Brexit has shone daylight on a crisis that’s been brewing for several decades. The utopian proclamation by Francis Fukuyama about the ‘end of history’, in the heyday of globalisation, has succumbed to the reality that paradigms come and go. The hegemony of neoliberal ideology and institutions, which supported a financialised and globally integrated form of capitalism, is fragile and fracturing.

For students of history and/or political economy that was utterly predictable. Karl Polanyi attributed the collapse of the last laissez faire era in his epic, The Great Transformation, to attempts to strip the social and political from the economic, and let the ‘markets’, or more accurately capital, rule and plunder. Laissez faire capitalism proved intrinsically unstable and socially and politically unsustainable. Sounds familiar.

My second favourite guru, Antonio Gramsci, offered his own pearls of wisdom as he languished in an Italian jail under Mussolini in the 1920s. Gramsci described a state of interregnum, where the old was visibly dying and the new was yet to be born. The transition from one paradigm to another would be heavily contested between those who hold power can dictate the formal responses to recurrent crises, and those who want to displace them, who need a workable plan for developing a real alternative. We are in that space again now.  

Gramsci also warned not to presume that the new would be socially progressive – fascism and neo-imperialism were equally likely responses. Progressive voices would need to work collectively and connect with people’s realities if they were to prevent regressive forces from shaping the new future. Ditto.

Not in the same universe as the others, but interesting as a case of (former) power speaking truth to power, is a blog on the Spinoff this week by Geoffrey Palmer who called the Brexit result ‘entirely understandable’: ‘when the treaties took more and more control away from national parliaments unease increased.’ He went on: ‘The political elites have foisted a new system on ordinary people and the ordinary people do not like it. So when the people have an opportunity to decide they reject it. Their fear about jobs and their sense of insecurity about immigration are entirely understandable. … There is a further and wider set of issues that also relate to democratic governance. There exists in many countries an underlying alienation of a significant portion of the population concerning the exercise of power by what they see as economic and political elites that the voters cannot influence.  

He then copped out and said: ‘I hope it doesn’t happen in New Zealand. But growing economic inequality may lead it that way. Some sense of democratic renewal is needed to avoid alienation, there is a sickness in western democracies.’

But we are already there. The unprecedented backlash against the TPPA is only symptom of a deeper malaise. In Auckland, belated coverage of homelessness has forced social realities of poverty and inequality centre stage. New figures show the gaps in income and wealth have widened once more, and the government maintains a state of denial.  It does this while presiding over a fragile and increasingly distressed economy of FIRE – where wealth creation depends on finance, insurance and real estate, rather than real production, firms that have a long term horizon, and quality durable jobs.

Last year in my book The FIRE Economy. New Zealand’s Reckoning I said we were sitting ducks for a financial crisis. Levels of household debt are well beyond the danger level identified by IMF researchers, as is our overseas debt. Those conditions have intensified. Almost everyone now concedes the property bubble will burst. The collapse of the dairy price has exposed an unserviceable rural debt. The Christchurch rebuild can no longer plug the GDP gap through a classic reliance on disaster capitalism. Immigration as a source of economic activity is compounding the other problems.

The IMF’s research economists describe affluent countries like ours as in a ‘state of denial’.

We know the capacity for the élites to resist paradigm change, and the appeal of fascism, are greatest when countries are faced with a crisis.

As the GFC, Europe’s debt crisis, and those that preceded them showed, the ‘orthodox’ response of austerity aims to rescue the failing status quo. The mechanisms that embed the neoliberal model are remarkably robust and resilient. The rise and neutralisation of Syriza in Greece will have emboldened finance capital and their crony technocrats in Europe and elsewhere.

The austerity response is a ruthless, but temporary, strategy. It compounds both the instability of financialised capitalism and the alienation, insecurity and inequality that fuels social and political dis-ease. There is a breaking point. As people who feel powerless get left further behind, those who seek to protect the status quo hasten the day of reckoning.

In this country that scenario has become frightening real. I believe it’s not now a question of whether we will have a meltdown, but when and how severe it will be. Popular mobilisations could take many forms and there are no guarantees they will be progressive.

As Brexit shows, the failure to take that prospect seriously leaves a void that allows state-corporate elites to regroup. It also shows the bastions of neoliberalism will not just melt away, nor will workable alternatives rise like a Phoenix from the ashes.

This is not a call to arms. It is a call to organise, to put strategies in place to protect the most vulnerable, and to work on concrete options and strategies to transform the institutions and instruments of the state and private power.