Friday 30 July 2010, 16:22

Adam Curtis Adam Curtis

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There are endless books and TV programmes that tell us that the period we have just lived through was the Age of Debt.

It was a time when debt was seen as good - an essential element of global stability. And those who said that rising debt levels were dangerous were dismissed as doom-mongers. Now they are "whistle-blowers"

These books and programmes also tell us how recently that idea - the belief that debt was good - came to dominate western societies. Only 30 years ago going into debt was portrayed as not only dangerous but morally wrong.

But what no-one has explained is why there was this sudden change?

Why did that attitude change so quickly? What drove it?

There is a really interesting new book by an economist Raghuram Rajan called Fault Lines. He argues that what led to the change was not just greedy banks, but growing social inequality in the West.

And - to put it crudely - when western governments were threatened by growing protests and dissatisfaction with this inequality, they simply bought the people off by giving them a mass of cheap money.

Raghuram Rajan has an extraordinary statistic. That if you look at the the growth in real incomes between 1976 and 2007, 58% of it went to the top 1%.

Faced with this, governments made a political choice. Rather than reform society, they removed all restrictions, gave up on their moral disapproval, and allowed a system to be created by the bankers that let everyone borrow.

It was better to give in and allow the "little people" to borrow rather than let them keep on striking and threaten social order. And what's more you could make lots of money out of it.

I am intrigued by this argument because it is the first time I have seen someone take the financial crisis and put it in a political and historical perspective.

It explains how the machinery of credit was used politically to try and manage and retain control the structure of power in the world. It was not a conspiracy, it was simply those in power taking the line of least resistance.

And it raises the question - if that system no longer works what will happen? The cheap money obscured massive growth in inequality and social stagnation. Will the resentment and envy re-emerge, and how will politicians deal with that?

I am researching this area, and I thought I would put up some of the films from the BBC archive from the time when there was moral disapproval by those in power of the "lower orders" wanting to "live beyond their means".

The programmes are quite extraordinary and riveting in their tone of patrician sniffiness about people borrowing on the "Never Never" and Hire Purchase. And not just from the bankers who are interviewed - it is also in the commentary.

But if you peer through that, you can see something else emerging in the ordinary people interviewed. It is a powerful desire to borrow money - so they can have what those above them in society have. The good life.

And beyond that there is a growing envy and resentment.

The first is a programme called Eye To Eye from 1958. It shows how back then everyone who wanted to borrow was investigated by this extraordinary organisation called the LAPT. The reporter calls it the private FBI - and it even had its own secret agents that would check up on people in every town and village.

There is also the wonderful Mrs Harrison - the wife of a managing director - in her kitchen showing off everything she has bought on HP. She looks just like Mrs Thatcher and she has a great food mixer.

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This is a brief bit from a programme called Men and Money made in 1964. It's a stockbroker talking about the "little people" who want to buy shares. In just two minutes it shows how patronising and snobbish financial institutions used to be.

It begins with a great new device to protect money being transported around the City.

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And here are three sections from a Man Alive made in 1968 called Beyond Their Means.

The interviews show just how much the televison-makers of that time, while claiming to be questioning and revolutionary, were in reality deeply involved in reinforcing the establishment attitudes of the time towards debt.

The first is a working class couple from South London and shows their weekly visit from the Tallyman. The commentary and the reporter's questions drip with a patronising snootiness - "Can't you make do with buying second hand furniture?"

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The next is an aspirational couple who are continually in debt. The reporter again is brimming with disapproval because the couple are being reckless. They are living beyond their means but they aren't poor.

Bad people.

But the couple - the husband especially - are amazing. He is a fantastic character. He borrows money he says as a protest against those around him who are richer. "To fling away the pittance that I have is a protest."

They show in extreme form the growing force of middle class aspiration and envy that Mrs Thatcher was going to harness ten years later.

He reveals that he has written to famous millionaires asking for more money. One is Charles Clore who was a property developer who also owned Selfridges. Another is Nubar Gulbenkian who was an oil magnate and a famous socialite in London in the 1950s and 60s.

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And the third is an upper-class couple who own a stately home that is falling down around them. Here the reporter treats them reverentially. The couple are presented as morally and socially good. They borrow because it is a duty to their country to keep their lifestyle and their house going.

Of course within 15 years TV-makers would switch sides and toe the new line on debt. A wave of programmes would help create the new system of Universal Leverage - showing everyone how they could use their property and other assets to create a personal mountain of debt.

But that's another story.

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    Comment number 1.

    Good stuff Adam. However, you and Mr. Raghuram Rajan are not the first ones to make this argument; Robert Reich, the former US Secretary of Labor whom you interviewed to great effect in the Century of the Self, has been taking a similar line for a long while on his blog. Here's a particular entry in the blog that lays out the main argument, but it's worth reading everything else he has written on there for his greta intellectual insights:


    Basically, as Americans have become poorer, with the median wage dropping while a huge percentage of income goes to the 1% of affluent earners, they've had to borrow more and more just to be able to have an average standard of life. This led to the huge housing bubble which, coupled with the reckless gambling of the financial elite, led to the mess we're still mired in.

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    Comment number 2.

    A fascinating historical insight ... but quite alarming ... I think that this is evidence of a conspiracy against millions and millions of ordinary British people

    It's shocking!

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    Comment number 3.

    From: "The Economic Consequences of Peace; 1919"
    John Maynard Keynes wrote:

    "Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become 'profiteers,' who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

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    Comment number 4.

    I'm afraid most people are hopeless with money, most people don't check their bank statements, and most people think that if you borrow £1000 and pay £100 per month for 12 months, then they will have been paid back with 20% interest.

    I'm sorry, you can analyse it any way you want, but as my Dad used to say to me, over and over again, "a fool and his money are soon parted".

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    Comment number 5.

    "if you borrow £1000 and pay £100 per month for 12 months, then they will have been paid back with 20% interest."
    Educate me, because I am one of 'most people', I suppose, in that I don't quite follow. A £200 profit on a 1 year loan of £1000 is indeed 20% interest (the price paid for the loan).
    Why would that be something which someone that is hopeless with money would think?

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    Comment number 6.

    Is the error not factoring in things like the time cost of money, inflation, etc?

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    Comment number 7.

    As always, very intesting but I'm not sure I agree with everything that's been said on here so far.

    1. Surely if the governments had been facing "growing protests and dissatisfaction with this inequality" which you characterise as the motivation force behind the market deregulation that occured, then to "give up" as you put it wouldn't have been to adopt a more laissez-faire economic approach would it? It would actually have been to "reform society" which you say they rejected in favour of removing restrictions. I'd agree that the former is more difficult, but if the factors you suggest, like the growing unrest at inequality, were behind the pressures of the time, then deregulation would not have satisfied these the public would they? Could they really be bought off? I think what's being levelled at the public in that case is that they allowed their greed to overcome their principles, and cheap credit sated their desire for money, in which case it was never about inequality really.

    2. It's important that Reich says that people "needed" to borrow to supplement their purchasing power. Now without getting into the difference between needs and wants, people wanted a certain quality of life, and the wider themes of Adam's work about the rise of individualism, and it's expression through consumerism seems to be in play here. I think it's fairer to frame the changes in terms of these trends post-war, and I think that's what Adam's done before particularly in Century and Kiss - is this a change in opinion? The reason I ask is I don't see that 79/80 were sudden points of particular social readiness for Thatcher and Reagan. The economic upheavals of the 70s and earlier in the public mind, and the intellectual battle against Keysianism culminated in the government of this area being elected.

    3. I love the Keynes quote. But didn't Keysianism introduce defcit spending in the biggest way in Western economies post-1929?

    4. I think there's an extent to which I think this contradicts the story in The Trap, and also in Pandora's Box, about (and I'm grossly simplifying) misapplication of natural science principles, the idea that quantitive theories are absolute and all things are reducable, the rise of positivism, all that stuff.

    I've run of time, I'll be back.

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    Comment number 8.


    My apologies Phil, my email seems a bit sharp to me now! People have my sympathy because banks know a lot more about money than we do and it's an unequal fight.

    You are paying more than 20% p/a because after your first repayment, you will be borrowing less than £1000. You would pay at a rate of 20% only if you pay £1200 in one repayment on 31 Dec . To work out the real interest rate, you need to take the interest - £200 - and divide it by the reducing amount borrowed. (Not an easy sum to do, by the way).

    Nowadays, lenders are mostly required by law to quote APR (annualised percentage rate). If this loan were quoted at 20% APR, your monthly repayment will be less than £100 per month, and you will save yourself approximately half the interest charge.

    As you put, there are other calculations to be made if you want to find out the real cost/benefit of the loan - the value of the asset you buy, inflation and opportunity cost are the main ones.

    None of this is easy to work out but most people don't try. Some basic financial education in the classroom could be of great value.

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    Comment number 9.

    I think this is also due to the rise of people owning collatoral - you cannot lend without (at least the pretence of) this, and since the renaissance, private ownership has been increasing steadily, as has the broader power of the banks. Thatcher certainly encouraged greater public ownership of property, by hook or by crook, partly for this reason I imagine. Her opening-up of the stock market also increased the size of the market the financial services could exploit.

    You say that, thirty years ago going into debt was viewed as wrong, but as you can see from your films, there was one exception to this - the aristocracy/those running the country. They can juggle debt, and if it works, they are lionised; if they fail, they are fed to the lions. Either way, it's entertainment (see your previous piece on the Goldsmiths). People want to have what those above them have, a carefree aristocratic life, and it it seems to me that the last 30 years have been largely about making this available, at a price, to people (the growth of technology helping this), with there being a concomitant easing of the fear of debt. After all, we now have a welfare state, and no poorhouses, so people don't have to worry so much about falling.

    As a final view, I think that Gordon Brown was so keen to increase the amount of financial-services activity because he understands and enjoys that way of thinking and life, and so enjoyed everyone being involved in the ins and outs of it. In the valley of the financially-blind, the one-eyed man was king. Just the latest in a long line.

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    Comment number 10.

    Fascinating stuff as ever.

    May I also point people to the interesting work of Elizabeth Warren (now TARP congressional oversight committee chair). Follows on from the issues raised by the last video in this blog post.

    Lecture: The Coming Collapse of the Middle Class (2007)
    Runtime = 60mins [and worth it!]

    Warren's focus on 'the family income' (1970s vs 2000s) and debt is fascinating and her outlook is extremely valuable to this topic.

    Many of my assumptions were challenged - in as much as I didn't realise it could be that bad!!!

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    Comment number 11.

    I have often mulled this thought in my mind of credit debt as my grandmother who lived through the great depression, though at the time working for a wage in addition to my grandfather, said the family went through unaffected. She has always said it was because they never spent what they did not have; a mantra she still follows to this day.

    This shift of open credit for me is interesting as it sets out a frame work for something more related to the human psychological necessity to organize social relations by hierarchy. Where we move away from actual labour and money having value by a universal gold standard now capital has become synonymous with our potential 'human capital' or perceived value of self relative to our financial/societal system's bottom line. A position such as this pits us in complete competition against all others, including family and friends, around us in such a way outlined by Adam in The Trap that we become paranoid as we begin to interpret the world and our relations as calculated strategies and therefore falling on ideals such a Game Theory to assist with navigating our daily lives.

    To not think this way would literally leave one vulnerable bringing the essence of such theories to fruition.

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    Comment number 12.

    Adam, you absolutely must read Michael Rowbotham's excellent 'The Grip of Death'. http://www.amazon.co.uk/Grip-Death-Slavery-Destructive-Economics/dp/1897766408

    It is a thorough analysis of how money is created in the UK but now applicable to the world and answers why so many things fail to make sense in our society.

    Only 3% of money is created through the UK government, ie notes and coins. The rest is created as debt through banks. It is not based on value but on debt. Mortgages are responsible for the majority (66%) of the UK's money stock. There is no reason why a country/government cannot create all of its money needed and never have to pay that back to a private organisation. All our taxes go back into directly paying off debts for the money borrowed into existence by the banks.

    Day after day we read headlines of all public services 'not have enough money'. The idea is simply preposterous.

    There is an excellent short introduction into the subject of Money as Debt by Canadian Paul Gringon.


    'The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of slight of hand the was ever invented. Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take away from them the power to create money and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.'

    - Josiah Stamp, Public address central hall, Westminster 1937, former director The Bank of England.

    It would be great to see your excellent research into this subject.

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    Comment number 13.

    Sorry but this is old stuff and I'm surprised so many people are discovering the true cause of this depression now.

    By far the biggest problem we face is the politicians. They will never admit it so they swept this problem under the carpet and fool us with the idea that the economy is recovering.

    Even if it's recovering, the next crash will be even more painful and so on till the whole system get destroyed and humanity plunges into Dark Ages 2.0

  • Comment number 14.

    This comment was removed because the moderators found it broke the house rules. Explain.

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    Comment number 15.

    Dear Mr. Curtis,

    I think all financial explanations of the recent events, including Mr. Rajan's, are somewhat superficial, even when these explanations have a "psychological" dimension. I think a much better explanation lies in some deep post-WW2 cultural shifts of western societies. The financial events are the result, not the cause.

    First, a distinction: I think the term "western governments" is too generic. I think what you mean by this term is "anglo-american" governments" (ie, UK, US, Australia etc). The trajectories of some other western governments (Germany is the prime example) are quite different from these.

    In my opinion, the most obvious difference between the Anglo-Americans and Germans is, the first willingly dumped its industry, while the other kept it. And I think more than anything else this was a Psychological decision. US-UK part of this story is partially touched in some of your documentaries, especially the "Mayfair Set".

    I went as a Ph.D. candidate in engineering to US in 1993. For me, the guy from a third world country, US was the country of firsts: Airplane, transistor, plastics, travel to moon, PCs, microprocessors, you name it. But I immediately became aware that Americans are no longer excited by technology anymore. Approximately %70 of M. Sc and Ph. D. students in engineering were foreigners, especially Chinese and Indians, but also Turks like me. Most older engineering professors were Americans, but they were increasingly replaced by younger foreigners. It seemed US was no longer sufficient to itself in terms of engineering talent.

    Then I've learned that US had a current account deficit. This really blew me of. How could such an advanced country have a deficit in international trade?

    Then I have noticed that the upstate NY town I was living in was like an industrial graveyard. Apparently, it was very active until 1970's but then it suddenly collapsed. There was a lot of deserted factories around with broken glass and locked doors. This incident was so recent that most townspeople can point to the factory buildings in which they once worked. But when pressed to give reasons for the change, they only gave very superficial, single sentence reasons.

    Then I noticed that this was a set pattern for the whole north-east US. Mainly the steel industry, but also a lot of other industries, folded in early 80's.

    I have tried to find books about the causes of this massive social event. What I managed to find was pitiful. At that time there was the Titanic craze, and bookshelves were groaning under Titanic books. In contrast, there was virtually nothing about the sinking of US industry. Apparently the whole thing went down unmourned, and much less noticed than Titanic. No author find it interesting enough to collect thousands of small narratives and fuse it into a coherent, unified story which analysed the reasons. I still find this disinterest as the most interesting part of the story.

    When industry is gone, a way of thinking, a culture and a whole psychology goes together with it. If you want to understand what I'm talking about, just look at the pages of an issue of scientific american magazine from 19th century. There you will see the pride of the yankee inventor. What is gone is this. And no conspiracy theory there, they killed it themselves, consciously or unconsciously. At one point they thought it so worthless that they dumped it to china. I regard this as the most stupid incident of their history.

    Culprit? I strongly feel some of it is related to 60's counterculture. But the collapse of US industry is as mysterious as its birth. At least, for me. What is certain is that US passed a point of "revaluation of all values" in early 70's and they decided they didnt want their industrial heritage anymore. And with typical american single-mindedness, they jettisoned their industry in one generation, which took their ancestors centuries to create. Without giving it a second thought.

    One may say that still all new things still come from US. . For example, a whole new world of virtual reality (3d computer games, animated movies etc) just came into existence ex nihilo in 1980-90's. But I believe most of this is the inertia of a huge and once a very fast ship, whose engines are not working anymore. This inertia is still immense and very respectable. But it is inertia.

    Why %58 of the new wealth went to top %1? Because in the new economic system the bottom %99 is not needed anymore. But this, like all economic results, is a consequence. American society of today is a non-producing society. No production, no wages to the bottom %99. If you dont count turning meatballs in McDonalds, that is.

    I think the Germans and the Japanese at the end of WW2 were in much better shape. Yes, they also had no production, but they had the culture of production. Hence they very quickly created a very sophisticated industry within 10 years. Unfortunately what americans willingly forgot is exactly this culture.

    I guess American ruling elites are quickly waking up to this fact. The invasion of Iraq and the struggle to control oil areas are partly a result of this wake up.

  • rate this

    Comment number 16.

    "One may say that still all new things still come from US. For example, a whole new world of virtual reality (3d computer games, animated movies etc) just came into existence ex nihilo in 1980-90's. But I believe most of this is the inertia of a huge and once a very fast ship, whose engines are not working anymore. This inertia is still immense and very respectable. But it is inertia".

    Mehemetsahhaf's observation brings to mind an episode I saw recently of the brilliant BBC series "Ascent of Man" which examined the Industrial Revolution and why it took off in Britain ahead of continental Europe in the C18th.

    While Britain's great minds were improving and adapting the steam engine, French inventors were building dolls to entertain the aristocracy. They could write, draw pictures and imitate human facial expressions. They were incredibly intricate works of automation, but ultimately still toys with little intrinsic worth beyond entertainment - the ipods of their time.

    Meanwhile back in the present, China has employed 10,000 R&D scientists and engineers for the development of rail alone. China will lead the world in the development of Green technology - scientists and engineers again. People who actually makes things. There's a novel thought.

  • rate this

    Comment number 17.

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    Comment number 18.

    #15 Mehmetsahhaf

    I find your comments and observations very interesting as the industrial decline of the US/UK is something I too have struggled to make sense of. As someone who works in what was once considered a vital part of british engineering I could not understand the way, manner and speed that it has been destroyed and for what purpose?

    My thoughts may be way off track…but I think it's to do with our version of capitalism being exploitative at its roots. British history is full of stories of the exploitation of its own working class and if it wasn't for the great Quaker families of the past that did at least treat their workers with some respect then the whole story would be a lot worse than it is. The USA with its lack of a large pool of working class to exploit went even further and resorted to the most inhumane treatment of workers by the use of forced exiled slave labour. From exploitation and with great sacrifice, through wars that were fought for the common good of all and from massive struggle over generations did eventually appear to grow a mutually beneficial society.

    Globalisation and the free market is nothing new (it could be argued that these were the very same forces that created slavery in the first place) but without rules and regulation globalisation and the free market can and will be forces of destruction.

    The US & UK have outsourced the productive parts of their economy as it has allowed them both to resort back to the type of exploitative capitalism that they used to practise, in doing so they have been able to cut the ties with their own working class and profit financially from it in the short term. In doing this they have broken a mutually beneficial financial cycle and replaced it with a one way system that could lead to the financial ruin of both countries

    When you hear a figure given about the trade deficit the US has with China you have to ask yourself what’s the true value of that figure to the US economy! This figure will be priced in the new lower cost Chinese labour the corporations now employ the real loss to the US economy compared to when these goods were produced in the USA is obviously far greater.

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    Comment number 19.

    For those that STILL wonder about the the industrial decline, this short video might help - http://www.youtube.com/watch?v=qOP2V_np2c0

  • rate this

    Comment number 20.

    Dear Adam,

    I read this post last night and over coffee this morning saw a report from California about the little people given cheap (so it seemed at the time) credit.

    Here's a summary, "The picture that emerges from this foreclosure study is of a generation of Hispanic homeowners, typically refinancing an existing, modest home, rather than buying an extravagant McMansion, losing years of accumulated wealth and savings in the process."

    "Fewer than half of mortgages in foreclosure were purchase loans. Thus, the typical foreclosure story is not a family reaching too far in order to buy an unaffordable house, but more likely, of using home equity to pay credit card debt and maintain a middle-class standard of living in the face of stagnating incomes. Essentially half of all foreclosures in California involve Hispanics, roughly in the same proportion that subprime mortgages were given out in the years prior to the crisis. Thus, the last to arrive at the bottom rungs of the middle class ladder are the first to be pushed back off."

    It seems like predatory credit was extended to many Hispanic & Black Americans. (Not just in mortgages, look at where the evil payday lenders are located).

    Was this to control parts of American society that were not going to be part of Rajan's top 1%?

    Here's the report if anyone is interested in the report I mentioned, it can be found here:

    "Dreams Deferred: Impacts and Characteristics of the California Foreclosure Crisis" California's Center for Responsible Lending


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