Can we think our way out of this recession? It may sound like a naïve, if not repugnantly futile hope, concocted by time-wasting avoidance trainers who sell those weekends away. But upon closer examination, it is economics’ very reliance on faith that merits its title as the ‘abysmal science’. And in a week in which investors have responded positively to Deutschebank’s optimistic predictions; a week in which the uncertainty shrouding Brown’s premiership has depreciated the pound and a week in which the decline in property prices is decelerating, it seems that the route to economic recovery rests not in further government debt, but in renewing public confidence.
Confidence has been the cornerstone of capitalism, since…forever. The crash in the value of Dutch tulips, Wall Street shares and now in global credit markets were all fundamentally precipitated by a collapse in confidence. The Dutch tulip trade collapsed following a fear of finding no more traders, Wall Street shares plummeted following the departure of a few big players while global credit markets were brought to their knees by a lack of confidence in the evaluations of various credit rating agencies.
What is noticeable about each of these events is that the collapse was not rooted in the discovery of rival assets, in a natural disaster nor in government intervention. Rather, it seemed to be grounded in the altogether more human belief that nothing can last forever.
The recent crisis has served to entrust such confidence-analysis with a renewed credence. Warwick’s very own Andrew Oswarld is leading a fundamental reappraisal of how we understand economics. By abandoning the agency-driven analysis that neo-liberalism inherited from nineteenth century liberal philosophers and instead pursuing an ideational approach, economics is now in a better position to encompass causes that were previously rendered inaccessible to preceding positivist approaches.
Moreover, by re-evaluating the relationship between the market-economy and ourselves, in this way, we can also investigate what else the market tells us about our preferences; about our beliefs. In a recent series of Radio 4 lectures, the Harvard philosopher Michael Sandel has made the point that the market is fundamentally a moral arrangement; a manifestation of our very understanding of justice.
This carries several implications. Firstly it demonstrates that the unquestioned authority that economists and politicians alike tend to assign to neoliberal logic is not completely watertight. The mere suggestion that neo-liberalism is part of a wider moral framework suggests that capitalism is as open to ethical criticism as any other system.
The second – which immediately follows from this – is that capitalism can be changed to legitimately encompass other ethical issues – were that be environmental or distributive concerns. This change can be facilitated by giving our support to or otherwise refusing to buy goods on the basis of their content, the way they’re manufactured or due to an ethical concern for the workers behind the product. This has already occurred in relation to certain goods – demand for fair-trade chocolate and coffee manufacturing for example has soared.
There is no reason why this couldn’t be extended to the entire system itself. In many ways we legitimised this banking crisis by failing to refuse the cheap credit made available to us and by accepting the positive equity on our property. Now more than ever is there a fantastic opportunity to reconstruct capitalism in a way that encompasses our concerns. But only in so far as we make sure – as the electorate and as consumers – that we shop and vote consistently; never forgetting the lessons we’ve learnt from this crisis.