The road-map to chaos

March 25, 2016

In early 2009, after Lehman and at the peak of the global financial crisis — but before Greece imploded and launched the formal crisis in the Eurozone — I became convinced that the true epicenter of the global crisis underway was not the US, but rather Europe. True, the real-estate boom and subsequent bust in America had triggered the financial crisis, but that was circumstantial. The Americans were capable, if they wanted, of pulling themselves out of the mud and getting back on the road, whereas the Europeans were so deep in the swamp that there was no hope for them.

This conclusion rested on a broad examination extending beyond the financial data, horrendous though they were, to encompass economic and social trends — and, above all, the demographic slump that was already clearly apparent across Europe, especially in central, eastern and southern Europe. All this and much more led me to draw up what I called then a ‘road-map’ for what to expect would happen in Europe. As I stressed in numerous lectures, discussions and articles since then, the road-map is not a prediction of what will happen, it is simply an expectation: given what we know from European history, this is the typical pattern of developments in a major crisis:

The crisis starts in the financial sphere — because the financial system and markets, even in the pre-modern and early-modern periods, are the most sensitive and most crisis-prone. Although not every financial crisis has longer-term and broader implications, those that do — namely the serious ones — have a severe impact on the real economy of production and employment. The resultant economic crisis is characterized by falling levels of economic activity, especially international trade (which is dependent on credit, now no longer available because of the financial crisis) and leads to sharply higher unemployment.

Morphing into social crisis

This is the critical point in the process. If the economic crisis is fairly short — because it is cyclical and does not have deep roots — it will usually blow over, allowing life in all spheres to return to whatever was considered normal before the crisis. But if it is a long and deep economic downturn, leading to a prolonged period of high unemployment, then the economic crisis will morph into a social crisis, via the mechanism of the labor market: more and more firms will go bust, pushing more people out of work and creating greater unrest and discontent.

Finally, if the socio-economic crisis extends for several years, it will generate a full-blown political crisis. This will include, at the least, riots and domestic unrest, but it may develop far beyond that into major conflicts, whether between groups (defined by class, race, religion, region or whatever) within the country — i.e. a civil war, or between two or more countries.

In short, a full-blown crisis will go through four stages: financial, economic, social and political. However, in Europe, when an extended crisis enters the social and political stages there is always an extra element, namely that the latent anti-Semitism always present in European societies becomes active. The later stages of the crisis therefore include specifically anti-Jewish activity, either popular — riots, pogroms — or officially-sanctioned, which traditionally move from fiscal (taxes) to legal/ bureaucratic restrictions, culminating in expulsion, whether ‘voluntary’ or imposed.

Appallingly accurate

That was the road-map I drew seven years ago and, with regard to Europe, I’m sorry to say it has proven appallingly accurate — which simply means that the Europeans are behaving to form, in the way one would expect from them, given all the precedents. The additional element in the witches’ brew of the 21st century, compared to crises in the previous several hundred years, is that the large, growing and increasingly problematic Moslem minority within Europe has catalyzed all the usual socio-political processes. The mass migration that emerged last year has served to push the entire downward spiral from second to fourth gear, so that the pace of deterioration is now extraordinarily fast. However, even if there were no Moslems in Europe, the underlying process would still be at work.

With regard to America, however, my assessment proved over-optimistic. True, the American economy has managed to recover better than those in Europe and Japan, but much of this recovery is phoney or borrowed from the future, which is therefore much bleaker than it would or should have been. The United States has proven singularly incapable of cleaning up its act, reforming itself and building a stronger base from which to advance. Nor will it do to blame Obama — the rot is plainly far deeper and it long precedes Obama. If anything, Obama, like Trump, Sanders and Clinton, is a symptom of what has gone wrong, far more than a cause.

The question of where do we go from here is therefore almost unnecessary. The road-map leads onwards and downwards, toward greater dissension, dislocation, violence, etc. To suggest today that countries, or entire blocs, will fall apart, probably in a prolonged, messy and discordant manner, is no longer shocking — it is almost stating the obvious.

Even the road-map derivative, that one million Jews in Western Europe will be dislocated and persecuted and will end up coming here is no longer the automatic cause of derision and scorn that it was seven years ago. Not only is the writing on the wall, it is fairly legible — for those prepared to read it.

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