It is the season of short days and long evenings, but that is not without its advantages. It is a great time to catch up on all the books you know you ought to read, have bought and now sit in an intimidating pile.
I have just finished two short, excellent books; The Big Short, by Michael Lewis, and Spoilt Rotten by Theodore Dalrymple. Whilst on the surface the subjects of the two books are miles apart, there are strong common themes about our current condition.
The Big Short tells the story of the US sub-prime mortgage crisis. It is not an economics thesis but a tale of the characters and events which unfolded. And anyone who has read his previous book, Liar’s Poker, will be familiar with the fast-paced journalistic style in which it is written. The books lays out how the market for sub-prime mortgages was created on Wall Street, how that market grew rapidly, even though it was based on lending money at cheap and essentially illusory introductory rates to poor (‘sub-prime’) customers who never had any realistic prospect or repaying the loans. It grew because it was in the interests of consumers, who had access to easy credit for housing they could not afford, the US government, which was keen to ensure that credit was available to all, and because it fuelled economic growth, and Wall Street because it drove enormous short-term profits. But it rapidly created a bubble and the key characters in the book are the few people who saw the bubble for what it was, were ignored when they raised questions and then found a way to bet that the bubble would burst. They made enormous sums of money when their bets came good.
It is extraordinary that this could happen less than ten years after Wall Street, and much of the rest of the world, had been sucked into an other bubble – the dot.com bubble. It reminds us of how desparately susceptible we all are to anything which appears to drive rapid economic growth.
Spoilt Rotten is a different sort of book altogether, though it is also short and highly readable. It describes how the seemingly attractive notion that everyone is born innocent and inherently good has led to the conclusion that if people subsequently lose that innocence and goodness that is the fault of their circumstances. We can none of us fail, we have no responsibility for the circumstances in which we find ourselves, indeed for our actions, and we are all victims.
Dalrymple calls this a romantic and sentimental view of the world, and the sub-title of the book is ‘The Toxic Cult of Sentimentality’. He contrasts this romantic view, which has its origins in Rousseau, with a Christian view (or I would say Classical view) which accepts that man was born imperfect and that it requires the exercise of will to be good. He shows how the principles of romantic sentimentality have spread through education, social welfare and the legal system, and how those principles have consistently undermined the sense that people are responsible for their own actions, and the consequences of those actions. He also shows how the consequence of this position is the view that the individual is always the victim, rather than the author of their own destiny.
There are some remarkably common themes which emerge from the two books which serve as a salutary reminder of the state of the western world:
1. The acceptance that people are not responsible for their decisions and actions has now become universal. It has extended all the way to the top so that the bankers and financiers who caused the recent crisis appear to be held no more responsible for their actions than is the individual who incurs debts they have no prospect of repaying. This universal abrogation of responsibility has to be reversed.
2. Beware the wisdom of crowds, particularly when their wisdom and their self-interest are aligned. It can create an almost unstoppable popular pressure to do the wrong thing. When a thing is almost universally agreed to be the right thing to do, it is almost certainly not.
3. The superior weight given to ‘feelings’ over reason has to be reversed, in politics, in business and in life. A business or political process which is driven by a belief that you consistently have to respond to people’s feeling and emotions is almost certainly heading in the wrong direction.
Reading these points again quickly, I see that they could be interpreted as anti-democratic; surely in a democracy the will of the people is absolute. But this is not my point or intention. We have to distinguish between democracy and mob rule. The founders of the American constitution understood this very well and structured government specifically to ensure democracy but guard against mob rule. Edmund Burke understood this equally strongly when he defended representative democracy to the electors of Bristol: “Your representative owes you, not his industry only, but judgment; and he betrays, instead of serving you, if he sacrifices it to your opinion”. Now that really is a message for our times.