I like to call the 2008 Financial Crisis the crucible of our generation.

Millennials were shaped by economic breakdown just as most of us were entering the job market. That’s a traumatic experience. I don’t think any of us are over it.

Commentators are shocked by polls that show a majority of young people are more skeptical of capitalism than they are of socialism. Why wouldn’t they be? Ten years after the crisis, our economy has barely recovered and it definitely hasn’t recovered for young people. The idea that Millennials should be more worried by ghosts of 1970s crises than the spectacular collapse of markets they all actually witnessed is one of the more perplexing narratives of 21st century politics.

Millennials are still reacting to the world that the 2008 Financial Crisis created. Hell, even the grassroots response to it — Occupy Wall Street — taught us how to organise social movements over the internet. It’s deep in this generation’s DNA.

Part 1 of the Millennial Guide to Neoliberalism was all about what it actually is, conceptually, and what gave rise to it. You can check it out here.

Part 2 takes in the big thinkers behind it all and how they became mainstream. See that here.

Part 3 is all about our first Western Neoliberal leaders, Thatcher and Reagan. Read about them here.

Part 4 takes us into the 90s and the rise of the Third Way. Listen to that here.

And now we’ve finally made it that turning point in this epic history of Neoliberalism.

Almost 20,000 words of research and four parts are already out there in the world. We’ve come to the final chapter of Warren’s magnum opus. We’ve gone through decades of history and politics, name-checked some of the most influential economists of the 20th century and spent quite a long time trying to find GIFs relevant to Neoliberalism.

Is the Neoliberal consensus only between the UK and USA ?

While everything was more extreme in the UK and USA, our industrialised cousins in Europe, Canada and Australia experienced a similar story of Neoliberal reform during the 80s and 90s. Because so many major countries took on similar policies, and major parties from both sides of the spectrum started agreeing on how economies should be managed, we got to a point where many elections were personality rather than policy driven. We’d all agreed on how to run things, deep down, the rest was just window dressing, This is what Francis Fukuyama famously called the ‘end of history’.

Why did so many different countries all take on Neoliberal policies?

For one thing, the 70s stagflation crisis hit basically all developed nations hard. Neoliberal proponents in each country pushed for the familiar reforms. But the second reason is that extensive Neoliberalism in a few industrialised countries, along with Neoliberal reforms imposed on the developing world by the IMF, World Bank and WTO, forced other countries to liberalise to compete in the global marketplace.

And that idea of a global marketplace is a key part of the Neoliberal jigsaw.

Today’s era is marked by globalisation, where investment, production and consumption easily and frequently cross national borders. Extensive economic liberalisation has turned the world into pageant show for the international finance sector. Corporations and investment funds inherently seek to maximise profits with little or no interest in the social consequences of their demands — they take their business wherever it suits them. Countries that lower tax, sell off the state and deregulate business attract their investment. Conversely, countries that try to reverse Neoliberalism in any marked way are punished by capital flight.

Financial markets became incredibly powerful and incredibly free during the Neoliberal era. Thanks to deregulation and privatisation, massive amounts of capital and debt were unmoored from states and put into the world of international finance.

And this is where the 2008 Financial Crisis comes in, right?

It started locally, with the US subprime mortgage crisis, with some 250,000 people evicted from their homes each month. And that shock to one system led to another and then another until it turned into full-blown global financial crisis and world recession.

Banks stopped lending to one another for fear of being handed these toxic subprime mortgages as collateral. This is called a liquidity crisis, and money not pumping round the world financial system sends it into something like cardiac arrest. No one gets the money they need, and banks start going insolvent. Eventually, the fourth largest investment bank in the United States, Lehman Brothers, filed for bankruptcy and ultimately set off a global financial crisis.

As I mentioned in Part 4, Clinton’s deregulation of the banking sector had enabled banks to take huge investment risks with ordinary depositors money, and merge with each other to become ‘too big to fail’ banks that present a risk to entire economic system. Governments worldwide had to underwrite a hell of a lot of debt, provide trillions in bailouts, nationalise some of the worst behaved banks, and begin a radical quantitative easing programme that spent billions of public funds to purchase assets from banks. This was an enormous transfer of private sector risk into public sector hands; and an enormous transfer of wealth to match, in the form of public debt.

If you’re thinking that none of that sounds like something Milton Friedman would have been in favour of, you’re probably right. But there was nothing else to be done.

A 2015 analysis by the Center on Budget and Policy Priorities indicates that without the huge state-led rescue effort, the global recession could have been three times as deep and twice as long. Even with the radical steps taken, we had the largest economic recession since that which preceded World War II. And that’s what was at stake — not only jobs and livelihoods, but social and political stability itself. Banks across the country would have shut their doors and ATMs. People wouldn’t have cash. Business would collapse, unemployment would skyrocket.

So how did the economists fix it?

It was actually British Prime Minister Gordon Brown, a famously tough Scot and formerly one of the longest serving Chancellors of the Exchequer, who decided to ditch Neoliberal assumptions and research the Keynesian answers to previous crises. He and his Chancellor Alistair Darling realised that simultaneous and firm commitments across world governments to recapitalise banks with public money was the only option to restore solvency and, most importantly, confidence in the system. This meant fully or partly nationalising them, in stark contrast to Neoliberal doctrine. They rapidly campaigned across Europe and America for countries to join this plan, and they did. This prevented the crisis worsening any further, and countries could begin the years long trudge out of recession.

So ironically, one of Britain’s least popular Prime Ministers — punished at the election for his relatively small role in causing the global crisis — may also be the guy who kinda saved the world. Nobel prize winning economist Paul Krugman has since made the argument that Britain’s dogged pursuit of austerity instead of following Brown’s plan is a sort of grim ‘natural experiment’ that proves Keynes knew what he was talking about.

Sadly for Britons, we came out on the wrong side of it. Even the IMF, hardly an ardent advocate of socialist spending, concluded that austerity has caused more harm than good, and the UK has visibly done worse than countries that brought in far less austerity, far later.

How come we didn’t learn our lesson?

Since the crisis, there has been plenty of excellent analysis detailing what happened, why, its impacts, and what the next one will look like. But unfortunately this has been drowned out by established Neoliberal interests seeking to maintain the status quo. This means that many people don’t really understand how close we came to total catastrophe, and therefore how necessary change is.

The headline numbers we use to discuss the financial crisis and Great Recession ignore how society was affected unevenly. The most politically powerful layers, the Baby Boomers and the whiter, wealthier half of Gen X, lost some asset value and maybe had to change jobs or pay off credit, but it wasn’t so bad they turned back from the Neoliberal consensus they’d bought into. Poorer and younger layers on the other hand experienced acute and extended levels of unemployment, a collapse in the quality of jobs on offer, and don’t even have any assets to cushion the blow when the next crisis hits.

The lesson for the banks was that push comes to shove they will be rescued by the state, ultimately shifting risk onto the public. Despite widespread fraud and malpractice by banks driving the crisis, only one banker went to jail. Regulations were tightened after the crisis, but ‘too big to fail’ banks still haven’t been broken up, and worryingly the Republicans have recently get a bill through the House to repeal these regulations and put us back at Neoliberal square one.

…

From now on, we’ll be trying to answer the biggest question on Neoliberalism: what do we do next? If you have any ideas, please get in touch. We’ll even have you on the show if you sound smart enough.

Til then, Warren is going to sleep for about six days. See you on the other side. It’s been real.

You know the drill:

Follow us on FB – www.facebook.com/connectedanddisaffected/

– www.facebook.com/connectedanddisaffected/ Follow us on Twitter – twitter.com/CandDPodcast

– twitter.com/CandDPodcast Subscribe and leave us a review on iTunes – itunes.apple.com/us/podcast/connected-disaffected/