How dangerous radicals are reaping the benefits of financial unease.

See Ben Wildavsky on how higher education won the recession. 

The headlines crawl across a motley collection of extremist blogs, web forums, Facebook pages, and YouTube channels, like a Times Square ticker from hell. "Government Silently Positions for Martial Law as Financial Collapse Arrives in America." "Report: Soros Unloads All Investments in Major Financial Stocks; Invests Over $130 Million In Gold." "U.S Banks Told To Prepare For Total Collapse!" "Billions of $ to Israel as U.S. Government Flounders under Record Foreign Debt." "Banks Can Legally Steal Customer Funds From Private Checking Accounts."

As the U.S. economy has struggled back to life, its woes have emerged as a unifying theme among Americans on the fringe. The right-skewing Patriot movement may not share social values with left-leaning anarchists, but both groups point to and fixate on the same economic stories: bank insolvency, currency devaluation, derivatives fraud, total-collapse scenarios, the perniciousness of the Federal Reserve, and the need to return to a gold standard. Extremists in America -- from militias to the Black Bloc (the masked, militant subset of the Occupy movement), from sovereign citizens to homegrown jihadists -- are reading the same economic headlines and pondering the same potential tipping points. (Trustworthy data on how many extremists or extremist groups are active in the United States is hard to come by, but the extent of the phenomenon is undeniable. This article alone draws from upwards of 400 U.S.-based websites generating thousands of posts per day.)

Of course, the granddaddy of extremist financial scenarios -- The Protocols of the Elders of Zion -- long predates the Internet age. The infamous 1903 document was a hoax indicting Jewish bankers in a conspiracy to control the world, an idea that reached full, terrible maturity in Adolf Hitler's Mein Kampf, which blamed Jews for Germany's economic collapse following World War I.

Today's extremonomics scenarios owe more to current realities than historical lunacy. The DNA of these anti-Semitic fantasies lingers, sometimes reinterpreted as elaborate plots run by the Bilderberg Group or the Council on Foreign Relations. More and more often, however, the enemies of financial security are simply Wall Street and Washington. In a sense, these are reality-based conspiracy theories, eschewing the most extreme claims in favor of worst-case readings of economic realities and near approximations thereof. They are terrifyingly mainstream -- and that's what makes them so dangerous.

The trend toward reality-based conspiracies extends well beyond economics, but since 2008, the financial crisis and ongoing recession have provided copious grist for the mill, reinforcing the crucial expectation shared by most domestic extremists: America's imminent downfall.

You don't have to be extreme to worry about economic collapse. Over the last two decades, the complexity of the global financial system has grown exponentially. Incomprehensible products like derivatives are only the tip of the iceberg. The stock market has become so complicated it is mathematically impossible to design a model that can predict its behavior, let alone the rest of the global economy.

The perils of such a system are clear. Consider the following quotes, taken not from extremist websites but from coverage of the financial crisis by PBS's Frontline:

  • "[We were] sitting in that room with Hank Paulson saying to us, in very measured tones, no hyperbole, no excessive adjectives, that 'Unless you act, the financial system of this country and the world will melt down in a matter of days.'" --Christopher Dodd (D-Conn.), former chairman of the Senate Banking Committee
  • "The chairman of the Fed said, 'If we do not act now, we will not have an economy by Monday.'" --Rep. Nancy Pelosi (D-Calif.), former speaker of the House
  • "If we did the thing wrong, everything was going under." --Austan Goolsbee, former Obama White House economic advisor
  • "We don't even have, as a country, in our regulators and our policymakers, the basic knowledge that they need about how our financial system operates." --Phil Angelides, former chairman of the Financial Crisis Inquiry Commission

The last point is especially important because in a realm where no one speaks with authority, anyone can be an expert. And on the fringe, "expertise" is a hot commodity indeed. Compare the quotes above to recent comments on extremist blogs and websites:

  • "Trillions of dollars are owed, and as a country we have no way to make good on that debt. Confidence in the US dollar will soon be lost, and when that happens we will experience a collapse in the United States and the global economy unlike any that has ever been witnessed in the history of the world." --survivalist blogger
  • "The Federal Reserve cranked out an incredible 16 trillion dollars to bail out banks and major corporations between 2007 and 2010 in the aftermath of the subprime mortgage crisis.… Now that the extent of the Federal Reserve bail out has become known, there will be public pressure against a similar massive bail out in the future and a good chance that the next big panic could lead to a stock market meltdown." --white nationalist David Duke
  • "A source in the Deutsche Bank claims that in 2008 our financial and monetary system completely collapsed and since that time the banking cartels have been 'propping up the system' to make it appear as if everything was fine." --Occupy blogger

Here's what's especially worrisome: Every credible piece of evidence that supports the economic-collapse scenario can be leveraged to sell two more extreme ideas, whether it's hoarding gold and canned goods or arming yourself heavily in advance of a breakdown in civil order. Reality-based arguments have a twofold effect -- attracting new recruits while reinforcing the commitment of those who are already true believers. But to what end?

Consider Greece, a real-life test lab where some of the worst-case scenarios of economic collapse and civil unrest are coming true on a daily basis. Hundreds of extremist blog posts over the last 12 months have discussed developments in Greece, where both anarchists and neo-Nazis have increased their visibility and violent aggression ever since mainstream politicians drove the economy right up to the edge of the proverbial cliff. The neo-Nazi political party Golden Dawn won nearly 7 percent of the national vote in this June's parliamentary elections, a massive increase from the 0.29 percent it netted in 2009.

Although Greece has not (yet) toppled into total chaos and open insurrection, there's no question extremists are making headway and giving hope to their counterparts in the United States. American anarchists, neo-Nazis, and Anonymous cyber-radicals have all issued statements of solidarity with their counterparts in Greece, and many are watching the situation there as a harbinger for the future of the United States.

One prominent American anarchist website recently summed up the lesson of Greece and the gift bestowed by the economic crisis:

Let us arm ourselves with the courage and determination to face this world down, let us rid ourselves of resignation and acceptance, let us embrace what was unimaginable yesterday, and is today entirely possible: insurrection against the existent.

Is it all just talk? Maybe. But American extremists of every stripe are increasingly following the same headlines and hearing the same alarm bells, most visibly in the economic realm, but also in stories of mass shootings, government surveillance, and civil liberties. Some might be tempted to take action. After 9/11, it's anyone's guess how Americans and their government might respond to a spree of attacks from every political direction. Here's hoping we never find out.

See Joseph S. Nye on how declinist pundits won the recession. 

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Democracy Lab

No Exit

For the first time in many years, Venezuela’s presidential election is raising the possibility of an electoral defeat for Hugo Chávez. But if he loses, does that mean he’ll go?

Despite its high crime rate, Venezuela has historically managed to largely avoid the political bloodshed that plagued so many of its neighbors during the twentieth century. But is that about to change? This past Sunday, supporters of President Hugo Chávez confronted a crowd of activists who had gathered in the state of Barinas to celebrate the campaign of Henrique Capriles, the opposition candidate in the approaching presidential election. By day's end two Capriles organizers lay dead, gunned down in broad daylight by angry chavistas. The government says it is investigating, and so far three suspects have been detained.

The killings make for an ominous portent. The Venezuelan opposition, long crippled by internal divisions, has combined forces to mount the first serious challenge to Chávez in recent memory. Capriles has managed to revitalize previously disenchanted supporters while making inroads into the poor and rural populations that have traditionally served as the president's base. The ailing president, meanwhile, has been drawing comparatively smaller crowds, in fewer places, and has seen his once insurmountable margins steadily slip away over the past two months. While the polling data remains contradictory, the fact that one of the country's most respected pollsters is giving Capriles a four-point lead suggests that the opposition finally has at least a chance to unseat the once unassailable president.

All this begs the question: How far might Hugo Chávez be willing to go to defend his revolution?

If Venezuelans can agree on anything, it is that they find it hard to imagine a scenario in which a defeated President Chávez peacefully hands over power. To many, this stems from a sincere belief that the charismatic populist leader, armed with the full resources of the state and still beloved by much of the country, would never actually lose a popular election. Others find it hard to imagine that Chávez, who once famously vowed to defend his revolution with his life, would ever willingly step aside.

He would certainly face little pressure to do so from within his own administration. After so many years in power, the president dominates every branch of government. Even Luisa Estela Morales, the presiding magistrate of the Supreme Court, has publicly proclaimed her belief that the constitutional separation of powers "unacceptably weakens the state."

Venezuelan elections themselves are quite free -- the problem is that they're far from fair. Four of the five magistrates of the Consejo Nacional Electoral (CNE), the electoral authority, are avowed and loyal supporters of the president. Under their watch the institution has habitually turned a blind eye to countless illegalities and abuses on the part of the government: the decorating of state buildings with campaign material, the misappropriation of state funds for campaign use, rampant gerrymandering, misuse of emergency powers to commandeer radio and television signals for campaign messaging, and the de facto disenfranchisement of Venezuelan émigrés (most of them opponents of the regime) through the closing of the Miami Consulate. By contrast, the CNE recently censured Capriles for wearing a hat based on the official flag of the republic.

Thanks to this high degree of institutional control, government electoral shenanigans have typically taken place prior to the vote itself, while the actual voting and tabulation processes have been allowed to proceed largely free of government intervention. By keeping elections comparatively free Chávez has been able to maintain a democratic veneer without much risk to his own power. Still, the combination of his own poor health, the dire state of the national economy, rampant crime, and a tough challenger could well complicate the outcome for the president this time around.

Surprisingly, any attempt at actually faking electoral results is likely to prove a challenge. According to Federico Ortega, an opposition advisor and Harvard-educated economist, the high-tech vote tabulation machines that Venezuela uses in its elections, as well as the reliability of available quick count methods, would make it technically unfeasible for the CNE to conceal an opposition victory outside of a dead-heat differential of maybe 100,000 votes. "Even then," he says, "they would only be able to maintain the charade for a short time."

While not discounting the possibility of a stolen election, Ortega believes that the government would be far more likely to do so by claiming fraud on the part of the opposition and then either disavowing or suspending the elections prior to any public announcement by the CNE itself. Indeed, Chávez himself seems to have already begun preparing his own supporters for just such an eventuality, assuring them that the opposition intends to physically mobilize regardless of the vote's outcome, offering cryptic warnings of chaos or civil war, and hammering home to his supporters all that they might stand to lose without him.

Yon Goicoechea is a prominent opposition leader who rose to national fame at the head of the movement that handed Chavez his first democratic defeat during a 2007 referendum on executive term limits. He recalls that the CNE demurred for eight hours before announcing the results -- a period during which, according to Goicoechea, government officials convened frantic meetings to work out a coherent response, even approaching him and other opposition leaders for "negotiations."

While the government eventually conceded defeat, Goicoechea says that the opposition would not have sat idly by if it hadn't: "We were prepared to call the Venezuelan people to the streets to defend their votes and their democracy." In his view, Capriles, whom he describes as a strong but responsible leader, will almost certainly be willing to do likewise, though "first he would have to know with certainty that we had indeed won."

The opposition's ability to counter fraud will depend on their ability to follow the vote counting process in real time. Once the results have been officially declared, contesting the results becomes much harder.

Therein lies the challenge. While the opposition has done much to secure its access to electoral information during the vote itself, only the CNE itself will be privy to exact vote counts prior to the final announcement -- by which time it may well be too late. This leaves the opposition dependent on more subjective metrics such as exit polling, observer testimonials, quick counts, and the vastly disparate pre-election polling data. International observers have been largely disallowed for the election, outside of a select few who are unlikely to be particularly critical of the regime, or cooperate much with the opposition.

If the opposition does cry foul and Capriles calls his supporters to the streets, it is by no means certain that the great crowds that rallied to support him on the campaign trail will continue to do so if the government suspends constitutional safety guarantees or implements martial law. Then again, the throngs of enthusiastic supporters that rallied around the opposition candidate during the closing of his campaign in Caracas on Sunday served, to some, as evidence that loyalty runs deep among his followers.

The Barinas shootings, as well as a recent clash in the seaside town of Puerto Cabello, underline the potential for violence. Any confrontation between confident chavistas gathering for their traditional post-election celebration outside of the presidential palace, and opposition protesters demanding a reversal, could easily lead to chaos.

Particularly worrisome in this regard are the so-called Bolivarian militias, a heavily armed group of militarized civilians fiercely loyal to the government. The Miami newspaper El Nuevo Herald recently published a document purporting to inform militia members of a post-election "external intervention" planned by the United States in conjunction with "the Venezuelan far right and transnational companies." The plan goes on to stipulate that two thousand armed militiamen should take up posts at sites of strategic importance to defend the government against the opposition.

Given this potential for instability, the powerful Venezuelan military is sure to play a key role in the likely event that the results are contested. It is difficult, however, to forecast precisely how the Venezuelan Armed Forces might behave. Unlike other national institutions such as the CNE or the courts, the VAF is something of a black box. In April 2002, when a peaceful opposition protest was met with gunfire, killing 19 unarmed men and women, the armed forces turned against Chávez, leading to his brief overthrow until loyalists within the army reinstated him in a countercoup.

Since then Chávez has been careful to assert his control over the VAF's top brass, though even they have given conflicting signals. Henry Rangel Silva, a high-ranking general and defense minister, has stated a number of times that the army strongly supports President Chávez's administration and will find it "difficult to accept a change in government." Yet Willmer Barrientos, head of military operations, has made remarks suggesting that the army will maintain its neutrality regardless of the outcome. In any case, it is by no means a given that the armed forces will move against the president without a clear reason to do so.

And then there's the international reaction. Venezuela has already scared off many foreign investors through its controversial nationalizations and its withdrawal from the ICSID convention on investment arbitration, and while such moves probably haven't helped its economy, they have, to a certain degree, cushioned it against potential economic repercussions. The regime's closest international relationships right now are either with client states that rely on its largesse, such as Cuba, Nicaragua, Argentina, Bolivia, and Ecuador, or with authoritarian countries such as Iran, Russia, and Belarus that are unlikely to criticize it.

Former U.S. Ambassador to Venezuela Patrick Duddy recently released a policy paper through the Council on Foreign Relations outlining possible contingencies in the case that Venezuelan elections prove destabilizing. In his view the United State's ability to exert pressure on Venezuela unilaterally is limited by the already frosty relationship between the two countries.

A brazen power grab on the part of Chávez, or even a suspected constitutional violation, could damage Venezuela's relations with Brazil and Colombia, and perhaps also with international organizations such as UNASUR, MERCOSUR or the OAS. But the effects are unlikely to be broad or enduring. Right now, Colombian president Santos is relying on Chávez to help him broker a peace deal with the FARC rebels; while Brazil, having put a great deal of effort into forging a strategic alliance with Chavez, may prove similarly loath to take the lead.

And while the OAS has recently punished Honduras and Paraguay for presumed violations of democratic norms by suspending them from the organization, Chávez has shown himself to be highly resistant to international shaming attempts. The best candidate for exerting pressure might be MERCOSUR, the South American trading bloc that recently admitted Venezuela after a protracted diplomatic struggle, and might be able to threaten it with expulsion.

But even if the opposition fails to dislodge the revolution, there is little doubt that Chávez will emerge from this contest significantly weakened. Even if a legitimate vote count leaves him the victor, the united opposition will have shown itself to be a force to be reckoned with. Despite the staggering advantages enjoyed by the incumbent, that Capriles was able to mount a respectable showing will speak volumes. And Chávez, his health fading, will have to govern with a weakened mandate and state coffers emptied by his own pre-election binge spending. South America's democratic despot may find himself vulnerable even in victory.