Whoops!, his collected thoughts on What Went Wrong, is well worth a read. Lanchester has realised that the Credit Crunch (and subsequent events) has been the big news story of the last five years or so, a jaw-droppingly dramatic and serious shudder in the foundations of the economic West, readable and informative in equal measure. To his great credit, Lanchester really has bothered to learn about the minutiae of the market in derivatives, credit default swaps and the like. His astonishment and anger at the behaviour of the bankers is refreshing and immediate.
So what's wrong with Whoops!? Well Lanchester's surprise that bankers should behave greedily smacks a little of naivety. What next? Bears squatting down in the woods? He isn't keen to emphasise the role played in this by Labour, the party he supported, both in terms of its deregulation of the City and its irresponsible, counter-cyclical running of a deficit after 2001. I know from his writing in the LRB that he believes the Government should be stimulating the economy by higher public spending, which is all very well but ignores (and Lanchester always does ignore this) that such spending can only be got by borrowing (of which more later); it also falls into the trap of assuming that for every problem there is a pain-free solution.
Lanchester says he has spent the last two years thinking and researching about the financial crisis, and it shows, both in his impressive command of the detail and his failure to grasp the bigger picture. I have been thinking about economics for nearer ten years than two, and while I learned a lot of new stuff reading Lanchester's book, I can't help thinking he has missed the wood for the trees (perhaps the same trees amongst which the bears are squatting).
For the sad reality about Britain's economic plight is that even if the bankers had behaved themselves (and even if Gordon Brown had discovered Keynes when there was still time to do the hard part - put money aside for a rainy day) it would not have affected our long-term economic position. This was very well expressed in Robert Peston's TV programme about the crash. The jobs we used to have in manufacturing have gone East, and with them has gone our prosperity. We have been allowed to maintain it only because the East was willing to lend its surpluses back to Western governments; which then recycled the money to its consumers; who then bought more Chinese goods. Viewed from this perspective, all the bankers did was find more and more ingenious ways of keeping the party going.
Poignantly, Peston showed archive footage of trade union meetings from the 1970s (a feast of bad clothes, bad hair and bad glasses), at which the comrades were voting not to accept management's offer. Again and again. You can hardly blame them. The unions wanted to improve the lot of their members. Management on the other hand wanted to protect their profits. They were both fighting a losing battle. I remember my Dad saying of some industrial dispute, "They're pricing themselves out of jobs". How right he was.
At some point the West's borrowing spree would have come to an end. China could not continue to lend us the money to buy its goods indefinitely. Actually it would probably have come to and end sooner if the bankers had not used their imagination to persuade us all that loans to people with no visible means of support were a good idea.
To put it the other way, anyone who thinks - and Lanchester apparently does - that if it had not been for the banker induced Credit Crunch none of this would have happened, and we would all be sailing serenely on as before, is wrong. The reality is that we would all have started to feel worse off anyway, and perhaps a lot sooner. The readjustment we are all having to make in our public and private spending would have happened at some point, Credit Crunch or no Credit Crunch. It would have happened even if Gordon Brown had not gone on his spending spree. At some point our outgoings would have had to begin to fall in line with our income.
This is happening now, but painfully slowly. I said there were two things in the papers this morning which reminded me of Whoops! The first was a piece in this morning's Torygraph by Jeff Randall. Randall points out that Britain's debt, despite the Coalition's efforts to cut the deficit, is increasing by £2 billion a day. Lanchester wants the Government to stimulate the economy by borrowing even more. Randall reminds us that the Government has hardly begun to cut public spending, quoting an analyst from Tullet Prebon as follows: "No one has yet explained why the British state must spend £700 billion today, having managed perfectly well on £450 billion, at today's values, 10 years ago."
Perhaps the most interesting thing about Lanchester's book is not what is between the covers, but what it represents. Lanchester's political class - well-educated, liberal - is not on the whole interested in the nitty-gritty of economics. For them businessmen fall into two categories, both equally unappealing. On the one hand is the besuited City capitalist, eating babies for breakfast. On the other, the manufacturer of widgets from the East Midlands, boring and, no doubt, speaking with something of a Birmingham accent. Money just is, or just happens. The prosperity we need to provide schools, hospitals and benefits comes from, well, where? The government? Traditionally the Left likes spending it, but doesn't much like investigating where it comes from. A book like Lanchester's would not have been possible, or necessary, or intellectually respectable were it not for the ignorance of the constituency to which it appeals.
The other thing which reminded me of Whoops! was the news that at the Guardian's open weekend the speaker at a seminar about the future of capitalism was - John Lanchester.
Pope is Catholic shock.
