On 1 April, British Prime Minister Keir Starmer gave an address to his nation regarding the ongoing war in West Asia. His message could not be clearer than this. He said, “This is not our war. We will not get involved in this conflict. It is not in our national interest.” Several other European heads of state have expressed similar sentiments.
Starmer may not have intended this. But his comments came exactly 44 years after another war when Britain and the US, unlike today, formed an alliance. On April 2, 1982, Britain fought a ten-week undeclared war with Argentina after Argentina invaded the Falkland Islands in South America, over what it considered its rightful territory. The US, led by Ronald Reagan, first tried to mediate, but after 28 days of the war, it announced full support for Britain.
Hosted by US President Ronald Reagan 10, Downing StreetOn June 8, 1982, after Britain won the war, British Prime Minister Margaret Thatcher expressed her gratitude to Reagan and the US.
“Mr. President, over the past few years much has been said and written about the relations between our two countries. And today I see no need to add generalities on the subject, because in recent weeks we have had before our eyes the most concrete expression of what our friendship means in practice. I am particularly impressed by your awareness of our readiness to oppose aggression in the Falklands even after great sacrifice and your readiness to support us even at considerable cost to American interests. Mention our awareness… Believe me, Mr. President, we do not take this lightly. We are deeply grateful to our national existence for your tremendous efforts in support of us. Thatcher said.
The 40-year gap between Britain expressing gratitude to the US for supporting the US in one war, returning the favor by supporting the US in several wars fought since then, and now, distancing itself from the war the US is currently fighting, is a story, and not just of military incompatibility between the US and Britain. What this represents is a major political economy breakdown between the US and its European satellites (Sir Starmer and his European colleagues may scoff at the term, but more on that later).
The roots of this political economy breakdown are best described by a quote from Abraham Lincoln’s speech after the Battle of Gettysburg in 1863, which Thatcher used in her toast to Reagan in June 1982.
Lincoln said in his tribute to the soldiers who changed the fate of the American Civil War against the Confederates for good, Lincoln said in his tribute to the soldiers who “changed the fate of the American Civil War against the Confederates,” Lincoln said in his tribute to the soldiers who “said, “The world will pay little heed nor long remember what we say here, but what they did here it can never forget. It is our duty to live dedicated to the unfinished work of those who fought here and have marched so far.”
At its peak, the Thatcher–Reagan friendship, and by extension, the UK–US relationship, represented a huge political ideological achievement for capitalism: the triumph of neoliberalism over the interventionist welfare state model of capitalism that had dominated since the Second World War. The powers that be in the US and Britain were exactly on the same page on the pitch for neoliberalism under Thatcher and Reagan – free markets were made a virtue, welfare beneficiaries were looked down upon, almost humiliated, and those who opposed the coup were labeled anti-freedom communists and brutally crushed.
A section of the working class actually bought this pitch. Neoliberals won the election. Reagan and Thatcher were not simply the darlings of capital or its ideologues. He was also an extremely popular politician at his peak.
The implications for political economy of this change in political fortunes and the ideological transformation that followed the neoliberal victory were profound.
In a highly significant revisionist approach to this issue, historian Fritz Bartel argues in his 2022 book The Triumph of Broken Promises: The End of the Cold War and the Rise of Neoliberalism That the neoliberal promise of welfare and workers’ rights in the US and UK allowed the capitalist camp to avoid economic pain from supply shocks in the 1970s. This was in contrast to the socialist camp led by the Soviet Union which could not inflict such pain on its citizens and collapsed under the increasing economic burden of its commitments.
The political consequences of the success of neoliberalism lasted for a long time. This is despite the fact that the working class experienced a steady decline in economic fortunes due to a double whammy: weakening bargaining power with domestic capital, resulting in attacks on trade unions, and a weak domestic economy due to outsourcing of manufacturing and services to countries such as China and India. How was this achieved?
The gradual economic damage of the working class was politically sustained by the proverbial steroids of cheap finance (read things like low interest rates and sub-prime loans for homes in the US). But this strategy ultimately delivered an almost fatal anaphylactic shock to the global economy in the form of the 2008 global financial crisis.
Trump-Brexit and its subsequent right-wing-populist variants are fundamentally the result of the anger of the Western underclass. This anger was channeled by a political system that, in a strategic masterstroke, created a powerful narrative of schadenfreude against the two categories. The first is the socially awakened managerial-intellectual elite, which benefited most from the neoliberal rise in the Western bloc. The second is a part-imagined, part-real campaign against immigrants, the majority of whom were poor rather than rich. The former was described by the latter as laying the groundwork for cultural/economic invasion. As can be seen from the political success of the likes of Trump, this was an extremely attractive political narrative. But it can do nothing to achieve a structural reversal in the fortunes of the lower class in the Western world, because the top echelons of capital are tied up with the current regime.
Of course, all this does not need to break US-UK relations. If Trump supported and benefited from this line in the US, his counterpart Nigel Farage was seen as the beneficiary of the political tide in Britain. Every other major European country has had its own version of this politics, with varying degrees of success. so far so good. However, political inducements do not guarantee economic stability. The neo-right revolution of Trump and others had to confront a fundamental problem: America declared a force majeure on its responsibilities as the global capitalist leader. Ideological tastes aside, a global capitalist leader is the oxygen of any open-economy capitalism.
Obviously, this meant the US closed off its export markets to the rest of the world, which is what Trump did with his Liberation Day tariffs. This was followed by several threats to impose tariffs on those who would not fully agree, even though the demands were trade related. It also meant that the US was asking other NATO allies – a military alliance created to contain the Soviet Union’s ideological, not just territorial, threat in Europe – to foot more of the military bill and reduce America’s costs of maintaining the security umbrella.
While the ice was already breaking on the trans-Atlantic US-Europe neoliberal alliance with (Greenland) tariffs and strange threats of military occupation of the allies’ territories, the US invasion of Iran, and the energy shock caused by the closure of the Strait of Hormuz, have proven to be the proverbial last straw that could break the (European economy) camel’s back.
With their economies still deeply hurt by post-pandemic inflationary pain, fiscal capacity struggling to balance political legitimacy and strong finances, at a time when AI and Chinese manufacturing are threatening the future of work and even the survival of its white-collar working class, Europe is fearful about its prospects for living in an era of crude oil above $100 a barrel. Trump flaunting the fact that the US is now an energy exporter rather than an importer, unlike the oil shocks of the 1970s and 1980s, which is bound to cause a serious damage, only adds insult to injury.
Coming back to Lincoln’s quote, Thatcher had said in her speech welcoming Reagan, that the “living” (US and European leaders) “cannot be dedicated to the unfinished work they fought for here, having gone too far (the neoliberal consensus)”.
Instead of acting as a disciplined and benevolent protector of the global economic strategic order, the US now wants to be a rogue, exploiting its economic-military advantage.
The rest of the world, especially its economically-strategically weaker European peers, has no option now but to recover from the crisis. What Trump is asking them to do by supporting the war in Iran is nothing less than shooting them in the foot economically. make no mistake. These countries are pressing for ejection from the US-led gravy train without a strong parachute. They will not land with serious economic or strategic damage. As far as his principles are concerned, there are none. Just a few weeks ago, the German Chancellor was talking about letting the US and Israel “finish the dirty work.”
As far as capitalism is concerned, the powers that be may or may not be swayed by this uncertain claim, which is really more helplessness. “We should all be hopeful that … we will win this thing and clear the strait and Iran will no longer be a threat to everybody,” the JPMorgan chief said. Jamie Dimon said Earlier this week. “The market will be worried until it’s over…what’s more important is that it gets done successfully than what the market does,” he said.
Capital, or its biggest voices, have chosen the side of the big bullies rather than some mutually beneficial trans-Atlantic club of neoliberal architects. To paraphrase Bartel, the latest broken promise of this transatlantic club – seen in the disintegration of how Europe and America view the current war – shows that the original broken promise of the welfare state and the original triumph of the rise of neoliberalism was long lived, but not eternal.
what now? History never ends. We are in a moment when its tectonic plates are shifting. It is too early to say whether this change will be for good or for bad.
