‘Take a deep breath, think about the worst possible outcome and how you can
survive, and then look forward with optimism. These are times that call for
courage.” So says Rick Haythornthwaite, chairman of MasterCard and head of
the Southbank arts centre in London, when I ask for his advice on how to
cope with the recession.
Or, as Irving Berlin put it: “Let’s face the music and dance.” But facing the
recessionary music is going to be tough, very tough, and dancing may be out
of the question. We’re all in the line of fire. You may not have a job next
year; you may not have a job now; you may not have a job ever again. This
one is going to be “long and deep”, says Haythornthwaite.
“There’s still a lot more bad news to come. We’re seeing corruption of the
basic structure of our industries . . . What is required is a whole process
of systemic rebuilding, and that has not yet started.”
That’s the music, so how do we dance? This may seem a callous question. No
recession is good. On the other hand, we’ve got one whether we like it or
not, so what’s the upside of the downturn? What will Britain be like after
this once-in-a-lifetime convulsion? Better? I think so.
But, first, what just happened?
CAPITALISM is a forest fire that is never extinguished, only contained. The
great Austrian-Czech economist Joseph Schumpeter saw “creative destruction”
as intrinsic to the nature of capitalism. “Economic progress in capitalist
society,” he said, “means turmoil.”
Smouldering in every boom are the fires of bust. Every generation has its City
wide boys with bonuses claiming to have beaten the markets. They are always,
by nature, in denial. In August 2007 I listened in disbelief as a big City
cheese lectured me on how they knew a thing or two in the Square Mile and
the sub-prime crisis in the US was no big deal. I must look him up.
We endured five downturns in the 20th century. There were two in the interwar
years. Then came the Seventies recession after the 1973 oil shock, the early
Eighties recession as Margaret Thatcher refused to fund union control of
industry, and then the early Nineties recession associated with the savings
and loan crisis in America and the rise in the price of oil caused by the
Gulf war.
The downturn that followed the bursting of the dotcom bubble in 2001 was
feeble in comparison. So, leaving that one out, since the last recession
we’ve had 16 years of boom, based on easy credit, the annexation of our
economy by financial services, rabid consumerism, a house price bubble and
low energy prices.
It was also 16 years of celebrity chefs, reality TV, insanely expensive and
ugly handbags, TV shows telling you how to do up your house and sell it,
Gordon Brown claiming an end to boom and bust, the death of Diana (the
shoppers’ princess), the rise and fall of Tony Blair (the spinners’ prince),
the rise of Britart, the continued failure of the England football team, the
Millennium Dome, Jade Goody, City boys drinking £24,000 methuselahs of
champagne at Movida nightclub, Bentleys everywhere, obesity and, as Abba
sang, “Money, money, money, always sunny in the rich man’s world”. So here’s
the first good news headline: it’s over!
Yes, maybe even obesity. The strange thing is that people get healthier in a
recession, according to Chris Ruhm, an economics professor at the University
of North Carolina. Some years ago he decided to test the conventional wisdom
that hard times make people sick. He found the opposite.
“People get physically healthier and mortality rates fall during bad economic
times,” he tells me. “It’s the opposite of what I expected to find.”
Studying recessions since the 1970s, Ruhm found that traffic deaths fell
noticeably, probably because of a combination of less drink consumed and
fewer miles driven. Even deaths from heart attacks, strokes, flu and
pneumonia fell.
Out of work and not eating out, people lose weight; and they tend to find
something more active to do than sitting in front of a computer screen.
Also, of course, they can’t afford to smoke and drink as much. “When times
are hard, they control the things they can control – they live healthily.”
On the other hand, Ruhm found a recessionary decline in mental wellbeing.
Suicide, anxiety and depression all increase as GDP falls. But we’re looking
on the bright side here.
How are those other horrors of the long credit boom going to change? Culture –
high, popular or political – is usually transformed in a recession. Already
the signs of a fundamental revaluation are upon us.
“Those house programmes on TV about maximising value, they’re being rebranded
as shows telling people how to make the best of what you’ve got,” says
Dominic Sandbrook, the historian. “We’re going back to the DIY ethos.
“And it was in the Seventies that Delia Smith took off as a TV chef. That was
not about eating out; it was about the dinner party, a classic Seventies
thing. It’s worth remembering that the very first celebrity chefs, Fanny
Cradock and Elizabeth David, took off during austerity. It was a form of
escapism.”
This is a crucial point: during recessions, fantasy survives alongside the
grim realism. In the Great Depression of the 1930s, John Steinbeck’s
dust-bowl saga, The Grapes of Wrath, co-existed with movie fantasies such as
the Busby Berkeley musicals and the poignantly titled Gold Diggersof 1935.
Although Hollywood investment is said to be in decline, history suggests that
movies could be in for a boom. Going to the cinema is cheap compared with
theatre, clubbing and restaurants. So that’s good news: film, the great art
form of our age, is going to be just fine.
The economist Paul Ormerod, author of Why Most Things Fail, is looking forward
to the impact of the recession on another form of popular culture, football
– or to be precise, footballers, the most visible sign of the boom’s
corruption of our values. It’s not just that they’re rich; it’s that they
egregiously flaunt their wealth as if celebrating their own alienation from
the rest of society.
“The recession may bring an end to the gross excesses in professional soccer,”
says Ormerod. “Players have become completely distanced from the fan base.
They’re like investment bankers.”
Footballers, after all, are only City wide boys with lower IQs and louder
clothes. For Ormerod the end of the detachment of both these elites from
ordinary life will be good news.
And Haythornthwaite sees more good news opening up here. Since the early 1990s
finance has been sweeping up many of our brightest graduates. Nothing could
be better news than the chance to guide the best young brains towards more
valuable careers.
“My hope,” says Haythornthwaite, “is that some of the most talented people
will go back into science-based and engineering careers. So much of the
financial sector is a zero-sum game, whereas science and engineering create
sustainable wealth. That’s what’s going to get us out of this recession.
It’s a good thing that jobs in the financial services are now so much less
appealing.”
Ormerod wants to see a culture in which it is commonplace for directors to
hand back bonuses when things go wrong. “The chairman of UBS actually paid
back his bonus – that’s good. I’m also seriously thinking we should have
show trials of bankers.”
EVEN more good news: getting rid of the fat cats will not simply be an act of
justice; it will make life better by reducing the price of luxury.
“The recession will mean relatively more affordable goods for the middle and
upper-middle classes,” says Nassim Nicholas Taleb, author of The Black Swan,
the book that forecast the crunch and anatomised the idiocies of the banks
before they became apparent to the rest of us.
He explains that fat-cat demand pushed up the cost of “good wine, restaurants,
business-class tickets, hotels in Venice, ski vacations, honeymoons” far
above the normal rate of inflation. They’ll all become cheaper now.
Taleb also looks forward to “less confident businessmen on cellphones in
trains, airplane lounges and restaurants, less arrogant bankers and
economists needing to prove they are not parasites by paying attention to
the material world”.
If that isn’t enough, he expects an increase in “yoga and/or church
attendance, poetry, teleconferencing and online gambling”.
Will people become nicer? There’s always been a strong belief that bad times
are good for people. “High costs of living and high living will come down.
People will work harder, live a more moral life,” said Andrew Mellon, the US
treasury secretary, in the aftermath of the 1929 crash.
Rowan Williams, the Archbishop of Canterbury, has said of our latest crash: “I
think there are some huge moral lessons to be learnt about the nature of
accumulating wealth . . . A lot of people are waiting to hear an
acknowledgment of some responsibility for irresponsible behaviour.”
Pope Benedict agrees: “The recent crisis demonstrates how financial activity
can be completely turned in on itself, lacking any long-term consideration
of the common good.”
Are they right? Perhaps we should see recessions religiously, as necessary
rites of retribution. Once a decade or thereabouts, we are destined to
embark on a seasonal festival of atonement for our sins of greed and excess,
for the folly of thinking that, this time, we have beaten the markets and
tamed the fires of capitalism.
A recession, like God, is something bigger than human vanity. It is certainly
bigger than the view that has prevailed until recently – that people are no
more than what they are worth, that every man has his price. Even if people
don’t learn those moral lessons, perhaps they will learn one big practical
thing: recessions happen and there’s nothing we can do about it.
“We should train all our executives to understand the nature of recession,”
says Professor Lynda Gratton, a management guru. “Young kids today don’t
understand; they only understand growth. We should help organisations to
rehearse the downside on a much more frequent basis.”
Luke Johnson, the serial entrepreneur and chairman of Channel 4, is more
sceptical of the benefits of downturn. He notes that “bishops and such-like
say there will be a healthy revision of our priorities and values”. He
doesn’t agree. “If we suffer a fall in our standard of living, that will not
be a very nice thing, and the idea that we will become more virtuous and
kindly is not what I think will happen. If anything, people will get more
angry and irritable. I think I’ve already noticed it. People are more tetchy
as you go into the Tube in the morning.”
On the other hand, Johnson believes in the power of the “creative destruction”
of a recession. He points to the American car industry as exactly the kind
of business that needs one of capitalism’s forest fires to sweep away its
complacent practices and bad cars.
Our equivalent of America’s Big Three car makers is the City. “There will be,”
says Johnson, “a massive shake-up in financial services and, although the
consequences are very painful, it may ultimately produce a better, more
efficient industry, less prone to self-inflicted errors, and that will be
good for the country.”
He points out that “Bill Gates started Microsoft in a hotel room in the depths
of a recession”. It can be a good time to start a business. “Talent is
available, property is available and some of the incumbents are so
distracted and weakened that, as an upstart, you can make real headway.”
The new technology will be cheaper. This is already happening: the netbook
arrived this year. It’s a small, cheap (often below £200), stripped-down
laptop. Buy the ones with open source – that is, free – software and you’ll
have a machine that does everything you need and nothing you don’t. They’ll
be everywhere next year, as will many other such cheap, effective products.
We’re just beginning to realise how ruthlessly we’ve been ripped off.
Such machines also suggest yet further power is to be unleashed by the
internet. Social networking – Facebook, MySpace – is already vast, yet still
in its infancy. Soon almost everybody will be talking to each other all the
time. And blogging both communicates and, often dubiously, gives idle hands
work to do.
“You’ve lost your job,” says Arianna Huffington, founder of the mighty online
journal and blog space The Huffington Post, “you have time to blog.”
Indeed, judging by the dotcom bust of seven years ago, the internet seems the
best example of all of Schumpeter’s “creative destruction”.
“I’m not sure we could have learnt how to really use the internet without a
dotcom bubble,” says Tyler Cowen, an American economics professor.
Recessions also produce more humble success stories. Sandbrook points out that
even in the 1930s there were significant pockets of success in
depression-hit Britain. This time, thanks not just to the recession but also
to the falling pound, people are showing signs of abandoning their mania for
travel. Holidays in the UK are expected to boom.
“It’s the biggest opportunity to sell Britain ever,” says Hoseasons, the UK
tour operator.
Even that breathtakingly expensive festival of running and jumping, the 2012
London Olympics, can now be seen as a Keynesian boost to the economy rather
than a costly drag.
SO what’s the best good news? Haythornthwaite forecasts we will soon realise
that we are more than our money. “People,” he says, “will spend less time
feeding their wallets and more time feeding their souls.” And remember: he’s
the chairman of MasterCard.
For me, the death of the culture-free, money-rich slob is the great good news
that will come out of this recession.
Years ago my wife and I took our daughter to Mirabelle restaurant in Mayfair.
Marco Pierre White was still cooking and the place had regained the
splendour of the days when Princess Margaret used to eat there. It was a
delight.
Then the hedge funds moved into Berkeley Square. We went back for another
treat. It was just before the smoking ban. The place was thick with grey
fumes. People were drunk and raucous, revelling in the sheer cost of their
orders.
Our service collapsed the moment it became clear we weren’t going to spend
£200 on a bottle of wine. Leaving, we had to step over a shouting lout on
the staircase, a fag hanging from his mouth and a phone clamped to his ear.
Another London institution had been corrupted by money.
It’s over, thank God. Hard times are ahead but deluded times are behind us. We
must face the music – but also dance. Next year in Jerusalem, say the Jews.
I say, next year at Mirabelle.
To read Bryan Appleyard’s blogs go to www.bryanappleyard.com
CAREER CHANGE
Less emphasis on making millions in the City, more attention on science,
engineering and other constructive industries
AFFORDABLE LUXURY
Spending thousands on an “It bag” such as the Hèrmes Birkin will look passé;
prices will fall. Thrift-store individuality will count for more
THE X FACTOR
Creativity often thrives in a downturn, spurring new ventures.
New forms of social networking are predicted to take off
WELCOME HOME
Properties will once again become places where we live, not the cash machines
that dominated television schedules and dinner-party conversations
FIT FOR PURPOSE
Goodbye to overpriced expense-account lunching, hello fitness. In a recession
people lose weight and improve their physical fitness
KICK OUT THE ‘CRACKBERRY’
The 24/7 office demands of the boom will give way to new freedoms as people,
through desire or necessity after redundancy, reinvent themselves
