Edward Bernays, the American nephew of Sigmund Freud, is said to have invented modern propaganda. During the First World War, he was one of a group of influential liberals who mounted a secret government campaign to persuade reluctant Americans to send an army to the bloodbath in Europe. In his book Propaganda, published in 1928, Bernays wrote that the "intelligent manipulation of the organised habits and opinions of the masses is an important element in democratic society", and that the manipulators "constitute an invisible government which is the true ruling power in our country". Instead of propaganda, he coined the euphemism "public relations".

The American tobacco industry hired Bernays to convince women that they should smoke in public. By associating smoking with women's

liberation, he made cigarettes "torches of freedom". In 1954, he conjured a communist menace in Guatemala as an excuse for overthrowing the democratically elected government, whose social reforms were threatening the United Fruit Company's monopoly of the banana trade. He called it a "liberation".

Bernays was no rabid right-winger. He was an elitist liberal who believed that "engineering public consent" was for the greater good. This could be achieved by the creation of "false realities" which then became "news events". Here are examples of how it is done these days.

False reality The last US combat troops have left Iraq "as promised, on schedule", according to President Barack Obama. The TV news has been filled with cinematic images of the "last US soldiers", silhouetted against the dawn light, crossing the border into Kuwait.

Fact They have not left. At least 50,000 troops will continue to operate from 94 bases. American air assaults are unchanged, as are special forces' assassinations. The number of "military contractors" is 100,000 and rising. Most Iraqi oil is now under direct foreign control.

False reality BBC presenters have described the departing US troops as a "sort of victorious army" that has achieved "a remarkable change in [Iraq's] fortunes". Their commander, General David Petraeus, is a "celebrity", "charming", "savvy" and "remarkable".

Fact There is no victory of any sort. There is a catastrophic disaster, and attempts to present it as otherwise are a model of Bernays's campaign to "rebrand" the slaughter of the First World War as "necessary" and "noble". In 1980, Ronald Reagan, running for president, rebranded the invasion of Vietnam, in which up to three million people died, as a "noble cause", a theme taken up enthusiastically by Hollywood. Today's Iraq war movies have a similar purging theme: the invader as both idealist and victim.

False reality It is not known how many Iraqis have died. They are "countless", or maybe "in the tens of thousands".

Fact As a direct consequence of the Anglo-American-led invasion, a million Iraqis have died. This figure, from Opinion Research Business, follows peer-reviewed research by Johns Hopkins University in Washington, DC, whose methods were secretly affirmed as "best practice" and "robust" by the Blair government's chief scientific adviser. This is rarely reported or presented to "charming" American generals. Neither is the dispossession of four million Iraqis, the malnourishment of most Iraqi children, the epidemic of mental illness, or the poisoning of the environment.

False reality The British economy has a deficit of billions which must be reduced with cuts in public services and regressive taxation, in a spirit of "we're all in this together".

Fact We are not in this together. What is remarkable about this PR triumph is that only 18 months ago, the diametric opposite filled TV screens and front pages. Then, in a state of shock, truth became unavoidable, if briefly. The Wall Street and City of London trough was on full view for the first time, along with the venality of once-celebrated snouts. Billions in public money went to inept and crooked organisations known as banks, which were spared debt liability by their Labour government sponsors.

Within a year, record profits and personal bonuses were posted and the "black hole" was no longer the responsibility of the banks, whose debt is to be paid by those not in any way responsible: the public. The received media wisdom of this "necessity" is now a chorus, from the BBC to the Sun. A masterstroke, Bernays would surely say.

False reality Ed Miliband offers a "genuine alternative" as leader of the Labour Party.

Fact Miliband, like his brother and almost all those standing for the Labour leadership, is immersed in the effluent of New Labour. As a New Labour MP and minister, he did not refuse to serve under Blair or to speak out against Labour's persistent warmongering. He now calls the invasion of Iraq a "profound mistake". Calling it a mistake insults the memory and the dead. It was a crime, of which the evidence is voluminous. He has nothing new to say about the other colonial wars, none of them mistakes. Neither has he demanded basic social justice - that those who caused the recession clear up the mess and that Britain's fabulously rich corporate minority be taxed seriously, starting with Rupert Murdoch.

The good news is that false realities often fail when the public trusts its own critical intelligence. Two classified documents recently released by WikiLeaks express the CIA's concern that the populations of European countries, which oppose their governments' war policies, are not succumbing to the usual propaganda spun through the media.

For the rulers of the world, this is a conundrum, because their unaccountable power rests on the false reality that no popular resistance works. And it does.