As Professor Tim Jackson says in his TED talk we live in times where we “spend money we don’t have, on things we don’t need, to create impressions that won’t last, on people we don’t care about.”
As we have written in Citizen Renaissance, our hyper-consumerist lifestyles are fueled by unsustainable credit-bubble, debt-based growth which is also unsustainable in terms of the planet. What’s more, the associated extrinsically-orientated values are harming our wellbeing and hollowing out our communities. This is the root cause of the broken-society and for many society won’t be ‘big’ until a political party comes up with a vision of a better economy fit for people and planet, not greed and growth.
There are those who are making different choices, for instance people in the Transition Towns movement. These are the kind of people Keynes wrote about when he said we should learn from “the delightful people who are capable of taking direct enjoyment of things, the lilies of the field who toil not, neither do they spin.”
But for the majority today we are in serious debt, based not just on our own spending, but on the extraordinary citizen bailout of the casino financial system. Bloomberg has quoted figures for US bailout costs of up to $7.76trillion. According to John Lanchester that is more than the (inflation adjusted) combination of the Marshall Plan, the Louisiana Purchase, the 1980’s Savings and Loan crisis, the Korean and Vietnam wars, the New Deal, the invasion of Iraq and the total cost of Nasa including Moon landings. It looks even worse in the UK, reliant as our economy has become on property bubbles and an economy based on the financial sector.
That’s a lot of money. But then numbers are big in this debate. At the height of the derivatives mania (which got us into this mess) in 2007 they were trading at a value of $2.1trilion per day!
Keynes long ago predicted a time when we would be able to throw off growth obsession and what he saw as our “distasteful and unjust” social and economic practices. He looked forward to a time when greed and acquisitiveness would be things of the past and “the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals”.
Ultimately the mess we are now in must be seen as a failure of the ‘Anglo-Saxon’ model of free-market deregulation capitalism. If anyone suggests you are anti-capitalist for questioning the current madness, ask them what form of capitalism they think we now have. By bailing out our banks to the tune we did, we have created what John Lanchester calls “grotesque hybrids, privately owned banks which are able to generate boggling profits because all the risk is underwritten by the taxpayer. It is a 100% pure form of socialism for the rich. A huge unregulated boom in which almost all the upside went directly into [relatively few] private hands, followed by a gigantic bust in which the losses were socialized [to the rest of us mugs]”.
And somehow, the ones who are to blame – our asleep-at-the-wheel politicians, and many bankers, can’t wait to go back to business as if nothing much went wrong.
We are living through a huge lost opportunity, both (as we write in Citizen Renaissance) to rethink the growth paradigm from a planetary and wellbeing perspective, but also to rethink finance and make the badly needed overhaul of capitalism.
The Vickers review might yet come up trumps despite Basle III being a slam-dunk for free-marketeers. But our political leaders seem in no rush to overhaul the finance sector.
To deal with the damage of the deregulatory madness like the US’s repeal of Glass-Steagall, and in the UK, Thatcher’s abolition of exchange controls and Big Bang, the heirs to Thatcher now in power need to come up with a new vision. The ‘Big Society’ is hollow without a mature critique of free-for-all, devil-take-the-hindmost economics.
The kinds of obvious solutions to the too-big-to-fail conundrum include, separation of ‘casino’ and ‘piggy’ banking, far more strict controls on capital reserves, liquidity and leverage ratios, bailout insurance and ‘Living Wills’, so that banks have to bring themselves to an orderly close when their sums go wrong, rules that shareholders of bailed out banks should lose their money.
For what it’s worth, my prediction for 2011 is the collapse of the Euro and at least one major EU bank and a storm which will make recent times seem like a walk in the park. Add to that a potential burst in China’s bubble and all bets are off.
All that we can do to survive such a meltdown is force our political leaders to wake up and act to put in place a radically updated finance system. If those in the financial sector less to blame for the mess we are in want to be seen as less “socially useless” by Lord Turner and the rest of us, then they need to call for the above changes before it’s too late.
