Tag Archives: LSE

Titmuss on the Welfare state

August 6, 2019 Andrea Gibbons Leave a comment

In 1950 Richard Titmuss (1907-1973) took up the first Chair of Social Administration at LSE, where he remained for the rest of his career.[1] Superficially this was a surprising appointment since he had no formal educational qualifications. But three factors explain his coming to the School. First, Titmuss was, and remained, extremely good at networking. In the 1930s, for instance, he had joined the Eugenics Society where he rubbed shoulders with prominent social scientists and academic leaders such as William Beveridge (LSE Director 1919-37) and Alexander Carr-Saunders (LSE Director 1937-57). Second, in the late 1930s, although employed by an insurance company, Titmuss was nonetheless carrying out independent, and well-regarded, research. His particular interests were in what he saw as the threat to Britain’s future population growth and structure and the state of the population’s health. Third, in the early 1940s he was commissioned to write one of the official histories of the British experience on the ‘Home Front’ during the Second World War, Problems of Social Policy. This volume, which appeared in 1950, remains an invaluable source of data about the wartime social services while also setting out what Titmuss argued must be achieved by post-war social reconstruction. For him, this should be based on the British people’s wartime social solidarity and social cohesion. [LSE history blog]

I don’t even know what to do with that biography. I’m one of those as thinks the right kind of experience in a field is generally equal to educational qualifications. But kicking it with Beveridge in the Eugenics Society? Just one of those unsurprising surprises that always seems to lurk in the closets of this empire.

So this is just going to focus on what I found interesting about what he saw and documented about the Welfare State, which is as useful in some ways as the Beveridge Report damn it. Considered a classic, these essays published in book form in 1958 contain another unsurprising surprise about just how far back current debates go. This is a collection of talks really, covering quite a lot of ground and looking at the many different aspects of poverty and working class demographics impacting on costs and policies of the welfare state. Not all them were useful to what I’m working on, but give such a good sense of how things began, which explains so much about how we have ended up where we are.

The titles give a great sense of the wealth of historical data and discussion to be found here.

Social Administration in a Changing Society

First, just a brief excerpt on this new department of the LSE, and the drive behind its founding — the expected appearance of the Fabian Webbs, the unexpected appearance of funding from Tata and the welcome transition from a moral inquiry into symptoms to a depper inquiry into causes:

This department for the study of social administration was founded at a time when fundamental moral and social issues were being debated with vigor and a new sense of purpose. It was a product of the ferment of inquiry to which the Webbs, Charles Booth and many others contributed so much. Poverty, on the one hand, and moral condemnation of the poor on the other, were being questioned. Inquiry was moving from the question ‘why are they poor?’ Professor Tawney, aware, as he has repeatedly taught us, that the most important thing about a man is what he takes for granted, was in his element when he gave his inaugural lecture as Director of the Ratan Tata Foundation… (17) it was a period when social policies were being shaped by diagnoses which took account of the presenting symptoms rather than of the causes of contemporary social ills. (18)

The Social Division of Welfare

So here we have the principal contemporary critiques of the Welfare State:

‘The Welfare State’ was ‘established’ too quickly and on too broad a scale. the consequences, it is argued, have been harmful to the economic health of the national and its ‘moral fibre’.

Ah, the old moral fibre. That’s one they keep coming back to.

Against this background, compounded of uneasiness and complacency, criticism has mainly focused on the supposedly equalitarian aims or effects of the social services. it is said that the relief of poverty or the maintenance of a national minimum as an objective of social policy should not mean the pursuit of equality…The error of welfare state policies since 1948 has been, according to this diagnosis, to confuse ends and means, and to pursue equalitarian aims with the result that the ‘burden’ of redistribution from rich to poor has been pushed too far… (35)

We can’t all be equal is another. Not that a bit of redistribution is the same thing.

Titmuss notes that the widespread nature of these criticisms have

produce[d] in the public eye something akin to a stereotype or image of an all-pervasive Welfare State for the Working Classes. Such is the tyranny of stereotypes today that this idea of a welfare society, born as a reaction against the social discrimination against the poor law may, paradoxically, widen rather than narrow class relationships. As Gerth and Mills have pointed out ‘… if the upper classes monopolize the means of communication and fill the several mass media with the idea that all those at the bottom are there because they are lazy, unintelligent, and in general inferior, then these appraisals may be taken over by the poor and used in the building of an image of their selves’. That is one danger…a second emanates form the vague but often powerful fears that calamity will follow the relaxation of discipline and the mitigation of hardship…(37)

I just…again, the more things change the more they stay the same. Turns out the upper classes did monopolize the media, did (further) propagate the idea that poverty was caused by being lazy and inferior. Our prime minister and cabinet are still spouting these things today like a stream of poisoned water out of a Flint water fountain.

What the welfare state was meant to achieve on the other hand? I rather like this, it feels a short rather conservation definition of the welfare state, yet one that takes as a starting place that the residents of the country form a whole, and that they are all part of one society:

All collectively provided services are deliberately designed to meet certain socially recognised ‘needs’; they are manifestations, first, of society’s will to survive as an organic whole and, secondly, of the expressed wish of all the people to assist the survival of some people. ‘Needs’ may therefore be thought of as ‘social’ and ‘individual’; as inter-dependent, mutually related essentials for the continued existence of the parts and the whole. No complete division between the two is conceptually possible…(39)

Pension Systems and Population Change

This is a talk about pensions and the impact of a changing population, the ‘long-term shift from an ‘abnormally’ youthful population in the nineteenth century to a more ‘normal’ age structure… (60) Are we really STILL having that same conversation? Yet at the same time it really brings home the horrors of working class life and early death before the welfare state was put in place. Also the fact that it was believed possible after the war, how much more should it be possible now?

All the adjustments involved in changing over to a different population structure can only be made with the minimum of social friction if the redistributive effects are equitably shouldered. They are as much a national affair as war or mass unemployment. It thus behooves us to take account of the total complex apparatus of social policy in relation to old age…(61)

It’s hard to believe this was written at a time when equality was growing, even if slowly…

The outlines of a dangerous social schism are clear, and they are enlarging. The direction in which the forces of social and fiscal policy are moving raises fundamental issues of justice and equality; not simply issues of justice between taxpayers as a separate class, or between contributors as a separate class, but between all citizens. Already it is possible to see two nations in old age; greater inequalities in living standards after work than in work; two contrasting social services for distinct groups based on different principles, and operating in isolation of each other as separate, autonomous, social instruments of change. (74)

Those days are long since gone, and it is steadily widening again. People still are worried about those pensions penciling out though.

War and Social Policy

Ah, another issue that remains an issue. Yet WWII moved everything in a new direction even as every war since seems to have been part of the pendulum swing back. On the Education Act 1944, Beveridge Report 1942, National Insurance, Family Allowances, National Health Service Acts:

All these measures of social policy were in part an expression of the needs of war-time strategy to fuse and unify the conditions of life of civilians and non-civilians alike. In practice, as we have seen, this involved the whole community in accepting an enlargement of obligations–an extension of social discipline–to attend to the primary needs of all citizens… as war has followed war in an ascending order of intensity, so have the dependent needs of wives and children been increasingly recognized. The more, in fact, that the waging of war has come to require a total effort by the nation the more have the dependent needs of the family been recognized and accepted as a social responsibility. (84)

‘The Position of Women’

A whole essay! On women! Amazing! Not particularly deep or insightful, why am I even excited, but it exists. Titmuss writes:

Few have been concerned with the working-class woman, and particularly with the conditions of life of the working class mother. (88)

He’s not wrong either. Shocking given the next fact:

At the beginning of this century, the expectation of life of a woman aged twenty was forty-six years. (91)

You really need to look at work done by people like Pember-Reeves and Harkness and Higgs to understand just how much hardship is contained in such statistics, but I am curious about the changes he notes here around marriage — not least because I had always assumed Victorians married younger and were more likely to marry period. Wrong.

No doubt the political and legal emancipation of women has contributed to these changes in what is expected from marriage. A more socially equal relationship was foreseen by the leaders of the Women’s Movement but what they could hardly have envisaged is the rise in the popularity of marriage since about 1911. (99)

Married life has been lengthened not only by declining mortality but by earlier marriage…In 1911 24 per cent of all girls aged twenty to twenty-four were married; by 1954 this proportion had risen to 52 percent. … There are now fewer unmarried women aged fifteen to thirty-five in the country than at any time since 1881… (101)

Industrialization and the Family

Not only does Titmuss give thought and space to the particular circumstances and hardships faced by women, but also of the family (perhaps following Engels here):

Industrialization demanded the breakdown of the mutual relationships of the extended family; paradoxically, the poor law struggle–though ineffectually–to maintain them… Authoritarian patterns of behaviour, sanctioned in the factory, were carried into the home. (110)

This is curious, were families less authoritarian really before factories? I wonder. He also tries to tackle the meaning of unemployment, citing Bakke’s Citizens Without Work on the idea ‘that a man’s job was not simply something that brought him money; it was an activity that gave him a place in the social world and in large measure gave meaning to his life‘. (113)

This of course is one of the underpinnings of Labour’s goal of full employment which in turn supports the welfare state economically.

The Hospital and Its Patients

He spends most time on the NHS here, full of facts and figures that I confess made me nod off just a little. The juicy bits were in the next section

The National Health Service in England

Like this one:

Among all the ideas of the 1930s and 1940s which led to the creation of the Health Service the one which increasingly dominated the mind of the public and the profession alike was the idea of prevention; the prevention of ill-health and incapacity. (140)

And what the hell happened to this idea of territorial justice?

‘Perhaps the most important argument in the planning approach [to the NHS] was the need for ‘territorial justice’–more equality of access to medical care services for people living in different parts of the country. In other words, a geographically comprehensive hospital service could not, it was thought, be provided under the aegis of some 2,000 separate, independent and often competing hospitals. (143)

But always fighting the everpresent argument that costs were spiraling out of control. In 1950 the BMJ’s headline went:

The National Health Service is heading for the bankruptcy court…and we are facing bankruptcy because of the Utopian Finances of the Welfare State. (2 December, 1950 — 148)

But this was from the time doctors hated everything about the NHS.

The other point of interest comes when Titmuss emphasizes the importance of practitioners spending time with patients…ah, imagine those days. How did we ever come to the 10 minute rule? Absurd. But that happened long after his time.

The Irresponsible Society

This was the most interesting piece I thought, from the point of view of today. Saved for last of course. He outlines some of the issues and guess what…they feel remarkably contemporary. Like this one Titmuss expected to be sorted in the 60s:

One of the most important tasks of socialists in the 1960s will be to re-define and restate the inherent illogicalities and contradictions in the managerial capitalist system as it is developing within the social structure of contemporary Britain. Much of the doctrine of Victorian Marxism is no longer applicable to a different set of fundamental illogicalities in a different age. (215)

and this?

In highly complex and wealthy societies like our own almost all social forces tend to encourage the growth of conformism unless checked by strong, continuing and effective movements of protest and criticism. If these do not come from socialists and if they are not stated in terms of power they will not come at all. (219)

Socialists fighting conformism! Encouraging multiple strands of criticism and protest! It’s the socialism I would have loved to see, if only that had happened!

This is just depressing:

We did not understand that government by the people could mean that power in the government, the Cabinet and the City, could lie almost permanently in the hands of those educated at Eton and other public schools. (220)

And finally, words against the solution that continues to be put forward today but its remarkably prescient on housing:

These problems will not and cannot be solved by the private insurance market, by property speculators, by forcing land values to insanely prohibitive levels, or by any criteria of profits and tax-free gains. Private enterprise is only building about 1,000 new dwellings a year in the county of London, for example, and most of them are luxury flats for the rich. Nor will they be solved by growth of the ‘social welfare firm’… (229)

If only New Labour could pay attention.

Department of Social Science and Administration, 1971. Credit: LSE Library

Titmuss, Richard M. ([1958] 1976) Essays on ‘The Welfare State’ Third Edition. London: George Allen & Unwin Ltd.

Building Social Spaces, Exhibitions

Designing the Urban Commons

June 17, 2015 Andrea Gibbons Leave a comment

Went to the launch event for this last night, it has been an interesting few months after a good invitation to people to submit proposals for how urban commons might be designed, created, reimagined, repurposed, preserved. The website with the original call from earlier this year states:

The city itself should arguably be treated as a common: a collective physical and cultural creation by and for its inhabitants. However the range of activities permitted in urban spaces is becoming increasingly narrow. Many streets and squares are now managed by private owners and those held by the state are too often sanitised by public space designs that serve to enhance local property values and business rates. This leaves little possibility for the urban public to be used productively by its communities to sustain themselves materially or culturally. Where today is there space in public for people to work together to produce the city and its resources outside of market demands?

Commoning, the collective ownership and management of resources, is currently being reimagined across social, political and economic debates as a response to this challenge facing all cities today. With Britain’s rich history of common rights, London is the perfect place to test commons out as a vital approach to urban design.

I think London is a good place — though in many ways it is a difficult place as struggle of who has a right to public spaces is so very fierce here as the housing crisis grows ever bigger, austerity bites ever deeper and people’s lives become even more precarious. Once diversity of class and race and occupation is lost simply by virtue of who can afford to live in an area and who has been priced out, beautifying public spaces takes on a whole new dimension with its user-base fixed.

The exhibition showed the ten winners, a few of them grappling in some way with these dynamics, though many not. It is a difficult thing to ensure manageable concrete interventions work to counter to the movements of capital and privatisation.

In reality, I think that things like this can often contribute to such movements, many are easily co-opted into placemaking for the elite who can’t manage to create their own own bottom-up ‘culture’ the way it sometimes emerges naturally and vibrantly in cities, often in places where the local residents have had the time and inexpensive space to create. Holding an exhibition at LSE under the gazes of nobel laureate economists doesn’t give me more confidence, perhaps more so because I went there. Truth is, though, after having living in Glasgow, after visiting Liverpool and Sheffield, I find myself jealous of the kinds of shops and the activities (art, music, writing, all that stuff that almost never pays its own way) that can flourish there where ground rents don’t kill everything but boutiques and chain stores.

Unquestionably, however, vibrant public spaces help people find the inspiration and the means of preserving their rights to remain living nearby. Such spaces also inspire people to fight for them, and protect them from privatisation. I quite love imagining how to help facilitate this vibrance, and thinking through just how much is possible through design. Whyte, Jacobs and Gehl among others show a great deal is possible. But only if you’re paying attention.

One of the pieces — Service Wash — was certainly a provocation around austerity and its consequences (and while launderettes may be declining in popularity, I rather challenge its premise that they are no longer much used, as they certainly are in my neighbourhood, and I’ve heard that women come for miles to wash clothes with their mums on a Saturday, back to their communities where they can no longer afford to live).

An urban phenomenon, the launderette is a relic of postwar social infrastructure, a provision intended to be egalitarian. Its decline in popularity is countered by an A1 class designation that prohibits change of use…thus explaining the bye-gone-era flavour of your local launderette. The Service Wash utilises the launderette’s quotidian presence proposing an expansion of its established function in favour of those most marginalised by urban renewal – the homeless. The physical inability to clean or be clean can be psychologically punishing; it creates an additional barrier to inclusiveness that the proposal aims to remedy. By partnering with homeless charities and drawing on existing initiatives, the launderette becomes a place to wash both clothes and self for those who have no other means to do so.

I’d prefer a focus on the problem of housing. I’d prefer a different use of words, perhaps, public baths were still being built at the turn of last century for example. But I like not ignoring the large and steady increases of those sleeping rough, I like imagining public places that serve their needs before we build their homes, and I especially like highlighting the negative changes in our society that are causing this increase in people who need public showers along with somewhere to wash their clothes. There was one explicitly battling developers — Commonstruction: A Manual for Radical Inclusivity:

Local community groups are resisting the planned regeneration of Tottenham with the claim that a policy of social cleansing is being used to facilitate a land grab by developers and speculators. The purpose of our design manual is to create a circular reference for various actors in the area that will coordinate collective action and enrich the threatened public life. There are 3 key combinations of spaces that constitute it: • Live-work & Community workshops • Public social spaces • Residential & Start-up spaces

It starts with a land trust…so I like it, though I’m not entirely sure I know exactly what it would be. It provokes questions about how commons are preserved exactly, and what happens when they are too full of activity and new building. I wonder. The winners were profiled on large boards along one wall, it was full enough to make it difficult to get wine and get close enough to the boards to read them properly, space was cleared though as the speeches started.

You can just see here the Reimagining the Lodge poster from the folks at Shuffle whose events, mostly held at Tower Hamlets Cemetery Park where the lodge sits are amazing:

Reinventing the Lodge is about creating a place to meet, a place to be and opportunities for things to do. To give people permission to inhabit this undervalued environment in new ways is to cultivate local pride, identity and sense of belonging – the feeling of being at home.

I was far and couldn’t see the wonderful Richard Sennet, who I never did manage to see lecture while at LSE. I could hear though: I’m not a big tweeter (I left the right hashtag off and everything), but I couldn’t resist this one a bit later (I just make up my own hash tags you see): It was good, though, to hear about occupy and the struggle over public space. Some proposals fit that better than others, like Saturday Commoning Fever:

Saturday Commoning Fever is an online platform that provides Londoners with means to common in the streets of the city. By simplifying “street rules” in a website rather than hiding in regulation files, we aim to question those rules and challenge them.

I quite loved Rainbow of Desires — not least because it involves theatre of the oppressed and mentions Augusto Boal, but I am quite intrigued by these kiosks and the uses an estate might make of them…

“Rainbow of desires” is a set of small pavilions installed in the open spaces of the Rhodes estate in Dalston. During a period of three months the pavilions are doubling as performative devices and workshop spaces based on the techniques of the theatre of the Oppressed and spaces of communal everyday life (public seating area, an open kitchen, an exchange library, a cinema).

There was a proposal to fill the old gasworks with trees (being raised in America it was years before I knew what the hell those things even were, and now I can only think of all the workers suffered there). Good idea, though they are fascinating structures and I sometimes dream of what else they could become…

I did like this little display showing the winners’ physical locations around London, though I couldn’t help but wonder what will happen to it when this is done, and will we be able to play with it then:

A good event, it was wonderful to view the ideas that poured out in response to the call and honestly, can we just put up these notice boards around lamp posts already?

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Role of the intellectual, Struggle & Movement

The Dalai Lama at LSE

July 18, 2012 Andrea Gibbons 1 Comment

On June 20th the Dalai Lama came to the London School of Economics to give a talk titled ‘Resisting Intolerance: an ethical and global challenge‘. Of course I went, though I did feel the immense ironies involved in seeing him there. His short bio:

HH the Dalai Lama, Tenzin Gyatso, is the spiritual leader of the Tibetan people. He was born on 6th July 1935 in north-eastern Tibet and recognised as the incarnation of the 13th Dalai Lama at the age of two. Since 1959, he has been living in Dharamsala in the north of India which is now the seat of the Central Tibetan Administration.

In 2011 HH the Dalai Lama completed the process of democratisation of the Central Tibetan Administration by devolving all his political authorities to the elected leadership. How did I miss this happy fact of devolution and the welcome separation of spiritual from temporal power? I don’t know, I suppose these things happen.

I wrote to my dearest friend that same day that the Dalai Lama has a belly laugh that sounded just like my grandfather’s, but he seemed far nicer and wiser. He laughed a great deal. I wonder how much he geared his talk to LSE, it was very focused on positive fundamentals which I am still pondering. He started with happiness, that all of us strive for a better life and for happiness in that life, and yet we have created a world of immense unhappiness. This can change, must change, with focus on three things: truth, justice, and compassion.

I have been thinking and thinking and at the end of it I think those are the values we need. Those values are fundamentally incompatible with every awful thing that has ever been done in this world, their practice in a real way would make such things unthinkable.

Truth and justice seem to me rather like swords wielded in struggle, and compassion ensures that they are wielded in a way that ends in true healing and makes the world better. We all know how much truth and justice can hurt. He continued to say then that what is needed is action to change the world, not wishes or prayers.

As in liberation theology, I think it is powerful when a religious figure can situate problems and answers squarely in this world and the actions of human beings, giving a strong moral framework for change. While of course I do not believe that you need the religion, I do believe strongly that you need the moral framework, love and compassion are so key to carry with us in our struggles for truth and justice. I think the focus on interior as well as exterior is also key here, and where our movements also lack. How many problems of ego and personality do we encounter in our struggles? Questions of burnout and emptiness and despair? The constant issue of ends and means?

Without a strong interior commitment to uncover our own truths, to be fair and just to ourselves and in our personal relationships, without a strong community of love and support, we fall prey to the terrors and injustices of the world. They are legion

So how do we take this foundation and apply it beyond the personal to our actions and our strategies for analyzing economic and political systems, for changing the world? That is what I found lacking in the talk, and given who else was sitting in the room with me, that left me a little upset. I was glad when the Dalai Lama described exploitation, lying, and cheating as violence. Sadly it is not often described that way, however true it is. But he didn’t connect this violence with the majority of corporations for whom LSE graduates go on to work, and with whom many of the expensively-suited people in the room were intimately connected.

To me it seems so clear that to work for an investment bank is to participate in such violence, but I wonder how many people left the Peacock Theatre with that thought in their minds. Especially when he put on the stupid LSE ballcap. I suppose politeness is something.

But it was indeed wonderful to see him and hear him speak, he was much more frail than I was expecting. To be honest I didn’t know what I was expecting, though I certainly didn’t have the glint of worship and hunger than I espied amongst some other audience members. He seemed far too human and down to earth for such nonsense, but I suppose it doesn’t stop other people from seeing him as something to fill their own holes. It was only a few days later that I saw this photo posted on facebook:

And it definitely made me happy, both his support for the exciting new student movement 132, but also to see that the Dalai Lama chooses sides.

[first published at drpop.org!]

politics

Marcuse & Davies: 2 views on roots of crisis

October 12, 2009 Andrea Gibbons 4 Comments

Thought I’d start out with a funny quote I’d forgotten about, courtesy of Howard Davies. It’s all downhill from here though…

“Bank failures are caused by depositors who don’t deposit enough money to cover losses due to mismanagement.”
–Dan Quayle

Peter Marcuse spoke on Tuesday night at University College of London, and Howard Davies spoke in the heart of LSE on Wednesday at noon, so technically I suppose they weren’t speaking to each other. But they should have been. So they shall through me. This is my interpretation and expansion on events of course, not a faithful recording of exactly what I heard…just to be clear.

Who are these guys exactly?

Peter Marcuse is the son of Herbert Marcuse, and a lawyer and planner. He has been a professor of Urban Planning since 1972, for three years at UCLA, and at Columbia since 1975. He has also been president of the Los Angeles Planning Commission, and has written extensively on housing and planning issues.

Howard Davies is the director of the London School of Economics, and the former head of the Chairman of the Financial Services Authority, the UK’s single financial regulator since 1998. He also served for two years as Deputy Governor of the Bank of England after three years as Director General of the Confederation of British Industry.

Two basic summaries of root causes:

Marcuse started with what are commonly seen as the underlying roots of the current economic crisis (then he tears those apart, but I’m saving the best bit for last!). In his view (his headings with with my own filler) these are:

The housing bubble – you know, that whole mortgage crisis thing. The inflated price of land, the mad speculation in it, the crazy loans to people with no equity. Those damn NINJA loans (I’ve always been with the pirates myself).
Unscrupulous people – the greedy bankers, the banks, those bastards who were out there sweet-talking your grandma into a loan worth more than her house, one that she would never be able to pay back. So she now lives with you instead.
Securitization – this is a big word, and of course it’s complicated. It’s deliberately complicated to get around annoying regulations and the agencies that tried to enforce them. Thousands of mortgages all packaged up together and insured and sold and then maybe reinsured and sold again and then maybe one more time…the important thing to know is that it made a lot of people rich as long as the housing market kept going up.
Deregulation – Not only were those “unscrupulous” people getting around existing regs and preventing the implementation of new ones, but they succeeded in getting rid of the Glass-Steagall Act which was made law in the 30’s to ensure that the Great Depression never happened again. Nice work.
Too much money floating around looking for something to invest in. You have to laugh at that really (and then cry), I’m sure none of us have known the feeling of too much money, too few options of what to do with it. But apparently there were trillions of dollars floating around the world economy that needed a home. I wished they’d asked me, but if equality and a just distribution of wealth around the world aren’t issues, than I suppose perhaps that could be seen as a problem.

This isn’t actually all that different from the analysis of the problem given by Mr. Davies, though he got much more technical around issues 3, 4 and 5, and sliced them up rather differently. I didn’t catch his final “summing up slide as he was talking fast and out of time, but the earlier top 4 underlying causes were:

Global imbalances – There was a huge increase in global imbalances, I know this is bad. I can’t remember exactly why, I do apologize! You can see the chart of global imbalances here, along with many other charts full of much technical financial information. I will, of course, be correcting my ignorance.
Loose monetary policy leading to a mispricing of risk and a credit bubble. What was Greenspan thinking keeping interest rates so low? There was just way too much money out there, anyone could borrow anything, and god help us all, they did. Luckily China was able to come in and sell the West lots of cheap goods (since they don’t really pay their employees) and then buy US treasury bonds. A third of them. That kept the wolf of inflation from the door, but confused everyone as to what kind of market they were operating in. Especially Greenspan.
Excess leverage facilitated by procyclical regulation and regulatory arbitrage. Yikes, no? It just means that banks were doing the same thing that all of those “gullible” homeowners (the same ones who are now getting evicted) were doing, taking out massive loans with no down-payment and not enough savings in the…er…bank. They had nowhere near enough money to cover their asses. And why did they think this was ok? Because their advanced historical and cyclical analyses of the housing market told them it was one market that would always go up. So everything would be fine. The equations promised.
‘excess’ unmanaged growth of the financial sector – it exploded into one area really, securitizing mortgages and playing with derivatives, and by moving into this area the financial sector thought it was diversifying risk (you know, putting down bets on lots of horses, not just one. And placing bets as part of a pool so to speak, by insuring your bets and…it’s complicated). But turns out so much money was being put into trading these property related bonds and CDO’s and etc, they were actually creating risk rather than managing it. A failure of betting strategy if you like. The fall of dominoes was insanely impressive however.

As a combination of factors it all makes some kind of sense, it certainly hangs together. And if you’re a bit rusty on your economic jargon, it makes your eyes glaze over but it sure sounds damn impressive. I think I’ve got a handle on most of it, but who really knows? Understanding the ins and outs of what actually happened takes a massive amount of energy, involving remote corporate skyscrapers, hundreds of acronyms, and unfathomable sums of debt being sliced up, repackaged, insured, reinsured, moved constantly from one major player to another. And it’s all happening on a global scale. And let’s not forget the distracting million dollar bonuses and offshore accounts…

And so these kind of explanations lead to even more complicated solutions, we are witnessing a grand escape into the technical. For Howard Davies? We need more and better regulation, better internal management of banks, better global coordination and so on into excruciating detail and even bigger words.

But instead of delving into all of that, let’s return to Peter Marcuse’s lecture: everything I have written above is interesting, but really it is missing the point entirely. You got it. Missing the point entirely. How is it that so many incredibly smart people are missing the point?

Focusing on technicalities of regulation and management hide the reality that the economic system itself is fundamentally flawed.

Some of us take that for granted, others will never believe it is true. Capitalism? Well, you know what they (or some of us) say. Crisis happens. We’ve been in crisis quite regularly for several hundred years, and that will continue as long as the system continues. Because crisis is inherent to the capitalist system.

What is the motor of the current system? Adam Smith called it self-interest, but it seems rather silly to expect people to hold the contested and rather imaginary line between self-interest and greed. Greed ultimately is the motivating force, it is the entrepreneurial way and a constant pressure. When you see regulation as the answer, you really aren’t giving people enough credit. They are hell of smart. And there are thousands if not millions of them trying to get around any rule keeping them from their self-interest. And they will. The mass securitization of incredibly risky mortgages as sound investments was just one clever proof of the power of invention to get around regulation. We can fix that loophole, but there will surely be others as it is symptomatic of the fundamental basis of the current economy.

Why is this particular crisis concentrated in real estate, as so many of them are? When buying real estate, you aren’t just investing in land, you are investing in a commodity that has only a fixed supply. There’s only so much of it, and it’s all spoken for. Because of this, you can sit on it, do absolutely nothing at all to improve it, and it will continue to grow in value. This value is due entirely to population and urban growth, it is socially created, it is ‘easy’ money. It invites speculation, always has and always will until we change how the housing market and property ownership work, and we change it completely. As long as housing is seen as a means of profit and vehicle for investment, this kind of crisis will be a recurring one. There’s nothing new about housing bubbles!

Too much money? No, there isn’t too much money, there is too much capital. Capital is what is produced by the exploitation of workers, it is profit extracted from production and at great cost to those who actually produce, and it is money whose sole purpose is to be reinvested to make more money. For me, this distinction goes some way to explaining a world where we can have simultaneously the problem of ‘too much money’, and millions earning less than one or two dollars a day. Clearly there needs to be change there, as the fundamental dark absurdity of such a world is obvious. Isn’t it?

So if Marcuse is right, and I rather think he is, it renders much of current policy and debate a bit meaningless really. All of these solutions are looking at the “fundamental” roots of an issue that really has foundations much deeper still. And if we dig those up, what will we build instead? That is the perennial question.

So the next blog will be about Marcuse’s vision of the Right to the City and the role of critical theory in building a new world…very exciting, even my cynical self can get somewhat excited about that. And I will.

The other very exciting note is that Howard Davies admitted that we’ve seen the failure of the efficient market hypothesis, a mainstay of economics for years. The idea that investors will act rationally? Well, obviously, that’s been proved laughable, so we really need to start all over again there. They’re creating something to take a look. I’m going to have to watch the aftermath of such an admission, I mean, where can they go after that while keeping within their framework? I have no idea, but do hope it will be interesting. It should be, I have immense respect for their intelligence. So we’re all rebuilding, though not quite together, and not quite for the same people. But it’s an interesting time to be alive.