The current crisis has precipitated the first decline in total global economic activity since the end of World War II. There are two main ways of looking at it. One of them was encapsulated by the Financial Times in a five-part series of full-page articles last week on “The Future of Capitalism” The other, a more diffuse point of view, may to be gleaned from looking back through The Economist magazines since the first of the year.
It’s not that the two papers have taken directly opposite positions: instead they offer different angles of vision, which in turn convey different sets of expectations. Regular readers of Economic Principals know that its enthusiasm for the FT is very great. But here’s an instance where self-absorption has got the better of the pink sheet.
The tone was set by Martin Wolf, the FT’s principal economic commentator. “Another ideological god has failed,” he began, as if citizens were pulling down statues of Ayn Rand in Canary Wharf. “The assumptions that ruled policy and politics over three decade suddenly look as outdated as revolutionary socialism.” His article was illustrated by graphically-rendered images of Alan Greenspan, Margaret Thatcher, Ronald Reagan and Deng Xiaoping, the communist party leader who turned China onto “the capitalist road” in the late 1970s. The era of liberalization they had inaugurated contained the seeds of its own downfall, wrote Wolf.
“What will happen now depends on choices unmade and shocks unknown. Yet the combination of a financial collapse with a huge recession, if not something worse, will surely change the world. The legitimacy of the market will weaken. The credibility of the US will be damaged. The authority of China will rise. Globalization itself may founder.”
Next came two of the paper’s most admirable reporters, Gillian Tett on finance and Krishna Guha on monetary policy – Tett’s book, Fool’s Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted By Wall Street Greed and Unleashed a Catastrophe, to be published this spring, is something to look forward to. On Tuesday, she found the complexity and opacity of financial instruments to have been at the heart of the crisis. She quoted the head of Merrill Lynch operations in Moscow, “Our world is broken and I honestly don’t know what is going to replace it. The compass by which we steered as Americans is gone. The last time I saw anything like this, in terms of the sense of disorientation and loss, was among my friends [in Russia] when the Soviet Union broke up.” Guha contributed the series’ most sensible piece, a quick sketch of the imbalances in saving and investment among national economies that in the late nineties and early twos led to the crisis.
On Wednesday, the FT identified “Fifty who will frame a way forward.” Two-thirds of those on the list were the usual suspects of political leaders, ministers, central bankers and regulators. The six economists included Robert Shiller, of Yale University; Montek Singh Ahluwalia, deputy chairman of the Indian Planning Commission, Paul Volcker, the former Fed chairman who is a counselor to President Barack Obama; Paul Krugman, “almost certainly the world’s most famous economist;” Nouriel Roubini, of New York University; and Lezek Balcerowicz, of the Warsaw School of Economics. (Lawrence Summers made the list as a politician.) The three commentators who will frame the future? Web-entrepreneur Arianna Huffington, broadcaster Rush Limbaugh and Kishore Mahbubani, Dean of the Lee Kuan Yew School of Public Policy in Singapore, an influential advocate of “Asian values.”
On Thursday there were articles by US edition editor Chrystia Freeland on the Obama presidency and European edition editor John Thornhill on the resentment there of the expense of rescuing the economies of eastern Europe. An interview with former General Electric chief executive Jack Welch, an icon of the 1980s, led Friday’s paper. “Welch denounces corporate obsessions.” The series was all accompanied by various editorials and op-ed pieces, the best of them a wise discussion of Adam Smith by Nobel laureate Amartya Sen. No “new capitalism” would be required, wrote Sen, but the present economic difficulties “do demand an open-minded understanding of older ideas about the reach and limits of the market economy.”
When I was done with the FT series, I looked back over The Economist’s covers for the past two months, considering their emotional valence and the attitude towards the future that they conveyed. “Drug Wars;” “The Bill that Could Break Europe” (the bailout of the former satellite nations);” “The Collapse of Manufacturing;” “To the Rescue (the trouble with Obama’s plan);” “Asia’s Shock (where the crisis is hitting hardest);” “Inside the Banks (the future of finance);” “Renewing America (Obama’s inauguration).” Each was timely and well-played. I had to go back to the beginnings of the crisis in October to find the kind of angst that the FT displayed last week: a suite of cover leaders, “The World on Edge,” “Saving the System” and “Capitalism at Bay”. And even then, it was tempered by the paper’s customary cheerful self-assurance, though somewhat off its hyper-confident peaks (“what went wrong and, rather more importantly for the future, what did not.”
So what’s the difference? The FT series clearly was timed to coincide with the meeting in London this weekend of the finance ministers of the Group of 20 nations, there to prepare for next month’s London summit. Given the FT’s long-standing goal to appeal above all to public and private decision-makers around the world, the articles were designed to subtly puff the visitors and their counterparts in the spheres of management, investment and finance, like the special sections that appear when International Monetary Fund and World Bank meet in Washington in September, or the regular advertising-based reports on investment in particular regions and industrial sectors.
(The headline of this weekly, incidentally, was the title of Merle Miller’s hilarious 1964 chronicle of sycophancy in the golden age of network television. One mogul, whom no one dared contradict, forever reiterated this recipe for a tryout episode. “In the first 30 seconds the pilot should go like this, ‘Fifty thousand murderous Berbers are headed toward Cairo, and only you, Dick Daring, can stop them.’” The same tendency to excessive deference shows up occasionally in economic journalism, epitomized by the famous Time cover depicting Alan Greenspan, Robert Rubin and Lawrence Summers as “The Committee to Save the World.” Even as shrewd a piece of reporting as this profile of Timothy Geithner, by Bloomberg’s Margaret Carlson, employs the ritual fawn as its kicker.)
The Economist, on the other hand, targets a much more decentralized audience: well-informed citizens around the world not necessarily involved in making high-level policy, but independent thinkers often deeply involved in the making of public opinion in communities of their own. It was these readers whom the editors exhorted in October: “Over the past century and a half capitalism has proved its worth for billions of people. The parts of the world where it has flourished have prospered; the parts where it has shriveled have suffered. Capitalism has always engendered crises, and always will. The world should use the latest one, devastating though it is, to learn how to manage it better.”
The special reports and sections that the FT does are potent moneymakers, but they rarely detract from the ongoing coverage of the paper. This one did. The FT’s top writers have been working so hard covering the story that it’s no wonder that they didn’t produce deep reading on demand. But it would have been better not to try. A weak series leaves the field open to rivals at Business Week and The Wall Street Journal to provide more convincing explanations of how the world arrived at its current state of affairs.