An Explosive Steering Device

Economist Mikhail Delyagin on how the act of terrorism in Boston could influence the global recession

It is sad that terrorist acts have become one of the instruments for steering societies, enabling them to sharply change their mood and stimulating actions that would have been unthinkable even just a moment before the misfortune.

At a minimum, terrorist acts dramatically transform the agenda. Thus, Boston has at once pushed aside the two most recent strategic failures of U.S. foreign policy: Syria and North Korea.

The non-Muslim part of Syria, understanding that the victory of an “Islamic democracy” would be conflicting, could halt the strategy of sowing global chaos in the Islamic world.

Blackmail on the part of North Korea is seen as an elegant Chinese response to the U.S.’ moving the center of its global strategy into the Asia-Pacific region. This response has exposed the helplessness of the U.S. and has forced it to cancel maneuvers and appeal to China itself for help. True, it managed to keep Secretary of State Kerry’s shame off the agenda, starting with a global media blackout of the visit. Then, as nightmarish as it sounds, he got back in time for the terrorist attack in Boston.

The poignant haste with which it described the “non-standard” nature of the terrorist act was characteristic of trying to quickly deflect blame from the new strategic ally of the U.S., Islamic fundamentalists. Whether that was accomplished or not, the idea is transparent: Caesar’s new wife must be above suspicion. Cheney didn’t risk his reputation — and was caught by a journalist concerning talks with al-Qaida in April 2006 — to jeopardize the new global strategy.

So anyone could be guilty of the terrorist attack — Syria, North Korea, Iran, a crazy loner, a member of the “American Fascists” — but probably not Islamic fundamentalists, those “new Stormtroopers” of the U.S.

However, regardless of whether they will carry out the next phase of the “war on terror to the last civilian,” or prefer to hold a Sword of Damocles over many heads at once, the first economic consequences of the terrorist attack are clear.

As in 2001, American society will rally around the authorities — on the eve of the attack, the government’s approval rating had fallen to a record 28 percent — as well as on an everyday level, and the outpouring of solidarity always raises competitiveness.

Probably insignificantly and temporarily, but all the same, the weakening of the dollar will spur the economy, which is just at the beginning of re-industrialization, and simultaneously help the representatives of the real sector of the economy in their opposition to financial speculators. By summer, when Italy fails to form a government, the country could appeal to the IMF and European Central Bank for help, effectively putting it under external control; the euro will weaken, and that will strengthen the dollar. Meanwhile, the terrorist act has given the real sector of the U.S. economy a “sip of competitiveness.”

It is understood that the military and security structures will use the terrorist attack for “budget revenge,” stopping the cuts in their own budgets and probably receiving new powers — including new limitations on citizens’ rights and freedoms. Who among them will bite off the biggest piece of the pie presented to them by a shocked public, and what, exactly, will comprise that piece, depends on the outcome of an utterly cynical, but completely understandable, competition for “identification of the perpetrators.” But the increase in security expenses as an element of “military Keynesianism” (Roosevelt tried it, and Reagan used it brilliantly in peacetime) supports the U.S. economy and that also gives a new stimulus to technological progress.

Understandably provoking fear, the terrorist attack will change the movement of global speculative capital. The flow to Southeast Asian markets has led to a weakening of traditional speculative markets: On the eve of the attack, gold continued to fall, dropping from $1,900 to $1,360 per Troy ounce, and even oil — Brent-blend — crossed the “psychological Rubicon” of $100 per barrel.

True, that decline had a second fundamental cause: The burden of debt rose so quickly that even unlimited credit issuances could not ease the shortage of liquidity in a number of sectors, portending failure in a global depression.

But now, frightening and speculative capital is being thrown together with time-tested assets, supporting the prices of oil and gold. For the latter, possibly, this could become the beginning of a new price rally.

Thus, the terrorist act in Boston will soon support the economy — in the U.S. and the whole world. But that itself demonstrates the exhaustion of traditional, especially economic, methods of control. When the support functions of a system require methods that deny its foundations, its collapse is near.

The world is skating toward a global depression, and the tragic economic consequences of failure will fade into the background of military, infrastructure and political catastrophes that will likely accompany that failure.

As in May 1941, it is once again time for us to prepare for the unexpected.