Politics may trump Economics

“Those who cannot remember the past are condemned to repeat it.” –George Santayana

The German philosopher Hegel in his dialectic held three stages of development of ideas: a thesis, giving rise to its reaction, an antithesis, which contradicts or negates the thesis, and the tension between the two being resolved by means of a synthesis.

Post World War II has seen a great expansion of Anglo Saxon capitalism (Wall Street banking) and Global trade. The antithesis is emerging and consolidating. We are heading for a turbulent ride and some parallels from history may be timely…( Credits to Business Week Lessons from the Credit-Anstalt Collapse   )

In May 1931, a Viennese bank named Credit-Anstalt failed. Founded by the famous Rothschild banking family in 1855, Credit-Anstalt was one of the most important financial institutions of the Austro-Hungarian Empire, and its failure came as a shock because it was considered impregnable. The bank not only made loans; it acquired ownership stakes in all kinds of companies throughout the sprawling empire, from sugar producers to the new automobile makers. Its headquarters city, Vienna, was a place of wealth and splendor, famous for its opera, balls, chocolate, psychoanalysis, and the extravagant architecture of the Ringstrasse.

Harold James, a British historian at Princeton University, described what happened next in his 2001 book The End of Globalization: Lessons from the Great Depression. “The Viennese panic brought down banks in Amsterdam and Warsaw. In June and July the scare spread to Germany, and from there immediately to Latvia, Turkey, and Egypt (and within a few months to England and the U.S.).” Austria got an undersized loan from the Bank for International Settlements and some help from the British branch of the Rothschild family. But French politicians rejected an international rescue without political concessions from Germany that weren’t forthcoming.

Thus the failure of Credit-Anstalt accelerated the financial panic that turned a recession into a global depression. Economic distress in Austria contributed to the outbreak of violent conflict between socialists and fascists in 1934. Jews became scapegoats. In 1938, Nazi Germany occupied Austria, and Adolf Hitler was received by adoring crowds in Vienna. Albeit indirectly, the failure of Credit-Anstalt helped clear the path for some of the darkest events of the 20th century.

The fall of Credit-Anstalt—and the dominoes it helped topple across Continental Europe and the confidence it shredded as far away as the U.S.—wasn’t just the failure of a bank: It was a failure of civilization.
We should see the emergence of politics as a driver for change trumping technology and trade. That is the antithesis…where bible thumping fundamentalist and bearded clerics run things…..The failure of Doha round, the Arab Spring…