A Journey (116 page)

Which brings me to the related issue of deficit spending. Again there is no doubt that in the event of the sharp contraction and credit crunch of 2009, governments needed to stimulate domestic demand. However, there are two important qualifications on such action. The first is that when a historical analysis of stimulus packages is conducted, I think we will find that it is the specific and targeted measures, e.g. for the car industry, that were most effective.

The second is that the operation of such deficit spending needs to be calibrated with immense care in the circumstances of the global economy of 2010.

Keynes was a great man, a revolutionary thinker, a rare example of an outstanding intellectual who could give practical advice. I bet he would be surprised at how his theory is being applied today.

In the 1930s, the amount of public spending relative to GDP in the UK was 26 per cent, in the USA 19 per cent. In 1950, after a world war, it was 34 per cent and 24 per cent. Today, it is 47 per cent and 45 per cent.

Of course there was a need to have a fiscal stimulus as demand dropped sharply in 2009. Keynes’ insight was that the state should act to lift demand if the consequence of contraction was a spiral downwards of shrinking growth, cuts to spending, resulting in even less growth and so more cuts. But it was never clear that the effect of 2008 was going to be a savage fall in growth that continued over years. The savage fall was itself partly due to the psychological collapse of the markets after Lehmans, leading to a collapse in confidence, leading to people deserting the market, cancelling investment and retreating to the bunker. What I noticed in 2008–9 was that even those with money were hanging back. Once the market stabilised, they came out of the bunker and recommenced activity.

The danger now is this: if governments don’t tackle deficits, the bill is footed by taxpayers, who fear that big deficits now mean big taxes in the future, the prospect of which reduces confidence, investment and purchasing power. This then increases the risk of prolonged slump. So yes, fiscal consolidation has to proceed with care. I agree entirely that a precipitate withdrawal of stimulus packages would be wrong. This is a judgement that is, if you like, one of right vs wrong, not right vs left. There is a need to balance the opposite impacts of deficit reduction: less overall demand, because of a contraction of government spending on the one hand; more confidence among consumers and businesses due to reining in the deficits on the other. There is a judgement to be made. But if we fail to offer a convincing path out of debt, that failure in the global economy of 2010, as opposed to that of the 1930s, will itself plunge us into stagnation.

The other vast difference today is the position of the emerging economies. They are a wholly new dimension and have their own fragility, but essentially they will keep on pushing forward. Ironically, they will continue to embrace liberalisation at the very point we seem to lose faith in it. Their risk is failure to implement their own government reform (e.g. India) and/or that through policies that stagnate growth we curtail the market for their goods (e.g. China).

So, if we take Europe, what Europe needs is a package of measures: a carefully calibrated deficit reduction plan; the fundamental reform of the European social model, the need for which the crisis has highlighted, not created; regulation that tracks systemic risk but does not suppress innovation and enterprise; and, for the eurozone, the fiscal coordination that a single monetary policy was always going to require.

But it is a package. Do one part and not another and we risk a worse crisis. In particular, cut the deficit and reduce incentives, or fall short on true structural reform, and the imbalance in measures will cause the package to fail, or at least significantly reduce its effect.

Consider the issue of Greece or Spain. If they have, as I hope they do, credible policies to sort out, in the former case the deficit, and in the latter the financial health of their banks linked to the deficit, the euro will stabilise if accompanied by far-reaching reforms. The market will recover and the reforms, necessary in any event, will make both countries more competitive. The result will not be to change the fundamentals of the economy the West has been developing over many decades, but to provide adjustment and reform to make them work more effectively.

What should strengthen this belief is that the new economies now rising up the rankings are doing so precisely by following more open economic policies, and faltering when they don’t. China is opening up, and thrives when it does so. India needs less bureaucracy and less state power, not more. President Lula’s success in Brazil is partly because he continued the anti-inflationary macroeconomic policy of his predecessor Fernando Cardoso. The economies in the Middle East, like Saudi Arabia, are focusing today on competitiveness and removing barriers to enterprise, not erecting them. It would be odd if we moved in the opposite direction. And foolish.

However, we may recover our confidence faster on the economy than on security. I have set out my explanation for Iraq, how it happened, what went wrong and why I still believe the decision was nonetheless right. Now Afghanistan hangs in the balance in a similar way. As in Iraq, we remove a regime that is hated, and do so with good intentions. The citizens of the country seem to intend the same, but we are thwarted by those with the opposite intentions. Over time, the issue ceases to be who is well intentioned and who is not, and becomes the apparent inability to overcome the forces against us and secure a definitive ‘victory’. So our allies lose heart, our public loses faith, and we ask: When and how will it end?

This is a picture moving fast; and with each evolution of political or military struggle, things can look different month to month, even week to week. So trying to stand back and see the picture clearly is hideously difficult. I will go right back to the first principles and try to put it in simple, even crude terms.

What is the nature of the threat? It does not derive from something we have done; there was no sense in which the West sought a confrontation. This is a vital first base in the argument. The attacks of September 11 came to most of our citizens as a shock that was utterly unforeseen. Countries like America and Britain were not singling out Muslims for unfair treatment; and in so far as Muslims were caught up in generalised racism towards those of a different race or colour, such attitudes were on the way out, not the way in.

The extremism we fear is a strain within Islam. It is wholly contrary to the proper teaching of Islam, but it can’t be denied that its practitioners act with reference to their religion. I feel we too often shy away from this assertion, as if it stigmatises all Muslims. But if it is true – and it is – it has to be faced, not just because it is true, but because otherwise we don’t analyse the problem or attain the solution properly. If it is a strain within Islam, the answer lies, in part at the very least, also within Islam. The eradication of that strain can be affected by what we outside Islam do; but it can only be actually eliminated by those within Islam.

Most problematically, there is a (natural) tendency for us to believe that the best way to empower those within Islam to take on the extremists is to reach out and meet people halfway. Let me explain what I mean by this, because it is at the root of our present policy dilemma.

The conventional wisdom is that the Bush/Blair position was wrong because it confronted when we should have reached out. It is accepted by many that Afghanistan was a justifiable conflict; Iraq was not. Iraq then ‘caused’ a schism between the West and Islam, it is said, that made it harder for our allies to get traction within Islam to take on the extremists. Our policy towards Israel is likewise seen as one-sided and that fuels the view of the West as inherently inimical to Islam. Turkey’s rebuff from the European Union is seen similarly.

President Obama’s speech in Cairo in June 2009, which was a brilliant exposition of the case for peaceful coexistence, marked a new approach, and if he is given the support and partnership he needs, it is an approach that can combine hard and soft power effectively. While hanging tough in Afghanistan, he has reached out. The speech was carefully calibrated. The hand of friendship would be offered, even to Syria and Iran. It was in part an apology, and taken as such. The implicit message was: We have been disrespectful and arrogant; we will now be, if not humble, deeply respectful. But join us, if you will.

The trouble is: respectful of what, exactly? Respectful of the religion of Islam, President Obama would say, and that is obviously right; but that should not mean respectful of much of the underlying narrative which many within Islam articulate in its politics today.

Here is where the root of the problem lies. The extremists are small in number, but their narrative – which sees Islam as the victim of a scornful West externally, and an insufficiently religious leadership internally – has a far bigger hold. Indeed, such is the hold that much of the current political leadership feels impelled to go along with this narrative for fear of losing support.

This is a situation with practical consequences. Iraq and Afghanistan are seen as the West’s battles. With a few notable distinctions, this is not perceived as a struggle for the heart and soul of Islam. Yet the outcome is surely vastly determinative of such a struggle.

I have my criticisms of Israel and my ideas as to how to make progress, set out in earlier chapters. But leave aside for a moment the details of the peace process. As I started to spend more time in Palestine, I was surprised to find it is often easier to raise money for the ‘resistance’ than to fund the patient but essential process of Palestinian state-building. Israel can and should do more to push forward the necessary changes on the ground – the West Bank and Gaza – that can underpin the peace process. However, it is also true that if the Palestinian cause gave up violence emphatically and without ambiguity, there would be a peace agreement within the year. Not enough voices in the Muslim world are asking them to.

It is America today that leads the challenge to Iran and its nuclear ambitions. But let us be frank: Iran is a far more immediate threat to its Arab neighbours than it is to America. It is of course a threat to us, too, but this is partly because of what a nuclear-armed Iran would mean for the Middle East, rather than as a direct threat.

The problem is this: defeating the visible and terrifying manifestations of religious extremism is not enough. Indeed I would go further: this extremism won’t be defeated simply by focusing on the extremists alone. It is the narrative that has to be assailed. It has to be avowed, acknowledged; then taken on, inside and outside Islam. It should not be respected. It should be confronted, disagreed with, argued against on grounds of politics, security and religion.

If we argue this case confidently and persuasively, it will give strength to those within Islam who know this argument has to be had and yet hesitate. They hesitate because they are afraid of being left out there alone, because we in the West, who are their allies, tacit or overt, find it all too hard, too wretched and above all too long a battle to contemplate.

Which brings me back to Afghanistan, though I would make the same point about Iraq. What is happening in Afghanistan is really very simple: our enemies think they can outlast us. Our enemies aren’t alone in thinking that. Our friends do, too. Therefore the ordinary folk think: I should make my peace with those who are staying, not those who are going. Now it is of course sensible, as we are doing, to envisage a timetable for departure and for transferring responsibility into Afghan hands; but it should derive from a position of strength and from an Afghan capacity that is real.

And our people say, ‘How long are you seriously saying we should hold out?’ If, in the 1950s, when faced with the threat of revolutionary Communism, I had asked you how long you expected us to fight it, you would have answered: As long as the threat exists. If I had said it may be for decades, you would have raised an eyebrow, as if to say: Well, if the threat remains for decades, what choice have we? In other words, you would have seen this as a clearly defined threat to our security that left us no alternative but to take it on and beat it. Of course, there were those who said ‘Better red than dead’, but that was surely one of the least appealing slogans to the human spirit ever devised, and only a minority bought it. Most people realised the threat was real and had to be confronted, however long it took.

The difficulty with this present battle lies in defining what ‘it’ is. After September 11 the phrase ‘the war on terror’ was used. People distrusted this, partly for its directness, partly because it seemed too limited. So we dropped it. Yet if what we are fighting is not a war, what is it?

The threat is obvious enough: weapons of mass destruction in the hands of those who would wage mass destruction. If they could get a dirty nuclear device, they would use it. But the threat is more than this. The movement also has the capacity to destabilise governments and take over countries, some of which are immensely important to our security and strategic interests, not simply in a selfish sense but to those of the global community. That’s why Iran matters. Iran with a nuclear bomb would mean others in the region acquiring the same capability; it would dramatically alter the balance of power in the region, but also within Islam. Then there is the actual war in Afghanistan.

However, the threat is more than that, too. Like revolutionary Communism, it is an extremist movement, not just a series of extreme acts. It doesn’t begin on the battlefield, it begins in the school. It starts not with talk of military weapons, but with talk of religion. You have to take on the clerics who foment the extremism, not just the people who engage actively in terrorism; and empower those clerics who will stand up for what is right. The ideology is not born of a desire for military domination; it is born of a world view based on belief in God’s will. Not only its narrative but also its ideology has to be systematically dismantled, just as it has been systematically constructed.