The Crisis With No Name
Society's inability to make sense of the downturn is hampering what we really need: a major public debate about the economy.
What happens to political and public life in the aftermath of a destructive global economic crisis? The answer to that question depends on how the crisis is interpreted, who is blamed for it, and what system of meaning exists through which communities might make sense of misfortune and disasters. Whether crisis-ridden events provoke a mood of demoralisation and passivity, a search for radical solutions, a blind outburst of extremism, or simply a sense of fatalistic acceptance, depends on the meaning that society attaches to the experience.
One of the curious features of the current predicament is that we lack a commonly comprehensible language for making sense of the economic crisis. In line with the twenty-first century obsession with nature and the environment, and with personal health, the global crisis is often presented as ‘payback time’ for human greed. Many describe the collapse of the financial system as a kind of ‘natural correction’, as if a cycle of nature had gone awry.
Others use the metaphor of environmentalism to make sense of the destabilisation of the world economy: ‘financial tsunami’, ‘economic meltdown’, the ‘contagion of toxic debt’. From this perspective, a harsh regime of austerity comes to be recycled as a positive thing for our personal and environmental health. Some economists have suggested that, thanks to recessions, people have been able to live longer, because they eat fewer rich foods, exercise more, and live in a less polluted environment. These fantasies about recessions as ‘healthy’ have a lot of force in public debate today. The UK shadow health secretary, Andrew Lansley, recently informed the British public that the recession might be ‘good for us’ in many ways, because ‘people tend to smoke less, drink less alcohol… and spend time at home with their families’.
It is important not to confuse these attempts to endow the recession with positive connotations with the kind of displays of bloody-minded fortitude normally associated with the British ‘Blitz spirit’. Historically, the Blitz spirit was an affirmation of a commitment to fight, whereas those who brand the economic crisis as ‘good for us’ express a mood of low expectations in their demand that we should all embrace austerity. Of course, this celebration of the virtues of a ‘good recession’ is an affectation of those who know, and can take for granted the fact, that they will have a financially secure life in the coming years. It remains to be seen how much resonance their ‘good recession’ arguments will have over the next few months; but the very fact that such a fantasy has been so widely indulged by serious public figures exposes their psychic distance from the realities of economic hardship.
It is worth noting that, until relatively recently, leading politicians and public figures had some direct experience of a severe economic recession or even of depression. In the twentieth century, the devastating impact of economic crises was part of the folk knowledge of most people. Memories of post-Second World War austerity, the economic upheavals of the 1970s, deindustrialisation in the 1980s, and the recession of the early 1990s had a direct bearing on most people’s sense of security in the late twentieth century. It is only in recent decades that we have gained sufficient distance from the Great Depression of the 1930s to treat it as an object of nostalgia.
Today, the treatment of an economic crisis as something unusual, or potentially ‘positive’, is underwritten by the naive belief that economic problems could be managed through making relatively minor technical adjustments. Prosperity and growth meant that many policymakers drew the conclusion that major crises were a phenomenon of the past. Indeed, numerous influential commentators argued in recent years that the problem was not too little but too much growth.
Disconnection between politics and normal life
One of the most interesting features of contemporary public life is the palpable sense of disconnection between politics and normal life. The fact that some leading politicians can celebrate the health benefits of a recession is symptomatic of their aloofness from the issues that concern everyday people. While politicians go on about global warming, child obesity, healthy eating and terrorism, most people are concerned about mundane day-to-day problems to do with maintaining or improving the quality of their lives and ensuring that they and their family have a secure future.
Even before the arrival of the ‘credit crunch’, surveys showed that people’s anxieties about their family circumstances far outweighed their concern about terrorism and other global fears. However, people’s worries about their social status and economic security are rarely voiced, and have had only a minimal impact on public debate.
From time to time, political leaders sense that they are out of touch with popular opinion. New Labour’s refusal to hold a referendum on the European Union’s Lisbon Treaty is motivated by its sense of isolation from public opinion on this issue. Most of the time, the political class simply doesn’t know what is going on in the minds of the electorate. This became clear during the Glenrothes by-election in Scotland in November 2008. All the way up to the counting of the ballot papers, Labour believed that it had lost this relatively safe seat to the Scottish National Party. Even in this historically solid Fife constituency in Prime Minister Gordon Brown’s backyard, New Labour had little idea what the people were thinking. In fact, Labour won the seat comfortably.
During the 2005 General Election, the Conservative Party’s slogan ‘Are you thinking what we’re thinking?’ had a disconcerting effect on some of its opponents. In truth, this was a Tory bluff because, as we now know, they had no more idea than anyone else about what ‘you are thinking’. Yet many of their political opponents became worried that the Tories had managed to connect with something important, that they really did know what ‘you were thinking’, and worse, that you and the Tories agreed with one another. Commentators hinted darkly that the Tories’ campaign had gained resonance with sections of the electorate. It was suggested that some of the public were not disclosing their real thoughts about the big issues of the day to pollsters, and that beneath the surface they were silently responding to the Tory message.
This concern about public attitudes towards the Tories’ half-baked subliminal message shows just how far removed from society the British political class has become. In truth, none of them knows what you are thinking. Politicians engage with the public as if they were a different race, and look at us as being driven by narrow self-interest and motivated by unspeakable passions and depraved prejudices. They tend to believe, for example, that white English people are easily manipulated by racist and xenophobic propaganda, and that in response to casual prejudice young Muslims might join the ranks of Islamic terrorists. This was the view expressed in a recently leaked Home Office memorandum titled Responding to Economic Challenges. The memo said that one of the consequences of the recession might be rising crime rates and more anti-social behaviour. It warned that there ‘could also be a rise in people turning to extremist groups and racism’, and speculated that those who experienced racism might turn to terrorism.
Interestingly, in the subsequent public debate, there was little criticism of the contents of the memo, only of the ability of the Home Office to deal with the challenges thrown up in recession-hit Britain. Yet, from a sociological point of view, what was interesting about the memo was its speculative, fantasy character. It is clear that the Home Office, like its political masters in Downing Street, has little idea about how people feel about the current economic situation, and even less about how the public might respond to it in the future. The memorandum is based on models from the recession of 1991-1992 rather than any assessment of social attitudes today. Relying on such abstract schema saves the Home Office, and others, the trouble of engaging in the kind of public dialogue that might genuinely aid them in finding out what people are really thinking.
Until now, the political response to the economic crisis has been relatively muted. One reason for this is because most people have been caught unawares by the speed and scale of recent developments. The absence of serious public debate is also an outcome of the dearth of alternatives. For well over a generation, officials and experts have become addicted to the idea that ‘There Is No Alternative’. Individual observers may have had reservations about just how far de-regulation and credit expansion should go, but they generally accepted the idea that the economy was working. Many had even drawn the conclusion that the economy was working too well, and that the real problem was the ever-expanding system of production and consumption. Consequently, in many societies, economic issues became depoliticised.
The depoliticisation of economics has coincided with the politicisation of quality-of-life issues. In recent years, issues relating to wellbeing, consumption, health and the environment have emerged as a major focus of public debate. Often, the quality of life was counterposed to a concern with the quantities of life. At least rhetorically, wellbeing has been placed at the top of the UK government’s agenda, and numerous advocacy organisations claimed that the realisation of the objective of wellbeing for all required the restraint of economic growth.
With economic stagnation, deflation and rising unemployment, there is likely to be a shift in focus from quality-of-life issues to more basic bread-and-butter issues. There is little doubt that society will re-evaluate its priorities as it is forced to recognise the fact that the quality of our existence depends on achieving a level of economic security. It is unlikely that concern with quantity (of income, of consumption, and so on) will completely displace the values-oriented quality-of-life agenda. What’s more likely is that there will be a convergence between the more old-fashioned preoccupation with economics and the emphasis on quality-of-life matters. How such a convergence emerges, and what shape it will take, depends on the counter-crisis policies worked out by governments.
In the absence of any political clarity about the scale and impact of the economic crisis, the predominant official response is to treat it as a problem that is above or outside of politics. There have already been suggestions that the recession is not a party political matter. Labour MP Frank Field has argued for a coalition of parties supporting a National Government to deal with this ‘threat to the nation’. One downside of this approach is that it would likely inflame officialdom’s already-existing aversion to taking proper responsibility and elaborating meaningful policies for managing the crisis.
There is a danger that if the economic recession continues to be treated as a technical problem, the public will become even more detached from political life. The real problem is not, as the Home Office memorandum fears, a rise in anti-social behaviour, but rather the consolidation of a mood of helplessness and passivity. A society that turns in on itself will find it much harder to deal with the difficult challenges that lie ahead. Thankfully, the difficult predicament we face also provides an opportunity to revitalise public life. But that requires a more systematic attempt to put forward policies that can help society contain the worst effects of the crisis and outline the kind of economy fit for our needs and desires. A grown-up discussion of all the available options is the precondition for ensuring that we find a language through which we can politically engage with the crisis.
Confronting the crisis of thinking
One reason why we are faced with a crisis in thinking about the economic crisis is the existence of a culture of low expectations. This culture exerts an enormous influence on public debate in Western societies. In retrospect, it is evident that the focus on quality-of-life issues in recent years was inspired by a mood of suspicion towards economic growth and ambition. Recently, various anti-growth arguments – such as the idea that prosperity does not make people happy and, on the contrary, a preoccupation with work and material possessions has made many of us mentally ill – acquired the status of an incontrovertible truth. Sustainability was turned into a cultural ideal, and restraint became a new virtue of our times.
At the same time, the belief that society faced limits (natural ones) that could not be transgressed gained significant influence. With so much emotion invested in the idea that growth represents a threat to the planet, it is not surprising that the grave consequences of the economic downturn are not always appreciated.
Another reason why the response to the current crisis is so diffuse is because the crisis is often wrongly interpreted as a consequence of failures in the financial and credit system. Many commentators naively believed that the crisis was confined to the system of banking and finance, and that therefore the so-called ‘real economy’ would be only marginally affected by the recession. For a period of time, it was possible to maintain the illusion that this crisis would be confined to the financial sector, and that the ‘real economy’ would continue to carry on as before. However, the finance sector does not exist in a different universe to the rest of the economy. In recent times, the finance sector has come to exercise a significant, if not dominant, influence over economic life. It is intimately interwoven into all dimensions of economic life, and accounts for a growing share of total profit.
The expansion of credit is held responsible for the recession – yet it was the massive expansion of credit that made possible the global expansion of capital in the first place. Without the securitisation and financialisation of the economy, the accumulation of capital and a sense of prosperity could not have been maintained in Britain and the US. Outwardly it appeared that economies such as Britain’s and America’s were doing well during the past decade. The remarkable increase in paper value of property and financial instruments created the impression that economic life was going from strength to strength. But what the growth statistics obscured was that there was relatively little wealth creation in the West. During this period, capital investment and growth of productivity remained sluggish. It is worth noting that countries like Britain and America imported capital faster than they were exporting anything in return for it. These countries became addicted not only to capital imports from abroad, but also to relying on an unprecedented expansion of credit to maintain economic activity. One important consequence of the expansion of credit was the growth of the finance sector as an important component of the service sector. By the time of the credit crunch, the financial sector accounted for around 30 per cent of the British economy. On both sides of the Atlantic, industry continued to decline.
Many commentators mistakenly talked about this era of massive credit expansion as the high tide of neo-liberalism. However, the de-regulation of the financial markets coincided with a regime of state intervention in economic life. In Britain, the public sector became the main source of new employment over the past decade. Around two thirds of the jobs created since 1999 have been funded through state expenditure. Once one takes into account the role of state expenditure and of credit expansion, the feeble character of the recent cycle of economic growth in the West becomes evident.
Any serious engagement with the contemporary crisis needs to refocus attention away from banking and finance and on to the rest of the economy. No society can continue indefinitely to consume more than it produces. The problem is not that the big deficit economies – the US, Britain, Spain, France, Italy – borrowed so heavily. The problem is that this credit fuelled the rise of property prices and unproductive consumption instead of serving as productive investment in infrastructure or the restructuring of economic life. Now, Western governments have adopted the narrow policy of trying to contain the downside of the contraction of credit. But attempting to stimulate the economy through new injections of credit is likely to perpetuate the conditions that led to the credit crunch in the first place. It is about time we had a public debate about the real economy, the economy itself, and began to consider such fundamental questions as how we might restructure and reorganise it.
Frank Furedi will be delivering the Institute of Ideas Christmas lecture, ‘The Political Consequences of the Economic Crisis’ tonight at the London School of Economics, Houghton Street, London WC2A 2AE. For full details and tickets, see the Institute of Ideas website. Visit Furedi’s website here.
Capitalism after the ‘credit crunch’: what is it good for?, by Frank Furedi
The ‘credit crunch’ and the SAD economy, by Phil Mullan
The state won’t be the saviour of the economy, by Frank Furedi
I don’t predict a riot, by Mick Hume
This Marxist isn’t laughing, by Brendan O’Neill
Against austerity, by Brendan O’Neill
There Is (still) No Alternative, by Mick Hume
Congress bales out, by Brendan O’Neill
Scapegoating the spivs, by Tim Black
It’s the politics, stupid, by Phil Mullan
Lehman Brothers: when confidence runs out, by Rob Lyons
Five myths about the Wall Street crisis, by Daniel Ben-Ami
Read more at spiked issue: Financial Crisis.
To enquire about republishing spiked’s content, a right to reply or to request a correction, please contact the managing editor, Viv Regan.
Want to join the conversation?
Only spiked supporters and patrons, who donate regularly to us, can comment on our articles.