Capitalism's crisis: why Mike was right

Economic crises always bring out the retrospective prophets. During the Great Depression, the grim years of global 'stagflation' in the 1970s, and the short but sharp shocks of the late '90s, and now the crisis of 2008, self-proclaimed experts have come out of the woodwork to insist that they'd seen trouble coming all along, but been ignored by governments and investors. The left as well as the right has liked to claim the mantle of Cassandra: there's an old joke that says that Marxists have predicted seven of the last two recessions.

One man who can justly claim to have foreseen the present crisis is Mike Beggs, the unreasonably clever graduate of Auckland University's sociology department who is currently studying and teaching in Sydney. Back in 2002 and 2003 Mike and I used to enjoy long boozy lunches in Auckland bars: I would lean back and slurp my Newcastle Browns, and Mike would discourse with remarkable fluency about the enormous bubble that he saw growing around the world economy. Mike was working on a Masters' thesis on the so-called 'knowledge economy', and he seemed to relish poring over vast printouts of the latest economic data from the United States and Europe. He was also interested in what academics like to call the 'microstructural' aspects of the economy, which meant that he would trawl the media and the blogosphere to find out how individual workers and households invested money and consumed goods, and how their choices were affecting their lives.

Soon after beginning his research, Mike had been struck by the ease with which credit was being made available, in the United States in particular. In tones which combined wonder and fear, he told of how struggling American families were receiving credit cards and cheques for thousands of dollars in the mail from banks they had never even patronised. All they had to to use the cards and cash the cheques was fill in a form and post if off. Mike explained that all this easy credit was an unsustainable attempt to to keep the economy gowing by stimulating demand artificially. Back when real estate moguls were still talking about an endless boom, Mike was warning of a day of judgement.

You don't have to rely on my testimony for proof of Mike's prescience: over the past couple of years his Scandalum Magnatum blog has regularly forecast trouble for the economy. Over the last year, Mike found more and more people who were inclined to take his pessimism seriously. Last year, when he gave a public lecture on Marx's economics and the state of the global economy, Mike recognised a wealthy Sydney stockbroker in his audience.

It's puzzling that Scandalum Magnatum has gone rather quiet now, in what should be Mike's hour of vindication. Instead of proclaiming himself Cassabdra, Mike is posting about Jimi Hendrix and Brian Eno. Perhaps, though, Mike has too much integrity to join the 'I told you so' game being played out in so many corners of the internet. Read the archives of his blog, anyway.