One hell of a hangover

It’s very long, and (for US readers) it’s mostly focused on the British side of this sorry mess, but people with a spare hour or two should read John Lanchester’s piece on the banking crisis in the current London Review of Books. First, because Lanchester is really pretty fantastic, and is great at understanding complex things and explaining them in articles to simpler people like me. Second, because it’s (another) useful corrective to the view that recovering from the banking crisis is the whole story. Getting back to growth is just a small part of the problem.

Lanchester is a bit of a Cassandra. But even if the plans being implemented by the British and US economies do work, we still have to pay for them – and it’s in this phase of the crisis, recovery, that you get the social carnage. We’ve been out on the town all evening on a horrendous binge with our buddies. We’ve now decided that it might be best to stop drinking. We're trying to find a cab to take us home. But, let’s be clear about this, the night is hardly over and the hangover hasn’t even begun to kick in yet.

No-one knows what it’ll look like, but in Britain the price of this crisis may well come through inflation and high goods prices for decades. In America, who knows? Because the dollar will stay strong we’ll probably see falling exports, budget cuts, foreign policy crisis and massive long-term unemployment. “I get the strong impression, talking to people,” Lanchester says, “that the penny hasn’t fully dropped. As the ultra-bleak condition of our finances becomes more and more apparent people are going to ask increasingly angry questions about how we got into this crisis.”

And that’s what’s really worth worrying about. Look back over the last couples of months at the public outcry on both sides of the Atlantic about bankers’ bonuses and the recent British scandal about MPs expenses. I’m not going to rehearse my views on these matters again (you can read my ranting about bonuses here and here or MPs here and here if you like). But think a moment about how interconnected the two scandals are. Both are driven by a fundamental disjuncture between the attitudes of the elite, establishment classes on the one hand, who firmly (and, in my view, sincerely) believe that they have done nothing wrong; and an intense fury on the part of a huge swathe of non-elite public opinion on the other. This anger is like nothing I’ve seen in my lifetime. And as further evidence of the cognitive gap between the establishment and the masses, the angry people get just as angry about the refusal of the involved parties to recognise their misbehaviour as they do about the scandals themselves.

Whether it’s the bankers who are still lobbying for their bonuses on the basis that they weren’t in the departments who screwed up with the mortgage-backed securities, or the head of HBOS taking home tens of millions in a pension for helping to break capitalism, or the MP who declares that public anger is “like an episode of Coronation Street” and simply a matter of people being “jealous”, it’s clear that huge chunks of the establishment just don’t ‘get it’. They quietly believe that this is a media-driven frenzy which will disappear once the news cycle moves on, that the price of recovery will be the sacrificing of a few of the more egregious sinners, that this anger has come out of nowhere and will just as quickly disappear. (The last point is the most annoying argument to me. People have been raging about fat cats for decades, it’s just no-one was listening.)

Note: this is not to make an observation about the legitimacy of either position here. Both sides are skewed in their judgement. The important point, for all of us, is how very, very far apart the two different views of the world are. Because whoever's right or wrong, that division is undeniable.

That said, though, MPs are supposed to be at least vaguely aware of what’s going on in the real world, so even if they don’t get the public anger or credit it with legitimacy you’d think that they’d at least learn to shut up, as their leaders have been trying to get them to. I think the single most offensive recent example of this has to be Tory MP Nadine Dorries’ recent complaint that the harassment of MPs who have been fiddling their expenses was “a form of torture”. I mean, how completely removed from the world we live in, the world in which people are actually being tortured in our name, can it be to make such a comparison?

Oh, how long ago it seems when it was that John McCain’s advisor, Carly Fiorina, was able with a straight face to declare that none of the major political leaders running for office in the 2008 presidential election was capable of running a major corporation as well as she and her fellow CEOs were. And yet we are still a very long way from the end of the great disillusionment.

The first lesson you learn in Ideology 101 is that ideologies don’t look like ideologies when they’re yours, like Monsieur Jourdain amazed to discover he’s been speaking prose all his life. Ideologies are things that other people, like those strange Marxist types living in Russia, have, not us ‘non-ideological’ Anglo-Saxons. (Shock news, by the way: Marxists didn’t think they were ideological, at least not in the way we use the word. They thought they had a scientifically true view of history.) Ideologies are like magic spectacles that seem invisible to the wearer, despite the fact that everyone else can see them on you. And yet even knowing how amazing humans are at self-deception, it’s still astonishing to observe how segregated we have all become from each other.

Of course, many liberal reformers – the ones who are saying things like “this recession is going to turn out to be a good thing” – are secretly hoping that because of this crisis we will all get a bit more tolerant, that we will spend a bit less time bullying other countries, that we will refocus ourselves on the ‘important things’ like education and health care and pay less attention to the self-regarding nonsense put out by big city bankers. Well, that’s not going to happen. Recessions and depressions are not fun. That’s the equivalent of saying that the ‘good thing’ about a hangover is that you get to eat pizza and watch a few movies - and ignoring the bit about not being able to move from your bed for two days without spewing up.

The European elections in Britain next month, in which the British National Party and other extremist groups are likely to get a huge spike, will begin to show what nonsense it is to say that this crisis is a good thing. Paying for it is going to produce a society divided into angry interest groups, fragmented, decaying. As Lanchester says, “Even if we fall short of the IMF option in favour of a run-of-the-mill severe recession, the consequences for Britain are going to be horrific. Roads and schools and hospitals will go unbuilt and unrepaired, medical treatments will go unbought, nurses and policemen and council workers will be laid off. Six hundred thousand jobs have been created in local government in the last few years. Most of them will have to go.”

And here’s the rub. At the centre of the great free market Reaganite ideology, the only dominant ideology that people of my age and younger have known, lies a claim that we are all in it together and that we can all rise together. When Carter said that America was going to have to face up to a world in which it wasn’t all-powerful and make some tough decisions, people voted for Reagan instead. Reagan, who told them that it was morning in America and Carter was being a defeatist. We’ve been told for decades that we can have our cake and eat it, that there are effectively no hard choices to make on spending since debt will cover our shortfalls. That’s left us free to fight each other about things, like religion and prayer and gays in the military instead. We’ve been able to pretend that there aren’t real divisions between interest groups in society, between which we must choose. iPods and inner-city schools, plasma screen TVs and policemen, we’ve can have them all.

But as we start experiencing this terrible hangover, we’re going to have to face up to the return of real hard choices. Not the hard choices that politicians constantly talk about making but don’t actually make, but real ones. You know, the ones where you sack a nurse because you’re paying more each year to service your debt than you are on the entire nation’s transport budget. Or the ones where entire towns end up with endemic 75% unemployment because they aren't ever going to be Tory voters anyway, so what's the point in wasting the small amount of money on them. Or where your kid doesn't get to go to university because we can't afford to subsidize her. You know, those kinds of hard choices.

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