agreed to remove the requirement that preferred
creditor status be given to governments over prívate
creditors on a proposed €100 billion rescue package
for Spanish banks. In other words, the latter would
not play second fiddle to governments if the debt had
to be rescheduled, thus making Eurozone taxpayers,
including Germans, as much at risk as prívate credi
tors. Another concession was to make the bail-out
funds directly available to the banks for recapitali-
zation, instead of going through governments and
thus adding to national debt levels. Finally the most
significant development was the agreement to set up
a supervisory system for European banks that could
form the first step towards a full banking unión, and
would mark a significant new step for European inte-
gration. As a result, the interest rates earned by lend-
ers and paid by the Spanish government on ten-year
Spanish bonds, which had risen to an unsustainable 7
per cent, began to fall, although the spending cuts that
accompanied the rescue deal helped push unemploy-
ment in Spain over 25 per cent.
A smaller bail-out was also given to Cyprus in
March 2013, after a crisis of confidence triggered by
loans the country’s banks had made to the property
sector, which led the government to propose a tax
on bank deposits. In this case, the Eurozone, EU, and
International Monetary Fund (IMF) agreed a 10 billion
Euro rescue package in return for banking reforms.
But Greece remained the most serious and persisten!
concern for the Eurozone, with continuing popular
unrest against the spending cuts, tax increases, and
measures to reduce tax evasión that the IMF, EU, and
Eurozone (the so-called 'troika’) insisted upon. The
initial 2010 bail-out was followed by a second bail-
out offer of 130 billion Euros, in October 2011, but
the conditions of this were so harsh that there was a
679
change of government in Athens before it was finally
accepted. The situations in Portugal and Ireland
improved, allowing them to manage without bail-out
support from mid-2014, but the last quarter of the year
saw another downturn in Greece, where there was a
renewed sense of deepening crisis. A general election
in January 2015 was won by Syriza, a left-wing, anti-
austerity party led by Alexis Tsipras, who formed an
uneasy coalition with a right-wing anti-austerity party,
the Independent Greeks. His administration sought to
renegotiate the terms of the existing bail-out, before
breaking oflf talks in June and holding a referendum,
which rejected further new bail-out terms that had
been offered. Meanwhile, on 1 July 2015, Greece had
the distinction of becoming the first developed coun-
try ever to miss an IMF debt repayment, deepening the
sense of crisis. The country’s banks had intermittently
been closed for weeks, there seemed a real chance of
a Greek exit—or ‘Grexit’—from the Eurozone and
there was renewed instability on global financial mar-
kets. But Greece and its EU partners all baulked at the
prospect of Grexit and the situation was eased by a
third rescue bail-out, worth about 85 billion Euros
over three years. This was put together in August,
despite the opposition of many Syriza MPs over the
spending cuts and tax increases that accompanied
it. The discontent led Tsipras to cali a snap election,
which returned him as Prime Minister, and allowed
him to fulfil the latest bail-out deal, even though its
terms seemed to be at odds with his coalition govern
ment ’s supposedly anti-austerity credentials.
Over the following few years, the problems of the
Eurozone seemed to ease and its GDP growth rate
improved from 1.7 per cent in 2016 to 2.8 per cent in
2017. Fears of a Greek exit —or ‘Grexit’ from the cur-
rency zone receded. But in 2018 more uncertainty
struck, thanks to the results of a general election in
Italy. In the wake of the previous election, back in 2013,
few could have predicted such a crisis. In February
2014, a coalition government had been formed under
the Democratic Party’s Matteo Renzi, who prom-
ised government reforms and improved growth. But
the dynamic Renzi was undermined by Italy becom
ing the focus of large-scale immigration from across
the Mediterranean Sea. His proposals to reform the
Senate were defeated in a referendum in December
2016, leading him to resign and paving the way for a
major political realignment, accompanied by criti-
cism of immigration, divisions over Italy’s future in
680 The Age of Uncertainty: Chaos and Confusión in a Globalized World, 201 1-18
the Eurozone, and the growth of two populist parties.
The March 2018 election saw the Democratic Party
lose almost 200 seats, with the main winners being the
left-wing Five Star Movement (227 seats) and the right-
wing Lega (125 seats). It then took two months before
the two populist groups, the Movement and Lega,
were able to put together a coalition government,
committed to a mixture of tax cuts and higher wel-
fare spending. (President Sergio Mattarella refused to
endorse their first proposed list of ministers because
he feared it might pulí Italy out of the Eurozone.)
The crisis provoked a general fall in European
stock markets, pushed up the cost of financing Italian
national debt, and raised new doubts about the future
of the Eurozone, whose operation seemed to benefit
northern Europe—especially Germany, which had
the dual benefits of a highly industrialized economy
and the ability to keep export prices low, thanks to its
membership of the Euro—at the cost of increased
surpluses in trade within the Eurozone and déficits
and low economic growth for its Mediterranean
members. The key question here was whether the
problem would be allowed to drag on, risking more
financial crises, or whether some realignment could
be achieved to aid the Mediterranean economies.
In November 2018, the populist Italian government
showed that it was determined to take a radical
stance, when it pressed forward with budget plans for
increased welfare spending and public infrastructure
projects that would increase the déficit beyond the lev
éis permitted by the EU. Meanwhile, however, finan
cial instability was matched as a challenge for the EU
by the decisión of its second largest economy to quit
the bloc altogether.
C . The Brexit Challenge
While not a founder-member of the oíd European
Economic Community, Britain was part of the first
enlargement of January 1973 and approved continued
membership in a 1975 referendum with a clear two-
thirds majority. Membership provided access to a large
market that might help boost growth rates, which had
lagged behind the UK’s continental competitors in the
1960S, as well as providing a basis for the projection of
British power as its Empire wound down. However, as
an industrialized State which drew relatively low pay-
ments back under the Common Agricultural Policy,
the country was always a heavy net contributor to
the Community budget. Into the twenty-first century
most political leaders in London remained favourable
to membership, fearing economic costs and a loss
of global influence if the country left the European
Union. That said, few were interested in a deepen-
ing of political integration and there were increasing
doubts about the very idea of membership from some
right-wing Conservatives. They were influenced not
just by a patriotic desire for independence and exag-
gerated fears of a European 'super-state’, but also by a
belief that the policies and practices of the European
Union (as it became in 1993) were damaging to Britain.
They were concerned over business regulations,
Britain’s large net budget contribution to the EU, the
activities of the European Court of Justice, and—
because it boosted immigration numbers into Britain,
especially from Eastern Europe—the free movement
of people within the single market. Conservatives in
particular were also worried over a loss of votes to
the UK Independence Party (UKIP), founded in 1991,
which grew in popularity to the point that, in the 2014
elections to the European Parliament, it won the larg
est share of the UK vote, at 28 per cent.
For David Cameron, the Conservative Prime
Minister from 2010 to 2016, who supported continued
EU membership, a referendum seemed a possible way
to end the Conservative party’s internal divisions,
deflate UKIP support, and allow the country to focus
on other issues. A Referendum Act was passed in 2015
and the campaign was launched in February 2016, but
despite Cameron’s personal popularity, support from
other major parties (Labour, the Liberal Democrats,
and the Scottish National Party), and a well-funded
campaign that included a pro-EU leaflet being deliv-
ered by the government to every home, the result was
not the one that was expected. Instead, on 23 June,
there was a 51.9 per cent majority for a British exit, or
‘Brexit’, from the EU. A combination of factors com-
bined to deliver this narrow defeat for Cameron. He
had failed to secute any dramatic concessions from
other EU members when he had sought a better deal
for Britain in talks during late 2014-16, although there
were some limits placed on child benefit payments
to EU immigrants. Then again, he had not asked for
much in the first place, since extensive changes would
have demanded amendments to the EU treaties,
which would have meant long and difficult talks, with
an uncertain outcome. Eastern European members
were unwilling to make changes that damaged their
citizens residing in Britain.
 Threats to the Existing Global Order: Instability in the West
During the referendum campaign, the ‘Remain’
effort arguably revolved too much around scare tac
hes, dubbed ‘Project Fear’ by the ‘Brexiteers’, includ-
ing claims (not borne out by later events) that there
would be an immediate, significant downturn in the
economy in the event of a ‘Leave’ victory. The léader
of the Opposition, Jeremy Corbyn, a left-winger,
never well disposed to the EU, failed to drive home
the message in traditional Labour heartlands that, in
the long term, ‘Brexit’ could bring higher unemploy-
ment, as firms re-located into the much larger EU
market. For its part, the ‘Leave’ campaign made false
promises of shifting expenditure from EU member-
ship to health care and cuts in immigration on the
back of quitting the single market. Most major news-
papers backed Brexit, some of them playing on fears
of EU workers ‘taking’ British jobs. The referendum
also coincided with the worst refugee crisis in Europe
since the Second World War, which heightened the
feeling against immigration—already associated in
some minds with the EU’s free movement of labour.
In addition, the economy was still only slowly recov-
ering from the 2008 crash, Cameron being identified
with a policy of swingeing expenditure cuts.
A vote to leave the EU seemed to go against all
recent history. In July 2013, after a decade of negotia-
tion, Croatia had become the 28th member of the
Union while, despite current problems, the Eurozone
had also continued to expand, with seven new mem-
bers between 2007 and Lithuania’s accession in 2015,
bringing its total to nineteen. In the immediate wake
of the UK vote, there was considerable consterna-
tion and confusión. Global stock valúes fell sharply
on this surprise decisión by voters in the world’s fifth
largest economy (and the EU’s second largest) and,
while the markets soon recovered, the fall in the valué
of the pound was longer lasting. Partly to minimize
the uncertainty, EU leaders were initially keen to see
Britain initiate exit negotiations quickly, but under
Article 50 of the Lisbon Treaty this process could take
two years (longer, if all parties agreed) and it was up
to the member affected to initiate the process. It soon
became clear that, so confident was the British govern-
ment of the referendum resulting in a remain vote, no
serious preparations had been made for any exit talks,
so that the process of defining a negotiating position
would take several months. Meanwhile, Cameron
immediately stood down as Prime Minister, to be
succeeded by his former Home Secretary, Theresa
May, who had only taken a limited role in the Remain
68 I
campaign. She soon appointed a leading member of
Leave, Boris Johnson, as Foreign Secretary.
There was then a debate over whether to seek a
‘soft’ Brexit, under which Britain might remain in a
cióse trading arrangement with the EU, while leaving
such elements as the Common Agricultural Policy and
Common Fisheries Policy, or a ‘hard’ Brexit, where it
might cut itself off from the EU altogether and make
its own trade deais with the rest of the world. Those
from the oíd Remain camp, including large compa-
nies, argued that a ‘soft’ deal would minimize the
costs to the economy. But if Britain stayed in the sin
gle market, the EU was bound to insist on continuing
the free movement of people, as one of the four bind-
ing freedoms of the single market (free movement of
capital, goods, Services, and people), which was seen
by the Leave camp as the cause of high immigration
into Britain and the most popular plank in their recent
campaign. Complications were caused by the fact that
most voters in Scotland and Northern Ireland had
voted in favour of continued membership. Scotland,
where the Scottish National Party won almost all
seats in the 2015 general election, had only recently, in
September 2014, held its own referendum, when 45 per
cent voted for independence from the UK. It was pos-
sible that another independence referendum might be
called to forestall departure from the EU. Relations
with Ireland, an EU member, might also become dif-
ficult after Britain left, though May said she was keen
to maintain the ‘common travel area’ between the
two States, who benefitted from the free movement of
people and goods within the island of Ireland.
Going into the Brexit negotiations, Britain was not
in a strong position. True, as May and others under-
lined, it represented a substantial export market for
the EU, not least for Germán car manufacturers, and
the City of London was by far the biggest provider of
financial Services in Europe. But the EU was unlikely
to grant Britain a generous deal, simply because this
might encourage others to leave. The talks were likely
to be difficult because of their technical nature, the
number of countries involved and (given the difficulty
of unanimously agreeing to any extensión of it) the
two-year time limit. There was basic initial difference
between the two sides in that, while Britain hoped
to negotiate a future trade deal simultaneously with
arranging the ‘divorce’ terms, the EU wanted to keep
these processes sepárate, dealing with the ‘divorce’
first (including a large ‘exit bilí’, covering expendi
ture to which London had already committed itself).
682 The Age of Uncertainty: Chaos and Confusión in a Globalized World, 201 1-18
The Lisbon Treaty meant that a final deal had to be
approved, not only by government leaders meeting
in the European Council, but also by the European
Parliament. Failure to secute approval from even one
member State might leave London trading with the
EU on normal WTO conditions, without any spe-
cial trading arrangements with a market of 450 mil-
lion people on its doorstep. Only after leaving the EU
customs unión could Britain finalize trade deais with
States outside the bloc.
In October 2016, May said she intended to invoke
Arricie 50 by the end of March 2017, but only in
January 2017 did she announce that she would seek
a compromise deal, in which Britain would leave
the customs unión and single market. but seek some
kind of ‘bespoke’ free trade agreement with the EU.
The Supreme Court decided that Brexit talks could
only open after an Act of Parliament was passed
and, since Britain was a parliamentary democracy,
the Westminster parliament could have overruled
the result of what was a non-binding referendum.
In the event, most MPs did not feel they could reject
the narrow referendum result. The talks were then
disrupted by elections in the two leading EU States,
France (won by a pro-EU centrist, Emmanuel Macron,
in May) and Germany (where Angela Merkel’s
Christian Democrats were unable to achieve a deci-
sive victory and faced months of talks—until March
2018—on creating a coalition government), but most
of all by a ‘snap’ election called by Theresa May injune
2017. This proved an ill-advised step that further com-
plicated Britain’s position. Against a background of
favourable opinión polis, she had hoped to strengthen
her majority in parliament on her ‘hard Brexit’ stance
but instead, after running a lacklustre campaign
against a resurgent Labour Party, saw it lost altogether.
The Conservatives were still the largest party in par
liament, but without an overall majority and with a
leader whose stature was seriously tarnished, just as
formal exit talks began. May was forced to rely on sup-
port in parliament from Democratic Unionist MPs,
who wanted any deal to safeguard Northern Ireland’s
place in the UK.
Progress on the revived Brexit talks was slow at
first, with the May government still divided over its
tactics—including, now, whether to seek transitional
arrangements after 2019, before a full withdrawal—
and the EU disappointed over the British position on
the ‘exit bilí’, the rights of EU citizens in the UK, and
the Irish-Ulster border. Far from resolving divisions
in the Conservative party over Britain’s relations
with the EU, the referendum simply led them to be
re-formed on new ground, focused on the ‘hard’ and
‘soft’ options for Brexit. The election result made May
vulnerable to rebellions from Conservative MPs on
either side of the debate and made it more difficult
to achieve an exit deal that satisfied both the EU and
the Conservative party. On 22 September, speaking in
Florence, May proposed a transitional period of up
to two years, during which Britain would continué to
contribute to the EU budget, but was weak on other
details, though she did hint at a lasting role for the
European Court of Justice in protecting EU citizens in
the UK. An important step forward was an agreement,
in December, on the principies that EU citizens could
remain in the UK after Brexit; there would be no ‘hard’
border between Northern Ireland (part of the UK) and
the Irish Republic; and Britain would pay a ‘divorce
bilí’ of about £37 billion. It was still unclear how some
of these principies would be carried out, but the EU
Council agreed sufficient progress had been achieved
for the talks to proceed to their second stage, defining
a post-Brexit deal with the UK.
Talks on the post-Brexit deal began in February
2018, with the ambitious aim of completing a deal
by October. There was also general agreement that
Britain’s departure from the EU in March 2019 would
be followed, down to the end of 2021, by a ‘transi
tional’ period, in which Britain would still be sub-
ject to EU regulations, to allow economies to adjust
to the changes. But as the talks intensified, divisions
between ‘Brexiteers’ and former ‘Remainers’ in the
Conservatives party intensified, making it difficult for
May to maintain authority over her ministers, some
of whom were openly critical of her attempts at com
promise. Meanwhile, many large UKbusinesses, some
foreign governments (notably Japan, a major source
of overseas investment), and even studies by the gov
ernment itself, believed that Brexit would condemn
the economy to lower growth in fu ture.
In the spring of 2018, the key issue became Britain’s
relationship with the customs unión, a debate which
focused on differences within the Conservative party,
rather than between London and the EU. Previously,
May had rejected continuing membership of the cus
toms unión or even of a free trade area, yet one of
these options might prove the best way to safeguard
growth and investment, as well as allowing a ‘friction-
less’ border with Ireland. Various compromises were
discussed, including Britain extending its membership
 Threats to the Existing Global Orden: Instability in the West
of the customs unión beyond 2019, to allow the Irish
border question to be resolved, or keeping Northern
Ireland—but not the rest of the UK—in the customs
unión. But the last was an option likely to be opposed
by May’s Democratic Unionist allies, who could hardly
welcome the re-imposition of any border within
the island of Ireland at odds with The Good Friday
Agreement bringing peace to the province. Ñor, as
Unionists, could they accept new customs Controls,
giving the impression of differences between Northern
Ireland and the rest of the UK, while ‘hard’ Brexiteers
were determined to avoid any customs unión. A cus
toms unión with the EU would prevent the country
making its own trade deais with the rest of the world,
independently from the EU. By mid-2018, the EU was
increasingly frustrated with Britain’s inability to decide
what it really wanted from the talks and a number of
major manufacturers, including the aircraft maker
Airbus and car maker BMW, warned of the danger to
future investment if the indecisión continued.
Only at a special Cabinet meeting on 6 July 2018
did May persuade her ministers to agree their aims
on Brexit, the aim being to create a free trade area,
in which Britain would collect tariffs for the EU in
a ‘facilitated customs arrangement’. This at least
seemed to offer a frictionless border with Ireland,
but it was almost immediately attacked from both
sides of the Brexit debate. Pro-EU businesses were
concerned over the likely costs of collecting tariffs
under the customs arrangement (some doubted that
it was even technically feasible) and felt it easier to
remain in a customs unión. Also, the proposed free
trade area would be one of industrial and agricultural
goods only, omitting the Service sector that was so
central to the British economy: the City of London
could gradually lose business to Frankfurt and Paris
if barriers were thrown up between Britain’s financial
Services and the EU. For their part, Brexiteers feared
the proposed deal would continué to submit Britain
to EU regulations, especially since the free trade area
would need a common ‘rule-book’, and maybe make
it harder to strike trade deais beyond Europe. Neither
did ministerial unity last long: one leading Brexiteer,
David Davies, who had been leading negotiations
with the EU, resigned the following evening, quickly
followed by Boris Johnson, who claimed that May’s
compromise deal would make Britain a ‘colony’ of the
EU. Once negotiations re-started, it was clear that the
EU also had doubts about the British plan, with par
ticular scepticism about the idea London might collect
683
EU tariffs (which was rejected by the EU negotiator
Michel Barnier as inappropriate for a non-member
State), even if it did hold better hope for a deal on
the Irish border. All this raised the real prospect that
Britain might exit without a deal and be left to trade
with the EU on World Trade Organization (WTO)
terms, a situation that might induce some businesses
to leave the UK.
It proved impossible to achieve a UK-EU with-
drawal deal by the original October deadline, but one
was finally signed off, at a special summit in Brussels,
on 25 November 2018, a bare four months before
Brexit was set to occur (on 29 March 2019). The with-
drawal deal, a legally binding document that ran to
almost 600 pages in length, confirmed the £39 billion
‘divorce bilí’, guaranteed the rights of EU citizens liv-
ing in the UK (and UK citizens in the EU), included
a ‘backstop’ position on the Irish border that might
yet leave Northern Ireland in a special customs rela-
tionship with the EU and established a transition
period down to the end of 2020, to allow both sides
to adapt to the changes before they carne into effect.
The withdrawal agreement was designed only to set-
tle short-term arrangements surrounding Britain’s
departure from the Union. But it was accompanied
by a non-binding political declaration, which set out
the two sides’ aspirations for their long-term relation-
ship. This had yet to be negotiated in detail, but it was
intended to inelude cióse co-operation on security,
crime-fighting and foreign policy, as well as trade and
economics. Mention of a ‘single customs territory’
worried Brexiteers, however, who feared becoming
committed to a customs unión, which would prevent
the UK pursuing trade deais without common EU tar
iffs. There were also concerns from Brexiteers about,
for example, the continuing power of the European
Court of Justice in future arrangements, a new form
of common fisheries policy and the danger that the
Irish ‘backstop’, instead of being replaced by some
more acceptable deal, could become permanent. Such
gains as ending the free movement of people between
the UK and EU did not seem to compénsate for such
dangers for Brexiteers. On the other side of the politi
cal spectrum, Remainers asked if it was worth leaving
the EU at all, given how cióse the future relationship
looked likely to be, but also given that Brexit would
remove the UK’s ability to shape future Union policies.
With Ulster Unionists particularly troubled by the
future status of Northern Ireland, Liberal Democrats and
Scottish Nationalists critical of Brexit, and Labour—the
684 The Age oí Uncertainty: Chaos and Confusión in a Globalized World, 201 1-18
main opposition party —hopeful of bringing about a
general election, May’s chances of pushing the deal
through the British Parliament were doubtful, even
before the Brexiteers within her own party—boosted by
more ministerial resignations —were added to the mix.
If the deal was voted down in the UK, the future was
highly uncertain, with options ranging from a ‘no-deal’
Brexit, through a general election and/or a renegoti-
ated withdrawal deal, to a further referendum, with the
last three options leading to months of uncertainty that
might prove seriously damaging to the economy With
the EU stating that negotiations were over, even if the
withdrawal deal was passed by London and the 27 mem-
bers of the EU, there remained years of talks ahead on
their futura relationship.
The EU was Britain’s largest trading partner and
the substance of their futura trading relationship was
something the EU refused to discuss in detail until
the withdrawal agreement had been settled, although
they were preparad to make changes to the political
declaration that accompanied it and which sketched
out their futura relationship. May remained commit-
ted to the withdrawal deal as the best precursor to any
futura economic arrangement talks, but the problem
was getting it accepted by her parliamentary allies,
the DUP, and the right-wing pro-Brexit elements in
her own party, who formed the ‘European Research
Group’. Its chairman, Jacob Rees-Mogg, an Eton/
Oxford educated multi-millionaire, who established
Somerset Capital Management in 2007, was notable
amongst the right-wing elements who made her posi-
tion in a ‘hung’ parliament far from strong or stable.
Yet, opposition to the withdrawal agreement carne
from all sides of the House of Commons, including
some júnior ministers in May’s own government.
Those who rejected the deal had very different reasons
for so doing, with some desiring to maintain cióse eco
nomic ties with the EU and avoid the damage likely
to be caused by Britain no longer having similar eco
nomic relations with its largest trading partner. Others
were concerned that the break with the EU was not
decisive enough. With the breadth of parliamentary
opinión against her deal, the vote on it was lost in
January 2019, in the biggest-ever defeat of a govern
ment bilí in British history.
A key sticking point was the agreement on the
British-Irish border in Northern Ireland, known as the
Irish 'backstop’. With the importance of the peace
enshrined in the 1998 Good Friday Agreement, which
had ended three decades of ‘troubles’ in Northern
Ireland, the ‘backstop’ was designed to ensure that the
free movement of goods and people within the island
would continué, until an alternative arrangement
had been agreed. With the defeat of the Withdrawal
Agreement Bill by 290 votes and the resignation
of more júnior ministers (to add to the two Brexit
Secretarles who had resigned in 2018), in February
2019 May headed for Brussels to attempt to change the
‘backstop’. Although it was part of the legally-binding
deal agreed with the EU, the ‘backstop’ was opposed
by Unionists primarily because of the emotive issue of
the different treatment of Northern Ireland threaten-
ing the preservation of the Union between Northern
Ireland and Great Britain. In Brussels, May was unable
to get the withdrawal agreement alterad by the EU,
and the assurances the latter provided could not satisfy
the Attorney-General that the legal position arising
from the ‘backstop’ had changed. Henee, many Tory
opponents of the original deal voted against it again.
With only a handful of Labour MPs preparad to sup-
port it, the Withdrawal Bill suffered another crushing
defeat, by 148 votes, on 12 March 2019.
There then began a frenetic period of unprecedented
parliamentary turmoil over the increasingly chaotic
Brexit circumstances. On 14 March, May again went
to Brussels and secured an extensión to Arricie 50. Its
implementation—and Britain’s departure from the
EU—had originally been scheduled for 29 March, but
was now put back to 12 April if the withdrawal agree
ment was approved. That agreement was immediately
rejected again, if only by 58 votes. Then, on 27 March,
the House of Commons rejected all eight proposals
designed to determine if there were any form of depar
ture from the EU which MPs could agree on. Thus,
the ever-deepening split in the country was replicated
in a paralysing parliamentary stalemate over Brexit.
The only point that the Commons could agree upon
was that to leave the EU without a deal would be unac-
ceptable and seriously damaging to the UK. Britain’s
departure had again to be delayed, with the EU eventu-
ally fixing it for 31October. The divisions and problems
present in British society still gripped by austerity, and
the failure to move forward with implementing the
result of the referendum had made Brexit an ever more
dominant and highly toxic issue in the country. The dif-
ficulty of reconciling the result of the 2016 referendum
with a withdrawal deal that avoided serious economic
damage to both the EU and UK was now more evident.
Furthermore, rather than Cameron’s referendum gam-
ble healing the long-standing rift over EU membership
 Threats to the Existing Global Order: Instability in the West 685

in the Conservative party, it now had the opposite effect,
tearing the Tories apart, as the debate became entan-
gled with emotive questions of British identity and
status. The whole country was now infected with the
‘Europe’ virus and desperare for the illness to be over.
May’s complex compromise agreement with the
EU remained the only option on the table, but since
it had been rejected by parliament, it meant that
leaving without a deal had become a real possibility,
with the risk of economic chaos. Out of desperation,
May finally decided to reach out to the opposition in
a search for an acceptable way forward, but her talks
with the supposed ‘Marxist’ leader of the Labour
Party, Corbyn, only created more dissatisfaction with
her leadership among Conservatives. On 24 May,
under intense pressure from her own side, she agreed
to stand down as party leader and Prime Minister.
On 25 July,,Boris Johnson, the former Brussels corre-
spondent of the right-wing Daily Telegraph and lead-
ing figure in the 2016 Brexit campaign, succeeded her,
hailed as someone who could deliver ‘the will of the
people’ and persuade the EU to renegotiate the with-
drawal agreement, or at least the Irish ‘backstop’, even
though EU representatives insisted that the only issue
open for discussion remained the non-legally-binding
political declaration.

Vísit the online resources that accompany this book to test your understanding and take your learning further:
— www.oup.com/he/young-kent3e

1. For discussion of these various views of Obama's foreign policy, see Michael Clarke and Anthony Ricketts, ‘Did
Obama Have a Grand Strategy?’,Journal of Strategic Studies, 40 (20 17).

2. https://twitter.eom/realdonaldtrump/status/8 160683555558 15424.

3. See. for example, Washington Post, 23 February 20 17.

4. New York Times, 23 March 20 18.

5. For details on how the system worked in jersey, see Oliver Bullough, Moneyland: Why the Thieves and Crooks Rule the
World and How to Take it Back (London, Profile Books, 20 18), 60-4 and for its international development driven by
secrecy and Manafort's role, see the extent of their international impact at 16-2 1, 44-8.

6. Jersey, Guernsey, and the Isle of Man, under the sovereignty of the Crown, have different constitutional arrange-
ments with the UK and are ‘Crown Dependencies’.

7. UK tourists were limited to £50 in foreign currency given over bank counters in 1964.

8. Oliver Bullough, Moneyland: Why the Thieves and Crooks Rule the World and How to Take it Back (London, Profile
Books, 20 18), 34-5, for how the City used dollars deposited there from outside the US to provide dollar loans
outside US government control. There was no limit on the interest to be paid on loans, unlike in the US, where
banks, immediately after the collapse of Bretton Woods, were also restricted in the amount they could lend by a
Required Reserve Ratio (RRR). Examples of the restraints on the use of capital requiring removal to maximize
earnings.

9. Details on how these tax havens worked to protect the owners of capital from tax and conceal their accounts were
leaked and published in 20 16: Bastian Obermayer and Frederik Obermaier, The Panamo Papers (London, One
World Publications, 20 16).

10. Financialization refers to Hilferding's oíd terminology of financia! capital (Rudolf Hilferding, Finance Capital: A Study of
the Latest Phase of Capitalist Development (London, Routledge, 1910)) combined with the addition of the new and
highly sophisticated methods by which debt and assets are related and used by the managers of financial institutions
and funds to achieve enormous incomes, for some of these mechanisms. See Glossary.
686 The Age of Uncertainty: Chaos and Confusión in a Globalized World, 201 1-18

1 1. Oliver Bullough, Moneyland: Why the Thieves and Crooks Rule the World and How to Take it Back (London, Profile
Books, 2018), 36-9.

12. Thomas Piketty, Capital (Cambridge MA, Belknap Press of Harvard University Press, 20 14), 5 7 1-2.

13. Karl Marx, Capital, Volume 3, 1894 (New York, Vintage Books, 1981).

14. ‘Debí is an essential component of a capitalist economy’: H. P Minsky, ‘The Financial Instability Hypothesis: An
Interpretation of Keynes and an Alternative to "Standard Theory”,’ Nebraska Journal of Economías and Business, 16
( 1977), 10. Cited in Steve Keen, Can We Avoid Another Financial Crisis? (Cambridge, Polity Press, 2017), 16-1 7.

15. Irving Fisher, ‘The Debt-Deflation Theory of Great Depressions’, Econometrica, I (4) ( 1933).