Five years ago, the United States Congress was debating its $700 billion bank bailout bill.
Lehman Brothers had collapsed a fortnight earlier. Global share markets were in free fall. It was a time of panic.
But half a decade onwards it is clear the global financial crisis was a cultural crisis as much as an economic one. That’s only natural. Assigning events with cosmic moral significance is part of the human condition.
In his famous crisis-era Monthly essay, Kevin Rudd said the economic downturn was so great that we were entering a new epoch in human history. But Rudd was positively restrained compared to what you heard on talkback radio and newspaper letters pages.
Take this letter, in The Age at the time, in which a professor of medicine speculates that our brains may need rewiring after the crisis. Meanwhile, this is a good example of the typical hand-wringing column warning of the danger of greed and avarice.
All pretty ridiculous in retrospect. And all, of course, from the political left. Perhaps understandably so. The left’s opponents had crowed for three decades that there was no alternative to deregulation and privatisation. Now those certainties seemed dead. The political high ground was up for grabs.
Well, for a bit. The financial crisis quickly morphed into a sovereign debt crisis. That development somewhat dirtied the otherwise clean political message. Turns out the societies most damaged by the crisis were not those who had let their markets run rampant but rather those whose governments had been unregulated by the norms of prudence and responsibility.
So much for the revolution.
The crisis has prompted some modest changes in economic policy – the renewed interested in Keynesian demand management, for instance – and has entrenched government deficits into the foreseeable future. None of these are welcome, but they are reversible.
But it seems likely that the most significant long-term consequence of the Global Financial Crisis is a deeper, more prejudicial popular cynicism about our economic and political institutions.
And rightly so. The GFC involved multiple institutional failures. All sides of political economy were found wanting. Politicians, regulators, central bankers, and markets were all equally corrupt or incompetent. They all failed in their own special, complex, and opaque ways.
In retrospect, the crises of the 1970s – symbolised by but not limited to Watergate and Vietnam – were less damaging to public confidence than the financial crisis of 2008. As I pointed out inThe Drum last year, polls record higher dissatisfaction with government now than they did then.
Here’s some indicative American polling data from Gallup on confidence in institutions, from the presidency to organised labour to banks. In almost all, there has been a clear long-term decline, a decline which was been exacerbated over the last five years.
Such cynicism inevitably manifests itself in popular culture. Hollywood has made a business of selling our neuroses back to us.
Yet most movies that directly tackle the crisis have been either forgettable or too heavy handed to succeed – for instance, the completely unnecessary Wall Street sequel. They tend to suggest that the crisis was caused by the Wall Street lifestyle; that the long economic slump can be blamed on greed, carelessness, or criminality.
As an exercise in fictional villain creation, this approach is fine. But it doesn’t quite capture the all-encompassing nature of the crisis.
There are just so many villains to go around – not just Wall Street excess, but the politicians who forged the massive bailouts, the ratings agencies, the financial regulators, and the central banks.
(It is interesting that one of the only films ever made which shows financial trading in a positive light – The Pursuit of Happyness with Will Smith – was released at the end of 2006, just months before subprime started to hit.)
More evocative of the crisis was the 2009 George Clooney film Up in the Air. This film said nothing about the causes of the crash, but instead focused on the economic despair it caused.
Australians tend to call the whole episode the Global Financial Crisis, but in the United States it goes by the prosaic “Subprime Crisis”, followed by “the Great Recession”. That different emphasis – from the origins of the crisis to its consequences – explains some of the pessimistic ennui which has enveloped the Western world.
It would be one thing if the 2008 crash had been followed by a strong recovery. But instead the world has experienced a long, uncertain slump.
Up in the Air depicts an economy battered by anonymous forces that the victims neither see or understand. Clooney’s job is to fire employees one by one. The recession in Up in the Air could be any recession. It doesn’t matter how it started. All the sacked workers know is that they have no control over their fate. The existing institutions have let them down.
It captures, in other words, a sense of institutional estrangement.
Such estrangement, and the cynicism it breeds, will be the long-term legacy of the Global Financial Crisis.