Over the weekend, I read a fascinating article from Paul Mason about how not only is another financial crash a la 2008 just around the corner – it may already have begun. It was the usual Mason shtick: moments of genuine insight accompanied by gaping holes in logic.
Let’s dissect Mason’s argument: the whole reason the crash is already in motion comes down to the fact that everyone is indebted to the hilt, which wouldn’t be quite so bad if this were accompanied by genuine economic growth. But it isn’t, as Mason points out, and we know this because most major commodities are declining in price – he points to oil as an example (which has its flaws given the crash in oil price is down to geopolitical factors which don’t fit in, but overall he does have a point here). All right, fine, but there’s one big problem for Mason and his acolytes in all this: if that’s the case, it undermines the Left’s argument about austerity completely and utterly. In other words, if we are in the midst of the early stages of another financial meltdown caused by too much debt, how do you think people will understand the argument that the UK should have even more debt than it does at present? Also, if all of this does unfold pretty much as Mason says it will, it seems clear to me that the main political beneficiaries will be the Tories, something Mason hasn’t factored into his prediction at all.
The only reason many on the Left will disagree is because they think that, in a rather old fashioned way, if the world economy crashes it will be blamed on those in power at the time. But again, there are several main problems with this, and I’ll stick to only the three most pertinent: one, again, it is extremely difficult to argue in the midst of a debt crisis that haven taken on even more debt than you have done would have been a great idea. Whatever the technical, theoretical, economic reasons for why this might have worked, it won’t fly with the general public. Two, in times of great economic stress the public flock to the Tories, now more than ever before. They are the “safe pair of hands” remember? Whether you like it or not, a sudden crash in the world economy will probably make more people vote Conservative, not less. Three, and this is probably the most crucial of all, there is no alternative anyway. To say it another way, if the world economy is on the brink of collapse, it isn’t going to cause Middle England to suddenly say to itself, “You know what, perhaps we should give that sensible Jeremy Corbyn a try now.”
The worst thing about Mason’s prediction is that it falls within a narrative the Left has seduced itself into buying very heavily into: that capitalism is on its last legs and the apocalypse (Mason’s word, not mine) for the economic system is just around the corner and may even have begun. That another crash of 2008 proportions will finally be enough to wake people up from the false consciousness that 2008 itself failed to rouse us all from, and finally people will embrace socialism as the one true way. Whether a financial crash is coming our way or not, I can tell you one thing: the vision that Mason and others on the Left have of capitalism’s demise is a fantasy. Like the political situation in Britain at present, people see no realistic alternative.
david morgan says
I ‘think’ the principle he is espousing is that the government are effectively transferring debt from the public sector to private debt which caused the 2008 crash. The poorest are getting loaded with private debt – with credit cards made easy to obtain.
This is happening. The poorest/most indebted are having their government funded debt – tax credits – removed £1350 per year. The only option will be to borrow money at a high interest rate on a credit card.
Adam McBride says
I was going to say this only to find someone already had 🙂
The problem with both the current Tory administration *and* Corbyn & Co is they both seem to believe in one trick solutions. For the Tory administration this is evident in their over-focus on austerity, while for Corbyn & Co it is evident through their belief that they can just print loads of extra money to fix the problem.
The reality is somewhere in the middle. Economic wisdom suggests that the best way to de-leverage a country with high levels of household debt (which is even higher now than pre-2008) is a balancing act between austerity, printing extra money, reducing the debt burden (through policies such as low interest rates) and wealth re-distribution (note, not on an extreme marxist-like level but through a more progressive tax system).
I think it is possibly this realisation which has had Osborne suddenly so keen on implementing a living wage. Perhaps someone in the treasury called him over to their cubicle and explained how economies work, or even sent him a link to Ray Dalio’s brilliant video on the topic – https://www.youtube.com/watch?v=PHe0bXAIuk0
How do you envisage Tim Farron and that grim crowd of Scottish seperatists faring, if (as seems quite plausible) this happens?
@asquith: Lib Dem/SNP coalition next time round you mean? Fascinating prospect, though I am not sure I can see that as being plausible right now. Which is a shame really.