Archive for May, 2009

After the Ball is over…

‘Meltdown – The End of the Age of Greed’

Paul Mason Verso £7.99, pp198

According to Alvin Toffler, by now, workers in developed countries would be the most secure they’d ever been, enjoying benefits and luxuries our 1950s forbears could only have dreamt about. Yet here we are in 2009 trying to stave off the worst economic crash since the Great Depression. What gives? Paul Mason, BBC2 Newsnight’s Economics Editor, charts this rise and fall of a global gilded age in his new book ‘Meltdown – The End of the Age of Greed’.

Much of this wealth was illusory: ‘George Soros has described the whole process as the bursting of a ‘superbubble’ built up over a thirty year period and driven by credit expansion, globaliation and deregulation. ‘It is’, writes Soros, ‘not business as usual but the end of an era’.Mason compares the events of September 2008 when Lehman’s collapsed and the world’s financial system stood on a precipice as akin to the 1883 eruption of Krakatoa – immediately devastating with long-term destructive effects.

Mason’s trip through the chaos covers familiar and new ground. We see how the slicing-and-dicing of debt into tradable instruments, ‘light-touch’ regulation, greedy short-termism, fraud, the ‘shadow-banking system’ and over-dependence on the financial sector has lead us to the mess we’re in today. Blame lies not just with ‘any banker found to have broken the law [but also with] regulators, politicians and the media who failed to hold them up to scrutiny’.

Mason’s portrait of one the boom’s chief architect’s, Alan Greenspan, is simultaneously humorous and frightening. A follower of the nutty Ayn Rand, Greenspan wrote (admiringly) of ‘Atlas Shrugged’: ‘Justice is unrelenting, Creative individuals and undeviating purpose and rationality achieve joy and fulfilment. Parasites who persistently avoid either purpose or reason should perish as they should.’ But by October 2008, Atlas himself shrugged when he admitted to Congress that he had uncovered a ‘flaw’ in his free-market economic model as Banks collapsed and Wall Street nose-dived.

The Chicago School and Washington Consensus world-view was entrenched by the ‘Third Way’ progressive movements in the 1990s. ‘It was the Clinton and Blair administrations who designed the light-touch banking regulations that unleashed financial mania’. Selecting archive footage of Gordon Brown praising ‘Principle’ based regulation is as easy as shooting fish in a barrel. President Obama will be anxious not have any similar newsreel haunting him in the future.

The world has changed so much in the last eighteen months: ‘yet the policymakers are still trapped, still exhibiting a lack of resolve that may prove fatal, and an attachment to the old ideas and strategies’ Mason states that ‘Basically, neoliberalism is over: as an ideology, as an economic model. Get used to it and move on’. Governments and their advisors are, however, still feeling their way desperately through the fog.

Mason recommends implementing some key ideas from the work of US economist Hyman Minsky. He stated that ‘there was a tendency for the finance system to move from the hedge situation, where everything is under control, to the speculative and Ponzi situations, where they are precarious’. His prescriptions have been partly adopted in some jurisdictions – nationalised banks and insurance: other proposals will grate with the financial establishment – greater regulation, strict limits on speculation and vigorous anti-trust enforcement.

As Mason rightly observes, ‘the jargon used by bankers, politicians and journalists can be exasperating’. He is careful to avoid finance-speak shorthand and this book is an accessible guide to an often-complicated subject. And as with any tricky issue, humour makes the medicine go down: while this is a serious work, Mason twice name checks ‘The Simpsons’. He adds to the growing ‘Crash’ literature with this highly informative, authoritative and stylish contribution. When it comes to a ‘buy, sell or hold’ recommendation, ‘Meltdown – The End of the Age of Greed’ is definitely a ‘buy’.

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