This post was contributed by Rose Devaney, Business Engagement and Impact Manager at Birkbeck’s School of Business, Economics and Informatics
The Birkbeck Cinema recently screened Boom, Bust, Boom, the latest documentary on the 2008 financial crisis. The film focuses on the behavioural elements of consumers in creating a “bubble” which ultimately bursts, and uses a historical canter through various financial meltdowns to demonstrate that we seem hard-wired to make the same mistakes over and over again.
Bubbles burst
Our ability to suspend rationality and believe that investments will keep increasing in value can be traced back as far as the Tulip Mania of 1637, followed by the South Sea Bubble of 1720, the British Railway Mania of the 1940s and the Wall Street Stock Market Crash of 1929. Even intellectual royalty including Isaac Newton was caught out when the South Sea Bubble burst, losing over two million pounds by today’s standards.
What’s interesting is that crises tend to occur with enough distance between them to be managed by an entirely new generation. They have heard the stories about the previous “bust” – but haven’t lived it – and arrogantly think they know better.
The post-film audience debate raised questions about the film’s omission of consideration of such things as the role of the banks, de-regulation, traders and globalisation – which all contributed to the crisis. But response to the film was overwhelmingly positive and it was agreed that the “euphoria” that a boom creates is a potent ingredient that was illustrated brilliantly throughout the documentary.
Jones and Minsky
My two heroes from the afternoon were Terry Jones and Hyman Minsky. Jones, a founding member of the Monty Python team, was the film’s co-writer and co-director and morphed into a clear and credible narrator. No doubt, he was largely responsible for the puppetry and visuals which provided light relief from the interviews with various economists and illustrated complicated concepts and power imbalances.
Minsky, an American economist, who was at the height of his career during America’s most stable and prosperous times during the 1950s and 1960s, predicted the slow movement of financial systems from stability to fragility when nobody wanted to listen. The irony of his book becoming somewhat of a best-seller during the recent recession was not lost on his son, one of the film’s contributors.
Even monkeys prefer something for nothing
The political soundbites were fairly minimal but used to good effect. Bill Clinton creating the National Home Ownership strategy that was a contributing factor in the American Sub-prime crisis; Gordon Brown declaring no return to “boom and bust” and George Bush describing the US economy as “healthy and vigorous, the envy of the world” – just before the arrival of the 2008 global financial crisis.
And what about those monkeys? Residents of Monkey Island and subjects of experiments demonstrate that, even when the outcomes of two situations are identical, even monkeys choose the route where it appears they are getting something for nothing, as opposed to the one where they perceive something is being taken away. It’s suggested that somehow our psychology distorts our rational judgement and decision-making and we naturally gravitate towards gain and away from the extra emotional energy which loss creates.
A pertinent question from the audience was about whether lessons have been learned and it was suggested that unless you personally experience the pain of the situation, you bounce back quickly and put it all down to experience.
This week, I read about Clinton commanding £330,000 for a 30 minute talk on world hunger and Dick Fuld now running a small New York hedge fund and presenting about life at Lehman Brothers. I doubt the real victims of the American sub-prime crisis, many now unemployed, with a poor credit rating and without the safety net of welfare and health benefits have found it as easy to re-invent themselves.
With special thanks to Sue Konzelmann, Reader at Birkbeck and Director of the London Centre for Corporate Governance and Ethics, who organised the screening and gave an introductory address.
Dr Konzelmann has authored two books (titles below) and will write ‘Labour, Finance and Inequality: The Changing Nature of Economic Policy in Britain’. (with S. Deakin, M. Fovargue-Davies and F. Wilkinson) Oxford: Routledge (forthcoming).
‘The Economics of Austerity’. Cheltenham: Edward Elgar, 2014.
‘Banking Systems in the Crisis: The Faces of Liberal Capitalism’. (with Marc Fovargue-Davies) Oxford: Routledge, 2013.
Find out more
- Visit School of Business, Economics and Informatics for information on future events or study options
- Boom Bust Boom trailer
- Birkbeck Cinema
