why the west still refuses to face the truth
WHEN THE MONEY RUNS OUT
Stephen D King
Often the obvious is the hardest thing for people to accept. For example, it is obvious that we shall all die, but most of us spend the great bulk of our lives acting as if this were not so. In the first decade of the 21st Century, it was obvious that the governments and citizens of the Western world were borrowing too much money, yet almost all the finest minds in banking, central banking, economics and politics devoted their energies to proving the opposite.
Stephen King is group chief economist and global head of economics and asset allocation at HSBC, so he is painfully conscious of this fact. He is not the same person as Stephen King, the novelist, but he tells a good horror story.
He has harsh words for his own trade. Economists, with their "precision-engineered mathematical models", "thought they had finally solved the world's economic problems". So they disregarded the dangers of systemic collapse.
This book, therefore, contains no mathematical models whatever, and not even a single graph. It is written in clear, lively English, and it constantly draws on history to trace cause, effect and likely catastrophe. You could accuse it of being wise after the event, but can history be anything else? It is certainly better than being foolish.
To King, the obvious thing now staring the West so fiercely in the face and that we refuse to look at it is that we might not recover. He does not mean that the whole of our civilisation will suddenly collapse (although the "dull" years of stagnation are tempting people to fight over the diminished spoils).
He means that our basic expectation, since 1945, that the West will always bounce back may now be false.
Our financial crisis has now been going on for longer than the Second World War. Real wages have fallen for a longer period than any since the twenties. Neither austerity nor its opposite seems to have won us victory. As King points out, you might think that low interest rates would encourage more risk-taking, and therefore more economic activity, but our persistently rock-bottom rates make everyone realise how bad things are. They "corroborate our collective gloom".
This gloom feels justified by factors that are longer-term than current policy errors. Perhaps the most important of these is the refusal of the West to breed. The baby boomers – reacting to the fact that there were (as their name suggests) so many of them – convinced themselves that over-population threatened the health and wealth of the world. Almost the opposite is the case. By failing to reproduce themselves in adequate numbers, the baby boomers have laid enormous burdens on those few children whom they have produced.
You can borrow and spend hugely if you know that the generation that will end up with the bill is much larger than your own. If it is much smaller, you can't; but we have.
I would pursue King's point. For 50 years now, European culture has developed the idea that the problem is too many people. Without quite realising, it has developed attitudes that work against the future of the human race. In cultural terms, the celebration of contraception, homosexuality and euthanasia all represent this trend.
The whole of electoral politics in the West still revolves around the idea of promising voters more public services.
This is why our current politics feels so unreal. It is the peddling of illusion to people who, though not yet ready to face the whole truth, know that they are being lied to.
It is it alarmingly difficult to disagree with Stephen King. All one can say, perhaps, is that one of the great errors of human nature – strongly displayed before the credit crunch – is the belief that a prevailing trend will continue indefinitely.
The crunch is surely a reminder that what goes up must come down. It presumably follows that what comes down will one day go up. Meanwhile, get breeding.
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