Conspiracy, perhaps not......

I received an unusual question today, as follows:

'Reading your essays one can't help but wonder at the enormity and depth of the government cock-ups that have made us the country we are today.

Looking at the exquisite perfection of the US and UK's problems, do you ever, just for a fleeting moment, wonder whether any of this might have been deliberate?'

I hope that I have not misunderstood the intent of meaning of this poster. It appears that there is a suggestion of conspiracy, that there is some malign purpose in what is occurring in the UK/world economy. I am not sure I have it right, but I will answer on that basis.

The short answer to this question is 'no', there is no conspiracy.

My own view is that the current situation stems from group think, vanity, pettiness, personal ambition and sometimes (good, old fashioned) stupidity.

For example, if we take the sub-prime fiasco, what were the causes? The answer is simply that someone came up with a very clever way of repackaging debt that separated risk away from the lender. It allowed for a massive expansion of business and, to those selling instruments such as CDOs, it allowed for big profits to be made. As such, the problem was created by the urge to make money. The stupidity part was that the same institutions that enjoyed the benefits of selling toxic loans were also, through other parts of the institution, directly or indirectly, buying such toxic waste. I have every confidence that there were people within the organisations that were highlighting the dangers, but they were more than likely sidelined. After all, who wants a party-pooper when it all appears to be going so well? Why spoil the party? In such circumstances, no one likes the person in the meeting who is asking the awkward questions.

If we look at government handling of the economy, for example the UK government, we can ask the same kind of question. What caused the government to follow such a disastrous economic policy?

In the case of the UK Gordon Brown was steering government economic policy. If what we read about Gordon Brown is true, he appears to be a very vain man, convinced of the power of his own intellect. As he was presiding over what appeared to be an economic boom, did it ever occur to him that the boom was built on a foundation of sand? I think that it probably did, but his own vanity would get in the way of accepting such an assessment. Instead of looking at the reality of the situation, it was far easier for him to convince himself that it was his sound judgement that was at the root of the 'economic success'.

Gordon Brown no doubt saw himself as an intellectual with power enough to shape the world around him. A wonderful illusion, but nevertheless an illusion. I have mentioned in a previous post that he may have intervened to prop up the house market. Was this part of an evil conspiracy? I think not, and am confident that he found self-justifications for what he did, outside of recognising that what he was doing was supporting an artificial boom. Undoubtedly fear of being 'found out' was the true motive, but people with such vanity are unlikely to accept their own fallibility.

Again, there were undoubtedly those who were questioning the wisdom of policies that were creating such apparent economic success. With international respect, acclaim, the respect of the press, and so forth, why would Gordon Brown want to hear the truth of what was really happening. After all, he could point to the numbers or to the economists (cheerleaders) that supported the view that all was going well. If the whole world says you are clever, capable, doing the right thing, then why would you not believe in your own brilliance. Until the last couple of months, people like myself (the cynics) were a minority (in my case a person with no power to influence, and saying things that nobody wanted to hear). Within government, do you think that any cynic's voice would be heard? After all, Gordon Brown had the charts and figures to show that all was going well. He could point to the holy grail of economics, growth in GDP.

The same can be said of the other western economic leaders, such as Alan Greenspan, who have presided over the recent boom. One and all, they believed they were 'masters of the universe', giants who (with their intellect) were guiding the world economy to success. As these leaders patted each other on the back, and offered their mutual admiration, they were steering the west into an economic black hole. The sad, and human, part of this is that they believed that they were in control, and that they convinced themselves of their own brilliance.

It would be nice to think that there was some conscious conspiracy behind the current mess, that there was some master plan, and that the situation has some purpose behind it. However, the reality is that the source of the mess is more prosaic. It does not lie with highly intelligent individuals making plans in smoked filled rooms. Instead it lies in the fallibility, weakness, personal ambition and vanity of very ordinary and foolish people.