When I was a student at the LSE, many long years ago, it was the age of student unrest and the famous or infamous ‘sit ins’. At that time, after the LSE had been occupied for several weeks and was therefore not functioning, there was a brilliant cartoon in the papers. It depicted two City of London gentlemen looking at the news headlines, which said ‘London School of Economics still closed because of sit in‘. One of the men says to the other, ‘Thank God for that! If we have no more Economists, then perhaps we can finally start getting the economy right again!’
At the time it was funny, today it is apt. Today Economists are predicting decades of recession and misery for the whole world. Dates like 2020 even 2050 are being bandied about for when recovery may just start. Furthermore, here in Greece, we are being told in all pompous seriousness that our debt to GDP ratio in 2021 (note the specificity of the date) will be as bad as it was in 2009, as if they could really know what either our debt or GDP will be in 5 let alone 10 years time! (Their 2010 predictions of what the would be in 2011, have already been proved fatally wrong!)
Which is just it. What is the wise Economists’ success rate when it comes to predictions? Remember the 80’s when it was being seriously predicted (in fancy magazines such as Wired not least) that there would be no more boom and bust cycles that economies from here on would be nothing but up and up and so on? That recessions were a thing of the past? That all this hedging etc had ushered in a new era of economic infallibility and more such garbage? Not to mention official predictions in the early naughties (take 2005 for instance), and what all the predictions were for the future then? Not only did nobody, but nobody at least in the official economist establishment, predict the crash (and subsequent related Armageddon which even now they cannot get their heads around) of 2008. And this even though the conditions generating the crash were staring them right in the face!
So take cheer. They have repeatedly got it all wrong. One of the reasons why this is so is what Professor Varoufakis has said in his talks. The mathematical modeling mania that took over all of economic academia. If you have four unknowns and decide to take one or even two of them as granted, then you may indulge in beautiful mind games and structures, none of which will have any relation to reality. The other is quite simply human nature. You can see it every time everywhere there is a stock market boom, from the late 1920’s down to the recent spate throughout Europe (remember the Yuppies?).
And that is that when everything is going up, people instinctively believe this will go on forever. Until it all crashes. Equally, when everything is going down and down and deeper down, people instinctively believe that this is it! Things will be going from bad to worse perpetually. Until… well yes, until real life, proves them wrong!
Again we come to the Economists’ inferiority complex and insistence on thinking of their pursuit as a science. But
also all of us. We need stability, we need to feel that things are under control, and therefore to be told and to
believe what will happen a few years down the line. But the truth is that in reality just about anything might and
will happen, that will change the whole course of the world and not necessarily in 10 years (now why should it be
10? I suppose German neatness is responsible for that here).
The ancients and agricultural communities being closer to nature than we tend to be today, knew that life is
governed by cyclicality. And yet we remain caught up in the linear conception of the development of events.Everything that goes up will keep going up and everything that goes down will keep going down. And yet anyone who bothers to dabble in a little history can see that it never works that way.
Which is why, I suppose, in his exuberance, Francis Fukuyama called his book ‘The End of History’. After all, how else could one explain away the truth of history in this ideological prediction that nothing would ever go bust any more, except by declaring that ok guys, there will be no more History. Convenient. But just how quickly was that proved totally wrong?
So the plain truth is that we don’t know what will happen. Nobody can know what will happen. That is why Oracles
always spoke in riddles. We can take guesses from wild to calculated ones, but no such guess or estimate will ever
be closer to the truth than having one’s palm read by a gypsy, perhaps.
So when you hear all these predictions of doom and gloom, that things will be bad for 10 years and all that, take cheer. They don’t know any more than we do. Don’t forget, in all their analyses Economists always add the caveat ‘ceteris
paribus‘ or ‘all things being equal. But of course they never are!