Book of the week: The Spectre at the Feast

Any analysis of the global credit crunch, financial market turmoil and recession that began in 2007 and is still with us today, is likely to suffer from the fast-moving nature of those events and the lack of perspective brought about by the fact that they are still unfolding. Being in the middle of something is not conducive to understanding the "something" itself. In this book, Andrew Gamble struggles with these realities but still makes a convincing and determined effort to peel back the layers of the crisis and make important and urgently needed links with crises in politics, democracy and the environment. This is important and urgently needed because the financial crisis is deeply embedded in a political and democratic crisis that has many links with an environmental crisis. All of these are a consequence of a quaint and superstitious belief in a market system that clearly cannot deliver the goods and is a creature of the "bubble" mentality.

Relating individual experiences of bad behaviour, whether it is a very large pension given to a failed head of a failed bank at the height of the well-documented failure or the Bernard Madoff approach to investment banking, tells us a great deal about a deeply flawed system. Madoff exploited the willingness of investors to invest in something that did not really exist and used the investments of new investors to pay returns to earlier investors. This reveals a number of fundamental weaknesses in the financial and market systems and Gamble skilfully paints a picture of a system, described as capitalist or free market, that is prone to crisis, political argument and rebirth.

The Spectre at the Feast is, he says, "about the politics of the crisis, how it arose, how we might understand it, what are its consequences, how far might it go and what might be done". Sadly, Gamble does not really grasp the first and the last of these intentions. His attempts to deal with politics rapidly shade into chronology and description rather than dissection and interpretation. The politics of the crisis has a great deal to do with the abrogation of state responsibilities and regulation and the steady transfer of power and authority to large multinational corporations and global financial and banking institutions.

While Gamble avoids grasping this particular nettle, he does detail the excesses of individual consumption and greed that are frequently associated with the consequences of rampant free-market economics. This is an intensely political debate and the crises and recession he describes are the result of political decisions to encourage free markets and casino capitalism and eschew a socially responsible politics that would protect and nurture people, places, vulnerable groups and human capital in a fair and equitable manner.

It is clear from Gamble's description and analysis that a free-market system operating in the way that produced the 2007-09 crisis was inevitable and a creature of politics. Politicians have made choices about deregulation, liberalisation, privatisation, subsidy, private finance initiatives (PFIs) and a host of other things that have encouraged a feeding frenzy in financial institutions, the taking of massively inflated profits and a widening of income and wealth inequalities in the UK and the US. What is lacking in this analysis is any sense of what shaped these political choices and caused the political and linguistic map to be redrawn to show, for example, that PFIs are "successful" when they actually require more risk and more debt to be carried by the public sector.

What is clear, however, is that politicians and bankers and the architects of global financial frippery (such as hedge funds) have engineered a seismic shift in favour of manipulating money, assets and casino capitalism, and downgraded the physical reality of investing in the ability to produce food, renewable energy, high-quality homes and a clean environment.

Gamble occasionally strays into environmental topics, including a brief discussion of climate change, although he does not make a strong link between a "bubble" approach to economic development and the trashing of the planet. A global financial system based on making super-profits from trading stocks, bonds, futures and other non-real things is institutionally incapable of protecting the biosphere or the planet's ecological services that deliver the means of life itself and preserve climate stability.

Certainly the environmental dimension deserves far more attention than Gamble gives it, and this is especially relevant to his objective of answering the question "What can be done?". We have now lived through an unprecedented period of economic growth associated with a consumption transformation so that the majority of citizens in Europe and North America have a large number of "things" and expect to keep adding more things and to replace what they already have at more frequent intervals and to consume distance as a new commodity (including long-distance commuting, leisure trips and holidays).

This explosion of consumption is just another bubble that, like the one in 1720 and like the one that terminated the Roaring Twenties, will burst. But this time there will be one very significant difference: the latest bubble is based on an unprecedented consumption of oil and gas and other material resources that feed into climate change, loss of biodiversity, species extinction, and water and air pollution on a grand scale. The triple hit of population growth, consumption growth and the accelerating economic dynamism of China and India have created a new super-bubble that consumes the environment as well as oil and gas and produces serious social and health dysfunction ranging from obesity through to 3,000 fatalities in road-traffic crashes every day globally and reinforces the obscenity of global poverty. The close links between economic and environmental crises fuelled by political myopia gives us a strong clue as to what should be done.

Both the environmental and economic crises can be fixed by a paradigm shift in the political process to direct resources into enhancing human capital, moving away from fossil-fuel dependence (as in the case of the Swedish Government's "oil-free by 2020" policy) and ditching casino capitalism in favour of investing in real things. A graphic example of the contrasting choices lies in the sad case of UK local authorities. In the past few years, encouraged by central government, they have invested public money in Icelandic banks that simply could not support the high interest rates on offer. The result was the loss of about £1 billion as those banks collapsed and were nationalised. In contrast, in the 19th century and early 20th century, local authorities in the UK invested in sewerage systems, tram systems, water supplies and other "hard" things that were real and created real jobs in every local economy.

All the free-market rhetoric on offer cannot convince the average observant citizen that chasing high interest rates in small Icelandic banks is better than investing in water systems that don't leak, homes that are warm and use little energy, high-quality public transport systems and electricity generation at each and every home, and all from non-fossil fuel sources. This is a political choice - which is fundamentally what Gamble is saying - and it is the politicians who have let us down by opting instead for the virtual (and perverse) reality of chasing quick returns through a global financial market that will always implode.

Gamble is right. It is all about politics, and the wreckage of a failed political system on both sides of the Atlantic shows the depths of the failure. In The Spectre at the Feast, he does not offer an answer to his own question about what is to be done, but he raises enough questions and makes enough links to point the way to a better future based on learning the lessons of the past.

The author

Andrew Gamble, head of the department of politics and international studies at the University of Cambridge, was, from 1973 to 2007, based at the University of Sheffield and still lives in the city, which he refers to as "a special place".

He read economics at Cambridge, then political theory at Durham University before returning to Cambridge to study for a PhD in social and political sciences. He is a founder member and former director of the Political Economy Research Centre and joint editor of New Political Economy and The Political Quarterly and is a fellow of both the British Academy and the Academy of Social Sciences.

When Gamble gets home to Sheffield, he says, he enjoys growing tomatoes on his allotment in a "rather ramshackle greenhouse" and rambling over Sheffield's many hills, a feature Cambridge is "sadly lacking", he says.