When the losers become the leaders

David Fell recalls his youth and… hopes.

It is 1978 and your correspondent is 13 years old. I have not yet heard of economics – I am, perhaps, a nascent economist – I have a letter published in The Daily Express. The letter passes poetic (and arguably blasphemous) comment on the current state of industrial relations in Britain: “Our union, which art immortal, hallowed be thy pay claim…”

Britain is the “Sick man of Europe”. Everyone is on strike and inflation is out of control. Just a few years ago I had to do my homework by candlelight because they weren’t making enough electricity.

Soon the country will elect Margaret Thatcher. Her policies of supply side reform will devastate heavy industry in the UK. Great numbers of people will lose their jobs. My father will be among them. More than three million people who want jobs will not have one.

Maybe that’s where it all started.

It is 1988. I now have an O-level, an A-level and a degree all in economics. The UK is having a whale of a time. The early 80s recession is long over and the “Big Bang” in the City – when the UK financial sector was deregulated overnight – happened a couple of years ago. Japanese and American banks have rushed to London. Anyone with a degree that involves the ability to count works in banking, accountancy or something called “management consultancy”.

“Our union, which art immortal, hallowed be thy pay claim”

Income tax rates have been slashed; the economy is growing at an annual rate of something ridiculous like 5 or 6%. Suddenly everyone has a credit card and can buy their own home. Harry Enfield is on television waving a wad of cash and shouting “Loadsamoney” and the M25 has just opened. Margaret Thatcher has recently won a record third term and seems in total control of all she surveys.

Your correspondent is paying all this rather less attention than he might; it is the second summer of love and I am less under the influence of Milton Friedman; more under the influence of a range of recreational pharmaceuticals. And Hunter S. Thompson. I am, perhaps, a Gonzo economist. I have a job that involves driving around and around the M25 collecting data about property markets. Through the haze I notice a building boom and business parks and things called out-of-town shopping centres.

Maybe that’s where it all started.

It is 1998 and I have spent several of the past few years as a business economist doing macro-economic forecasting and consultancy. Oh and I have a wife and children and a mortgage.

“I served as chair of governors at my children’s primary school for several years and watched as the money to provide for the needs of an inner city community grew steadily and securely.”

The recession I’d seen coming as I orbited the capital has come and gone, but its fall-out is still with us. The people of Britain have just kicked out the Conservative government under which I have lived my entire adult life and installed someone called Blair. He and his sidekick Brown have granted independence to the Bank of England and have set about the most substantial and well-organised investment in Britain’s public infrastructure for decades.

I shall see some of this close up. I served as chair of governors at my children’s primary school for several years and watched as the money to provide for the needs of an inner city community grew steadily and securely.

These are the days of the Goldilocks economy; not too hot, not too cold. The entire world, in fact, is basking in the wonders of the Washington consensus. The Soviet Union collapsed a few years ago and Western capitalism is the only game in town. Globalisation will deliver endless prosperity; all we have to do is make sure the proceeds get distributed in a way that can be described as fair.

Maybe that’s where it all started.

It is 2008. A thing called the iPhone came out last year and the long-awaited fusion of computers and phones has finally occurred. I can still remember when floppy disks were actually floppy, so the emergence of social media leaves me somewhat bewildered, but everyone seems terribly excited. Everything is going to be technology and wonderful.

“Globalisation will deliver endless prosperity; all we have to do is make sure the proceeds get distributed in a way that can be described as fair.”

Instead, chaos breaks out. The demand for Volvo trucks, having grown a little each year for decades, drops to zero overnight. Economic events previously only described in theory begin happening on a daily basis. There are queues outside banks and television commentators run out of descriptive power.

By this stage I am a former economist. I still think about economics, and use the tools and language of economics from time to time, and I can still muster a half-decent economic argument if I have to. But I now I run my own business, Brook Lyndhurst, which is concerned much more generally with why humans and systems behave the way they do, and what might be done to make them behave more sustainably.

We’ve been doing quite well; but – and just like every other enterprise in the land – we’re going to be hit hard by whatever is going to unfold from this chaos. We don’t know yet. It is obviously bad. Very, very bad.

Maybe that’s where it all started.

It is 2018. And if you thought 2008 was bad…

The UK has endured a decade of austerity. Real wages and productivity have flat-lined and the economy is moribund. Young people can no longer afford to buy houses. The country has split itself into two increasingly vituperative factions, the slightly larger of which has voted to abandon our closest friends and allies and take the country out of the European Union.

“Economic events previously only described in theory begin happening on a daily basis.”

At the same time, the United States has elected Donald Trump, right wing populist parties are in government in Italy, Turkey and Hungary, and they are on the rise more or less everywhere else. Those who predicted an aftermath akin to the 1930s are looking more and more prescient.

Meanwhile, the oceans are choked with plastic, thousands of people are dying prematurely every year because the air quality is so bad, and the evidence of climate change – rising temperatures, melting ice caps, more frequent storms – continues to accumulate. There has been a global agreement that we should try to tackle climate change; but there is no sign whatsoever of greenhouse gas emissions being controlled to the extent necessary if we are to keep the planet habitable for humans.

In bewilderment and dismay, your correspondent has abandoned the field. I am a recovering economist.

Well, I say abandoned. This is not quite true. To say I withdrew would be more accurate. I needed to walk away and take stock. I needed to acknowledge that I was – am – a member of that educated metropolitan elite who’d taken the enlightenment for granted. I’d spent years and years in conferences and seminars, writing reports and articles, researching and trying to understand things so that I could try to make a better future. And all the while, I was talking to a group of people that already largely agreed with me and I’d stopped paying attention to all those people whose here and now was so shit.

Maybe this is where it starts.

In reality, there is no start. None of this started anywhere. It’s a complex, open system. Every cause is an effect, every effect a cause. To wonder where it all started is to miss the point. The point is to try to understand where we are, and what this means for what might happen next, and – as far as we can – to try to minimise the downsides and maximise the upsides.

“I was talking to a group of people that already largely agreed with me and I’d stopped paying attention to all those people whose here and now was so shit.”

Which is where a reflection on the past decade, and the one before that, and the one or two or three before that, might help. It reminds us – it certainly reminds me – that the economic circumstances we experience, particularly during early adulthood, fundamentally shape our behaviour and our expectations for the rest of our lives.

Two recent papers from the NBER in the US – The Making of Hawks, Doves and Swingers, and Scarred Consumption – confirm this point. Early life experiences, and economic shocks in particular, permanently influence, at one end, the voting behaviour of elected representatives and, at the other, the spending patterns of ordinary consumers.

I was certainly shaped by the early days of Thatcherism, by the mindset of my economics teachers who’d learned their craft in the heyday of Keynes, and by my horror at the excesses of the late 80s boom.

What lessons will today’s 20- and 30-somethings, whose perspectives and expectations have been forged by the aftermath of 2008, take forward for the next few decades? On a gloomy day, I see yet more authoritarianism, more fatalism, more anger, more withdrawal.

But on a sunny day, when optimism glimmers more brightly, I see something else. I see young people in American galvanised against their insane gun laws. I see young people in Britain experiencing common cause – for the first time in decades – as they discover that they all have bullshit jobs and that none of them will be able to live financially independent lives. And I find myself imagining that maybe, just maybe, their leadership in 2028 and 2038 will put a smile on my face. I probably won’t understand it; but that’s ok. I’m not an economist any more.

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