First published in the Telegraph on 15 October 2009
The “definitive” take on the financial crisis most probably will not be written for some decades. Neither Galbraith’s nor Friedman’s accounts of the depression appeared until some decades after the 1930s – and even now the depression is still being analysed and argued over by the experts. But if past is any precedent, we ought in the next couple of years to see some lasting and important works of art and fiction about the financial and economic crisis. After all, Steinbeck turned out The Grapes of Wrath before the end of the 1930s.
All of which makes it so much more frustrating that David Hare’s take on the crisis, “The Power of Yes [http://nationaltheatre.org.uk/50093/productions/the-power-of-yes.html]” (on currently at the National Theatre), is such a disappointment and a missed opportunity. The play isn’t really a play, but sits somewhere between a “story” (as one character describes it at the start) and a lecture. It is rather like having someone stand up in front of you and read you a selection of features from the financial press over the past year. Fine as it goes, but I prefer doing the reading myself rather than having someone doing it out loud for me (and having to paying for the privilege).
Economics is extremely difficult to dramatise. I know this from bitter experience, having tried numerous times before the crisis to work out with filmmaker friends how to depict the financial markets and the growing bubble in the British economy for screen. Each attempt ending in failure. It really isn’t easy: either you risk descending into banality (as the BBC did in its recent drama Freefall) by trying to depict mortgage brokers and bankers at their jobs, or you try the grand sweep of global events and end up alienating everyone. Hare plumps (sort of) for the latter course of action.
The plot, such as it is, is as follows: a playwright (David Hare, played by Anthony Calf) tries to get his head around the crisis, talks to lots of the involved parties (though most of the key players – Greenspan, Gordon Brown, Mervyn King, Hank Paulson etc – aren’t on-stage since they weren’t available) and eventually finds himself outraged that it all happened and so many of the people got away with it.
The tacit conclusion is that this crisis is nigh on impossible to dramatise. I disagree. There is oodles of drama in this crisis, and the tantalising thing is that there were fleeting moments in Hare’s play when he touched on them. What about the passing comment that so many of the people who spoke out about the risks of a bubble bursting were immigrants from countries prey to revolution and unrest? Whether or not you agree, there seems plenty of dramatic potential in telling the story of those people. Or the shattering of illusions for a whole generation of economists and policymakers as the rules and creeds they followed are exposed by the crash?
I have long been a fan of David Hare’s work. Via Dolorosa, his exploration into the Israel-Palestine stalemate, was, I thought, brilliant theatre, and a perfect amalgam of journalism and drama. But trying to depict the financial crisis in the same terms, by dramatising the playwright’s own journey of discovery, was a cop-out.
Part of the role of literature is to express the general through the particular. This was George Eliot’s dictum – to express the drama of the human condition by describing the lives of ordinary people. And there are so many personal experiences throughout this crisis which could have helped illustrate the bigger picture: the greed of investors, the delusion of the bankers, the drama people felt when they realised the ideas they had pinned their future on had simply been wrong.
What this crisis needs is something like The Wire [http://www.hbo.com/thewire/]. You will have heard others drone on about this phenomenal programme elsewhere so I won’t go on about it too much (though you must see it). But its achievement, to my mind, is, twofold: firstly to tell the story of a whole spectrum of characters, showing no-one, whether it is the gangster, the politician or the policeman, as truly one-dimensional. But secondly and even more importantly, to show that each member of society, despite their own ambitions and agency, is captive to forces way beyond their control. “It’s all part of the game”, as the characters say a couple of times.
And in this sense, the financial system is not all that different to the police department in Baltimore, or the drug dealing network, or the shipyards. Everyone had their own individual motives, most simply wanted the best for themselves, their friends and their families. But despite the fact that surely no-one wanted it, the combined effect of their actions and the nebulous system they sprouted was to create a bubble which almost took down the entire system. Bonuses? profits? bubbles? It’s all part of the game – the intractable world of finance, the inhaling and exhaling of financial markets. What a story! Sadly we are still waiting for it to arrive either onscreen or on stage.
How bad will it get? Take a look at Latvia
First published in the Telegraph on 15 October 2009
Allow me to paint you a picture of a country mired in chaos. The unions are in open revolt. Public sector workers have just stomached their biggest pay cuts in living memory; many face losing their homes. In a desperate attempt to bring the budget deficit back under control, ministers are considering slashing child benefit by a fifth – the biggest attack on the welfare state since it was set up in the first half of the 20th century. The government’s popularity is at historical lows.
This is the state of affairs in one of our closest cultural and geographical neighbours. We should be watching closely, because what is happening in Ireland today is almost exactly what will happen in Britain tomorrow.
In the past few weeks, our politicians have begun setting out their embryonic plans for cutting spending – and we are all agreed that such cuts are necessary. But are we really aware of what lies ahead, of the cost in terms of human suffering, political stability and social unrest? I suspect not. To say that Britain will have to endure its toughest period of austerity since the war is significantly different to living through it.
But we won’t be able to say we weren’t warned. Across Europe – from Belgium to the Baltics – a whole suite of austerity laboratories have cropped up, as countries attempt to tackle deficits of unprecedented proportions. As well as Ireland, one might choose Iceland and Latvia as examples. A third of teachers in Latvia have been laid off; the rest have endured savage salary cuts, leaving them barely above the minimum wage. Many have seen their pension entitlements slashed by 70 per cent; doctors and police officers face sacrificing a fifth of their pay. According to local reports, the state has cancelled some scheduled operations and hospitals are turning away some sick patients.
This is what happens when, quite simply, a country has no way of raising extra cash; when asset sales, such as those
re-announced by Gordon Brown last week, come to their inevitable end; when tax revenues collapse catastrophically and the government has no option but to take a knife to the apparatus of the state.
Each country’s route to this pretty pass is different. In the cases of Latvia and Iceland, the austerity measures were imposed by the International Monetary Fund after it bailed them out. In Ireland, it was the threat of such a bail-out, as markets started to balk at the country’s debt, that sparked action. But whether inflicted by external forces or self-imposed, the cuts are unavoidable.
There is a rule of thumb among those whose job it is to rate a country’s creditworthiness: that once the interest payments on its debt exceed 12.5 per cent of tax revenues, it is heading for the point of no return – in other words, getting into such a state that it will have to be bailed out. The relevant level of debt interest when Britain was last rescued by the IMF in the late 1970s, was just over 12 per cent.
In a couple of years, according to the Treasury’s internal calculations, around 10p in every pound of tax we pay will go straight to servicing debt interest, compared with less than 5p at the moment. This time around, the repayment burden is soaring, while actual interest rates are at low levels – even a small increase in interest rates could push Britain’s debt beyond critical mass.
We know that the cuts the Conservatives mapped out last week – to raise the retirement age and freeze public-sector pay – are only a start, and are not radical enough. Their proposals would cut the long-term deficit by around pounds 7 billion a year (assuming that you believe their sums), and come on top of the Government’s plans to reduce it by pounds 14 billion. But the total size of the hole that needs eventually to be filled is closer to pounds 90 billion.
Some, including Vince Cable, have had a go at sketching out how to plug the gap: their conclusion is that major projects such as Trident and Crossrail will have to go. But again, these only get us so far.
The lesson from Ireland, Latvia and elsewhere is that in the end the only choice is either to raise taxes or cut public sector services and jobs.
Further, whether it manifests itself in spending cuts or tax increases, this fiscal onslaught will almost certainly mean, at best, an insipid economic recovery, at worst, a further dive into recession.
Deflation, not inflation, will continue to pose a major risk to the British economy – however much stimulus is pumped into the economy by the Bank of England, in the form of low interest rates and quantitative easing, it is almost inconceivable that in the face of a budget bonfire the public will go out and spend heavily.
All in all, it makes for an unpalatable future, but it is one that David Cameron and George Osborne can do nothing to avoid. Their teams, consulting with Treasury mandarins as they prepare for office, are fast realising that what they face is every incoming government’s nightmare.