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2014 has seen a range of commentators proclaim that Britain is fully on the path to healthy growth. The OECD estimated that this year will see the UK economy outpace its European neighbours Germany, France and Italy. The IMF has made similarly positive predictions. With business investment and consequent growth taking place at the most sustained pace since 2007, it looks like we may finally be making our way back to pre-crisis levels of dynamism.
But just how dynamic was the economy before the financial crisis? Investment as a share of GDP had been tumbling downward since the early 1970s; GDP growth had fallen below zero in each major recession since 1970, which never happened in the preceding 20 years; and the mean unemployment rate was higher between 2000-2007 than in the ‘dark days’ of the 1970s. This picture is very similar across many of the world’s advanced economies. In other words, there was something very wrong with the underlying global economy in the years leading up to the 2008 financial crash.
Recently, this has been acknowledged by remarkably centrist economists. In November last year, former US Treasury Secretary Larry Summers told the IMF that Western economies may have been suffering prolonged weak growth or ‘secular stagnation’ since the turn of the millennium. Such weak growth in real production has provoked governments to slash interest rates in an attempt to encourage growth – the unintended consequence of this being a great increase in debt and an influx of money into speculative financial markets. Such high-risk, high-reward bubbles have given advanced economies the illusion of health.
The Financial Times’ Martin Wolff, former US government economist Jared Bernstein and Nobel Prize winners Paul Krugman and Edmund Phelps have all lent support to this view. Krugman went further than Summers, suggesting that this thesis has “arguably been true, although perhaps with increasing severity, since the 1980s”. Phelps went further still: “It’s surprising when people suddenly are talking about stagnation when we’ve been in stagnation since 1972”.
Discussing the problems of our current financial system without talking about these troubles in the underlying economy can lead to very unsatisfactory explanations for the 2008 crisis. We should all be familiar with them by now: the bankers were too greedy; the financial culture too hedonistic; the regulations too lax. Of course we should not exclude these factors, but a comprehensive explanation for the bloated state of finance today must begin with an understanding of what drives capitalist economies in the first place.
An Angry Person’s Guide to Finance starts at exactly this point. The engine of capitalism is profit – it is the sole motive of investment and an absolute necessity for any business. However, there is no guarantee that profitability across the whole economy will rise or even remain stable over long periods. In fact, it has been stagnating and even falling on average since the middle of the 20th century (various economists’ data is presented here). It is for this reason that we have seen a slowdown in investment, growth and employment across the advanced capitalistworld in recent decades. This is also the key to understanding why money has been increasingly channeled into financial ventures.
This pamphlet traces, in layperson’s terms, exactly how weak profits in the production of goods and services has led to a transformation in the workings of global banking through the processes of disintermediation, securitisation and the expansion of derivatives trading. It then shows how headline-grabbing things like credit rating agencies and bank bailouts are linked to these important processes. Finally, this pamphlet discusses the meagre state of financial reforms and raises questions about the possibility of any real, lasting regulation of a capitalist financial system.
It is no longer sufficient to have a public discussion about the banking system that neglects the economy as a whole: finance and production. It is also no longer reconcilable with the principles of democracy to leave so many people in the dark about these issues by masking them in jargon. An Angry Person’s Guide to Finance endeavors to tackle both of these problems – something that must be done if we are to avoid bringing the same man-made disasters down upon our heads time and time again.
Marienna Pope-Weidemann explains why decades of occupation and oppression have lead some people to call Israel an apartheid state.
International Women's Day is set to be marked by strikes from "paid work in offices and factories, or unpaid domestic work in homes, communities and bedrooms."
Laurie Laybourn-Langton writes that measuring the economy is political - and economic measurement dominates politics.
David Scott argues that our prison system represents a human rights disaster, and reformist solutions can't tackle the root problems.
A deeper engagement with culture can strengthen our democracy, taking political projects beyond electoral impact and festival memes into a whole new world of radical, lasting change.
Ruth Tanner writes that revelations about Oxfam's behaviour in Haiti are shocking, but not surprising.
The actions of Oxfam officials are horrendous - but gutting foreign aid funding just puts more people at risk, writes Daniel Gibson.
Dr Laura Basu explains that the media allowed politicians to re-write history, erasing the true causes of the economic crisis.
Outsourced cleaners are on the front lines of the battle for workers' rights. By Emiliano Mellino
Power to our beloved comrade and friend, Mehmet Aksoy, a hero of Kurdistan and the internationalist struggles against capitalism, colonialism and fascism. This tribute was authored by Mehmet’s family and friends.
For All, By All
The latest issue of Red Pepper asks - how do we invite, support and nurture greater public participation so that our cultural capabilities are empowered beyond the crushing logic of market fundamentalism?
‘We are hungry in three languages’: The forgotten promise of the Bosnian Spring
Ruth Tanner looks back at a wave of protests which swept through Bosnia and Herzegovina in 2014.
It’s time for a cultural renewal of the left
Andrew Dolan writes that we need to integrate art, music, films and poetry into our movement, creating spaces where political ideas are given further room to breathe.
Jeremy Hunt is poised to flog the last of the NHS
Peter Roderick sounds the alarm on an 'attack on the fundamental principles of the NHS'.
Viva Siva, 1923-2018
A. Sivanandan, who died this week, was a hugely important figure in the politics of race and class. As part of our tributes, Red Pepper is republishing this 2009 profile of him by Arun Kundnani
Sivanandan: When memory forgets a giant
Daniel Renwick calls for the whole movement to discover and remember the vital work of A. Sivanandan, who died this week
A master-work of graphic satire
American Jewish cartoonist Eli Valley’s comic commentary on America, the US Jewish diaspora and Israel is nothing if not near the knuckle, Richard Kuper writes