Comment: On the Economics of mistrust

Just how serious is the economic state we're in? At a debate on Christian responses to the recession, Andrew Dilnot, the well-respected economic commentator and evangelical Christian, suggests the crisis isn't so bad. Recessions are part of life in a capitalist economy: the real question is why there hasn't been a recession for the last 16 years, since in previous decades recessions have come every 3 or 4. He also thinks that the worry about the levels of debt the UK is now carrying is a worry about the wrong thing. Debt is basically a good thing, at the macroeconomic level: it is the key that liberates people from poverty. Ask yourself how one billion children have been lifted out of poverty in Asia. It couldn't have been done without the alchemy of debt, the ability of the countries concerned to borrow and lend. As for UK's debt, it's larger than it was, but it is still pretty modest by historic standards.

So why the sense of panic? Dilnot's suggestion is that it's a moral issue. He believes that there is a kind guilt lying behind much of the current anxiety about economic woes. We, in the UK, are a rich generation – four times as rich as our parents and grandparents were after the second war. So we need to get used to our prosperity, and not let the media drive us into paroxysms of fear, which actually make things worse since they stop us enjoying the benefits of wealth.

Dilnot is at pains to point out that we are a massively redistributive economy too: 1% of earners at the top of the pile pay 25% of all income tax; the bottom 20% of earners are 60% better off because of the welfare benefits taxation funds. This redistribution he interprets as a practical application of the commandment to love your neighbour. Humans have a tendency to greed. But Christians should be proud of their economy, even celebrate it as a manifestation of Christian faith.

That was the pollyannarish view. But his opponent was John Milbank, the well-respected theologian. When he stood up to speak, he lambasted the analysis.

The big issue is not the ups and downs of the economic cycle, but it is the kind of people we are becoming because of late capitalism. Whilst we are richer, that wealth has been bought at the price of massive social disruption, which is corrosive of civic virtues like trust. Further, the world has become a different place because, now, banks are bigger than governments. This means that governments are arguably more beholden to the markets than to the people – which is to say our system might be described as a market oligarchy. Sound excessive? Well, consider that as a result of the banking crisis, a few rich “lords” have been bailed out at the expense of the masses of poor “serfs”, in possibly the biggest redistribution of wealth in history – and a redistribution in exactly the opposite direction to that celebrated by Dilnot.

What the banking crisis highlights is the damage of abstraction. Everything has become a thing – people and planet alike – something that can be traded. In the process, all is desecrated because our sense of what real value is fails us. So don't believe the figures of economists. Their abstract stats tumbling down the screen look real, but they're not. Real life has different measures of value.

You get a sense of this when you consider how contracts now shape so many of our relationships, be that between companies, or between employees and employers, or citizens and government. Contracts inhibit gift exchanges because their ever tighter clauses determine the outcome of every eventuality. That prevents people from acting generously, with trust, as humans. It's a “computer-says-no” culture, one in which even parents must gain criminal records bureau clearance before caring for their children. Similarly, firms stop trusting their employees, instead treating them as creatures to be manipulated, rewarded, incentivised, managed.

The irony is that this is actually damaging to capitalism, for capitalism itself requires trust to function well: without trust people take fewer risks and show less initiative. A target culture, in which people only watch their own backs, is disabled when it comes to creativity and innovation. To put it another way, the flourishing economy is a moral economy. It's because the butcher and baker care about the human relationships they have with their customers, and not just for their own self-interests – contra Adam Smith – that they excel at their trade.

So is the current economic crisis serious? Financially, we'll survive, and so long as you don't lose your job, probably fairly unscathed. Morally, though, it could be a sign of nothing less than the steady diminishment of our humanity., Monday 14 December 2009

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