The recession: a boom in depression-mongering

It is too early to say what the recessionary fallout from the financial crisis will eventually be. But that has not stopped a wave of pre-emptive panic, as experts queue to warn us that the end is nigh. However the economic problems pan out, it is already clear we are witnessing a boom in recession-mongering and a serious depression in views of the future. This arguably has less to do with recent events in the economy than with longer-term developments in politics and culture, where the tendency today seems always to look on the dark side of life. The danger is that such speculation could become a self-fulfilling prophecy.

There are severe financial problems affecting the UK and wider global economy, and the ‘credit crunch’ sparked by last year’s US sub-prime mortgage crisis has had a wider impact than many originally thought likely – partly because of the over-cautious response to it. There is a shortage of easy credit as banks that have racked up multi-billion dollar losses draw back from exposing themselves further, and housing markets are grinding to a halt – although there is little sign yet of the sort of slump that depressed UK property prices by 16 per cent in real terms at the start of the 1990s. But there remain big questions about how much of an impact these problems will finally have on the ‘real economy’ beyond the financial sector, where employment and spending figures are still holding up quite well on paper.

All we can say with any degree of certainty today is that sooner or later some sort of recessionary pressures are likely to make themselves felt in the economy – that is in the nature of the capitalist cycle. We also know that the UK economy is peculiarly vulnerable to any global downturn, because of its dependence on foreign credit and the financial sector – ie, the City of London makes its billions from handling capital created elsewhere (see Northern Rock and not-so-popular capitalism, by Mick Hume).

Beyond that, who knows how serious things might become? Nobody, yet. But that has not prevented a wild boom in speculating about how soon the ‘inevitable’ recession will turn into another great depression. It is an attitude captured by the British TV news reporter who recently informed us that the financial crisis is beyond doubt ‘worse than the 1940s, I mean the 1930s, no the 1920s!’ All that matters, it seems, is that we understand things are worse than ever. The small matter of historical ignorance is no barrier to such ‘hard’ economic reporting today.

Partly this reflects the downbeat miserabilsim that has become the dominant cultural mood of our age. At a time when many have lost faith in the future and feel distanced from the achievements of the past, it has become a knee-jerk reaction for observers to interpet everything as for the worst, in the worst of all possible worlds. We are constantly bombarded with grim messages about the prospects for everything from the planet to our pensions, all of which take the worst-case scenario as the most likely outcome.

In which case, why should we expect the discussion of the economy to be any different? The premature declarations of imminent depression reflect what we might call the recessionary psyche of our times, more than economic realities right now.

But this recession-mongering goes beyond mere pessimism. In some quarters there is a mood bordering on relish, as pundits cheer on the financial crisis (Another fat bank down! Whoo-hoo!) and rub their hands together at the prospects for further crises in the housing, share and consumer markets. It started with radical green commentators demanding ‘bring on the recession!’, but has now reached the point where serious economics journalists can write that we have waited too long ‘to see some blood splattering on those broad investment-banking braces’, and it would have been ‘a travesty …if we had to wait much longer’ (1).

No doubt some expressing these sentiments are just trying to settle scores with a small minority of rich financiers. Many others, however, appear to be taking pleasure from seeing those they imagine to be the obese, consumerism-crazed, credit-bingeing masses finally getting their comeuppance. Recession will be the good thing, they suggest, because it will ‘teach us a lesson’ about the need to spend less, want/have fewer things, and (in St Jamie Oliver’s latest crusade), grow our own vegetables as our forebears did during the war. What does it matter if some people lose their jobs so long as pundits score some points? Those who declare that ‘the party’s over!’ are celebrating themselves – holding a silent, alcohol-free street party to cheer on a victory for austerity and virtuous miserabilism.

But then, shouldn’t spiked writers like me – a longstanding critic of capitalism who used to edit Living Marxism magazine – also be happy to see the financial markets in trouble? Hardly. Where my politics come from, being left-wing was never about dreaming of an ‘imminent’ depression, or imagining that it will somehow bring capitalism down. There were many on the British left who wasted their time doing just that through the postwar era. They missed the point that what matters most is always politics. What determines whether the outcome is for the best will be the political responses to economic ups and downs.

Today, those responses are consistently dominated by sentiments of fear, conservatism and retrenchment. The current recession-mongering is the latest expression of a cultural mood that has long seen ‘too much’ growth as a bad thing and believed that less would be more. So they end up interpreting capitalism’s financial problems, not as an argument for moving society and the economy forwards, but for going backwards.

For those of us on the left who still believe in progress and development, however, and who see the popular desire for more as an important driver of both, the problem today is not that capitalism has gone ‘too far’. It is rather that the system has not gone far enough to test its limits. Hobbled by a climate of cowardice, risk-aversion and growth scepticism, UK and Western capitalism has taken the softer option to survive on easy credit, repackaging its debts to sell to one another in new financial instruments rather than making more productive investments. As a result, it is ill-equipped to face fresh challenges, and can be destabilised by a crisis in one sector of the US mortgage market (see The truth about the ‘credit crunch’, by Phil Mullan).

Indeed, that same mood of caution and risk aversion is now making matters worse, as banks behave like Silas Marner-type misers and hoard their gold under the floor, thus exacerbating the credit crisis (which is not due to a shortage of capital, but a lack of willingness to lend it) and the housing market problems.

Karl Marx long ago identified the dynamic and destrutive sides of capitalism – and the relation between the two. He understood the role that a recession could play in destroying the old, making space for the new and laying the basis for a new round of growth. But for that to happen there needs to be some dynamism in society. There is little evidence of that today. The mood is more one of talking the economy into a slump rather than planning how to move on from one.

Whether or not we get a full-blown recession, and how serious it becomes, remain to be seen. But there can little doubt now that we are witnessing the golden age of the recessionary psyche, as the bull market in doom-mongering speculation goes into a feeding frenzy.

Mick Hume is editor-at-large of spiked.

(1) The US economy is about to suffer a painful does of reality. About time, too, Guardian, 18 March 2008