{"id":1517,"date":"2021-04-14T19:07:23","date_gmt":"2021-04-14T16:07:23","guid":{"rendered":"https:\/\/metacpc.org\/?p=1517"},"modified":"2021-04-20T19:31:27","modified_gmt":"2021-04-20T16:31:27","slug":"thought-the-2008-financial-crash-was-bad-at-this-rate-theres-worse-to-come","status":"publish","type":"post","link":"https:\/\/metacpc.org\/en\/thought-the-2008-financial-crash-was-bad-at-this-rate-theres-worse-to-come\/","title":{"rendered":"Thought the 2008 financial crash was bad? At this rate, there\u2019s worse to come"},"content":{"rendered":"\n

By Antara Haldar on INDEPENDENT<\/a><\/p>\n\n\n\n

We’re signing our own death warrant putting too much faith in the market in our era of big tech and globalisation.\u00a0Antara Haldar<\/a><\/strong>\u00a0argues that it doesn’t have to be this way<\/p>\n\n\n\n

It was the economic analogue of 9\/11. The moment that changed everything.<\/p>\n\n\n\n

Ten years ago this September, the iconic Lehman Brothers was the first domino to fall, setting off the event that has defined the times we live in \u2013 the Great Recession. It was like one of those big-studio disaster flicks (so much so that Bond movie director Sam Mendes has turned his attentions to the theme in his new work at London\u2019s National Theatre, The Lehman Trilogy). Cue explosive trailer.<\/p>\n\n\n\n

The year is 2008. A few wicked men \u2013 let\u2019s call them The Quants \u2013 come up with a plan to achieve world domination. They unleash a reign of terror \u2013 holding the terrified, helpless masses hostage to their diabolical scheme; threatening their homes, their livelihoods, their savings. It looks like the end is nigh.<\/p>\n\n\n\n

Just when we\u2019re all starting to give up hope: enter the hero \u2013 the dusky saviour. Tall, dark, handsome and, above all, cool. Oh, and of course, with that baritone \u2013 the voice from God. He doesn\u2019t quite screech onto the scene on a motorbike in a studded leather jacket \u2013 but almost; yes, indeed \u2013 the Harbinger of Hope definitely knows how to make an entrance.<\/p>\n\n\n\n

Legislation is enacted. Bailouts are issued. Uplifting speeches are made. Yes we can, indeed. Peace is restored on earth. Or is it?<\/p>\n\n\n\n

In the midst of the sound and fury \u2013 the heart-wrenching scenes of family homes being foreclosed, the tense images of placard-wielding Occupy protesters in Zuccotti Park, Congressmen making impassioned speeches \u2013 in some places, it\u2019s business as usual.<\/p>\n\n\n\n

Cut to an image of an innocuous figure somewhere in the echelons of the ivory tower, your average college economics professor: tweedy, bearded \u2013 all the loveable, deceptively harmless stereotypes. On a blackboard, he is drawing an all too familiar image: the ever-laconic, bashfully feminine downward sloping demand curve, always yearning for a fillip; and the relentlessly optimistic, thrusting supply curve, gazing north with no upward limit. The two intersecting at the equivalent of the G-spot of economics. The story being told here untouched by the storm raging outside, as disconnected from reality as the blackboard from a smartphone screen.<\/p>\n\n\n\n

The pan of the camera in that last scene \u2013 its ever so slightly creepy quality \u2013 is warning enough. We can almost hear the menacing score in the background. Hollywood has schooled us sufficiently for that. We know we\u2019re witnessing an ember of evil that remains unextinguished by the regulation and political rhetoric \u2013 something that can\u2019t be snuffed out by physical force or even bombs: the idea of the economy.<\/p>\n\n\n\n

And we know that we\u2019re being set up for a sequel. The financial crisis is merely Act One.<\/p>\n\n\n\n

The history of human ideas is so profoundly chequered, so saturated in overt perversion that the competition for the top spot for which one is most evil \u2013 the \u201cmost dangerous idea in the world\u201d, as Francis Fukuyama puts it \u2013 is stiff. Genocide, slavery, colonialism, sexism and nuclear war are all worthy contenders in terms of the misery they are capable of inflicting. But I would argue that there is something just as demonic \u2013 that we systematically underestimate.<\/p>\n\n\n\n

My answer, ostensibly far more vanilla, underpins \u2013 even valourises \u2013 the blood-splattered items that usually make the usual \u201ctop ten\u201d lists. It\u2019s annihilation without the oomph. A chronic killer, all the more deadly for striking in silence. Far more lethal than media favourites terrorism and cancer put together.<\/p>\n\n\n\n

It is the notion of the modern economy.<\/p>\n\n\n\n

Economic activity \u2013 the proverbial butcher, baker and candlestick maker \u2013 has existed for millennia, but for most of that period the relationship between people and things was the right way around. Things existed for people, rather than people for things. It is only as recently as the last century or two that this began to change.<\/p>\n\n\n\n

The Industrial Revolution unleashed forces so profoundly powerful that its vortex drew everything \u2013 but everything \u2013 into it. The world that emerged in its wake was fundamentally different from what had come before, flipping the order of priority so that every other aspect of society became secondary to the organising logic of the economy; all else reduced to grist to the mill of the economic machinery. In his 1944 classic The Great Transformation, the social theorist Karl Polanyi coined a term for this rupture between economy and society: disembedding.<\/p>\n\n\n\n

But the roots of the current economic crisis go back to the period immediately after the Second World War. In 1948 a young economist by the name of Paul Samuelson published a textbook called, simply, Economics. The title proved apt: it more or less defined the discipline since its publication. By far one of the most influential thinkers of the 20th century, he went on to become the first American to win the Nobel Prize in economics \u2013 and ushered in an era in which America would authoritatively dominate, not only the global economy, but economic thinking. The volume presented a kind of unified field theory for modern economics and did so in what Samuelson emphatically insisted was the subject\u2019s \u201cnatural language\u201d \u2013 mathematics.<\/p>\n\n\n\n

The congealing of consensus in the discipline that quantitative economics was the only game in town came at a price. Samuelson was one of the \u201cgood guys\u201d \u2013 particularly on account of incorporating into mainstream economic thought the insights of the British economist (once considered a heretic for advocating more government spending when the economy was in a slump), John Maynard Keynes. Nor was he, by any means, the first to liberally deploy mathematics in economics \u2013 several before him, including Leon Walras and Alfred Marshall, had done so earlier in the 1900s. But against the backdrop of a world reeling from major tectonic shifts, quantitative economics offered the promise of a seductive certainty that made it central to the reconstruction of the post-war world. If the Industrial Revolution was the technological moment in which the rupture between the economy and society occurred, the methodological shift to the quantitative was the ideological one: the instant in which the intellectual arsenal of the supremacy of the economy became unassailable.<\/p>\n\n\n\n

While the tenor of the discourse (that had once boasted a cast of characters like Adam Smith and Karl Marx) in the past had been more overtly political, the new paradigm was based on the notion that mathematical rigour produced politically neutral decisions. Not only was the complexity of political choice obfuscated, but quantitative economics established a monopoly over the conversation \u2013 excluding from it both other disciplines (former friends, like sociology, history, politics and philosophy) and ordinary people (whose lives it, ironically, increasingly dictated). Its identification of itself as a science justified \u2013 by analogy with the laws of nature \u2013 the complete abrogation of moral responsibility: just as an apple does not experience falling as an indignity inflicted by the laws of gravity. The cumulative result was a discipline that was insular and elitist \u2013 and imbued with a deep sense of invincibility. The Model was king, and the complexity of reality a footnote to it.<\/p>\n\n\n\n

The post-Industrial Revolution economy made the tail-wagging-the-dog logic of things controlling people the norm \u2013 but this new mode of economic thought, by invoking the authority of pure science, silenced dissent as simple-minded and elevated it to the status of an unqualified symbol of progress.<\/p>\n\n\n\n

If the Industrial Revolution was the prequel to the current economic moment, rest assured that it has a sequel. And that it will be \u2013 in Hollywood lingo \u2013 \u201cbigger and badder\u201d than what came before. The seismic shifts \u2013 globalisation, financialisation and technologisation \u2013 associated with what is euphemistically referred to as the \u201cnew economy\u201d are poised to make the changes of the past look as incremental as an iPhone upgrade.<\/p>\n\n\n\n

The Uber-Amazon-Airbnb-Tinder economy has changed how we travel and shop, live and love. Tech titans like Google, Facebook and Twitter have now become instrumental to how we vote \u2013 and how we think. That\u2019s to say nothing of the developments in AI and genetics that are on the cusp of catapulting us into the dystopian future that was once the exclusive preserve of sci-fi.<\/p>\n\n\n\n

If the manufacturing economy was the Frankenstein\u2019s monster to human society\u2019s Dr Frankenstein, the forces of technologisation are the equivalent of Godzilla \u2013 comparable to the shift from cavalry to chemical warfare. And, to the extent that the forces of, for instance, artificial intelligence, genetic engineering and climate change represent existential threats of a kind that we have never encountered before, history may not, this time, even have the luxury of repeating itself.<\/p>\n\n\n\n

To trust our destiny to the tyranny of The Model \u2013 a regime \u201cof the 1 per cent, by the 1 per cent, for the 1 per cent\u201d, to borrow a phrase coined by my co-author, Nobel prize winner in economics, Joseph Stiglitz \u2013 is to willingly sign our collective death warrant. The seemingly inoffensive corduroy-clad economics professor from Scene One of our story is to The Model what Oppenheimer was to the Manhattan Project \u2013 without him there would have been no device for The Quants to detonate. Far from the trickle-down advertised on the tin, the financial crisis has revealed the current economic system to be a can of worms devoted to funnelling up. The system is broken. By design. How much more evidence do we need? The explanation lies not just in the usual suspects that are vilified \u2013 the greedy bankers and corrupt politicians \u2013 but, even more fundamentally, the hubris of economic theory. If the current rubric could have nearly burnt the world to cinders tweaking algorithms for the derivatives market, can you imagine what they can do with the combined power of robotics and eugenics?<\/p>\n\n\n\n

Polanyi\u2019s prophesy was that this upside-down world order \u2013 in which monopoly money was real and people reduced to human chessmen at its will \u2013 could not endure. That the homogenising zeal of the modern economy, eviscerating labour, land and money was not only wrong, but unsustainable. And all the evidence suggests that this scenario is playing out. As we live more and more in the digital realm and less and less in the physical, the epidemic of alienation is exacerbated \u2013 undermining the only things (government, community, the collective contract) that might have the power to rein in the forces at play.<\/p>\n\n\n\n

If populism is the primal scream that society is emitting in response to the financial crisis, obliteration will be the product of allowing the system to carry on. Injustice \u2013 and ultimate destruction \u2013 are written into the flowchart of our current economic system.<\/p>\n\n\n\n

In a culture increasingly, and admirably, committed to standing up to structural injustice on various axes with righteous indignation \u2013 gender, race, ethnicity \u2013 the discourse on inequality still speaks in a relatively meek voice. The 99 per cent, predictably losers in the economic lottery, continue to harbour a sneaking suspicion that it\u2019s somehow their fault that they didn\u2019t make the cut \u2013 that they may legitimately have missed out on merit. Economic theory nods encouragingly on.<\/p>\n\n\n\n

And this is where the solution lies. There is a line from the Preamble of the Constitution of UNESCO that has stayed with me: \u201cSince war begins in the minds of men,\u201d it goes, \u201cit is in the minds of men that the defences of peace must be constructed.\u201d Every piece of the intricate latticework of human civilisation started with an idea. This is the defining feature of the Anthropocene; the essential hubris of humankind \u2013 the capacity to think our way into an alternative reality.<\/p>\n\n\n\n

And, so, because we made it, we can change it.<\/p>\n\n\n\n

A few weeks ago, I was invited to give a talk at Oxford. I was buoyed to see a group of bright-eyed, bushy-tailed undergraduates gathered, especially on a Friday night. The topic was \u201cradicalising the curriculum\u201d. The very \u201cwoke\u201d students thought I would talk about race, or, if I was feeling eclectic, gender. As I started my talk, I could see some uncomfortable shuffling: what was the trouble, I thought? Was I being seen as a traitor to the cause, a sell-out for buying into the all-encompassing logic of economics?<\/p>\n\n\n\n

The problem, I found out afterwards, was different: many in the audience (historians and sociologists, philosophers and biologists) were alienated by my use of the term \u201cneoclassical economics\u201d. How deeply ironic that these young adults, some of the best and brightest in the country, whose economic futures will be determined by this system of belief \u2013 who will never own homes and have their \u201cavocado habit\u201d blamed for it \u2013 can\u2019t even name the ideas that serve as the blueprint for their world. After some coaxing the students \u2013 especially the politically invested (who, like me, were often made to feel embarrassed for this trait) \u2013 admitted that they were driven away from economics by the maths.<\/p>\n\n\n\n

The methodological penis envy of economics has led to a field that is closed to a degree that has made the subject almost Masonic. But economics, as a discipline, is failing even on its own terms \u2013 as a predictive science. In the last few decades, it has not only missed the story of the biggest financial crisis since the Great Depression, but also been hard pressed to explain other major global events, such as the rise of the economies of the Global South, such as India\u2019s and, particularly, China\u2019s.<\/p>\n\n\n\n

But it isn\u2019t all doom and gloom: to borrow the tag line of the World Social Forum, another world truly is possible. Most importantly in the realm of ideas. The work of Nobel prize winning psychologist Daniel Kahneman, together with legal scholar Cass Sunstein and fellow Nobel laureate in economics Richard Thaler, could fundamentally shift our understanding of the protagonist at the heart of the economy. Their work has helped replace the sociopathic hyper-materialistic rational actor that has been at the centre of economic analysis for centuries \u2013 known as homo economicus \u2013 with a better fleshed out, more human account. Developments in behavioural economics \u2013 drawing on the breakthroughs in the cognitive sciences, particularly moral psychology \u2013 are establishing that human beings are not entirely selfish and respond to non-material incentives.<\/p>\n\n\n\n

The work of Stiglitz on asymmetric information picks a gaping hole in the notion of perfect markets. The only woman Nobel laureate in economics, Elinor Ostrom, demonstrated the importance of community-based solutions to market problems. Amartya Sen\u2019s work on the inversion of means-ends reasoning in economics has been crucial: is the bicycle important, as Sen asks, or what a person can do with it? The Nobel archives curate \u2013 and reward \u2013 an endless array of contributions to a field that disproves many of the central tenets of economic theory; yet, in the face of wave upon wave of assault, neoclassicism \u2013 like the Trump presidency \u2013 seems to emerge virtually unscathed.<\/p>\n\n\n\n

The challenge, then, is to join the dots between these individual breakthroughs to construct a genuinely new paradigm. Building what I call the \u201cthree Cs\u201d into economics \u2013 cognition, context, and most importantly community \u2013 will go a long way towards making economics a more socially accountable discipline. But, ultimately, it will have to be a matter of putting ethics before economics.<\/p>\n\n\n\n

The current mode of economic thought \u2013 neoclassicism \u2013 is not the only possible one. Nor has it been in place since the beginning of time. The notion of choosing to set aside market logic is not as radical or old-fashioned as it seems. We do it all the time. It\u2019s the reason that we don\u2019t pay our romantic partners for sex, hire friends to invite to dinner parties or lease out parts of our anatomy as billboards.<\/p>\n\n\n\n

We need, following Polanyi, to re-embed \u2013 in humanity, and in the humanities.<\/p>\n\n\n\n

Martin Luther King \u2013 as often quoted by Barack Obama \u2013 was fond of saying, \u201cThe arc of the moral universe is long, but it bends towards justice.\u201d But we are the ones tracing out that line. We hold the pencil in our hands. But before the world can change, our ideas about it need to change. Otherwise we are complicit in accepting the system. Saying that the monster that is the market must control man is like saying that the invention of the atom bomb makes nuclear war inevitable. Markets and morals are not mutually exclusive.<\/p>\n","protected":false},"excerpt":{"rendered":"

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