This week EU Trade Commissioner Peter Mandelson attacked Hilary Clinton for her suggestion that she may not press hard for a global trade pact. Politically, you could scarcely put a blade of grass between the Machiavellian genius behind the British Left's triangulation into New Labour and the current heir to the New Democrat throne.

For one to attack the other suggests that something very fundamental is going on here. Hilary Clinton had touched a very raw nerve with European economic liberals. The significance of this rap over the knuckles of the natural heir to the leadership of the Atlanticist Project by one of its global courtiers needs some explanation.

Atlantic Ideology

Not so widely reported was President Bush’s inclusion, during his recent Press Conference about new intelligence assessments of Iran, of an ‘offer of ease of membership into the WTO’ as one of a diplomatic carrots for Tehran. WTO membership has been central to the politics of Saudi-Western integration and an offer which America makes to every country that it wishes to build into the international liberal democratic project.

The link between the Doha Round and the importance of WTO membership for pivotal states on the one hand and Mandelson's preparedness to risk a 'split in the ruling order' may not be clear until you understand (placing the nut case conspiracy theories to one side) that a lot of very important people have risen to high office as part of a consensus about a project that can truly be called 'ideological', as ideological as anything dumped on humanity by the Marxists.

Atlanticists (of which Mandelson is a prime representative) have developed a sophisticated strategy for global peace and economic development that is based on extending markets through integrating new elites into the liberal trading system (from which, it is assumed, democracy and human rights will soon follow).

The success of this ideology seemed unanswerable in the wake of the Soviet collapse. Consequently, elite groups within many emerging countries have developed pro-Western wings with conservatives ‘accepting the inevitable’ and 'resistance' only to be found amongst political activists prepared to operate at the lowest levels of society.

The terms of political trade have leaned heavily towards the Western liberal democratic model since the fall of the Soviet Union because, whatever silly things Americans might do militarily, it has seemed to work economically - until the last few months.

Although we remain fairly confident that we are currently seeing a correction rather than a collapse, the credit crisis, the idiocies of international bankers and the weakness of regulators have combined to create a new nervousness about prospects that is beginning to drive political rhetoric - in the US if not elsewhere.

Short Term Electoral Politics in the US

It is unfortunate that serious economic difficulties have emerged at the beginning of the most intense period of the American electoral cycle when candidates compete for their core party vote before opening themselves up to national competition as representatives of their political tribe.

The entire Atlanticist model of liberal economics and democracy depends on leadership from the US and has done so since the US intervened in Europe in the 1940s. The upside is that the massive resources of the US state are available to sustain it between elections. The downside is that every four years the American people get to decide whether they want to buy into the project.

Every four years since the 1940s, the American people have tended to choose candidates of both parties who are committed to the consensus. Although worries about NAFTA caused some fluttering in economic liberal breasts in the past, this year is the first year when neo-protectionist and neo-isolationist ideas might just get a hold on one of the two great parties despite the best efforts of its own leadership cadre.

Such ideas are unlikely to win an election but they might - and if they do, then global liberals have a problem. What is needed at this time is a conspiracy of silence, not a desperate politician risking long term strategy on a short term electoral fix.

On the other side, President Bush has sustained European elites' support for other electorally less domestically popular aspects of the alliance, at great risk to themselves on occasions, on the basis of his own unwavering commitment to what its opponents often call the ‘Washington Consensus’ but might better be called the 'Atlantic understanding'. 

By casting doubts on the ‘Consensus’ in order to appease her Left ,in the drive for the Democrat nomination (perhaps because wise counsel would suggest that Obama’s lack lustre performance to date may have tactical elements), she has deeply unnerved the European wing of the Atlantic Project.

Pinpointing The Problem

This is not because they really believe that she is a protectionist but because she has opened the door to a debate that they do not want.

If Mr. Mandelson really thought that her comments were just the sort of rhetoric you use to win elections and then conveniently forget, he would be silent. His fear must be that such ideas catch hold, enter the American marketplace, gain strength in the blogosphere, radicalise Americans in an economic crisis and over-turn everything he and others like him hold dear.

Mandelson was explicit: “Politicians have a huge responsibility not to overstate the risks attached to open investment … ” i.e. darling, you are breaking ranks!

The point is that, if the sub-prime crisis in the US and the credit crisis elsewhere deepen, this will raise doubts about the liberal-capitalist road amongst non-US victims of the next round of ‘creative destruction’. These victims may turn to more traditionalist solutions of both Left and Right.

To the highly cosmopolitan mentality of those committed to the European Project, this is a matter of great concern since they had thought that they had put socialism and nationalism back in their boxes a long time ago.

Such ideas may come-and-go in the perfervid atmosphere of the American electoral cycle without much harm in the long run, but they could prove much more virulently infectious in a troubled Europe – and (we believe) they may undermine pro-Western ‘bazaar’ (or 'bourgeois', if you are a Marxist) collaborators in the pivotal allied states in the emerging world.

Effects on Allied Elites

The classic contemporary anti-insurgent alliance is one of business interests operating alongside reform-minded dynasts and/or the national military to effect economic and some democratic or liberal reform against the instincts of local conservatives and traditionalists.

Elite traditionalists will buy into the Western project because it offers protection against revolution from below by, allegedly, creating jobs and other opportunities for the rising lower middle classes and urban working class - oh, and opportunities for a jolly lifestyle overseas.

The non-elite element of local conservatism, on the other hand, often makes up the very heart of insurgency. Populists from Venezuela to Tehran, often with an alternative military-populist ideology (such as the Bolivaran ideology or through a reference back to a Revolution like that of 1979 in Iran) are creating highly ambiguous traditionalist-Leftist joint responses to the ‘Washington Consensus’.

In this matter, Mandelson speaks for the European Commission and not just for himself or his brief. There is no dissent on the future trajectory of global economic and political liberalism within the European Project.

The British, although increasingly vulnerable to the ups and downs of the global economy (perhaps now to the point of no return) share this wider ‘Euro-federalist’ position.

Sovereign Wealth Funds As Marker Policy

A marker policy is that surrounding sovereign wealth funds. The acceptance of such funds has geo-strategic implications because acceptance binds the GCC and China closer to Europe and to the world economic system.

The contrast of European attitudes with the debate in the US is quite stark. In American populist circles, sovereign wealth funds are more likely to be seen as threats to national economic sovereignty and even security than sources of investment capital.

It is at this point in the electoral cycle that European Atlanticists fear that American economic power may eventually be directed at creating a codicil to the Washington Consensus that damages a strategy of integrating sovereign wealth into the wider system.

If American power sees sovereign funds as threats and demands that allies regulate them as threats, an Atlantic Project based on universalising its values through elite appropriation becomes transformed into a world of camps, reproducing the Cold War as competing economic blocs. Let us regulate through persuasion and stealth, say the Europeans.

As if to press the point this week, a direct welcome was extended by the British City Minister, Kitty Ussher, to the China Investment Corporation with its $200bn of funds.

Ussher is an unlikely democratic socialist (not that anyone dare use that term nowadays within the Labour Movement), a direct descendant of the famous seventeenth century divine, Archbishop Ussher and a technocrat, almost completely unknown to party activists, who has quietly moved to a high office in a career trajectory that includes that beacon of High Atlanticism, the Economist Intelligence Unit.

London was firmly positioned by Ussher as the logical operations centre for sovereign funds, whether GCC or Chinese. In case someone wishes to interpret Ms. Ussher as part of some wierd LaRouche-type conspiracy, her position on attracting capital is shared not only by the wider business community but by the left-wing (truly socialist) Mayor of London, Ken Livingstone.

Livingstone has built his own Chinese and Gulf links, including, much to the rage of the Jewish community and neo-con hawks, tete-a-tete relations with Muslim divine Al-Qaradawi.

Where Is This Leading?

We clearly have a consensus here that stretches across the British centre-left. There is no disagreement on free market fundamentals from the Tory and pro-European Liberal Democrats. There is obviously a shared perception of national interest here.

Although most Tories and a few Labour politicians might prefer that the United Kingdom was not locked into the European Project as such, the core of the liberal model increasingly resides in Europe, which is building pragmatic relations with some very undemocratic regimes on the basis that soft power will transform their elites over time.

The US’ own East Coast elite is scarcely very keen to give up its leadership of this process but is now faced with severe and growing populist pressures that may disrupt the cosy assumption that the difference between Democrats and Republicans is merely one of style.

The Republicans easily chased off the national populism of Pat Buchanan in favour of global Reaganomics but the Democrats have a substantial community of critics of global free trade, past warriors against NAFTA who see Bill Clinton and the New Democrats as having sold out their country. It is these votes that Hilary now needs against Obama - and she then needs to ensure that they come into the polling booths to support her in November 2008.

These same populist pressures may become more aggressive and assertive about human rights and democracy and may place the finely balanced international system under increasing strain as a result.

The Clooney factor (the mobilisation of naive demands by passionately engaged celebrities) may demand actions on Darfur, Tibet, Saudi Arabia or Burma that really do not stack up as credible options in the international community. Faced with ethical demands for intervention against their national interests, pivotal states might revert to conservatism.

Back to the Global Picture

Elsewhere in As It Happens, we have noted the emergence of nationalist approaches to the management of energy resources and the creation of alternative models of inter-state co-operation (such as the SCO) to defend strategic control of resources.

We have also noted that elites in countries with large populations without primary resources tend to ally themselves increasingly with the West (Pakistan and we believe, eventually and logically, China) while countries with significant resources will tend to ‘resistance’strategies (Venezuela, Russia).

Direct untrammelled access to the global economic system not only encourages China to collaborate rather than compete geo-politically but it keeps conservative states like Saudi Arabia operating within the system and encourages a 'counter-resistance' movement in states like Iran. If you take away from local elites the possibility of getting rich through free trade, a lot of the incentive for sticking with the West goes out of the door.

There is another issue here. Within the West, the ‘enemy within’ (the nationalist and socialist critics of the system) can be contained so long as economic conditions remain good, but the numbers critical of the system could grow and, in some countries, start to break apart the system from within as economic conditions worsen.

If bankruptcies and foreclosures increase and jobs are lost, resentment will grow at failures to meet implicit promises of economic success - Gordon Brown must be sensing the possibilities even now. Such resentment may be directed at Western elites in the ballot box.

It is very much to be doubted that the Western elites will crumble or lose control but they may become defensive. In response, neo-protectionist strategies might hold the line domestically only to undermine the elites of allies. The expansion of Western liberalism may end or even be reversed.

So, this is why Peter Mandelson has turned on Hilary Clinton, the American politician closest to his own political position. From the Euro-liberal perspective, she has committed the cardinal sin of putting her short term political needs ahead of the ‘great project’. People like Hilary are really only valuable if they sustain that project. Otherwise, let's be honest, what is their point!

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