‘I thank thee, oh Lord, that thou hast not made me a woman’, goes an old patriarchal prayer that could be fine tuned thus: I thank thee, oh Madam, that thou hast not made me an economist. I am quite sincere: these are not good days for economists because we are about to ‘celebrate’ the ten year anniversary of ‘the financial crisis’ of 2007, and they’re going to have to endure another round of abuse and criticisms, the poor dears.
But let’s begin with the good news: Mark Carney, who used to be our very own Governor of the Bank of Canada before he became posh and switched to being the Governor of the Bank of England as well as head of something called the Financial Stability Board, just assured the G-20 summit ahead of time that everything’s simply swell. All the problems that led to the 2007 crisis have been fixed, and if the banks ever got into hot water again, they now have plenty of cash to bail themselves out. They won’t have to ask for handouts from you and me.
Well, that’s a relief, isn’t it? And he’s so doggone handsome; in fact, Canadians can be so proud of having so many exceptionally instagrammable leaders. We forgot to mention that during our recent celebrations of 150 years of Canada. Where was I? Oh yes, the economy. And how well it’s doing. According to economists like Carney, there has been a healthy rebound and we’re back to ‘normal’. According to most ordinary people, that’s simply not the case. And because nobody listened to them, they got mad and voted for some old fart named Trump. And Brexit.
What’s going on? And why do even some economists now admit that they can’t actually make any meaningful predictions about coming bubbles and such because their models just aren’t good enough. They used that as an excuse when their prediction of an immediate economic decline after the Brexit vote failed to materialize. So, they’re rather reluctant to go out there and make any further predictions about possible real estate bubbles and so on. I read it in the Guardian, so it must be true. That venerable newspaper, one of the few that engages with serious topics like The Bank of England, said this: The risk is that keeping interest rates at 0.25% leads to the same reckless borrowing as before. Ominously, household debt levels are creeping back towards their previous record highs. Oh, how true! In Canada, everyone can now boast of being in debt to the tune of $1.67 for every dollar earned. That kind of number should be enough to frighten any banker, but not Governor Carney. Our new Governor, is equally sanguine.
But since I have no scientific models to speak of and furthermore am burdened by something called memory and common sense, let me step up and make a bold statement, the kind that they are too chicken to make: we’re due for another financial crisis, bigger and better than the last one. It’s simply the good old capitalist way; every decade or so, there’s a crash, sure as shootin’. And this one will be a beaut because we have extreme inequality across the globe, which drove the crash of ’29, albeit with one difference: we have an economic system that runs on algorithms and digital systems where everything is connnected in ways it never was before. Call it the Butterfly Effect on steroids. In connected systems like ours, problems like debt, money laundering, insane real estate bubbles, or too many risks like unwinnable wars with millions of refugees spread like a nasty virus.We know that extreme inequality kills societies, so why should it be any different this time around? Ask Mark Carney. He thinks it’s all about the banks. And they’re doing great, so we’re good.
Strange that they always get it wrong, isn’t it? It is, indeed. But anyone familiar with The Chicago School of Economics and their famous guru, Milton Friedman, the inventor of laissez-faire economics, also known as neoliberalism, knows why things have gone awry, again. Even Paul Krugman, no lefty he, concluded a long article in the New York Times asking Who is Milton Friedman thus: When Friedman was beginning his career as a public intellectual, the times were ripe for a counterreformation against Keynesianism and all that went with it. But what the world needs now, I’d argue, is a counter-counterreformation. Keynes was a strong believer in government intervention and rules, and he said that the Crash of ’29 was due to a lack of government rules and regulations. Which is pretty much what happened in 2007. The trick is always to find a happy medium where the markets are kept in check but not too much. This has proved impossible, at least so far. Capitalism veers wildly from one crash and recovery to the next; it’s what makes it all so exciting, isn’ it. Some people, like Naomi Klein, call it Disaster Capitalism and it’s better than ever. Just think of all the terrific opportunities that Climate Chaos will bestow on us. The mind boggles.
Things are always so clear in the rear view mirror: Friedmann’s ideology enabled the last financial crisis by ripping up rules and regulations put in place during the Great Depression, by FDR. He told the mutinous bankers that they were ‘for the pitchforks’ if they didn’t go along with them. Grudgingly, the moneymen gave in and the Glass-Steagall Act was passed, among others. It put up a high wall between banks and investment houses that are allowed to take risks, a wall that has since been dismantled and under Trump, further ‘freedoms’ for investment bankers, swindlers, money launderers, real estate flippers and other heroes of finance, are in the works. Gamblers and risk takers of all stripes are the winners in this economic model. Everyone else is simply a dunce, and it is this confederacy of dunces that is now calling the political shots in the US and Britain. I can’t say I blame them, and the elites, of which Mark Carney is surely a gorgeous example, fear them. Only the election of Macron in France has given them hope; he is, after all, a banker. Still, there’s Marine Le Pen. There’s Elisabeth May, who might have said a la Thatcher: there’s no such thing as the economy and Merkel would surely agree since she’s the queen of austerity, which hasn’t worked out at all.
As the head wagging Indians have it, whattodo?
Well, that’s the trillion dollar question, isn’t it. And I don’t know the answer; nobody seems to know. But to pretend that everything’s just peachy because the banks are in such fine fettle surely proves that economists arent’s simply fools with algorithms; they’re criminals who haven’t learned their lesson. Next time you hear some politician moan about how awful it is not to be trusted by the general public, remind him that trust once lost is the dickens to regain. And for now, we trust nobody, certainly not clapped out, if gorgeous, wankers of capitalism also known as economists.