Maybe there are alternatives? Understanding economic change after 2008

We need to remember that economic change is messy and fragmented.

Liam Stanley Tom Hunt
9 August 2019, 2.18pm
A man leaving the Lehman Brothers headquarters in Canary Wharf after the investment bank filed for bankruptcy, 15 Sept 2008, Johnny Green/PA Archive/PA Images

The new Prime Minister takes office; standing in Downing Street he pledges to make Britain a global success story, to reform public services and to deliver what matters to the British people. The opposition demands an election and speculation is rife about a snap poll in the autumn.

Sound familiar?

Despite the similarities, this is June 2007 and the contrasts between the start of Gordon Brown’s premiership and Boris Johnson’s are clearly stark. Brown came to power at the end of a period of sustained economic growth when the big global economic questions that dominated the twentieth century had seemingly been settled. Before the 2008 crash there was a consensus amongst politicians of left and right that global capitalism had prevailed to the benefit of Britain and the task was to not rock the boat. After all, there was, famously, ‘no alternative’.

Fast forward to 2019 and underpinning Johnson’s premiership, so far, is the absence of consensus. The government is ramping up preparations for a No Deal departure from the EU with full knowledge of predictions that this rupture will have negative economic consequences. The opposition, meanwhile, offers a radically different economic programme of public ownership and massive public investment.

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Before the crash the very idea of Boris Johnson becoming Prime Minister and pursuing such a divisive and potentially disastrous economic agenda – or Jeremy Corbyn leading the Labour Party – would have been unimaginable. The worlds of 2007 and 2019 are far apart. Yet despite such clear shifts in the politicians and policies that now shape the economy, there is still a sense that neoliberalism continues to dominate.

Given that radical reforms to macroeconomic policy didn’t occur after 2008, we do not necessarily disagree. Yet it is important to note and analyse how in spite of this, the unimaginable has become imaginable: since 2008 there has been a fundamental transformation in how the economy is thought about and understood. Tracing how new ideas and practices become part of mainstream economic debate can help us understand how the unimaginable becomes imaginable – and can become real. It helps to explain where new policies come from and why they attract support. This matters because failing to understand how economic change occurs means that when big changes do take place they might not be the ones we want.

The notion of structural transformation following economic crises is a key narrative in contemporary Britain. The 1945 and 1979 elections are widely seen as the two post-war moments when big shifts occurred and new economic policy paradigms, Keynesianism and neoliberalism respectively, took hold as the dominant frameworks shaping economic policy and goals. Since 2008, many politicians and commentators on the left have called for an alternative, arguing – rightly, in our opinion – that the current model of capitalism is failing to provide adequate existences for most people and so a new approach is needed.

This narrative of structural transformation can have some unintended consequences. It can suggest that economic change must be connected to a ‘Big Bang’ moment such as an election or another financial crisis, and that, before that moment, there can only be continuity in the prevailing ideology. A top-down ‘out with the old, in with the new’ approach might be how we change Prime Ministers but it isn’t always how economic change occurs. This takes time. New ideas bubble up, they slow-burn; new thinking is tried out, experimented with; ideas fail and are improved, some are discarded and some take hold. Without a shift in how we think about change, proponents of economic reform unintentionally bolster a narrative of ‘no change’. This can create frustration and anger at ‘the system’ and those in charge.

A better approach is to consider how change may appear—and is appearing—in fragmented, messy ways and from the bottom-up as well as top-down. If we do this then can we tell a different story about the last decade? We think yes. We identify five sets of ideas and practices that have emerged since 2008 that each challenge the pre-crisis orthodoxy and in many ways rip up the pre-2008 rulebook.

Emergency economics

The immediate response to the crash that included bank bailouts and quantitative easing – what we call ‘emergency economics’ – is highly significant for thinking about economic change. These interventions showed that states could intervene in markets, that nationalisations can and sometimes must take place, and that when needed, extraordinary economic measures can be taken. Would support for Labour’s programme of mass renationalisation be as high if the bank bailouts hadn’t occurred? Would the public and politicians be prepared to accept emergency planning for a No Deal scenario without the experience of the crash?

Scandalous economics

In a decade when austerity was embraced across the political spectrum and when pay, benefits and public services have been cut it is perhaps no surprise that distributional questions of who gets what, when, and how have become a central feature of our post-crash politics. Fuelled by a series of scandals – such as MPs expenses, banker bonuses, Panama Papers – the idea that an elite plays by different rules is core to populist politics on the left and right. Pre-crisis acceptance of the rich getting richer has been replaced by anger about deep inequalities.

Outsider economics

A third challenge comes from ideas that were previously on the far fringes of economic thinking but have made their way towards mainstream debates. Emblematic of ‘outsider economics’ is Universal Basic Income, an idea that spent decades in the wilderness but is increasingly being scrutinised by politicians (of left and right) as a potential way to overhaul social security systems. Digital and cryptocurrencies also fall into this category. Since its launch in 2009 Bitcoin has attracted scorn and derision for its bubble-like valuation and as a mechanism for money laundering. Yet digital currencies and blockchain look set to stay. In 2019 Facebook’s proposed digital currency is causing serious headaches for politicians and regulators.

Big-picture economics

One of the hallmarks of the pre-crisis political-economic consensus was its relatively ideology-free nature. Governing from the centre combined with a technocratic approach to the economy was the order of the day. Since 2008 the return of ‘big picture’ system-level ideologies can be observed. Discussion of socialism has returned to mainstream political debate, as have debates about the future of capitalism and alternatives to it. But this is not just a shift on the left, and indeed the most successful ‘big-picture’ economics arguably comes from the right where nationalist and ‘nativist’ political–economic programmes are being enacted by right-wing leaders in countries as diverse as Brazil, Italy, Hungary, Russia and the US. If there is any common denominator across left and right it is that this shows how the parameters of political debate have been substantially widened in the last decade. Gone is the politics of fighting over a narrow centre ground.

Rethinking economics

The final challenge is to the primacy of the economy itself. Greater awareness of the climate emergency and of human wellbeing is encouraging new thinking about what counts as ‘economic success’ and how to measure it. Rising GDP is no longer seen as an unequivocal good. But more significantly, we now see an awareness amongst politicians and the public that the economy is not necessarily the central factor that motivates people’s behaviour. As the EU referendum and the backlash against ‘Project Fear’ show, some people may indeed vote to be poorer, or at least are prepared to accept that risk. The new awareness that notions of independence, control, and democracy may matter more to people than the economic consequences, is in part what gives Boris Johnson the political justification to prepare for No Deal Brexit. In this instance, democracy trumps the economy; an idea that would have been unimaginable 10 years ago.

The new economic thinking outlined here is neither left-leaning nor right, it’s incoherent and fragmented, and we might not like the direction it could take us in, but it all challenges the settled consensus that existed pre-2008. Before Lehman Brothers collapsed there was a broad sense that the economy ‘worked’, and that politicians’ job was to lightly steer it from afar. The crash and events of the last decade shattered that illusion and what we see since 2008 is the repoliticisation of the economy. We have moved from ‘there is no alternative’ to the sense that ‘maybe there are alternatives’. Rules and conventions are being rewritten – whether it is supporters of a Green New Deal proposing QE as a means to finance it, Mark Zuckerberg seeking to create a global currency, or right-wing populists channelling popular anger against austerity in support of nativist economics – this is an era of change and much of what we have described would have been unimaginable 10 years ago. If we look for a structural transformation in the economy then we won’t find it, but that does not mean that the economy and the discourse around it is not already changing right before our eyes.

This article draws on a longer article published by The Political Quarterly which is available to read here.

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