Learning economics

(Above: taken in a newsagent in Beijing Ariport in October 2008)

In a youth hostel in Moscow, sometime in September 2008, I used a few minutes of my carefully rationed internet access to log onto the BBC news website. In the kind of headline size normally reserved for terrorist atrocities or general elections was announced the collapse of two banks that I had never before heard of, Lehman Brothers and Meryl Lynch.

Over the next few weeks, as myself and two other friends traveled across Russia and China we saw the economic Armageddon unfolding in peeps and snatches. Stock market boards showing rows of LED minus arrows or glimpsed newsreel footage of guilty looking men in suits carrying small boxes of their possessions through skyscraper lobbies. Every day the BBC’s font got bigger and bigger, as Iceland’s became a failed state and banks were nationalized by the dozen. None of it seemed real. Unlike the hard news, the roadside bombs and hurricanes that had set the agenda over the previous decade, this was everywhere, invisible and extremely confusing.

What’s more, despite being well-educated people who, for our brief adult lives, had followed the news almost every day and who held assiduously formed opinions about how society should be structured, none of us had a clue what was going on. An entire alternative universe of finance and credit, of insurance and mortgages that had previously escaped our notice was burning to the ground, dragging the next ten years of political discourse into hitherto unknown territory and bringing us all back to square one. All of the issues we had traded opinions on, be it Iraq, ID cards, climate change or constitutional reform now had as much capital as your average Lehman Brothers CDO. We had a lot to learn.

And who can blame us? Since the publication of the Black-Scholes paper in 1973, which worked out a formula for trading derivatives, economics had undergone a shift towards abstraction and self-referentiality equivalent to the birth of modernism in literature. In fact John Lanchester has argued that the invention of credit default swaps in 1994 saw high finance take a turn for the post-modern, writing, “for anyone who studied literature in college in the past few decades, there is a weird familiarity about the current crisis: value, in the realm of finance capital, parallels the elusive nature of meaning in deconstructionism.” In other words the financial markets in recent years have only really been created and understood by Maths PhD graduates leaving everyone else, from protestors to politicians, feeling confused and alienated from the entire process.

Cut to 2010 and the new politics of deficit reduction and public spending cuts has energized the left in a way that the social issues of the past failed to do. Even the rough social edges of the coalition, the Victorian marriage incentives, Cameron’s inflammatory speech on immigration or the government’s staunch silence on climate change are rarely discussed. The student protests last December concentrated on the raw issue of funding rather than the culture shift towards ‘marketization’ in higher education. Its been a steep learning curve and I worry that, dizzy with our new-found rhetorical toys, we are forgetting difficult issues such as multiculturalism and gender politics. A senior Climate Camp organizer recently told me that the climate movement is “dying on its arse.”

Unfortunately many of us still can’t really describe with certainly what’s going on. We are still not comfortable enough about economics to make informed judges between the left and right wing economists who put forward radically different arguments for the scale and speed of short term deficit reduction. We are inclined towards the former because the Tories have been on the wrong side of every clear-cut social issue that we ever remember being on the table (with the possible exception of detention without trial). We don’t trust that a party which has been consistently calling for an ever-smaller state won’t pick an economic policy that is a means to that end. Furthermore, the academic economists who have spent the last ten years calling for globalized unregulated growth, intimidating into silence almost everyone on the left who lacked a degree in economics, are discredited by the crash, and can no longer monopolize the high-ground of common sense.

Perhaps the lesson of the last eight months is that the solidarity of the balance sheet always trumps the solidarity of identity politics. Our dizzying, turbulent and traumatizing process of fiscal politicization over the last six months affirms William Cobbett’s old adage that it is impossible to agitate a man with a full stomach.