Since the late 80s one of my daily pleasures has been to listen to Late Night Live, the ABC Radio National’s daily program in which Philip Adams, the renowned Australian film maker, author and public intellectual reviews the current political, social and cultural climate, talks to authors about a great variety of interesting books (that he has in fact read) and, generally, sets out to create a little oasis within his audience’s lives in which the cacophony of life yields to nuanced and critical thinking.
So, imagine my joy when last Wednesday (14th September) I was invited on the program to partake of a tripartite debate, chaired by Philip, on what caused the Crash of 2008 and its continuing aftermath. The other two interlocutors were Jeff Madrick, editor of a magazine called Challenge, visiting professor of humanities at the Cooper Union and author of Age of Greed (Random House), and Oliver Marc Hartwich, research fellow at the libertarian Centre for Independent Studies. The program’s, and the debate’s, stated purpose was to pit Jeff’s explanation of the Crash of 2008, as developed in his Age of Greed, with the one I present in The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy (Zed Books).
You can listen to the 45 minute debate that resulted here. Below I annotate our debate, giving myself the opportunity we all crave, ex post, to add arguments that I was either too constrained (by time limitations) or too slow to think of on the hoof (my excuse being that I participated in that debate by phone, sitting in a Dublin hotel, straining to hear the challenging ideas bandied about on the other side of a substandard phone line…)
Notes on the debate
- Jeff kicked off the discussion by making the valid point that greed and financialisation exploded after the 1970s.
- Philip then turned to Oliver who took us back to the Old Testament suggesting that, while greed is a defining feature of human beings, the problem is how to tame it.
- Soon after, Philip asked me to outline my Global Minotaur’s explanatory thrust, with particular emphasis on the merits of my Minotaur metaphor. No comment here. You make of it what you will.
- Jeff made a point of objecting to my preceding mini presentation by saying that he is wary of metaphors and that in his work he tries hard to write without using them. He argued that one should eschew metaphor, suggesting that when one begins to “put detail to the metaphor” the metaphor begins to look less impressive. Before referring to two other important points that Jeff raised, let me take this opportunity to retort that Jeff was probably unaware of the painstaking manner in which my metaphor has been ‘detailed’ not only in the book itself but also in another volume entitled Modern Political Economics: Making sense of the post-2008 world (published earlier this summer by Routledge), jointly authored by Joseph Halevi, Nicholas Theocarakis and myself. In its 500 pages the reader will find a great deal of detail supporting the Global Minotaur metaphor. Granted that ‘easy’ metaphors, unsupported by painstaking research, can be extremely dangerous (as Jeff implied), the Global Minotaur is not one of them!
- Jeff also disputed two factual points that I raised. First, he disputed that the US had a rational plan for managing the global economy after the war, adding that that he only wished it were true. Well, it was true. The Bretton Woods era was a period during which the US run the global economy according to an ambitious, well thought out, blueprint for recycling US surpluses to Japan and Western Europe (Germany in particular). And that when Global Plan (as I refer to it in my book) broke down, some extremely astute US policymakers (Paul Volcker being one of them) engineered a “controlled disintegration of the world economy” for the purposes of reversing the flow of trade and capital surpluses in a manner that allowed the US to retain its hegemony while running increasing trade and budget deficits. The resulting tsunami of capital flows into Wall Street was the foundation on which Wall Street built its audacious financialisation that gave greed a new lease of life and turned greed into a form of ideology.
- Jeff’s second objection was that US trade surpluses in the 1950s were small and relatively unimportant. By this, he disputed my point that the Global Plan entailed surplus recycling between the US and Japan-Germany. It is of course true that immediately after the war US trade surpluses were a small portion of US national income. How could it be otherwise when the rest of the world was still immersed in the war’s ashes and had hardly had a chance to rise from the ruins? This is precisely why the New Dealers were keen to recycle US surpluses to Japan and Germany: to prop them up so that, in due course, Asia and Europe would become capable of absorbing increasing quantities of American exports. And this is exactly what happened. Indeed, within a decade, by 1957, US trade to Asia and Europe had quadrupled, thus creating a rising tide of demand for America’s manufacturing industry. Its importance should not be underestimated.
- Oliver came in at that point arguing that world capitalism lost its ‘anchor’ in 1971, when the Global Plan died. He put forward a standard libertarian point that the moment money was divorced from gold the scene was set for the bubble that led to 2008. No need to say much more on this, save to comment that such views seriously misunderstand the character of modern capitalism: Tying up oligopoly capitalism to the quantity of money (via a link with the almost fixed quantity of gold) is equivalent to inviting the sort of trouble that befell the world economy in 1929. Metal fetishism is an illusion that some turn to in times of trouble, like our present era, but does nothing to throw light on the reality we are facing.
- Next I was given a chance to reply to Jeff’s hypothesis: Greed, unregulated bankers, Central Bank policies etc all played a role in bringing 2008 about. Sure. But the question we ought to ask (I argued) should go deeper: What is it that gave greed a new, toxic twist? How come the authorities stood aside, allowing the banks to run riot? The Global Minotaur answers these questions.
- Oliver rightly lambasted economic theory for misunderstanding really existing capitalism. What he seems to have overlooked however was that economics’ failure was a motivated one. That the less relevant economic models are to really existing capitalism the greater the academic and political discursive power of the economists who conjure them up.
- Jeff re-entered the conversation accusing me, and possibly Oliver, of historical myopia. I have no idea why he said that since he immediately went into a narrative that was utterly consistent with that which I had said just before… Jeff also challenged my point that greed has always had a good ‘potential’ in the libertarians’ mind. Indeed, Adam Smith’s most powerful point was that free markets serve the public interest by harnessing greed and pressing it into society’s service. Jeff reacted to this by saying that Smith never mentioned the word greed. True, though irrelevant. For Smith’s point can be faithfully summed up by the expression ‘private vices, public virtues’; where the dominant vice in question is none other than greed.
- At that point Philip asked me about, what else, Greece. No need to add to what I said on this sad topic. Oliver, in a bid to confirm my view that libertarians are just as predictable as unreconstructed Marxists, added his bob’s worth: The euro will collapse because all currency unions go that way; drawing the parallel with the 19th Century’s Latin Union. Of course he is wrong, though Europe is currently conspiring to prove him right.
- Philip turned to Jeff with a question about a particular story in his book featuring an American financier who was a pioneer of deregulation but who, at the same time, was rescued by the ever generous taxpayer thrice. An early precursor to what I call Bankrutpocracy…
- As an aside, Jeff agreed with me on the importance of instituting a Surplus Recycling Mechanism both globally and in Europe.
- Philip then asked me to elaborate on my account of how capitalism placed finance at the very beginning of the chain that leads to production, following the Enclosures in Britain. Since then debt and debt crises became indispensible to capitalism. Any comments on that story of mine?
- Oliver lamented that we do not have the kind of capitalism that Adam Smith and Friedrich von Hayek imagined. That we live under crony capitalism. My retort was that Smith’s and Hayek’s capitalism never existed because it cannot exist. That libertarian political economics bears as much of a relationship with really existing capitalism as Marxism with Soviet Communism: none whatsoever.
- Jeff was then asked to talk about another interesting character in his book. Which he did.
- Finally, Philip gave me a chance to narrate the way in which, during the Global Minotaur era (1970s to 2008), the rest of the world voluntarily sent its capital to New York, resembling a latter day form of tribute that kept, by recycling the world’s surpluses and deficits, the world economy going – until, that is, Wall Street’s private money burned out mortally wounding the Minotaur and causing a mountain of debt on the one side and a glut of savings on the other. The causes of our current mutating, ever evolving, Crisis.
All in all, I enjoyed participating in this debate hugely. Thanks Philip and the LNL team…