It seems like everyone, right now, is convinced of their own doom. The pages of the Guardian are full of angry leftie types who feel betrayed by 52% of the electorate, while the pages of the red-top papers are little better and filled with angry accusations of treachery and imagined attempts to subvert the result of the Brexit vote. Bizarrely, every side feels under threat simultaneously, but in crazy times like these maybe they’re all right. When the rules of the game fall apart, no-one can be sure anymore what it takes to win, or what winning even means, even if the team captains themselves were the ones who shot the referee and are now warring for possession of the rule book. The village has to be destroyed in order to save it.
According to Google and Wikipedia, the original sense of the word doom was judgment, someone receiving what they deserved:
Old English dōm ‘statute, judgement’, of Germanic origin, from a base meaning ‘to put in place’; related to do.
And there’s certainly a lot that needs judging. The Brexits and Trumps of the world weren’t random events, they were responses to the faults that run through the way we organise the world, and the increasingly desperate papering over the cracks. Every system contains the seeds of its own destruction (as Marx supposedly said of capitalism), and when those seeds germinated there were two choices:
- Be honest about the problems and the drastic changes required to fix them
- Lie, pervert and distort all law and reason to delay burying the bloated but familiar corpse as long as possible
It doesn’t take much to see which way our illustrious leaders went.
Large societies always find it hard to fundamentally reform, because the illusion of permanence is the only way they can work. Imagine what would happen if people with pounds in their pockets didn’t believe that the pound was a stable store of value, with a stable and strong government behind it? Or if they didn’t believe that their pensions would deliver what was promised? If they didn’t act as if institutions, which are composed entirely of rules and therefore in theory more mutable than anything physical, would endure forever?
In such a world, the only thing you can trust are friends and family, but no system of 60+ million people (such as the UK itself) can be run on that basis. It’s been tried in Africa and other parts of the world where small tribes were randomly allocated to states, and the result has generally been massive corruption and a state that barely functions at best. The ability to work together with strangers, the historically bizarre cultural belief that the system itself can substitute for personal links, is what makes the advanced economies work, but that very illusion means that nothing fundamental can be fixed without bringing into question the very basis of the system, even when the system is tearing itself apart. There’s always a temptation to tweak and paper over the cracks and hope.
Let’s take our current repeat of the Great Depression as an example:
- SUCCESS: In the post-war period, Keynesian policies created a much more equal society with a much higher standard of living for the working class than before.
- FAILURE: The pursuit of full employment gave organised labour a lot of bargaining power. In the 70s when the economy hit the rocks, workers were basically unable to reach a compromise with the investment class about how to divide limited spoils. The result was the three day week and a country at war with itself.
- SUCCESS: Margaret Thatcher broke the UK unions and redistributed power towards the investment class. After a sharp recession, the economy started functioning again and, combined with a boost from North Sea gas and oil, things seemed to improve.
- FAILURE: Instead of rebalancing power between labour and investors, the pendulum swung massively too far the other way. Not only was the power of organised labour destroyed, but the government deliberately pursued policies to increase competition in low-skilled jobs by bringing cheaper labour into the EU and pushing free-trade deals that facilitated off-shoring of jobs. This caused a shortage of demand for the goods being produced – the propensity to spend at the bottom is higher than the top, and there has to be enough money spent to buy the goods being produced or the economy enters a death spiral. The lesson of Keynes was ignored by Thatcher and other followers of Friedman.
- SUCCESS: A liberalised financial sector (also due to Thatcher) propped up consumer demand by creating a debt bubble. Secured lending on housing, and unsecured lending via credit cards, created money to plug the spending gap (yes, banks create money, and the money multiplier model is empirically wrong). Everything seemed to be OK as long as the bubble was inflating. Since the liberalisation of finance also occurred across borders, positive feedback loops crossed borders too to reinforce the bubble.
- FAILURE: In parts of the system, the bubble popped. Strong connections between banks meant that instead of one national bubble popping, the entire international debt bubble went pop.
- SUCCESS: Banks were bailed out, and continue to be bailed out (the latest being Italy’s third biggest bank, Monte dei Paschi). At first, economies were stimulated by governments to maintain consumer demand and avoid an even bigger recession. Things seemed to stabilise.
- FAILURE: Government debts soared faster than for a long time, causing panic among politicians and influential people. Austerity was imposed to try to slow the growth of debt or decrease debt, causing a return of the lack of demand problem which was ‘solved’ by the debt bubble in the first place. Some parts of the world entered a death spiral (Greece).
- SUCCESS: Everything can be solved by better public relations! Politicians rely on animal spirits to magically solve the problem. Unemployment and inflation statistics are calculated in misleading ways to make people more optimistic. Crapification is progress: zero-hours contracts and a replacement of well paid full-time roles with minimum wage and part-time jobs is presented as a good thing. In the UK, politicians succeed in restarting debt fueled house price inflation, for a time.
- FAILURE: It turns out that the dogs won’t eat the dog food. Long-standing anger at economic policies at the bottom combine with anger of the previously insulated to deliver Brexit and Trump. Spain is ungovernable. Le Pen and other right wing populists rise in France, Austria, the Netherlands. The 5 Star Movement has a good chance of being the biggest party in the Italian parliament, and want to withdraw Italy from the Euro.
- SUCCESS: ???
Another example might be our inability to solve the environmental problems of economic growth, or to accept that growth itself, of both populations and economies, is limited in a finite world.
Note that the first failure has been returning to haunt us for decades now. We started down this road because of the difficulty of maintaining a balance between demand and supply, labour and capital. Now we have exactly the same problem, but we also have:
- The aftermath of the biggest debt bubble in history
- A zombie financial system
- A government that regards lying (everything is fine!) and perverting justice as a problem solving mechanism (no bankers were jailed!)
- The disintegration of the political centre (Brexit, Trump, …)
How much easier might it have been if the fundamental flaw in the system, the need to maintain some kind of equilibrium between supply and demand, workers and capitalists, had been comprehensively solved in the seventies? But to do that would have required an admission that this man-made system can be whatever we want it to be, that the only constraint is what we’re willing to collectively live with, and admitting that would have destroyed the system all by itself. So instead we get the sticking plasters and the gradual march towards total disintegration.