It is astonishing that everything about the credit crisis is still discussed in the technical terms of economics. Although, as most commentators agree, almost all economists failed to predict the financial crisis that swept through the western economies in 2008 - we still slavishly discuss and analyse it in their technical terms.

Whether it is straight journalism, or columnists' rants, or even imaginative responses like the play Enron, the problem is described either as a technical system that went wrong or as a set of strange inventions that were then corruptly used by bad and greedy people. And in doing this all the journalists, and the critics, and the playwrights earnestly try and explain to us the system in the terms, and the framework of "market-speak" created by the economists and the financiers.

The high point of this came last week when lead items on TV news were devoted to the letters written by two opposing groups of economists. It was the height of absurdity as economists from the opposing camps came on News-24 to announce pompously that "this is far more important than politics". As David Blanchflower (ex-member of the Monetary Policy Committee) pointed out in a really good piece in the New Statesman - HERE - they have absolutely no basis for any of their claims. The reason is that they have no idea what is going to happen to the economy in the next 12 months.

But more than that - perhaps the economists are the problem? That they themselves cannot see the full dimensions of the project of which they have been a part.

But still we listen to them, and still our journalists use their language and assumptions.

Which means that despite the disasters we are still trapped in the economists' world.

But the moment you pull back and look at that world from a wider perspective strange things start to emerge.

When the neoliberal project first began in 1979 with Mrs Thatcher the idea was that politicians would give away power to the markets and the state would shrink. Over the past 15 years the idea of the "market" has been extended to practically every area of society - education, health, even the arts. But to make this happen those running the neoliberal project had to enforce it by creating vast and intricate performance indicators and feedback systems (which in many cases led to wide scale absurdities). And to do this they used the mighty power of the state.

The crucial thing is that these systems had practically nothing to do with the original idea of the "market". They are actually a strange pseudo-scientific piece of planning engineered by politicians and groups of technocrats that borrowed far more from cold-war ideas of feedback engineering and cybernetics than from the risky roller coaster of the market. And to create the systems they had to greatly enlarge the state and the extent of its power, which is the very opposite of the vision of a free-market utopia.

And when you examine the roots of the neoliberal idea of the market it gets odder still. The ideas that rose up in the post-war years that captured the imagination of people like Mrs Thatcher are actually a very strange mutation of capitalism. If you listen to interviews with Friedrich Hayek he talks far more like a cold war systems engineer discussing information signals and feedback than Adam Smith with his theories of Moral Sentiment.

While the roots of the technical systems that the banks created to manage risk also lie back in the cybernetic dreams of the 1950s and 60s. Dreams not of progress through the dynamism of markets - but of using computers to create a balanced, almost frozen world. - just like in the Cold War.

Which raises the question - have we misunderstood what we have lived through since 1979?

We think it was the resurgence of capitalism. But maybe it was something very different? Something that we can't see properly because we are still trapped in the economists' world and their mindset.

I am putting up a film I made as part of the Pandora's Box series - because I think it is relevant. The Pandora's Box series looked at how scientific ideas were taken up and used by politicians and other powerful groups to justify what were essentially political attempts to change and re-engineer the world.

In this episode I argue that Mrs Thatcher's monetarist experiment of the 1980s was not just giving power away to the markets. In reality it was a pseudo-scientific attempt to re-engineer Britain that had far more in common with the preceding Old Labour attempts at "scientific" economic planning that it did with any free market theory.

And I think it would be good to pull back and look at the recent crisis in the same terms.

The film also includes the most fabulous machine I have ever seen. A giant interconnected system driven by water to model the whole British economy.


More Posts