No 2040 Posted by fw, August 26, 2017
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For newcomers to this blog, I am in the process of writing a series of synopses of every chapter, section by section, of the 2nd edition of Tim Jackson’s thought-provoking book, Prosperity Without Growth, (Routledge, 2016-17).
Jackson’s title for Chapter 2, “Lost Prosperity” sets the chapter’s tone, for, as he puts it in the chapter’s penultimate paragraph: “There now seems to be a distinct possibility that the growth on which we have relied, not only to improve the quality of our lives but also to maintain economic stability, might just not be available any more.
As Jackson explained in Section 1 of Chapter 2, the “Introduction”, government attempts to bailout failing banks and jumpstart the economy not only failed, they precipitated further crises. The litany of failures prompted Queen Elizabeth II to ask economists why no one had seen the crisis coming.
In Section 2, Chapter 2, titled “In search of villains”, Jackson echoes Queen Elizabeth II, asks why economists failed to foresee the 2008 global financial crisis. Although the finger of blame was pointed in different directions and at different villains, in the final analysis, it appears that private and public sector indebtedness were prime suspects.
Section 3 of Chapter 2 should be up next. However, I have decided skip Section 3. The reason: — As the author points out, this section, titled “The labyrinth of debt”, “is not strictly necessary to the flow of my argument, but provides a useful background to the way debt works.”
Moreover, as if to underline the complicted nature of debt, in the opening paragraph of Section 4, Chapter 2, he concedes —
“Understanding this labyrinth of debt is a tough grind for the uninitiated. But, as the London economists explained to the Queen, the task isn’t much easier for experts, most of whom got caught out massively by the financial crisis.”
Having, myself, capitulated to the task of understanding “this labyrinth of debt,” I’m relieved to know that I’m not alone, finding myself in the company of “London economists”.
So, moving right along, this post is a synopsis of Section 4, Chapter 2, titled “The enemy within.”
Tim Jackson is a British ecological economist and professor of sustainable development at the University of Surrey. He is the director of the Centre for the Understanding of Sustainable Prosperity (CUSP), a multi-disciplinary, international research consortium which aims to understand the economic, social and political dimensions of sustainable prosperity.
Tim Jackson returns to the question Queen Elizabeth II posed to economists: Why had you not foreseen the 2008 global financial crisis?
With the benefit of 20:20 hindsight, Jackson says the Queen’s question should have been phrased this way: “Why is it that households, firms and governments more or less dismantled financial prudence in the decades leading up to the crisis?”
In addressing that question, Jackson declares there has been, until now, no satisfactory report to explain:
It was George Soros’ 2008 insightful realization that linked the ‘super-bubble’ in global financial markets to a series of economic policies in the decades preceding the crisis which were designed to increase liquidity as a way of stimulating growth.
This insight eventually led to the answer the London economists should have given Queen Elizabeth II:
The very policies put in place to stimulate economic growth, Your Majesty, led inexorably towards its downfall. This is the answer the London economists should have given Queen Elizabeth II. The market was undone by growth itself.
The market was not undone by isolated malpractice carried out by rogue individuals. Or even through the turning of a blind eye by less than vigilant regulators. If there was irresponsibility, it was much more systematic, sanctioned from the top, and with one clear aim in mind: the continuation and protection of economic growth.
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