We’re now in year three of the worst financial crisis since the great depression, and it’s a little difficult to say exactly where we are. Equity markets have just had their strongest quarterly performance in decades (and in some cases, ever). Bankers are starting to feel a little more confident about calling an end to the crisis. The financial media, being the natural cheerleaders that they are, are back to saying that everything is looking up again, and even an number of respected analysts (you know, the ones who missed the crisis in the first place) are getting a bit more optimistic. Even Nourel Roubeni is starting to sound a little more bullish. Gone are the days, apparently, of watching Maria Bartoromo have palpitations on CNBC, which was occasionally the high point of my days about a year ago.
Um, not so fast. There are several things here being conflated. First of all, the strong economic recovery that’s being seen in China and some of Asia, and certainly in much of Latin America, is not about to be replicated in Europe or the US. There’s no reason to think the consumer is going to start running up those Visa cards again. The consumer is still very squeezed, especially in the US, and the fact that economic conditions are a bit more stable now doesn’t redress the fact that real wages declined over the past two or three decades, and that the only source of wealth creation for most Americans and British–home equity–has been pulverized. Second, the sad fact is that the roots of the financial crisis–and make no mistake, it was a genuine financial crisis of unprecedented global scope–are still unaddressed. And apparently aren’t going to have addressed either. There was a time earlier this year when one could hope that there would be some meaningful regulatory reform. But then Obama, in a major disappointment (and possibly a politically disastrous error in judgment) appointed Tim Geithner Treasury Secretary and Larry Summers Chief Economic Advisor. And since neither has never met a financial regulation each didn’t think should be weakened, I knew that there wasn’t much hope for reform. So at this point, then, there has been nothing done at the level of any government, or any regulatory authority, that will prevent a replay of 2007 and 2008.
If the people involved in drafting and proposing regulatory changes are developing the same kind of memory deficits we’re seeing in banks these days, they should probably head over to the National Theatre and sit through David Hare’s The Power of Yes, his new play about the origins and causes of the financial crisis. In short, its’ a brilliant evening of theatre. Hare has followed the model of his two previous plays on controversial themes–The Permanent Way, about the disastrous state of the privatized UK railway system and the Potters Bar disaster, and Stuff Happens, about the factors leading up to the invasion of Iraq by the US and UK, along with the coalition of the clueless. In both of these outings, Hare basically combed the public record and assembled a stage full of the personages involved in each event, recounting, in their own real words, their opinions, or judgments, or (usually) their rationalizations. We never went to Stuff–it would have been too painful. But it worked brilliantly in The Permanent Way–yes, it was clear that Railtrack was incompetent and culpable for a number of unnecessary deaths. But hare also brought out the complexity of the situation–the history behind the poorly planned privatization, and the layers of government complicity, that made allocation of blame broader, but more difficult at the same time simply because it was more diffuse.
Hare follows a similar approach in The Power of Yes, but with a twist–he’s now one of the central characters, a playwright who is writing a play about the causes of the crisis, who doesn’t know anything about banking, or finance, or even the appropriate vocabulary. So much of the play is based on his interviews with various parties, and it works well–because the audience is unlikely to be any more clued in, to be honest. So we follow Hare on his search for some rationale behind the meltdown. And, not surprisingly, it’s complicated, simply because the players are more global, and they do things that no one outside of banking had much inclination about, or interest in, until the meltdown. So Hare interviews reporters from the Financial Times, and the chairman of the Bank of England and the FSA (the principal financial regulatory body in the UK), and George Soros, and a hedge fund guy, and bankers and lawyers, and whoever he can talk to that can explain this all to him. And the explanations are multiple, and overlapping, and contradictory, and sometimes wrong, or misguided, and sometimes spot on. And it eventually becomes clear that there is no single one thing, no smoking gun–there are a number of things, ranging from regulatory failure, to banking cultures, to simple greed and mendacity, to genuine incomprehension about the complexity of what banks were doing. Just like life. If I disagree with anything, I think Hare should have put a little more emphasis on the change in banking cultures in the 1980s and 1990s, when banks moved from sleepy partnerships to large global powerhouses with few constraints and, more importantly, a higher risk appetite because those risks were no longer being borne by just the banks–they were diffused throughout the global financial system. What was supposed to be riskless was just the reverse. It’s not that it’s not there in the play–I would have just given it a bit more emphasis. But that’s a quibble, really.
It’s a journey of discovery for both Hare and the audience. At the end, Hare seems to understand what happened, and he recognizes its complexity. But he’s also furious, and astonished, that there has been no reckoning. As are we all. Hare wants a reckoning, and there isn’t one. And Hare intimates out what I mentioned earlier–it’s not clear at all what is being put in place, if anything, to prevent a repeat performance. Fortunately, that’s not an issue for The Power of Yes–there will be plenty or repeat performances, since it runs through January 10. The acting is fine, and the play itself is often quite funny. And the house was packed. Book soon and go.
Categories: scholars and rogues