Socialists For Small Government?

From Chris Dillow's Stumbling and Mumbling blog:

Shrink the state: a leftist aim, April 17th 2009

David Semple thinks the left should join American tea parties, which protest against high taxes. I think I agree. The desire to shrink the state should be a leftist aim. I say so for four reasons.

1. Big government cannot be redistributive government. If the state is raising 40% of GDP in taxes, it must tax the worst off, simply because the rich, even in the UK and US, aren’t that rich or plentiful.

This pdf gives us the numbers. Table 2 shows that the tax system - leaving aside benefits - actually adds to inequality. This is because direct taxes cut the Gini coefficient by 4 percentage points, but indirect taxes add 5 points to it. And table 21 shows that the poorest fifth of households with children pay a higher proportion of their income in taxes than the richest 10%: 37.2% against 33%.

2. A big state hurts the worst off. Right-wing nut jobs might pose as victims of “ZaNuLabour.” But whether we look at Purnell’s welfare plans, repressive anti-immigration laws or the policing of protests, it is ordinary people who are the real victims of an overly powerful state: newspaper sellers, poor foreigners, the unemployed and ill. The left should be on their side.

3. When the state has lots of power, there’ll be a big fight to control it. And it’s the rich and powerful that win such fights. Why do you think banks get big bail-outs whilst ordinary workers are flung onto the dole with little compensation?

4. Belief in big government rests upon the notion that there’s an elite of leaders which has the wisdom and know-how to manage our affairs from the top-down; this is why New Labour found common cause with corporate bosses - both share the same ideology. But it is an utterly anti-egalitarian notion. It is also utterly wrong.

British State Degeneration...and English National Regeneration?

This weekend I saw two articles by two of my favourite political writers: Peter Oborne and Paul Kingsnorth.

Peter Oborne's The Triumph of the Political Class
is a rollocking good polemic about the degeneration of British political life in recent decades. He is possibly the only Daily Mail columnist ever to favourably cite the Noam Chomsky/Edward Herman 'propaganda model' of the media as a good explanation of how British political life works!(p.265) My main problem with Oborne is that he persists in hoping that a David Cameron Government would improve the quality of public life. My own opinion is that, like the annual Soviet grain harvest figures, British Governments tend to be worse than the last one, better than the next one...

The Tories must avoid the cult of the celebrity prime minister: Parliamentary democracy has been supplanted at Westminster by a regime of media hype, spin doctors and skulduggery
Peter Oborne, The Observer, Sunday 19 April 2009

Even when he was prime minister, Stanley Baldwin was in the habit of taking long journeys by train. He seems never to have been molested on these trips. However, on one occasion, he became conscious that a fellow passenger was staring at him rather intently. At length the man introduced himself. "Remember me?" he declared. "We were together at Harrow in the 1890s. What are you up to now?"

The agreeable notion that a sitting prime minister could travel on his own by rail, unrecognised except by a former schoolfriend, seems implausible today. The Baldwin anecdote does, though, reflect a fundamental truth about the constitutional role of a British prime minister. He or she is not the head of state and therefore has no symbolic public role. Constitutionally, the prime minister is all but impotent. Power is legally vested in the hands of cabinet ministers. That is why it is Nye Bevan, health secretary in the great postwar Labour government, and not prime minister Clem Attlee who is remembered as the founder of the National Health Service.

The modern notion of a celebrity prime minister, permanently surrounded by an army of flunkeys and operating out of a great command centre inside Downing Street, is novel. Harold Wilson, Jim Callaghan and John Major were all closer to Stanley Baldwin's idea of government than the structure that prevails inside Downing Street today. It is not fully understood how quickly this idea of a celebrity prime minister has arisen - and to what extent it represents a revolution in British government.

National leaders from Baldwin to Major did their best to respect the rule of law. Celebrity prime ministers are actively hostile to historic freedoms and civil liberties. Traditional prime ministers understood and appreciated due process. Celebrity prime ministers see it merely as an encumbrance and resent the civil service disciplines of impartiality, scruple and properly noted cabinet meetings. Traditional prime ministers always sought to govern through parliament - Baldwin would spend hours in the chamber of the House of Commons. Celebrity prime ministers have tried to cut out the Commons. Instead, they have enfranchised the media and turned it into an ancillary arm of government.

A good way to illustrate this is to examine Michael Dobbs's powerful study of high politics in the 1980s, House of Cards. The most menacing and potent figure is the fictional chief whip, Francis Urquhart. It is he who bullies, bribes, manipulates, blackmails and schemes. In Armando Iannucci's superlative film about British high politics in the first decade of the 21st century, In the Loop, the chief whip has been written out of the script. Urquhart has been replaced by the sinister spin-doctor Malcolm Tucker. All the same blacks arts are at work; however, the battlefield has changed. Urquhart applied himself to parliament, Tucker bypassed the traditional institutions of the state and was only concerned with the media and its other methods of control: access, favouritism, information and the creation of an elite corps of client journalists.

For a British prime minister in the age of parliamentary democracy, the key figure was his chief whip. Today, we have moved on to a new constitutional arrangement, beautifully labelled "manipulative populism" by the civil rights campaigner Anthony Barnett. In this new environment, the crucial aide is the press officer, whose job is to burnish the image of his leader, while using smears and other secret tactics to punish and marginalise political opponents. Tony Blair and his gifted assistant, Alastair Campbell, brought this methodology to something close to perfection in the 1990s. "Go around smiling at everyone and get other people to shoot them," as Tony Blair advised the future foreign secretary David Miliband when he started to contemplate a career in politics.

Gordon Brown insisted when he became prime minister that he was going to turn his back on this debased political methodology. He pledged to bring back cabinet government, respect civil service impartiality, restore the primacy of parliament and to abandon the dark political arts at which the team of political assassins around Blair had so excelled.

Perhaps Brown genuinely meant what he said. It is impossible to say. Whatever the reasons, and some of them may have been understandable, he ended up remaining loyal to the Blair system of manipulative populism. Brown retained the alliance with the Murdoch press which lay at the heart of the Blair system of government, as well as an inner circle of cronies and spin doctors, of whom Damian McBride was the most noteworthy.

McBride's methodology contradicted everything that Brown publicly claimed to stand for. Before entering Downing Street, Brown told an interviewer: "I studied history. It is fascinating. There is a Namier school of history, which is less to do with ideas of popular concerns and all to do with manoeuvring of the elites. I do not accept that. I think that the real story of decision-making in politics is about ideas and ideals."

McBride, said by tutors to have been a brilliant student who could have embarked upon an academic career, is an indirect product of the Namierite school. He studied history at Peterhouse, Cambridge, under the guidance of Maurice Cowling. Cowling was an inspirational teacher. However, his particular scholarly contribution was to take Namier's pessimism about human nature, scepticism about political ideas, and dogmatic insistence that public events could only be explained by reference to narrow personal interest, to their ultimate conclusion. His most important book, The Impact of Hitler, argued in spellbinding detail that the British reaction to the rise of fascism in the 1930s could only be understood in terms of squalid calculations of partisan advantage. Cowling, who enjoyed disturbingly close connections to Tory central office, has been the mentor of a variety of other political figures. Among them are John Major's defence secretary Michael Portillo, the rising Tory star Michael Gove, and Mike Ellam, the current Downing Street press spokesman. It is Brown's tragedy that he has become a prime minister on the Namierite model.

This is also a national tragedy. This weekend, British politics has reached a dead end. Parliament is disgraced, thanks to the complicity of all three main parties in the abuse of the system of expenses, and the willingness of Labour peers to make a market in parliamentary legislation; the report is expected this week. Meanwhile, Downing Street has been caught out fabricating lies and calumnies about opponents. As a direct result, trust in politics has sunk and far-right parties such as BNP are on the rise.

The great question is whether David Cameron's Conservative party is capable of offering a different methodology. The signs are mixed. At Westminster, the Tory party has been complicit in the theft of taxpayers' money by ministers and MPs through exploitation of the expenses system. There is every reason to suppose that when Commons expenses are published in a few weeks' time, just as many shadow cabinet ministers will be exposed as ripping off the taxpayer as members of the government. Cameron would doubtless like to sack the offenders. Were he to do so, he would soon find that he has no frontbench left.

The opposition chief whip, Patrick McLaughlin, a former miner, may be a decent man, but inside the Tory party, the director of communications, Andy Coulson, is the more powerful figure. Like Blair and Brown, Cameron has chosen to govern through Iannucci's tight inner clique rather than Dobbs's traditional system of parliamentary democracy. I have no evidence of any kind, and nor do I have reason to believe, that Coulson operates through smears, let alone the filthy and shameful lies that Damian McBride and Derek Draper hoped to put in the public domain.

Yet Coulson is the former editor of the News of the World. During his time as editor, it was discovered that his royal correspondent was spending very significant sums of money to hack into the private conversations of members of the royal family. The royal correspondent went to jail, while a very perfunctory Press Complaints Commission investigation cleared Coulson of any knowledge of what was going on.

Coulson was much in evidence alongside Cameron and George Osborne at a party thrown at the West End nightclub Tramp by Rupert Murdoch's media fixer Matthew Freud two weeks ago. You can understand why Cameron likes Coulson. He is a highly intelligent man who is thoroughly familiar with the debased architecture of 21st-century public discourse. Cameron, who once boasted that he was the "heir to Blair", may have concluded that this is the only route to power.

But at this grim moment in our national life, Britain doesn't just need a change of personnel at the very top. We urgently need a new decency and morality in government and to get rid of the stinking and corrupt regime that has brought the idea of British democracy into such deep disrepute over the last few years.

So while 'There is Something Rotten in the State of Denmark', can meaningful change come from below? Can England and the English be mobilised to provide an alternative to Westminster's games with the City of London and Whitehall? This is a subject Paul Kingsnorth wrote about in Real England, which is another great read (though he slags off JD Wetherspoons at length for being bland- surely any firm that sells real ale cheap and converts banks into pubs cannot be all that bad?!).



Forget St George. It's time to celebrate Wat Tyler's Day: Levellers and Diggers have been replaced by binge drinkers. Has the glorious flame of English radicalism gone out?
Paul Kingsnorth, The Guardian, Saturday 18 April 2009

In case you didn't know - and that would put you in the majority - this Thursday is St George's Day. If recent years are a guide, traditional English cultural activities on display will include tabloid articles about councils refusing to fly the George Cross in case they offend Muslims, liberal handwringing about whether the whole thing is racist or not, and a proud display of massive indifference from everyone else.

The English, these days, do indifference well. To some, this is a good thing: it saves England from the kind of bombastic and sometimes sinister flag-worshipping patriotism that the Americans, for instance, go in for. Whether good or bad, it is certainly nothing new. Almost a hundred years ago, in 1915, GK Chesterton published probably the most famous poem ever written about the English, The Secret People, which comes back again and again to the same line: "But we are the people of England, and we have not spoken yet."

The English, some would have you believe, have never really spoken much. Those who view St George's Day with suspicion often claim that this is an essentially reactionary nation, whose people remain in thrall to a dying monarchy, a rose-tinted vision of the past and the collected works of Jeremy Clarkson.

But England, like any nation, has many faces. And if there is an English tradition worth celebrating on this St George's Day it is not our past triumphs in commerce or empire, but our tendency towards rebellion, dissent and resistance - a glorious tradition that, if we are not very careful, could soon be defunct, just as we need it most.

The English radical tradition can compete with that of any other nation. We, after all, killed our king before the French; we had our revolution before the Americans; and we fought against the invasion of the nation by a foreign king and his posse of robber barons before the Scottish.

From the resistance to the Norman conquest through to the great rebellion of 1381 that almost destroyed feudalism, the radical flowering of the civil war, the movements against enclosure, the machine-breakers and rick-burners of the early industrial age, the Chartists and the Tolpuddle martyrs, the Suffragettes and the early Labour movement - every ratcheting up of power and exploitation in England has been met with an angry and often successful reaction from its people. There is nothing indifferent or quietist about this version of the English story. This is a nation that it feels good to be a part of.

So where has it gone? When we need it most, why do most of us seem to have abandoned this spirit of resistance and liberty? Why do we live in a nation of CCTV cameras, email surveillance, DNA databases and masked riot police, watching in silence as more and more of our fundamental liberties are stolen by our own government?

Culturally, we are seeing the strip-mining of much of what makes England unique. Our independent shops and our local pubs disappear in their thousands every year. Our rural communities are ravaged by second homes, our high streets are carpet-bombed by superstores, our orchards and our small farms are rooted out at rates unprecedented in our history. We are selling off our health service and our schools. We are told that an ever-rising GDP justifies all of it.

Meanwhile, the English are the victims of a constitutional con trick that allows English legislation to be decided by Scottish and Welsh MPs, but not the other way round. Thus the English are lumbered with, for example, university fees and a market-based health service, despite the majority of England's MPs having voted against both these things; Scottish and Welsh MPs voted in Westminster to impose them on an unwilling England, despite their own people having rejected the same measures at home.

And what are the English doing about all this? At local level, some are bravely resisting these trends; but most of us seem too busy shopping. There is no rebellion in the offing, no revolution; not even a spate of rick-burning. Has the flame of English rebellion guttered out?

"In all societies," wrote George Orwell in 1940, "the common people must live to some extent against the existing order." Orwell reckoned that the spirit of English dissent had been reduced to "something that goes on beneath the surface, unofficially and more or less frowned on by the authorities." In the 21st century, this probably means binge-drinking and vandalising speed cameras.

But the times demand more. England is still under the cosh of what William Cobbett, one of our greatest radical writers, called "the Thing" - a voracious capitalist system with an ever-greater appetite. It is not too late to rediscover the righteous anger that coursed through the veins of the Levellers and the Diggers, of Wat Tyler and Thomas Paine. But one thing is clear: if the people of England don't speak soon, there may be little left worth saying.

Police State-Lite?

'If you want to know the time, ask a policeman...'

I didn't go on any of the demonstrations in London around the time of the G20 Summit a few weeks back. I had half a mind to go on the march on the Saturday before the summit, but I did not get bed until the early hours on Saturday morning and did not get up until Midday...! On the whole demonstrations alway seem to consist of a slow walk (and I'm not a slow walker!) followed by listening to (a fairly predictable) speakers who shout through a megaphone with a pretty poor PA system something you knew already. That does not inspire me. If we had a genuinely democratic political system where people knew that voting or signing petitions would have an important, or even decisive, say on the policies of the state, there would be little need for people to go on demonstrations. Perhaps I am being a naive democrat saying that, but being labelled a 'naive democrat' is one cross I can easily bear. However, people are increasingly losing faith in the political system so I expect the numbers of people wanting to air their grievances in public will increase. One thing that did annoy me in media coverage was those people writing/phoning/texting/e-mailing in complaining about the cost to 'the taxpayer' of policing all the demonstrations. I'm not sure how much it all cost, but it was pretty small beer compared to the cost to 'the taxpayer' of bailing the banks out, wasn't it? People who think there should be no demonstrations or marches should go and live in North Korea (along with people who say living in Britain is 'just like living under communism.' Five years in a North Korean labour camp would help them regain their sense of perspective).

Furthermore, I am not an enthusiastic demonstrator as I have no wish to be hit by a police truncheon and no wish to be 'kettled'. Being stuck for hours in a confined space by lines of police does not appeal to me at all. It seems demonstrators need to revise their tactics. Reading the linked article above, it is clear that the police have no desire to lose control of events in central London as they did during the Poll Tax riots on March 31st 1990. They have moved on in operational terms, just as they did in terms of tactics from the miners' strikes of 1972 and 1974 to the one in 1984-5. 25 years ago, Arthur Scargill thought NUM 'flying pickets' just had to turn up at power stations, coke plants etc and they would close. They did not expect the police to turn up en masse in riot gear a la the French CRS. This is how ruling classes stay ruling classes; when they come under serious threat they change tack and tactics (ditto with the recent jettisoning of 'free market' ideology with barely defrosted pseudo-'Keynesianism' straight from the outside freezer).

However, ruling classes and their institutions can screw things up too. After the death of Ian Tomlinson and various other film and photographic evidence of police 'excesses' (I'm using English understatement here) towards demonstrators, public distrust of the police and moves towards 'police state-lite' must increase. Hopefully coverage of recent events in London may even jolt the cosy assumptions of those who say 'If you've done nothing wrong, you've got nothing to hide.' (which sounds like an IngSoc slogan from the pages of Nineteen Eighty-Four). Or at least they may see that, now that it is a criminal offence to photograph police officers, their complacent phrase should also apply to the police.

However, enough of my witterings. Two articles I saw recently caught my eye...

Put enough cameras on the police and even the serially deferential wake up: The flowering inverse surveillance society can end the myth of faultless policing that survived 1,000 deaths in custody
Marina Hyde, The Guardian, Saturday 11 April 2009

Who watches the watchmen? Or, to translate Juvenal another way: who polices the police? The answer this week was a New York fund manager, of all unlikely superheroes, who provided the Guardian with key footage of the minutes leading up to the death of Ian Tomlinson during the G20 protests in London. The man came forward because "it was clear the family were not getting any answers".

If there is anything to feel optimistic about today, perhaps it is the hope that we are witnessing the flowering of an effective inverse surveillance society. Inverse surveillance is a branch of sousveillance, the term coined by University of Toronto professor Steve Mann, and it emphasises "watchful vigilance from underneath", by citizens, of those who survey and control them.

Not that turning our cameras on those who train theirs on us is without risk. Indeed, one might judge it fairly miraculous that the man was not forcibly disarmed of his camera phone, given that it is now illegal to photograph police who may be engaged in activity connected to counterterrorism. And as we know, everything from escorting Beyoncé to parking on a double yellow while you nip in to Greggs for an iced bun can now be justified with that blight of a modern excuse - "security reasons".

Yet it will by now have dawned on even the most dimwitted Met officer that it is increasingly impossible for them to control the flow of information about their activities - to kettle it, if you will - no matter how big their army of press officers putting out misleading information in the immediate aftermath of any event may be.

Did the Met genuinely think they could prevent the emergence of a far more joined-up picture of Tomlinson's passage through the City of London that afternoon, much as they thought they could suppress the details about Jean Charles de Menezes's tragic final journey? If so, their naivety is staggering.

Yet it's odd how often it has been the little ways in which the state attempts to keep tabs on our behaviour - tracking devices on wheelie bins and the like - that have most alienated those who previously bowed to authority. Also captured on film and published yesterday was an amusingly British act of defiance - a pyjama-clad householder blocking dustmen into his road by standing in their path, after they had declined to empty his neighbour's bin of five pebbles.

As Tomlinson's death shows, though, it's not all Victor Meldrew-meets-Passport-to-Pimlico larks. Indeed it is something of a shame that certain elements of society have only recently woken up to the possibility that the police might not be the faultless, justice-dispensing force of establishment myth, and only because - in the cases of De Menezes and Tomlinson - they have seen it with their own eyes, or at least enough of it to provoke a suspicion that was hitherto absent.

The serially deferential dismissed the Blair Peach outcry as lefty agitating. They did not make a point of seeing Injustice, the brilliant and desperately depressing 2001 documentary about deaths in police custody, of which at the time there had been 1,000 in the previous 30 years, without a single conviction.

But they are undeniably more cynical and inquisitive now, and it is interesting that for many previously deferential Brits, the Countryside Alliance march a year later, in 2002, was such a watershed. Here, peaceful marchers who considered themselves fine, upstanding members of law-abiding communities, were genuinely shocked and appalled at the manner in which they felt police treated them during the demonstration.

It is hard to say whether this sea change in the amount of trust people are willing to put in their alleged protectors will be reflected in the judgments of those with the power to call those protectors to account. The De Menezes jury chose notably to believe the civilian witnesses who countered the police line and said that officers had not shouted "armed police" before they shot.

Then again, the Independent Police Complaints Commission had apparently failed to interview the police officer who attacked Tomlinson 48 hours after he had come forward, with anonymous Met sources briefing that the man had not known it was him till he saw the footage, and collapsed upon realising it was. It is up to you how you interpret that memory hole. Maybe the attack was merely a forgettable instant in a trying afternoon. Maybe he had seen so many lone men walking with their hands in their pockets truncheoned that day that his own crack of the baton didn't stick in the mind.

Either way, perhaps the IPCC should interview the officer no matter what sort of funk he is in. After all, from what little we know of him, he would surely agree that there are no excuses for dawdling.

But we have no means of chivvying the IPCC along, alas - of giving them a metaphorical shove in the back, or a notional truncheoning. So in the meantime, let's note that a day which started out protesting about a very different them-and-us situation has reminded us that there is more than one attritional show in town. And sometimes, New York fund managers are on our side.

The police should take note: little brother's watching you
John Naughton, The Observer, Sunday 12 April 2009

The attack on Ian Tomlinson was the Metropolitan Police's "Rodney King moment". King, you may recall, is a black American who, in March 1991, was savagely beaten by Los Angeles Police Department officers after being stopped for a speeding offence. A resident videotaped the proceedings from his apartment. The Los Angeles District Attorney charged four officers with use of excessive force. A jury acquitted three of them and failed to agree about a verdict on the fourth. Six days of rioting followed, in which more than 50 people died and $1bn of property was destroyed.

The assault on Tomlinson will not spark off a riot, but nobody should underestimate the outrage it has generated. And from the instant the video footage - shot by an American bystander using his digital still camera - appeared on the Guardian website, it was clear that we had reached a pivotal moment. Consumer technology had given citizens a serious tool for recording how policemen behave.

It also brought to mind the case of Blair Peach, the young New Zealand teacher who, on a demonstration 30 years ago, was clubbed by a police officer and died the day after of his injuries. Nobody was ever tried for the assault and the coroner recorded a verdict of "death by misadventure".

There was no "citizen journalism" at the time of the Peach case. Nobody had a cameraphone or a digital camcorder, because they hadn't been invented. And the incident wasn't recorded by any press photographer or film crew. So the cop who attacked the young teacher escaped scot-free.

In a normal democracy we would expect that the technology which revealed what really happened to Tomlinson would stimulate a reassessment by the police about how they conduct themselves. Accidents will happen, terrible things are sometimes done in the heat of the moment, and political demonstrations attract their share of violent and disturbed people, but from now on the police will have to reckon with the possibility that anything they do will be recorded and globally published. At one time, they - and the authorities they serve - were the only ones with CCTV and face-recognition technology, the ones with the sole prerogative to videotape and photograph demonstrators. Now this technology is in the hands of consumers.

The police have two choices. Accept that digital technology will make them accountable for their actions or try to control the technology. In any normal society there would be no decision to be made. But since 9/11 the threat of global terrorism has given the state - and its security apparatus - carte blanche to take whatever measures it deems necessary. And it has imbued in every uniformed operative, from "Community Support" officers and the bobby on the beat to the bored guy in the airport checking your toothpaste, the kind of arrogance we once associated only with authoritarian regimes.

You think I jest? Talk to any keen amateur photographer. As a group, photographers have been subjected to increasingly outrageous harassment by police and security operatives. (For a partial list of incidents see bit.ly/22VFRX). Try photographing a bridge, public building or a police car parked on a double-yellow line and you will have a goon demanding your camera, image card or film.

Better still, ask John Randall, a Tory MP who recently told the Commons how one of his Uxbridge constituents, a Mr Wusche, photographed properties he thought were in bad repair to pass on to the council. In front of one building was a police car containing police community support officers who had parked on a double yellow line as they popped into a sandwich bar.

Randall told MPs that "one of the PCSOs went over to Mr Wusche" - who fled fascist Italy in his youth - "and told him that he must immediately delete the photographs. When Mr Wusche asked why, he was handed a notice and pretty much cautioned. That upset him a great deal".

It upsets me too. And I expect that when the fuss over Ian Tomlinson's tragic death has died down, we will find that the Nokia N82 and the Canon Digital Ixus have joined flick-knives, knuckledusters and coshes on the list of "offensive weapons". Welcome to New Labour's National Surveillance State.

Finally, if you think tourists may be put off from visiting London by the current image of the police, you may want to peruse Madam Miaow's thoughts on the matter...

The New Seriousness, Part 2

Vincent Cable, the Lib Dem's Treasury spokesman, has gained a lot of kudos for warning several years ago that NuLab's 'British Economic Miracle' would end in tears. You can see him becoming the Chancellor in an emergency 'National Government' if the economy should hurtle even further over the proverbial precipice in the next couple of years. Furthermore, he would be a popular choice with the public for the role.

However, for me the adulation over Saint Vince is tempered by the fact that he is a leading member of a party that sabotaged in Parliament attempts to put the Lisbon Treaty to a referendum. I am pretty sure that a Lib Dem presence in government would mean serious attempts would be made to join the euro. There would be serious efforts to argue that Iceland's economic meltdown in late 2008 was caused by it not being a member of the EU/eurozone. Just like membership of the EU/eurozone stopped riots in Greece during late 2008...?

If, as Larry Elliott argues below, VC helps to sustain an atmosphere of 'New Seriousness', all well and good. However, this should not degenerate into mindless adulation...

We're doomed: he told us so: Britain's financial meltdown was predicted by one politician back in 2003.
Larry Elliott,The Guardian, Saturday 4 April 2009

It was November 2003 and Gordon Brown was in his pomp. Alone among the major developed nations, Britain had sailed on through the global downturn that followed the collapse of the late 1990s dotcom bubble. The chancellor liked to boast of the strength of the public finances and of how he had abolished boom and bust. He was certainly in no mood to take any lip from Vince Cable, the Treasury spokesman for the Liberal Democrats, when he had the temerity to suggest in parliament that the only reason Britain appeared to be doing so well was that consumers were taking advantage of rising house prices to borrow as if there were no tomorrow.

The response from Brown was an object lesson in complacency and hubris: "The honourable gentleman has been writing articles in the newspapers, as reflected in his contribution, that spread alarm, without substance, about the state of the British economy."

The financial and economic crisis that has unfolded rapidly and ruinously since August 2007 has shown that Brown would have done well to heed the warning. Britain's dangerously lopsided economy meant it relied heavily on two engines of growth – the housing market and financial services – and when these both stalled a hard landing was inevitable.

Cable recounts this Commons exchange in his account of the financial crisis with just a hint of relish, but it would be wrong to see The Storm as an exercise in "I told you so". He has the occasional dig at Labour and the Conservatives but his book is analytical rather than party political. Where credit is due – as in the government's much-copied bailout plan for the banks last October – Cable is scrupulous in giving it. But he is scathing about the PM's claim that Britain's problems are imported from across the Atlantic. True, Britain had 16 years of uninterrupted growth with low inflation, but this was mainly due to Chinese workers flooding the global economy with cheap manufactured goods, and recycling the resulting trade surpluses into the City and Wall Street. As the book notes: "Without diminishing in any way the global origins and nature of the crisis it is also necessary to debunk the self-serving myth that Britain has, in Gordon Brown's words, created an economic environment of 'no more boom and bust', and that the country is uniquely well placed to ride out the global storm."

On the contrary, Cable argues, Britain's housing and debt bubbles have been larger than elsewhere; the government has less room to cut taxes or increase public spending because it has borrowed too much in the good times; and an economy far too dependent on financial services has left the UK exposed to the "full force of the gale that is blowing through international financial markets".

All that, sadly, is true. Both the major parties bought into the fantasy that the City represented the future and manufacturing the past. The motivation for the Conservatives is easier to fathom; they had to have an intellectual justification for the decimation of industry they presided over in the 80s. Labour's conversion to the idea that the City was the manifestation of all that was good about Britain – buccaneering and innovative – was more complex. In part, the defeats handed out to previous Labour governments fostered a belief that the party had to make itself financial-market friendly. It was also the case, though, that many Labour ministers – few of whom have any real experience of life in the private sector – became starry-eyed at the money being made in the City.

Cable, who is unusual for a modern politician in having some hands-on experience of life in the private sector – he worked as an economist for Shell – says that a "brutal reappraisal" is now under way. "Brilliant financial innovators have been recognised as greedy or reckless or incompetent, or all three. Self-proclaimed, buccaneering entrepreneurs in the banking industry have been reduced to rattling a begging bowl and are dependent on the government bailing them out."

As for what happens now, Cable says the reform camp has three distinct strands. There are the "New Interventionists" who see the disaster as evidence of supine, even non-existent, regulation and want to replace the Washington consensus – liberalisation, deregulation and privatisation – with something akin to the mixed economy of the 50s and 60s. Then there are the "Old Liberals", who say that some improvement in regulation is needed but that, on balance, the good markets outweigh the bad. Cable puts himself somewhere in the middle: he believes that financial markets are subject to repeated bubbles, panics and crashes, but maintains that there are benefits from markets in goods and services, and from trade. Don't throw the baby out with the bathwater, in other words.

The final chapter of The Storm fleshes out what a Liberal Democrat reform package would look like. Banks would have to hold more capital in the good times, thus limiting the amount they can lend. Cable would also like the Bank of England to "lean against the wind" when setting interest rates. Most controversially of all, he says Britain's banking sector should be split in two: there would be highly regulated high street banks and riskier investment banks, hedge funds and shadow banks that had no state guarantee. Cable clearly regrets that wheelerdealers such as Adam Applegarth at Northern Rock and Sir Fred Goodwin at Royal Bank of Scotland were ever allowed to turn these pillars of respectability into debt factories, and he wants banks to return to being safe but boring.

Financial deregulation in the 80s and the transformation of building societies into banks in the 90s changed them rapidly from being solid and respectable into being aggressively competitive but risky. Cable says high street banks should become the equivalent of highly regulated utilities, having the simple job of recycling savings as loans to home-owners and small businesses. It is hard not to sympathise.

I have some quibbles with The Storm – not least the naff cover photo, which makes Cable look like Heathcliff without the hair. More importantly, he rather glosses over his conversion from enthusiasm for the European single currency to becoming "a little Eurosceptic in recent years", and has a perhaps naive belief that globalisation and free trade will survive the crisis. His determination to show political kinship with the economist of the moment means that he tells us twice that John Maynard Keynes was both "Liberal (and liberal)" .

But these are minor blemishes. For a book that has obviously been turned around quickly in response both to the deepening of the crisis last autumn and Cable's growing reputation at Westminster, The Storm is remarkably error-free and well written.

In these difficult times, some may cavil at paying £15 for a book of 157 pages. But anybody with an interest in the causes of the deepest economic crisis since the great depression – and that is most of us these days – can easily digest it in a single sitting, and be much better informed as a result.



Another well-known Jeremiad who has been proved right over the economy is John Gray. I have mixed opinions on his writings, which have gone over the years from Thatcherism to Red Toryism, with a strong eco-doomster streak (another Eco-Doomster For Nuclear Power type, although he lacks the self-righteousness of James Lovelock, Mark Lynas and George Monbiot). However, he is always interesting (although when he wrote in The Guardian back in the mid-90s, he tended to overuse 'defining moment) and definitely should be seen as a prophet of the 'New Seriousness'.

'We're not facing our problems. We've got Prozac politics': The philosopher John Gray is riding high as one of the few thinkers to have predicted the current economic chaos. Here, he tells Deborah Orr how we got into this mess – and how we might get out of it
Deborah Orr, The Independent, 11 April 2009

It's universally recognised that some people benefit hugely from recessions. But no one really expects those beneficiaries to be philosophers. John Gray, thus far, has had a fabulous recession, not least because he was one of the few people who forcefully predicted it, notably in his 1998 book False Dawn: The Delusions of Global Capitalism. This week, with perfect serendipity, Penguin has published Gray's Anatomy, a collection of his political writings over the past 30 years. Gathered together, Gray's essays, articles and reviews offer a very handy historical and philosophical guide to how we all got here, in a hefty, readable slab of glorious prescience.

Gray, who is now 60, withdrew from his sparkling academic career not much more than a year ago, in order to write full-time, and he still gets a bit of a kick from his new-found freedom. He grandly insisted on booking a room in "the Wylie building" for our interview. This, I think, hints a little at pleasure in being represented by Andrew "the Jackal" Wylie, the pre-eminent transatlantic agent of his generation, and a lot at habituation to having well-appointed institutional rooms at his disposal. Gray moved to Bath, with his wife Mieko, a dealer in Japanese antiquities, around the time when he surrendered his most recent post, as Professor of European Thought at the LSE. So the plush Bloomsbury office now serves as a London base.

One might forgive Gray, as he sits in Georgian splendour sporting a rust-coloured corduroy suit, for being a little bit bumptious, and slightly prone to self-regarding cries of: "I told you so." But such egotistical grandstanding would be a betrayal of everything Gray has ever believed in, if he could be accused of ever having "believed in" anything. Gray eschews all "isms", except realism, and he admits, with some shame and an awareness of the dreadful irony of life, that "a surviving element of utopianism in me" presently leads him to hope against hope that realism – and the establishment of a reasonable modus vivendi – might possibly be the coming thing.

Long mistaken for a pessimist, Gray instead has a talent for calling an ideological spade an ideological spade. His intellectual speciality, or his "recurrent habit of enquiry", as he puts it himself, "is to try to identify features of the present moment, which are taken to be unshakeable by conventional opinion and established interpretation, but are not, in order to try to find out the interstices or weaknesses or fragilities". It's a technique that has served him very well.

However, Gray always does his best to respect the politicians who wield the ideological spades, preferring those who are "willing to get their hands dirty" and involving himself in the think-tanks that nourish them. This guiding principle dictated that he was an early supporter of first "the Thatcher project" and then "the New Labour project", even though many people would argue that one or both of these contributed vastly to our current predicament.

Again, it's all about realism. It would be wrong to say that Gray has "faith" in politics. But he does think that politics are a much better way of sorting things out than the messier alternatives – war and revolution. He also reserves a degree of disdain for protest politics, not because it never succeeds in getting its point across – Gray fully accepted the evidence of global warming early on, for example – but because he is suspicious of movements that people join in order to find psychological satisfaction and "give meaning to their lives". It is the "meaning-conferring function of political projects" that he identifies as the aspect of them that allows people to get carried away with dangerous fervour.

In the introduction to Gray's Anatomy, the author declares with some irritation that he has lost count of the number of people who have asked him why he stopped "believing in Thatcherism". He has the good grace to chortle amiably when I facetiously insist on making that my first question to him. Anyway, it's still a good question, as he concedes himself, because its answer encapsulates pretty much every aspect of Gray's formative thinking.

Certainly Gray recognised in Thatcher, from the moment she became leader of the opposition in 1975, a politician who was willing to get her hands dirty. But more importantly for him, she was a militant anti-communist, as was he. He dates his interest in Russia from early in his teens, when he began reading Dostoevsky, and credits the hardening of his anti-Soviet, anti-ideological stance to "the enormous influence" of Norman Cohn's 1957 book The Pursuit of the Millennium.

"Cohn argued that all of the great political movements of the 20th century, including Nazism, were at least partly pathological versions of western religious traditions, in particular apocalypticism. If you talk to most centre-left people, these happy meliorists, these so-called inch-by-inch meliorists, they will say: 'That may be true of the 20th century and of the extremes of politics but not of us.' But I always believed that utopian or millenarian or, let's just say, irrational politics, could break out in democracies as well." His 2007 book, Black Mass: Apocalyptic Religion and the Death of Utopia, explains how the war in Iraq was one such nightmarish manifestation.

Crucially, Gray considers that one of the signals of incipient pathology is the advent of hubris. Hubris, he points out, entered the Thatcher project when communism collapsed. It was then that it came widely to be dubbed as "Thatcherism" and then that Gray judged it to have disconnected from reality. He recalls seeing Thatcher on television saying, "We are a grandmother," and thinking: "That's it, then..."

"One of my recurring tests of political reality and of political fantasy is when hubris penetrates not just leaders but an entire organisation," he explains. "Then it's over. That happened with Thatcher, and it happened with Bush. The key phrase with him was the famous: 'Are you part of the reality community?' "

Significantly, Gray's anti-communism differed in one important aspect from Thatcher's – and almost everybody else's. "Far from being pessimistic," says Gray, "I was considered wildly optimistic at that time because I thought communism – a tremendously repressive system of government – would simply collapse. Nearly everyone, including the Foreign Office and Sovietologists, always portrayed it as completely unshakeable. I didn't think that was true. It didn't have much internal legitimacy – ever."

So, while Gray fully endorsed Thatcher's "militant position in the Cold War", he wasn't utterly surprised when the Berlin Wall suddenly went, like a tower block that had been demolished in a controlled explosion. Except that this was an explosion that few saw the need to control.

"I was horrified by the uncomprehending and stupid western post-collapse policy towards Russia ... What were western policy-makers thinking in the Nineties, when Russia went through a demographic crisis? People were dying in numbers unique in modern peace-time. A third of the population went underwater, pensions and life savings went out of the window. What were they thinking would result from that? That was an absolute catastrophe. George Bush Senior, not long after the Wall came down, said: 'This is a great moment for freedom, but no occasion for triumph. It will be very, very difficult.' But nobody wanted to hear that.

"It went against the prevailing mood of triumphalism, when Thatcherism turned into a global project. It went against the opportunities for financial gain that presented themselves in the former Soviet Union. It went against the hubris of the time. What was needed was a very light touch, a non-ideological approach, very pragmatic, very flexible, very skilful. Instead what we got was: 'This is what you've got to do. Adopt this wonderful model that we've got.' "

The swaggering hubris of the time gained widespread intellectual legitimacy with the publication of Francis Fukuyama's essay The End of History, in 1989. Gray was back then contemptuous of what he saw as yet another expression of apocalyptic thinking, and an example of "the domination of the American mind by the liberal ideology that has fostered blind spots in American perception of the real world that have been immensely disabling for policy". While Fukuyama's theory is now dismissed as an aberration, Gray rightly maintains that its influence was pervasive and baleful.

Anyway, it is now all too obvious that neither global liberal democracy nor global free markets were unstoppable. Gray is quite certain, on the contrary, that they are over, in their present form. He predicts, during the piecemeal process of coming up with a different model, "a relatively long period of sheer survival".

"We are presently in the first phase, not of recession, depression, deflation, inflation – all these sterile debates. We're in the first phase of the collapse of this type of globalisation, or this phase of globalisation, which will have some features in common with the Thirties but will be different in lots of ways."

Gray admires John Maynard Keynes, and admires the post-war settlement. Why shouldn't he? From a working-class background in South Shields, he was nudged into grammar school and from there to Exeter College, Oxford, where he studied PPE because its reading list "coincided with the things I was reading anyway". He describes himself as a Butler boy, a child of the post-war settlement. But he doesn't think that approach will work now. All it provides, he says, "is a staff to lean on" while we work out how to "stop fighting the last battle instead of the one we are in".

"A crucial difference is that America isn't the industrial powerhouse of the world any more, so reflating America, even if it was possible, wouldn't get us out of the mess. The Obama administration is essentially rudderless. Gordon Brown did stop the banking system from outright collapse, but that was crisis management, and we're now at a later stage. Mechanical Keynesianism won't work, or at least won't work well in a context in which capital movements and economies are open.

"A semi-open global free-market was created, especially for capital. It has its own features, its own logic, its own dynamism. I don't think anyone fully understood how it worked or how big it was growing. So then it becomes very difficult to control, because there's no entity that embraces this economy. Each separate state or entity presents problems without even comprehending what is happening. They all react in different ways as they resolve different issues. The elite oscillates between immediate crisis management, and just dithering, or not knowing what to do, or quarrelling about who is to blame.

"In this early phase of collapse, Brownian rationalist re-regulation at an international level is utterly remote from what is in fact happening, which includes an entrenchment of illegal parts of the economy that are rather globalised. The elements of de-globalisation are: less trade, repatriation of capital, nation state more important. If you're going to bail out a bank there will be pressure – so far not very effective – for the benefits of that to be felt locally.

"So all these classical features of collapse are present. Which has happened before. This is a normal historical collapse. There was a major collapse in globalisation after the First World War. I'm not saying we are going to have what we had then, because there were a number of malign features then that we don't have now. We don't have fascism or communism we don't have imperialism or colonialism ..."

But we do have ecological peril.

"Yes. Industrialisation is still occurring. China still wants and needs 8 per cent growth a year. That requires large energy inputs and so oil prices will go back probably to $80 or more in the next few years. When that happens, will it be against a background of governments having taken various measures to ensure that they develop alternatives to oil? I doubt it. Because most environmental and ecological projects are being reined back because now the immediate imperative everywhere – in the case of China for regime survival even, or in democratic countries just as part of winning the next election – is to try to get the show back on the road. But the reason it collapsed is that it is not sustainable.

"There are no goodies and baddies in this. It's not just the Russians, the Chinese. It's also Canada, Denmark, Norway. All saying: 'We want our share.' That's the future. If we had the realism to see that as an ongoing trend, it could be mitigated, the sharp edges could be taken off. We could expect conflicts we might be able to manage better.

"But the actual response, I think, and this is partly to do with the way democracy works and the way the mass-media works, is to avoid confronting these admittedly intractable problems, because there is actually underlying despair. It's Prozac politics. If you say actually, possibly, we're past the tipping point for preventing a two-degree change. That's despair: 'I can't get out of bed. I'll get drunk. I just can't take it.' So it's a very fragile mental resilience we've got here.

"But in the Netherlands, they're giving some land back to the sea, they're giving some land that was farmed back to nature, they're building on stilts, they're creating wildlife passageways – they're responding. Intelligently. To my mind that's inspiring. Just take the emerging consensus of scientists and respond.

"Realism is a necessary condition of serious politics and serious policy-making. And realism isn't popular. Because what many people are looking for in politics – including green politics at the moment, is a meaning for their lives. If you say to people: 'We can't move to a world in which we don't have either nuclear or fossil fuels. That's impossible,' they will say, 'That's not impossible, not if we all want it.' But many countries don't want it. Russia's not going to do it. Venezuela's not going to do it. Iran's not going to do it. Their wealth and power depend upon fossil fuel. 'Well, we can do it,' they'll say.

"And when you push it, it comes down to a kind of symbolic expressive function whereby even if the effect of certain policies – like moving towards wind power – is to be forced back to coal, then it doesn't matter, because the purpose of the policy is not actually to effect a real-world change but to keep the spirits up.

"The search for a narrative which confers meaning on people's lives and shows them to be part of a larger, meaningful picture, is to my mind a legitimate and deep-seated human need." For that reason Gray scorns Richard Dawkins, and the whole idea that if people turned away from religious belief, the world would be "better".

"The search for meaning is dangerous when it spills over into politics. It's not only dangerous when it produces the communists, the Jacobins and the Nazis, but also in the context of democratic or liberal meliorism, because it creates a preference for policies which satisfy this need for meaning rather than have an actual effect."

Gray sees the present collapse as an inevitable consequence of the human condition, and particularly the human belief that somehow industrialisation is progressive, and can become wholly benign, for everybody. "Humans don't always adapt well to industrialisation, but pretty much all humans want the benefits of industrialisation. They want clean water, they want long lives, they want warm rooms, and, let's be frank, they also want a high-stimulus environment. I can't imagine what life is like in an immobile village in the medieval period. But it would be a very low-stimulus environment, in which people are stuck. There's no room for romantic nostalgia here.

"Yet all forms of industrialism are on one hand attractive to humans and on the other intolerable to them. Partly, that's their revolutionary character. It is in the nature of industrialisation that markets rise up and disappear because new technologies rise up and disappear. So whole industries vanish, with some of the ways of life that are associated with them. People have to move or change their skills, or find other things to do. It's not a transition to a stable state. It's permanent change.

"It's not really about capitalism. Industrial civilisation itself is inherently dynamic and revolutionary. I think Marx got that right. That's partly what human beings like about it. That's what's attractive. What's unattractive is that it is very difficult to reconcile its actual operation with the human needs for security and stability. People do want security and stability. But they also want possibility and thrills. They do want happiness, but they also want excitement, which is quite different. And these are ubiquitous human conflicts."

Gray remains a fan of the 19th-century philosopher John Stuart Mill: "Not his utilitarianism, not his belief in progress, not his Victorianism – but his eclecticism. He took things from different systems of thought. The truth about human civilisation is very unlikely to lie in some single form. Which he understood."

Yet specialisation is another change that has been ever-increasingly wrought by industrialisation. Very few people on the planet now can really claim to be intellectual generalists yet still have a grasp of "the detail". Gray suggests that there are one or two people who manage to achieve a useful overview. He is complimentary about Nassim Taleb, the writer and hedge-fund manager who also anticipated the crash. But he is, like many others, a bit cross with the "experts" of Wall Street and Canary Wharf, who didn't read Keynes or Galbraith – or even Ayn Rand – until they got their redundancy bonuses.

"The type of economic thinking that went on up to and including Keynes – which was not that long ago – doesn't happen any more. Political economy. Adam Smith. Lectures on jurisprudence. Theory of Morals. And so on. David Ricardo. Marx came out of that tradition.

"Economics wasn't seen as a separate discipline concerned with mathematics and the ability to model it. It was seen as a historical discipline connected with history, connected with morality, connected with the analysis of the nature of the human mind. And that went on right up to Keynes, who was a sophisticated kind of guy, founder of the Arts Council and so on, but who also wrote a treatise on probability, read all the philosophers of his day, was an investor, liked to go to Deauville and have a flutter.

"The post-war settlement did last a long time and was a benign settlement, predominantly ... But the way economics has developed ... it has cut loose from history, even from the history of economics, let alone the history of economies ... the loss of the past, of the sense of history is a very profound development."

It's slightly weird talking to Gray, because I find I agree with absolutely every word he says. I'm not sure whether we are just on the same wavelength, or whether, over the years, he's had such a profound influence on my world-view that I'm just a little John Gray thought-clone. However, since that's one question that Gray is quite unable to answer, I fear that I cannot answer it either.

'Gray's Anatomy' is published by Allen Lane, £20

The New Seriousness, Part 1

The media both here and abroad is trying to convince us that the worst of the global economic downturn is over. Perhaps it is, perhaps it is not. One of the consequences of the crash is that few people believe the experts and politicians any more. Obama gives us 'hope' for the moment, but in the longer-term, will the current euphoria (which seems to largely consist of banks making lots of money...courtesy of taxpayers) last? I've just seen an interesting article by Alexander Cockburn, which suggests that, to quote a favourite catchphrase of Ronald Reagan, the USA may have seen nothing yet:

The economic news in the near and medium term is ghastly. Retail sales crashed again in March, nowhere worse than in the car market, though electronics and building materials were way off too. They now reckon there'll be just over 2m housing foreclosures in 2009, up 400,000 from 2008. Industrial output is going through the floor at an annual rate of 20 per cent, the biggest quarterly drop since the end of the Second World War. US industry is now running at only 70 per cent of capacity, the worst number since they started tracking this stat in 1967. Job losses are currently running at 650,000 a month.

Wall Street is trying to pretend that the worst is over - no-one believes it. Round the next corner is credit card delinquency and the long-heralded slump in commercial real estate, where vacancy rates are already running at 15 per cent. Capital One, a huge issuer of Visa and Mastercard, just said the annualised net charge-off rate for US credit cards - debts the company reckons will never be paid - rose to 9.33 percent in March from 8.06 percent in February. In other words, Capital One – whose credit card promotions take up hefty space in the mailbag of every US postman – is in big trouble, and under one in 10 of these credit card holders will have a messed up credit rating for several years to come.

Wall Street and its boosters are trying to pretend that indeed the worst is over. The Dow and S&P Index have been rallying for five weeks. Wells Fargo, the huge San Francisco-based bank, second biggest home lender, announced that first quarter net income rose 50 per cent to $3 billion.

No one seriously believes the bank is in anything other continuing huge trouble, and will soon need – so Bloomberg News surmises - $50 billion to settle near-term commitments. The profit figure stems from newly relaxed rules about the valuation of Wells Fargo's assets.

In other words it's thin economic ice from here to the horizon. Robert Reich, now teaching economics at Berkeley and formerly labour secretary in the Clinton administration, wrote a piece recently, titled 'Why We're Not at the Beginning of the End, and Probably Not Even At the End of the Beginning'. There are huge problems with the whole orientation of the US economy. The "free market" outsourcing model has failed. Even at the best of times the US consumers who account for over 70 per cent of all economic activity in the country, don't have purchasing power to keep the whole show on the road, unless they put it on the credit cards which are now maxed out and going into default, or borrow on houses they can't afford.

Amid a hail of well founded criticism from liberal and conservative economists alike, Obama, with Geithner, Summers and Bernanke at his elbow, remains absolutely committed to giving the bankers everything they ask for, trillion upon trillion. As William Black, deputy director at the former Federal Savings and Loan Insurance Corp. during the thrift crisis of the 1980s, recently remarked in an acrid interview in Barron's: "Unless the current administration changes course pretty drastically, the scandal will destroy Obama's administration, both economically and in terms of integrity. We have failed bankers giving advice to failed regulators on how to deal with failed assets. How can it result in anything but failure?"

One consequence of the crisis has been increasing numbers of people questioning how our economies, societies and political systems are run. Reportedly sales of the works of Karl Marx, John Maynard Keynes and Ayn Rand (representing the political 'left', 'centre' and 'right' respectively) have been increasing appreciably since the crisis started to approach meltdown last Autumn. Whatever your opinion of these three, I think it's a good sign. People are once again thinking about the big issues which affect us all. If people are prepared to think and change their opinions there is hope yet. We may be, to coin a phrase, entered a period of 'New Seriousness'.

How the credit crunch and recession helped Britons discover the joy of being serious:
A year ago few of us had heard of quantitative easing or toxic debts - much less had any interest in knowing what they meant. But the credit crunch has changed all that and sparked a keen interest in economics and business. Suddenly, as Michelle Obama pointed out, being smart is cool and the tenor of media debates and dinner party conversations has taken a more serious turn
Gaby Hinsliff, The Observer, Sunday 12 April 2009

A year or two ago, it would hardly have been the stuff of TV executives' dreams: two middle-aged politicians in live conversation about arcane economic theory.

So it is perhaps a sign of how times have changed that broadcasters are now fighting for the rights to screen a lengthy US-style televised debate between Kenneth Clarke and Peter Mandelson over how to tackle the recession.

The two camps are still locked in talks over a date and a favoured channel, but the fact that a duel between the business secretary and his cigar-chomping rival over investment banking models could be regarded as big box office suggests something has shifted.

The recession may not have killed the cult of celebrity, as the media circus around Jade Goody recently proved, but there are glimmers of a new mood of intellectual seriousness. As the economic crisis brings once dry and dusty mathematical concepts to life, could being clever - or at least economically literate - now become, as Michelle Obama recently put it, "cooler than anything in the world"?

"Five years ago it was a conversation stopper," says Professor John Beath, president of the Royal Economic Society, about his profession. Now everyone wants to talk to him - although he admits that "they usually want to ask me about what's going to happen to house prices or interest rates".

Predicting the shape of recession - a gentle U? a sharp V? a deadly L? - is now a staple of dinner-party conversations. And while a year ago an inability to load an iPod was the mark of a philistine, now understanding quantitative easing confers more social credibility than being on Twitter.

According to Google Trends, which tracks global passions by recording which phrases internet users are searching for, at the peak of the emerging credit crisis in August 2007 more people were looking up "sub-prime" (as in lending) than "Kate Moss" (as in the supermodel whose love life dominated that summer's tabloids).

Such serious times have made stars of those able to explain them, from the BBC's business editor Robert Peston - mocked at first for his clumsy broadcasting style, now admired for his banking scoops - to Vince Cable, the Liberal Democrats' slightly nerdy treasury spokesman.

The latter's shrewd judgments on the recession have inspired jealousy among colleagues, a Facebook group called Cable the Able and even wistful talk of Vince merchandise. He will rub shoulders with novelists and Radio 4 stalwarts at next month's Hay-on-Wye literary festival to promote his book on the crisis, The Storm.

Hay's invitation to Cable, and to other surprise guests such as Howard Davies of the London School of Economics and the Financial Times global markets editor, Gillian Tett, reflects the flurry of heavyweight economic books being rushed out by publishers anxious to meet readers' cravings for an explanation of why their worlds are imploding.



Gillian Tett

Tett's book, Fools Gold, which blames unfettered greed for destroying the markets, is the culmination of years spent in relative obscurity battling to get coverage of the arcane derivatives markets in which she specialised and in which the global meltdown began. "Three years ago, writing about CDOs [complex financial instruments] did not compete with Fern Britton's gastric tummy band," she says, dryly. Now she has been crowned Journalist of the Year at the British Press Awards, a gong she hailed as a turning point for her "rather geeky" specialism.

She argues we can no longer afford not to understand what she admits is a field that many still find baffling and offputting: "You need to understand how money goes round the world, or you don't understand the world."

For those of us still baffled by credit swaps and deflationary pressures, however, there is some consolation. Professor Beath argues that beneath the complex mathematical formulae of higher economics lie familiar human desires we are all capable of understanding: "Many of the basic ideas in economics - especially those that would allow you to have some understanding of what the Bank of England is doing, why speculative markets like housing have behaved in the way they have - are to do with demand and supply and the role of expectations that people have. They are not technically difficult."

Which is why some of his colleagues are now trying to use the interest generated by the crisis to bring their message to the masses.

When a group of economists set up a website in June 2007 designed to bring complex ideas within the reach of anyone who could follow an average Financial Times editorial, they did not expect to make much of an impact. Then came the sub-prime scandal, the collapse of Northern Rock and the global credit freeze - and voxeu.eu sprang to life. One article last week on how the world economy is suffering as badly now as it was in the 1930s got 36,000 hits in three days.

And it was to Vox that the government turned to recruit 50 bloggers who could report live from this month's G20 summit in a way that was immediately accessible the world over.

Romesh Vaitilingam, a member of Vox's editorial board, credits the increasing interest in his subject not just to the credit crunch but on the emergence of people such as Sir Nicholas Stern, whose report on climate change for Gordon Brown showed how economics could help save the planet. "It's partly the nature of what's going on in the world, but more and more economists are now willing to stand up and be counted," Vaitilingam said.

The Institute of Ideas, a thinktank which specialises in questioning the status quo, hopes to capitalise on that willingness next month with a public meeting in London at the Battle of Ideas festival hosted by the Royal College of Arts. The institute has assembled a clutch of eminent economists with instructions to explain and defend their arguments in public, in terms that ordinary people can understand.

The idea was born, says a spokeswoman, out of frustration that ordinary Britons seemed to have been left out of a debate polarised between a remote political elite and protesters throwing bricks through bank windows: "The economy is not a force of nature; it's created by people and by society. It's not just about Barack Obama and Gordon Brown, or bashing bankers, which doesn't really get us anywhere. It's about saying that as the public we can understand it and we have all got a stake."

Tett goes further, arguing that the public now has a duty to work out what has been done in its name. "If you as a consumer just buy crap food and don't ask what's in it, what it's doing to your body, how it's being produced, that is a real derogation of responsibility," she says. "Not asking questions about how money goes round the world, who controls it and if it's sustainable is a derogation too."

And that, she argues, means going beyond demonising bankers, since it is impossible to understand exactly what went wrong in the markets without accepting that they are peopled by human beings as vulnerable to misjudgments and mistakes as anyone else.

It is at this new frontier of economics, where rational theory meets the wilder urges of human psychology, that the lessons of the credit crunch are now being learned.

When Andrew Oswald was a schoolboy growing up in the 1970s, the backdrop to his life was recession. And it was watching the nightly news of soaring unemployment and threatened deflation that triggered his curiosity.

He studied economics in an effort to make sense of it all. Three decades later, Professor Oswald is a leading academic whose work links economic theory with behavioural psychology to help explain why markets sometimes act irrationally. And now he is watching a new generation of teenagers experience the same spark of curiosity about the powerful forces reshaping their world.

There has been a 15 per cent rise in applications to university to study economics this autumn and next, and the Royal Society of Economics reports growing interest at A-level and GCSE. Oswald is optimistic that they may be driven by more than hopes of landing jobs in the City. "In my generation we studied economics because we were very concerned about the events of the period," he says. "But the students I have taught at Oxford and Warwick, I am afraid 90 per cent of them are motivated by money. I hope in five years' time that will change. Perhaps this [crisis] will reinvigorate the purer intellectual concerns which I think drove my generation more."

Oswald's work has long attracted political interest, from Downing Street down, because of its focus on the economics of happiness: how much money do we need to feel better about our lives? Does winning the lottery make us happier? Oswald has assigned financial values to events such as marriage and bereavement, to assess how much money might have a comparable emotional impact.

But his current focus is on the psychology of crowds - or markets, as they become in the City - and how that affected the crash. He argued in a recent lecture that economists had failed to allow for herd thinking, which saw even highly economically savvy individuals within banking swept along with the crowd.

Analysts who warned the bubble was unsustainable were apt to get fired; financiers whose bonuses depended on relative performance compared with their peers were highly motivated to emulate their peers, rather than standing back and questioning whether they should be getting involved with the risky new financial instruments emerging.

Similarly, homeowners took out mortgages that they could not afford so that they could pay excessively inflated house prices rather than be left behind by a crowd all apparently reaping the benefits of a property boom. "A tremendous herd-like fever gripped the country over the last five years: people forgot common sense," says Oswald.

"We have assumed super-rationality and forgotten that occasionally the herd takes over, to everyone's detriment. In a world where you are rewarded according to relative performance, it is rational to behave rather like sheep in a field and to cluster together for safety.

"Very often that is a rational thing, but occasionally for the group it is a disaster. The interplay between psychology and economics is going to get more and more important, and the crisis will probably help sharpen that interest."

Similarly Beath argues that crowd psychology can help to explain why consumers do not always respond logically to "rational things to do with prices or incomes", a key concern for the chancellor of the exchequer, Alistair Darling, as he finalises a budget which must attempt to restore consumer confidence.

What our neighbours buy and do can have a profound effect on our spending patterns, which is not always allowed for in strict economic models, Beath points out. He cites the work of US economist Robert Frank who has argued that many Americans were lured into unsustainable debt by trying to keep up with richer neighbours - at a time when the incomes of the wealthy were increasing much faster than those of the middle class, widening the gap between them to levels that could not be bridged.

Tett, who trained as a social anthropologist before becoming a journalist, has a similarly sociological approach to her work. For her PhD thesis she lived in a remote mountain village in Tajikistan, observing rituals and ethnic conflicts. She tackled the City in the same way. "I went into the community and tried to see how the bits fitted together and see what was driving the financial village."

As a result, she thinks, she got an overview of the financial system enabling her to identify trouble brewing in the derivatives market early - which is more than many economists did, as Oswald acknowledges. "Economists in my view have to take some of the blame. We didn't understand the world as well as many economists thought," he says.

And if even economists still need to get smarter about the financial earthquake that has engulfed the world, that suggests the rest of us have a lot of dumbing up to do.
The credit crunch gurus

Vince Cable, deputy leader, Liberal Democrats
No one fully understands the scale of the complex but extreme economic crisis we face or has any simple "silver bullet" solution to it. The problems are partly international - the "credit crunch" - and partly national.

The latter is a legacy of a long period of economic growth built on debt-financed household consumption and a grossly inflated bubble in house prices. Both of the international and homegrown problems are difficult; together, they are potentially lethal. This crisis could drag on for a decade.

Robert Peston, BBC business editor
The moral authority - that America can lecture the world on the best way to run their economy - has been shot to pieces. And that will have a profound impact on, the way countries run their economies, because if you live in a developing economy, you're just going to say, 'We're not going to take any lessons from you!'

Gillian Tett, assistant editor, Financial Times
Behind the vast numbers and the alphabet soup that mark out the credit world lie human beings, social organisations and incentive schemes. During the past decade, most banks have mishandled human management. But hard lessons can now be learnt. It is to be hoped that the next generation of managers will learn not just what has gone so wrong, but also what did not go quite so badly wrong at the few banks that are now emerging as survivors.

Be an instant expert: What to say at the dinner table to show off your knowledge

On the risk of a depression
"It's terrifying how stock markets are crashing faster now than in 1929. But we reacted faster this time. Is our memory of the 1930s all that's stopping history repeating itself?"

On printing money to inject more cash into the economy
"Of course, they don't actually print the money any more. It's created electronically now." (The Bank of England buys securities from banks and just adds extra zeroes to the accounts).

On the reprinting of J M Keynes's 1936 book, The General Theory of Unemployment, Interest and Money
(For left-wing dinner parties): "I prefer the original, don't you? Paul Krugman's new foreword oversimplifies ... "
(For right-wing dinner parties): "As Margaret Thatcher liked to remind us, economics is too important to leave to economists."

On bankers
"They're not evil people per se. But when the psychology of crowds infects the market, what do you expect?"

On interest rates
"I'm sure you're delighted with your tracker mortgage but the smart money is on long-term fixed rates - the real value of sterling's headed down."

Civil Liberties (and threats to thereof) update

Does anyone seriously think that terrorist atrocities will be stopped by the state monitoring every sort of telephone, internet and e-mail communication we make?

Now 'Big Brother' targets Facebook: Minister wants government database to monitor social networking sites
Nigel Morris, The Independent, 25 March 2009


Millions of Britons who use social networking sites such as Facebook could soon have their every move monitored by the Government and saved on a "Big Brother" database.

Ministers faced a civil liberties outcry last night over the plans, with accusations of excessive snooping on the private lives of law-abiding citizens.

The idea to police MySpace, Bebo and Facebook comes on top of plans to store information about every phone call, email and internet visit made by everyone in the United Kingdom. Almost half the British population – some 25 million people – are thought to use social networking sites. There are already proposals under a European Union directive – dating back to after the 7 July 2005 bombs – for emails and internet usage to be monitored and added to a planned database to track terror plots.

But technology has moved on in the past three years, and the use of social networking sites has boomed – so security services fear that that has left a loophole for terrorists and criminal gangs to exploit.

To close this loophole, Vernon Coaker, the Home Office minister, has disclosed that social networking sites could be forced to retain information about users' web-browsing habits. They could be required to hold data about every person users correspond with via the sites, although the contents of messages sent would not be collected. Mr Coaker said: "Social networking sites, such as MySpace or Bebo, are not covered by the directive. That is one reason why the Government are looking at what we should do about the intercept modernisation programme because there are certain aspects of communications which are not covered by the directive."

In exchanges with the Liberal Democrat home affairs spokesman Tom Brake, he insisted: "I accept this is an extremely difficult area. The interface between retaining data, private security and all such issues of privacy is extremely important. It is absolutely right to point out the difficulty of ensuring we maintain a capability and a capacity to deal with crime and issues of national security – and where that butts up against issues of privacy."

Facebook boasts 17 million Britons as members. Bebo, which caters mainly for teenagers and young adults, has more than 10 million users. A similar number of music fans are thought to use MySpace.

Moves to include the sites in mass surveillance of Britons' internet habits has provoked alarm among MPs, civil liberties groups and security experts.

Mr Brake said: "Plans to monitor our phone and email records threaten to be the most expensive snooper's charter in history. It is deeply worrying that they now intend to monitor social networking sites which contain very sensitive data like sexual orientation, religious beliefs and political views. Given the Government's disastrous record with large IT projects and data security, it is likely that data will leak out of every memory stick, port and disk drive when they start monitoring Facebook, Bebo and MySpace."

Isabella Sankey, policy director at Liberty, said: "Even before you throw Facebook and other social networking sites into the mix, the proposed central communications database is a terrifying prospect. It would allow the Government to record every email, text message and phone call and would turn millions of innocent Britons into permanent suspects."

Richard Clayton, a computer security expert at Cambridge University, said: "What they are doing is looking at who you communicate with and who your friends are, which is greatly intrusive into your private life."

Chris Kelly, Facebook's chief privacy officer, said yesterday that it was considering lobbying ministers over the proposal, which he called "overkill".

A Home Office spokeswoman said the Government was not interested in the content of emails, texts, conversations or social networking sites. She added: "We have been clear that communications revolution has been rapid in this country and the way in which we collect communications data needs to change so law enforcement agencies can maintain their ability to tackle terrorism and gather evidence."

'Oh, the EU will save us from this.' Oh yeah, right...

Understated threat to Internet freedoms - this time from the EU: To members of Blackout Europe: Telecoms Package dangers to open EU internet
Ireland Offline: 04 April 2009
Please translate and send to the Press in your country

[FOR IMMEDIATE RELEASE]

Opennetcoalition calls for protection of European citizens and users rights on Internet

Amendments to the "Telecoms Package" before the European Parliament will likely mean that Internet users and citizens will no longer have unmonitored Internet access
and free access to websites of their choice.

* This proposed EU regime has many privacy and civil rights issues it is contrary to articles 7, 8, 11 and 16 of the EU Charter of Fundamental Rights(1).
* The idea of "3 strikes and you are out" is almost Stalinist in outlook. This is not the Europe that citizens want, but the one that some politicians are starting to build.
* An ISP(2) can decide which website you can visit, arbitrary websites could possibly be blocked under this regime. You may have to pay more to visit "foreign" websites.
* The damage this will this cause to our international reputation is enormous.
* The financial implications for citizens and companies of this filtering system will be large, taxpayers will have to pay for these additional costs.
* Many companies will send their servers out of the EU so that they can continue to guarantee connectivity. Many others will not be able to export their products and services
* The proposed solutions are essentially futile.

The Opennetcoalition are calling simply for Net Neutrality and the rights of users to be respected and protected.

The function of an ISP is to deliver your message intact and without interference, to the destination, wherever that may be.

None of this precludes proper judicial oversight or any agencies seeking a specific remedy in the Courts, in respect of infringing sites and users.

The specific issues are explained in a number of languages on our website.

ENDS

Notes:
1. Security and Fundamental Freedoms on the Internet

2. ISP : Internet Service Provider

ABOUT the Europe wide Opennetcoalition

Free Knowledge Institute - Wouter Tebbens
P2P Foundation - Celia Blanco and Michel Bauwens
eXgae - Simona Levi
ISOC-ECC - Christopher Wilkinson
Ireland Offline - Eamonn Wallace
Hispalinux - Jorge Fuentes
Arbeitskreis Vorratsdatenspeicherung - Ralf Bendrath
Asociacion de Internautas - Victor Domingo
IT-Political Association of Denmark - Niels Elgaard Larsen
Istituto per le Politiche dell'Innovazione - Guido Scorza
Associazione Scambio Etico - Paolo Brini
EDRI - Niels Elgaard Larsen
La Quadrature du Net - Jérémie Zimmermann
Open Rights Group - Jim Killock
FFII - Alberto Barrionuevo
Center for Media and Communication Studies (CMCS).- Laura Ranca

For more information on the organisation, please visit the Blackout Europe website at http://www.blackouteurope.eu
or contact us at blackout.europe@gmail.com