On the 14th September, 2017 it will be 10 years after the run on Northern Rock. This was the first run on a British bank for about 150 years. 10 years after the last comparable financial crisis in 1929, the 2nd World War broke out. The historical parallels between the 30s and the current decade have been drawn by many, particularly in terms of the rise of ‘strong men’. So how did we get here and what can we do to avoid repeating past catastrophes?
This was not meant to be…
In the decades pre-Crash, leaders claimed that all the big questions had been settled. History had ended. A New Labour government, after almost 20 years in the wilderness, was elected on the sales pitch of being a better manager of the economy. Not on big ideals.
There was only one answer to any question: more market forces. You had to get the incentives right. This was the view of all the ‘serious people’. To suggest people would do anything for any other reason was to be ‘naive’. New Labour was “intensely relaxed about people getting filthy rich as long as they pay their taxes” as Mandelson famously said.
Clearly though for many on the wrong end of the market, this was not a good answer as they were left behind and marginalised. The certainties of market fundamentalism also silenced people. They just had to accept the ‘natural order’ of a world driven by markets.
Then almost 10 years ago, ‘out of the blue’, the Financial Crash…
Following the run on Northern Rock, we had a slow motion unfolding of events across the world, with Lehman Bros in the US collapsing a year later, the banks being bailed out with trillions pumped in and Gordon Brown ‘saving the world’ at the G20 summit in April 2009.
In late 2008 the Queen famously asked economists why did no-one ‘see it coming’. British academicians said in response ‘It is difficult to recall a greater example of wishful thinking combined with hubris’. The emperors, who thought they had ‘the answer’, were revealed to have no clothes.
Of course many did ‘see it coming’ but they were unwelcome marginalised voices. This could be the greatest example of international groupthink the world has suffered from.
Since then, the response has not been promising…
The banks now know for sure they are seen as too big to fail. Bonuses remain eye watering and of course can only be positive. Theirs overall is an even more secure world of one way bets.
Of course for individuals, it probably doesn’t feel like that in a highly stressful and competitive world. Finance may be one of the few places where those made redundant get summarily marched out by security guards.
There has been much regulatory tightening up although seen by many as ineffective red tape. Talking to people who work in finance, the consensus seems to be that the one thing that hasn’t changed is the culture.
It is back to business as usual with minor tweaks. The period of sackcloth and ashes following the Crash is largely forgotten. Speculation is still the name of the game, asset values have soared while the real economy has spluttered.
Economics for the most part seems to have gone on as if nothing had really happened. Pledges to bring more pluralism into academia have gone by the wayside in spite of the protests of students. The UK Government is currently putting a major investment into economic models of a similar type to the ones that couldn’t ‘see’ the Crash coming. These are meant to help guide us through a post Brexit world. Only very recently has a centre been set up to initiate a process of ‘rebuilding macro-economics’.
Economic illiteracy continues unabated. Many politicians still insist on likening managing the national economy to a household budget although there are crucial differences. Few people understand how money and finance works even though it can be seen as the fundamental institution for our economic success since key reforms following the Glorious Revolution in 1688. After over 300 years, you would think we would be wiser!
Meanwhile the majority on low pay have paid the price of the Crash with a more significant dose of austerity than even the 80s. Pay is frozen, benefits have been cut and public services shredded.
There are now signs of emerging hope, but what should we actually do?
Now there is recognition amongst many that we need a more inclusive economy. Even the OECD, the home previously of market fundamentalism, is suggesting that. The UK Government talks about rebalancing the economy and making an economy that ‘works for all’. The recent election result has been interpreted as an indication of a desire for change.
But what change? How can we design an economy that is not only more inclusive but also sustainable and resilient? How would such an economy work? What would it look like?
No-one in authority seems to have worked this out nor do they seem to have the right tools in terms of economic thinking with which to do it.
10 Years after: Time for a people’s inquiry
So what is the 10 years after project about and why should you get involved? We believe that the lessons from the Crash have not been learnt and our survey suggested we were not alone in this. There has been no independent inquiry into why it happened. The question has been treated more as a political football, with politicians seeking to assign blame for political advantage when the issues seem much more fundamental than that.
So we want to use the 10 year anniversaries as rallying points to create a people’s inquiry for the people potentially spreading around this globalised world.
We want to bring a whole range of different perspectives together and create a serious indepth conversation. We want to spend the next 18 months or so to the 10th anniversary of the G20 meeting in April 2019, seeking to build a consensus as to what the fundamental reasons for the Crash were and how we can design a fairer, more sustainable and resilient economy.
The events in September are intended to start this process. We are bringing together a lot of the organisations and people who have already started pondering these questions, but we want to expand and diversify this conversation.
We can only do this with your help… Please don’t leave it to the experts. It is too important for that.
We want you to take an active part in the conversation so we can learn how you see the economy. You can also learn more about the latest emerging thinking. So book now.
You can even organise your own event to create the conversation you think we need. We can provide you with materials and support to do this. Go to our get involved section.
We also need financial support to create the spaces and structure to have these conversations. Please donate as much as you feel able to. Regular monthly contributions, however small, are the most helpful to provide us with certainty to plan.
Economics is ultimately about trust as much as numbers, empathy as much as analysis and creativity as much as eppraisal. And the resulting decisions affects us all as the economy permeates everything. This should not be left to experts.
Dickens wrote of the French revolution ‘they were the best of times; they were the worst of times’. If we work together maybe we can make what has the potential to be the worst of times, into one that has the potential to become the best of times.