Ten Years On
I've a piece in the latest issue of the fabulous The Mint, commissioned in response to the tenth anniversary of the financial crash of 2008:
https://www.themintmagazine.com/hereandnow
There are many other wonderful things to read in the magazine, but for those of you reticent to take out a subscription to a magazine focused on pluralist economics, here's the original 1,500 words...
It is 1978
and your correspondent is 13 years old.
I have not yet heard of ‘economics’ – I am, perhaps, a Nascent Economist
– but I have a letter published in The Daily Express. The letter passes poetic (and potentially
blasphemous) comment on the current state of industrial relations in Britain:
“Our union, which art immortal, hallowed be thy pay claim…”
Britain is
the ‘sick man’ of Europe. Everyone is
always on strike and inflation is out of control. Just a few years ago I had to do my homework
by candlelight because they weren’t making enough electricity.
Soon the
country will elect Margaret Thatcher.
Her policies of supply side reform will devastate heavy industry in the
UK. Great numbers of people will lose
their jobs. My father will be among
them. More than three million people who
want jobs will not have one.
Maybe that’s
where it all started.
**
It is
1988. I now have an O-level in
economics, and an A-level, and a degree.
The UK is having a whale of a time.
The early 80s recession is long over and ‘Big Bang’ happened a couple of
years ago. The financial sector in the
UK has been deregulated. Japanese and
American banks have rushed to London.
Anyone with a degree that involves the ability to count works in banking,
accountancy or something called ‘management consultancy’.
Income tax
rates have been slashed, the economy is growing at an annual rate of something
ridiculous like 5 or 6%, suddenly everyone has a credit card and can buy their
own home. Harry Enfield is on television
waving a wad of cash and shouting ‘LOADSAMONEY’ and the M25 has just opened. Margaret Thatcher has recently won a record
third term and still seems in total control of all she surveys.
Your
correspondent is paying all this rather less attention that he might. It is the second summer of love and I am
rather less under the influence of Milton Friedman and rather more under the
influence of Hunter S Thompson. (Which
is by way of saying I am actually under the influence of a wide range of
recreational pharmaceuticals.) I am,
perhaps, a Gonzo Economist. I have a job
that involves driving around and around the M25 collecting data about property
markets. Through the haze I notice a
building boom and business parks and things called ‘out of town shopping
centres’.
Maybe that’s
where it all started.
**
It is 1998
and I have spent several of the past few years as a Business Economist doing
macro-economic forecasting and consultancy.
Oh yes. I have a wife and
children and a mortgage, too.
The
recession I’d seen coming as I orbited the M25 has come and gone, but its
fall-out is still with us. The people of
Britain have just kicked out the Conservative Government under which I have
lived my entire adult life and installed someone called Blair. He and his sidekick Brown have granted
independence to the Bank of England and have set about the most substantial and
well-organised investment in Britain’s public infrastructure for decades.
I shall see
some of this close up. I served as chair
of governors at my children’s primary school for several years and watched as
the money to provide for the needs of an inner city community grew steadily and
securely.
These are
the days of the Goldilocks economy: not too hot, not too cold. The entire world, in fact, is basking in the
wonders of the Washington consensus. The
Soviet Union collapsed a few years ago and western capitalism is the only game
in town. Globalisation will deliver
endless prosperity; all we have to do is make sure the proceeds get distributed
in a way that can be described as fair.
Maybe that’s
where it all started.
**
It is 2008. A thing called the iPhone came out last year
and the long-awaited fusion of computers and phones has finally occurred. I can still remember when floppy disks were
actually floppy, so the emergence of ‘social media’ leaves me somewhat
bewildered, but everyone seems terribly excited. Everything is going to be technology and
wonderful.
Instead, chaos
breaks out. The demand for Volvo trucks,
having grown a little each year for decades, drops to zero overnight. Economic events previously only described in
theory begin happening on a daily basis.
There are queues outside banks and television commentators run out of
descriptive power.
By this
stage I am a Former Economist. I still
think about economics, and use the tools and language of economics from time to
time, and I can still muster a half-decent economic argument if I have to. But I now I run my own business, Brook Lyndhurst, which is concerned much more generally with why humans and systems
behave the way they do, and what might be done to make them behave more
sustainably.
We’ve been
doing quite well; but – and just like every other enterprise in the land – we’re
going to be hit hard by whatever is going to unfold from this chaos.
We don’t
know yet. It is obviously bad. Very, very bad.
Maybe that’s
where it all started.
**
It is
2018. And if you thought 2008 was bad…
The UK has
endured a decade of austerity. Real
wages and productivity have flat-lined and the economy is moribund. Young people can no longer afford to buy
houses. The country has split itself
into two increasingly vituperative factions, the slightly larger of which has
voted to abandon our closest friends and allies and take the country out of the
European Union.
At the same
time, the United States have elected someone called Donald Trump, right wing
populist parties are in government in Italy, Turkey and Hungary, and they are on
the rise more or less everywhere else. Those
that predicted an aftermath akin to the 1930s are looking more and more
prescient.
Meanwhile, the
oceans are choked with plastic, thousands of people are dying prematurely every
year because the air quality is so bad, and the evidence of climate change –
rising temperatures, melting ice caps, more frequent storms – continues to
accumulate. There has been a global
agreement that we should try to tackle climate change; but there is no sign
whatsoever of greenhouse gas emissions being controlled in the kind of way
necessary if we are to keep the planet habitable for humans.
In
bewilderment and dismay, your correspondent has abandoned the field. I am a Recovering Economist.
Well, I say
‘abandoned’. This is not quite
true. To say I ‘withdrew’ would be more
accurate. I needed to walk away and take
stock. I needed to acknowledge that I
was – I am – a member of that educated metropolitan elite who’d taken the
Enlightenment for granted. I’d spent
years and years in conferences and seminars, writing reports and articles,
researching and trying to understand things so that I could try to make a
better future – and, all the while, I was talking to a group of people that
already largely agreed with me and I’d stopped paying attention to all those
people whose ‘now’ was so shit.
Maybe this
is where it starts.
**
In reality,
there is no ‘start’. None of this
started anywhere. It’s a complex, open system. Every cause is an effect, every effect a
cause. To wonder ‘where it started’ is
to miss the point.
The point –
surely – is to try to understand where we are, and what this means for what
might happen next, and – as far as we can – to try to minimise the downsides
and maximise the upsides.
Which is
where a reflection on the past decade, and the one before that, and the one or
two or three before that, might help.
It reminds
us – it certainly reminds me – that the economic circumstances we experience,
particularly during early adulthood, fundamentally shape both our behaviour and
our expectations for the rest of our lives.
Two recent
papers from the NBER in the US – ‘The Making of Hawks, Doves and Swingers’ and
‘Scarred Consumption’ – confirm this point.
Early life experiences, and economic shocks in particular, permanently
influence, at one end, the voting behaviour of elected representatives and, at
the other, the spending patterns of ordinary consumers.
I was
certainly shaped by the early days of Thatcherism, by the mindset of my
economics teachers (who’d learned their craft in the heyday of Keynes) and by my
horror at the excesses of the late 80s boom.
What lessons
will today's 20- and 30-somethings, whose perspectives and expectations have
been forged by the aftermath of 2008, take forward for the next few
decades? On a gloomy day, I see yet more
authoritarianism, more fatalism, more anger, more withdrawal.
But on a
sunny day, when optimism glimmers more brightly, I see something else. I see young people in American galvanised
against their insane gun laws. I see
young people in Britain experiencing common cause – for the first time in
decades – as they discover that they all
have bullshit jobs and that none of
them will be able to live financially independent lives. And I find myself imagining that maybe, just
maybe, their leadership in 2028 and 2038 will put a smile on my face. I probably won’t understand it; but that’s
ok. I’m not an economist any more.
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