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| Our leaders have lost touch with reality – just like the banks did | Our leaders have lost touch with reality – just like the banks did |
| (21 days later) | |
| Even as their world came apart, the bankers clung to denial. By August 2007, the flagship hedge fund of Wall Street’s most prestigious firm was tanking fast – and what explanation came from the man at Goldman Sachs? “We were seeing things that were 25-standard deviation moves, several days in a row.” The bank was getting hit by events that were only meant to happen once every 100,000 years – and they were happening every day of the week. Given a choice between blaming their models or reality, Goldman’s bosses held the world at fault. | Even as their world came apart, the bankers clung to denial. By August 2007, the flagship hedge fund of Wall Street’s most prestigious firm was tanking fast – and what explanation came from the man at Goldman Sachs? “We were seeing things that were 25-standard deviation moves, several days in a row.” The bank was getting hit by events that were only meant to happen once every 100,000 years – and they were happening every day of the week. Given a choice between blaming their models or reality, Goldman’s bosses held the world at fault. |
| You know the rest because, a decade later, you and I are still paying for it. How the banks died, the world economy collapsed and most of us got poorer. How the financiers, mainstream economists and regulators were so detached from reality that they swore blind that such a catastrophe was impossible – even while it was under way. | You know the rest because, a decade later, you and I are still paying for it. How the banks died, the world economy collapsed and most of us got poorer. How the financiers, mainstream economists and regulators were so detached from reality that they swore blind that such a catastrophe was impossible – even while it was under way. |
| Their reputation has never recovered. And as an economics journalist, I look across at politics and see the same process at work. Brexit, Donald Trump, Jeremy Corbyn: time after time, the political class has completely failed to understand the world they were governing, policing and analysing. Allow me to be blunt: our political crisis is also a crisis for our political class. And it is one from which I doubt they can recover. | Their reputation has never recovered. And as an economics journalist, I look across at politics and see the same process at work. Brexit, Donald Trump, Jeremy Corbyn: time after time, the political class has completely failed to understand the world they were governing, policing and analysing. Allow me to be blunt: our political crisis is also a crisis for our political class. And it is one from which I doubt they can recover. |
| At each major fork in the road, they have sped off down the wrong turning, while decrying the other as unimaginable. Each time, they have crashed. Before the EU plebiscite, a senior EU official remembers David Cameron strolling around a G20 summit, telling other world leaders: “We’re going to win. Maybe by 70:30.” He loses by 48:52 and quits. Theresa May calls an election, the sole point of which is to deliver her a landslide majority. Now the leader of the party that outlawed squatting is herself squatting in No 10. | At each major fork in the road, they have sped off down the wrong turning, while decrying the other as unimaginable. Each time, they have crashed. Before the EU plebiscite, a senior EU official remembers David Cameron strolling around a G20 summit, telling other world leaders: “We’re going to win. Maybe by 70:30.” He loses by 48:52 and quits. Theresa May calls an election, the sole point of which is to deliver her a landslide majority. Now the leader of the party that outlawed squatting is herself squatting in No 10. |
| Their colleagues and outriders on the backbenches, in the press and running the thinktanks are just as badly wrong. The sheer back-scratching, tummy-rubbing self-agreement is as startling as it is mistaken. May is a winner; Corbyn is a born loser. The Tory manifesto gets a triple-A rating – until its dementia tax turns out to be toxic. Labour’s proposals for renationalising the railways are dismissed as communism – until voters, snaggle-toothed fools that they are, turn out to quite like the idea of not being bled dry by Richard Branson. | Their colleagues and outriders on the backbenches, in the press and running the thinktanks are just as badly wrong. The sheer back-scratching, tummy-rubbing self-agreement is as startling as it is mistaken. May is a winner; Corbyn is a born loser. The Tory manifesto gets a triple-A rating – until its dementia tax turns out to be toxic. Labour’s proposals for renationalising the railways are dismissed as communism – until voters, snaggle-toothed fools that they are, turn out to quite like the idea of not being bled dry by Richard Branson. |
| When the models go awry, it’s always reality that cops it. During the credit crisis, economic analysts blamed the poor for taking out sub-prime loans. This time, the political analysts bash the young … for exercising a democratic preference. The heathens in the Labour party who put forward a winning platform are written off as Trots, even though some of them were barely alive when the Berlin Wall was up. | When the models go awry, it’s always reality that cops it. During the credit crisis, economic analysts blamed the poor for taking out sub-prime loans. This time, the political analysts bash the young … for exercising a democratic preference. The heathens in the Labour party who put forward a winning platform are written off as Trots, even though some of them were barely alive when the Berlin Wall was up. |
| Over the worst recovery Britain has seen in centuries, ever more outlandish schemes are dreamed up to keep the show on the road. Bungs for housebuilders and hundreds of billions in quantitative easing are presented as part of the new normal. In one of the biggest constitutional crises ever seen in postwar Britain, May strikes a secret deal with the creationists of the Democratic Unionist party – and is still unable to start Brexit negotiations on time, or to do a Queen’s speech. The Tories are in government but they are no longer governing. But still: move along, nothing to see here. | Over the worst recovery Britain has seen in centuries, ever more outlandish schemes are dreamed up to keep the show on the road. Bungs for housebuilders and hundreds of billions in quantitative easing are presented as part of the new normal. In one of the biggest constitutional crises ever seen in postwar Britain, May strikes a secret deal with the creationists of the Democratic Unionist party – and is still unable to start Brexit negotiations on time, or to do a Queen’s speech. The Tories are in government but they are no longer governing. But still: move along, nothing to see here. |
| This isn’t simply about calling last Thursday’s election wrong. On such fortune-telling, whether in economics or politics, I’m with the baseball-playing philosopher Yogi Berra: “It’s hard to make predictions, especially about the future.” Plenty doubted whether Labour could make the dramatic turnaround it pulled off last week; but the class of mainstream politicians and pundits didn’t think it should. To their minds, any politics that deviated from that set out in the decade-and-a-bit spanning Tony Blair and Cameron, falling taxes and triangulation – a period described by Jeremy Gilbert as the Long 90s – was harebrained nonsense. Any questioning of an economic system in which the poor pay for the rich and the rest of the country subsidises London was futile. | This isn’t simply about calling last Thursday’s election wrong. On such fortune-telling, whether in economics or politics, I’m with the baseball-playing philosopher Yogi Berra: “It’s hard to make predictions, especially about the future.” Plenty doubted whether Labour could make the dramatic turnaround it pulled off last week; but the class of mainstream politicians and pundits didn’t think it should. To their minds, any politics that deviated from that set out in the decade-and-a-bit spanning Tony Blair and Cameron, falling taxes and triangulation – a period described by Jeremy Gilbert as the Long 90s – was harebrained nonsense. Any questioning of an economic system in which the poor pay for the rich and the rest of the country subsidises London was futile. |
| The fundamental problem here is not the cocksure forecasting, it’s about the failure of understanding – in particular, to understand how much Britain has changed since the banking crash. This political crisis is a direct product of the decade-long economic crisis – which the political class has never fully understood. For them, the present is another country: they do things differently there. | The fundamental problem here is not the cocksure forecasting, it’s about the failure of understanding – in particular, to understand how much Britain has changed since the banking crash. This political crisis is a direct product of the decade-long economic crisis – which the political class has never fully understood. For them, the present is another country: they do things differently there. |
| Take one example: to switch on the Andrew Marr show and the rest of the Sunday political programmes was to watch hours of guff about how this was a Brexit election. Yet Brexit was one of the arguments that never got ventilated in this campaign: both parties simply accepted it was happening and parked the subject. | Take one example: to switch on the Andrew Marr show and the rest of the Sunday political programmes was to watch hours of guff about how this was a Brexit election. Yet Brexit was one of the arguments that never got ventilated in this campaign: both parties simply accepted it was happening and parked the subject. |
| Yet talk to the people around the Labour leadership about how a dead-cert race turned into a hung parliament, and the theme that keeps coming up is the party’s anti-austerity platform. Slashed public spending, falling living standards, a “national” recovery really felt only in London and the home counties: such issues barely ever feature in the political class discourse, yet they shape our politics. I heard it in south Wales before the Brexit referendum, and I saw it in deindustrialised outer London in the run-up to this vote. The Resolution Foundation describes this as the worst pay squeeze in 200 years, and what do the political class talk about? Whether Philip Hammond can keep his portfolio. | Yet talk to the people around the Labour leadership about how a dead-cert race turned into a hung parliament, and the theme that keeps coming up is the party’s anti-austerity platform. Slashed public spending, falling living standards, a “national” recovery really felt only in London and the home counties: such issues barely ever feature in the political class discourse, yet they shape our politics. I heard it in south Wales before the Brexit referendum, and I saw it in deindustrialised outer London in the run-up to this vote. The Resolution Foundation describes this as the worst pay squeeze in 200 years, and what do the political class talk about? Whether Philip Hammond can keep his portfolio. |
| Pundits leap on the importance of youth in this election – but fail to see that since the crash, age has become practically a proxy for class. To be a young graduate is to be saddled with debt, compelled to move to a major city, tout for unpaid internships, land a temporary job and have no hope of ever buying a house or retiring before 70. Go up the demographic tree and you see young and even mid-career university lecturers whose jobs have been Uber-ised. | Pundits leap on the importance of youth in this election – but fail to see that since the crash, age has become practically a proxy for class. To be a young graduate is to be saddled with debt, compelled to move to a major city, tout for unpaid internships, land a temporary job and have no hope of ever buying a house or retiring before 70. Go up the demographic tree and you see young and even mid-career university lecturers whose jobs have been Uber-ised. |
| Barely any of this gets discussed by our political class; hardly any time is spent thinking about solutions. But one result of both Brexit and last Thursday is that the political class which used to dictate the “narrative” and set the agenda is having those powers wrested off it. What was it that Goldman’s executive said back in 2007? “It makes you reassess how big the extreme moves can be.” The political class should brace itself for many more extreme moves. | Barely any of this gets discussed by our political class; hardly any time is spent thinking about solutions. But one result of both Brexit and last Thursday is that the political class which used to dictate the “narrative” and set the agenda is having those powers wrested off it. What was it that Goldman’s executive said back in 2007? “It makes you reassess how big the extreme moves can be.” The political class should brace itself for many more extreme moves. |