October 28, 2019

In May 2007, Tony Blair was still Prime Minister, David Cameron was Leader of the Opposition, and Brexit wasn’t even a word yet.

Some things, though, never change. Then, as now, Oliver Letwin was in the news. He’d just given a speech on the theory of Cameron Conservatism. It still makes for a thought-provoking read. The timing, however, was spectacularly unfortunate.

Letwin’s central argument was that “politics — once econo-centric — must now become socio-centric”; or, as he also put it, “instead of being about economics, politics in a post-Marxist age is about the whole way we live our lives; it is about society.”

Yet, as he spoke those words, the first dominoes were falling in the Global Financial Crisis of 2007-08. By September 2007, it engulfed the Northern Rock building society — a shocking event, but a mere curtain-raiser to what was to come. The credit crunch turned into a banking meltdown which turned into the Great Recession which turned into the long, hard slog of austerity (punctuated by the Eurozone crisis and the immiseration of Greece).

Suggested reading
The permanent punishment of the Greek people

By Peter Franklin

Contra Letwin, politics became intensely, almost exclusively, “econo-centric”. It stayed that way for years. Today, though, it’s as if it never happened. If, outside the business pages, the state of the economy is considered at all, it is usually through the lens of a hotter story.

What explains our economics amnesia? Is it because the problems of capitalism were all sorted out five years ago and we can afford to worry about something else? Or were the problems massively over-hyped ten years ago — meaning there was nothing to worry about in the first place?

Or, much more likely, have we been so distracted by the political consequences of the last financial crisis, that we’ve left ourselves unprepared for the next one?

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If you’ve forgotten what we argued about before Trump and Brexit then, trust me, it was economics. The subject dominated the headlines and the leader columns. Any journalist who knew the difference between a debt and a deficit saw their careers flourish.

Robert Peston, officially BBC business editor (later economics editor), became king of the news. Economists like Thomas Piketty became best-selling authors. Books about finance and financiers were made into Hollywood movies. Central bankers, meanwhile, were treated as if they were film stars.

Of course, the experts did have some uncomfortable questions to answer, like “why didn’t you see this coming?” But mostly they got away with it because the media and the politicians hadn’t seen it coming either. In any case, the hard questions soon moved on to the future of the capitalist system. For instance, did it have one? At very least, it became acceptable — indeed, fashionable — to express doubts about the neoliberal version of capitalism.

The “before” and “after” of this shift in mood was a wonder to behold. On the eve of the crisis, Oliver Letwin could confidently state the following:

“…the capitalist/socialist debate has in general ceased to dominate modern politics. From Beijing to Brussels, the free market has won the battle of economic ideas.”

As it turned out, the debate wasn’t quite done-and-dusted. The country didn’t turn to socialism, but with private banks being taken into public ownership it was clear that the world had changed. The Conservatives took too long to realise this and it cost them dear. Gordon Brown regained a brief moment of relevance (“this is no time for a novice”) and Vince Cable seized the intellectual initiative.

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Where did the Church's land go?

By Giles Fraser

Meanwhile, on the streets, the Occupy movement was physically bringing capitalism to a halt, if only in some city centres. But, crucially, it wasn’t just the Left on the warpath. The conservative heartlands were up in arms too — with elements of the media giving voice to their anger.

An ingenious piece of research helps to quantify this phenomenon and the economics news boom more generally. You can read about it in a post by Tony Curzon Price and colleagues on the Rebuilding Macroeconomics blog:

“We collected the entire online corpus of the Daily Mail money section since 1998 — 240,000 articles. We used Google’s text analytics tools to extract entities like firms, places and subjects from the articles. We used Google’s emotion detection tools to identify the valence and stridency of the emotions in each article.”

What they found was a huge increase in stories about “rip-off” companies:

“Before 2004, there were about 10 rip-off stories a week; this rose slowly to around 15 before the GFC, when it rose rapidly to around 30, peaking in 2010. It then fell back but has settled at a level above 20 rip-off stories per week.”

The peak in coverage coincided with a peak in the emotional negativity of the articles. Furthermore, as a breakdown of the subject matter reveals, it was news about the financial sector driving these trends.

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And yet what did all that fear and anguish amount to? For all the earnest discussion of radical reform, capitalism today doesn’t look much different from capitalism before the crash. Nationalised banks have returned to private ownership, while those in charge escaped with their riches and all but one of their knighthoods. Move along, nothing to see here.

The news agenda did move along. By the middle of this decade, non-economic events were grabbing our attention: conflict in the Middle East, the refugee crisis, the rise of populism at home and abroad.

In 2015, Robert Peston quit his role as BBC economics editor to become ITN’s political editor. It was a canny move — because, in 2016, the Trump and Brexit earthquakes remade the landscape. It was all about politics now; the economics news boom was well and truly over.

Suggested reading
The global economy has gone mad

By Peter Franklin

We now study the minutiae of Parliamentary procedure, not the minutes of the Bank of England’s monetary policy committee. Where we once put names to faceless bankers, we now make celebrities out of EU bureaucrats.

Books that explain politics have displaced books that explain economics. For instance, the super-productive Mr Peston hit the shelves with How Do We Fix This Mess? The Economic Price of Having it All and the Route to Lasting Prosperity in 2012, then changed tack with the compactly titled WTF? in 2017. Or take the example of another former BBC economics editor, Evan Davis, who offered us his Made in Britain: How the Nation Earns Its Living in 2011, but followed up with Post-Truth: Why We Have Reached Peak Bullshit and What We Can Do About It in 2017. 

Arguably, the book of the financial crisis was The Big Short by Michael Lewis, which was published in 2010. He stuck with finance and economics with subsequent books, but with The Fifth Risk in 2018 he too had switched to politics (specifically a study of the machinery of government under Donald Trump).

Even among anti-capitalist protestors, we’ve seen a shift in focus. The radical egalitarians of Occupy have given way to the radical environmentalism of Extinction Rebellion.

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Of course I don’t mean to suggest that we’ve stopped talking about the economy altogether. You can read all about it in the business section of any newspaper that still has one. The Economist still covers economics. The money pages of the Daily Mail are still about money, even if the tone isn’t as angry as it used to be.

But however good the specialist coverage, it is the mainstream news agenda that really matters. For all the importance of the internet and the detailed information it can provide on almost any topic, it is worth remembering that somewhere in the offices of every powerful man and woman on the planet there will be a table on which the day’s newspapers are laid out. It is the front page headlines that the decision-makers see every time they walk past, not the inside page analysis.

If the economy gets a look-in at all, it is typically within the context of higher profile issues. In Britain that means Brexit. To see what I mean, have a look at the blog of the BBC’s current economics editor, Faisal Islam. It started in July of this year, and, as of the 25 October, there have been nineteen posts so far. By my count, sixteen are mostly about Brexit; only one doesn’t mention Brexit at all.

Of course, Brexit matters a lot — not least to the economy. But the unrelenting media focus means that we’re not paying attention to important economic developments that have little or nothing to do with the B-word.

For instance, any story about a car factory closing or being scaled back in the UK turns into a slanging match over the impact of Brexit uncertainty. Meanwhile, we miss the much wider story about the technological disruption of automotive manufacturing around the world. What may turn out to be one of most consequential developments of the next decade — Germany’s industrial crisis — doesn’t get the attention it merits.

Suggested reading
What if Germany's economy toppled?

By Peter Franklin

And that’s not the only story we’re missing. In August this year, global investment in negative yield bonds hit $17 trillion — a truly bizarre and worrying phenomenon, and yet one that most members of the news-consuming public will be completely unaware of. That’s bad, because if we don’t hear about it then our politicians won’t care about it. Conventional monetary policy has basically collapsed, but it hardly features on the political agenda.

I wonder how many of our 650 MPs know what a negative yield bond is or could provide a cogent explanation of their attractiveness to the money markets — and what that says about the state of the global economy?

I don’t know the answer, but I suspect it’s roughly as many MPs who knew or cared about what was going wrong the last time it all went to shit.