My generation thought that it knew better. At any rate it wanted better and made a Faustian deal. It’s payback time now – and few writers are able to explain what has happened, let alone how we cope with the new world.
Some of my previous posts have referred to the accounts of people such as Howard Davies and Robert Skidelsky – the first of whom looked briefly at 39 possible explanations (!!) for the recent global collapse. I've also given space to the more radical accounts of Paul Mason and Yanis Varoufakis who put the events in a deeper context; and covered the more apocalyptic writers such as William Greer and Dmitry Orlov who not only give their own explanations but also spell out the scale and details of the changes we need to make in our own personal lives if we are to survive.
It should be noted that only 2 of these writers could be designated an academic (Skidelsky and Varoufakis)
But this week I came across perhaps the most impressive bit of analysis and writing – from Tim Morgan who writes strategic papers for a consultancy. They are all clear, challenging and well worth reading. The latest is called Perfect Storm and basically attributes the global crisis of the past 4 years to four factors -
- The madness of crowds
- The "globalisation disaster"
- Self-delusion (eg statistical lying)
- Seriously diminishing returns from the exploitation of fuels on which our growth has depended for the past two centuries
I’m only half way through the paper but let me share some excerpts from his gripping introduction -
With 24-hour news coverage, the media focus has shifted inexorably from the analytical to the immediate. The basis of politicians’ calculations has shortened to the point where it can seem that all that matters is the next sound-bite, the next headline and the next snapshot of public opinion. The corporate focus has moved all too often from strategic planning to immediate profitability as represented by the next quarter’s earnings.
This report explains that this acceleration towards ever-greater immediacy has blinded society to a series of fundamental economic trends which, if not anticipated have devastating effects.
The relentless shortening of media, social and political horizons has resulted in the establishment of self-destructive economic patterns which now threaten to undermine economic viability.
We date the acceleration in short-termism to the early 1980s. Since then, there has been a relentless shift to immediate consumption as part of something that has been called a “cult of self-worship”.
The pursuit of instant gratification has resulted in the accumulation of debt on an unprecedented scale.
The financial crisis, which began in 2008 and has since segued into the deepest and most protracted economic slump for at least eighty years, did not result entirely from a short period of malfeasance by a tiny minority, comforting though this illusion may be.
Rather, what began in 2008 was the denouement of a broadly-based process which had lasted for thirty years, and is described here as “the great credit super-cycle”.
The credit super-cycle process is exemplified by the relationship between GDP and aggregate credit market debt in the United States (see fig. 1.1 of the report). In 1945, and despite the huge costs involved in winning the Second World War, the aggregate indebtedness of American businesses, individuals and government equated to 159% of GDP. More than three decades later, in 1981, this ratio was little changed, at 168%. In real terms, total debt had increased by 214% since 1945, but the economy had grown by 197%, keeping the debt ratio remarkably static over an extended period which, incidentally, was far from shock-free (since it included two major oil crises).
As figure 1.1 shows, this changed dramatically in the 2 decades following – with the percentage of debt hitting almost 400% in 2008.