Ten Years On: Why Didn't The Left Make The Most Of The Crash?

With the Eurozone still in a fragile position; global leverage and debt still rising; and fears of a tech bubble abound this may not be the distant possibility we want it to be. Ten years on from this crisis, it is time to learn the lessons of the crash and our response to it. After all, "those who fail to learn the lessons of history are doomed to repeat them".
|
Open Image Modal
Reuters Photographer / Reuters

"Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around." If this quote by the Nobel Prize winning economist, Milton Friedman, is true, the financial crisis of 2007/8 and the response to it by those on the left has been a monumental failure.

Ten years on from the start of the economic crisis this is a popular view. "We let the 2007 financial crisis go to waste" writes Torsten Bell, Director of the Resolution Foundation, in last weeks Guardian whilst, Naomi Klein sets out a very similar argument in her recent book 'No is not enough'.

These commentators find their evidence in the response of policy makers to the Great Depression and the Second World War. Back then, there was clear break with the orthodoxy with the instigation of bold Keynesian spending programmes; the creation of ambitious new social institutions such as the NHS; and the introduction of regulation to curb the excesses of the financial sector.

By contrast, post-crisis policy has reinforced rather than overturned the existing order. Austerity has passed the costs of the crisis onto ordinary people and has left many of our most prized social institutions on their knees. The underlying cause of the crisis - dangerous levels of debt - has not been addressed: McKinsey recently found that no major economy has decreased its debt to GDP ratio since 2007. Meanwhile, there has been little serious attempt to re-write the rules of our economic system to promote sustainability, social justice and equality.

This begs the question: why did progressives fail to do more in the wake of the crisis?

Partly, of course, it was a result of their own success. It was precisely because policy makers were so quick to respond with strong monetary - and initially fiscal - policy that the immediate economic and social costs of the crisis were lessened (compared with the devastation of the Great Depression, which was driven in part by an inadequate response by policy makers). There is little doubt that this cushioned not just ordinary people but also the system that caused the crisis.

However, more fundamentally, it was because on the eve of the crisis progressives had bought into the status quo - and in particular the rights' pro-market intellectual framework - to such an extent that they had no alternative manifesto to replace it. This was further exacerbated in the the UK by the fact that the Labour Party was in power as the crisis hit and was therefore directly involved in promoting the policies that had caused it.

As a result, by and large the policy prescriptions of those on the left were captured by the idea that markets are efficient, and that the ideal society is 'meritocratic' rather than redistributive. Being a progressive under Blair and Clinton became about using tax revenues to soften the hard edges of free markets rather than intervening in their rules and regulations to drive equality and social justice.

Given this, when the time came, they failed to pin the responsibility for the crisis on the existing orthodoxy or to provide a bold alternative to replace it. Indeed, it is only since the crisis that a groundswell of progressive thinkers and politicians have been able to shake off the chains of the neoliberal consensus and put forward a range of progressive alternatives to the status quo.

From radical fiscal policy like helicopter money (sometimes referred to as 'peoples quantitative easing'); to much greater action on inequalities in wealth and income; to bold new measures to reduce poverty such as the universal basic income: the left is now awash with radical alternatives but has seemingly missed its opportunity to implement them.

Of course, it may be that progressive forces - and in particular the Labour Party under Jeremy Corbyn - can take us in the right direction, albeit through a more incrementalist approach. But failing that - indeed, regardless of that - progressives must be ready for the opportunity for bold change.

With the Eurozone still in a fragile position; global leverage and debt still rising; and fears of a tech bubble abound this may not be the distant possibility we want it to be. Ten years on from this crisis, it is time to learn the lessons of the crash and our response to it. After all, "those who fail to learn the lessons of history are doomed to repeat them".

Harry Quilter-Pinner is a Research Fellow at IPPR, the UK's progressive think tank, and Director of Strategy at SCT, a homelessness and addictions charity in East London. He writes here in a personal capacity.