Civilisation: My part in its downfall
“Our enemies… never stop thinking about new ways to harm our country… and neither do we.” – George W. Bush (cosplay cowboy & US president 2001-09)
Seventeen years ago this week the US investment bank, Lehman Brothers, collapsed and a credit crunch was rocket propelled into a financial crisis that brought global capitalism to its knees. I believe that single momentous event, more so even than 9/11 or the Covid pandemic, explains the polarization, populism and paranoia that currently plague Western society. Whilst I neither traded nor sold CDOs, the cancerous sub-prime-based financial products that infected the financial system, I plied my trade as a stockbroker in the same casino as the boys who did and my walk-on role in that global catastrophe still occasionally gives me a sleepless night.
There were three major consequences from that dark day in September 2008. Firstly, the steady pre-2008 real wage growth that Europe had enjoyed for decades stalled which, in simple terms, means that many people today are effectively poorer than they were 17 years ago. Whilst the USA has fared better than Europe, inflation-adjusted weekly wages are still only 13% higher than they were in 2006 and this has felt incredibly disappointing as it was not even a third of the annual growth that the previous 40 years had delivered. The American Dream that promised that the children of industrious workers would be better off than them looked as if it were only being enjoyed by a few at the top.
Secondly, in order to stabilize the economy central banks’ interest rates plummeted to record lows – falling to an average of 0.5% for over a decade in the UK compared to the c.8% they had been for the previous 40 years. Borrowing money was thus absurdly cheap but depositing your cash into a bank offered no real return. This ensured that everyone with spare cash poured it into property and shares, resulting in booming markets and sky-rocketing house prices. This meant that if you already owned assets you got even richer but if you didn’t you saw no benefit and you found it ever harder to get a foot onto the property ladder. Capital, not labour, provided the biggest dividends and thus economic inequality grew ever more pronounced; in 1989 the top 1% owned 23% of the USA’s wealth but that figure has now grown to 32%.
Finally, the banks and the bankers, the very people who had caused the financial crisis, were bailed out to the tune of perhaps $3 trillion and were not subject to any legal punishment for the short-term reckless gambling that had so impacted the lives of their poorer compatriots. This injustice, understandably, angered vast swathes of ‘civilians’ but that anger turned to fury when so many bankers continued to receive vast bonuses and so few showed any remorse. My self-eviscerating 2008 memoir ‘Cityboy’ was my attempt to say ‘sorry’ but cynical observers rightly pointed out that my guilt wasn’t so overpowering that I felt the need to hand back my twelve City bonuses.
It is these three developments that explain the widespread resentment, the suspicion of elites, the conviction that the ‘globalist’ system is rigged against the common man, the related wacky conspiracy theories and the scapegoating of minorities that fuelled the rise of populists like Trump and Farage on the right and, to a lesser extent, Bernie Sanders and Corbyn on the left. The political middle ground fell away and extreme polarization, fuelled by social media’s algorithms, Russian bots and basement-dwelling incels, became the order of the day.
You cannot explain the 2016 Brexit vote without referencing the ability of the Leave campaign to channel this anger and blame it on the EU, foreigners and ‘metropolitan elites.’ Likewise, it is impossible to comprehend Trump’s rise without appreciating the post-2008 distrust of ‘the deep state’ and the ‘failure’ of the American dream for workers in the rust belt. Fuel was added to the fire by right-wing billionaires and a conspiracy-obsessed presidential candidate who would blame globalists, immigrants or even a cabal of baby-eating liberals – depending on the voter’s IQ.
Seventeen years on, the financial crash still shapes our world like a debilitating whiskey hangover. The good news is that hangovers do eventually fade away and politics tend to swing cyclically between moderation and extremism. Perhaps AI will shower us with incredible productivity gains that improve all or lives… or maybe it will just write conspiracy theories that make QAnon look like Jackanory. Either way, I suspect that one day we’ll look back at this turbulent era as just another chapter in capitalism’s chaotic soap opera — with this episode being the one when the nasty bankers got away with it, the common people got seriously pissed off and absurd populists, who would have been laughed off the stage in calmer times, got elected.
Well, if that perspective helps me get some sleep tonight that’s what I’m going to keep telling myself.