Anyone who claims to know how the economy works, with a high degree of confidence, is lying. So says Lord Turner, who now serves on the $50m think-tank funded by billionaire hedge fund operator George Soros.
So am I a liar?
That is the implication of the pronouncement by Adair Turner at a meeting in London that was convened to explore the need to change the way banks create money.
Adair Turner speaks with authority – you would think – when pronouncing on the economy.
- Chairman of the UK Financial Services Authority as the financial crisis broke in September 2008.
- He helped to redesign the global banking and shadow banking regulation as Chairman of the International Financial Stability Board’s major policy committee.
- Now a Senior Fellow of the Institute for New Economic Thinking, and at the Centre for Financial Studies in Frankfurt.
- Visiting Professorships at the London School of Economics and at Cass Business School, City University.
Before 2008, Lord Turner was a non-executive Director at Standard Chartered Bank; Vice Chairman of Merrill Lynch Europe; and, in the 1990s, Director General of the Confederation of British Industry.
Now comes the problem.
In his new book, Between Debt and the Devil, Lord Turner confesses that he did not see the 2008 crisis coming. And if he couldn’t see it coming, that must mean there is something wrong with economics as a social science, right? He learnt his economics at Cambridge, where he was not equipped with the knowledge to anticipate major events like a looming global depression.
So as born-again researcher/reformer/educator, his lordship declared on September 7, at a meeting in Central Hall, London, that it was necessary to inform the public that economics does not have definitive, certain answers. It’s a subject for continual exploration under conditions of uncertainty. “We must not propagate that we have got all the answers,” he declared. If we did so, “we are lying”.
So I am a liar?
In 1997, 10 years before the peak in house prices, I provided a forecast to the New Labour government. I wrote to each of its top politicians: Blair, Brown, Darling and Mandelson; and, for good measure, to the new media guru in Downing Street, Alastair Campbell, with whom I worked for a short period in Fleet Street.
With utter confidence I warned them that house prices would peak in 2007 (they did), and that this would be followed by a depression (into which the global economy is still locked). They could have taken my advice and adopted pre-emptive reforms that would have softened the blows. They didn’t, as a result of which, millions lost their homes and jobs.
I am a critic of the way economics is practised; it’s a social science abused by its practitioners. People like Lord Turner, who has left his fingerprints all over the western economy (to say nothing of post-Soviet Russia, which he presumed to advise in the 1990s).
Uncertainties do abound, but they are not due to the defects in economics as a social science. The failures are almost entirely due to the ideological prejudices that distort an intellectual discipline that would otherwise serve us very well.