What’s changed in the ten years since the global financial crisis in 2008? In looking for the lightning strike of structural change, do we overlook or take for granted how the 2008 crisis has opened up space for reimagining how we organise our economies?
The collapse of Lehman Brothers, on 15th September 2008, is the event that most identify as the decisive moment in which a panic over US subprime mortgages evolved into a global financial crisis.
This upcoming ten-year ‘anniversary’ invites reflection — and already has done. John Lanchester has written for the LRB, New York magazine has a comprehensive overview of the last decade in the US, and Adam Tooze’s book will define the period. Within recent political economy scholarship, Mark Blyth and Matthias Matthijs on IPE’s missing macroeconomy, Helen Thompson on why it is still the 2008 crisis, and Scott Lavery and Jeremy Green on emerging processes of post-neoliberalisation are setting the academic debate.
All of these accounts give a sense of living in a new world, from which we cannot return. Yet despite living in a different world — Trump, Brexit, and all — there is still a tendency among political economists in Europe and the US to characterise the past decade as a continuation of the pre-2008 world. As a result, we can take the dramatic shifts in economic ideas and practice over the last decade for granted — despite being in many ways the very definition of a ‘new normal’.
Inspired by a quote from Antonio Gramsci, it has already become clichéd to write and speak of the last ten years as an ‘interregnum’. That is to say, the decade has been characterised as a time of neither-here-nor-there; a gestation period in which the old ways or system are yet to be replaced, despite expiring.
For many political economists, those old ways are best characterised by the dead-but-still-dominant characterization of neoliberalism. This is reflected in Philip Mirowski’s book, Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown, or Colin Crouch’s, The Strange Non-Death of Neoliberalism. In the sub-field of international political economy (IPE), a similar focus is on the continuation of liberal international order and global governance. This is reflected in Eric Helleiner’s The Status Quo Crisis and Daniel Drezner’s The System Worked.
Either way, the sense that what-went-before has, at most, only slightly evolved since the crash is a dominant narrative with political economy circles. What unites these accounts is a sense of stasis: that we’re stuck, and we’ve been stuck for a decade. 2008 is dead, long live 2008!
Because one cannot really experience a ‘paradigm shift’, our historical imagination and collective memory of previous crises is not necessarily that helpful in navigating and understanding the present. We tend to think of how crises change the world through the benefit of hindsight. 1945 and the birth of embedded liberalism; 1979 and the dismantling of that consensus. The culmination of decades-long political and social struggle is abstracted as a lightning strike of structural change, often driven by key actors and key events.
Change does not work like that. And there is no blueprint. The two ‘cases’ of 1945 and 1979 on which these accounts are built are vastly different and reflect a wider way of structural thinking that is common amongst political economists. Here we are making reference to an image of the type of change that crises are said to engender: top-down, system-level, intellectually-coherent. But what if change only looks like this in hindsight? What if the experience of it is or can be bottom-up, fragmented, and messy?
Given how long a decade feels, in combination with a sense of stasis over the last decade, we sometimes are primed to overlook or downplay how legitimate public discourse surrounding economies has been fundamentally transformed since 2008. Whilst mainstream policy programmes have largely stayed the same the ways in which the economy is talked and thought about have been opened right up. Ideas and practices that were previously unthinkable or illegitimate in mainstream debate are now commonplace.
If we trace the emergence of new ‘challenger’ ideas and practices would that result in a different kind of story about how the 2008 financial crisis changed the world? To speak of, say, universal basic income or the perils of inequality, in 2007 would have been a sure fire route to the fringes of mainstream economic debate. 2018 is very different.
Below, we outline four different mechanisms, with examples of each, in which challenger ideas and practices have emerged over the last 10 years: outsider movements, heterodox interventions, resurrected concepts, and scandalous economics. They share a similar characteristic: most of these ideas or practices were considered outside of the boundaries of legitimate economic thinking prior to the crisis, or at least were considered less meaningful or possible than they are today.
Some of these challenger ideas and practices can be thought of as outsider movements: little pockets or enclaves of alternative economic practice and policy that would have once been deemed as crackpot, but are now part of conventional economic discourse. For example, bitcoin was explicitly set up in 2009 as a challenge to the monetary system, as a techno-utopian experiment and/or libertarian fantasy. Cryptocurrencies are now symbolic of a wider challenge to monetary orthodoxy and are undeniably present in economic debates. While there are many sceptics, all sorts of firms are scrambling to develop the underlying blockchain technology into something profitable.
Universal basic income mirrors this journey from outside to in. Propagated in obscurity by a committed network for decades, an idea that spent most of the twentieth century in the economic wilderness has since 2008 become a serious policy proposal. Both ideas have a clear radical potential, and are thus emblematic of the way that new economic thinking has penetrated the mainstream. They are also, notably, both attractive to social forces that wish to adapt and utilise them so to patch up the status quo.
It is not just outsiders who are shifting the contours of contemporary capitalism. A number of heterodox interventions are producing something similar, as capitalist states grapple with a post-2008 world — whether by developing or borrowing new tools to restore growth, trying to prevent the system toppling over, or dealing with the continued effects of 2008.
For example, macroprudential regulation has emerged as a new, albeit contested, way of approaching financial regulation that has been unevenly adopted by central banks across the globe. By rejecting neoclassical economic assumptions that underpin the pre-crisis focus on minimising risks in individual banks, macroprudential regulation challenges neoliberal orthodoxy by emphasising the importance of managing systemic financial risks. Other key examples of heterodox interventions include quantitative easing and the Bank of England’s radical admission that money is created through issuing loans.
A third mechanism of change is the way in which old concepts that were treated as anachronistic, unnecessary, or dangerous have returned with renewed vigour and urgency. These resurrected concepts have become necessary in making sense of uncertain times, but also represent how the boundaries of political possibility have gradually expanded.
For example, capitalism and socialism were both dirty words before 2008, but now it is commonplace to read and hear debates about the future of capitalism in mainstream publications. Communism has re-entered public debate, whether on British morning TV or through the intellectual development and memeification of ‘fully automated luxury communism’. Thanks in part to the combined efforts of The Spirit Level, Thomas Piketty, and tax evasion scandals, serious political attention is now being paid to income and wealth inequality. Pre-crash ethical and political comfort with the rich getting richer (famously, as long as they pay their taxes) is no more, replaced by a new politics of inequality that seeks to actively narrow the gap between rich and poor.
Scandalous economics are a fourth mechanism. In a post-2008 context of austerity and scarce resources, conflicts between existing social cleavages (e.g. native vs. immigrant, old vs. young, public vs. private sector, or even men vs. women) have intensified. In this world, scandals that reveal the inequities of ‘who gets what, when, and how’ are especially meaningful to a populations that have been told variants of ’we’re all in this together’ and that ‘we must live within our means’.
Some scandals such as the British MPs’ expenses scandal have contributed to a sense of populist disillusion with the elite — for example, the widespread use of the organizing metaphor of the 99% versus the 1% rich segment of the population who play by different rules. Other scandals, however, such as the #MeToo movement have taken a different tone. Here there are tentative signs of shifts in how our economic lives are understood and organized, informed by gender, power and violence. Other scandals, such as on-going tax evasion scandals, lie somewhere between the two; if we rewind to 2007 then tax justice was a fringe issue, far from the headlines.
These are four mechanisms that demonstrate how the way we imagine and discuss economies, and the ways that they are organised and practiced, have transformed since 2008. This brief mapping exercise raises further questions:
Do these mechanisms and examples represent a pattern or a trend? Or is this change fragmented and disparate? All the examples outlined above are united in challenging the status quo in some way. The cumulative effect is to challenge the legitimacy of pre-crisis order. Rather than simply having an ‘Overton Window’ effect, in many ways they offer a new lens of analysis. However, it is unclear whether there is a stronger thread that runs through them, so to posit or to start underpinning a coherent alternative way of thinking to neoliberalism.
How do these challenger ideas resonate with or reinforce the shifting organisation of capitalism in the neoliberal heartlands? Here, we would make reference to stagnant wages and low-interest rates; the rise of platforms and zero-hour contracts; increasing authoritarian tendencies; and neo-nationalist protectionism and trade wars.
To what extent will these challenger ideas and practices lead to systemic and transformative change? It’s difficult to call, but in some instances there are indications of such. For example, outrage about tax evasion scandals combined with a new politics of inequality suggests that there is renewed public appetite for radical changes to tax and spending. The most recent iteration of the British Social Attitudes survey shows that support for ‘tax more, spend more’ is at 48% – the highest level in a decade.
The end of the Second World War and the election of Thatcher and Reagan are seen as decisive moments in which an old system died. We use our historical imagination to interpret the present and so there is a sense that we are yet to have similar events following 2008; that the old is still living in zombie-form. Perhaps in the stories we tell in thirty years, Trump and Brexit will be those equivalent movements. But it’s difficult to write history while living through it. What we have outlined is messy, incoherent and incomplete. Yet these new (and old) ideas and practices undeniably illustrate significant change from the pre-crisis world. In looking for the lightning strike do we risk failing to take seriously the changes that have taken place? Maybe it’s time to start treating our new times as normal.