Apocalypse Now?

Panic on the Sao Paulo stock exchange, at the start of the last global crash in April 2007. Panic on the Sao Paulo stock exchange, at the start of the last global crash in April 2007.

Are we really on the brink of another global economic catastrophe? Will 2016 see the beginning of the end of capitalism as we know it? Has mainstream economics failed? And are our leaders up to the job? With our new occasional series for 2016, Apocalypse Now?, we’re on a mission to find out.

engeco apolcalypse logoIn June 1940, George Orwell told his friend Stephen Spender that he’d known since 1931 that the future must be catastrophic. Spender replied that he’d known since at least 1929. “I could not say exactly what wars and revolutions would happen,” Orwell wrote in his diary, “but they never surprised me when they did”1. Four years ago, I wrote that the economic and political situation felt a lot like 1931 – we seemed to be on a similar trajectory towards disaster. Orwell and Spender were, of course, right. Was I right too? It’s too early to tell, but the first few weeks of 2016 do feel a bit like 1936.

But it’s an occupational hazard for writers to think they’re living in the end of days. Writers are drawn to the thing looming in the dark that you can’t quite see but you know is there, to the idea that the future (after us, of course) must be catastrophic. How many optimistic novels set in the future have you read ? How many ended on even a remotely optimistic note? For most writers the future is almost by definition a dystopia. They only differ in the degree in which they are willing to go there. And, writing about the present, few writers can resist the idea that we’re going to hell in a handcart, that, as Damon Albarn once said, “modern life is rubbish”.

Before Christmas, it felt like we were stuck in a China Miéville novel – living in two parallel worlds which occupy the same space but in which the news is different. In one world, we didn’t know whether to worry more about Islamic State, war with Russia, a meltdown in the Chinese economy, nuclear-tipped diplomacy in Korea, panic in Saudi Arabia, the moribund eurozone, debt everywhere, zombie banks or a shutdown in world trade. We seem to be on the brink of a disaster every bit as bad as 2008, and probably worse. There was a feeling that the blow would come from somewhere, and soon, but no one one knew where from. In this world, the glass isn’t half empty, it’s bone dry and hurtling towards the floor.

In the other world, where George Osborne and David Cameron (and everyone who writes for the Spectator except Nick Cohen) live, things were steadily returning to normal after the 2008 crash. Banks had been tamed, “entrepreneurs” were optimistic. The US and UK economies were seeing strong growth in GDP and employment. The Greek crisis was behind us and even the eurozone was showing some signs of life. China would weather the storm. Capitalism had learned, adapted and moved on. British bombs would stop Daesh’s little games. Cheaper oil was good for us and bad for Putin. Skilled market analysts writing in the FT, no less, were confident the outlook for 2016 was good. In this world, the glass is still half full and there’s plenty more in the keg.

In December, the US Federal Reserve felt so confident about the strength of the US economy, it raised interest rates for the first time in nine years. In November, the British chancellor, George Osborne, unveiled one one of the most complacent and ignorant economic statements of modern times. His independent advisors, the OBR, still think the British economy will hum along nicely for the next five years. They’ve even found £27bn they didn’t know they had. The only threats to all this glow is are, apparently, over-powerful trade unions and a 66-year-old college drop-out named Jeremy Corbyn.

Since the turn of the year, the violent unease of that first world has rudely intruded on the peace of the second. Markets have tumbled around the world. This year’s billionaire’s bean-feast at Davos was, by most accounts, a gloomy affair. Most world leaders are still mouthing the language of “recovery”, but the words are dying on their lips. The Chinese leadership looks close to panic. Angela Merkel looks vaguely worried for the first time in her political career. UK and world growth figures are being revised down. It is January, it’s pelting down and the glass looks pretty empty after all.

So is this the beginning of the end of capitalism or just another dip on the roller coaster? If capitalism is finished, is that a good thing or a bad thing, or could it go either way? What does it mean for working people? The truth is that nobody knows – economists can’t even agree on what capitalism is let alone what it might becomebut almost everyone agrees that something is going on.

Our occasional series Apocalypse Now? will try to get under the skin of the global economy to work out what that something is. We’ll look at both sides of the argument and at more balanced positions in between. We’ll look at the conventional economic indicators and some you’ve never heard of. Yes, we’ll probably end up just as confused as when we started, but we might just learn something along the way.

  1. George Orwell, The Collected Essays, Journalism and Letters, Vol. II, p392. ↩︎
Photo: Rafael Matsunaga/Creative Commons 2.0