THE RETURN OF THE GNOMES OF ZURICH

Thursday 13 May 2010, 13:04

Adam Curtis Adam Curtis

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Here are some extracts from a fascinating Panorama made in 1968 - about how there are massive spending cuts on the way and asking where they will happen. It is called Where Will the Axe Fall?

The Labour government was in the midst of a terrible economic crisis. Harold Wilson had devalued the pound and announced that Labour was about to bring in big cuts to all its public spending. They had to reduce the deficit he said, otherwise there would be disaster.

There was a frenzied reaction. Bankers, economists, and much of the press agreed that the cuts were inevitable. Many Labour MPs said it would destroy the very fundamentals of the party.

Panorama debated the issue.

And it is just like today. As if time has stood still.

There is a great argument between a Labour MP Christopher Mayhew who wants to pull all British troops out of the Middle East. He says that "western military deployment in the Persian Gulf is a dangerous anachronism". Against him is one of the great supporters of the British Empire - the Conservative MP Julian Amery - who insists it was British troops who prevented the Iraqi dictator from invading Kuwait in 1961 and cutting off the oil. (The dictator was General Qasim)

Christopher Mayhew was also the first MP to take mescaline publicly. Back in 1955 he had allowed Panorama to film him taking the drug - and then record everything he said and did during his trip. The film was never shown, but the rushes exist. There is a restriction on them but I am going to try and get it lifted and put the film up.

Then there is a battle between two Labour MPs. One is a left-winger, Stan Orme, who insists that there is nothing wrong with Britain - the cuts are just there to please the international bankers who have caused the crisis by speculating on the pound. He calls them the Gnomes of Zurich.

His opponent is the right-wing Labour MP Woodrow Wyatt who says Britain has been on a borrowing binge and has to wake up. As you watch him remember that in the 1970s he would switch sides and become one of Mrs Thatcher's most fervent supporters.

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What then happened was that the British economy began to grow again. And by 1969 there was a balance of payments surplus. Although Labour did pull out "East of Suez" many of the really draconian spending cuts that people feared never happened.

But then Labour lost to the Conservatives in the 1970 general election. And within 18 months there was another and this time catastrophic economic crisis which by the mid-70s destroyed all faith in the old politics in Britain.

Sometimes history repeats itself. And sometimes it doesn't

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  • rate this
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    Comment number 1.

    http://bldgblog.blogspot.com/2010/05/fires-save-date.html

    This couldn't be any more up your alley.

  • rate this
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    Comment number 2.

    So do you think we will end up in a similar position to those in the mid 1970s where the cuts destroyed trust in politics? I don't think the Con-Lib coalition will be as amenable to the effects of the spending cuts as Labour was in the late 60's.

    I'm reminded of the end of "The Power of Nightmares". You said that when the politics of fear have nothing left to give, a more progressive type of politics will emerge. Is that what we're seeing now? And will all that be destroyed once the "savings" the government wants to make start to bite?

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    Comment number 3.

    Very interesting. I see your boy Mossman makes another appearance :)

    There's something I can't quite put my finger on with regard to the points about economics, I'm trying to work it out. There's a few things going round my head so I'm just gonna throw them out there.

    Firstly, we seem to want to play a game with the market. In a previous blog AC talks about today's 'free market' bearing little resemblance to the ideas on which it was founded. It occurs to me that, put simply, that modern economics is a game of modifying perceptions foremost, over something direct and simple like encouraging new business and therefore growth. Our approach to economics is strange. On the one hand we seem to consider it's rules absolute, we see it as rational despite the fact that people are the agents (which we've discussed at length on here). On the other hand, and this is suggested in the post with the episode of Pandora's Box, our economic approach is not based on these absolute rules, and that underpinning certan approaches e.g. Thatcher's neoliberalism, are actually more broad philosophies in terms of what makes a good society, how the country should be, and most of all ideas of human nature. This is pointed out by AC repeatedly, specifically in one example that the memory of the British Empire and how it was/is lionised by certain people (I guess you might call it nationalism?) is behind the interpretation of economic rules and introduction of specific economic policies. I mean, did Thatcher want a more stratified society? And if so, why?

    The extension of this is whether economics, and other ideas AC mentions, the role of science, the perception of nature, only have meaning and significance with respect to how we define them?

    I'll leave it there. Except to link to this brilliant song with lyrics I think people who read this blog may like.

    http://www.youtube.com/watch?v=ev5RMiujiQE

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    Comment number 4.

    It's too late now, but I wish "The Market" wasn't mentioned as much as it is. The market does not have control of our economy or any input into the way we run our politics. The market reflects what has happened or what may happen in the very near future. If a country has a public sector borrowing habit like ours, eventually, people decide they don't really want to hold more UK bonds because (a) they already have plenty, and (b) they begin to have concerns that the bonds will not be paid back. (Don't forget, we all own these government bonds too).

    What does happen is that the markets have a habit of moving all at once which causes a panic and forces politicians to reassure everyone. This gives the wrong impression that politicians are answering to the market.

    PS I'm not saying there isn't market manipulation going on - there is - but for it to work the underlying market (say in Greek Government bonds) must already be teetering.

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    Comment number 5.

    GPWC> That's a fair point.

    I think the market though, patently, has a massive effect on the way we run our politics. Weve just had an election where the economy was at the heart of the debate and of people's voting. The primary goal of the new coalition we have now seems to the reduction of the deficit and out debt, because of what increases could do to gilts and investment into the country etc.

    I think what has been suggested in these blogs is there is more to what happens to our economy that somehow 'natural' market forces. Someone made a terrific point and metaphor that said 'the process of observing an electron changes it's behaviour'. It might also be pertinent to the view that our economic value system is built on ideas relate to value in physics, but that's another point.

    I don't want to be glib, but are we seeing economic problems exclusively because of failures in economic policy? The 'Gnomes of Zurich' idea suggests that government action that is not conducive to the creation of wealth for a narrow minority who hold enormous power, not even within the country, exercise significant political power in the UK. Perhaps it's naive to even discuss this, perhaps it's something everybody accepts. But certainly with regard many of the ideals we share in creating a more egalitarian, and perhaps therein freer society, are inhibited by the narrow self interest of non-democratic forces. Moreover that the 'rules' of the social science of economics, far from being necessarily false, are viewed as absolute and that people are somehow inert agents.

    Like I said I don't want to be glib, but I like the conversation from the film Sneakers, which talks about perception and information, that these guide behaviour, and their failings.

    Cosmo: Posit: People think a bank might be financially shaky.
    Bishop: Consequence: People start to withdraw their money.
    Cosmo: Result: Pretty soon it is financially shaky.
    Bishop: Conclusion: You can make banks fail.
    Cosmo: Bzzt. I've already done that. Maybe you've heard about a few? Think bigger.
    Bishop: Stock market?
    Cosmo: Yes.
    Bishop: Currency market?
    Cosmo: Yes.
    Bishop: Commodities market?
    Cosmo: Yes.
    Bishop: Small countries?

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    Comment number 6.

    Footage of Christopher Mayhew's mescaline experiment:
    http://www.youtube.com/watch?v=Lq2kcIM4auk

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    Comment number 7.

    Adam! Your research is brilliant, but whenever you state your opinion it's nearly always economics that you manage to trip over!
    ("draconian spending cuts" !?)
    Economists from left, right, and libertarian teams widely accept that inflation eventually follows increases in aggregate spending over increases in demand (though the role of money supply, fiscal spending etc. is of course contested).
    When you say that the economy flopped once conservatives took the rains, you're correct in the same way that the US economy flopped when US liberal's took the rains.
    I was about to write about the inflation creeping up in the late 60's, but then I realised that if you're genuinely interested your economic claims you would have investigated them yourself -
    The real issue behind your opinions that keeps popping up is your obvious bias against the right wing. Personally, I am also, as well as against the left wing. But I think that what you need to consider, if not a scientific study of economic history, is the nature of these two teams. If you take a look at left and right wing history before your footage, you'll find there was a time when the left preached liberty and capitalism and the right preached paternalism and big government - what changed was that capitalism won out, lost its underdog status through the left point-of-view and, from a right wing point-of-view, protected the right's economic interest.
    And the key lesson from all this? Left and Right wings aren't biases of principal but emotions, and because the right happens to superficially associate itself with laissez faire government and individual liberty at the moment doesn't mean the effects of laissez faire serves only that one team which you're emotionally against.

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    Comment number 8.

    It seems to be clear that western civilisation has failed
    miserably cause its economical fundamental is quantitativ growth on
    multiple levels which is evidently not sustainable for much longer.
    There are physical limits on the horizon and we are moving in such speed
    towards them that soon questions of political colour will be seen as luxurious absurditys of a degenerated counter enlightened society.


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    Comment number 9.

    From the perspective of a decent skilled workman the last thirty
    years brought a decoupling from prosperity,diminishing rights
    and growing social insecurity. The workforce got caged in and
    excluded at the same time. For them it plays no role what party
    is elected. They get further exploited anyway. And this is an
    ongoing process.



  • rate this
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    Comment number 10.

    A 1931 appeal by Baldwin for support for the National Government, arguing that the Labour Party (under Arthur Henderson) had disrupted the stability of the country.
    http://www.youtube.com/watch?v=0UL5AOgqWLQ

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    Comment number 11.

    'Firstly, we seem to want to play a game with the market. In a previous blog AC talks about today's 'free market' bearing little resemblance to the ideas on which it was founded. It occurs to me that, put simply, that modern economics is a game of modifying perceptions foremost, over something direct and simple like encouraging new business and therefore growth. Our approach to economics is strange'


    Absolutely. The classical economists that people today derive their theories from literally lived in a different world to us today. On this point you should read JK Galbraith's 'The Affluent Society' - a classic of 20th century economic literature; and rather easy on the brains too.

    Or for all you illiterate web-surfers (and also for those just interested) check out the series he made for the Beeb back in the 70s, the first episode of which deals precisely with this topic:

    http://www.youtube.com/watch?v=hN8yPLaBVm8&feature=related

 

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