The Rise and Fall of the Cult of Economics

I fell into economics the way a drunk man falls into an open manhole on a dark street. Growing up I had zero interest at all in business or making money, instead taking A Levels in English literature, classics, French and, er, computer science. It was only when I began to falter in the latter that a careers adviser suggested to my father that I had no chance in hell of getting a job with my chosen subjects (this was the late 1980s) and I should study something a bit more ‘solid’.

I agreed because I had been in quite a bit of trouble with my parents at that time and decided I should try and do something conciliatory to please them. And so, at 16, I found myself trying to catch up in A Level economics.

Two years later disaster struck. My shift in subjects had caused me to drop back a year and, when the time came for all my friends to go off to university, I found myself staring at another year in a provincial town on the outskirts of Birmingham. By this point the urge to flee had become so powerful that I would consider practically anything to get me on the next National Express bus out of there. Someone suggested that a few of the universities had a number of ‘bottom of the barrel’ courses that they couldn’t fill because nobody wanted to study them. The next day I got on the phone and rang around almost every university in England, practically begging for a place to study ... anything.

And that’s how I ended up reading economics at Middlesex University. While my friends ended up in more salubrious universities, I found myself contemplating the squalid tower blocks and rising damp of north London.  

Economics, thankfully, did not start out as I expected. Both my father and the careers advisor had made the error of equating economics with business studies. It was nothing like it. The first year could more aptly be described as philosophy, and I found myself reading everything from Rousseau and Locke to Marx, Smith and even Schumacher. This wasn’t so bad, I chuckled to myself. I began to wear glasses, grew my hair long and hung around the student union drinking ridiculously cheap subsidised beer.

My fellow students were not so happy. They had thought economics was all about how to get rich. They didn’t want to know about poncey dead French intellectuals. This was 1989 and a short Tube journey away Margaret Thatcher sat in Downing Street and Harry Enfield’s ‘Loadsamoney’ was on the TV. What’s more, the Berlin Wall had just fallen and, although I didn’t realise it at the time, the very meaning of economics was about to change.

According to the text books economics (which derives from household management in ancient Greek) was all about making choices for how best to distribute scarce goods and services in the most efficient manner. By this very definition there was an implicit assumption that there may be more than one way of achieving this distribution.  But the lifting of the Iron Curtain put an end to all that. The Soviet Union had, by buckling and collapsing, revealed that there was only one prize-fighter in the ring worth backing: GDP growth driven capitalism.

My second year at university proceeded uneventfully, although the more interesting topics of the first year were now in the rear view mirror and I now had to study macro and micro economics, and other unsavoury subjects, including statistics.

And then something very unexpected happened. We were to spend our third year in the ‘real world’, at the end of which we had to write a thesis on some topical economics related matter or other. One day I went to my pigeon hole to check my mail only to discover an expensive looking manila envelope with my name printed on it in a classy looking font. I opened it, wondering what it could be, and discovered it was an invitation to spend my year working in the heart of the British government at Her Majesty’s Treasury on Whitehall.

When I’d recovered from the shock I had a haircut, went for an interview and, before I knew it, was working as an intern in the Economic Analysis division of the Treasury. It was an unusual experience, to say the least – the kind of thing for which people reserve the work Kafkaesque. There were about ten of us interns (back then we didn’t use the American word ‘intern’ we were simply ‘students’) and our job was simply to gather up huge piles of printed paper, punch the numbers into very basic green-screen computers (remember them?) and print out charts showing projected economic growth, and other things. At the end of each day we saved the data onto huge hard drives and then locked these in very sturdy safes.

The department in which I worked was where economic forecasts were formulated. Imagine a constant gnawing silence, punctuated only by the bonging of Big Ben right outside our window, with bald-headed clerks poring over charts and uttering occasional passive-aggressive curses. Occasionally a minister, or even the chancellor, would pop by and there would be a flurry of activity and much thumping of the piles of paper. My charts were produced and pored over and occasionally bits were added to them with black felt tip pens and the stressed-looking economists would get back to work again. That was what working at the Treasury was like.

To punctuate the boredom a few of us began to explore the cellars beneath the huge building, finding room upon room of dusty detritus from the days of empire. These were also Churchill’s war offices, and as such, piled up with maps and old furniture and rubber stamps. It was an eerie place but we managed to get a pool table put in one of the rooms and played sneaky games by candle light at every opportunity. The building was a huge labyrinth and nobody ever asked you what you were doing as long as you had a pen behind your ear and were holding a piece of paper.

At the time the Chancellor of the Exchequer was Norman Lamont. Our only contact with him was at lunch, and he would sometimes share tables with us. John Major had only just left the building, taking up the reins of government following Thatcher’s ousting.  At one point we were even invited round to Number 11 for a glass of wine – and I stood there wondering how the hell this had happened.

I didn’t learn anything useful about economics during my time there, although I did write a thesis about the inevitability of economic and monetary union was in Europe (a title suggested by my tutor). At least I got to see what an economist looked like (usually tired looking, bald, and prematurely aged with a wrinkled brow) and decided I didn’t want to be one. I also discovered that, as George Orwell had said of politicians, economists used language in the way that squids use ink – to obscure and confuse. Anyone who has sat through a Treasury surgery can testify to that.

At the end of my year I left to spend the autumn travelling on trains around the US, flying out the day before Black Wednesday – in which my erstwhile boss squandered billions of pounds to keep the pound from being annihilated on the currency markets as it crashed out of the exchange rate mechanism. (As an aside, I had just turned 21 and, like most of my friends, had never been on a plane before – which is quite amazing to think of today when people jump on planes as if they were buses.)

I finished up with an average degree and an aversion to economics as it was being taught. This was at the beginning of the Great Boom and in the years that followed everyone seemed to be losing their minds. Credit became widely available, house prices soared (which people treated as equity to borrow ever spirally amounts) and the BBC began to copy its rival CNN and dedicate masses of air time to analysing the minute movements of economic indicators. People, it seemed, no longer wanted to study history or philosophy at university –instead they all wanted to study marketing. Marketing, marketing, marketing. That’s all we heard! The dark art of making somebody want something they didn’t realise they wanted.

We were told, repeatedly, that we had never had it so good. Boom and bust had gone, history was at an end and all would be well if we just let the economists continue to steer the country, the scientists get on with their inevitable work of finding cures for the remaining killer diseases and the marketers get on with dreaming up new products on which to spend our plastic money which the boys in the City somehow created for us.

Economics had morphed into ‘growth’ and growth was the only way to keep the economy going.

But it was all an illusion, of course. All we had really been doing was sawing away at the branch we were sitting on. The huge range of food that we suddenly had in our shops was being grown in far flung invisible places, the cheap consumer electronics seemed to magically appear and the money we all thought we had turned out to be a mass hallucination. Ghost money, created out of thin air, possessed in turn the bodies of dotcom companies and real estate, only to be exorcised periodically.  And all the while the hidden engine of all this economic activity – oil – began to display tentative signs that it was nearing the summit of its production.

Natural gas was ballyhooed as a saviour for both the climate and the energy balance out of all proportion to reality and perhaps it was my economics degree that saw me getting a job actually trading the stuff on a computer screen, which I would describe as a bit like playing a slow moving computer strategy game against a bunch of ruthless opponents.

Could it be now, with economic growth in the west being anaemic at best and the streets filled with protestors, that we might see the crown of economics slipping? With growth figures grossly inflated by government spending and the euphemistically called quantitive easing, the system that promised so much appears to be breaking down. This could be a Wizard of Oz moment – we have already seen the grand wizard of the economic boom, Alan Greenspan, exposed for what he really is: an old man with old fashioned ideas of cornucopian invincibility.

But old habits die hard. Newspapers, obsessed with figures spoon fed to them industry cheerleaders, are having a particularly hard time adjusting to the cognitive dissonance of our age. For every article warning about the overshooting of fish stocks, topsoil, the climate, population ad infinitum, there are at least three promoting a ‘return to growth’.  It’s a bit like gravely warning an alcoholic friend that he is about to die of liver cirrhosis before handing him a bottle of whisky and saying  here’s something to make your recovery a little easier.  Note that every time there is the slightest upwards blip of a random economic indicator the television screens are filled with tame economists talking about how it is the start of a long delayed recovery (from the slump which they failed to foresee).  All they have to do is look very serious as they are saying it and when they are inevitably proved wrong they will explain in equally serious tones that a leftfield event had occurred which nobody could have reasonably predicted, safe in the knowledge that they will never be called to book for their misjudgement.

How economists have gained this aura of invincibility is simple: they told us what we wanted to hear for thirty years. In a rising tide they told us the boats were going to rise. They had their computer models to back them up, and they had oil so cheap it wasn’t seriously considered as a part of the equation worth bothering about much. All of it was couched in the kind of confusingly geekish economic shibboleths that the average Joe couldn’t care less about – just so long as his shares were going up and he could continue to live the frivolous lifestyle he had come to expect as a birthright.

But for all the advantages of being a messenger bearing good news in good times it can be a dangerous business when the news isn’t so good. The times of guaranteed economic expansion are drawing to an end, and it will be interesting to see how many economists’ heads end up on poles in the ensuing chaos. I, for one, am glad I didn’t continue down that path, even if it meant tossing away all the privileges that came with it. As such, I don’t dwell too heavily on economic news –and to do so has become an addiction for many.

This is just one of the many ways we are going to have to re-imagine our connections with the real world, and something I'll focus on next week.