Opinion
Saving The Global Economy: A Question Of Culture
Bubbles and their collapses will continue to ravage the world's economy unless their cultural causes are addressed.

The present global economic crisis is a financial contraction of perhaps unprecedented scale and consequences: the United Nations Development Programme's 2010 report records that as a result of the tumult, 34 million people have lost their jobs, and 64 million people have fallen below the $1.25 a day income poverty threshold. Particularly notable have been the alarming effects in developed nations, with trillions of dollars of value being wiped out across a vast range of asset classes and employment haemorrhages transmogrifying the economies of countries such as the United States (nearly 6 million jobs lost, according to the OECD), Spain (around 1.4 million) and the United Kingdom (over 750,000).             

With these awesome levels of destruction all too richly in evidence, fierce debates have been raging across the intellectual spectrum as to how the economic carnage can be stemmed. Some have identified the crisis as one of liquidity: the irrepressible author and strategist Kenichi Ohmae has exemplified this tendency, positing that inauguration of a credit facility of up to ten trillion dollars - composed of 'donations of mercy' to the US, that engine of growth, from friendly nations - is the only way through the crisis. Others, such as Ben Bernanke, the current Chairman of the Federal Reserve, have clung to the orthodoxy of the monetarist school of economics, locating a panacea in dizzying injections of quantitative easing. Still others have advocated a Keynesian response to the all-enveloping malaise, averring that government spending in the form of the now-familiar stimulus packages is the best way to reinvigorate the global economy.

These are doubtless well-intended policy prescriptions, and perhaps with the exception of quantitative easing - a rather desperate measure which fails to convince many observers that it will lead to anything other than a potent inflation spike at some future juncture - meritorious ones, to varying degrees. Yet however successful or otherwise these and other instruments prove to be, they are essentially purported solutions to an already-existing problem; they address the symptoms of the slump, but say little about the profound intangible shift which, if not challenged, will mean crises of  this type will occur time and time again and with ever-increasing frequency: the dominance of a culture of rapid-fire financialisation which threatens to undermine the stability and trust on which any properly-functioning economic system depends.     

This culture - which is especially pronounced in the United States and United Kingdom, but is a worldwide phenomenon - is composed of three key elements and their reinforcing interactions with each other: technology, psychology and morality. Firstly, epoch-defining advances in information technology and communications are eliminating time and geographical barriers to the formation of economic bubbles: a parade of manias in fields as diverse as Japanese property and Icelandic banks - and, of course, the American subprime mortgage market, in which many argue the roots of the current crisis lie - has erupted with incredible velocity since the late 1980s, with sensational levels of capital being annihilated. The synergies between software of ever-increasing sophistication and lightening-fast Internet connectivity promise a frequency and intensity of bubbles beyond anything that could be dreamed of just a decade ago.   

Secondly, this very technology is engendering nothing less than the transformation of human consciousness. The recent explosion in attention deficit hyperactivity disorder and similar conditions - a trend that is notably apparent in children in developed economies - is only the extreme facet of what Richard DeGrandpre, author of the prescient Digitopia (2001), cogently terms a broader societal addiction to "hyperstimulation". This addiction is being fed and exacerbated by the cornucopia of digital devices that have become ubiquitous in all but the world's poorest countries during the last fifteen years. In the context of the economy as a whole and financial services in particular, a generation with an accentuated appetite for constant thrills is likely to be desensitized to issues of risk, as evinced by the erosion of due diligence and hazard assessment in the mortgages, securities and derivatives sectors since around the turn of the millennium.

The third element of the culture of rapid-fire financialisation is one that can be discerned at virtually every level of contemporary society: the reshaping of morality in the image of Wall Street and the City of London.  In his illuminating account of the 2008 fiscal meltdown - Freefall: Free Markets and the Sinking of the World Economy - Joseph Stiglitz, one of the few contemporary economists to incorporate an explicitly ethical dimension into his analysis, laments the "misallocation" of "our human talent": the stampede of many of the best and brightest students into the financial sector for no other reason than their inability to "resist the megabucks". In nations where the apotheosis of ambition is to work for an investment bank rather than to serve society; where property speculation is a respectable form of recreation; and where broadsheet newspapers devote column inches to the fashion vagaries of the wives of hedge fund traders, the reascription of moral categories to reflect the values of the financial services industry is complete. In the minds of many, the distinction between a bubble and a market has virtually been erased.     

Governments and policymakers everywhere should avail themselves of all reasonable options before them to alleviate the economic trauma that continues to cast a shadow over the era. But without confronting the culture that subverts the values on which the feasibility of the entire global economy is contingent, they are ultimately condemning themselves to failure and imperilling the well-being of present - and future - generations.