Stefan Stern: Marx was right about change

Even now, political leaders are advocating wholly orthodox approaches to managing deficits and currency volatility
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The Independent Online

The pundit could not have been clearer. "Equities are cheap," she declared with wonderful certainty. In plain English what listeners to the Today programme were being told was that they should consider scrabbling together whatever spare cash they could to buy shares in stock-market companies. But we never got to hear which companies in particular we should be investing in. Equities may indeed be cheap. Then again, perhaps they aren't. I really don't know, and neither do you. And nor do any of the experts who earn a good living telling pension fund managers, insurance companies and other investors where to place their financial bets.

If you think you know for certain what will happen next to US unemployment levels, their budget deficit, the eurozone, Chinese inflation, or the price of oil, wheat or copper, you are either a genius (sorry, but that is unlikely) or deluded (I'm tending to option (b) here). That is not meant to be as rude as it sounds. I know no more, and possibly less, than you do.

At a time like this in the global economy confusion is a rational and not unhealthy response. But we should seize this moment to move on from confusion and enjoy intellectual liberation. That is what Charles Moore, the High Tory former Daily Telegraph editor and official biographer of Baroness Thatcher, has done.

In a recent column for that newspaper he shared his anxiety that "the left" may have been right about business all along. He summarised the workings of the free market in these terms: "The rich run a global system that allows them to accumulate capital and pay the lowest possible price for labour. The freedom that results applies only to them. The many simply have to work harder, in conditions that grow ever more insecure, to enrich the few." I'm not sure that the subject of his long-awaited biography would accept this characterisation of global capitalism.

Other respected figures are daring to say things that, perhaps only a few months ago, would have still been completely unsayable. Nouriel Roubini, professor of economics at the Stern school of business in New York, managed to produce "Marx was right" headlines after an interview with the Wall Street Journal last week. "Karl Marx got it right, at some point capitalism can destroy itself," he said. "We thought markets worked. They're not working."

Roubini earned himself the nickname "Dr Doom" – revealing label – for being among the first economic commentators to declare that all was not well in the world's financial system. I first heard him speak at a conference in Tel Aviv about five years ago, before the crisis started. Seemingly without pausing for breath for around 30 minutes, he explained calmly why things looked grim for the global economy. But it was still possible, then, to disregard his warnings as over-the-top and unnecessarily pessimistic.

That, of course, is the psychological problem which lies behind politicians' and financiers' reluctance (or inability) to recognise that radical change in their system is required. Everyone is more comfortable with familiar orthodoxy. When a critical voice is raised to suggest things are going badly wrong, it is easier to reject it as a misguided voice of doom. Whistleblowers face this problem, whether employees in a business or organisation or participants in a network.

For two or three years after the credit crunch of 2007 first struck, newspapers and airwaves were filled with earnest people announcing that we must not at all costs go back to "business as usual". At that time expressing this view was a sure way to win supportive nodding from all who were listening. But the nodding dogs did not really mean it. They have reverted to type. Perhaps this is what has provoked figures such as Professor Roubini to ratchet up the rhetoric a bit more.

Even now, most global financial institutions and political leaders are advocating wholly orthodox approaches to managing budget deficits and currency volatility, even as their efforts are revealed as being more or less futile, or worse. The truth is perhaps too scary for some to contemplate. Either that, or the temporary winners of the current system are simply filling their boots with as much as they can before the next, potentially even bigger crash.

Those who regard the recent actions of rioters in English cities as "criminality pure and simple" will not see any connection between Roubini's declaration that "Marx was right" and the decision to steal a 42-inch TV from a burning electricals store. But, for some, looting may have seemed a sensible (if illegal) response to the apparently continuous turmoil of the economy. If everything about your financial future seems at best uncertain and at worst desperate, why not carpe diem, or carpe television at any rate? Rational economic man (and woman) has finally been sighted, legging it down Tottenham High Street in a new pair of trainers.

Marx said that while interpreting the world was all very well, the point was to change it. If capitalists want to keep their world safe for capitalism, they need to face up to what is wrong with it, and change it, fast.

The writer is visiting professor of management practice at Cass Business School, London