Not a Step Back: Liberalism and the Crisis at the Economist
Some financial journalists reconsidered their positions in the aftermath of this calamity, chastened by their blindness to it, and writing bold think-pieces announcing the death of neoliberalism, the revenge of Keynes, even of Marx.102 Not the Economist. Steadfast, it acted as a kind of automatic stabilizer for a liberal ideological order suddenly racked with self-doubt – which helps explain why neoliberal policies that caused the crash were prescribed as the only cure for its aftereffects, amidst persistent stagnation in the world economy a decade later.
Not only did the Economist demand that governments bail out banks, warning of utter disaster on the scale of 1929 if they did not – ‘no country or industry would be spared from the equivalent of a financial heart attack’ – it pushed aggressively for the austerity that flowed from this, in order to pay down the debts that states had taken off banks’ balance sheets. The crisis thus became a powerful rationale for urging cherished reforms, advocated long before 2008. In ‘Capitalism at Bay’, the paper advised liberals to keep calm and carry on. ‘All the signs are pointing in the same direction, a larger role for the state, and a smaller and more constrained private sector. This newspaper hopes profoundly that this will not happen.’ But, ‘in the longer term a lot depends on how blame for this catastrophe is allocated. This is where an important intellectual battle could and should be won.’103 The Economist suited up for battle. As the credit crunch turned into a global recession, it argued nothing much was wrong with the real economy, still less capitalism; and if the causes of the crisis were technical – ‘dodgy lending’, ‘cheap money from emerging economies, outdated regulation, government distortions and poor supervision’, ‘dangerous incentives and the reckless use of mathematical models’ – so were the solutions: ‘smaller, better regulated, more conservative’ banks, and more oversight.
In point of fact, the Economist pushed back against proposals to attach conditions to the bailouts, or restrict banks’ freedom: ‘wholesale nationalizations’ would ‘undermine property rights’, sap the entrepreneurial spirit, and foment cronyism. Breaking up the banks or returning them to Glass-Steagall rules, which had once kept investment and depository banks separate, was ill-advised. Even oversight could go too far, for ‘liberalisation had good consequences as well: by making it easier for households and businesses to get credit, deregulation contributed to economic growth.’104 With concessions as footling as these in the pit of the crisis, the paper clambered out in no time. Deregulation was back on the agenda by 2010. In 2012, the front cover evoked the London Blitz under the banner ‘Save the City’, signalling finance had been unfairly attacked.105
Having demanded a bailout for Wall Street, the Economist refused to countenance the same for the US car industry or the millions it employed. ‘Banks qualify for help because the entire economy depends upon their services. They are vulnerable to sudden collapses in confidence that can spread to other banks that are perfectly solvent.’ Detroit ‘employs a network of suppliers, which would suffer if production shuts down’, and yet, ‘nothing would sap a recovery and job-creating enterprise like locking up badly used resources in poorly performing companies.’106 And even as monetary policy grew increasingly unorthodox, with central banks buying up public and private assets and keeping interest rates at or near zero, the Economist took up the battle hymn of a doctrinaire deflation (‘growth friendly fiscal consolidation’) in country after country by the turn of 2010, from Portugal, Ireland and Spain to Italy and France – but nowhere more lustily than in Britain itself, which could once again become an economic model unto the world.107
Enthralled by the Liberal-Conservative coalition that came to power there in 2010, the Economist hailed its legislative agenda as ‘revolutionary’: cuts of a quarter to most state departments, higher consumer taxes, student tuition fees raised from £3,200 to £9,000, a public sector pay freeze and 330,000 layoffs in four years, spending cuts to bring deficits down 6.3 per cent by 2014–15.108 This was just the start. Why should the ‘bloated’ National Health Service be off-limits? ‘Tories should have used their disastrous inheritance as an excuse to break their promise to maintain NHS spending.’ In welfare, means-testing child benefit and eliminating winter fuel payments and bus passes for the elderly could yield savings. David Cameron appeared on the cover in a Union Jack Mohawk, ‘Radical Britain: The West’s Most Daring Government’.109 If that was not clear enough, Wooldridge spelled it out under his own name in the Times in 2012: ‘Stop the war on wealth, we need these rich few.’110 A year later, Margaret Thatcher’s death was treated like the martyring of an insurgent, rifles pointed skywards, spent ammo clanking to the ground. ‘Freedom Fighter’, blared the Economist in black and white.111
Bestirring the ‘Weakened West’
Though he acknowledged past mistakes in Afghanistan and Iraq, Micklethwait showed neither remorse nor reticence about urging on further American wars. On this score, the Economist did not always give Barack Obama the credit he deserved, grumbling that he was too hesitant to use the hard power at his disposal. In Libya, all went well. When Arab Spring protests gave way to an armed rebellion against Muammar Qaddafi in February 2011, the paper called for a NATO-enforced no-fly zone from the start. Soon it was demanding aerial bombardments, a naval blockade and regime change – to guard ‘against the threat of butchery in Benghazi’ and give ‘a region of 350 million Arabs stuck in poverty and dysfunctional politics’ a ‘chance to come alive’. Such an attack was ‘unarguably legal’, based on a ‘helpfully elastic’ UN resolution ‘endorsing “all necessary measures” to protect civilian life’, opposed only by ‘the pacifist brigade’.112 Some 17,000 air sorties later, it was ‘a good war’ for NATO: admirably restrained, its pilots ‘keeping collateral damage to a minimum’, and with Europe supposedly in the lead of an operation essentially conducted by the US, a ‘template for future operations’.113
Concerning Syria, however, the president was a disappointment. There, in a bloody civil war in the aftermath of the Arab Spring, where Obama was funding and arming Islamist rebels, it called for partition in 2012: a Turkish run ‘safe-haven’ in the north-west, funded by NATO and Arab League countries, to train the Free Syrian Army fighting against forces loyal to President Bashar al-Assad.114 A year later, it called on Obama to strike at Assad for using chemical weapons: ‘hit him hard’, it urged. Let a ‘week of missiles rain down on the dictator’s “command and control” centres, including his palaces’ to ‘deter him from ever using WMD again’. Should this fail, show him ‘as little mercy as he has shown to the people he claims to govern. If an American missile then hits Mr Assad himself, so be it’.115 When Obama asked Congress to authorize the attack he had readied, and settled for mediation by Putin, the paper was aghast at this blow to presidential power (which must be ‘quick and agile’, ‘take hard and unpopular decisions’), to ‘the credibility of US foreign policy’ (creating expectations this might be ‘subject to the vagaries of congressional sound bites’ in future), and to all those ‘who cherish freedom’ and ‘put their faith’ in the West (represented on the cover as a lame and toothless lion, casting a forlorn look at Syria from across the Mediterranean).116
This overwrought language about the fate of the free world was reminiscent of the Cold War for a reason. Under Micklethwait, the Economist once again spied a Russian behind every setback for the West; a narrative that took shape in 2008 after Moscow trounced Georgia in a dispute over South Ossetia and Abkhazia in the Caucasus. This, argued the paper matter-of-factly, was a setback for the West, ‘which has been trying to prise away countries on Russia’s western borders and turn them democratic, market-oriented and friendly.’117 Six years later, such prising provoked a new conflict, when pro-Western protestors toppled Viktor Yanukovych in Kiev, and Putin reacted by backing pro-Russian separatists in east Ukraine and annexing Crimea, home of Russia’s Black Sea Fleet and a Russian majority population. For the Economist, this was
quite simply the end of ‘the existing world order’. Crimea was a new Sudetenland, Putin another Hitler, ‘armed with a self-proclaimed mission to rebuild the Russian Empire’ from ‘Central Asia to the Baltic’. Anything less than sanctions against him was ‘appeasement’: a ‘fundamentally antagonistic’ state, Russia should be ‘cut off from dollars, euros and sterling’, finance and trade, with a total embargo on its oil and gas.118
The editor most responsible for this feverish coverage was Edward Lucas, who came of age as the Cold War ended. His father John Lucas – a philosopher who hosted dissidents at Oxford and smuggled Plato and the Greek New Testament into communist Czechoslovakia – raised him to fight in the closing act of that conflict. At the LSE, he campaigned for Solidarity in Poland, before setting off to Berlin, Prague and Krakow as an activist-cum-journalist in 1988. Expelled from Lithuania after he arrived to show ‘symbolic support’ for its anti-Soviet regime in 1990, he started an ‘intentionally provocative’ English-language weekly in Estonia in 1993 with a column, Troopwatch, that ‘monitored the occupation forces’ misbehaviour’.119 As Moscow bureau chief at the Economist from 1998 to 2002, he formed a view of Russia that differed from the prevailing optimism about the post-Soviet transition to liberal democracy and capitalism.
In 2008, Lucas’s The New Cold War: How the Kremlin Menaces Both Russia and the West barely glanced at the decade of economic chaos and decline that followed the fall of the Soviet Union. ‘Never in Russian history have so many Russians lived so well and so freely’, he observed, with a growing middle class able to buy property, travel abroad and send their children to boarding school.120 But if Moscow now accepted the rules of the game so far as capitalism was concerned, it remained unreconciled to the geopolitical order governing it – with the same gnawing hunger for power as before. ‘Once it was the communist trade unions that undermined the West at the Kremlin’s behest. Now pro-Kremlin bankers and politicians betray their countries for thirty silver roubles.’ Long before the standoff over Ukraine, Lucas pushed for a confrontational line on Russia. ‘Until we make it clear we believe in our own values, we cannot defend ourselves against the subversion and corruption leaking into our citadels of power.’121 In 2012, Deception: Spies, Lies and How Russia Dupes the West arrived to reinforce that point.
In style and outlook, Lucas was a link to the Crozier-Moss-Beedham tradition at the Economist: amiably bedraggled, with a wry sense of humour and the air of an MI6 man – like those he ‘rubbed shoulders and clinked glasses’ with as a young man, but refused to join, because ‘I reckoned I could do more good on the outside’ – and with similar extracurriculars. Senior vice president at the Center for European Policy Analysis, a Washington and Warsaw-based think tank with a list of donors that includes the US State Department and arms companies, Lucas runs its stratcom [i.e. propaganda] program, euphemistically described as an ‘on the ground effort to monitor, collate, analyze, rebut and expose Russian disinformation’ in ‘central and eastern Europe’.122
Given this outlook, it is hardly surprising that revelations about the reach of the US security and surveillance state since 2008 should not have perturbed the Economist. Obama’s unprecedented use of drones to assassinate suspected terrorists on his ‘kill lists’ – in Yemen, Somalia or Pakistan, where America was not at war, and without judicial oversight even when the targets were its own citizens – ‘do not undermine the rules of war’, though more could be done to ‘adapt’ a ‘potent new weapon’ to the constitution.123 When the US Army private then named Bradley Manning leaked hundreds of thousands of secret government documents related partly to the wars in Iraq and Afghanistan in 2010, exposing war crimes committed by US mercenaries, the Economist insisted that both he and the ‘digital Jacobins’ at Wikileaks to whom Manning confided this cache be punished. Julian Assange should be extradited, though in the meantime the paper found ‘some consolation’ that his revelations actually offered ‘a largely flattering picture of America’s diplomats: conscientious, cool-headed, well-informed, and on occasion eloquent’.124 Three years later Edward Snowden, a private analyst for the National Security Agency, exposed the staggering extent of its illegal surveillance of US citizens and foreigners, including such staunch allies of the US as German chancellor Angela Merkel. Disagreement between Lucas and other editors resulted in a toothless verdict on the American security empire – ‘our point is not that American spies are doing the wrong things’ – and a vindictive one on the traitor who had exposed it: Snowden, who had fled to Moscow must return to face US justice.125 Lucas, writing under his own name, was less equivocal. He denied the NSA had done anything illegal and strongly insinuated Snowden was a Russian agent in a 2014 e-book, The Snowden Operation: Inside the West’s Greatest Intelligence Disaster.
The Rise of ZMB and the Keynes-Hayek Divide
In 2015, Michael Bloomberg hired Micklethwait to restructure the news side of his data terminal business in New York. Of the three finalists competing to replace him in London – Ed Carr, Tom Standage and Zanny Minton Beddoes – the last was a long-running favourite with both staff and management, in possession of all the prerequisites to be editor: PPE at St Hilda’s College, Oxford, MPA from Harvard’s Kennedy School and time spent in America, where she had lived since 1996. In due course appointed, she became the first woman to occupy the role, after 172 years – well-known from television and radio, elegant in brightly coloured suits and patterned dresses, a prized guest on panels and at global gatherings from the Davos Forum to Bilderberg. Sharp and eloquent, she was also refreshingly willing to listen and debate with her interlocutors. Born in Shropshire to an Army officer father and a German mother, she went to Moreton Hall, a public girls’ school near her home.
In her first summer at Harvard, Beddoes travelled to Poland with her professor Jeffrey Sachs, working as an intern in an old Soviet Ministry building, ‘writing policy memos designed to help Poland’s reformers to build a market economy’. In 1992, she turned down a job from Goldman Sachs to pursue similar work as a junior economist at the IMF, first in Senegal and Mali and then in Kyrgyzstan. ‘This meant basic things, like figuring out national income, which had never been done before. In Kyrgyzstan, I’d go to the train station and literally count trains to see what they were sending out.’ Opting to pursue journalism after two years of this, she wavered between the Economist and the Financial Times – with Harvard classmates Clive Crook and John Heilemann at the first, and New Labour’s Ed Balls at the second. ‘Economist editorials have more heft’, she decided, perhaps with the example of Sachs in mind, who had launched ‘shock therapy’ in Yugoslavia, Poland and Russia in a signed piece for the paper in 1990, urging a ‘transition to a private-sector market economy in one year’.126 Emmott hired her for the new post of emerging markets correspondent in 1994 and two years later promoted her to be economics editor, based in Washington, D.C.
In that post until 2007, Beddoes enthusiastically backed globalization, explaining the role that regional and global financial markets played in it: private pension schemes in Latin America in 1995, copper, uranium, cotton, oil and natural gas in Central Asia and the Caucasus in 1998, global banking and regulations after the Russian default in 1999, rebalancing of the world economy away from US households in 2003 and towards Asians and Europeans in 2005.127 But the 2008 crisis altered the landscape at the Economist, and her place within it, as fault lines emerged over how to respond to the Great Recession. Named business editor just as the crisis hit, Beddoes convened the section editors and invited two outside economists to offer critiques. ‘We saw mistakes we had made in the 1960s and 70s – corporatism, industrial policy, state subsidies, high taxes.’ But there were other historical missteps – in the 1920s and 30s, when laissez-faire needlessly prolonged a depression: ‘this also bolstered my position, which you might call small-government Keynesianism’. In contrast to Micklethwait, Beddoes defended a bailout of Detroit automakers at the time – doing so again in a heated exchange on the Bill Maher show in 2012, point
ing out that if they had filed for bankruptcy ‘in the midst of this huge financial crisis, they would have been liquidated, with hundreds of thousands of jobs lost throughout the Midwest.’
This mild-mannered, post-2008 ‘Keynesianism’ put her at odds with two wily old operators at the Economist, Ed Lucas and the capital markets editor and Buttonwood columnist (on finance), Philip Coggan. ‘There is a kind of divide, yes, between the Keynesians and the Hayekians’, Lucas explained in 2011. Beddoes was a ‘fierce Keynesian … on what to do about the Eurozone, on US stimulus’. ‘I think she is wrong. But she is very, very smart and articulate.’ On the other side were Coggan and himself: ‘I’m the most Austrian of all the Austrians’ and ‘we want to save capitalism from itself’, giving it a supple yet strong regulatory framework – clawing back some ground from the financiers, their tax breaks and offshore wealth havens. (Neither fiscal stimulus nor monetary easing would work – since, they argued with Hayek, after a certain threshold, lower interest rates had deflationary effects, encouraging people to save and not to spend.)128
For a moment, he and Coggan seemed to have the upper hand. After three years of recession, and with the spectre of a sovereign debt crisis hanging over Europe, young indignados took to the streets in Madrid to protest austerity in May 2011, kicking off a global ‘movement of the squares’ that reached New York by September. In October, the Economist cover featured a young man with a twenty-dollar bill taped to his mouth, American flag grazing his cheek, at the Occupy Wall Street encampment. ‘Rage against the Machine: Capitalism and Its Critics’ seemed, after the requisite jokes about hygiene among the campers, to side with its critics. That was Coggan, who argued for taking their ‘deep-seated grievances’ seriously – with youth unemployment at 21 and 17 per cent in Europe and the US respectively, real wages falling for the middle class, and inflation eroding the savings of the elderly, as bankers raked in bonuses. He contrasted the Occupy movement with the ‘selfish’ protests in Seattle in 1999, ‘easy for economic liberals to dismiss’ as ‘an attempt to impoverish the emerging world through protectionism’. Lucas was slightly cooler. For without organized labour, argued a second piece written largely by him, the occupations in Berlin, London, Madrid, New York and Rome would struggle to be heard. ‘Protestors can occupy the world’s financial markets physically, but they have not shown they can spook them.’
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