Trump’s visit to Europe has led to uproar on both sides of the Atlantic.

Trump is singular. But tensions within the trans-Atlantic relationship have been mounting for some time. Trump, after all, is not the first Republican president that bien pensant Europeans have found it hard to get along with. Most obviously, the Iraq war in 2003 drove a wedge into the Western alliance. Its fissures ran not just down the Atlantic divide but within Europe between the UK, France and Germany and between Western and Eastern Europe. As in previous moments in modern history, culture wars spill over and cross borders. No one, least of all America is exempt from the shockwaves of economic, political, social and cultural change.

Watching Trump I could not help thinking of some lines from Deluge about the Wilsonian moment:

“America’s own entry into modernity, presumed in such a simple way by most accounts of twentieth- century international politics, was every bit as violent, unsettling and ambiguous as that of any of the other states in the world system. Indeed, given the underlying fissures within a formerly colonial society, originating in the triangular Atlantic slave trade, expanded by means of the violent appropriation of the West, peopled by a mass migration from Europe, often under traumatic circumstances, and then kept in perpetual motion by the surging force of capitalist development, America’s problems with modernity were profound.”

This complex interconnectedness, this uneven and combined development is overlaid by truculent assertion of distinction and identity, stark lines of difference drawn in the shifting sands. American exceptionalism is one such discourse. Trump exhibits a less exalted and more generic form of nationalism. Finger pointing comes in many different forms.

Even if one sets aside the antagonistic protectionist policy of the Trump administration, what hangs over the trans-Atlantic relationship are the undigested legacies of the financial crisis of 2007-8. And for all the talk of uncoupling globalization from America, one cannot ignore the massive dependency that the crisis of 2008 exposed.

When the financial crisis struck in 2007-2008, European politicians were quick to blame the United States. And that narrative has stuck. A Bundestag Commission of Enquiry cemented a narrative that described Germany’s financal system as basically sound, until America’s botched handling of Lehman panicked global markets.

For many commentators the true anniversary of the crisis is not September 2018 (Lehman) but August 2017, when we remember the moment that the French bank Paribas announced that it was closing its US real estate funds, for lack of liquidity in the market. Following as it did on the difficulties of several smaller German banks, one might think of this as a moment of European crisis. But that is now how Europe sees it. Quite gratuitously in August 2017 the European Commission put out an Orwellian press release, which affirmed that the crisis was imported to Europe from America and went on to credit the EU with a prompt crisis-response that saved Europe from disaster.

It was an audacious inversion of the facts. In 2007-2008 Europe’s banks were at least if not more dangerous than their American counterparts. They straddled three giant credit bubbles: in the US, in the hot spots of the Eurozone and in Eastern Europe.

Source: BIS

Their leverage was enormous, their capital laughably thin and unlike their US counterparts they had considerable currency mismatch on their balance sheets too. They needed to raise dollars to hold huge portfolios of America subprime. Their primary home funding sources were in European currencies.

Despite the rhetoric of opprobrium and the narcissism of small differences deployed so loudly by European politicians, the European financial system would not have survived the crisis had it not been for massive lender of last resort activity by the Fed. Between 2008 and 2009, more than half of the trillions of dollars in liquidity it provided to large banks went to banks that were not American.

The bailouts and financial stabilization of 2008-2009 were enough to staunch the crisis but not to prevent a second round of escalation in Europe in 201o. The trigger was the crisis in Greek public finance. But the common denominator of instability was the dangerous fragility of Europe’s bank balance sheets.

Already in 2008 it had been obvious how difficult it would be to coordinate a European response. The Eurozone saga was a grinding struggle to find a common solution. In that struggle the crucial power dynamic pitted Angela Merkel’s CDU/FDP coalition on the one side against crisis governments in Greece, Ireland, Portugal and Spain and those that feared becoming crisis governments in France and Italy.

Obama and Merkel at the tumultuous November 2011 Cannes G20 meeting.

It was a classic instance of European politics. The only power that could hope to shift this balance towards a more proactive and large-scale solution from the outside was the US. In this sense the crisis recapitulated a common theme of modern history since the beginning of the 20th century. Europe’s inability to resolve conflicts sucked America in. The Obama administration was far more deeply involved in Eurozone crisis-management that is generally realized and played a key role in anchoring the stabilization that was finally achieved in the late summer of 2012.

It was when I began to realize the extent of this trans-Atlantic dimension to the financial crisis that I decided that Crashed was a book I should write. The Trans-Atlantic theme was at the heart of both Deluge and Wages of Destruction. They traced how American power emerged in the early 20th century as the pivot of world politics and how this shifted the argument over grand strategy in Germany, Italy, France, the UK, Japan and on the part of Russian and Chinese revolutionaries. At stake, particularly in Deluge, was the question of the conditions of possibility for progressive liberal politics under these conditions. Writing a history of the financial crisis of 2008 and its long aftermath would, it turned out, allow me to continue to explore this theme.

It seemed all the more important to write because the trans-Atlantic dimension of crisis management after 2008 was so underexposed. This was not a Marshall Plan or a Wilsonian moment, in which America’s presence was universally acknowledged. The silence around the transnational dimensions of American crisis-fighting after 2008 seemed significant. What did this silence mean? Why had America’s pivotal role in the North Atlantic economic and military system become so hard to coherently and explicitly articulate?

In its heyday Atlanticism and its institutions, preeminently NATO, had a normative standing. They were the highest embodiment of the ambition to bridge the gap between Europe and America and to define the West as a democratic power bloc capable of responding to any global challenge. Hitherto even those who were skeptical of such talk, and dismissed it as mere Cold War rhetoric, had to reckon with Atlanticism as a real existing ideological complex. Its heft was derived not just from rhetoric, and memories of shared sacrifice, but from a complex and powerful military alliance and deep economic investments.

The North Atlantic economy was the hub of the world economy. No part of it was more deeply integrated than the financial nexus between Wall Street and the City of London. This in turn was the frame out of which the Fed’s lender of last resort stabilizing function emerged in 2008. It is not by accident that the liquidity swap lines, through which the Fed pumped dollar liquidity into European and Asian central banks in 2008, were leftover from the postwar Bretton Woods system. In 2008-2012 one might say that the United States behind the scenes resumed the hegemonic role it had periodically exercised to such powerful effect since World War II.

Indeed, to talk in terms of hegemony understates the drama of what happened in 2008, at least as hegemony is conventionally understood in the international relations literature. As the boundary between private and public power and resources became deeply blurred in the course of crisis-fighting, the US Fed and Treasury, working closely with the global banks represented in Wall Street and with their central banking counterparts, touching base periodically with the Democratic Party leadership in Congress and cooperative European governments, notably the Labour administration of Gordon Brown, assembled something highly unusual. They constituted something like a Gesamtkapitalist – the fabled being which overcomes the divisions of capital and its dysfunctional rivalry, to realize a kind of collective interest.

The crisis-fighting coalition was improvised. It was fragile. It was politically unsustainable. It did not last. But without the coordinated response that was achieved by 13 October 2008, it is likely that the crisis world have been truly catastrophic. But unlike Bretton Woods or the Marshall Plan moment, and unlike the diffused operation of neoliberal governmentality, this articulation of collective capitalist governance was unspeakable. It wasn’t a secret. But it could not be hailed or celebrated. It manifested “conflicts of interest”, the confusion of public and private interest and the subordination of state power to corporate interest to a degree that was too staggering.

The “vampire squid wrapped around the face of humanity” was too close for comfort. The most that could be said for this crisis-fighting, but also the least, was that it “worked”. To see how bad things could get when such a coalition could not be brought together, one only needed to look to the Eurozone after 2010.

But because it was executed without fanfare, the significance of the American-led collective crisis fighting in 2008 also tends to be underestimated. One of the challenges that Crashed hopes to pose is the question of how to understand this spectacular historical moment and its implications for the future. It is one of many different incidents in the recent past which suggest that the previous mode of international political economy organized around national economies, articulated under an umbrella of American power, may be giving way to a new order.

In Januay 1989 at Davos German foreign minister Hans Dietrich Genscher hailed the coming of a new age in world politics, in a speech entitled: Gezeitenwechsel – Von der Weltpolitik zur Weltinnenpolitik (From Great power politics to global domestic policy). The term global domestic policy (Weltinnenpolitik) was later taken up by Carl-Friedrich von Weizsäcker and then by Ulrich Beck and Jürgen Habermas. In German social science it came to represent the highest stage of globalization and the emergence of a new cosmopolitan political organization.

In 2008 Habermas happened to be visiting Yale University to expound on his theme of the early 2000s – the post secular age. What he witnessed outside the lecture halls of the Yale law school was America’s response to the financial crisis. On his return to Germany, he was interviewed by Die Zeit’s Thomas Assheuer. English translation here.

As Habermas reported his impressions everywhere he looked: “Hopperesque melancholia flickered across television screens on endless repeat. Abandoned little houses in Florida with foreclosures signs on their front lawns. Bus tours of potential buyers from Europe or wealthy latin americans, real estate agents showing them bedrooms with walk in closets wrecked by their former owners in bouts of anger and despair.” On his return to Europe, Habermas was struck by how different the desperate mood in the US was to the “indifferent business as usual” prevailing in Germany.

It might, Habermas speculated, be the beginning of a new historical era. In the same way as the Korean war brought an end to the New Deal, would this crisis end neoliberalism? The US had of course been a pivot of Habermas thought back to his youth. More recently he had engaged in the debates around the Iraq war. And he could not help being struck by the parallel. In retrospect there were clear warning signs – the Bush doctrine and the Iraq invasion seemed to him symptomatic of the social Darwinist potential of market fundamentalism in foreign policy as much as in economics.

In response to Iraq and the shock of the War on Terror, Habermas had formulated the idea of a divided modernity. In 2008 he reacted differently. Now he was looking for a more comprehensive transformation. All the way back to the 18th century there was a dialectic in Habermas’s view between disruption of society by capitalist crisis and its rearticulation through law, through constitutionalism and the welfare state.

Could the financial crisis be contained in that way? If so, he insisted, it would have to be performed at the global level. Back in the 1990s there had been a recognition that the path of economic globalization chosen by politics would have to be followed by extension of international law. As Habermas pointed out, even Bush the elder had talked of a new world order. But the first steps had been aborted already under Clinton and those deficits were now glaringly apparent. And yet it remained the case that globalization and the complex networks and zones of individual choice they created demanded new forms of regulation and mechanisms for generalizing particular interests.

It was classic Habermas and in the face of the crisis Thomas Assheuer was impatient: “But what does that mean? You cleave to Kant’s cosmopolitanism and have taken up Carl Friedrich von Weizsäcker concept of a global domestic policy (Weltinnenpolitik). With all due respect that sounds pretty illusionary. Talking of Weltinnenpolitik – world domestic politics or policy – sounds like the daydreams of a spiritualist.”

When they discussed Weltinnenpolitik both Habermas and Assheuer were probably thinking of the EU. That gave no grounds for optimism. In 2008, even before the Eurozone crisis broke, the EU was having a disastrous year. The troubles of the EU did not start with Greece in 2009/2010. In 2008 the Lisbon treaty was on the point of failing and Lisbon remember was the fix for the failed constitution. Berlin vetoed any collective reaction to the financial crisis of 2008. Habermas was left to gesture towards French proposals for common economic government. Christine Lagarde had proposed a joint European response, which Merkel had vetoed. Ten years later Paris is still waiting for a constructive answer.

Neither Habermas or Assheuer had any inkling of the significance of what the Fed was doing precisely at that moment. It was positioning itself as the lender of last resort to European and Asian banks. It was flushing trillions of dollars into their balance sheets directly in Wall Street. Or, by way of the liquidity swap lines, Europes and Asias central banks were functioning as local outlets for dollars provided from New York. Weltinnenpolitik, in other words, was taking shape under their noses. But what kind of “Politik” was it?

The term Politik in German is famously slippery – meaning both politics and policy. The crisis-fighting of 2008 was Weltinnenpolitik stripped as far as possible of the politics. Furthermore, it was world policy, but performed through the existing national institutions of the United States. Insofar as it had a global political frame it was by way of the newly constituted leadership meetings of the G20. Those gave enhanced status to the emerging markets with China in the lead, but they were rarely anything more than stilted ceremonial affairs.

Indeed, one is tempted to add to the distinction between policy and politics, the French distinction between le and la politique, politics and the political. This yields a three way distinction between policy, politics as in party political competition and “the political” i.e. the acts of argument, debate and struggle through which social and political unities are constituted.

In these terms, it is undeniable that the Fed’s lender of last resort role that saved the global banking system was policy. It was grand geoeconomic policy at the global level. The Fed knew what dangerous territory it was entering. It coordinated every move with the state department. Several countries were denied swaps. India, Russia and China still have no swap lines. It is as much foreign economic policy as Bretton woods or the Marshall Plan ever were.

But if this is policy, it is policy that does its best to avoid politics in the sense of keeping them out of sight of nationalists in Congress. To achieve that effect, it operates as liberal governance always does, on the line between what is political and what is not.

And this in conclusion is also one of the alarming messages of a history of 2008 for our present day. What 2008 showed is not just that the opportunity for a break to a new order was missed. Part of the reason that the crisis did not lead to a fundamental break was that the worst of the crisis was contained. It was contained through radically new technical instruments, the most important of which actually remained entirely outside public sphere and were improvised on the basis of the American nation state.

Not for nothing the chief architects of this network – the likes of Tim geithner and Bernanke – talk in terms of emergency services, fire services or military analogies. Their priority was not long-term order, constitution making, or law but security. Their principal drivers were the sheer urgency of the situation and a profound fear of the instability of the markets and the “populist” incomprehension of politicians.

But as we are now witnessing, the realm of security can be politicized, sometimes explosively. The question is where devices such as the central bank liquidity swap lines fit in our brave new world, both domestically in the US and on the larger stage.

In 2008 they were deployed within a familiar trans-Atlantic frame. The swap lines still mapped the contours of the cold war and world war II. On the new frontier of the global economy none of that soft tissue is present. It is on that frontier of the emerging markets that the next major next crisis wills surely come. And the question is whether on that terrain a Weltinnenpolitik can be effectively constituted. Given our present political configuration, regardless of the technical virtuosity of the instruments devised, the odds are not good.

Unfortunately, I did not discover the telling Habermas interview until after I had finished Crashed. But it served very well as the pivot of this talk, which I had the pleasure of giving to the American Academy in Berlin earlier this year. You can see the video here.