To state the obvious, change can either be a positive or a negative phenomenon. An important determinant of which broad category changes falls within is determined by whether humans master the change or change destructively masters them. The wide range of issues analysed in this article by Dr. David Paul Bennett highlight the importance of how policy direction decisions that are decided upon determine whether change is negative or positive.

The issues most pertinent to facilitating either positive or negative change concern whether the US Congress will save the American and global economies from falling into an horrendous abyss by adopting Speaker John Boehner’s plan which will prevent America going over the fiscal cliff.

(The sub-section which analyses the urgency of the current section is entitled, ‘ So Close But So Far: America At The Tipping Point of the Financial Abyss’.

Super-Profits Taxation: Zero Sum Taxation Raises Zero Revenue

The news that the Minerals Resource Rent Tax (MRRT) on iron and ore and coal brought in zero - that’s correct, zero- dollars and cents for the first quarter of the financial year 2012-2013 is a vindication of the perspective that super-profits taxation for the mining sector is essentially a dud revenue raising regime.

Tax revenue that comes in on an economically quarterly basis is logically supposed to be a quarter of the revenue that will eventually be cumulatively raised. The amount of zero dollars and zero cents for the first quarter of 2012-2013 is a precise indicator of the MRRT’s overall revenue capacity. This zero revenue figure starkly contrasts with Treasurer Wayne *Swan’s previous prediction that the MRRT would bring in nine-billion dollars in revenue and the Treasury’s prediction of two billion dollars.

(*If Swan had any sense of self-respect whatsoever he would resign as Treasurer as a result of the MRRT fiasco, his attempts to inflict a super-profits tax regime on Australia’s vital mining sector, his general in-debting of the nation via the superfluous stimulus packages and his subsequently ludicrous claims that there would be a budget surplus ).

This situation would be tragicomic if the government had not factored in *’MRRT revenue’ helping finance the compensation packages for the carbon tax rebates and the supposed transition to a green economy to eliminate high carbon emitting industries. Similarly, the high rate of overseas borrowing to finance these aforementioned costs cannot be paid down by any MRRT revenue. Furthermore, the joke of an MRRT bolstering Australia’s fiscal position to help put the budget into surplus is just that- a joke!

(*The term ‘MRRT revenue’ is oxymoronic).

That is not to say that the dud MRRT, -or its proposed precursor, the more encompassing Resource Super Profits Rent Tax (RSPT), are still not dangerous- they are! This is because an important objective of super-profits taxation is to undermine the viability of smaller investors by providing huge mining corporations, such as BHP-Billiton, with the advantage of legally minimizing their taxation due to their economies of scale in order to facilitate close trading links with a mercantilist People’s Republic of China (PRC).

Even though the MRRT is a dud of a tax its official existence still creates an expensive tax compliance framework that discourages smaller investors away from Australia’s minerals sector. This scenario ultimately benefits the huge mining corporations which have not had to pay any super-profits tax revenue under the MRRT. Indeed, the MRRT’s design was based on the federal government’s commissioned consultation group headed by former BHP-Billiton Chairman Don Argus. The Argus committee’s March 2011 report recommendations encapsulated the essence of what is now the MRRT.

A key recommendation of the Argus committee, which was adopted, was that mining companies be allowed to claim tax exceptions under the MRRT based on state mining royalties. Trying to turn a disastrous situation (i.e. the MRRT not collecting any tax revenue whatsoever) into an advantage, super-profits taxation diehards, such as the Trade Minister Dr. Craig Emerson, are now arguing that state mining royalties should therefore be abolished so that the MRRT can raise revenue!

Whatever the legal power of an MRRT framework, for all practical purposes, any prospect of substantial revenue being raised from this dud tax is for now and in the immediate future is a virtual impossibility because the China mining boom has essentially ended. There are no super-profits from the Australian mining sector to be taxed!!!

Australian Economic Balance: The Antithesis of Rent-Seeking

Even though the mining boom is now over, Australian economic history since the 1850s has shown that when such booms ended the economy did not go ‘bust’ because there were sufficiently strong agricultural, *manufacturing and service sectors to ‘pick up the slack’. Furthermore, the mining sector usually remained viable during periods of decreased international demand due to a sufficiently broad investor base.

(*Manufacturing was a vital component of Australia’s domestic economy until the so-called ‘economic rationalist’ policies of the 1980s and 1990s decimated this vital sector).

Therefore, whatever the Gillard government can do to encourage investment diversity in the mining sector is to be welcomed. The more investors there are in the Australian mining sector the greater the scope there will be for mineral export supply chains to overseas markets. Important reasons why Australia as a predominately primary product exporting nation has remained prosperous with such a general high standard of living have been due to having a diverse range of trading partners to help balance the respective domestic and export orientated sectors of the economy.

Taxation policy, such as super-profits taxation on the mining sector, which undermines achieving the above cited balance, is potentially fatal to Australia’s genuine national interest. Even though no revenue under the MRRT has yet been raised (or probably never will be) the compliance requirements for smaller investors in the mining sector of this tax are such that they help create an over-dependence upon a mercantilist PRC.

The above cited scenario is part and parcel of the process of establishing a rentier state by narrowing an investor base to corporations that have special links to the PRC. This development is reflective of the success that has occurred since the latter period of the Howard era in which the capacity for Australian politicians to be ‘independent actors’ has been progressively undermined by rent-seeking forces.

The Crucial Importance of Australia Having Independent Political ‘Actors’

Indeed, the adoption of the MRRT was essentially based upon part of the deal done in June 2010 between most of the ALP federal parliamentarians who wanted to be independent political actors by shifting their support to Julia Gillard and parliamentary caucus members who were supportive of the Australian Workers’ Union (AWU). The principal AWU federal parliamentarian was (and probably still is), the Treasurer, Wayne Swan. The AWU federal parliamentary group is beholden to corporate business interests and as such were supportive of an RSPT.

Under an RSPT the scope to apply a dud super-tax regime in the mining sector would have extended beyond iron and ore and coal. Due to the realizations on the part of most ALP federal parliamentarians in June 2010 that ‘regionalization’ (sic), a dud mining tax regime and a probable future Labor government under Lindsay Tanner would be disastrous the decision was independently and critically made by them to transition to Julia Gillard. The AWU group (most of whom by then could no longer personally endure Kevin Rudd) was prepared to support a leadership transition but on the condition that a form of super-profits taxation still be retained, hence the MRRT.

The federal government’s endorsement and subsequent adoption of an MRRT was a testament of corporate business power within the ALP via the AWU. There is nothing inherently wrong with moderate unions having political links to the business community. However, the major problem concerning union-business links is that due to the consequences of union amalgamation in the 1990s destroying too many smaller craft based unions, the once honourable AWU became a conduit for corporate business interests within the ALP.

Disturbingly, union amalgamation has also facilitated a basis within federal Labor governments for left-wing industrial unions, such as the Australian Manufacturing Workers’ Union (AMWU), to enter into corporatist arrangements with big business. This was often done by hard-left industry unions to keep the AWU out of their areas of industrial coverage. Deals that a tame cat AWU and/or left-wing industrial unions do with big business to advance rent-seeking ultimately undermine the independence and integrity of federal and state*ALP governments.

(*The Hawke and Keating governments, 1983 to 1996, as ciphers for big business interests and ideologically neo-liberal public servants, mainly survived for as long as they did due to public dissatisfaction with the coalition in opposition and the positive social dividends that were gained from the Accord that the Australian Council of Trade Unions, ACTU had obtained).

With regard to national leadership and political independence the narrative of the prime ministership of Julia Gillard since 2010 has essentially being that of the ALP finding its way under a determined and critically thinking leader. This is not surprising because it was Ms. Gillard as Deputy Prime Minister between 2007 and 2010 who previously demonstrated independence by repealing the Work Choices (No Choices) industrial relations legislation and making education orientated toward genuinely serving the interests of students by enhancing the teaching profession.

All might have been well for Australia under the ALP had Prime Minister Kevin Rudd fulfilled his part by being the fiscal conservative that he claimed to be when he was Opposition Leader between 2006 and 2007. Unfortunately, Mr. Rudd was manipulated by Treasurer Wayne Swan and Finance Minister Lindsay Tanner into in-debting the nation by undertaking unnecessary stimulus packages in the wake of the 2008 Global Financial Crisis (GFC). This deliberate in-debting was designed by Tanner and Swan to create an over-reliance on the mining sector as part of establishing a rentier state.

It is therefore inaccurate as it is insulting for the former Finance Minister Lindsay Tanner to claim that ALP federal caucus members over re-acted to adverse poll data to depose Kevin Rudd as prime minister in June 2010. Mr. Rudd was deposed by ALP parliamentarians as part of their re-asserting independence from a rent-seeking agenda that had been inflicted on them by Swan and Tanner. Crucially contributing to the facilitating of this rent-seeking agenda was Abbott becoming Opposition Leader in late 2009 by deviously deposing Malcolm Turnbull as federal Liberal leader.

As someone who has been a victim of political rent-seekers, Australia therefore needs Malcolm Turnbull to return as Liberal leader to save the nation from a transition to such a destructive socio-economic political economy. Alternatively, even if Malcolm Turnbull is not Opposition Leader, he could hopefully at least introduce a private member’s bill to secure an immediate repeal of the carbon tax and a subsequent move to an immediate Emissions Trading Scheme (ETS). The success of such a bill would be dependent upon sufficient inter-party support by MPs whose overriding allegiance is to the nation’s genuine national interest.

Such a move on Malcolm Turnbull’s part would fatally undermine the rent-seeking agenda by removing the top-down impost of a carbon tax which by design is progressively narrowing the scope for economic activity to facilitate rent–seeking. However, for Malcolm Turnbull to undertake such an action would require even more courage than what Malcolm Fraser demonstrated in October and November 1975 as Opposition Leader. He resisted the then equivalent of rent-seeking by having the Senate defer supply due to legitimate concerns as to how and why the Whitlam government (1972 to 1975) was illicitly borrowing money.

Fighting rent-seeking in the current context is a far more challenging because it has bi-partisan support within the political elite. Indeed, the secret to political ascendancy in contemporary Australian federal politics is inter-party *collaboration of which Abbott is a master. Unless, the non-rent-seeking side of politics subliminally co-operate across party lines then selfish interests will prevail.

(*The Greens are probably not consciously collaborating in inflicting rent-seeking because they are ‘useful idiots’ with regard to facilitating this destructive agenda. This still does not excuse the Greens because a rent-seeking economy will be overly dependent upon mining which will inevitably lead to eventual wholesale environmental degradation.

As ‘useful idiots’ the Greens blocked the adoption of an ETS in early 2010 which could have provided a practical basis for actually reducing carbon emissions. The hypocritical Greens instead crucially gave their balance of power support to an economically and socially destructive carbon tax in November 2011 that has had, and will have, no positive environmental impact.

Even though the MRRT has been shown to being totally ineffective as a revenue raiser the Greens still want to ‘plug the gaps’ in this dud tax. The leadership of this political party does not seem realize that the tangible impact of super-profits taxation is to discourage investment therefore making Australia vulnerable to a concentration of power in the mining sector by domestic and external interests).

For Malcolm Turnbull to initiate the replacement of the carbon tax by the expeditious transition to an ETS will require have sufficient ALP parliamentary support for him to undertake such a courageous action. Indeed, most federal Labor MPs probably now realize that with the MRRT been shown to be a dud tax that visions of Sovereign Wealth Funds (SWFs) creating new revenue streams to support the transition to a supposed new Green economy are now just mirages.

The Rent-Seeking Threat of ‘Regionalization’ (sic) to Labor: Why The ALP Cannot Advance By Retreating

Unfortunately, the impending defeat of federal Labor in an election to be held in 2013 has probably deepened ALP support for ‘regionalization’ (sic) as a fall-back position. Therefore it may not be possible to secure the passage of ETS legislation which immediately ends the carbon tax. Furthermore, why should any senior Liberals do the ALP a favour by ensuring the immediate repeal of the carbon which would give Labor a chance of winning the 2013 federal election?

The benefit of the Liberals helping secure a repeal of the carbon tax is that state rights will be preserved. The *Liberals have massive majorities in the New South Wales and Queensland parliaments which begs the question as to why coalition state governments should be sacrificed for ‘regionalization’ (sic) ?

(*The term ‘the Liberals’ encompasses the Liberal National Party, LNP, in Queensland).

True, the ALP brand name will probably be too tarnished as a ramification of the full detrimental impact of the carbon tax that regional bailiwicks may not necessarily be there for Labor factional big wigs to transition to. Furthermore, the support of the Abbott Liberals for a Lasch type of political party/parties will further undermine the capacity for Labor factional heavy-weights to acquire regional bastions in traditionally pro-Labor areas, such as New South Wales’ Hunter Valley Region, north of Sydney.

The erroneous assumption by Labor ‘chieftains’ that ‘regionalization’ (sic) will preserve and enhance their political power is already affecting factional dynamics within the ALP. There are leading members of the Socialist Left (SL) faction of the Victorian branch of the ALP who are covertly supportive of ‘regionalization’ (sic). They are therefore prepared to ensure the fall of Prime Minister Gillard even though she initially hails from and notionally still belongs to this faction. Similarly stalwarts of the Labor New South Wales Right faction associated with the states public sector unions erroneously believe that the ALP can make up lost ground by the introduction of ‘regionalization’ (sic).

Those within the ALP who think that they can advance their interests via ‘regionalization’ (sic) should realize that this reform can only be brought in by an anti-union Abbott government. Although Abbott has declared his opposition to a revival of No Choices type legislation a government that he leads will still be very anti-union. The former Workplace Relations Minister Peter Reith still has a formidable network within the Liberal Party which is dedicated to destroying Australian trade unionism.

The strategic/tactical difference from the Howard era is that anti-union Liberals will not try to re-inflict a No-Choices industrial relations regime that effectively abolishes the award safety net. This will be because the removal of award minimums and restrictions on bargaining under No Choices alienated too much of mainstream Australia and paradoxically led to renewed member rank and file commitment to their respective union organisations.

Instead, a de-unionising agenda will be pursued by an Abbott government at a workplace level in which employees will be encouraged to exit their unions. As democratic pluralist legislation there is sufficient scope under the current Fair Work Australia (FWA) legislation that does not preclude employers from promoting de-unionisation so long as an employees’ freedom of choice is respected. However, under an Abbott government steps could be taken by the state to bolster a framework that either encourages employees not to join unions or for existing members to exit from them.

The fundamental difference regarding de-unionisation under an Abbott government will be that a low wage/anti-entitlement agenda will not be pursued because anti-union Liberals now recognise that this it does not necessarily lead to de-unionisation. The figurative horse will be placed in front of the horse by facilitating de-unionisation as a prelude to later undermining wages and general employee rights. This approach will be intended to cause general de-unionisation while powerful left-wing industry unions such as the AMWU could be targeted, in specific campaigns similar to the Howard government’s campaign against the Maritime Union of Australia (MUA).

Therefore, even if the ALP Victorian SL faction and the New South Wales Labor Right faction adjust to ‘regionalization’ (sic) the viability of the unions which back these state based factions will still be threatened. The best option for unions and all ALP factions/sub-factions to survive into the future is to genuinely and loyally support the re-election of the Gillard government in 2013. A fundamental competitive advantage that the Liberal Party has over the ALP is that it can afford to ‘advance by retreating’ because the rent-seeking agenda that led to Howard’s fall in 2007 is still on course to ultimately destroying Labor.

The Rent-Seeking (Ruthless) Nature of a Future Abbott Government

A New South Wales or Queensland type of mega landslide against the ALP at a federal level will not necessarily mean that Abbott will be accommodative to those in the coalition who are not wholly committed to his ‘magic circle’. Such Liberal Party outsiders could well ultimately be politically dispensed with by an Abbott government. This approach starkly contrasts to the usual practice in Australian politics of parties upon coming to power accommodating internal/factional differences that had existed in opposition.

It is not in Abbott’s nature to be accommodative as the rent-seeking nature of the changes that he has wrought since late 2009 attests. While an Abbott government will undoubtedly repeal the carbon tax it will still proceed with ‘regionalization’ (sic) as part of establishing a rentier state. Rent-seeking by definition entails restricting access to economic resources to the politically connected. An Abbott government could cleverly and eventually purge those within coalition ranks who are not beholden to the three big mining corporations and to the respective privately mining companies of Gina Rinehart and Clive Palmer.

The ruthlessly applied skill with which Malcolm Turnbull was deposed in late 2009 as Opposition Leader is reflective of the fact that the political operatives who support Abbott do not mess around. The intensity with which Deputy Liberal Leader Julie Bishop restlessly attacked Prime Minister Gillard over the so-called AWU ‘scandal’ (sic) in the final 2012 session of federal Parliament is testament to the ‘take not prisoners’ approach of the Abbott camp.

Even though most federal MPs regardless of party know that no credible evidence was produced by Bishop against the prime minister in regard to the AWU ‘scandal’ (sic) it was still a virtuoso performance on the Deputy Opposition Leader’s part and the staffer(s) who supported her were diligent and focused. This was partly because the intended impact of these AWU related attacks were to keep the Commonwealth Parliament polarized so that cross-party alliances between rent-seekers could be maintained and the potential for non-rent-seeking alliances thwarted.

Will Julia Gillard Be the ‘John Howard’ of the 2013 Election?

Consequently, the ALP is still well-positioned to lose the federal election to be held in 2013 due to internal sabotage, let alone because of the carbon tax. Had either Paul Keating in 1996 or John Howard in 2007 known well in advance that their re-election campaigns were to be internally sabotaged they might have been able to avoid electoral defeat by undertaking political preventative maintenance.

Even foreknowledge of future internal sabotage within the ALP campaign may be insufficient to save the Gillard government in the 2013 federal election. There are no signs of inter-party alliances been formed by non-rent-seeking elements within the ALP or the coalition parties.

Julia Gillard will probably still be prime minister at the next federal election but this will not stop pro-rent-seekers within the media and the Abbott Liberals from trying to manipulate the ALP into deposing her to increase the chances of the coalition winning a mega-election landslide by removing a national leader who is an independent political actor.

To further restrict Ms. Gillard’s capacity to be an independent political actor the scope for the prime minister to forge her own cross-party alliances is being pre-emptively prevented. In this political context the real political impact of Malcolm Turnbull and Kevin Rudd recently appearing on the ABC’s Q & A television programme on November 20th 2012 was that it undermined prospects of the former Liberal leader providing the necessary leverage to Prime Minister Gillard to overcome the rent-seeking agenda that confronts her.

Many Australians who support Malcolm Turnbull again becoming prime minister hope that he will depose Abbott when the next federal election is called to help create momentum for a Liberal Party landslide. A Hawke-Hayden type of leadership transition in the current political context however is nonviable because Abbott’s personal staff have too a formidable intelligence network that will detect and pre-empt any move aimed at deposing him.

For Abbott’s powerbase to be effectively undermined within the Liberal Party inter-party support from Gillard loyalists for Malcolm Turnbull’s return as party leader is required. By necessity a Gillard-Turnbull alliance must be temporary if both are to remain effective competitors for national power. While the nature of such an alliance would be temporary its long term ramifications could be profound by short-circuiting rent-seeking by achieving an expeditious transition to an ETS in lieu of a carbon tax.

The imposition of a carbon tax has placed the Abbott Liberals on a course to convincingly win the 2013 federal election because the current increase in electricity prices alone has alienated a sufficient number of swing voters to support the coalition. The coalition might achieve a mega-landslide should the full effects of the carbon tax become apparent by the second half of 2013. Furthermore, as previously mentioned, a possibly even more important reason why Labor will lose the 2013 federal election will be because of internal sabotage by pro-rent-seeking elements within the ALP.

The ‘throwing’ (i.e. the deliberate losing) of elections is a phenomenon which is undermining Australian democracy. Traitorous elements within a party will sabotage their side of politics if there is a gain for them. This was the case with the throwing of the March 2007 New South Wales state election by the state Liberals. This ultimately had tremendous benefits for the state coalition which consequently won a landslide in 2011 because of public hostility toward the ALP was so great as an opportunity to vote them out four years earlier had been previously squandered.

The long-term dividends for anti-state rights elements within the New South Wales ALP are more difficult to discern in relation to the 2007 state election. However, the eventual introduction of a ‘regionalized’ Australia by an Abbott government will be the long term political benefit for the rent-seeking elements within the New South Wales branch of the ALP.

Advance By Retreating: The Political Effectiveness of Engineered Party Splits

Similarly, in Queensland ‘regionalization’ (sic) apparently offers the prospect of ALP renewal after the state ALP was reduced to seven seats in the March 2012 state election with 26% of the popular vote! This election result was even worse than the 1974 state when the ALP was reduced to eleven seats with 36% of the vote. Nevertheless, the Queensland ALP of 1974 was able to later restore its fortunes due to retaining its status as the opposition party in the state parliament.

The current Queensland political context may change in that the ALP might not be able to fall back upon an anticipated return of some of its voting base. This is because of the potential for defections by regional and rural Queensland state MPs from the LNP to Katter’s Australian Party (KAP). Such a process could see the ALP displaced as the official opposition party in the current parliamentary term. This outcome would not necessarily be adverse to the LNP as Queensland could become the first state where the ALP’s prospects for regaining government might consequently become a forlorn hope.

The consequences of such an outcome in Queensland could change the nature of Australia’s traditional two-party system that has traditionally been based on a dichotomy between capital and labour to crucially help counteract the danger of rent-seeking. The emergence of KAP as a party that is avowedly opposed to ‘economic rationalism’ (sic) should on the face of it, be welcomed. However, the emergence of KAP is a phenomenon that might by design as opposed to a grass roots driven phenomenon. As such rent-seeking strategists within the coalition might achieve their agenda because of KAP consolidating as a major political force.

B.A. Santamaria believed that new political parties, such as the Democratic Labor Party (DLP), which was formally formed in 1957, were not viable unless there were sitting parliamentarians who were prepared to join them at the outset. There have been important exceptions to this rule in Australia such as the Australian Democrats and the Greens but this Santamaria analysis has influenced many smart operatives on the non-ALP side of politics, both within and outside the mainstream of the coalition parties.

For better or for worse operatives involved in the formation of the LNP in 2008 and that party’s subsequent consolidation are smart because their actions were often calculatedly pre-determined. The running of a Campbell Newman as Brisbane’s Lord Mayor not only helped the LNP gain the support of the state capital’s conservative voters who had previously supported the ALP (the ‘Beattie Liberals’) but also the city’s undecided voters and many one-time ALP stalwart supporters.

In a similar vein, political calculation could see possible defections of Queensland state MPs from the LNP to KAP to re-configure politics so that the state ALP is marginalized. An official KAP state opposition (which would need eight or more members) would have the right to resources, such as the Opposition Leader receiving a special salary, which would contribute to side-lining the Queensland ALP.

The June 1998 Queensland state election precedent in which Pauline Hanson’s One Nation Party won an eleven seats indicates that there is a potential electoral base for KAP to be a revived Country Party that displaces the ALP. Therefore should KAP become the official opposition party there will be scope for this party to retain this position or become a coalition partner to the LNP should there be a resurgence of the Labor vote in Queensland at the next state context.

In a federal context so long as KAP is within a preferencing stream with the LNP the ALP could lose all of its federal seats in Queensland in the 2013 federal election. The onset of a KAP emergence via the substantial LNP defections of Queensland state MPs is yet to occur but the signs are already there.

There is little if anything that can be done on the ALP side to prevent coalition strategists helping engineer a KAP emergence. Nevertheless, non-rent-seeking ALP operatives who are genuinely committed to the Gillard government should appreciate that opportunistic elements within their party are prepared to sabotage Labor’s 2013 federal election campaign. This will be done in return for an Abbott government instituting ‘regionalization’ (sic) so that they can later recover and expand their political power.

Victoria: The Last Defence Against Rent-Seeking?

Because reconfiguring Australian politics to establish a rentier state is a fundamentally transformative process the stakes are high that ALP collaborators cannot afford to undermine their party based on just future promises from the Abbott Liberals. The major bargaining chip that ALP rent-seekers will have after the coalition wins the next federal election will be the prospect of Labor re-gaining office in Victoria in order to ensure that their interests are represented in the phasing out of Australian states.

The Victoria coalition government of Ted Baillieu is relatively unpopular as it is perceived by most Victorians to be mediocre. This government’s one seat majority makes viable the scenario that rent-seeking elements within its own ranks could bring the government down so that a new pro-‘regionalization’ (sic) Labor state government led by Daniel Andrews can be formed. Another scenario is that early elections are held as a result of the Victorian government losing its majority which would be won by the ALP.

The Baillieu coalition government is ironically politically vulnerable because it has not effectively addressed the revenue problems bequeathed by the former ALP state government. These include the Myky ticketing fiasco and budgeting issues with regard to the delayed construction of the Wonthaggi desalination plant.

While Ted Baillieu will probably lose the next state election it is possible that he could be replaced beforehand as premier by a supporter of the Kroger faction. The ramifications of such a development will in one way or another be the advancement of rent-seeking via ‘regionalization’ (sic) to ensure the Liberal Party’s final break with the Menzies/Deakin tradition in which the respective interests of labour and capital were balanced.

Victoria’s socio-political and economic traditions were conducive to fighting against rent-seeking because a political balance was achieved in the 1850s between the interests of gold mining prospectors and the squiretocracy. An important aspect of Victoria’s subsequent social contract was later support for manufacturing which is why this colony and then state became protectionist. However, protectionism (which I am inclined toward supporting) was not the central tenet of Victoria’s social contract but rather industrial arbitration which established the socio-political and economic balance.

Victoria’s figurative golden age commenced one hundred years after the 1850s gold rush era with Sir Henry Bolte (a Liberal Party stalwart) serving as premier of Victoria between 1955 and 1972. This was because labour rights were respected while the interests of small business were promoted. The economically prosperous Bolte era was also one where the Liberal Party was able to attract quality candidates at a state and federal level because they were dedicated to public service because there was a strong party branch structure.

During the time of the ALP federal Whitlam government (1972 to 1975) Liberal Party branches not only in Victoria but throughout the nation crucially helped their party remain grounded in the context of a terrible government. Strong Liberal Party branch membership support helped Malcolm Fraser during his eight months as Federal Opposition Leader between March and November 1975.

During the above cited period Malcolm Fraser steadfastly opposed the Whitlam government by having the Senate defer supply between October and November of that year. In a Victorian context the Liberal Party’s strong branch structure helped the party to initially endure going into opposition in 1982 after twenty-seven years in government.

Victoria: Where Menzies/Deakinite/Fraser Liberalism Can Be Revived

There might have been Liberal Party renewal in Victoria had the state branch not at its 1989 state conference ceded too much of power away from party branches to the equivalent of the party’s state party executive, particularly with regard to candidate pre-selection. The consequences for Victorian and federal politics were profound as entry for self-seeking political forces was facilitated which has since crucially established the current rent-seeking threat.

That is not to say that ethos of the Melbourne Establishment (which can be traced back to the accommodative but clever squiretocracy of the 1850s) did not have potential to survive as a political force after Malcolm Fraser lost the March 1983 federal election. Indeed, had Andrew Peacock won the March 1990 federal election the Menzies/Fraser tradition within the Liberal Party might have been revived and adapted with the mentoring support of the Melbourne based businessman/entrepreneur John Elliot.

The election of the Kennett government in Victoria in October 1992 similarly provided scope for a revival for the Menzies/Fraser tradition. However this state government’s draconian industrial laws, deep cuts to services and its metro-centric focus fatally stifled that potential. Undermining the power of the state auditor-general also helped precipitate a change for worse with regard to attracting quality people from the Liberal Party side to state politics.

Nevertheless, the wheeling and dealing that occurred in Victorian politics since the end of the Kennett era (1992 to 1999) not only saw inter-party opportunistic elements within the state’s polity bring down Geoff Kennett as premier in 1999 but similarly ensured that Ted Baillieu became premier in 2010. The irony of Ted Baillieu becoming premier is that Victorian ALP and coalition rent-seekers expect a Kennett supporter (Baillieu) to help facilitate ‘regionalization’ (sic).

Whether the Baillieu government will acquiesce to ‘regionalization’ (sic) is one of the most important questions in Australian politics. Alas, there are already signs of fundamental policy mis-direction by the Baillieu government going against the Menzies, Fraser and Bolte tradition in regard to Victorian state politics. This is particularly so with regard to the prospect of the auditor-general’s powers again being curbed.

The major positive accomplishment of the Victorian ALP government of Steve Bracks (1999 to 2007) was to restore the powers of the auditor-general. Due to pressure from the ALP backbench the Bracks government abandoned its own attempt to curb the power of the auditor-general. Unless, the Victorian Liberals now want to again undermine themselves by attracting the wrong sort of people to politics then the powers of the auditor-general must be safeguarded.

As with regard to ‘doing the right thing’ by respecting the position of auditor-general, there can also be another correlation between ethical public policy and political benefit by the Baillieu government thwarting ‘regionalization’ (sic). Preventing ‘regionalization’ (sic) would constitute an important fight-back against the disastrous suite of policies that have hit Australia since the Hawke government’s election in March 1983.

The Continuum Between Economic Rationalism and Rent-Seeking

Australia was able to mitigate the onset of ‘economic rationalism’ (sic) during the Hawke-Keating and Howard eras between 1983 and 2007 because of the institutional protection of important institutions such as the Crown, arbitration/trade unions and the states. Now the political stakes have never been higher in Australia because there is a concerted attempt to bring in a rentier state which is integrally linked to a mercantilist PRC.

The frustrating aspect of the current scenario is that it seemed under the Howard-Costello government that the destructive impact of ‘economic rationalism’ (sic) had been overcome because the public foreign debt had been paid off. Furthermore, the excellent prudential financial controls that the Howard-Costello government (1996 to 2007) had brought in had actually protected Australian financial institutions and national revenue sources during the GFC phenomenon which came into being in 2008.

There were however major black marks against the Howard-Costello government which included its anti-union industrial relations agenda and its intensely anti-states stance. The industrial relations agenda of the former federal coalition government eventually led to the removal in 2006 of award safety net concerning minimum pay and employee entitlements while its anti-states policies established the groundwork for ‘regionalization’ (sic).

With regard to 2006 No Choices legislation its impact went beyond adversely affecting wage earning employees to threaten overall living standards by lowering aggregate national pay levels. Consequently, most Australians are now thankfully intuitively hostile toward any return to a No-Choices industrial relations regime. While the No-Choices industrial relations agenda was probably not underpinned by a rent-seeking agenda the intended outcomes were similar: restricting economic resources to a particular *class.

(*The term ‘class’ is reluctantly used because of its Marxist connotations).

Major discrepancies in wealth between classes in nations that are abundantly endowed with natural resources is usually the result of a close but skewed integration between political and economic systems (the political economy) in which there is a concentration of power. The eventual abolition of Australian states via ‘regionalization’ (sic) will lead to such a concentration of power even though the ostensible purpose of this process is to achieve de-centralization.

New regional tiers of government will be dominated by political hacks who will utilize them to establish bailiwicks. What has happened in the 1990s in the state of Victoria with regard to local government amalgamation is a vivid example of power been concentrated with political elites at the expence of democracy. It is therefore not surprising that former *ALP Victorian premier, John Brumby (along with former New South Wales Liberal premier, Nick Griener) are currently supporting a ‘review’ of the GST rate which is now setting the groundwork for the Gillard government to increase this tax.

(*Using former premiers from different parties is integral to the strategy of establishing a bi-partisan consensus for a future GST increase. While the Gillard government will undoubtedly resist increasing the GST, the prime minister’s denials that there will be an adjustment of this tax will not be credible with the electorate.

This will be because Prime Minister Gillard broke her 2010 promise that a government she led would never introduce a carbon tax. Even though the prime minister was politically coerced into both making and then breaking her no-carbon tax pledge she still will have insufficient credibility with the electorate because the carbon tax and GST issues are so important to the electorate).

When Axiomatic Truths Actually Become Realities: Making the GST Regressive

Brumby and Griener have canvassed increasing and/or expanding the GST rate beyond 10% on the basis of economic considerations. It may seem fair enough to review increasing/expanding the GST rate based on financial circumstances. However, it should not be forgotten that indirect consumption taxes become regressive when the certainty of a flat rate is removed by raising the rate to adjust to fiscal changes.

As previously mentioned, the current transformation of Australia’s GST into a regressive tax is all the more galling because it was and is so avoidable. Had it were not for the post-2008 profligate stimulus packages and the economic contraction that the carbon tax is causing, Australia’s fiscal position would not be such, that there would be momentum for advocating a GST increase and/or expansion in its application. Furthermore, ridiculous suggestions that states set their own rate GST rates are part of a concerted campaign to link any increase in this tax to the states to help bring in ‘regionalization’ (sic).

A crucial first step in achieving ‘regionalization’ is to divert GST revenue away from the states. Even though the Commonwealth is responsible for administering the GST, advocacy by pro-‘regionalization’ (sic) premiers such as Barry O’ Farrell of New South Wales is contributing to the mis-perception that future GST increases can be avoided by diverting GST revenue from the *states. The public will hopefully not blame the states for any GST increases by seeing through the actual agenda of rent-seeking politicians.

(*Further to the objective of undermining states, state governments are facing pressure for Treasurer Swan to abolish payroll tax. Whatever the inherent merits in such a proposal, they should not now be implemented because any measure which undermines states cannot be considered until the rent-seeking/regionalisation (sic) agenda is no longer a danger).

Discerning what is really going on in contemporary Australian politics is very difficult because rent-seeking politicians have been adept in both concealing inter-party collusion and in attitudinal setting of public opinion. The public is already being manipulated into eventually supporting ‘regionalization’ (sic) by traitorous state politicians citing possible tax increases with regard to funding the National Disability Insurance Scheme (NDIS) and Gonski Report education reforms as the pretexts.

Whatever the inherent merit of the NDIS and the Gonski reforms these policies should not have been advocated by either federal or state governments in a context where there is such a high budget deficit and high public foreign debt with out of control foreign borrowing. The two aforementioned policies are being advocated in an adverse fiscal context which places a strain on state public finances so that the groundwork can be established for a clawback of GST revenue from the states to fatally undermine their viability.

Prime Minister Gillard probably supports the NDIS and the Gonski reforms to genuinely advance the public good but there needs to be a separation between intentions and probable outcomes. In this regard the Gillard government is being conned by rent-seekers within its own ranks and by pro-‘regionalization’ (sic) state politicians. The substantial financial commitments that state governments have to make to fund both the NDIS and the advocated Gonski education reforms are too much that the scene is now being set by some premiers to advocate an increase in the GST rate.

The Nexus Between A GST Increase/Clawback and ‘Regionalization’ (sic)

An increase in the GST rate will in turn prepare the way for party hack dominated state governments to engineer a Commonwealth clawback for that tax. It does not take a rocket scientist to realise that current fiscal realities are such that the viability of states will be seriously threatened by a loss of GST revenue. For those who argue that a GST clawback is an inevitability because states are obsolete, they should appreciate that making this tax regressive is crucial to establishing a rentier state in which economic power is restricted to a select few.

Australia’s weakened fiscal position as a result of over-spending and over-borrowing since the post-2008 stimulus packages is now threatening important areas of the Australian economy. The Commonwealth’s depleted revenue base is already leading to a contraction in funding for the nation’s higher education university sector. The imposition of the carbon tax is imperceptibly undermining the small business sector. The fiasco concerning the attempt to foist a dud super-profits tax regime on the mining sector is causing a disastrous over-dependence on the PRC by having the effect of narrowing the scope for foreign and domestic investment in that vital sector.

The point of no return that is confronting Australia is that of the nation becoming too mired in public foreign debt. The viability of the nation’s excellent social security system is being threatened because it is now being financed by foreign borrowing which may not be repayable in the long-term. Indeed, with higher levels of unemployment/underemployment on there way the nation’s social security system will be faced with many challenges regardless of the overall public foreign debt burden.

The dire situation that Australia now finds itself in is the result of bad policy decisions that date back to the Rudd government taking office in October 2007. The ALP should not be too harshly condemned for the problems which now threaten Australia because the Rudd and Gillard governments have been subject to the broader rent-seeking agenda which had brought down John Howard as prime minister.

For the Gillard government to rise above the rent-seeking agenda that is being imposed on it there must be an expeditious transition to an ETS by immediately abolishing the carbon tax. This would send a very powerful signal to the rent-seekers that their attempts to abolish states and to increase the *GST rate are no longer viable policy options.

(*Increasing the GST rate is another example of the rent-seeking Abbott Liberals having the Gillard government to do their dirty work while also clearing the way for a coalition landslide federal election victory in 2013).

The Need for the Gillard Government to Have A Pro-Active Agenda to Counter Rent-Seeking

Admittedly, it is one thing to say what policies a government should ditch, it is quite another to advocate policies that it should pursue. The major general policy direction that the Gillard government will hopefully consider adopting is that supporting the nation’s rural sector. Higher international food prices are placing Australia in a potentially strong position to sell agricultural produce that the effective end of the mining boom can be countered.

Should there be a re-elected Gillard government in 2013 it will hopefully focus on paying down (if not completely paying off) the public foreign debt in its next parliamentary term. In the immediate time period, the Gillard government will hopefully resist pressure from traitorous pro-‘regionalization’ coalition state governments (i.e. News South Wales and Queensland) to increase the GST. Inherent challenges concerning state funding of programmes such as the NDIS can be overcome federal and state governments working together to bolster the agricultural sector and ensure that there is a consequent improvement in Australia’s fiscal position.

The Nexus Between Rent-Seeking and ‘Unequal’ Trade Relations

Alas, there are already disturbing signs that Australia’s agricultural sector is being undermined by rent-seeking inspired public policy. The major manifestation of this trend is that Peoples Republic of China (PRC) State Owned Enterprises (SOEs) are buying important agricultural properties such as the massive Cubbie cotton station in southern central Queensland. Even though federal and state politicians have protested this development or provided verbal re-assurances that Australia’s national interest will be protected they are doing no more than ‘*talking the talk’.

(*’Talking the talk’ is a practice that is often, but not necessarily always used, as part of the process of betraying the people that someone such as a politician is disingenuously claiming to be protecting).

That coal seam gas exploration currently poses ‘a talk the talk’ threat to Australian farmers is reflective of the fact that too many Australian politicians are operating within a rent-seeking policy paradigm. Ironically, caution must be sounded with regard to pro-‘regionalization’ state (sic) governments being prepared to cede their jurisdiction regarding mining exploration rights to the Commonwealth. If there is to be any pressure to protect the interests of farmers let it be directed toward state governments by having them retain their current jurisdiction to deny rapacious mining companies the capacity to ride rough shod over Australian farmers.

Why State Politicians Should Now Be Independent Political Actors

The fundamental challenge of state rights being maintained to stop rent-seeking is complicated by the duplicity of politicians claiming to be federalists when they probably are not. An example of a politician who was probably disingenuous about being pro-states rights was Brumby. He went to a special premiers’ and chief ministers’ conference in Canberra in May 2010 ostensibly on ‘hospitals reform’ he asserted that he would block any proposed clawback of GST revenue from the states. His change in stance shortly after arriving in Canberra to support such a clawback almost resulted in such a theft occurring.

Brumby’s woeful capitulation on the GST theft was reflective of his not being an independent political actor. It was therefore not surprising that he lost (albeit narrowly) the November 2010 Victorian state to the coalition. Deals had already been done between rent-seeking Victorian politicians within both the ALP and the coalition parties for Labor to go into opposition in 2010 so that the succeeding government of Ted Baillieu would help bring in ‘regionalization’ (sic).

An important pre-requisite for dismembering the nation via ‘regionalization’ (sic) is to attempt another ‘clawback’ of GST revenue from the states. In this context the recently announced appointment by the federal government of Brumby to be Chairman of the COAG Reform Council in January 2013 is an ominous development. The COAG Reform Council (the so-called Reform Council) is in effect the secretariat/bureaucracy of the Council of Australian Government (COAG) which was established in 1992 at the behest of the ALP centralist federal government of Paul Keating.

COAG itself represents the Commonwealth, states, territories and local government as its key members are the heads of the different federal, state and territory governments*. The scope for the dismemberment of states actually exists with the so-called Reform Council which is essentially a secretariat with links to the bureaucracies of Commonwealth, state and local government authorities. This council will probably fulfil the co-ordination role required to dismember Australian states as part of the ‘regionalization’ (sic) process.

(*Local government interests in COAG are also represented by the head of the Australian Local Government Association, the ALGA. If it were not for the threat of ‘regionalization’ (sic) the inclusion of the AGLA would not be a matter of grave concern).

An important first step with regard to the so-called Reform Council facilitating ‘regionalization’ would be to have clawed back GST revenue disaggregated to local government authorities as the forerunners of their becoming new regional authorities. The complete lack of democratic consultation and transparency with the Australian people is testament to the nefarious nature of the rent-seeking inspired ‘regionalization’ (sic) process.

Australian political history has consistently shown since the Rum Corp Rebellion of 1808 that a secret to the nation’s subsequent and impressive socio-economic success has been that political economies have an underlying legitimacy. The lack of public awareness concerning the real reasons behind Kevin Rudd’s winning the October 2007 federal election and why he lost office as prime minister in June 2010 is testament to how and why rent-seeking politicians have concealed their agendas from the people.

The Crucial Importance of Political Transparency

Transparency in post-2007 politics has also been undermined by inter-party collusion and politicians and political organisations espousing positions that they do not really believe in. A prime example of such an organisation is the Samuel Griffith Society which is suppose to defend state’s rights. In reality the Samuel Griffith Society is connected to pro-‘regionalization’ (sic) politicians who belong to the conservative faction of the South Australian Liberal Party and the Right faction of the New South Wales branch of the Liberal Party*.

(*There have been attempts to establish a national Right/Conservative faction within the Liberal Party. This objective has not yet been achieved because the support of espoused moderates within the Liberal Party who are required to help facilitate rent-seeking might be alienated.

The need to formalize a national right-wing Liberal Party faction will after ‘regionalization’ (sic) afflicts Australia when such an inner-party organisation is needed for co-ordination purposes).

The Samuel Griffith Society through its seminars and conference papers has projected an image of being pro-states rights that many genuine advocates have probably been unwittingly co-opted while a cover for rent-seeking politicians to claim that they are pro-state rights when the reality might be different has been provided. Although former Liberal Party Premier Jeff Kennett is probably sincerely pro-states rights the overall situation is so confused that whether his recent call for the abolition of COAG (and by extension the so-called Reform Council) was genuine is therefore difficult to ascertain.

Nevertheless, in terms of broad ideological comparison between Jeff Kennett and Brumby, the former Liberal premier is probably more inclined toward having a *patriotic sentiment toward his state of Victoria. The area where the two former Victorian premiers are similar is that they both lost elections. Jeff Kennett probably did not know that he was going to lose the 1999 state election due to the sabotage of pro-‘regionalization’ (sic) forces within his own party.

(*Patriotism and nationalism are distinct concepts. The former does not necessarily mean solely having a commitment to a nation but can also refer to an institution, such as a football team, where one feels a sense of devotion. Nationalism is where the commitment is specifically to a nation.

Making the distinction between nationalism and patriotism is important in explaining how and why feeling a sense of allegiance to a state or a province does not negate an overall sense of national commitment).

In contrast to Jeff Kennett, Brumby probably knew that he would lose the 2010 Victorian state election. This would have been because had known that Jeff Kennett had lost in 1999 due to wheeling and dealing between pro-‘regionalization’ (sic) factional heavy weights within the two major parties. Therefore Brumby most probably aware that when he became premier in 2007 that it what be up to the powers that be within the Victorian ALP as to whether he would be allowed to win an elected term in his own right in 2010.

Brumby’s probable acceptance of his loss of office in 2010 meant that he could still fulfil an important role in implementing a rent-seeking/’regionalization’ (sic) agenda- hence his impending appointment as Chairman of the so-called Reform Council. With regard to Brumby’s predecessor, Jeff Kennett, he can still eventually win out against those in the Liberal Party and the ALP who brought him down by utilizing his continuing political influence by helping thwart ‘regionalization’ (sic).

Because Jeff Kennett could again have a political impact by saving Victoria as a viable state, an overview of his past political impact and popular attitudes toward him is undertaken. Too many Victorians do not have particularly fond memories of Jeff Kennett as premier. This is because of steep budget spending cuts that his government introduced caused a contraction in too many important services and because of the anti-employee industrial relations policies of his government.

The most impressive achievements of the Kennett government (1992 to 1999) were paying off the state’s crippling debt and to attracting substantial business investment which consequently precipitated substantial employment growth. Jeff Kennett also won a degree of grudging respect from some of his critics by taking a strong stance against Pauline Hanson’s One Nation Party. Overall, despite the political polarization of the *Kennett era, the positive impacts of this former Victorian coalition government are probably fading from people’s memories due to subsequent political events.

(*Jeff Kennett’s contemporary boosters seem to be veteran Melbourne taxi drivers and restaurateurs who remember and appreciate the impact of his government in reviving business activity).

Due to this general lack of conscious evaluation by Victorians of the Kennett government the role that pro-‘regionalization’ (sic) Liberals fulfilled in bringing down that government will probably be widely known. However, if Jeff Kennett is really sincere about his being pro-states rights and if he wants to politically avenge against those in his party who previously brought him down in 1999 in pursuance of a rent-seeking he should thwart the onset of ‘regionalization’ (sic).

Ted Baillieu, the current Victorian premier is a party factional ally of Jeff Kennett’s but there is little indication that his government has a strong sense of purpose to be a success. Indeed, rent-seeking elements within the Victorian branch of the Liberal Party regard the Baillieu government as a transitory one on the way to ‘regionalization’ (sic). As previously mentioned Jeff Kennett should be inclined to using his *continuing political influence, if not power, with the Baillieu government to thwart regionalization (sic) as a patriotic Victorian.

(*An important reason why the Kennett government fell in 1999 was because Malcolm Fraser did not fulfil an effective mentoring role. The former Liberal prime minister had previously made a mistake in office by not conciliating with Andrew Peacock, a then senior federal Liberal politician. Their political rift laid the groundwork for the later Howard ascendency in the Liberal Party which has placed Australia on its current rent-seeking course.

There had been a prospect of Malcolm Fraser fulfilling a mentoring role when Jeff Kennett was premier. The former prime minister was understandably happy when the coalition won a landslide election victory in October 1992. Indeed, Malcolm Fraser had previously bravely advocated that the Victorian Legislative Council, the state’s upper house, defer supply to force an early election due to the financial incompetence of the Victorian state ALP government.

Had Malcolm Fraser fulfilled a mentoring role in the Kennett government he could have helped formulate a model for Liberal federal and state governments to move away from ‘economic rationalism’- which is now degenerating into rent-seeking. Hopefully, Jeff Kennett will not forfeit his opportunity to fulfil a respectful mentoring role in assisting the Baillieu government resist rent-seeking).

Why People of Good Will Should Work Together: The Benefits of Temporary Inter-Party Co-operation to Oppose Rent-Seeking

In addition to Victorian resistance hopefully helping stop ‘regionalization’ (sic) there will hopefully be a correlating calculated interaction among anti-rent seeking federal coalition parliamentarians. Federal opposition to rent-seeking could be discreetly conveyed by ALP and coalition federal MPs supporting the Gillard government expeditiously *transitioning to an ETS by immediately repealing the carbon tax. Pro-Gillard ALP Victorian state MPs could reciprocate by subtly conveying their intention to support the Baillieu government against any no-confidence vote before the next state election in 2014 in return for Liberal support a federal repeal of the carbon tax.

(*Admittedly, time frames for anti-rent-seeking inter-party alliances are difficult to establish in the context of a 2013 federal election. Nevertheless, inter-party rent-seeking alliances are still intact and on course to pre-determine the outcome of the 2013 federal election in a way similar to the 2007 and 2010 federal election results. The pressing red button area of concern for the Gillard and Baillieu governments will be that of GST clawbacks and/or pressure to increase that tax).

If Malcolm Turnbull was to return as Opposition Leader then the scope to prevent the infliction of a rent-seeking agenda would substantially increase. Indeed, a Malcolm Turnbull reinstatement as federal Liberal leader could mark a final end to the sabotaging public policy paradigm of ‘economic rationalism’ (sic) that Australia has been confronted by since Hawke was elected prime minister in 1983.

Will Australia Ever Be Free of ‘Economic Rationalism’ (sic)?

In relative fairness to the neo-economic rationalist government of Howard and Costello government (1996 to 2007) the ill-effects of this public policy were alleviated by its stupendous achievement of paying off Australia’s massive public foreign debt and inherited budget deficit. The re-accumulation of public foreign debt by the Rudd government signified a return to the economic vulnerability of the Hawke-Keating that is necessary to establish a rentier state.

The total failure of the MRRT to secure any revenue is reflective of destructive public policy (economic rationalism/rent-seeking) being re-applied. In the current context the infliction of this carbon tax is already causing a decline in disposable income and driving up power bills. Indeed, higher power costs are creating price pressures which will eventually cause higher unemployment and higher inflation by the second financial quarter of 2013.

The impact of the carbon tax in precipitating electricity price rises is already undermining the viability of smaller electricity providers with the potential to facilitate lower carbon emissions due to technological innovation. This dark irony of this trend is reflective of the counterproductively tragic consequences of contemporary public policy facilitating a shift in economic and political power to a select elite as a consequence of the infliction of the carbon tax.

Similarly crucial to the establishment of a rentier elite is general control over electricity power generation and distribution. It is in this vein that inherent caution is warranted with regard to current proposals that the federal government ‘deregulate’ (sic) electricity prices by having the state government owned electricity generation power plants privatized. The federal government has advocated this ‘deregulation’ (sic) on the basis extra Commonwealth funding (‘gold plating’) for privatized electricity will facilitate discounts for consumers during off-peak periods.

As laudable as the objective is of lower electricity prices is, the eventual reality of privatization in this sector could well be a de facto monopoly by a narrow range of private corporations with the capacity to set prices as they see fit. This canvassing of electricity ‘deregulation’ (sic) by Martin Ferguson, the Federal Minister for Resources and Energy is symptomatic of the socio-economic impact of the carbon tax: advocating solutions to problems caused by this tax which actually facilitate a rent-seeking agenda.

The higher electricity prices that a carbon tax is causing are consequently legitimising attempts to establish a private corporatist monopoly in the electricity sector. What regulatory price restrictions will be in place to prevent privately owned electricity companies from charging exorbitantly high rates? This is a rhetorical question which does not need be dignified by an answer. Higher electricity prices will in turn provide further impetus for *mining companies to be granted Liquefied Natural Gas (LNG) exploration and acquisition rights on prime agricultural land across Australia.

(*Major mining companies such as BHP-Billiton supposedly support a carbon tax on the basis that by paying this tax legal protection from being sued as a major polluter is obtained. However, it is more plausible that the ‘benefits’ of the carbon tax for BHP-Billiton are that of creating an over-dependence on mining at the expence of the agricultural, manufacturing and service sectors of the economy).

This onset of a rent-seeking agenda would be a challenge to any Australian prime minister determined to be an independent political actor. This is the case with regard to Julia Gillard who is currently doing well in opinion polls as the preferred prime minister. The overriding reality is that the Abbott led Liberals will still win the next federal election in a landslide as a result of the terrible consequences of the carbon tax taking effect by the second quarter of 2013.

Nevertheless, it is an amazing accomplishment of Prime Minister Gillard’s that in courageously fending off attempts to depose her she has won public support due to widespread admiration for her personal *courage and tenacity in the face of adverse odds. However, Abbott knows that he can lose most of his battles against Prime Minister Gillard and still win the war at the next federal election as a result of the adverse impact of the carbon tax been apparent by the second quarter of 2013.

(*Hopefully, Prime Minister Gillard after asserting personal strength will continue to show respect to all people thereby avoiding the trap that Paul Keating fell into where he consolidated his personal arrogance as a result of his fleeting political ascendancy).

The current paradox of Australian politics is that rent-seekers within the two major parties are allowing the Gillard minority government to last so that the Abbott Liberals can win the next federal election due to the ill-effects of the carbon tax. This tax was designed by particular Canberra bureaucrats who moved from Treasury to the Department of Climate Change (i.e. rent-seeking). Just as such bureaucrats astutely designed the GST in the 1990s they have successfully engineered the inflationary impact of the carbon tax to take effect over a longer period of time so that the Labor government will metaphorically ‘dig its own grave’.

Abbott Transforms Australia as Opposition Leader in Order to Become Prime Minister

As Opposition Leader, Abbott has already played a long game with regard to winning power. He has previously undermined the nation’s socio-economic fundamentals by engineering the necessary dynamics to introduce the carbon tax. This reality was reflected by his calling for a plebiscite on such a tax at the time of its parliamentary passage in November 2011.

Abbott knew at the time of the November 2011 parliamentary vote that his avowed advocacy of a plebiscite would discredit another individual whose name had been blackened for genuinely advocating a popular vote on the carbon tax. Furthermore, parliamentarians on an inter-party basis conveyed their contempt for this individual by wearing a yellow and black badge with the question, ‘Are You Ok?’ The wearing of this badge by coalition MPs denoted their underlying support for the carbon tax.

While the carbon tax is not a dud tax it will still have a tremendously negative impact on the economy which will be apparent by the second quarter of 2013. The underlying objective of the carbon tax is to undermine the secondary services sector of the economy by causing price rises as a result of higher power costs so that there will be an overdependence on the mining sector dominated by the five big mining companies with special links to the PRC.

The inflationary and jobs destroying ramifications of the carbon tax will be crucial in driving millions of ALP supporters to the coalition or a Lasch type political operation such as the purported Democratic Labor Party (DLP). Rent-seeking elements within the ALP believe that they can adapt to the economic changes that the carbon tax will precipitate by ‘regionalization’ (sic) creating new local government bailiwicks in which they will have concentrated political power.

However, whether the above cited reconfiguration of Australian political structures occurs from the perspective of the Abbott Liberals will be an optional extra. Just as the MRRT’s abysmal failure to raise any revenue should serve as a warning to rent-seeking elements within the ALP that what they anticipate occurring will not necessarily transpire, they should similarly be aware that the dividends of ‘regionalization’ (sic) might not come their way.

Indeed, instead of facilitating ‘regionalization’ (sic) the challenge for an Abbott rent-seeking Liberals after winning government in a landslide in 2013 will be to subsequently apply a Lasch strategy to con former Labor voters to stick with either the coalition parties or a Lasch type political party. This will be a difficult but not insurmountable challenge because there are accomplished political operatives within the coalition parties who will be able to effectively apply a Lasch strategy.

Victorian Liberal Senator Mitch Fifield has an excellent on the ground network amongst small to medium business which will communicate the adverse impacts of the carbon tax. The negative impact that this tax is already having is not being adequately communicated by Abbott despite his attacks. Nevertheless, the federal Opposition Leader knows that time is on his side that the carbon tax will eventually hit hard by the second economic quarter of 2013.

Therefore the current Abbott political weakness of the carbon tax’s lack of apparent negative impact in 2012 will become a great political strength in the following year. Similarly, even though the Gillard government is a minority one this vulnerability can be converted into a strength.

If there are federal coalition MPs who are prepared to support an immediate transition to an ETS, Abbott would not be able to stop it. Although it will ultimately be in the interests of the ALP to quickly break with the carbon tax there will be selfish Labor rent-seeking diehards who will refuse to. An important reason why rent-seeking ALP politicians will continue to support the destructive carbon tax will be their expectation regarding the onset of ‘regionalization’ (sic).

Abbott will undoubtedly ‘talk the talk’ with regard to denouncing the carbon tax for causing a contraction in living standards and as prime minister he will have an array of political operatives who will be able to effectively apply a Lasch strategy to ensure that the ALP remain in opposition. That will not be that difficult because the adverse effects of the carbon tax in causing unemployment, precipitating high inflation, discouraging foreign investment and depressing business activity will alienate millions of Australians from the ALP for a generation.

Due to the MRRT being the dud tax that it was predicted to be as a revenue raiser there is now the prospect (but not an inevitability) that Sovereign Wealth Funds (SWFs) will not be utilized as a driver of economic power and allocation of resources between the rent-seeking elements within the coalition parties and the ALP. The probable negation of SWFs now calls into question whether *‘regionalization’ (sic) will still be implemented by an Abbott government because a major determinant for inter-party rent-seeking facilitation has possibly been fatally undermined.

(*Nevertheless, there is still the strong prospect for ‘regionalization’ (sic) being undertaken should the Baillieu government in Victoria fall).

The question therefore emerges as to what can be expected from an Abbott rent-seeking government? Such a government will undoubtedly abolish the carbon tax (which a decimated ALP would be very foolish to oppose in the Senate) and drop the MRRT. The dropping of the MRRT will probably be counteracted by an Abbott government hypercritically declaring that the ill-effects of super-profits taxation on the mining sector necessitate the abolition of state mining royalties to create a broader investor base. This is a plausible scenario because Abbott’s previous role in covertly facilitating a *super-profits taxation regime was previously undertaken to ensure that state based mining royalties were abolished.

(*It was interesting to note that the opposition federal Treasurer Joe Hockey initially denounced the Gillard government for moving from an extensive RSPT to the MRRT even though his party was supposedly opposed in principle to super-profits taxation for the mining sector.

Similarly, the federal Deputy Opposition Leader Julie Bishop went against her party’s traditional pro-states position- which is particularly strong in her Western Australian branch of the Liberal Party- by criticising the Gillard government for scrapping the so-called ‘hospitals agreement’ under which there would have been a clawback of GST revenue from the states!

All in all, the pursuit of a rent-seeking agenda by some senior Liberals gives rise inconsistencies which are possibly reflective of a detrimental agenda which is actually at variance with the Menzies tradition. This socio-political tradition opposes having an economic system configured where one section of society benefits at the expence of the majority, or anyone for that matter).

Rent-Seeking Now Threatens Australia’s Vital Agricultural Sector

Abolition of state mining royalties under an Abbott government would be in line with moves to transfer responsibility for the granting of exploration rights on agricultural properties from the states to the Commonwealth. This transfer will undoubtedly be couched in terms of protecting farmers from coal seam gas exploration but Abbott has a particular skill in saying the opposite of what he intends to facilitate outcomes that he is avowedly opposed to.

The infliction of the carbon tax is already setting the scene for the Commonwealth’s (mis) appropriation of responsibility for granting mining rights on agricultural properties. Coal seam gas exploration is already being promoted by the mining companies as a cheaper and cleaner energy source to coal. This may be so but the actual agenda of the big mining companies is to secure a virtual monopoly to undertake mining any where in Australia.

The special links that the five mining* companies have to the PRC will be a conduit for the creation of a new rentier regime in Australia which an Abbott government will be at the forefront in establishing. Abbott will similarly ‘talk the talk’ with regard to safeguarding Australian farms against being displaced by agribusinesses that have links with a currently mercantilist PRC.

(*These mining companies are: BHP-Billiton, Rio Tinto, Xstrata, Gina Rinehart’s privately owned Hancock Prospecting and Clive Palmer’s privately owned Mineralogy).

However, a sufficient number of coalition MPs unfortunately voted with the government to allow ‘wheat deregulation’ that the interests of farmers in the eastern states may have be fatally undermined in the long term. It is noteworthy that Abbott and his deputy Julie Bishop ostensibly opposed the wheat deregulation bill but it still went through. As prime minister, Abbott government the Liberal leader will probably ‘talk the talk’ to placate adversely affected communities, such as farmers, while their interests are undermined in favour of rent-seeking elements within the coalition which have links to PRC SOEs.

The GST and Rent-Seeking Facilitation

Because an objective (which goes against the Menzies tradition) of an Abbott government will be to gain control of economic resources for a political elite the interests of states must first be undermined. This will occur because states have institutional structures which are blockages with regard to a rentier elite dominating the economy. It is therefore not surprising that Griener is now advocating that either the 10% GST rate be increased or that the base of this tax be increased.

The GST by its nature as a consumption tax is inherently regressive. However, the GST in the Australian since its introduction in 1999 has been an effective tax in that it created a substantial non-inflationary revenue stream. Australia’s enhanced fiscal position that was derived from the GST was consequently utilized by the Howard government to increase social spending, thereby substantially negating this tax’s potentially regressive impact.

For John Howard another dividend of the GST was to utilize its application to undermine the financial viability of states. His centralist government was initially seemingly generous towards states in that GST revenue went to them. However, had the Howard government won re-election in 2007 it undoubtedly would have commenced the process of GST clawback as a means of dismembering states.

As it was, the Rudd government commenced this anti-states process in early June 2010 with the so-called ‘Hospitals Agreement’. Under this arrangement states in essentially forfeiting their responsibility for hospitals ceded a substantial amount of GST revenue to the Commonwealth. Had the Rudd government continued in office this process of fiscally dismembering states probably would have continued in keeping with that government being a transitionary cipher in regard to establishing a rentier state.

It is therefore interesting to note that as Prime Minister Gillard courageously scrapped the so-called ‘Hospitals Agreement’ in 2010 that she almost simultaneously announced the introduction of a carbon tax. The symmetry of this announcement was undoubtedly a concession to rent-seekers within the ALP, such as Treasurer Wayne Swan, so that a rent-seeking could be achieved by other means.

For all the progress that the ALP have made in government as a result of Julia Gillard becoming prime minister in June 2010 an overriding rent-seeking agenda is still in place. This is not surprising because rent-seeking elements within the coalition facilitated the ALP’s federal election victory in October 2007 to lay the current foundations for a rentier state.

Why Rent-Seeking is Un-Australian

The deeper underlying cause over the attempts to establish a rentier state are related to the pursuit of the objective of Australia being domestically weakened so that control over the nation’s natural resources can be gained by a local elite with connections to overseas trading interests. This threat has always been there since before federation in 1901. However, the nation’s political economy has usually been conducive to a socio-economic balance been achieved in which Australia’s domestic economy has been sufficiently strong to generate both high levels of employment and maintain the nation’s trading position.

The onset of so-called ‘economic rationalism’ of the Hawke-Keating era (1983-1996) saw a dangerous undermining of the nation’s economic capacity as a result of steep tariff cuts, accumulation of a high public foreign debt and an infliction of a high interest rate regime in the 1990s. The ramifications of this era still afflict Australia with regard to institutionalized high levels of casual employment.

As grotesque as the industrial relations policies of the Howard-Costello era were, at least the coalition government paid off Australia’s high public foreign debt and created a new non-inflationary GST revenue. These economic accomplishments of the Howard-Costello government established the settings to reap the benefits of the ‘China mining boom’.

It was perhaps too much to expect that so-called ‘economic rationalists’ (sic) within the two major parties would not attempt to reconfigure Australian politics to their inherent economic and political advantage. The circumstances of how and why the Howard government was brought down in 2007 have been detailed in previous Social Action Australia articles as have the federal ALP government’s struggle to be independent from a rent-seeking agenda.

However, Australia is really at the cross roads of whether the nation will break with the self-sabotaging ‘economic rationalist’ (sic) approach which can no longer be indulged due to the phenomenon of the Global Financial Crisis (GFC). A point has to be reached where prominent ‘economic rationalist (sic) media commentators such as The Australian’s Paul Kelly should end their mantra of the need for the nation to be more internationally ‘competitive’.

If the reforms of the Hawke-Keating era were so successful, as Kelly claims, surely there is no more need for further economic reform. Indeed, as previously argued in Social Action Australia that era of Labor government was detrimental to the nation due to the high levels of public foreign debt that were accrued, the undermining of local manufacturing and the transition away from full-time employment. Australia’s rural sector was also undermined during this period by the Hawke and Keating governments which seemed to revel in weakening the nation’s economic capacity by claiming that harsh reform would be of benefit in the long term.

It is therefore not surprising that Hawke’s former economic advisor Professor Ross Garnaut has used his prestigious credentials to endow the carbon tax with a credibility that it does not deserve. To be candid, Professor Garnaut’s role in designing and advocating the carbon tax is reflective of the hallmarks of the Hawke/Keating era: politicians and public servants defending public policy which undermines the nation’s economic capacity and then calling for further counterproductive ‘deregulatory’ reform to supposedly counter the self-inflicted economic harm.

In the context of the GFC Australia simply cannot risk persisting with the carbon tax. The abysmal (but pathetically predictable) failure of the MRRT to raise any revenue at the very least means that the federal government cannot afford to finance the payment of compensation packages for this terribly unnecessary impost. The high levels of foreign debt that are currently being accrued to finance carbon tax compensation will be compounded by the onset of high levels of unemployment by the third economic quarter of 2013.

The scenario which now confronts Australia as a result of the carbon tax is that of a high interest rate regime to finance the public foreign debt, cheaper manufactured imports from the PRC undercutting Australian manufactured products due to the costs of this tax and the interests of farmers been sacrificed by forcing them to make way for coal seam natural gas exploration undertaken by the five select mining corporations. A potential dividend for rent-seekers with regard to the granting of LNG exploration rights could well be the undermining of the traditionally privately owned Australian farms by PRC SOE backed agribusinesses.

Why Are The Greens Supporting the Carbon Tax?

A galling aspect of the above cited scenarios is the role of the Australian Greens in promoting the carbon tax. Do the Greens not understand that by the carbon tax bolstering the power of the select five mining companies that the way is being cleared (no pun intended) for them to dominate the Australian economy?

The Greens could have forged an alliance with rural Australia by defending farmers against the five mining companies gaining control of their land. Instead the Australian Greens’ support of a carbon tax is leading to a situation where miming companies under a rent-seeking coalition government will be able to mine any part of Australia at will due to the nation being so economically vulnerable.

Future protests against mining will not be viable due to the nation’s economic precariousness. Indeed, most Australians will probably despise the Greens for their role in having foisted a carbon tax on the nation when an Abbott government astutely applies its Lasch strategy.

Already, the signs of the Australian Greens’ demise are there. The next federal election will be polarizing that once stalwart Labor voters will shift to the coalition, or a Lasch type satellite party, while hard-left voters will transfer their support away from the Greens to try to save the ALP. The Australian Capital Territory’s *(ACT) recent October 2012 election results are an indicator, or a harbinger, of such a future political re-configuration.

(*It is amazing that in a pro-Labor bastion such as the ACT and that with the prospect of a probable Abbott civil servant retrenching government that the Liberals did so well. This was probably due to the ACT Liberals as a foretaste of ‘regionalization’ (sic) campaigning as the ‘Canberra Liberals’. The grass roots campaign that the Liberals ran might have resulted in their winning the ACT elections had Australian Greens voters not deliberately transferred their votes to the ALP).

The tragic irony for the Australian Greens is that there is a genuine concern in the electorate for the environment which they could successfully harness to remain politically viable and even expand their support beyond the hard left. The truth is that the Greens would not now be in as strong a position as they currently are in the Senate or having a House of Representatives seat if it were not for Liberal Party preferences.

Rent-seeking elements within the Liberal Party have preferenced the Greens to help establish a rentier state, the most outrageous manifestation of this dividend being reaped was this party (i.e. the Greens) voting against an ETS in the Senate in early 2010. If the Greens were really ‘green’ they would have supported an ETS as opposed to an economically and socially destructive carbon tax.

Perhaps Greens Party stalwarts such as their former leader Bob Brown still really believe that SWFs can still be utilized despite the gross ineffectiveness of super-profits mining taxation. It is probably for this reason that the Greens are advocating the introduction of an RSPT despite the recent MRRT debacle. Ultimately it does not really matter because the Greens will be consigned to the political scrapheap for collaborating with the Abbott Liberals by helping compel the ALP to foist a carbon tax on the nation.

Even though the Australian Greens will eventually be too reviled to be a part of the power structure of a rentier state does that necessarily mean that most Australians must suffer by living in such a future political economy. The rent-seeking strategists in the two major parties should be aware that Australians will eventually not take kindly to their living standards being diminished by a self-serving elite.

Alas for the ALP and the Greens the Abbott Liberals will apply a Lasch strategy to ensure that they electorally suffer for imposing the carbon tax on the nation. However, domestic political considerations will eventually count for little in a rentier state because a mercantilist PRC will become the predominant power in a rent-seeking Australia.

Will the PRC Continue on the March Toward Mercantilist Destruction?

Crucial to the establishment of such a rentier elite will be a trade dependence on the PRC and engineering special political links between Beijing and Canberra. There is however an inherent risk in warning of the dangers of PRC economic (and possibly political) domination of Australia of being accused of *racism. It should therefore be pointed out that the whistle-blowing with regard to a China rent-seeking connection is derived from the aversion to the ‘top-down/win-lose’ nature of the PRC’s Marxist-Leninist mercantilist political economy.

(*The Greens Party senators previously gained a high profile by advocating the release of David Hicks, a one-time detainee at the Guantanamo Bay American naval base in south eastern Cuba who had previously fought for Al-Qaeda in Afghanistan. It is interesting to note that the Australian Greens have done nothing publicly to advocate the cause of Stern Hu. He is a Chinese born Australian citizen who is serving a ten year sentence since 2010 for allegedly trying to pay a bribe to the Chinese government on behalf of his then employer, Rio Tinto. Whether Stern Hu received a fair trial is an open question to say the least).

The leadership succession undertaken at the Chinese Communist Party’s (CCP) November 2012 eighteenth party congress in Beijing was noteworthy because it marked the accession of a new national leadership. Will this new leadership allow mercantilism will destroy China or engineer a transition to a mixed economy that will guarantee national unity? Despite western media attempts to endow the party congress pre-deliberations and its proceedings with a degree of drama the selection of party leaders to be ‘elected’ at the congress was pre-arranged. The real question concerning the 18th CCP Congress is not the leadership that was installed but its future effectiveness.

The PRC’s outgoing leader *Hu Jintao (1942- ) in his address to the party Congress warned that corruption to, is a long-term threat to viability of the CCP. There is extensive scope for corruption within the CCP because in contrast to the unlamented Communist Party of the Soviet Union (CPSU) the China’s ruling party has accommodated a range of massive financial concerns (i.e. SOEs) within its official leadership structures.

(*Hu has held the positions of CCP General Secretary and President).

A contemporary Trotskyite would therefore undoubtedly refer to the CCP as a prime example of a state capitalist revisionist deviation from ideologically correct Marxist-Leninist Party. However, the CCP is a formidably functioning ‘top-down’ Leninist vanguard party which in essence is the vehicle that currently maintains Chinese national unity. The accommodation (or co-option) of different power groups within a CCP framework is both a strength and potential weakness for the ruling party.

The major strength of the CCP’s reach (in contrast to the defunct CPSU) into the private sector is that it provides the ruling party with the necessary co-ordination capacity to help engineer a higher general living standing commensurate with the PRC being an economic super-power. Alternatively, the potential weakness of the CCP’s current model of domination is the inherent danger of massive corruption eventually destroying national unity. This threat exists due to the absence of an institutionalised separation between party and state.

Neo-Confucianism: Government with Stability and Honesty

Separation between the state and society as envisaged by the great and practical Chinese philosopher Confucius (551-479 BC) as a source of national unity. The Chinese nation under the Confucian model was subsequently usually strong and united when governed by an honest and respected statist bureaucracy which was selected by examination.

There was always a danger that state bureaucrats (Mandarins) becoming corrupted by proximity to a ruling imperial family’s court. When this occurred the public could become emboldened to support a transition (which was often a violent and protracted process) to a new dynasty if the preceding one was perceived to have lost its ‘mandate of heaven’.

Paradoxically the palace courts of ruling Chinese imperial dynasties often had a vested interest in being relatively honest in order to perpetuate their rule. A manifestation of an imperial dynasty’s virtue was the degree to which it respected the nation’s merchant class. Merchants were usually prepared to give an imperial dynasty their allegiance (an important manifestation of which was the regular paying of taxes) in return for respect for their property rights. Recognition of property rights denoted protection against corrupt and arbitrary rule.

The rights of all imperial subjects under the Confucian system were supposedly upheld by honest magistrates who were akin to activist local government Mandarins. Due to rulers deriving their legitimacy under the Confucian model from their virtue, civil rule was to be the norm in which the military abstained from politics. Involvement of the military in directly ruling the country was often perceived as a weakening of the state as a faltering imperial dynasty resorted to force to maintain its position. Normatively, under the Confucian system, the military was suppose to be apolitical but focused on national defence and possible national territorial expansion.

The effectiveness with which an imperial dynasty applied the Confucianist system could often be measured by the artistic talent of a particular era. This was indicative of palace courtiers and imperial family members refraining from mis-government and corruption to effectively utilize their leisure time and private resources. It is therefore not surprising that two of China’s greatest dynasties, the *Tang (618-907 BC) and the Ming (1368-1644 AD) were renowned for their artistic output and major contributions to the development of Chinese Han culture.

(*The impact of the Tang dynasty was such that it profoundly influenced the development of Japanese culture).

That is not to say that the Ching dynasty (1644 to 1912) was not influential with regard to Chinese art and culture. Indeed, the paradox of this non-Han imperial dynasty was that in conquering China was that the ‘ruling’ Manchu people were profoundly transformed by Chinese culture and Confucian inspired power structures that it was they who were arguably *conquered.

(*Egypt’s Ptolemy dynasty is perhaps the most prominent example of a conqueror being transformed by the conquered. This dynasty’s Macedonian origins were Hellenized by Alexander the Great’s conquest of ancient Greece. Ptolemaic rule (305 BC to 30 BC) of Egypt commenced following the division of the Alexandrian empire amongst the late founder’s generals.

The adoption of local religion, rituals and philosophy by the Ptolemy family ended the sense that many Egyptians had of there being under foreign Hellenic rule. Nevertheless, due to family in-breeding and use of ancient Greek as the court language the Ptolemys were separate from broader Egyptian society. However they were no different from preceding dynasties which were separate from everyday people because royalty was then officially classified as divine.

The most famous Ptolemy was undoubtedly Queen Cleopatra VII (69 BC to 30 BC), who was the first of her dynasty to speak Egyptian in addition to ancient Greek. By shrewdly aligning Egypt with the Roman general, Mark Antony (83 BC to 30 BC) Queen Cleopatra VII almost conquered the Roman Empire. Had the Egyptian Queen not panicked at the naval battle of Actium in 31 BC then a culturally Egyptian dynasty might have ruled over the Roman Empire).

The Tragic Personal Determination of China’s Dowager Empress Tzu Hsi

The paradox of the Ching imperial dynasty was that in adapting to Chinese culture and applying the Confucian system the Manchus were able to effectively unite and govern China. However this dynasty lacked the framework or breadth of vision to successfully fend off European encroachment of following the Anglo-Sino War of 1839 to 1842. An important contributing factor to the fall in 1912 of the Ching dynasty was the contradictory impact of its last important ruler, the Dowager Empress Tzu Hsi (1835-1908).

Her Imperia Majesty’s stubborn determination helped keep China together despite European and Japanese imperialism weakening the Chinese empire. However, this personal determination of the Dowager Empress’s also underpinned Her Imperial Majesty’s hostility toward adopting and applying western ideas to a Chinese context. When Tzu Hsi did belatedly undertake reform following the abortive Boxer Rebellion of 1900 it was not actually a case of too little, too late but rather that of the imperial court lacking the capacity to undertake effective reform because of the previous purge of reformers in 1898 following the Dowager Empress’s coup against her nephew, the subsequently detained Emperor Kuang-Hsu (1870-1908).

The major architect of the abortive so-called ‘One Hundred Days’ Reform was the Cantonese scholar K’ang Yu-Wei (1858-1927) who fled abroad into exile following the Dowager Empress’s 1898 coup. It often forgotten or overlooked that K’ang’s émigré organisation, ‘Protect the Emperor Society’ was probably more important than Sun Yet Sen’s (1866-1925) republican Revolutionary Alliance in opposing the Dowager Empress’s regime.

General Yuan Shi-kai’s Treason Leads to National Disintegration

The imprisoned Emperor Kuang–Hsu would not have previously fallen in 1898 had General Yuan Shih-k’ai not betrayed His Imperial Majesty by crucially supporting the Dowager-Empress’s palace coup. Indeed it was probably this traitor who had the imprisoned emperor poisoned one day before the Dowager Empress died in November 1908. Inspite of her death, the late Dowager’s testament still posthumously prevailed over General Yuan’s strenuous objections in that the late Emperor’s nephew Hsuan-Tung (Pu Yi, 1906-1967) became the new monarch with his father Prince Chun (1883-1951) acting as regent.

The new regent and the late Emperor’s widow, the Empress Dowager Long – Yu (1868 to 1913) promptly secured their positions by dismissing General Yuan Shih-k’ai as commander of the Peyiang army and exiling him to his home village. The late Emperor’s request that General Yuan be executed was disregarded by the two regents to avoid unnecessary political turbulence.

General Yuan’s dismissal created a vacuum which could have been filled by the Prince Regent reconciling with K’ang’s ‘Protect the Emperor Society’ by forming a cabinet pre-dominantly composed of its members. This did not occur due to opposition from the new Dowager Empress Long-Yu because Her Imperial Majesty represented the interests of courtiers who had supported and/or benefited from the 1898 coup.

The persecution of the ‘Protect the Emperor Society’ was ended by Prince Chun, who appointed a small minority of its members to high office but they in no way constituted a power faction. The imperial regents therefore forfeited a golden opportunity not only to have saved the dynasty but to have maintained national unity.

Nevertheless, the attacks made against Prince Chun’s rule and the associated inaccurate ridiculing of His Imperial Highness’s character obscure the fact that he still endeavoured to establish a constitutional monarchy. However the Prince Regent was in a race against time in which His Imperial Highness’s promise to introduce responsible parliamentary government by 1917 alienated court reactionaries as too great a concession and reformers as too late.

The October 1911 Revolution was one of those peculiar revolutions where only a slight nudge was needed to bring about regime change. The 1911 Revolution was no where near as formidable a threat to the Ching dynasty as what the nearly fifteen year long Taiping Rebellion of the 1850s and 1860s was. The success of this republican revolution was mainly due to General *Yuan’s betrayal of the dynasty by ostensibly defecting to Sun Yet-sen inspired rebels.

Furthermore, the long held fear of many ethnic Manchus that they would be slaughtered by Han Chinese in anti-dynasty uprising influenced powerful courtiers to peacefully make way for a republic. Indeed, the Chinese republic which was established in February 1912 with the traitor *Yuan Shih-kai as the first president was done so by imperial decree.

(*General Yuan had been foolishly recalled as Peyiang army commander and made prime minister by the Dowager Empress Long-Yu to crush the republican revolt. Her Imperial Majesty had become sole regent as a result of the traitor general’s insistence that Prince Chun be removed from power as a condition of his agreeing to defend the Ch’ing dynasty).

From A United Imperial China to Republican Anarchy

While the Revolution of 1911 was essentially a tale of a temporarily avoided civil war the real achievement of the Chinese Republic was that it since survived. This was because the republic was merely intended by the traitor Yuan to be an interregnum between the Ching dynasty and a new imperial dynasty with himself as the new founding emperor. Ironically there would have been more support in China for a constitutional monarchy under a hypothetically reinstated Ch’ing dynasty in 1915 than for a new absolute monarchy that Yuan’s unsuccessfully tried to establish that year.

That General Yuan would betray both the Ching dynasty and the new republic should was not that surprising considering his deficiencies of character. Indeed, the tragedy of General Yuan Shih-kai was that he could have had an honoured place in Chinese history had the newly pro-Sun Kuomintang (KMT, Nationalist Party) been allowed to form government after winning the predominately middle class voting national elections that were held of 1913. The later formation of the Progressive Party among non-KMT parliamentary parties was also the story of a forgone golden opportunity for China to have had a viable two-party system which paradoxically could have helped guarantee national unity.

A united and peaceful China during and after the First World War (1914 to 1918) would have helped recover German and Russian territorial concessions, thereby establishing a stronger Chinese position at the 1919 Versailles Conference to have had the unequal treaties terminated. Instead the weaknesses of the Chinese republic upon Yuan’s death in June 1916 were such that by 1920 the authority of the central government was more fictional than actual.

Leninism Enters The Fray to Re-Unite China

The effective disintegration of national unity provided Communist Russia with a golden opportunity from the early 1920s to assert its power and influence in a weakened China. This was primarily achieved by the Comintern (a Moscow based agency which then co-ordinated the activities of communist parties around the world) to re-organise the KMT along Leninist lines while establishing an aligned CCP. Indeed, a notionally re-united China in 1928 was ostensibly ruled by the KMT under an anti-communist Leninist, Generalissimo Chiang Kia-shek (1887 to 1975). He seized the party leadership in April 1927 as he violently broke with the communists in the port city of Shanghai.

China being ruled by Chiang as a militarist operating in close alliance with the financial interests of his in-laws the Soongs was a violation of the Confucian model that the nation be ruled by honest virtuous civilians. In relative fairness to Chiang, most new dynasties were initially ruled corruptly out of necessity by military leaders who later became emperors.

Perhaps, the Generalissmo might have gone through the authoritarian interregnum that Sun Yet-sen envisaged as a necessary prelude to a republican democracy. This might have been the post-1945 World War II reality for China had Chiang eliminated the massive corruption within his ranks as his regime received massive war-time financial and military aid from the United States between 1942 and 1945.

Therefore an important reason why Chiang lost the Chinese Civil War (1946 to 1949) was because of internal corruption, hyper-inflation and consequently overwhelmingly middle class support for the CCP. These aforementioned have been overlooked by too many non-Chinese historians who have accepted the Maoist orthodoxy that the support of the peasantry won the civil war for the CCP.

However the above contention is contestable on the basis that high levels of peasant support from the late 1920s for the CCP while making this party a national contender for power were insufficient to ensure the complete communist victory that was achieved on the Chinese mainland by late 1949. Crucial to this communist *victory was that the financial wizardry of the Chiang in-laws, T.V Soong and H.H. Kung going awry after the Second World War as hyper-inflation set in.

(*Comprehensive communist infiltration of the ranks of Chiang’s National Revolutionary Army, NRA, was also a crucial factor in facilitating communist victory).

Probable then Chinese middle class majority support for the CCP was reflected by the boycott of staggered parliamentary multi-party *elections that were held in 1947 and 1948 under the Republic of China’s (ROC) 1946 constitution. The effectiveness of the election boycott was indicative of the popular support for the CCP aligned China Democratic League and the KMT Revolutionary Circle.

(*It was ironic that this discredited National Assembly provided Chiang’s continuing government on Taiwan with a constitutional claim to still rule all of China while negating the need for his regime to democratise on the island province.

The Chinese Nationalist regime on Taiwan was a concealed reality within a concealed reality. Under the 1946 constitution the ROC on Taiwan was supposedly a multi-party democratic republic. In fact the post-1949 ROC was really a one-party state where the underlying reality was covert control by the military as opposed to the single ruling party.

Under the exceptional leadership of Chiang’s son and successor Chiang Ching-kuo (1910-1988) and his canny, if at times duplicitous, successor Lee Teng-hui (1923- ) the ostensible forms of ROC democracy eventually became realities. Chiang Ching-kuo established the groundwork for and Lee, who served as president between 1988 and 2000, to engineer: democratic elections, an independent judiciary, civilian control over the military and a free press.

The above cited accomplishments did not, despite a period of opposition between 2000 and 2008, destroy the KMT which is still the ROC’s ruling party. Furthermore, the KMT successfully divorced itself from a corrupt state sanctioned sector to remain the world’s wealthiest political party. That the incredible wealth of the KMT did not become a source of party splits was this party brilliantly converted itself from being a Leninist type party into one that is more organisationally akin to Japan’s Liberal Democratic Party (LDP), which is still powerful despite being currently in opposition).

It would seem strange that there could be middle class staunch support for CCP aligned parties. However middle classes are usually alienated when they are economically insecure and their property rights are imperilled. Hyperinflation and post-war carpet bagging by senior KMT officials disillusioned most middle class Chinese many of whom were re-assured by CCP discipline which they often equated with financial probity and predictability.

In the period between 1949 and 1954 the middle class (the ‘patriotic bourgeoisie’) genuinely participated in government via its nominated representatives meaningfully serving on the Chinese People’s Consultative Conference (CPCC). During this five year period, which was arguably the PRC’s golden age, many CPP cadres received training in the Soviet Union.

Correcting Internal Contradictions: The CCP Politically Eliminates the ‘Patriotic Bourgeoisie’

With a sufficient critical mass of Soviet trained cadres the CCP in 1954 essentially dispensed with the sharing of power with the patriotic bourgeoisie to rule China on bureaucratic Soviet style Leninist lines. This shift was reflected by the National People’s Congress (NPC) replacing the CPCC, which was in keeping with its name was retained for advisory purposes, as the PRC’s national legislature in that seminal year of 1954.

The adoption of Soviet style five year plans, collectivization and an increasing regimentation of civil society saw the PRC between 1954 and 1958 come as close as it would be to the phobia that many American anti-communists had of China as a slavish Soviet satellite. It was to avoid a Moscow inspired threat to his national leadership that Mao instigated the disastrous Great Leap Forward between 1958 and 1961 to ideologically distinguish the PRC from the Soviet Union. Under the so-called Great Leap Forward too many peasants were diverted from agricultural production to establish home based smelterring furnaces to supposedly facilitate rapid and massive industrialization.

The resulting massive famine resulted in the CCP transitioning to a post-Stalin Soviet style of collective leadership with the nation being effectively led by a triumvirate consisting of President Liu Shao qui (1898 to 1969), Premier Chou En-lai (1898 to 1976) and Deng Xiao-ping (1904 to 1997) who held the position of CCP secretary which was separate from Mao’s post of party chairman. A difference between this Chinese collective leadership which effectively ruled between 1961 and 1966 from the Soviet approach was that the discredited leader (i.e. Mao) was consigned to semi-retirement as opposed to political oblivion and possible death.

During this five year period (1961 to 1966) the nation’s leadership was moderate in a domestic context. Citizens were allowed a degree of latitude with regard to criticising and participating in public policy so long as the power of the CCP was not challenged. The most important post-Great Leap Forward development was an official abhorrence toward ad hoc and erratic policy initiatives. A return to a Soviet approach of central planning instead of precipitating closer relations between Moscow and Peking caused the great Sino-Soviet Split of the 1961.

The thin line between criticism of the Great Leap Forward and affronting PRC national pride was crossed by Moscow arrogantly assuming that the CCP’s acknowledgement that the Great Leap was a horrendous mistake indicated a Chinese willingness to again submit to Soviet policy direction. The Peking-Moscow rift also contributed to an anti-western approach to foreign policy as the Liu, Chou and Deng leadership team was determined to illustrate their ideological bona fides. The most obvious manifestation of this anti-western stance was staunch support for North Vietnam, particularly between 1963 and 1966.

Ironically, the unleashing by Mao of the so-called Cultural Revolution in 1966 saw the PRC’s relatively moderate (in a domestic context) leadership purged. The highest official to escape the purge was Premier Chou En-lai. His survival established the groundwork for President Richard M Nixon’s (RN) to make his historic visit to Peking in February 1972.

Premier Chou could not have helped initiate the beginning of Sino-American rapprochement in 1972 had a planned coup by the Defence Minister Marshal Lin Biao (1907-1971) not been thwarted the year before. Indeed, the so-called Cultural Revolution could not have been initiated in 1966 by Mao without the support of Marshal Lin Biao.

Due to the acquiescence of the People’s Liberation Army (PLA) under Lin’s command the so-called Red Guards, which were mainly composed of youth and university students, undertook wide scale purges of CCP officials and people in any positions of authority such as factory managers and school teachers. The anarchy of the Cultural Revolution was in keeping with the particular Marxist theory of the Soviet Communist Nikolai Bukharin (1888-1938). His approach was the polar opposite of Stalin’s Marxist ideology where proletarian power was facilitated by a ‘democratic’ centralist communist vanguard power exercising strict control.

The People’s Liberation Army Restores Order to Rule Without Governing

Mao tried to generate Bukharinite chaos from below to undertake a Stalinist purge from above of the CCP and then restore strong central control under his absolute rule. The upshot was that by 1967 the CCP had virtually organisationally disintegrated that the PLA stepped in against the Red Guards (who still continued to function) to restore a semblance of order. The irony of the PLA’s intervention was that this seemed to violate the Maoist injunction that the party always control the gun by having a politically subordinate armed forces.

The PLA’s reluctance to directly rule the PRC to avoid potential warlordism was reflected by care been taken by *officers exercised official power under the auspices of a tentatively revived CCP. The greater political role of the military within the CCP was reflected by senior PLA personnel assuming powerful positions at the ninth Party Congress in April 1969 where Marshal Lin was officially designated as Mao’s successor.

(*The term ‘officers’ is awkward when referring to Maoist China because officer ranks were officially abolished during the Cultural Revolution).

The PRC might have become a Communist military dictatorship if Marshal Lin had not been at variance with his fellow senior officers in desiring a rapprochement with the Soviet Union. This was understandably an anathema to the upper echelons of the PLA due to border clashes with the Soviets in the late 1960s. An opportunistic Mao was by now wary of Marshal Lin because the Chairman was very hostile to the Soviet Union. He therefore strategically supported Premier Chou’s advocacy of seeking relations with the United States to check the possible Soviet threat.

The military’s support for Premier Chou’s American initiative allowed Chairman Mao to undermine Marshal Lin who crashed in a plane crash in September 1971 in Outer Mongolia with his wife and son while apparently attempting to flee to the Soviet Union. Marshal Lin’s demise seemed to clear the way for the ascendancy of Mao’s wife Jiang Qing (1914 to 1991) and the so-called Gang of Four which she supposedly led.

The Gang of Four’s ascendancy was really between 1972 and 1976 as opposed to the period between 1966 and 1969 when the full impact of radically generated chaos was felt on China. This was due to the vacuum that was caused by Marshal Lin’s death and because Premier Chou concentrated on administrative affairs. Had the Gang of Four being more able they could have re-established an organisationally coherent CCP through which to rule the PRC. Instead they deluded themselves into thinking that they were all powerful by generating incessant *propaganda.

(*In the early 1970s it was reported that 90% of all printed material in the PRC was either written by or about Mao).

National Strategic Considerations Trump Maoist Ideological Nonsense

The fact that power was not really with the Gang of Four was reflected by their acquiesce to the February 1972 visit of President Richard Nixon (RN) to Peking. RN’s 1972 visit as well as his politically vital private anniversary visit in February 1976 helped convince the senior echelons of the PLA to arrest the Gang of Four within a month of Mao’s death in September 1976. By late 1978 the political power of the military established Deng Xiao-ping as the PRC’s paramount (de facto) leader by late 1978.

As the PRC’s paramount leader Deng’s power was derived from the military supporting him as a problem solver who could rule the nation on their behalf. Such magnamity with regard to ceding power to a particular individual was derived from the PLA’s determination to refrain from directly ruling the nation to avoid a possible descent into warlordism. The military therefore supported Deng organisationally reviving the CCP and ushering in a new party and national constitution in 1982 which stipulated institutional processes that have since ensured that the PRC’s national unity is dependent on an individual leader or a shadowy power group.

The travails and stupendous successes of Deng’s effective leadership of the PRC between 1977/1978 until his death in February 1997 have been detailed and analysed in previous Social Action Australia articles. The major positive achievement of Deng’s rule as is the case with nearly all successful rulers is the creation of a massive middle class.

It is therefore ironic that having coming to power partially as a result of middle *class support, having previously destroyed that class in the 1960s and having revived this section of society that the CCP’s major source of strength and weakness is middle class support. The PRC’s middle class have seemingly entered into a pact with the CCP similar to what the fictional character of ‘Julia’ from George Orwell’s brilliant (if turgid) 1949 novel, ‘Nineteen Eighty Four’.

(*Using the term ‘class’ is difficult due to its Marxist connotations but an alternate term is not readily available).

Similar to Orwell’s character of Julia most members of the Chinese middle class seem to desire personal freedom as opposed to wanting to attempt the seeming impossible of overthrowing the ruling party. The PRC context is more complex and different to Orwell’s conceptualization of totalitarianism in that the CCP as a ruling party does not wish to obliterate capitalism to establish an alternative socio-political system. Instead, the overall objective of CCP rule is to engineer high economic growth rates to help avoid mass poverty and to help maintain national unity.

In analysing the CCP as primarily a pragmatic party it would be very wrong to assume that Marxism as an ideology has been totally jettisoned. Chinese socialism remains ideologically viable and operational in that the Dengist dictum that the state must always supercede the private sector remains in force. This is facilitated by state money going into SWFs and by SOEs covering shortfalls in the private sector to generate employment.

Indeed, mass unemployment has been averted by the state exercising its power by auditing business profit and turnover to engineer the hiring of workers. Such an intrusion of the state into the private sector may seem too heavy handed to non-Chinese. However, considering the liberalisation that has occurred since the Mao era and a widespread fear of general unrest most of the Chinese middle class are generally accepting of the state exercising this degree of socio-economic power.

General middle class acceptance of state power is also derived from the PRC having an adept and powerful bureaucracy that plans ahead of time and successfully administers the state with the particular objective of maintaining a balance between a massive public sector and a still growing private sector. Many PRC sate bureaucrats are the contemporary equivalent of imperial Mandarins in that their power is mainly derived from their technical capacity and respect for their honesty.

The flipside of an authoritarian (or a political system essentially without popular sovereignty) bureaucratic regime is that there are no effective checks against corruption. The statist bureaucratic nature of the PRC’s political economy is conducive to corruption due to a lack of transparency. There is also an acute danger that because SOE executives are becoming too embedded in official CCP power structures that the ruling party could become a crony based political party.

The dangers of corruption fatally undermining the CCP in the short to medium term are remote due to still relatively high state engineered growth rates generating high levels of employment. However, unless transparent corporate business practices are eventually adopted the PRC could have its own form of rent-seeking in which SOEs compete amongst themselves within the auspices of the CCP to gain unfair commercial advantages.

Another possible problem could be that of operatives within SOEs abusing their power to gain unfair advantages over potential private sector domestic rivals. It should be remembered that the chief benefit of SOEs for the PRC is that they can generate employment that might not otherwise exist in a market context. Consequently, it would be horrendous alternate reality if favoured SOEs caused a contraction in employment generation because privately owned companies were ‘squeezed’ out.

In an international trading context there is also the danger of PRC SOEs gaining an undue economic advantage over resource rich nations such as Australia. This could ultimately be counterproductive because domestic economic growth around the world in individual nations is needed to eventually overcome the GFC. If too many nations cumulatively lose their economic sovereignty then the dangers of a global economic collapse eventually encompassing the PRC will increase.

Japan as a trading nation, with the crucial input of the Ministry of Economy, Trade and Industry (METI), has helped ensure that Japanese foreign investment is conducive to domestic economic growth within the nation where investment occurs. This ‘win-win’ approach ultimately benefits Japan by establishing reciprocal supply chains.

The current trajectory of a currently mercantilist PRC is one where primary resource imports, such as Australian minerals, are advantageously being obtained to fuel a powerful statist sector which will ultimately undermine the viability for a needed co-existing market sector of the Chinese economy. It would be a great pity that if the PRC’s two-tier economy - i.e. between a state dominated sector and a predominant privately owned market sector- results in a ‘lose-lose’ scenario due to corruption undermining the former sector.

It is however naïve to expect that the potential cancer of corruption can be expeditiously removed from the PRC’s body politic due to the embedding of SOEs within the CCP and an overall lack of transparency. Indeed, it is perhaps ill-advised that the SOEs ever be phased out due to their importance in generating employment and endowing the PRC’s central government with a co-ordinating capacity to prevent mass poverty and discrepancies in living standards between regions.

No Great Nation Can Maintain National Unity without an Effective Legislative Branch

The 18th CCP Congress of November 2012 was hopefully a milestone marking the commencement of smart and considered approach to socio-economic reform over the next ten years. Nevertheless, without being personally insulting the impending elevations of Xi Jinping (1953- ) and Li Keqiang (1955- ) to the respective positions of CCP General Secretary and premier may not be crucial in driving needed socio-economic and political reform.

The position that may well be the driver of reform could be that of Chairman of the NPC. The probable next occupant of that potentially vital post is the current vice-premier, Zhang Dejiang (1946- ). He will probably become Chairman of the NPC in March 2013. While Zhang will almost certainly assume that position whether he will have a beneficial transformative impact on the PRC remains to be seen.

A General Secretary Xi and a Premier Li can very effectively fulfil their leadership roles but a parallel but non-threatening force in the PRC’s power structure is needed so that clever reform can be undertaken over the next ten years. If the national and provincial legislatures are to fulfil the role of being parallel institutional forces then a very talented and versatile NPC Chairman, which Zhang hopefully will be, will be required.

The fundamental importance of the position of NPC Chairman was first demonstrated by Marshal Ye Jian-ying (1887 to 1986) who held the position between 1978 and 1983. Marshal Ye’s crucial support for Mao enabled him to become CCP leader in 1935 and for all his personal ruthlessness of the future tyrant always appreciated this. The lasting legacy of the Mao-Ye political relationship was that the PLA has always supported the only beneficial Maoist dictum, that the armed forces remain subordinate to civilian authority.

While Marshal Ye was consistently protected by Mao during political turbulence, such as the ‘Cultural Revolution’ (sic), he never partook in any of the excesses of the tyrant’s rule. There were also utilitarian dividends for Mao in protecting Marshal Yi and this was apparent in 1971 when the Marshal enabled the Chairman to withstand a leadership challenge from Lin Biao. It was due to Mao’s sense of personal security that he derived from Marshal Ye’s support that he agreed to Premier Chou’s suggestions that former purged officials, the most notable being Deng, who were associated with the late President Liu Shao-qui be rehabilitated. This occurred between 1972 and 1976.

The broader national dividend of Mao’s trust in Marshal Ye came to fruition less than a month after the tyrant’s death when in October 1976 the Gang of Four were removed in what effectively was a military coup. This military coup was historically unique in that it was backed by government incumbents who had been confronted by the challenge of the Gang of Four trying to rule the nation as a shadowy political force.

Marshal Ye was also exceptional as successful coup leader in that he deliberately fostered a return to civilian rule by supporting a restoration of the CCP’s organisational effectiveness and authority. Due to Marshal Yi’s discreet support senior officials who came from the Liu Shao-qui Group by 1981 had peacefully completed the process of removing Maoists from leading positions. Nevertheless, the potential fault-lines for division within the ruling group emerged due to differences between Deng and Chen Yun (1905 to 1995) over the extent to which market reform should be fostered.

To be relatively fair to Chen he was actually supportive of market reform but this support was qualified by a determination that CCP rule be maintained not only on a national level but at a workplace level. In essence, Chen was intensely wary of an independent civil society emerging as a potential threat to CCP rule and as a possible cause of destructive social instability. Marshal Ye never took sides in regard to the Deng-Chen coalition government as his major impact until his death in October 1986 was to promote harmony within the government.

An important role that Marshal Ye visibly performed was that of NPC Chairman between 1978 and 1982. His appointment to this position in 1978 marked the substantial re-establishment of a national legislature as an important institution whose major impact was to indicate that a reversion to Maoist type chaos or erratic arbitrary rule could never re-occur.

The institutional nature of the PRC’s polity via having a politically important NPC, particularly after the promulgation of the 1982 Constitution, also ensured that differences between Deng and Chen never destabilized the CCP in a major way. This helped Deng politically survive the June 1989 Tiananmen Square Massacre and assisted him in later re-asserting his authority in the 1990s.

Crucial to Deng surviving the aftermath of the Tiananmen Square Massacre was the support of then NPC Chairman Wan Li (1916- ). As the nation’s most powerful political liberal it is plausible that the crushing of the 1989 student demonstrations was commenced because Wan was in the United States at the time. Disappointing party hardliners Wan did not take political asylum in America but bravely returned home.

The major political leverage that Wan then had was his personal connections to the US administration of President George W Bush to help ensure that the PRC did not lose its Most-Favoured Nation Trading Status (MFNTS) with the United States. A possible loss of this status was of major concern to the PLA and had the MFNTS been revoked then Li Peng led hardliners might have re-asserted a pre-Perestroika Soviet model on the PRC in which any potential for an independent civil society was scotched.

Hardliner hostility toward Wan was such that he unfortunately could not obtain a second term as NPC Chairman in 1993. Nevertheless, his relatively political liberal successor Ch’iao Shih (1924- ) still triumphed by upholding the 1982 Constitution to deny Li Peng’s (1928- ) unconstitutional bid for a third term as premier in 1998 as well the NPC previously rejecting his national report to the legislature in 1993. These two actions in have been the most important to the NPC to date and illustrate the great potential of the PRC’s national legislature.

Ironically and probably to deny the NPC’s political potential, Li Peng served uncomfortably as its Chairman between 1998 and 2003. Li effectively thwarted the NPC’s potential to be an important institution which broadens the PRC’s options to overcome potential national problems and consolidate as an international super-power. In this regard Li’s successor, Wu Bangguo (1941- ) as NPC Chairman has faithfully followed on in his predecessor’s footsteps.

Wu’s background is that of a technocratic industrial engineer who is competent, genial and generally well-regarded in political circles. His prestige has been based on keeping the NPC within strict confines on the premise that cautious public policy is the cornerstone of achieving and maintaining political stability. This laudable objective is relatively easy to achieve in the short to medium term but impossible to maintain in the longer term if underlying problems are not addressed.

The outgoing NPC Chairman’s emphasis on stability has placed him politically behind the times as has his association with the so-called Shanghai Clique. Due to former General-Secretary and President Jiang Zemin (1926- ) not exercising predominant de facto power, toward the end of the Hu era the power this faction gone into decline. The paradox of this development has been that Wu is now the most important member of the remnants of the so-called Shanghai Clique.

An important reason why the Shanghai Clique went into decline, if not dissolution, has been that its leading members moved on to be an integral part of President Hu’s power base that a sense of collective identity essential to maintaining a faction has been lost. This loss of factional identity is an important reason why the PRC is still stable because the CCP’s national leadership is coherent. This leadership stability does not negate the profound underlying problems such as corruption and potential social unrest that confront the PRC.

Hopefully, Wu will remain a stabilizing influence to a reformist successor as NPC Chairman who will help make the national legislature into a transformational political force for reform from above.

How and Why A Juridical State Safeguarded Spanish National Unity

The best example of a legislature in an authoritarian system paving the way for an appropriate political economy for a nation confronted by fundamental challenges was the *Cortes of Francoist Spain which was constituted between 1967 and 1975. The secret to Generalissimo Francisco Franco’s success a ruler of Spain following the Nationalist victory in the Spanish Civil War in 1939 until his death in 1975 was his adaptability. In this regard Franco was really an opportunist with principles.

(*The Cortes was first established by Franco in 1942).

Franco’s overriding concern was to maintain and to bequeath Spanish national unity. This was an important objective because Spain’s sense of national unity was undermined by the progressive disintegration of the Spanish empire. Spain had been effectively created as a nation by the personal union of the kingdoms of King Ferdinand of Aragon and Queen Isabella of Castile in 1479. This new kingdom’s identity was forged by Christopher Columbus’s voyage to discover the ‘new world’ in 1492.

The breaking away of Spain’s South American colonies between 1816 and the 1820s consequently not only undermined the kingdom’s international power status but sense of national unity which was integrally connected to having had an empire. The loss of the Caroline Islands, Cuba, Guam, the Mariana Islands and the Philippines in 1898 in the American-Spanish War was a catastrophe for Spain which gave rise to the Generation of 1898.

The Generation of 1898 feared that with the final end of the Spanish empire that Spain itself would eventually disintegrate as a nation with the Basques and the Catalans eventually seceding. A sense of widespread alienation from the Spanish nation was also manifested by the popularity of anarchism in the twentieth century which was associated with widespread anti-clericalism.

There was a strong sense of anti-clericalism amongst much of Spain’s middle class which regarded the Catholic Church and the monarchy as impediments toward national progress. Social unrest amongst Spain’s emergent industrial working class after the 1900s also threatened the nation’s socio-political order. The unity of the Spanish state and the survival of the monarchy from the 1900s until the Second Republic of 1931 was mainly reliant upon the power of the mainly Castilian dominated army.

The nation’s middle class endured the power of the army due to the creation of what became known in political science of a ‘mimic democracy’. This political system came into being following the Bourbon Restoration of 1874 in which power alternated between the Conservative and Liberal parties whose feudal land owning leaders engineered election results in rural areas. In Spain’s the major party that came to represent the interests of the middle class, much of which was anti-clerical, was the moderate ‘Radical’ (sic) Republican Party.

The prospects of the Spanish monarchy surviving were ironically enhanced by King Alfonso XII’s (1886-1941) unhappy marriage to Princess Ena (1887-1969) of Britain. Spain’s Queen Consort endeared herself to her adopted nation through her extensive charity work and financial probity. Her Majesty’s major political impact was during the First World War where she and her godmother, the Spanish born deposed Empress Eugenie of the French led a powerful faction in the royal court which favoured the allies. By contrast the king’s Austrian mother, Queen Maria Christina led a similarly powerful pro-Central Powers court faction.

These court divisions reflected a split within the aristocracy that paradoxically contributed to the elite consensus that it was best the Spain remain neutral during the First World War. Given the then fragility of Spain’s social and political conditions it is improbable that the monarchy would have survived had the nation entered the First World War. Consequently it was a mistake of Alfonso XIII’s to have embroiled his nation in a war in Spanish Morocco following the outbreak of the Riff revolt in 1919.

It was primarily due to the king’s immediate concern to prevent the release of a parliamentary report which would have indicated that His Majesty’s interference in military strategy in Morocco had caused military reverses which led Alfonso XIII to coax a reluctant General Miguel Primo de Rivera to stage a military coup in September 1923. Alfonso XIII’s instigation of this coup was also possibly prompted by the king’s longer term concern regarding the rising support for the Spanish Socialist Workers’ Party (PSOE) and the Radical Republican Party (PRR) in urban areas which threatened the rotational system of a mimic democracy between the rural based Liberal and Conservative parties.

The Reluctant Dictatorship of General Primo de Rivera: 1923 to 1930

The king may also have initiated the 1923 coup on the basis that Primo de Rivera’s military dictatorship would provide efficient government that His Majesty believed was needed to overcome Spain’s profound socio-economic problems. The initial Primo de Rivera regime (1923 to 1925) was a civil service based government which was honest and efficient.

The successor cabinet (1925 to 1930) was composed of industrialists and talented technocrats who devised policies which created financial conditions conducive to loaning cheap credit to small businesses and to small landowners. The Prime de Rivera government also adopted a labour code whose application was often more than token and undertook a limited literacy programme was undertaken.

The major failing of the Primo de Rivera regime was its refusal to undertake any land reform with regard to the large, but generally inefficiently administered, landed estates. To have done so would have undermined the power of the nation’s landowning elite from whom the army’s senior officer corps was predominately drawn. As a result of this grievous failure social backwardness was perpetuated throughout much of Spain. This policy failing consequently undermined the Primo de Rivera regime’s capacity to expand its base of *support.

(* Limited land reform was undertaken under the Second Republic between 1932 and 1936. This programme dissatisfied tenant farmers as deficient while alarming landowners as too radical. During the Spanish Civil War, 1936 to 1939, large landowners were amongst Franco’s strongest supporters.

Warnings from Franco’s astute advisors in the 1940s and the 1950s that land reform was needed to circumvent social unrest were dismissed by the Generalissimo on the basis urbanization resulting from industrialization and the expansion of a tourist backed services sector would negate the need for land reform. Franco’s perspective on land reform was vindicated by the 1960s).

The failure of the Primo de Rivera government to undertake land reform contributed to another fundamental shortcoming of his regime: its failure to institutionalize. The Patriotic Union was established in 1926 as the ostensible ruling party and corporatist Cortes was appointed the following year. However, because General Primo de Rivera was not really committed to ruling as a life long dictator the political institutions that his regime created were wholly dependent upon the continuance of his government. The government in turn was tolerated by most Spaniards so long as high economic growth rates were sustained.

Spain was no exception with regard to being hit hard by the onset of the Great Depression in 1929 that the viability of the Primo de Rivera regime was seriously challenged. Wearied by his nation’s economic crisis, personal ill-health and undermined by the reticence of support from the nation’s army captain generals (i.e. regional commanders) Primo de Rivera resigned in January 1930. (He died two months later in Paris).

The vacuum caused by Primo de Rivera’s resignation led to a state of limbo in which the power of the military and landed aristocracy remained intact but without an institutional framework to maintain national cohesion. The two provisional military governments that succeeded Primo de Rivera were orientated toward returning the country to a mimic democracy (1874-1923) even though the nation’s underlying socio-economic and political fundamentals had since profoundly changed by the ramifications of abrogation of the 1876 Constitution as a result of the 1923 coup.

An abortive military coup attempted in Aragon in December 1930 by republican army officers in support of the *Pact of San Sebastian that was signed in August that year reinforced the need for a return to constitutional government in order to avoid a possible civil war. Perhaps a monarchist mimic democracy might have been re-established had legislative elections been held before the local government elections which were held in April 1931. In these local government elections the continuing power of the landed aristocracy was manifested by pro-monarchy candidates prevailing in rural areas.

(*The Pact of San Sebastian was a unity agreement among republican, socialist and regional politicians calling for the re-establishment of constitutional government, commensurate with a national assessment as to whether the monarchy should be retained. The intellectual author of the Pact of San Sebastian was the lawyer Niceto Alcala Zamora (1877-1949). He was a conservative Liberal who, as a convert to republicanism, became a key transitional figure as the first prime minister/acting head of state of the Second Republic and its inaugural president in December 1931 following the promulgation of a new republican constitution in October 1931).

The urban centres were another matter where pro-republican candidates overwhelmingly prevailed. Middle class and Catholic urban voters supported the relatively conservative and misnamed Radical Republican Party *(PRR) of Alejandro Lerroux (1866 to 1949) instead of the revived monarchist Conservative and Liberal parties.

(*The Spanish Radicals were similar to the French Radicals in that they were political ‘radishes’, i.e. red on the outside and thoroughly white on the inside. The anti-clericalism of these two parties provided them with a left-wing façade which was belied by staunch middle class support. Nevertheless, the avowed leftism of these two radical parties often created an ambiguity which enabled them to gain left-wing votes and/or enter into coalition with socialist parties when the need arose. Consequently, the hallmark of the French and Spanish Radical parties was their respective opportunism upon which their strength was derived).

Even though Lerroux was generally a shameless opportunist he was still an unequivocal republican that the PRR’s electoral performance unambiguously undermined the monarchy. Alfonso XIII might have survived the adverse municipal election results with the support of the army. However, army commanders knew that the king’s support base was too narrow for them to win a civil war in the cause of fighting for an authoritarian monarchy.

The king probably felt betrayed by the refusal of his royal favourite, the Moroccan war hero, General Franco, the then commandant of the Saragossa Military Academy, to intervene on his behalf. Although Franco was a staunch monarchist (as subsequent events would to later attest) he was too was not prepared to risk a possible national social implosion for Alfonso XIII who lacked a sufficient popular support base to prevail in a possible civil war.

Making virtue out of necessity Alfonso XIII conceded that he had ‘lost’ his people’s ‘love’ that His Majesty departed for exile two days after the local government elections but without abdicating or renouncing his claim to the Spanish throne. The Second Spanish Republic was proclaimed on April the 14th 1931 with d elections to a Cortes serving as a constituent assembly promptly scheduled for June of that year.

National Disunity Consolidated: The Second Spanish Republic, 1931 to 1939

The June 1931 Spanish national elections were undoubtedly free and fair but ironically less than totally representative of popular opinion due to the virtual absence of the political right. Bereft of a supportive Home Affairs Minister (i.e. Interior Minister) to ‘arrange’ the elections the large estate landowners declined to run Liberal and Conservative Party candidates in the 1931 national poll. This virtually ensured the election of an overwhelmingly republican and anti-clerical constituent assembly.

The American historian, Professor Stanley Payne astutely observed in his book, The Franco Regime, 1936 to 1975 (1988) that the anti-clericalism of the founders of the Second Spanish Republic undermined the basis for national unity which might have ensured this republic’s survival. Had there being an effective conservative counter-weight within the constituent assembly a more inclusive constitution which took into account differing perspectives within Spanish society might have been accommodated.

Spain’s 1931 Constitution provided for a parliamentary republic with a degree of autonomy ambiguously devolved to the Basque and Catalan provinces. The left-wing ethos of the constituent assembly was reflected by the quasi-Marxist nomenclature of the constitution in which power was vested with ‘workers of all classes’ and private property was notionally subordinated to the collective interests of the nation.

Given the composition of the constituent assembly secular aspects of the 1931 Constitution included the compulsory stipulation of civil marriage and the banning of religious teaching in government schools. The extent to which the anti-clerical clauses of the constitution challenged the Catholic Church’s freedom were similarly ambiguous but there was still sufficient scope for many Catholics to fear the possibly intended application of the constitution.

The potential hostility of the 1931 Constitution toward the Catholic Church was strange in that senior officials of the Second Republic (such as President Zamora) were Catholic and that freedom of religion should have been respected in an avowedly liberal state.

The anti-clericalism of the Second Republic was reflective of a widespread perception among many republicans that Catholic religious (i.e. the clergy) were deliberately perpetuating a backward superstitious outlook amongst much of the middle class and the poor to selfishly perpetuate their power. From this perspective, the nation’s broad social ills, such as rural poverty, were attributed to the regressive cultural and political influence of the Catholic Church.

With the considerable benefit of hindsight the political leaders of the Second Spanish Republic should have treated the Catholic Church with professional respect while attending to important social concerns, such as the need for land reform. Had such an approach been adopted the separation between church and state that the founders of the Spanish Second Republic desired could have become an actual reality.

A major culprit with regard to undermining the scope for polarizing tension between a clerical and anti-clerical Spain was President Zamora. The president’s small but still potentially influential Liberal Republican Right Party (DLR) fulfilled a key role, along with the PRR, in moderating the 1931 Constitution, but more was required. Then again it is perhaps unfair to condemn President Zamora’s party due to its small parliamentary representation.

However President Zamora cannot be forgiven for in essence going against the popular will, following the November 1933 general elections. The president by refused to offer a prime ministerial commission to Gil Robles (1898-1980) the leader of the recently founded Spanish Confederation of the Autonomous Right (CEDA). The major constituent component of CEDA, which was composed of other mainly Catholic lay organisations, was the Popular Action Party which was founded by Robles, who was a Catholic law professor.

The strong showing of the CEDA, which came first in the November 1933 national elections, was due to the activation of an extensive lay Catholic network which had not been organised in April 1931 to fill the vacuum caused by the disappearance of the Liberal and Conservative parties following the proclamation of the Second Republic. The shift to the right was also due to the granting of female suffrage because women voters tended to be more conservative. Another important manifestation of the shift to the right was the transfer of votes from the left-wing Radical Socialist Republican Party (RPRS) to Lerroux’s PRR.

Why Democracy Denied Can Lead to Civil War

Instead of appointing Robles prime minister, President Zamora commissioned Lerroux following the November 1933 elections to head a minority government which had the support of the CEDA. Had President Zamora appointed Robles then the Second Republic undoubtedly could have consolidated because the mainstream political right would have eventually been reconciled to the republic’s legitimacy. It was perhaps too much for an anti-clerical such as President Zamora to commission the leader of a man who was essentially a Christian Democrat as prime minister.

Had Robles been appointed there could have been a revolt by the hard left. The plausibility of this concern was validated in October 1934 by a miner’s revolt in Asturias in north eastern Spain. This abortive communist revolt (which was crushed by General Franco) was precipitated by three CEDA members formally entering the Lerroux cabinet. This miner’s revolt was the first indication of the influence of the Spanish Communist Party (PCE) within the PSOE and the socialist affiliated union movement, the General Union of Workers (UGT).

Nevertheless, in a democracy the party which has strong electoral support is a legitimate contender for office. The reluctance of the powerful anti-clerical left establishment and the outright PCE to countenance a moderate centre-right party with strong electoral support enter government was crucial to precipitating the polarization which caused the outbreak of the Spanish Civil War in 1936. Had President Zamora, who in a republican context was moderate right-winger, allowed the CEDA under Robles to lead a coalition government with Lerroux in a junior position guaranteeing republican continuity then civil war could have been avoided.

Instead, the denial of senior office to the Roble’s led CEDA by President Lerroux caused a political polarization between left and right which otherwise would not have existed. As polarization set in, Lerroux’s PRR became more corrupt as its electoral viability became increasingly problematic. Alienated by being denied senior office, the CEDA at Roble’s instigation withdrew its support for the Lerroux government and new national elections were held in February 1936.

Had the CEDA as the major constituent of the National Front, won the 1936 elections civil war would have ensued as a result of a consequent left-wing revolt. As it was, the narrow *Popular Front election victory precipitated a civil war by a right wing military coup attempt on July 18th 1936. The Popular Front was an alliance of the PSOE, the PCE, regional parties and the Left Republicans. The last cited party was founded in 1934 as essentially a re-unification of the Republican Action Party and the PRRS which had been a left wing breakaway from the former in 1930. This re-united party, which also encompassed regional parties, constituted a move to the left away from the original Republican Action Party.

Manuel Azana (1880 to 1940) the leader and founder of the Republican Action Party must carry substantial blame for the outbreak of the Spanish Civil War in 1936. Had it not been for Azana’s leadership the Left Republicans would not have been founded to give their crucial support to enable the Popular Front to narrowly win the February 1936 general elections. The Popular Front was really controlled by the PCE due to their successful infiltration and control of the youth wing of the PSOE under the leadership of the covert communist Santiago Carrillo (1915- 2012).

The first Popular Front government was headed by Azana as prime minister between February and May 1936 until the Cortes removed the relatively moderate but ineffective Zamora as president to replace him with Azana. There were two successive Left Republican prime ministers in 1936 before Francisco Largo Caballero (1869-1946) of the PSOE formed a government in that eventful year. Largo gave way as prime minister to his arch-party rival Juan Negrin (1892-1956) as prime minister in 1937.

Negrin as a supposed PSOE moderate paradoxically worked in close co-operation with the PCE under the effective leadership of Carrillo to instigate the brutal elimination of Trotskyites, anarchists and to effectively suppress regional separatism as the civil war progressed. It is interesting to speculate that had the Second Republic prevailed in the civil war whether the PCE would have overthrown Negrin or if he (Negrin) would have facilitated a full communist takeover by later merging the PSOE with the communists.

During this period (1936 to 1939) of communist consolidation the genuinely anti-communist President Azana served as a useful figure head who endowed the Spanish Republic with a degree of legitimacy that was unwarranted. Having previously been a ‘useful idiot’ to the PCE in terms of undermining the political centre it was not really surprising that Azana continued his tragic role in paving the way for an eventual communist takeover by undermining the centre-left.

The on-going communist takeover between 1936 and 1939 was all the more tragic because the PCE, as the 1931 and 1933 general elections demonstrated, was an electorally marginal party. The fascist Phalange (Phalanx) Party was similarly an electoral marginal party garnering less than one percent of the vote in the February 1936 elections. The Phalange Party was founded in 1933 by Jose Antonio Primo de Rivera (1903-1936), the son of the late dictator, General Miguel Primo de Rivera.

The Franco Regime’s Pre-History

Unusually for a far-right party in a recently established republic, the Phalange Party was republican. This probably reflected Jose Antonio’s antipathy toward the exiled Alfonso XIII whom he blamed for discrediting his father’s reputation. Nevertheless, the Phalangists entered into an alliance with Renovacion Espanol, the electoral wing of the Alfonsine monarchist Accion Espanol.

Accion Espanol was founded and led by Jose Calvo Sotelo (1893 to 1936) who had been an outstanding leader of the Conservative Party under the mimic democracy. Calvo was the leading figure from this era to collaborate with the Primo de Rivera dictatorship serving as Finance Minister between 1925 and 1930. Following the fall of the dictatorship in 1930 and the proclamation of the republic in 1931 Primo de Rivera’s marginalized monarchist supporters naturally looked to Calvo to lead them.

It was therefore ironic that Calvo and Jose Antonio were rivals on the radical right considering their respective political and personal links to the Primo de Rivera dictatorship. Out of political necessity the two rivals formed an electoral alliance, the National Bloc in 1934. Even though this electoral alliance received a paltry vote Calvo established a political ascendancy over Jose Antonio by narrowly clinching election to the Cortes in the February 1936 elections.

Indeed, the Popular Front’s election victory that year ironically politically advanced Calvo because consequent further political polarization undermined Robles that the former became the nation’s de facto opposition leader. Ironies further abounded when government security forces assassinated Calvo on July 13th 1936 thereby precipitating the outbreak of the Spanish Civil War. The ramifications of this assassination instead of cowering the opposition not only counterproductively precipitated the civil war but ultimately ensured that Calvo’s ideas and philosophies would become the guiding objectives for General Franco.

Professor Stanley Payne insightfully identified that the ideas and philosophies of the Franco regime were Calvo’s as opposed to those of Jose Antonio’s Phalange Party. Calvo’s analysis was predominately itself drawn on what he considered to be the failings of the Prime de Rivera dictatorship. From Calvo’s perspective the major failing of the former dictatorship was its failure to institutionalize. Calvo therefore advocated a dictatorship be established in Spain under a regentist model similar to what had been established in Hungary under Admiral Nicolas Horthy (1867 to 1857).

The Horthy regime (1920 top 1944), was Europe’s first post World War conservative nationalist dictatorship, and as such for a time had been a contemporary of the Primo de Rivera government. Similar to *Horthy, Calvo was a monarchist who was opposed to an actual reinstatement of the legitimate deposed royal dynasty. From Calvo’s perspective Spain needed a dictator regent who could rule Spain on a long term basis to address the nation’s deep seated socio-economic problems.

(*In the case of Horthy, he was selfishly motivated because he wanted to utilize his regency as a basis to establish his royal dynasty. For this reason Horthy stupidly thwarted a reinstatement of the Hapsburgs and aligned Hungary with Nazi Germany to regain Hungarian territory that had been lost under the unjust 1920 Trianon Treaty so that he would have the necessary prestige to later found his own dynasty).

Calvo’s concept of a dictatorship-regency would later be crucial in Franco distinguishing his regime from those of Benito Mussolini (1922-1943) in Italy and Adolf Hitler (1933 to 1945) in Germany. In contrast to these two aforementioned regimes, Franco as Caudillo played the different autonomous factions (which were known as ‘families’ within his regime) against each other rather than concentrating executive power in a personalized regime.

The Franco regime was also distinct from the Hitler and Mussolini dictatorships because power was also not concentrated in a single totalitarian party. In accordance with Calvo’s advocacy Franco established an umbrella organization through which to rule by arbitrating amongst the different political families. These divisions were then later institutionalized by the formation of a corporatist Cortes in 1942 headed by the Carlist leader, the Duke of Quintillo, Manuel Fal Conde (1894 to 1975).

In contrast to Primo de Rivera’s talk shop of a Cortes, the Francoist version by the late 1960s developed a degree of leverage due to the diversity of opinion and conflicting power interests within the regime being reflected by the legislature’s composition. This was in keeping with Calvo’s advocacy of a corporatist legislature being the source of power in lieu of a single ruling party.

How and Why Calvo’s Philosophical Legacy Eventually Separated Franco from Fascism

Due to Calvo’s weariness of ruling party for an authoritarian regime he envisaged the army as the agent for social and political change. Be that as it may, Calvo was determined that once a regentist dictatorship was established that the armed forces would refrain from directly ruling the nation to promote their professionalism crucial to maintaining national unity. Overall, Franco’s application of Calvo’s ideas ensured that he bequeathed a united juridical nation state upon his death in 1975 in which power was not concentrated in a self-interested power group.

Another associated irony with regard to Calvo’s assassination was that had the Popular Front government not effectively banished Franco to the Canary Islands in February 1936 he probably would have opposed the July 1936 coup on the condition that the communists were kept in check. Ironically, the July 18th revolt precipitated a communist instigated counter-coup in which power actually began to pass the PCE.

Franco in the early days of the revolt pledged his continued allegiance to the republic as he sought to overthrow its government. From Franco’s perspective the aim of the July 1936 coup (golpe) was not to necessarily establish a permanent authoritarian regime but rally most moderates against a possible communist takeover. The need to accept assistance from Fascist Italy and Nazi Germany in the airlifting of troops from Morocco in the early stages of the revolt led Franco to move toward an ostensibly fascistic model.

The Nationalist leader’s orientation toward a fascist model was also reinforced by the emphasis on a single leader which the Generalissmo found appealing due to his determination to avoid a collegiate form of leadership in what became known as Nationalist Spain. Therefore, at a meeting of senior Nationalist officials in Burgos in early October 1936 Franco with crucial and adept help from his brother Nicolas had himself proclaimed Caudillo which was the Spanish equivalent of Italian fascism’s Duce or Nazi Germany’s Fuhrer.

The Franco regime seemed to move further toward a fascist model with the creation of an ostensible single ruling party, the Falange Esponala Tradicionalista y de las JONS (FET) in April 1937, which became popularly known as the National Movement, with this title officially been adopted in 1949. The National Movement was however different from the Italian and German equivalent parties because a strong nationalist and non-fascist organisation in the Carlists initially counterbalanced the power of the Phalangists.

In this regard the Franco regime was the inverse of the Mussolini and Hitler regimes. Both these dictatorships initially came to power with the crucial support of authoritarian but not fascist parties: the Italian National Association (INA) and the German Nationalist Party (DVPP). The INA was absorbed by Mussolini into a newly merged fascist party (the PNF) while the DVPP was dispensed with by Hitler within less than a year of coming to power.

It did seem that Calvo’s ideas would not survive him as his Accion Espanol was dissolved into the National Movement in April 1937. However, Franco was always consistently orientated toward Calvo’s objectives but out of necessity had to refrain from implementing them in the short to medium term due to prevailing circumstances. Due to Accion Espanola’s small organisational base Franco looked to the Carlists to counteract the increasing power of the Phalange.

Spanish Monarchism Versus Fascism

The Carlists were a loyalist organisation supportive of the Carlist branch of the Bourbon dynasty which challenged the legitimacy of succession of Isabella II (1830 to 1904) as a female monarch in 1833. As incredible as it may seem three were three Carlist revolts respectively in the 1830s, 1840s and 1870s which constituted civil wars. The durability of the Carlists was due to their close links to Integralist components of the Catholic Church and support for decentralization which contributed to enduring support for their cause in the Basque province of *Navarre.

(*During the 1936 to 1939 Civil War, Navarre was a bulwark of support for Franco as a continuing Carlist stronghold).

The Carlists often found themselves at odds with the Phalange which had rapidly grown from a marginal working class fascist republican movement into a major force in Nationalist Spain. The growth of the Phalange was precipitated by the disintegration of the CEDA with most of its radicalized youth wing, Popular Youth Action (JAP) swelling the ranks of this fascist party.

The JAP had been led by Franco’s brother-in-law Ramon Serrano Suner (1901 to 2003) who helped ensure that his partisans stacked out the expanding Phalangist Party. Serrano also helped take the Phalangists into the National Movement where he consequently held a powerful position second only to Franco’s. Serrano’s power was also reflected when with the formation of a *cabinet for Nationalist Spain in February 1938 when he was appointed Interior Minister. Due to Serrano being the Interior Minister the Phalangists, which for a time operated their own security service, were clearly the most powerful constituent organisation within the National Movement.

(*The Franco cabinet in which the Caudillo also served as premier, had former ‘Radical’ republicans and Alfonsine monarchists which indicated that an out fascist regime had not actually been established).

Nevertheless, the clear division between the Phalangists and Carlists was commented upon in the Britannica Year Book of 1940, events of 1939, following the military defeat of the Second Spanish Republic. The power of the Phalangists following the taking of Madrid in April 1939 by Franco reflected his then personal sense of gratitude toward Hitler and Mussolini. However, Hitler’s unprovoked aggression against Poland in September that year and Nazi Germany’s signing of a non-aggression pact with the Soviet Union profoundly shocked Franco that he first began to have doubts about an alliance with Hitler.

The close interconnection between international events and Spain’s domestic power structure was reflected by Franco appointing Serrano as foreign minister in October 1940. This appointment was a prelude to Franco meeting Hitler in Hendaye in France near the Spanish border later that month. Serrano would later disingenuously claim that Franco would have entered the Second World War if Hitler had granted his extensive demands for territory. This claim was made by Serrano to discredit his brother in-law whom he fell out with in 1942 and to conceal his pro-German orientation during the Second World War.

Franco adopted a stance in his negotiations with Hitler of, ‘yes but’ that so infuriated the German dictator that he later famously remarked that he would rather have his four front teeth removed than have to again negotiate with the Franco. From Franco’s perspective he had won his battle against the anarchists, communists and socialists in the civil war that he was not prepared to risk this victory by entering the war as a subordinate ally (if not satellite) of Hitler’s Nazi Germany’s.

Furthermore, in contrast to Mussolini and Hitler, Franco consistently sought objective advice from counsellors of whom he expected the truth. Senior anglophile naval officers warned Franco that despite the 1940 Fall of France, Britain still had a powerful navy and intact empire which would fight on against Hitler that the quick peace conference that Mussolini anticipated could not eventuate. Franco was also warned by professional diplomats and intelligence operatives of the determination of President Franklin Roosevelt to have United States eventually enter the war in Europe to fight against Hitler.

For all Franco’s wariness toward Hitler the major area where he was in accord with fascist Italy and Nazi Germany was in his hostility toward Moscow. Therefore when Hitler invaded the Soviet Union in June 1941 Franco dispatched a Phalangist Blue *Division to fight on the Russian Front. The Soviet military campaign precipitated corresponding Phalangist domestic agitation for a Spanish entry into the Second World War even after the American entrance into the war in late 1941 all but guaranteed a virtual allied victory. This agitation may not have really been concerned with securing Spain entering the war but rather the Phalangists taking power in their own right by eliminating the Carlists.

(*This division was withdrawn from the Soviet Front in 1943).

The Phalangist move to eliminate the Carlists culminated in an incident in Bilbao in August 1942 where Phalangists throw hand grenades into a Carlist rally were supposedly and ironically anti-Franco slogans were chanted. The term ‘ironically’ is used because the regime actually took the side of the Carlists in regard to this incident thereby conveying Franco’s determination to the Phalangists that he would not to allow them to become politically dominant within the National Movement. The fallout from the Bilbao incident was such that it resulted in Serrano’s dismissal as a cabinet minister the following month.

The dismissal of Serrano adversely affected the Phalangists capacity to be independent operators (‘actors’) within the Franco regime. In an organisational context the Phalangists were undermined by Franco appointing serving armed forces personnel to senior executive positions within the National Movement to regulate them. That is not to say that the Phalangists were still not powerful in the 1940s and 1950s as they staffed most of the government sanctioned official trade union syndicates and often held senior positions within the government bureaucracy, particularly the state media.

The major utility for Franco of having Phalangists in powerful positions was that their autarkist economic ideology helped Spain withstand post-war international isolation when Spain was inaccurately categorized as ‘fascist’. Franco after the Second World War however appointed civilian technocrats to local government positions in lieu of armed forces personnel, Phalangists and Carlists. This development later helped the National Movement become a predominately bureaucratic organisation distinct from the armed forces and political families such as the Carlists and the Phalangists.

The onset of American military and economic aid after the leasing of air bases to the United States under a 1953 agreement negated the need for Franco to utilize the Phalange that their remaining ministers were dismissed in a cabinet reshuffle in 1957. The new dominant administrative group became the doctrinally integralist Catholic Opus Dei lay order whose members as cabinet ministers held economics related portfolios between 1957 and 1973. They competently, if not brilliantly, administered Spain. Opus Dei was however too narrow a sect that was separate from society that it could be categorized as a political ‘family’ power group within the context of the Franco regime.

The Phalangists and the Carlists manifested their continuing existence within the Cortes but as Spain entered the 1960s these two once powerful families atrophied as they failed to adopt new ideas or adapt to changing circumstances. For all the vehemence in which some Carlist and Phalangist leaders criticised Franco for deriving them of power they never came to terms with their own refusal to undertake organisational renewal.

1967 to 1975: Bureaucratic Led Liberalization

Respective Carlist and Phalangist decay in the 1960s did not cause Franco any concern because the National Movement had advanced from been a front for these two organisations to a bureaucratic organisation in its own right. Nevertheless, there was still domestic and international anxiety during this period that Spain would be plunged into a crisis after Franco died. This concern negated the fact that the National Movement was not an ideological ruling party but rather a bureaucratic organisation which would competently administer Spain until Franco’s succession plan took effect.

Franco’s succession plan was always, if viable, to establish the groundwork for being succeeded by a reinstated monarchy. Accordingly, in 1947 Spain was converted from a corporatist republic into a monarchy with Franco as regent for life. It was not then specified as to who would be Franco’s successor as king except that he be Catholic and of ‘royal blood’. Theoretically, this meant that Franco’s regal successor could have been a Bourbon, a Carlist, a *Hapsburg, a Savoy or a Bonaparte as members of these royal families that had at one time reigned in Spain.

(*Franco offered to designate the Austro-Hungarian claimant Archduke Dr. Otto Hapsburg (1912 to 2011) as Spain’s royal heir in 1961 but His Imperial Highness graciously declined. King Juan Carlos did not forget this and in 1982 His Majesty persuaded the Austrian government to allow Otto’s mother, the Dowager Empress Zita (1892 to 1989) to be allowed to visit Austria after a sixty-four year absence).

The leading contender to succeed Franco was Prince Juan Carlos (1938- ). He was the son of Don Juan, the Count of Barcelona who had been the royal claimant since Alfonso XIII abdicated in his son’s favour just prior to His Majesty’s death in Rome in January 1941. Prince Juan Carlos arrived in Spain in 1948 to be educated in Spain where His Highness often had to endure the hostility of republican Phalangist bureaucrats. His Royal Highness’s prospects for succeeding to the throne were enhanced by his marriage in May 1962 in Athens to Princess Sofia of the Hellenes (Greece) because of the family’s then status as a reigning royal house.

The birth of a son, Prince Felipe in January 1968 seemed to consolidate Prince Juan Carlos’s selection as the royal heir. The attendance and rapturous welcome that the Queen Ena received on Her Majesty’s return to attend her great-grandson’s christening as his god mother seemed to seal the royal succession in Prince Juan Carlos’s favour. Furthermore the expulsion of Carlos Hugo (1930 to 2010) the son and heir to the Carlist claimant from Spain later that year was an important indication that Prince Juan Carlos would be designated as Franco’s heir.

When the Cortes did designate Prince Juan Carlos as royal heir in July 1969, this event seemed to be anti-climatic as it caused more comment abroad than in Spain. A minority of Phalangist deputies voted against Prince Juan Carlos’s designation but Franco, who was present at the installation investiture at the Cortes ignored their defiance. Indeed, Franco formally closed up the moribund *Phalangist component of the National Movement in April 1970. In doing so Franco paradoxically made himself the personal embodiment of Phalangist orthodoxy that he could distinguish himself from the bureaucratic National Movement.

(*Phalangist quasi dissidents between 1970 and 1975 defiantly held ceremonies commemorating historical events such as Civil War battles. Eerily enough, while dissident Phalangists were commemorating on the 20th of November 1975 of the thirty-ninth anniversary of the execution of Jose Antonio de Rivera by the Second Republic news came through of Franco’s death that day).

Franco himself moved into semi-retirement in May 1973 when he relinquished the position of president (i.e. prime minister) of the government to his trusted confidant Admiral Luis Correro Blanco (1904 to 1973). Even though Admiral Blanco was reputedly a member of Opus Dei (he probably brought them into government in 1957) he removed them from the cabinet upon becoming prime minister. In this regard the National Movement finally became an organisation in its own right as opposed to an umbrella to front for other power groups.

The 1973 Admiral Blanco Assassination: Franco Witnesses The Beginning of the Decline of Francoism

The process of the National Movement becoming a ruling organisation in its own right was ironically furthered by the assassination on December 20th 1973 by Basque ETA guerrillas of Admiral Blanco. The usually stoic Franco stunned all by crying uncontrollably at Admiral Blanco’s funeral. Franco not only mourned the passing of a friend but the man who had best understood his ideas and the logic and rationale that underpinned them.

For Franco was almost unique among dictators and/or leaders in that a major source of his power was the way in which he applied his particular ideas and philosophy to achieve specific outcomes. More often than not Franco’s associates did not understand his rationale which helped him keep them of balance so that he could achieve particular outcomes. From this perspective Franco’s main hope of ensuring that his ideas survived was to pass power onto his virtual alter-ego, Admiral Blanco.

Admiral Blanco’s assassination paradoxically ensured the final civilianisation of the Franco regime as he was succeeded in January 1974 as prime minister by Carlos Navarro (1908 to 1989). He was the epitome of a National Movement bureaucrat as Navarro had never belonged to the Carlists, the Phalange or Opus Dei.

The new prime minister, who had previously been a public prosecutor and mayor of Madrid between 1965 and 1973, was a bureaucrat bereft of a particular ideology. However, National Movement members, most of whom were public officials, had either supported Franco during the civil war or their family members had, were faithfully committed to his regime. Consequently, Franco had a loyal support base for whom it was unthinkable of them to even contemplate moving against him.

Nevertheless, the National Movement as a collective organisation did not have a particular ideology which would (as occurred in post-Tito Yugoslavia) be utilized after Franco died in November 1975 to prevent a progression to an electoral democracy. Franco did not delude himself that he was not a dictator but he did hope that his concept of ‘organic democracy’ would survive him.

An organic democracy according to Franco was one where power was exercised by corporatist organisations, such as the industrial syndicates as opposed to directly elected politicians. Representatives of these corporatist organisations constituted the Cortes which as previously mentioned had been created in 1942. The power of the Cortes was seemingly enhanced when a referendum was held in 1966 which endorsed the so-called ‘Organic Law’.

The major innovation of this new constitutional regime was the creation of the Council of State which was a sort of national executive elected by the Cortes. Franco hoped that after he died that the Council of State would exercise power (as distinct from directly governing Spain) as the embodiment of popular sovereignty. After Admiral Blanco’s assassination Franco discreetly communicated to the Council of State that they could nominate any three candidates for prime minister so long as they included Navarro whom he inevitably selected.

Franco envisaged that after he died that a King Juan Carlos would be a constitutional monarch by not interfering (as he had as dictator) in the decision making of the Council of State. The Caudillo was not however naïve to believe that it was a certainty that Spain would become a full ‘organic democracy’ after his death or that his system would survive him.

Indeed, Franco privately asked the National Movement’s Minister-Secretary Adolfo Suarez (1938- ) in 1975 if an ‘organic democracy’ would survive him. When Suarez, who unusually for a sycophant was consistently honest, answered Franco in the negative, the Spanish leader tearfully turned away making no comment.

That is not to say that Franco’s major objective was a consolidation of an ‘organic democracy’ after he died. His overriding concern was to bequeath a united Spain upon his death. For this reason Franco publicly stated in 1969 that it was better that *Spain be ‘red’ (i.e. communist) than forfeit its national unity. In a meeting in 1956 with President Eisenhower’s envoy, the Spanish speaking General Vernon Walters, Franco prophetically assured him that in twenty years time when he was dead that Spain would be safe from political upheaval because the nation would be a democratic constitutional monarchy.

(*Franco as a Galician was determined that a patriotism allegiant to Spain as opposed to Castile be the norm. The Galician language is closer to Portuguese than it is to Castilian, i.e. Spanish).

An important step in Spain becoming a constitutional electoral democracy was the holding of direct election in 1967 of a minority of Cortes members based on a suffrage restricted to *heads of families similar to Portugal’s then electoral system. The direct election of members to the Cortes did however set a valuable precedent in an authoritarian system which showed that a later transition to an electoral democracy could be undertaken. This electoral precedent was also a sign of hope to the broader public that an electoral democracy could very well follow after Franco’s death.

(*Heads of families in essence meant the married father in the house although there was scope for female suffrage when widows were recognised in this position).

It was this implicit realization that an electoral democracy could follow Franco which explained the relative lack of turmoil in the late Francoist period between 1974 and 1975. Then international media commentary and historical analysis has portrayed this period in which the supposed inadequacies of Franco’s system of government precipitated a breakdown in his personal authority. Instances of Franco’s loss of authority were cited with regard to his allowing the *PSOE to more or less freely operate.

(*Spain’s security forces were still functional during this period with regard to energetically repressing the active and disturbingly well organised PCE).

However, the relative political freedom that existed in this period was testament to Franco’s confidence concerning the ultimate security of his regime. That is not to say that there were no political dramas as Spain approached Franco’s impending death. Due to Franco being put out by Admiral Blanco’s assassination an important function of the Navarro government was to protect the interests of the Franco family as his health faltered.

The close inter-connection between protecting the immediate Franco and shadowy power groups wanting to use the family as a source of power in the post-Francoist era almost derailed Spain’s post-1975 transition to a democracy. The scope for turmoil was potentially created by the March 1972 marriage of Franco’s grand-daughter Maria Del Carmen to Duke Alfonso. As the grandson of Alfonso XIII, His Royal Highness arguably had a stronger claim to the Spanish throne than Prince Juan Carlos.

In the 1974 to 1975 period there was a concerted attempt by some ministers in the Navarro cabinet to displace Juan Carlos (who after 1971 was officially entitled the Prince of Spain) in favour of his cousin. This scheme fell eventually supported Prince Juan Carlos and his wife Princess Sophia received renewed support from Franco who was impressed by their fortitude. The fact that there was little support for the Franco family having a powerful future role in the post-Francoist era was also manifested when Franco’s son in-law Critobal Martinez-Bodium, the Marquis of Villaverde, (1922-1988) receiving a relatively low vote in the Cortes when he stood for election to the Council of State in 1975.

Within the Cortes at this time de facto, if informal, political parties had been formed amongst its members. Although Prime Minister Navarro is usually cast as the *villain during this period he nevertheless piloted the 1975 legislation which facilitated the formation of political associations as the forerunner of political parties. Prime Minister Navarro’s ambiguous role in helping lay the groundwork for Spanish democracy reflected his political role: protecting the interests of the Franco family and senior officials in the immediate post-Francoist period so that they would not oppose a transition to democracy.

(* The clique, which included Prime Minister Navarro, that attached itself to Franco’s wife Donna Carmen and his son-in-law the Marquis of Villaverde during this period, was derisively known by the public as the ‘Bunker faction’).

A Reinstated Monarchy Restores Democracy

Juan Carlos after been proclaimed king before the Cortes on November the 22nd 1975, two days after Franco’s death, instigated a cabinet reshuffle the following month in which the leading liberal of the former regime, the former tourism and information minister Manuel Faraga Iribarne (1922 to 2012) in which he re-entered the cabinet. The Francoist coalition between regime conservatives and liberals within the cabinet reflected a balance between continuity and the prospect of reform.

Although this ‘coalition’ government was inherently dysfunctional in the long-term it nevertheless served its purpose in providing a sense of continuity in a period of anxiety. It was generally believed that after King Juan Carlos dismissed Navarro, which His Majesty did in early July 1976, after the prime minister offered to resign following a verbal stoush with his sovereign, that the king would appoint Faraga as the new head of the government.

Instead of appointing the liberal Faraga as prime minister the king selected Adolfo Suarez, the former head of state television and Minister-Secretary of an atrophying National Movement. This selection initially dismayed most liberals and many Spaniards because Suarez was such a National Movement insider that it was thought that he had no capacity to undertake meaningful reform.

At this time the king’s passing over of Faraga in favour of *Suarez seemed in-explicable because it was believed that a golden opportunity to democratize had been foolishly forfeited by King Juan Carlos. Although it is hypothetical, from a counter-historical perspective a Faraga prime ministership probably would have been a disaster. It is very plausible that the acerbic Faraga would have alienated both former National Movement officials and opponents of the Franco regime to ensure a ‘lose-lose’ scenario for Spain.

(*Suarez was in fact the protégé of the late Admiral Blanco and King Juan Carlos’s appointment of him as prime minister in 1976 was in a way His Majesty expeditiously moving to the former Franco’s regime’s reformist ‘Crown Prince’).

By contrast Suarez as prime minister was not only able to re-assure National Movement members, the powerful ones being local government officials, that they had nothing to fear from democracy but that they could still have an influential role in a post-Franco political system, as many subsequently did. Accordingly, an overwhelming majority of parliamentarians passed a bill in November 1976 providing for the democratic election of a *Cortes to serve as a constituent assembly to draw up a new national constitution.

(*The passage of the reform legislation precipitated an outburst of emotion that one could be forgiven for not knowing that deputies were associated with an authoritarian system that they had willingly voted to re-establish the basis for an electoral democracy. Their euphoria was understandable because the impending return to democracy heralded the establishment of a bulwark against possible destructive political turmoil).

Once the Rubicon had been passed of providing for democratic elections, once seemingly impossible reforms became inevitabilities. In April 1977 the PCE was legalized and the National Movement was dissolved. This last action was not as dramatic as it seemed because Suarez had utilized his position as prime minister to create the Union of the Democratic Centre (UCD) in March 1977 which was essentially a coalition between former National Movement bureaucrats/local government officials and members of the liberal monarchist ‘*taxi parties’ which claimed antecedence to the pre-1923 Liberal Party.

(*The term ‘taxi parties’ was used because the actual active membership of such parties usually did not go beyond the entourage of their leaders).

The Democracy Panacea: Democratic General Elections

The dynamics of the June 1977 Spanish elections were interesting in that officials recently affiliated with the National Movement were supporting and running under an avowedly centrist party while some of the liberals of the Franco regime were placed to their right as they predominately ran with the Popular Alliance (AP) which was founded by Faraga in 1976 and led by him in the 1977 elections. Ironically, there were staunch Francoists who ran with the AP because the UCD would not accept them. This development tarnished the AP’s credibility but the predominant reason why AP performed poorly was due to the Suarez led UDC monopolizing the crucial political centre.

The UDC was strengthened by non-Castilian regional leaders from the super-ceded National Movement aligning to the new party. Juan Antonio Samaranch (1920 to 2010), the president of the *Catalan government, who later became Chairman of the International Olympic Committee (IOC), was the most prominent example of a former National Movement official supporting the UDC. His regional party, the National Movement descended Catalonia Concordia affiliated to the UDC for the June 1977 national elections.

(*In a political masterstroke Prime Minister Suarez invited the exiled president of the Generalit of Catalonia, Josep Tarradellas (1889 to 1988), who was later ennobled as a marquis, to return which he did in October 1977. The power that Tarradellas’ returned government in exile, which had previously been affiliated to the Second Spanish Republic, was ambiguous. However, in the period between 1977 and 1978, when Spain’s new national constitution was been drafted by the Cortes, the Generalit represented Catalonia’s interests in the constitutional renewal process.

The Generalit continued to represent Catalonia until the election of a new regional parliament in March 1980. Catalonia is currently ruled by the Convergence and Union (CiU) configuration, which is a clever alliance of a pro-autonomy party and a nationalist inclined party. The skills in which Catalonia’s political leaders re-gained autonomy for their region and their political power in the broader context of Spanish politics augurs well for the main industrialized part of the nation helping Spain overcome the GFC).

The major dramas with regard to the June 1977 elections were not associated with possible secessionist issues but the re-emergence of the PCE. Communist Party campaigners frequently received hostile receptions in remote villages because they were predominately pro-Franco in sentiment.

The Franco regime had de-politicised many people in remote areas in that they often uncritically accepted an authoritarian government and were consciously very anti-communist as opposed to having a broader sense of ideology. Ironically, these regional communities were staunchly supportive of the UDC as opposed to the AP due to many local government officials once associated with National Union supporting the former party.

The UCD comfortably came first with 34% of the vote in the 1977 elections and the PSOE coming a solid second. This election result augured well with regard to Spain having a viable two-party system with a party broadly representing the interests of capital and the other of labour. The PCE did well to come third with just under 10% of the vote, while the prospects of the AP surviving were seemingly grim as it came a distant fourth with just over 8% of the vote.

The 1977 election results were however to prove to be deceiving in foreshadowing Spain’s future party formation. The UCD major strength and simultaneous weakness was that it was an amorphous centrist party. Subsequent events showed that UDC unity was derived from the unifying focus on drawing up a new national constitution and Suarez’s exceptional leadership. To help maintain UDC party effectiveness Suarez called new national elections in March 1979 after the ratification of Spain’s new constitution.

The 1978 Constitution achieved the balance between regional autonomy and national unity to facilitate a ‘win-win’ context for Spain as a viable nation state. The Spanish constitution also guarantees individual liberties and recognizes the nation’s special role as a focal point for Hispanic culture around the world. This constitution is the first of Spain’s eleven post-1812* constitutions that had meaningful public input and the genuine popular approval of the Spanish peoples. This popular approval of the 1978 constitution also helped legitimize the Spanish monarchy which is a vital force for unity and harmony within Spanish society.

(*Although Napoleon I’s brother, Jose I, 1768 to 1844, was reviled in Spain as a French puppet during his rein between 1808 and 1813, the older Bonaparte at least bequeathed the 1812 constitution which became the rallying point for Spanish liberals. The hostility of the reinstated Bourbons to the 1812 constitution precipitated domestic political tumult and crucially contributed to the break up of the Spanish empire).

The paradox of Suarez’s success in bringing in a new constitution contributed to his fall because the UDC consequently lost a sense of national focus. The first top three placed parties in the 1977 elections (the UDC, the PSOE and the PCE) virtually garnered the same national percentage votes in the 1979 elections. Indeed, these election results seemed to indicate that the UDC would consolidate as the major centre-right party as the vote for Faraga’s AP which declined by a further two percent, which was a substantial decline for a party with a relatively low was voting base. This was despite the AP entering into a coalition with other centre right parties for the 1979 elections.

That the AP was to become one of Spain’s two major parties at the October 1982 elections was due to the painful decline and eventual disintegration of the UDC. Between 1979 and 1981 respective Christian democratic, social democratic and liberal inner-party factions were formed within the UDC which would have destroyed party unity had it not been for Suarez’s leadership. Indeed, there was a widespread fear that not only would the UDC disintegrate if Suarez was to depart as prime minister but that the viability of Spanish democracy would be imperilled.

Wearied by chronic party dis-unity and determined to help show that Spanish democracy could survive without him as prime minister, Suarez resigned in February 1981. However, it was at this vital juncture that neo-fascist elements within the Civil Guard led by Lieutenant-Colonel Antonio Tejero (1932 - ) forcibly occupied the Cortes. This armed seizure was more than just a terrorist action but a practical attempt to incapacitate the civilian government so that army regional commanders would move into the void by staging a nationwide military coup.

Disturbingly, enough regional army commanders were inclined toward seizing power. Had King Juan Carlos not made a national televised address opposing the coup and convinced uncertain army generals to remain loyal to the constitution then Spanish democracy may have then ended. The failure of the coup due to this regal intervention demonstrated the importance of the monarchy in protecting democracy by been an objective safeguard that defended democracy and the rule of law.

Some post-coup commentary heralded the failure of the 1981 coup as the death knell of Francoism. However this perspective was unfair because it inferred that Franco would have supported the overthrow of the democracy that had succeeded him. Franco’s major objective was to ensure the unity and stability of Spain. Had the 1981 coup succeeded then Spain would have gone back on the roller coaster ride of political turbulence and possible disintegration. Consequently and perhaps paradoxically the consolidation of Spanish democracy since with a stable *two-party system is reflective of the success with which Franco’s applied Calvo Sotelo’s ideas.

(*The People’s Party, the former AP, and the PSOE are now the two major parties which vitally help underpin Spanish democracy).

The essence of Sotelo’s philosophy was that Spain be a juridical national state in which state institutions were not attached to self-seeking shadowy power interests. This alas, had not been the essence of Spanish politics and history that civil war culminated in 1936. Consequently the only two viable political alternatives for Spain following the outbreak of civil war were communism and fascism.

The apparent triumph of ‘fascism’ in 1939 and the subsequent discrediting of this stupid ideology apparently with the defeat of the Axis in 1945 led to predictions throughout the 1950s and 1960s by many foreign commentators that Spain would face a terrible crisis following Franco’s death. This analysis negated that Franco applied Sotelo’s ideas in his own way so that the framework for a united juridical nation was bequeathed. True, the respective skills of King Juan Carlos and Adolfo Suarez were invaluable in piloting Spain in its transition to democracy but this might not have been achieved had it not been for Franco’s legacy.

Why The Spanish Precedent Might Be Relevant to the PRC

As interesting, important and wonderful a nation as Spain is, the PRC (with the possible exception of the United States) is arguably now economically and politically the world’s most important nation. It is therefore essential that the PRC eventually become a juridical state where there is an overriding patriotic commitment to state institutions as opposed to a particular political party or a power clique. However, to expect the PRC to magically become overnight a juridical state in which the rule of law is the ultimate guarantee of national unity and social stability is unrealistic.

Nevertheless, General Secretary-designate Xi Jinping and Premier-designate Li Keqiang can provide the PRC with effective and stable leadership over the next ten years while the dynamics of political reform can be generated by whoever is chosen in March 2013 as the next Chairman of the NPC. As previously mentioned the leading contender for this position is the current vice-premier Zhang Dejiang. His selection would auger well for the PRC and the world because his has a formidable reputation as a problem solving overcoming issues as diverse as North Korean refugees settlement to the Severe Acute Respiratory Syndrome (SARS) epidemic.

Zhang Dejiang is apparently similar to other CCP leaders in that he gained high office by originally belonging to the Shanghai Clique and then rendering that faction possibly obsolete by aligning with President Hu. He has acquitted himself well, if not exceptionally, for effectively dealing with the PRC’s energy needs. However, it is probably best not to place too much hope in one person to be another Deng who will effectively rule by serving as the nation’s chief problem solver.

Nevertheless, it is to be hoped that Zhang will utilize his exceptional talents to help transform the NPC into the institution that will if required potentially be the nation’s salvation. The political genius of Deng Xiaoping bequeathed via the institutional structures of the 1982 Constitution have ensured national unity in the immediate term but they have so far being insufficient in preventing the CCP from becoming a corrupt ruling party. True, the Chinese model of socialism has proved to be infinitely superior to the Soviet version, but a top-down/power-over socio-economic and political model is ultimately non- viable without institutional checks and balances associated with popular legitimacy.

Refining and Updating Dengist Thought

Deng was correct in using SOEs as a means of overcoming potential gaps in the private sector to generate employment, thereby helping avoid mass poverty. SOEs have also proved to be an ingenious model by which the state through the provision of credit paradoxically facilitates private capital formation and a strong influence over economic direction. The major input into state in economic policy that Deng engineered was to prevent (or perhaps more realistically mitigate) regional economic and living standard discrepancies between the coastal and interior provinces.

The success to date of Deng’s ‘market socialist’ model does not negate the dangers inherent in such a hybrid system. Yes, economic discrepancies between regions have been mitigated in that there is still a regional dichotomy in that investment in SOEs in that those in Guangdong Province and Fujian Province have utilized foreign investment while this has been less the case in northern and western provinces. A related sign with regard to SOEs has paradoxically being their giving way to privately owned companies.

However, it would be a mistake for the PRC to phase out SOEs altogether because unemployment and poverty could ensue. Nevertheless, there is too much corruption within SOEs and signs of rivalry between them that the PRC could be set up for a future financial fall which could be fatal in the context of the GFC.

To blithely advocate internal corporate reform of SOEs would be naïve because the PRC’s institutional settings are not adequately in place. The NPC only meets for one ten day session a year to rubber stamp the decisions of the Standing Committee of the CCP’s Politburo. Hopefully, the next NPC Chair will have the authority to establish standing committees that meet throughout the year to review and ultimately formulate reforms in relevant to their specific concern.

A wide range of businessmen and managers with industry experience will hopefully be appointed as NPC deputies and specialist legislative committee members to facilitate reform. An important area of reform would be with regard to the operation of SOEs. Laws regarding business transparency, respect for private property ownership and corporate governance could provide SOEs with the capacity to operate in a transparently ethical manner so that the exercise of corrupt arbitrary state power (which was the cause of the fall of previous imperial dynasties and Chiang Kia-shek’s mainland regime) can be avoided.

Respect for and legal protection of private property would help economically vulnerable PRC citizens, too many of whom have been victims of forced evictions due to the whims of CCP connected businessmen. While it is true that Deng’s socialist market model has overcome mass poverty that nations such as India, Indonesia and the Philippines are afflicted with, general uncertainty in rural and urban areas regarding the threat of eviction is a potential threat to the PRC’s long-term social cohesion.

Maybe it is a paradox to advocate private property and business rights to protect and promote the interests of the poor people of a nation but a sense of psychological security with regard to ensuring basic needs (such as shelter and food) is essential if long-term social stability is to be achieved for the PRC. At the risk of coming across as a neo-liberal by advocating private property rights and effective institutional corporate government framework to promote the interests of the economically vulnerable, the granting of genuine labour union rights in the long term is a must.

High levels of precarious employment, which is reflective of uncertainty caused by a lack of due process with regard to housing and property rights, has led to the phenomenon of vast numbers of there being vast numbers of unregistered migrant workers in the PRC’s big cities. If transparency in SOEs, the state encouraging the growth of small business and creating conditions for stable business (domestic and foreign) investment is to be conducive to permanent employment and long term social stability then genuine labour rights must eventually be granted in the PRC.

The transformational impact of establishing (or moving away from) pluralist industrial relations system has crucially affected the dynamics of the social settings for a range of nations. As the world’s most populous nation the absence of a pluralist industrial relations system is a potential danger which the PRC cannot afford in the long run. An example of a nation which was positively affected by adopting a pluralist industrial relations system was France.

The brilliant American journalist and historian William L. *Shirer (1904-1993) observed that the absence of union collective bargaining undermined the capacity of employees to gain from the economic advances of pre-World War Two twentieth century France. This institutional bargaining gap underpinned rancorous class divisions in France which have since persisted but not sufficiently counteracted the tremendous socio-economic advances of the Fourth and Fifth French Republics crucially connected to having a pluralist industrial relations system.

(*Shirer was an American liberal-conservative in the tradition of Woodrow Wilson and Franklin Delano Roosevelt (FDR) who was unfairly blacklisted as a communist sympathiser in the late 1940s. In fact Shirer was a staunch admirer of Charles De Gaulle and Sir Winston Churchill and it was he who had alerted the world as a Europe based correspondent in the 1930s of the profound danger that Hitler posed. As such, Shirer was a staunch opponent of totalitarianism and of American isolationism.

The major mistake that this very important writer made was that he advocated a harsh peace settlement against western Germany after the Second World War. Had the Truman administration adopted such an approach the Soviet Union undoubtedly would have prevailed in the Cold War. This mistaken policy direction of Shirer’s does not negate his many brilliant insights, particularly with regard to modern French history).

The Importance of Independent Socio-Economic and Political ‘Actors’ to Maintain PRC National Unity

The crucial initial step for the PRC to have a pluralist industrial relations system is for the state to allow Chinese unions to become independent ‘actors’. The appointment of critically thinking workers and managers as deputies to the NPC and equivalent provincial legislatures could establish the long-term framework for the granting of genuine labour rights. A vital step in such a process would be for the All-China Federation of Trade Unions (ACFTU) to allow rank and file members to elect their own workplace delegates as a crucial step in advancing genuine union democracy.

Indeed, for trade unions to be independent they first need to be genuinely democratic. The need for independent trade unions in the PRC is already being manifested by the operation of ‘illegal’ trade unions. These ‘illegal’ labour unions pose a long term threat to the PRC’s social stability which would dissipate if ACFTU affiliates became independent or at least responsive to their members’ concerns.

While it important that trade unions be democratic and independent it is still difficult to achieve union effectiveness unless there is an institutional bargaining framework. Even though Germany and Japan have very different industrial relations they are both pluralist and as such have importantly contributed to boosting economic productivity and high employment generation. This occurs in the German and Japanese industrial contexts because union rank and file members, often with the input from union officials, devise and/or support work systems which facilitate a competitive business advantage.

Alas, the PRC’s current economic and ‘industrial relations’ systems are too top-heavy that the scope for a future upheaval from below cannot be realistically discounted. There are also pressing social problems such as high levels of mass migration from rural areas to the cities contributing to high levels of underemployment, pro-longed family separations and generally appalling working and living conditions for so-called ‘migrant’ workers.

That is not to say that the PRC’s talented and forward thinking bureaucracy which along with SOEs has successfully applied policies that have underpinned a new middle class and improved the lives of the working class and peasants. However, there have been too many gaps with regard to overcoming poverty which is a direct result of corrupt power interests seeking to perpetuate their economic and political power at the expence of the economically vulnerable.

In the above context having independent unions will in the longer term help overcome the existing social ills of poverty and precarious employment in a nation as massive in size and population as the PRC’s by protecting and enhancing employee rights. The stupendous achievement of Deng regime in the 1980s of dismantling Mao’s agricultural communes and having their place taken by productive privately owned plots could not have been achieved had CCP operatives worked in close co-operation with farmers on the ground. Without this successful land reform the PRC could not have become the contemporary economic super-power that it now is.

If similar achievements are to be accomplished in urban China with regard to employment generation and improving living and working conditions than let rank and file members and officials of future independent unions be the equivalent of the farmers of the 1980s. Furthermore, having independent actors, such as genuinely democratic unions, will also increase the prospect for the state to institutionally and practically separate from those in society (such as CCP-connected business people) who exploit others to advance their selfish interests.

The experience of the Franco regime in Spain between the late 1950s and mid-1970s was instructive in how an authoritarian regime can circumvent the explosion of social unrest by creating the scope within its institutional structures for semi-independent actors to operate. Although Francoist labour guilds (or commissions) did not challenge the existing regime their influence was such that unfair dismissal laws were formulated and applied. An important ramification of this development was that a subliminal signal was sent too many Spaniards to endure Franco’s continuance in power on the basis that a legal system was been developed which would not conducive to power later being concentrated with a narrow ruling group.

It is probable that if democratic elections are even held in the PRC that this will occur in 2023after the nation’s recent CCP leadership team’s terms have expired. In such a context it would be a positive development if institutional settings for an independent judiciary, a pluralist industrial relations system and a transparent corporate sector (with shareholder rights) developed over the next ten years in lieu of democratic multi-party elections.

The achievement of the above cited intermediary outcomes is however contingent upon there being an effective as opposed to democratically elected NPC. Because historical reference to the Cortes of the Franco era is challenging to place in a contemporary PRC context analysis of Hong Kong’s past and recent political development is more relevantly appropriate.

The Hong Kong Model: Squaring the Circle

Hong Kong for over one hundred and fifty years (1843 to 1997) was the archetypal British Crown Colony with regard to its political structure. This then colony had a vice-regal governor directly appointed by the British government and assisted by a mainly appointed Legislative Council (LegCo) composed of leading citizens. After the Second World War Hong Kong governors wisely moved away from predominately appointing British Europeans as LegCo members that the LegCo became predominately Chinese.

The LegCo did not however become a democratic legislature due to a majority of its members being appointed or elected from a very narrow voting suffrage. The prospects for Hong Kong democracy was also undermined by the LegCo’s lack of political power. The major political shift that did occur in Hong Kong by the 1960s was that power was effectively transferred from British colonial administrative personnel to local bureaucrats and powerful businesspeople.

There was negligible local popular agitation for democracy between the 1960s and late 1980s for democracy due to the implicit social contract that most Hong Kong people desired political freedom instead of a constitutional electoral democracy. This was because it was popularly envisaged that the latter would not be tolerated by the PRC after 1997 while the former might stand more of chance in a PRC ruled Hong Kong.

General anxiety in Hong Kong over the post-1997 return to Chinese sovereignty was unfounded due to the close links between the businesspeople in the LegCo and general government administration. The consequent 1984 Hong Kong Agreement which was formally negotiated between the British and PRC governments was really a deal between powerful local businesspeople and the Beijing where the concept of a system of ‘One Country, Two Systems’ was devised. As a Special Administrative Region (SAR) this territory is a political hybrid which reflects the inter-connection between local Hong Kong politics and broader PRC national security considerations.

Hong Kong now has a fully democratically elected legislature but its authority is counteracted by the extensive power of the Chief Executive who is ‘elected’ by a semi-corporatist electoral college which Beijing has sufficient institutional reach to influence. Indeed, the Chief Executive’s ‘election’ is formally subject to conformation by the PRC’s national government. The PRC’s political power in a Hong Kong context is also bolstered by the substantial, if minority electoral based support for the pro-Beijing political parties, most notably the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB).

As a Chinese political entity Hong Kong is illustrative of how political deals can be done ahead of time by having a powerful and useful non-elected legislature. A transfer of political power was affected in the 1960s from the London appointed governor to influential business interests which were represented by their appointment to the LegCo. These local elite interests in turn negotiated the 1984 Hong Kong Agreement with the PRC’s national government. This established the current modus operandi balancing local democracy with sufficient accommodation of Chinese national interests (the Hong Kong model).

Deals within and between political elites, even if shadowy, are a dime a dozen throughout history. The distinctive aspect of political deal making with regard to Hong Kong which is relevant to contemporary, and possibly future, PRC politics is that a non-elected legislature was utilized to brilliantly formulate and institutionalize ahead of time to seemingly intractable problems.

Effective National Legislatures Can Ensure National Salvation

The NPC, if revamped, can become the equivalent of a PRC version of Hong Kong’s LegCo: an institution with the capacity to be an alternative but non-threatening alternative to the CCP. Immediate measures to assess the impact of a possibly reformed PRC would be its role in facilitating the formation of independent (or quasi-independent) associated institutions or organisations, such as trade unions. The NPC could also be the ‘laboratory’ (as Francoist Spain’s Cortes had become by the mid-1970s) as the forerunner for future possible PRC political parties.

Paradoxical continuity between the PRC’s current Marxist-Leninist system (which has served its purpose in facilitating and maintaining actual national re-unification on the mainland in and since 1949) and a future political system can be achieved if institutions and/or parties are formed under the Rubicon of the existing regime. For this to happen there still has to be a powerful internal reform within the contemporary system as opposed to a projected transformation. The major reform challenge is that of effectively combating of corruption.

To be blunt, corruption in a nation as massive as the PRC can only effectively be counteracted by institutional processes being in place. The traditional means of countering corruption in China was to have administrative power vested with a virtuous administrative scholarly caste of officials who had gained initial entry by civil service examinations. When the power of such an administrative class went awry this contributed to the corruption of a ruling dynasty. This in turn was often taken as a sign that the ruling imperial family had lost its ‘Mandate of Heaven’ and that it was appropriate to revolt to initiate a change of dynasty.

An equivalent republican methodology devised by Sun Yet-sen was the creation of the Examination Yuan as a branch of state. This yuan (tier/agency) did not supervise civil service examinations as its name suggested but rather acted as a permanent anti-corruption agency. The Examination Yuan of the Republic of China (ROC) on Taiwan since the de facto leadership of the ROC was assumed in 1972 by Chiang Ching-kuo (1910-1988) became the effective tier of government that Sun had intended it to be in combating corruption. The legitimacy that Chiang Ching-kuo therefore gained as president between 1978 and 1988 has virtually assured the ROC’s permanent survival.

In a PRC context a future NPC could demonstrate its powerful utility in underpinning national unity on the Chinese mainland by creating and delegating power to the PRC equivalent of an Examination Yuan. Such a yuan combined with the PRC equivalent of a Judicial Yuan could ensure that effective and transparent institutional processes are in place to combat corruption. A combination of retired military officers and lawyers could administer these yuan (tiers) to ensure that professional integrity of the highest standard is adhered to in lieu of there being conventional checks and balances associated with an electoral democracy.

The Franco regime was one which overcame the fundamental problem of corruption within an authoritarian system. There was extensive initial *corruption in the Franco regime but by the early 1960s the Phalangists and Carlists had withered away to be replaced by relatively honest National Movement bureaucrats that the potential cancer of corruption was overcome. Corruption as it was after the 1960s in Spain was paradoxically transparent, such as the families of armed forces personnel shopping in special dispensaries, but such privileged distinctions were overlooked due to the achievement of general higher living standards.

(*The Spanish Generalissimo did not tolerate any corruption within the army during the civil war that officers who misappropriated funds or rations were summarily executed).

Franco himself never misappropriated any funds as he arranged to live off a generous civil list which encompassed official residences and household staff derived from his life tenure as chief of state. His personal entourage included well paid secretaries, cooks, a dietician, physicians and military ADCs who were all drawn from the highest echelons of their respective spheres of expertise so that corruption on their could part was never an issue.

After Franco died no high officials of his regime were prosecuted for either human rights abuses or corruption because there was an evolutionary sense of continuity to the new democratic constitutional monarchy. Previously powerful generals in the post-Franco era often went into lucrative retirement as they often served on various corporate boards of management that most of them adapted to the onset of democracy.

Similarly, if institutional processes are initiated in the PRC by the NPC then currently corrupt practices can be phased out without fear of possible retribution in a newly evolved future political system. Opponents of political reform within the CCP helped instigate allegations of extensive corruption against Premier Wen Jiabao in the foreign media. The New York Times newspaper cited allegations that the premier’s family controls US$ 2.7 billion in financial assets.

Whatever the credibility of the allegations against Premier Wen’s family they have the potential to undermine future political reform which the PRC needs in the long term to maintain national unity and avoid political turbulence. Wen is the major political survivor as a close ally of former CCP General-Secretary Zhao Ziyang. The outgoing premier survived Zhao’s fall in 1989 due to the protection of Deng Xiao-ping who utilized his depleted political power following the *Tiananmen Square massacre of June that year to protect Wen.

(*Had Deng not agreed to the shooting of protesters encamped in Tiananmen Square he would have been arrested by corrupt CCP hardliners).

The political comeback that Deng made in the 1990s established the basis for Wen to become premier in 1998. As premier, Wen has followed on in the tradition of Deng in formulating policies aimed at overcoming the inherent dangers of having a Leninist top-down form of government in a nation as vast as the PRC. The dangers associated with a Leninist form of government have been countered somewhat by the PRC having a talented and honest technocracy that is forward thinking and practical.

That the PRC now has such an effective civil service after the ideological lunacy of the Mao era is incredible and is a tangible legacy of Deng’s reforms. Having such a talented civil service with national reach throughout the nation was a secret to previous imperial dynasties been effective. Unfortunately, corruption at the Emperor’s court more often than not undermined the power of the scholar administrative class of Mandarins that a cycle of rebellion, national disintegration, reunification and renewal under a new dynasty often occurred over two thousand years.

Even though there is unfortunately no prospect whatsoever of a Chinese monarchy ever being restored the above cited pattern is still a dangerously plausible scenario. The PRC has a talented bureaucracy but a corrupt ruling party where power within the CCP is gauged by the wealth accumulated by competing party bigwigs. To divert attention from the need to establish anti-corruption institutional processes powerful figures within the CCP are promoting international discord so that the armed forces will be diverted from utilizing their power to support political reform.

Why The PRC’s Best Defence is National Unity

Indeed, a sure sign that political reform is needed in an authoritarian system can often be gauged when entrenched interests divert national attention and resources from domestic affairs by promoting international discord. The national cohesion of the PRC in itself guarantees that China will always be a world power that the primary objective of the People’s Liberation Army (PLA) must always be to maintain national unity.

For all the disasters which befell China as a result of the nation becoming communist in 1949 the PLA always focused on maintaining national unity. The most important manifestation of this focus was in 1976 when the PLA removed the Gang of Four from power following Mao’s death in September that year. Although this ensured that power was vested with a then organisationally weak CCP the military’s action ensured that national unity was maintained by vesting power with civilian authority- the scourge of warlordism was thankfully avoided.

The military’s understandable determination to maintain national unity was such that the PLA’s senior officer corps were prepared to withdraw their support from Deng in 1989 unless he acquiesced to the Tiananmen Square Massacre. Deng was able to re-emerge from semi-retirement in early 1992 to again lead the nation until his death in February 1997 because the armed forces decided not to support a return to centralized Leninist planning in the wake of the Soviet Union’s disintegration in late 1991.

Deng’s 1992 return to power constituted the armed forces restoring him as the PRC’s chief problem solver. Deng had an intact power base to resume national leadership because he had previously in the late 1970s and 1980s rejuvenated the CCP by rehabilitating the critical mass of party officials who had previously been purged during the so-called Cultural Revolution. Furthermore, the void created by Mao’s weakening of the CCP in order to establish a personal Stalinist dictatorship enabled Deng to later bring in honest technocrats into the void. Consequently the PRC now has a powerful and effective civil service.

As important as Deng as a leader was in maintaining national unity he knew that the model of a one person problem solving ruler was unviable in the longer term after he died. Deng therefore ushered in the 1982 national constitution whose main attribute to promote institutionalized collective decision making was to place term limits of a maximum of two five year terms on senior officials. The PRC’s system of collective party leadership has been effective in that high economic growth rates have been achieved to endow an acceptance of CCP rule by the majority of the Chinese people.

Why Shrewd Liberalization is Often Required if Leaders Associated with Dictatorships Are to Ultimately Politically Survive

However, history is littered with examples of corrupt regimes achieving impressive high growth rates and temporary improvements in standards of living due to dictatorial power being exercised to implement the policies devised by talented technocrats. Indonesia under Suharto and the Philippines under Marcos in the 1970s were stand out examples of sultanistic regimes that were very economically successful for a time but whose corruption eventually caught up with them that they eventually fell.

The Marcos regime might have survived and disengaged itself from its colossal corrupt practices which the canny President Ferdinand Marcos (1917 to 1989) knew could ultimately bring him down had he not tried to re-impose martial law in February 1986. Prior political manoeuvring by President Marcos had compelled the main opposition presidential candidate Corazon Aquino (1933 to 2009) to run as a candidate of the United Nationalist Democratic Organization (UNIDO), the major opposition umbrella organisation/party.

UNIDO was led by Doy Laurel (1928-2004) who was covertly aligned to the Marcos regime. Because Corazon Aquino had run as the UNIDO presidential candidate this party was accorded the status of Dominant Opposition Party (DOP) that it was entitled to field poll watchers for local watchers (scrutineers) for local elections which President Marcos had moved to May 1986.

The initial Marcos strategy was to allow UNIDO (many of whose leading members had once been aligned to the regime) to win the May 1986 local government elections to placate the uproar caused by Marcos rigging his re-election in February that year. The ensuing scenario probably would have been appointing Laurel as prime minister after the UNIDO victory in the local government elections to head a national unity government.

The formation of a Marcos-Laurel government would have been a prelude to UNIDO and the regime’s Kilusang Bagong Lipunan (KBL, New Society Movement) merging to form a dominant ruling party (DRP). To ensure that his wife Imelda (1929- ) and her brother Benjamin ‘Kokoy’ Romualdez (1930-2012) had a strong power base after he died Marcos would have dropped his constitutional decree powers so that when a Vice-President Arturo Tolentino (1910-2004) would succeed to the presidency as a titular head of state.

Although power would have been vested in a Prime Minister Laurel his personal weaknesses would have provided Imelda and Kokoy with the capacity to maintain their power with the former to possibly succeeding Laurel at a later stage by buying him off. Crucial to members of the Marcos family maintaining their power in a parliamentary system was Eduardo ‘Danding’ Cojuangco’s (1935- ) controlling the San Miguel Corporation.

This corporation is the only Philippine mutli-national and a Marcos regime backed raid on San Miguel shares in January 1984 set the groundwork for Danding to become company chairman in March 1985 with the Romualdez family receiving 20% of the company’s shares. By linking the San Miguel Corporation to a dominant ruling party, which would have had electoral legitimacy due to UNIDO’s victory in the 1986 local elections, the interests of the Marcos-Romualdez clan would have been secured.

The egregiously corrupt financial practices (which had come home to roost for the Philippine economy by 1982) of Marcos regime cronies, might have been curbed, if not ended, had a parliamentary system been adopted with a DRP. This was a plausible scenario because the economic power of the regime’s cronies would have then been institutionalized with a San Miguel led corporate empire.

The transition to a parliamentary system did not eventuate because President Marcos tried to re-impose martial law after his rigged February 1986 re-election after his army chief of staff; General Fabian Ver uncovered a coup plot in which the Defense Minister Juan Ponce Enrile (1924- ) planned to instigate a commando raid against the Malacanang Presidential Palace to kill the first family.

President Marcos and General Ver in setting a trap for the Enrile led rebels took the fatal decision to move against the vice army chief of staff, General Fidel Ramos. As commander of the Philippine military constabulary it was General Ramos’s tactical and technical skills that enabled Marcos to get away with imposing martial law in September 1972. Nevertheless, it was General Ramos’s power within the armed forces which prevented Marcos from establishing an absolutist family dictatorship similar to the Duvalier regime in Haiti.

Therefore, for President Marcos that impending abortive Enrile coup provided a golden opportunity to purge General Ramos to establish an absolutist family dictatorship. Unfortunately for Marcos his ever alert defense minister discovered at the last minute that a trap had been set for his troops so he took refuge in a military base where he was soon joined by General Ramos who otherwise would not have joined the rebellion had Marcos not also tried to purge him.

Hundreds of thousands, if not millions of people, in Manila turned out to demonstrate in support of the revolt that Marcos sensibly gave way in return for he and his family being allowed to depart into exile. The Marcos family were eventually allowed to return to the Philippines in November 1991 after Ferdinand Marcos had died in Hawaii in September 1989.

An important reason why the Marcos family were allowed to return to the Philippines was so that Imelda’s presidential candidacy in the May 1992 presidential elections would split the vote of Ramon Mitra, the Speaker of the House of Representatives, to help Fidel Ramos to win the presidency. Having fallen from power in 1986 by failing to destroy the man whose support was needed to establish a dictatorship in 1972 the Marcos family re-entered Philippine politics by effectively aligning with Fidel Ramos.

The dramas that the Marcos family and aligned their cronies endured after 1986 were avoidable had Ferdinand Marcos adhered to his original game plan of establishing a parliamentary system in which the economic power of regime cronies would have been legally institutionalized within the San Miguel business empire.

Officials and powerful supporters of the Franco regime avoided the drama that befell the rich and powerful associated with the Marcos regime because a long term strategy for post-dictatorship adaptation was adhered to. This was partly because there was no corrupt ruling party or coterie to block a transition to an electoral democracy, or at the very least, prevent the consolidation of a juridical state.

The institutional structures of the Franco regime also crucially aided in establishing the groundwork for a transition to democracy. Furthermore, a range of industrialists, managers and labour lawyers and representatives from labour syndicates were appointed to the Cortes between the 1960s and 1970s. This helped ensure that there was a diversity of representation so that corporate and industrial laws did not unfairly favour a section of society or perpetuate state sponsored corruption.

There is scope over the next ten years (2013 to 2023) for the next NPC and equivalent provincial legislatures to be revamped so that company, industrial, legal and judicial reform can be undertaken to establish *institutionalized processes. This will be crucial to helping the PRC become a juridical state that will ensure permanent Chinese national unity and avoid political turbulence. Such an outcome is plausible because the PRC has a talented bureaucracy that can be supported by a lateral NPC help achieve that an outcome similar to post-Franco Spain eventuates.

(*Even if the allegations of corruption against Premier Wen’s family are true howls of outrage are best avoided. In authoritarian systems where there is the position of prime minister, the occupant is usually an honest technocrat whose administrative competence helps ensures the government’s functioning.

Because of the PRC’s massive size it is perhaps improbable for a premier to maintain a powerbase without a corresponding financial base given the predominately non-ideological factional rivalry within the CCP. The fact that there are still reform prospects for the PRC had been due to the tenacity of Premier Wen is reason enough that allegations of corruption against his family should not be given automatic credence. Should this occur then the possibility for needed future economic, legal and political reform could be fatally compromised.

Financial gains that have been made by senior party and government officials can be legally consolidated into future corporations and SOEs with transparent accountability processes over the next ten years as part of a reform process. The ROC’s ruling Kuomintang (KMT) is reputedly the world’s wealthiest political party and as such there was every reason for power groups within that ruling party to obstruct reform.

Having however experienced the trauma of the fall of his father’s mainland regime between 1946 and 1949, President Chiang Ching-kuo (1910 to 1988), who was perhaps even more astute than Deng, undertook the required previously cited preventative maintenance to ensure the ROC’s permanent survival by gaining the majority acceptance of its citizens).

Importantly, the PRC has a talented bureaucracy which is capable of confronting the challenges of effectively administering the world’s most populous nation. For all the doom and gloom predictions concerning the PRC’s future it should not be forgotten that its state technocrats fulfilled a vital role in the early stages of the GFC in 2008 in preventing an international financial collapse.

An international collapse was averted in 2008 by the PRC strategically buying US Treasury bonds. It is therefore very re-assuring that this strategic and technical skill of the PRC’s civil service is transferable in a domestic political context so long as self-interested and corrupt power forces do not impede the necessary reform that can and must be undertaken.

Due to the PRC’s role in saving the international financial system and in providing a potential pathway out of the GFC, Sino-American co-operation must be a very high priority for any American presidential administration. In this context President Barack Obama’s 2012 re-election is a welcome development. The GOP presidential candidate Mitt Romney’s attacks on the PRC for supposed ‘currency manipulation’ were counterproductive to the point of fatal.

The Curious 2012 American Election Campaign

Romney’s 2012 electoral defeat has led to subsequent media commentary as to how the Republicans should review their strategy and adopt a fundamental sense of policy re-direction. Such analyses are flawed because the GOP is transitioning toward consolidating becoming the United States’ majority party. This trend is reflected by the Republicans now holding thirty of the nation’s fifty state governorships. Indeed, President Obama probably would not have been re-elected had it not been for a sufficient number of GOP officials counteracting Romney’s strategy in the closing stages of the 2012 campaign.

The Romney strategy was essentially one of winning the votes of white males (and that of their families) by campaigning with the implicit message that President Obama was not committed to generating full employment for that very important section of society. This strategy was in itself disingenuous because Romney’s previously secretly recorded comments indicated that the pursuit of full employment by an administration of his would have been an optional extra to say the least.

The major force which powered Romney’s presidential bid was that of wealthy Americans funding his campaign to avoid paying increased rates of tax. It is estimated that over US$ 6 billion was funnelled into the Romney campaign through Political Action Committees (PACs) by wealthy Americans wishing to avoid paying higher taxes.

This impact of this financial support was reflected by the well organised Republican nationwide on the ground to ‘get out the vote’. The GOP voter drive did not have an explicit racial basis to it and non-white communities were targeted. However the strong anti-tax increase theme of the Republican campaign was a direct appeal to the middle class which did not resonate with African and Hispanic Americans because they tended to be less economically well-off. In many respects the Romney campaign was a well organised replay of the *John Mc Cain push for the presidency in 2008 in that voter turnout and candidate selection had a strong racial component to it.

(*That is not to say that Senator John Mc Cain was in anyway complicit in running a race based campaign as this dynamic was a phenomena that unfortunately arose of its own accord in 2008).

The flipside of Romney implicitly racially based campaign was that it paradoxically consolidated the support of non-Anglo communities behind President Obama. There was a Romney campaign expectation (or perhaps hope) that enough African Americans and other minorities who under-whelmed by performance of the Obama administration that enough of them would stay at home on polling day.

The above scenario did not occur due to the paradox of the Romney campaign’s implicitly, but still distinctly, targeting white voters. This strategy was still evident enough that a sufficient number of ‘non-Anglo’ voters were motivated to support President Obama’s re-election. Furthermore, polices such as Romney’s strong anti-migrant stance, prompted many Hispanic voters probably to turn out to vote for the president’s re-election.

That is not to say that the Obama administration did not have its own substantial achievements which generated a strong re-election base. The financial support that was given to the American auto industry (‘the bailout’) by the Obama administration saved that vital sector. This important step crucially helped stave off a potentially catastrophically negative multiplier effect that could have been economically disastrous. The narrow margin by which President Obama won re-election in the electoral swing and car manufacturing car state of Ohio was testament to both the economic and political importance of judicious government financial support.

Why the GFC Is A Credit Crisis That Could Lead To Another Great Depression

Critics of government/state intervention might argue that this is a creeping form of American socialism/statism. However, the United State’s private sector is so remarkably robust and innovative, that most of the government loans lent to car manufacturers have since been re-paid. This demonstrates that these ‘bailouts’ far from undermining the auto industry have helped renew the American private enterprise system as the driver of economic growth.

The Obama administration’s success in helping bail out of the American auto industry is indicative of how economics is a cyclical social science: there are times when government intervention is appropriate and others when it is not. In an American context government support via the emergency provision of credit is more than appropriate because (as the ‘bailout’ of the American car industry showed) important components of a private sector can be renewed at the vital juncture by temporary government financial assistance.

The major threat that government financial assistance in the United States or another developed economy is that of *political elites gaining undue influence in the private sector to advance their interests at the expence of a genuine national interest. A private sector is conducive to promoting the wider good when there is scope for private capital formation (i.e. credit), ensuing business activity and subsequent employment generation. The negative impacts of the GFC are such that the achievement of these aforementioned criteria is being undermined.

(*In Australia the onset of PRC SOEs buying prime agricultural land is illustrative of the failure by - or treason- of rent-seeking elements within the ALP and the coalition parties to adequately protect private property rights to help safeguard the genuine national interest).

With regard to private capital formation, the scope for the United States to break out of the GFC is unachievable unless and until the financial credit worthiness of the American government is restored: i.e. the budget deficit and massive public foreign debt re expeditiously reduced. Consequently, the efficacy of the previous long-standing approach of financing American public debt by Treasury bonds should be continued but reviewed in the longer term.

The United States has historically circumvented the potential pitfalls of high debts and deficits through the issuing of US Treasury bonds which are government guaranteed and secured by the American dollar being the world’s de facto reserve currency. The strength of US Treasury bonds combined with economic growth spurred by America’s amazing private sector usually saw over a period of time the value of national public debt decline to the point of being no economic threat.

However, the context of the GFC and continuing domestic American economic uncertainty (despite an apparent increase in consumer spending for Christmas 2012) means that high budget and foreign debt levels presently threaten the viability of the American and global economies. Indeed, the PRC’s current focus on gold accumulation as part of adopting a Chinese version of the gold standard is reflective of the PRC developing a fallback position should the value of the US dollar ever become imperilled.

Due to the close interconnection between the PRC and American economies because of the high levels of Chinese purchases of American Treasury bonds Beijing cannot afford to pull the rug out from below the American economy. Nevertheless, the transition to the PRC equivalent of a gold standard could change the aforementioned premise.

History indicates that when great nations such as the United States become economically vulnerable when they ultimately have to rely upon external powers which might want bring down a major power when it advances their interests. The raising of taxes for the very wealthy in the United States offers an expeditious escape route as an invaluable stop gap measure to internally strengthen America which can be later reversed by future tax cuts for the very wealthy.

Why The Approaching Fiscal Cliff is Really An Economic Abyss

It is true that in-built legislatated tax increases and spending reductions scheduled to take effect on the First of January 2013 might reduce the budget deficit and public foreign debt but at the expence of an international economic meltdown. The immediate economic and social cost of these in-built ‘fiscal cliff’ economic re-adjustments is too a high a risk in the context of the GFC.

International economic confidence will be jeopardized unless there is a lateral and considered bi-partisan budget package which has the support of both the Obama administration and the Congress. A spike in international business confidence (which at the very least the United States going over the fiscal cliff will cause) will precipitate a global financial disaster.

Therefore the 2012 re-election of President Obama in the contemporary context of the GFC presents both a major positive opportunity and risk to the world economy. Going on the record of President Obama’s first term, his major strength has been to adhere to a particular policy course to facilitate its implementation*. The stand-out example of this approach was the passage of Obamacare.

(*This powerful aspect of President Obama’s leadership is being manifested by the prompt formation of a task force to make recommendations to be quickly implemented for gun control following the massacre in Newtown, Connecticut on the December 14th 2012. The American skill for expeditious action will hopefully be replicated with regard to stopping the United States from going over the fiscal abyss on New Year’s Day, 2013).

The major shortfall of the Obama presidency has been a failure to work constructively with the American Congress, particularly since the Republicans won a majority in the House of Representatives in 2010. Perhaps there is blame on both sides but President Obama’s Lincolnesque success of achieving a rapprochement with the Clintons indicates that his political talents have yet to be similarly applied with regard to effectively negotiating with the GOP majority in the House of Representatives.

Back To The Future? : The Important Lessons of the Clinton-Gingrich Era

The frustrating aspect of the contemporary executive/legislative deadlock is that between 1995 and 1998 the heavy lifting of getting America out of a debt and deficit conundrum was achieved by effectively reaching a presidential-congressional policy consensus. True, the *co-operation between President Clinton and then House Speaker Newt Gingrich was acrimonious but non-inflationary employment generating economic growth was achieved, despite, or perhaps because, of the personal and political dynamics of that era in the 1990s.

(*Co-operation is conceptually superior to compromise. The late American Gestalt political scientist Mary Parker’s Follet (1868 to 1933) preferred co-operation over compromise. For Mary Parker Follet co-operation offered the promising prosect of a synthesis of initially differing but still valid ideas to powerfully overcome apparently intractable problems. Alternately, Mary Parker Follet was wary of compromise because of the danger of trying to align ideas/approaches which were possibly inherently non-compatible).

Financial disaster was previously averted because the overriding objective of reducing the budget deficit and public foreign debt was a consistent policy objective for both President Clinton and Speaker Gingrich. The respective talents of these two American leaders were harnessed due to the urgency of achieving debt and deficit reduction in the 1990s.

The gravity (no pun intended) of the contemporary situation is such that executive (i.e. presidential) and congressional co-operation must be achieved by the New Year of 2013 to avoid an economic catastrophe. If in-built tax increases and spending reductions take effect in 2013 the American economy will fatally contract. There may be American neo-liberals who would welcome mass unemployment and underemployment to help establish a socio-economic regime in which wealth is concentrated with those with access to money and resources.

If Creative Destruction is Negative Then Negative Socio-Political Extremist Turmoil Will Follow

Furthermore, the impact of incredible on-line technological change in facilitating creative destruction also has the potential to go either way: boosting employment growth to generate economic security or consolidating a shift toward institutionalized high levels of unemployment, low wages and mass poverty. These two vividly contrasting scenarios reflect the great importance of the December 2012 congressional of the vote (or non-vote) on a budget bill which will determine whether the United States goes over the fiscal cliff into socio-political disaster.

The social change caused by the industrial revolution in the late nineteenth century saw the rise of a class approach to politics in European nations which facilitated the emergence of social democratic and labour parties. This was a positive development because the emergence of social democracy in Europe and later around the world was more often than not commensurate with a growth and consolidation of democracy.

Unfortunately however industrialization also saw the growth of Marxism as an ideology. Had Lenin not seized power in Russia in 1917 and consolidated his dictatorship then Marxism would not have become such a destructive force in the world. Nevertheless, Marxism became this terribly destructive political and ideological force in the twentieth century due to (among other reasons) this ideology’s lack of respect for *private property rights.

(*An absence of a legal respect for property rights in the PRC threatens a possible future economic collapse which even talented technocrats will be unable to avoid).

Another ideology which again threatens to wreak havoc should there be an international economic collapse is fascism which is less ideologically developed than Marxism. Fascism became a powerful and destructive force in Germany in the early 1930s in the context of societal breakdown wrought by a profound economic crisis.

It is now almost an axiomatic historical deduction that without the Great Depression Hitler could never have come to power in Germany in 1933. The intensely annoying aspect of the rise of fascist regimes in Europe in the inter-war period was that they were more often than not a result of ruling elites mistakenly believing that they could manipulate popular unrest to their advantage.

A House Divided Cannot Stand: President Abraham Lincoln

With profound socio-economic change occurring now is not the time for the leadership of the United States failing to appreciate the nexus between economic catastrophe and disastrous socio-political ramifications. In this age of social media extreme left-wing and extreme right-wing groups will be able to harness massive unrest should there be an American socio-economic collapse, which will occur if the United States goes over the ‘fiscal cliff’.

The application of a Lasch strategy by some on the political right will be insufficient to counter a left-wing on-slaught particularly as a populist right will appeal to a predominately white base. This will in turn solidify support by many impoverished non-Anglo Celtic Americans for a far left-wing social movement.

In the above cited context the so-called ‘occupy movement’ is essentially a preliminary movement for a more virulent extremist force in American society. Whether the ‘occupy movement’ transitions to being a destructive force is essentially dependant upon whether President Obama (1961- ) and the House Speaker, John Boehner (1946- ) reach a deal by the end of the month.

Due to the immense importance of President Obama and Speaker Boehner reaching a deal reference to the Clinton-Gingrich era in which massive fiscal problems were overcome is appropriate for the purpose of critical review. That the fiscal dangers that the United States in the 1990s were surmounted was partly due to the personal and political dynamics between the then president and speaker.

Newt Gingrich’s (1943- ) political career validates the maxim that luck is where preparation and opportunity coincide. The future speaker commenced his political career in the mid-1970s as a political oxymoron by being a Southern Republican. After the American Civil War (1861 to 1865) the former confederate states became Democratic bastions until President Richard Nixon’s (RN) 1972 re-election. Indeed, RN carried Newt Gingrich’s home state of Georgia with 75% of the vote in 1972 but four years the former governor, Jimmy Carter carried his home state with 67% of the vote as the Democrat presidential candidate.

Paradoxically, because President Carter had such bad relations with a Democratic majority Congress the Republicans made a relatively small net gain of fifteen seats in the 1978 congressional elections. Importantly, Newt Gingrich was among the GOP freshmen congressmen. Gingrich’s election to the House of Representatives in the president’s home state was a portent of Ronald Reagan carrying the ‘Deep South’ in the 1980 elections and of the Republicans becoming competitive in that time Democrat bastion.

American Greatness Restored: The Reagan Era in Retrospect

President Reagan’s is justifiably considered to be one of the great presidents of the United States due to his role in reviving the American economy and helping America provide leadership to the more or less free world in prevailing against Soviet power. However, it should not be forgotten that throughout the Reagan presidency (1981 to 1989) the Republicans were the minority party in terms party registration and popular congressional voting support. For this reason it seemed to be an impossible dream that the GOP could ever win a majority in the House of Representatives.

Congressman Newt Gingrich therefore often found himself in the situation of supporting a popular president who could not pry away a sufficient number of voters to support the GOP in congressional and state elections. The 1980s equivalent of a presidential-congressional struggle approximating a battle for America’s ideological soul was the inter-play between President Reagan and House Speaker Thomas ‘Tip’ O’Neal (1912 to 1994). The intensity of the Reagan-O’Neal struggle was essentially concealed from the public by their respective affable *personas.

(*Following the outbreak of the Iran-Contra ‘Scandal’ a recently retired Tip O’Neal launched a series of scathing personal attacks against President Reagan in 1987 which ultimately rebounded to tarnish the former speaker’s image).

More often than not it was GOP congressmen such a Newt Gingrich who were at the forefront in fighting for the ‘Reagan Revolution’ against O’Neal partisans encompassing Congressmen and their staffers. This battle was in some ways uneven because FDR’s New Deal remained the socio-economic orthodoxy. Nevertheless, the ideas underpinning the Reagan Revolution remained sound, such as cutting taxes to stimulate economic and employment growth. Indeed the 1981-82 Reagan tax cuts facilitated the longest period of post-war inflationary growth in American history.

In many ways the Reagan era was one where the American people got their cake and ate it. The spending cuts to entitlements that the Reagan administration sought to avoid going into deficit were not achieved. The massive budget deficit was deepened by the tremendous increases in defence spending in the 1980s that were undertaken to challenge Soviet power. These increases in defence spending were loathed by so-called liberal-democrats who as a result of their Vietnam Syndrome were inherently suspicious of the United States exercising its power in the world.

To help undermine the United States as an international power much of the ‘liberal’ American and international media personally ridiculed President Reagan and derided his presidency as a failure after he retired in 1989. The massive budget and trade deficits, as well as the high level of foreign debt that were bequeathed, supported a media commentary that the Reagan era had set the scene for the United States to become a failed nation.

However, official economic statistics during the Reagan era negated the strength of the American private sector’s impact in still facilitating high levels of economic growth, employment and international competitiveness. Furthermore, the foreign and defence policies vitally contributed to the fall of the Berlin Wall in November 1989 and break up of the Soviet Union at the end of 1991. President Reagan’s role in helping facilitate these historic outcomes were not *acknowledged by too much of the American and international media.

(*Many Berliners welcomed President Ronald Reagan to their city in 1990 on the first anniversary of the wall coming down to show their appreciation of his historical role).

The overall success of the Reagan presidency was such that even before the Berlin Wall came down that enough American voters deliberately opted for the George HW Bush in the 1988 presidential election. The 1988 Bush victory was a repudiation of the anti-Reagan theme of the 1988 Democratic Party presidential candidate Michael Dukakis that America was in profound decline.

The presidency of George HW Bush (1989 to 1993) was interesting in that the president was an unusual combination of technocrat and party loyalist. Appreciating that the budget deficit eventually had to be addressed, President Bush believed that his initial success in liberating Kuwait in 1991 provided him with the political capital to raise taxes to provide the groundwork for eventually overcoming the budget deficit.

Indeed, while President George HW Bush did help set the scene for paying off the budget deficit the political cost was high because he alienated too much of his base in the 1992 presidential election. True, most of the squandered Bush vote went to the independent candidate, Ross Perot of Texas, but the net result was still the same with Arkansas Governor Bill Clinton of the Democrats easily winning the presidency.

Had President George W Bush better utilized Reagan congressional loyalists such as Newt Gingrich in negotiating a budget deal in late 1990, his electoral base may have held in 1992. These GOP congressmen knew what their Democrat counterparts were prepared to accept in relation to entitlement reform to help bring the down the budget deficit. Furthermore, the then contemporary Reagan loyalists had sufficient nous to shore up President Bush’s base that he could have won re-election in 1992.

President Bush’s 1992 election defeat naturally resulted in American and international media commentary that Reaganism was a failure and that the Republican Party had to fundamentally re-assess its sense of direction. Such condescending advice often ensues for the party of a losing presidential candidate. President Bush’s 1992 election defeat seemed to place the Republicans in a quandary because their former leader was bereft of an ideological legacy which could serve as a possible basis for political renewal.

President Reagan however had bequeathed a coherent ideological framework based on the premise that America’s private sector is the driver of economic and employment growth. Importantly, President Reagan had a post-presidential political base among congressional Republicans such as Newt Gingrich. They had supported President Reagan in office and then fought for his ideological legacy in the Clinton era.

Newt Gingrich House, who had become Minority Leader in 1989, had probably once thought it a dream that his Republican Party could ever win a majority in the House of Representatives. But such a dream did come true as a result of the combination of circumstance and preparation. Just as Newt Gingrich had become a politically active Southern Republican when it seemed to go against the tide, he led the Republicans to a majority in the House of Representatives in the 1994 mid-term elections when it seemed that the Democrats would retain their New Deal legacy as America’s majority party.

The Republicans’ 1994 congressional election victory essentially converted the previous majority support that President Reagan had garnered on a personal level in the 1980s into a party majority for the Republicans. This is a scenario might have been in the 1974 congressional elections if it was not for the Watergate beat up. A Republican voting majority during the Reagan and George W Bush presidencies did not occur because congressional Democrats safeguarded entitlements.

The platform for renewed Reaganism which helped facilitate a transition to a Republican national majority was encapsulated in ‘The Contract with America’, the 1994 GOP election manifesto. This cornerstone of this contract was lower taxation to stimulate demand and employment growth. Less credibly, as a Republican election promise at this time, the Contract with America committed a GOP Congress to eliminating the budget deficit.

Snatching Victory From the Jaws of Defeat: The Post-1994 Clinton Renewal

Paradoxically, the 1994 Republican election victory was the best thing for President Clinton because it provided him with a policy framework context by battling with and eventually arriving at solutions with a Congress which was committed to paying of the budget deficit. That a GOP majority Congress in the 1990s would eventually achieve a paying off of the budget deficit then seemed an improbable scenario given that the Reagan White House and the Tip O’Neal led House of Representatives failed to reach agreement in the 1980s.

Because of the underlying strength of the private sector in the 1980s, which was partially but crucially derived from the Reagan tax cuts the Republicans and Democrats could afford to agree to disagree over fundamental points of difference which were tangibly manifested by the massive budget deficit. Republican congressional leaders in the 1980s such as Newt Gingrich had witnessed the failure of the White House and the majority Democrat House of Representatives to overcome the budget deficit.

Congressman Gingrich had probably gained a reinforced sense of political formation as a Reagan conservative which would serve him well as House Speaker when it came to negotiating with President Clinton in the 1990s. The political dynamics between President Clinton and Speaker Gingrich were very painful as deadlocks between the executive and legislative branches sometimes resulted in a temporary shutdowns of federal government services due to budget *deadlocks.

(*In the context of the GFC any similar temporary federal government shutdown will lead to a socio-economic and political catastrophe).

Nevertheless, by hook or by crook, the President and the Speaker managed to arrive at budget deals because sufficient expenditure cuts were made but not to a socially destructive extent. This was because of President Clinton safeguarded the underlying social security net.

The Clinton-Gingrich achievement of a paying off the budget deficit and the high rates of employment generating economic growth led a subsequent Democrat renewal in terms of the party’s base becoming more committed. This dividend may have been counteracted by an emerging Republican national majority but the Democrats still remained competitive despite this on-going development. The Democrats were aided in adapting to changing political dynamics by a biased television and print media which consistently attacked the person of Speaker Gingrich.

The attacks on Speaker Gingrich were reminiscent of the media vilification of RN which led to his unfortunate 1974 resignation and their consistent ridiculing of *President Reagan. The Speaker might have been able to withstand the relentless media vilification had been supported by his congressional GOP colleagues. Due to internal opposition within Republican congressional ranks Newt Gingrich was obliged to give way in late 1998 for Illinois Congressman Dennis Hastert (1942- ).

(*The media ridicule of President Reagan was more reflective of the hubris and personal inadequacies of commentators who insulted one of the United States great presidents).

Self-Sabotage: The GOP Deposes Newt Gingrich

The impetus and pretext for the de facto deposition of Newt Gingrich as House Speaker in early 1999 was that there had been a moderate swing against the Republicans in that year’s mid-term congressional elections. It was ironic that the party which did not occupy the White House and that had maintained its congressional majority turned against its de facto leader by effectively removing him as Speaker. That this occurred reflected the extent to which power in a policy making context had been acquired by the Republican Party as an unofficial co-ruling party during the Clinton era.

An important reason why Newt Gingrich was deposed as Speaker was because there were powerful rival leaders within GOP congressional ranks who wanted to come to the fore. The ideological divisions and the paradoxically constructive dynamics of the Clinton-Gingrich division might have been maintained had political titans such as Bob Livingston or Dick Armey succeeded Newt Gingrich as House Speaker. However, these two aforementioned congressmen had made political enemies during the very toxic Clinton-Gingrich era that their possible successions to the speakership were thwarted.

The election of Dennis Hastert as Newt Gingrich’s successor as House Speaker in 1998 terminated the continuing ideological and partisan drive of the 1994 generation of Republican congressmen. To be fair, Speaker Hastert’s agenda was not to precipitate fundamental reform or be a combative political knight fighting for Republican Party values. Consequently, the real political and historical impact of Dennis Hastert was to create a vacuum in the wake of Speaker Gingrich’s departure.

Arguably, the major ramification of Newt Gingrich’s 1998 political departure was Governor George W Bush of Texas defeating Arizona Senator John Mc Cain in 2000 for the Republican Party presidential nomination. Had there being a conscious Reaganite force within the Republican Party as a result of Newt Gingrich still being House Speaker then Senator Mc Cain may had the necessary capacity to have countered the formidable Bush family network within the GOP.

When Idealism and Self-Interest Conflict: The Presidency of George W Bush, 2001 to 2009.

The major Reaganite connection to the presidency of George W Bush (2001 to 2009) was the introduction of major tax cuts which crucially helped stimulate economic growth. But it would be the major successes and failures of the second Bush presidency regarding the liberation of Afghanistan in 2001 and of Iraq in 2003 for which that administration will be remembered.

The major failure of the second Bush presidency with regard to Iraq was that oil interests connected to that administration established an unfair dominance over Iraq’s major natural resource. However well intentioned Paul Bremer as a neo-con may have been, it was wrong to appoint him as a non-Iraqi to be the initial Administrator of that nation.

The installation of an Iraqi equivalent of a *Hector Garcia Godoy (1921 to 1970) would have served the United States and the world well by stopping an initially avoidable long term military occupation of Iraq. Even though Paul Bremer only ruled Iraq for a year (2003 to 2004) as Administrator the dye was cast with regard allocating control of Iraqi oil to corporations which were connected to the Bush administration. To help facilitate a continuing influence dominance by foreign oil corporations the nation’s extensive civil service was dismissed as part of a de-Baathisation process which plunged Iraq into avoidable chaos which consequently helped crucially underpin a virulent insurgency.

(* As Provisional President between 1965 and 1966 during the American occupation of the Dominican Republic the emotionally calm and brilliant Hector Garcia saw his nation through to its first genuine democratic election. The considerable scope for military and political disaster in the Dominican Republican for the United States was circumvented by the effective leadership of Provisional President Garcia. It is unfortunate that he is not better remembered by his nation for his services).

Perhaps de-Baathisation should have been undertaken but such a decision in the initial stages should have been made by a politically shrewd provisional Iraqi leader who knew what the probable consequences could have been in terms of generating political chaos.

While American neo- conservatives did vitally assist in helping Iraq make a transition to an electoral democracy in 2005 their effective contribution was undermined by American oil companies gaining an unfair dominance in the initial year of the occupation. The ramifications of this development contributed to an entrenched guerrilla insurgency which could have been avoided.

Idealism and Pragmatism Can Coalesce: Why Democracy Should Be The First Priority of American Foreign Policy

American political and economic decision making that is conducive to promoting anarchy (such as alienating Iraqi domestic public opinion by establishing an American dominance over the nation’s oil industry) actually aligns to the Al-Qaeda strategy for waging a guerrilla insurgency. Al-Qaeda’s strategy to achieve victory in Muslim nations is to create anarchy and then fill the vacuum with the ultimate objective of gaining control of Saudi Arabia so that there can be a Caliphate state.

Osama Bin-Laden was correct in his assumption that an American-led liberation of Afghanistan from Taliban rule in 2001 and of Iraq in 2003 would create a chaotic vacuum. The Al-Qaeda leader however mis-calculated that the two respective virulent guerrilla insurgencies would break American will to clear the way for the Caliphatists to take power. Nevertheless, the Al-Qaeda strategic expectation of protracted insurgencies could have been circumvented had the United States installed effective (if not brilliant) provisional governments for *Afghanistan and Iraq.

(*The initial installation of Hamid Karzai (1957- ) first as interim leader of Afghanistan was initially promising because he came from the so-called Rome Group of Afghan émigrés who were loyal to their exiled king, Zahir Shah (1914 to 2007). Unfortunately, members of the Afghan royal family acquiesced to the American plan of establishing an executive presidential republic in return for appointment to lucrative positions.

Had the Afghan monarchy been restored, which an overwhelming majority of Afghans had desired in 2001 and 2002, then international coalition forces could have expeditiously withdrawn from a nation that would have been grateful to the United States and her coalition partners for their liberation. Unfortunately, coalition forces in Afghanistan have overstayed their welcome by essentially supporting a corrupt regime which actually has covert links to the Taliban. The main benefit of coalition forces remaining in Afghanistan is they at least temporarily stave off a probable return of the barbaric Taliban).

Don’t Tread on the United States!

The avoidable tragedies of protracted guerrilla insurgencies in Afghanistan and Iraq do not negate the correctness of the original decision by the United States and its allies to liberate these nations or to subsequently stay the course. Indeed, Al-Qaeda strategists perhaps now wonder why the United States did not bail out in the thick of their insurgency in Iraq. The overriding reason is that the American psyche will never allow their nation to succumb to an enemy which has attacked the United States proper.

The accuracy of the above analysis was previously shown by the colossal mistake made by Japanese militarists in attacking the American naval base of Pearl Harbour in Hawaii in December 1941. Japanese strategists thought that by temporarily incapacitating the American military that they could seize territory in the Pacific, some of which they would cede back as part of a negotiated settlement with the Allies while keeping important natural resources which had been taken.

The above assumption was wrong because the Japanese militarists had violated the major principle which went back to the American War of Independence- ‘don’t strike me!’ The United States was never going to negotiate with a nation that had committed unprovoked aggression on its territory and against its citizens. Even if the United States had not acquired the technology for a nuclear bomb a US led invasion of Japan costing possibly hundreds of thousands of American lives would have taken place until an unconditional Japanese surrender was secured.

Al-Qaeda strategists just did not understand that a Somalia scenario of the early 1990s of the United States bailing out after casualties of American military personnel was not going to occur following the September 11 2001 terror attacks. The Al-Qaeda killing of American citizens on home soil was an outrage which the United States was never going to allow to go unpunished.

For the above reason Al-Qaeda is an organisation that the United States is going to fight until it is defeated. There are sophisticated American policy analysts who work for the US State Department who have an understanding of domestic politics in a range of Muslim nations which will advise on how to best defeat the Al-Qaeda model of destabilization to create a chaotic vacuum which they can fill in pursuit of establishing a modern-day Caliphate.

Ironically, the American military success in killing Osama Bin Laden in Pakistan in early May 2011 has probably cleared the way for the withdrawal of American and coalition troops from Afghanistan in 2014. Nevertheless, by one way or another American influence with nations neighbouring Afghanistan will be exercised to prevent a Taliban return to power in Kabul.

The ramifications of the successful 2007 military surge devised by General David Petraeus in 2007 are such that Al-Qaeda affiliates in Iraq can never come to power despite the withdrawal of remaining American troops in December 2011. As imperfect as Iraqi democracy is, the nation’s institutional settings and political dynamics combined with the impact of the uprising in Syria have so far prevented the government of Prime Minister Nouri al-Maliki from establishing a pro-Iranian dictatorship.

Republican Iran’s nuclear weapons programme is still the major threat to world peace. The Tehran regime should realize that the potential of Iranian nuclear weapons to reach the United States will precipitate an military American attack on Iran. Such American military action could entail a full-scale war and occupation of Iran if that is what is perceived by Washington policy makers as necessary to prevent republican Iran from having nuclear weapons that threaten its citizens.

Republican Iran regarded the United States as a paper tiger under the presidency of Jimmy Carter that the Iranian hostage’s crisis was inflicted on America between late 1979 and early 1981. But even though the Soviet Union and the Vietnam Syndrome were strong during the Carter presidency, had any American diplomats been killed by the Iranian republicans the United States would have gone to all out war against republican Iran. It is this American preparedness to go to war to protect its citizens that is part of what makes the *United States such a unique nation.

(*The United States even if severely weakened by going over the fiscal cliff will still have a sufficiently strong military to prevent republican Iran from possessing nuclear weapons).

Because the power of American patriotism is part of the phenomenon of what makes the United States great, serious domestic discord is America’s Achilles ’ heel. This was most vividly apparent during the American Civil War (1861 to 1865) when white southern secessionists fought for what they thought was their version of the United States was that they refused to recognize that they were committing high treason.

The potential socio-political disaster that now confronts the United States if the nation goes over the fiscal cliff is that racial based divisions will undermine American national unity. As the American Civil War demonstrated Americans will fight against each other, particularly if they perceive their opponent to unpatriotic. The tragedy of Americans been divided on blue and red partisan lines with an economic and racial dimension is a real one which will be precipitated by the economic disaster of the United States going over the fiscal cliff by New Year 2013.

Why The Fiscal Abyss is an Avoidable Tragedy

If the United States is subjected to socio-political chaos the word ‘tragedy’ will be frequently used. Tragedy essentially is counter-productiveness where you destroy what you seek to build. There is unfortunately wide scope for tragedy in the United States because ‘red’ and ‘blue’ Americans may measure their respective patriotism by mis-perceiving the other as unpatriotic. This potential division is presently latent but it could become actual should the United States go over the fiscal cliff.

The nature of tragedy also encompasses missed opportunities. The tragedy of the contemporary prospect of the United States going over the fiscal cliff is that the United States has a critical mass of congressmen from the Clinton/Gingrich era which are not utilizing their political skills to economically safeguard and advance their nation’s socio-economic interests by avoiding the fiscal cliff.

This under-utilization of existing American political talent goes back to Newt Gingrich’s deposition by his own party men as House Speaker in early 1999. As previously alluded to, Dennis Hastert as Newt Gingrich’s successor as House Speaker effectively fulfilled the role of Republican Party loyalist by helping ensure that the GOP majority supported the second Bush administration’s policies. In this regard Speaker Hastert was different from his predecessor in that he was not propounding his own policy framework. Perhaps this was unnecessary role for a House Speaker whose fellow partyman was in the White House.

However, the departure of a heavy lifting neo-Reaganite Gingrich Republican as House Speaker deprived the United States of a guardian to safeguard the achievements of the Clinton-Gingrich era. Under President George W Bush the ramifications of the mistakes that had led to avoidable protracted insurgencies in Afghanistan and Iraq crucially contributed to the United States ratchting up a massive public foreign public debt and budget deficits between 2002 and 2008 to maintain overseas commitments.

Had Speaker Hastert been in the Gingrich mould then preventative maintenance could have been undertaken to have protected the United States’ overall financial position. An important reason why the second Bush administration ‘got away’ with undermining the nation’s fiscal underpinnings was because the fighting of avoidable protracted guerrilla insurgencies ironically solidified domestic divisions which helped secure President Bush’s 2004 re-election.

In the 2004 election President George W Bush essentially succeeded where his father had previously failed – he re-connected with the Reagan Democrats. This re-connection was based on national security and defence issues as opposed to economic accomplishments of the second Bush administration. Had it not been for the contempt that many Americans felt toward the Bush administration in the context of the GFC then a Reagan Democrat base might have been strong enough to have delivered victory to Senator John Mc Cain in the 2008 presidential election.

Had there been a Mc Cain administration its ultimate success would have been predicated upon the extent to which Republicans and Democrats associated with the Clinton-Gingrich era were brought into government to expeditiously overcome the GFC. Having a Nancy Pelosi House Speakership during a Mc Cain presidency could also have contributed to the scope for a replay of the dynamics of the Clinton-Gingrich era in which there was a focus on repaying the national foreign debt and the budget deficit.

As it was Nancy Pelosi (1940- ), who had been House Speaker following the Democrat victory in the 2006 mid-term congressional elections, gave her crucial support to the passage of Obamacare in 2010. This was understandable because the achievement of universal health care is a fundamental objective of the Democrats and one that is in keeping with the United States being a civilized nation.

However, this important reform perhaps should have been pursued in a second Obama administration so that the Democrat majority Congress between 2008 and 2010 could have increased taxes for the primary purpose of increasing revenue to help the United States pull out of the GFC. Instead, the passage of the Obamacare legislation at that point in 2010 combined with the prospect of tax increases provided the impetus for the so-called Tea Party to endow the Republicans to win the mid-term congressional elections that year.

The phenomenon of the Tea Party was a negative version of the application of a Lasch strategy par excellence as lower middle class and working class Americans were prepared to align themselves to the Republican Party on a basis of there being no tax increases for the wealthy.

The disastrous ramifications of this policy mindset were manifested in August 2011 when too many GOP congressmen were prepared to risk a default on American Treasury bonds by not allowing the United States debt ceiling to be increased as a temporary but crucial expedient to stave off economic catastrophe. The longer term danger of the continuing application of a Lasch strategy was Mitt Romney being the 2012 GOP presidential nominee.

Reaganism is in the Continuum of Progressive Republicanism

Governor Romney was not so much a Republican ‘moderate’ but rather the quintessential GOP establishment candidate who was utilizing the dividends of a Lasch strategy to apply to economically vulnerable white voters who were (and are) open to the narrative that President Obama was leaving them behind.

However personally formidable Mitt Romney and his wife Anne may have been as president and first lady they would have lacked the political capacity to have effectively led the United States. They could not have gone against the wealthy donors who had bank rolled the 2012 Republican presidential campaign on the basis that there would be no tax increases for the very rich.

Therefore a Romney administration would have lacked the political capital to avert the on-coming fiscal disaster. At best a President Romney might have alleviated the disastrous impact of an economic collapse as opposed to engineering an economic recovery in which the GFC was placed in a past tense category.

As futile as it may be to analyse a hypothetical scenario from a counter-historical perspective, the United States and the world would have been in a much stronger position had Speaker Gingrich won the 2012 GOP presidential nomination and then the presidency. A neo-Reaganite president with an as acute understanding of American history as Speaker Gingrich would have established a historical continuum to the progressive Republicanism of Teddy Roosevelt which in turn can be traced to the legacy of the Lincoln *presidency.

(* Progressive Republicanism would have been stronger had an African American base been established within the GOP. The failure of the Grant administration, 1869 to 1877, to support African Americans during the Reconstruction period in the South not only undermined this community but consequently the general American body politic).

Even though Speaker Gingrich was not the 2012 GOP presidential nominee Progressive Republicanism was still a crucial component of the Obama coalition which crucially secured the president’s perilously narrow re-election. Whether intended or inadvertent the civic respect that Republican New Jersey Governor Chris Christie showed to President Obama when he inspected the damage wrought by Cyclone Sandy in the closing stage of the campaign enabled the president to win re-election.

It therefore does not make sense for those Republicans who crucially delivered victory to the president in the closing stages of the 2012 campaign not to allow tax increases on the United States top bracket. This is because so much depends on this fundamental concession being made to avoid the destructive social unrest that will ensue from an economic collapse.

Why the GOP in Saving Themselves Can Save America

It is an accurate political maxim that any national leader who does not include a vital component of a coalition which delivers victory is sure to consequently fail. A cynic might say that because President Obama will never face re-election that he can politically afford to leave behind those Republicans who provided him with his narrow margin of victory by undermining a higher election turnout.

However, the world is now facing a worldwide international economic catastrophe of the same magnitude had the United States defaulted on its Treasury bonds in August 2011 had the American Congress not increased the debt ceiling. A presidential failure to reach agreement with congressional Republicans by New Year of 2013 will result in adverse socio-economic and political consequences which are too horrendous contemplate for the United States and the world.

The intricacies of scenarios to avoid disaster are too hypothetical that they would lack credibility. However, there is sufficient scope to go back to the future by re-applying the dynamics of the Clinton-Gingrich era in terms of negotiating a budget deal. In this context much depends on President Obama being a Bill Clinton to Speaker John Boehner’s Newt Gingrich.

Post-1998 GOP congressmen still have to recover the sense of leadership direction since Newt Gingrich was unfortunately removed as House Speaker in early1999. A major consequence of this regrettable action was that the Republicans did not fiscally safeguard the nation during the second Bush presidency. This has laid the groundwork for the current crisis. To be fair to Speaker Boehner (1946- ) the role of the anti-tax Tea Party movement in helping propel the Republicans to victory in the 2010 mid-term congressional elections undermined any capacity for him to reach a meaningful agreement with President Obama.

Indeed, the 2010 congressional election results set the scene of Governor Romney’s 2012 GOP nomination and near election victory that year. President Obama’s failure or refusal to negotiate in 2012 with Speaker Boehner was regrettable, if politically understandable, because any hint of compromise on the president’s part could have led to a weakening of his political base which he needed to win re-election.

So Close But So Far: America At the Tipping Point of the Financial Abyss

However if it is true that President Obama was personally dismissive toward Speaker Boehner in a recent December 2012 meeting and refused to offer any prid pro-quo measures then this is a regrettable development. The House Speaker has acted in good faith which in a time of possible catastrophe should have been reciprocated by the president.

Nevertheless, because time is of the essence, the point needs to be emphasised that because the GOP has the majority in the House of Representatives and Speaker Boehner has had the courage to make the running to prevent the United States and world economies from falling into an economic abyss it should be appreciated that it is still substantially up to the Republicans to decide whether to support the Boehner budget plan.

At this time of extreme emergency it is up the Democrats Senate Majority Leader Senator Harry Reid (1939-) the GOP’s Senate Minority Leader Mitch Mc Connell (1942- ) and Speaker Boehner and Democrat House Minority Leader Nancy Pelosi to do a budget deal by the time that Congress reconvenes on Thursday of this week (27th of December, 2012).

President Obama’s stipulations that the budget deal be a vital circuit breaking stop gap agreement and that it does not violate his party’s core principles has essentially been met by Speaker Boehner. His framework agreement naturally enough does not go against GOP values that the paradox of the situation is that the United States is frustratingly poised to opt for a ‘lose-lose’ outcome due to a tragedy of *errors when a ‘win-win’ outcome is so tantalizingly close.

(*The term ‘comedy’ was not used under the circumstances).

Hopefully, the United States four top legislators will spend the rest of their lives sparring with each other as to who can claim the credit for saving the American and global economies from collapse rather than blaming each other for failing to save the world from a financial implosion.

Why John Boehner is Politically Today’s Newt Gingrich

The United States is now facing a crisis similar to the debt ceiling mega-crisis of August 2011 because most GOP congressmen refused to support Speaker Boehner’s proposal for a modest tax increase on America’s very wealthy. This development seemingly indicates that a deal cannot be done to avoid the American and global economies falling into an abyss which will lead to world-wide social chaos that could surpass the turmoil that the Great Depression (1929 to 1942) generated.

Indeed, there are indications that GOP congressmen are moving to depose Speaker Boehner and install Mitt Romney’s former running mate Congressman Paul Ryan of Wisconsin as his successor! This development could lead to the socio-political polarization and economic crisis that had seemingly been averted because Governor Romney had failed to win the presidency.

Congressman Ryan is ideologically opposed to any tax increases and he could be prepared to wreak havoc as part of his avenging against those Republicans who held back in the final week of the campaign to crucially help secure President Obama’s narrow re-election. To cut to the chase a possible Ryan accession to the Speakership in the current context will constitute the GOP breaking with a centre-right Progressive Republicanism in favour of a retrograde Ulysses Grant type of conservatism which could throw the Republicans onto the scrapheap of history.

The current situation for the Republicans is dire. If the United States does go over the fiscal abyss then the public will blame the GOP majority in the House of Representatives. This will be because it will have been the Republican congressmen who had rejected the circuit breaker budget deal of their de facto leader (John Boehner). Whatever reservations Barack Obama may have had regarding the Boehner budget plan, the president in effect had the basis of a deal he could have endorsed so long as vital social security benefits such as unemployment payments were not compromised.

Republican hardliners will attempt to blame President Obama for not been prepared to negotiate in good faith which was symbolized by his departure from Washington for his Christmas holidays in Hawaii. This perspective may hold with Obama haters but it will not wash with the majority of the American people given the Republican Party’s majority congressional rejection of Speaker Boehner’s budget plan.

If polling data is accurate, most Americans loathe their congressmen but were too apathetic to vote them out in the 2012 elections. This situation will change by the 2014 mid-term congressional elections because a narrative can be effectively articulated that the five percent contraction in the United States Gross Domestic Product (GDP), cuts to social security and higher *taxes was the fault of the Republican majority House of Representatives.

(*How can the Republicans claim to be purists with regard to opposing tax increases when the scope for middle class tax cuts under the Boehner plan will be thwarted and once avoidable tax legislated tax hikes will take effect?).

The 2012 presidential voting results indicate that President Obama’s electoral base is committed. In all probability that electoral base will remain intact for the 2014 mid-term congressional elections because the president’s *supporters loathe the GOP so much that they will not abandon the Democrats. This probable scenario has already been factored in by GOP hardliners that the questions must be what will be the effect on committed Republican voters and independent voters if the United States goes over the fiscal abyss?

(*They are possibly more anti-Republican than pro-Obama or perhaps these two sentiments are too closely inter-connected).

With regard to Democrat supporters in 2014 anti-Progressive Republicans such as Congressman Ryan may think that going over the fiscal cliff has immense political benefits. He might believe that legislated social security cuts will undermine the Democrat voting bases because a perceived failure by the Obama administration to protect once sacrosanct entitlements. However, due to the advent of social media and the strong emotions that have already apparent from the 2012 election campaign a consolidation of President Obama’s support will probably occur in 2014.

Concerning independent voters, they will probably support the Democrats in 2014 because a well-oiled Democratic Party machine will constantly remind them that it was Republicans who thwarted Speaker Boehner’s budget plan. Furthermore, independent and probably many Republican voters may be attracted to support the Democrats due to the existence of contemporary pro-Clinton organisations such as the New Democrat Coalition and the so-called Blue Dog Democrats. These organisations are both fiscally conservative and protective of social security entitlements that they could win over independent and Republican voters in the 2014 mid-term congressional elections.

The most frightening prospect concerning the recent de facto deposition of Speaker Boehner is that anti-Progressive Republicans somehow believe that there will be a galvanization of middle class and of working class/economically disadvantaged Americans to support them as a re-action to the socio-political chaos that will ensue as a result of the United States going over the fiscal abyss in early 2013. History is however horrendously replete with instances of *political elites ‘coming up a cropper’ by trying to engineer political chaos for their political advantage.

(*The stand-out example of this phenomenon was of course Germany between 1932 and 1933. The closest American approximation of elite manipulation eventually going awry was the political machinations of the cotton Whig traitors between 1860 and 1861).

In times of potential political calamity it is essential that the political centre hold in the context of a pending crisis. What constitutes the political centre can change when the political stakes are so high. Speaker Boehner has been considered to be a Republican conservative but the GOP’s very recent rejection of his sensible circuit breaking budget plan has now in effect made him the guardian of both America’s political centre and of America’s genuine national interest.

Why Speaker Boehner’s ‘Win-Win’ Budget Plan Adheres to Follet’s Gestalt ‘Law of the Situation’

Speaker Boehner’s circuit breaker budget plan is essentially centrist because it is reflective of a Gestalt approach- fixing a specific problem by holistically taking into account the broader issue causing the specific problem. The Boehner budget plan is an appropriate response because it takes account of the broader *context. The Speaker’s budget plan closes substantial budget gaps and very importantly prevents by modestly taxing millionaires stops legislated tax hikes been foisted on middle class America thereby protecting much of the GOP’s electoral base from economic harm.

(*Mary Parker Follet conceptualized this broader context as the ‘Law of the Situation’).

Potential crises are best avoided when a Gestalt approach is applied because specific problems are placed in broader context to help establish the urgency of taking appropriate action. With regard to the possibly impending fiscal abyss of January Ist, 2013, there is the acute danger of a collapse in international financial confidence due to the prospect of a five percent contraction in America’s GDP as a result of legislated expenditure decreases and tax hikes.

To avoid this disaster hopefully there will be co-operative Gestalt type ‘win-win’ based negotiations between the Democrats and the GOP between the end of Christmas and New Year. The essence of applying a Gestalt approach to problems is to find common ground and then utilize this as a basis to achieve an enhanced solution that might otherwise not have arisen in relation to a seemingly intractable problem. A potential Gestalt ‘win –win’ policy outcome exists because President Obama has declared his openness toward supporting a middle class tax cut if a higher rate of tax is applied to those in the top *income bracket.

(*There are concessions that can still be granted to those in the top tax bracket such as tax deductions for particular investments).

Speaker Boehner’s budget plan is therefore both the first crucial step in overcoming America’s massive fiscal problems and more importantly at this juncture an effective escape route from the United States going over the fiscal abyss. While time is of the essence with under a fortnight to go to negotiate a deal to avert the fiscal abyss it should not be forgotten that a distinct competitive advantage that Americans have is that of *productive speed. But just as Paul Revere had to first saddle his horse, GOP congressmen will have to meet between Christmas and New Year to thrash out their differences regarding the Speaker’s budget plan.

(*The development of on-line computer technology and specific innovations such as Wikipedia is testament to the capacity of the United States’ private sector to apply the American competitive advantage of productive speed to help make America).

Care will have to be taken by the GOP’s congressional leadership that the Democrats will ‘come on board’ to Speaker Boehner’s budget plan or a modification version of it after Republicans have sorted out their internal differences. Overall, technical aspects of spending and taxation policy are subordinate to achieving a Gestalt context in which win-win outcomes are applied to avert impending crises.

It may seem presumptuous to assume that the GOP will eventually agree to Speaker Boehner’s budget plan or that the Democrats and the Obama administration will agree to this national rescue package. However, the alternative is too dire and time is too brief that it is too frightening contemplate the American and global economies going over the fiscal abyss.

Why Creative Destruction Will Be Horrendously Negative If The United States Goes Over The Fiscal Abyss

An emerging and possibly intractable problem that the GFC is generating is that of negative ‘creative’ destruction being facilitated. This could be, or possibly already, is reflected by large American companies/big business utilizing new technology so that less people are employed due to uncertain economic conditions.

While it is probably impossible to for President Obama and/or Congress to change the employment practices of American big business, it is an eminently achievable objective for them to facilitate the growth of small and medium business sectors. This can be achieved by American federal and state government central banks having appropriate prudential controls and supports in place so that small to medium credit lending financial institutions can provide capital to technologically savvy businesses and entrepreneurs to help them be viable.

Small to medium American business growth can be the engine of employment generation and non-inflationary economic expansion that will eventually remove the ‘Sword of Damocles’ threat that America’s budget deficit and public foreign debt currently pose to the United States and global economies. Therefore America’s public foreign debt should not be allowed to continue to grow. This is because the mega-disaster of the United States going over the fiscal abyss will be compound by what will consequently be the disaster of the Congress not raising the nation’s debt ceiling in February 2013.

Hopefully, there will be no fiscal abyss so that the issue of whether or not to raise America’s debt ceiling will not again become a life and death economic matter for the United States. That the United States is constantly at the brink with regard to vitally important deadlines not been met is somewhat of a mystery considering the high calibre of American political leadership.

President Obama and Speaker Boehner are intelligent leaders who instinctively have a Gestalt approach which endows them with the capacity to understand the ‘bigger picture’. They both appreciate that engineering the growth of small to medium business growth to revive the American economy is the key to the United State’s economic salvation. Hopefully the speaker and the president will bring in Senators Harry Reid and Mitch Mc Connell to seal a deal between Christmas and New Year 2013 to save the United States from going over the fiscal abyss by ‘signing off’ on the Boehner budget deal.

The GOP Senate Minority Leader Senator Mitch Mc Connell is a crucial political leader whose support will be essential if the Boehner budget plan is going to be accepted in order to save the United States from financial disaster. Similarly, the Democratic Party Senate Majority Leader Senator Harry Reid’s endorsement of the Boehner budget plan, or a modification of it, will be needed to secure this plan’s congressional passage.

Admittedly, Senator Reid might be doing the Republicans a favour for the 2014 mid-term congressional elections because the GOP could take considerable credit for preventing the United States from going over the fiscal abyss due to the impact of the Boehner package. However, the entrenchment of pro-Clinton inner party groups within the Democratic Party such as the New Democrat Coalition provide the Democrats with a potential competitive advantage over the GOP in the 2014 congressional elections.

Should a fiscal abyss be averted let fierce partisan rivalry in the 2014 mid-term congressional elections between the Democrats and the GOP be based upon which party can legitimately take credit for leading the United States and the world out of the GFC by reviving the small and medium business sectors by having previously established necessary the policy settings for non-inflationary economic growth.

The 2012 elections showed that both the Democrats and the GOP have strong grass roots organisations, particularly amongst younger voters. This augurs well for America’s future but there are potential pitfalls because partisan divisions can be dangerous because they are currently based on racial divisions which can solidify.

Let the Obama presidency be historically significant for been the transition point at which party partisan rivalries were converted from racial divisions into differences over ideas which transcend ethnicity that they actually promote inter-racial unity based on common party allegiances. President Obama has an incredible capacity to win people over and in the process attract many into public service (i.e. politics) that there is scope for him to bequeath a politically engaged citizenry.

Because President Obama has a committed support base that will continue into the 2014 mid-term congressional elections his presidency will ultimately be assessed to be a success or otherwise on the basis of whether he succeeds in bequeathing divisions based on ideas and political philosophy as opposed to acrimonious societal fissures. Paradoxically, the Republican Party can crucially contribute as to whether the Obama presidency is considered to be an historical success based on it influencing the future nature of partisan party divisions.

The Republican Party alas has not had party legends such as Newt Gingrich enter its pantheon of party heroes. This is because it is still too underappreciated by the American public the role that Newt Gingrich fulfilled in reviving Reaganism in the 1990s to paradoxically overcome the Reagan fiscal legacy of high budget deficit and a high public foreign debt.

The above cited accomplishments were achieved in the 1990s by then Speaker Gingrich and GOP allies, such as John Boehner, due to ironically acrimonious co-operation with the Democrats led by President Clinton. The nature of this at times painful co-operation obscured the nature of the ‘win-win’ outcomes for America.

The removal of New Gingrich as Speaker in early 1999 set the scene for the GOP to safeguard their historic fiscal achievements that the Republicans unfortunately took their eye off the ball in the 2000s during the presidency of George W Bush. By contrast the Democrats under the leadership of former president, Bill Clinton have drawn strength from their achievements in the 1990s.

Consequently, Bill Clinton now has a capacity that probably no other former president has ever had of being able to influence domestic politics. This is because the accomplishments of his presidency have been converted into a base within the Democratic Party of people who draw strength by invoking the Clinton legacy and utilizing this as a basis for future political renewal.

By contrast the GOP has yet to properly acknowledge its accomplishments of the 1990s. True there was an attempt during the 2012 election campaign by the GOP establishment to invoke Reaganism by utilizing a Lasch strategy by appealing to blue-collar and economically vulnerable people who could be classified as Reagan Democrats.

The Romney campaign application of the Lasch strategy did not work because the GOP candidate was not perceived as a credible Reaganite. This was because his commitment to generating employment was not believed and his subliminal focus on winning white male voter support narrowed Governor’s Romney’s capacity to effectively carry the Reagan mantle into the 2012 campaign.

The contemporary Republican Party now has the potential to renew Reaganism by re-connecting to the neo-Reaganism of the Gingrich era by having Speaker Boehner’s budget plan passed before the close of 2012. This will provide the GOP with a lateral basis for political renewal by firstly avoiding the socio-political chaos that will ensue if the United States goes over the fiscal abyss.

If such an important outcome eventuates then the GOP will have the potential to be the driver of policy so that a Republican national majority is consolidated in the second Obama presidential term. Clinton loyalists could push to secure the mantle of being the ideological and fiscal guardians of America’s genuine national interest. However, these claims by Clinton Democrats could be countered in the future by Republicans if Speaker Boehner becomes a powerful driver of public policy as a result of his budget package been passed. This is a distinct possibility because the second Obama administration may be focused on protecting vital entitlements in lieu of propounding lateral policies.

Alternatively, if the GOP transitions to Paul Ryan as House Speaker as part of a rejection of the Boehner package then the Republicans will becoming a *re-active party which will be severely challenged by lateral Clinton Democrats working in close alliance with a politically savvy President Obama White House.

(*The term re-active’ is not intended to denote the left-wing denunciation of one being reactionary but rather to convey the inherent dangers state of being non-proactive).

The Republican Party in being at a cross roads with regard to whether or not to support save the nation from going over the fiscal abyss by supporting Speaker Boehner’s budget plan and in the process saving itself as a political party. As in the cases of nearly all tragedies it is up to the GOP’s congressional leadership to decide if they want to effectively destroy their party at the point a Republican Party national majority could be consolidated.

Dr. David Paul Bennett is the Director of Social Action Australia Pty Ltd.