- Culture
- 10 Dec 24
As he explores the history of money in his compelling new book, economist David McWilliams sounds off about the financial crash, Trump’s re-election, Elon Musk, Bernie Sanders, Brian Eno and more.
In David McWilliams’ new book Money: A Story Of Humanity, the Irish Times columnist and economics commentator traces the history of money, from Ancient Greece and the French Revolution, right through the emergence of the American dollar and the 21st century creation of crypto-currency. It’s a fascinating, provocative read, tackling some of the important questions we face in our current fraught socio-political moment.
I first interviewed McWilliams 20 years ago at the height of the Celtic Tiger, and I start by asking him: if I’d told him that evening that, within a few years, Ireland wouldn’t just endure an economic downturn, but a legitimate financial catastrophe and full-on recession, what would his response have been?
“I think at the time, I was the only person saying we were going to have an economic catastrophe,” McWilliams, now in his late fifties, reflects. “I was taking a lot of flak for it – I said, ‘These things don’t just gently occur and everyone feels a little bit sorry.’ I said, ‘These things blow up – and they blow up completely.’ If you go back and look, I was one of the very few people saying this thing was going to end in a total catastrophe for the country, which it did.”
Of course, when – to quote Salman Rushdie – the excrement hit the ventilation system in 2008, many of us were forced to read up on the origins of the crisis in the US financial system. It turned out the calamity had its origins in the trading of sub-prime mortgages on Wall Street, with bankers devising all manner of increasingly imaginative ways to squeeze money from already distressed loans, including soon-to-be-infamous products like credit default swaps and financial derivatives.
As Blackadder said of the military theory designed to prevent the First World War, there was one slight flaw in the plan: it was bollocks.
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“This ties into one of the themes of the book, and probably links to your incredulousness about the financial crash,” says McWilliams. “Which is that actually, economists don’t really understand money. I know it’s something that sounds weird, but that’s something I always felt in those years.
“I remember being alone very much alone, thinking, ‘How can they not see this? What bit of our understanding of money, credit, economics etc, does not lead you the conclusion that (a) this is a ridiculous Ponzi scheme, and (b) it will collapse with monumental consequence?’
“Having written this particular book, one of the conclusions I’ve come to is basically that economists do not understand what money is all about: what it does to society and people; why it is both a wonderful and dangerous technology; why it is both stable and unstable – all that sort of stuff.”
BIZARRE COALITION
The volcanic anger that erupted after the financial crash partly found its expression in one of the phrases that will be tattooed on this period of political history: people were sick of experts. It’s a theme touched on in McWilliams’ new book, with the author noting that money is far more political than we ever really acknowledge.
“Economics and finance is the only area where financial engineering makes things less, not more stable,” notes McWilliams. “Think about that! If you get a couple of engineers to build a bridge, every innovation in bridge-building since the Romans has made the load capacity and geometry better, and the bridge is safer etc. That’s normal construction engineering. Contrast that with financial engineering, which is what came up with the stuff you were talking about – the swaps, derivatives and so on.
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“Financial engineering, largely postulated by economists, is the only type of engineering that has made the system less stable. That I think validates the scepticism in your question!”
As McWilliams further notes, there’s one vital component economic modelling tends to fatally overlook.
“It doesn’t take into account the human being at the centre of everything,” he elaborates. “Not only does it not simulate accurately – it simulates something that’s actually in contradiction to what happens in real life. The thing about the human being at the centre of the model, is that he or she is beautifully irrational, and does things you least expect. There’s an example in the book called the ‘cobra effect’.
“It’s an event that happened in India in the 1860s, where the Whitehall Indian office got a telegram saying there’d been an outbreak of cobras in New Delhi. This particular outbreak was so devastating that if you were bitten, I think you had a 70-minute survival time. So the British economists said, ‘Okay, what we’ll do is enlist the Indians to kill the cobras for us – we’ll put a price on each cobra’s head of a fiver.’
After about a year, amazing things happened.
“All the Indians started killing the cobras, the Brits thought it was all working and the cobra population collapsed. Then after about two years, the British noticed something really weird – the cobra population started to grow again, really rapidly. They couldn’t figure out what was happening. And what was actually happening was the Indians bred the fucking things! What you think logically is going to happen as an economist, the opposite happens, because in the middle, you have the beautiful human being, chancer, scoundrel etc.”
The political fallout from the financial crash has been drastic, with McWilliams suggesting that, remarkably, it has spawned both far right populism and millennial socialism.
“Bernie Sanders has a think-tank called the Sanders Institute, and I’m on the board of that,” he explains. “I go over to Burlington once a year, and I’ve brought Bernie over to Ireland for festivals and things. You’d be amazed at how, when you listen to the labour left in America, the trade union movement, they sound very like JD Vance. They both want to increase working people’s wages. With the left, their whole idea is that, ‘Hang on a second, our people have been degraded by years and years of inequality.’
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“That’s Bernie’s central message, and it resonated with me in the mid-2010s when he asked me to come onboard. But when I read and listen to the Trumpian right – the left-behinds, the MAGA people – they also speak the language of increasing working people’s wages. But they don’t seem to find it inconsistent that they are also the party of the billionaires. So they’ve managed to create this very bizarre coalition. Particularly in America, you’d be amazed at how the Bernie Sanders left and the MAGA right, in certain areas, sound very similar.”
SHAMELESS BULLSHITTING
In the aftermath of the Democrats’ catastrophic recent election performance, Sanders earned the ire of the party establishment – including Nancy Pelosi – for making the entirely accurate observation that the Dems had lost contact with both the culture and economic outlook of the American working class. While Kamala Harris tried in vain to make the case for improvement on a macroeconomic scale, it roundly failed to resonate with millions hurting from inflation and the cost of living crisis.
Had McWilliams been advising the Biden administration on the economy, does he feel there’s a way they could have made the economic improvements more tangible in people’s everyday lives?
“They could have,” he says. “There’s an economist called Isabella Weber, and she takes this very interesting view: ‘Why did China succeed and every other emerging market, for example Russia, collapse?’ The Chinese succeeded in bringing as many people as you can imagine into a world where prices never rose, things were stable and they never had a crisis. Many hundreds of millions of Chinese are better off now than they were 20 years ago, which is not the case in Russia.
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“So Isabella Weber asked why that was, and she says, ‘It’s because economics was precise in its intervention.’ And what she means by that is, if the Chinese wanted to, let’s say, bring down the price of steel because they wanted to create a car market, they just did that. They’d say, ‘We are going to subsidise the price of steel.’ And what they did, therefore, was reduce the price of critical materials in the economy, using a very old-fashioned 1970s government policy to do so.
“What they wouldn’t do was risk the long-term viability of the country in the hands of oil traders, steel traders or whatever, which is very sensible. Biden could have done that, but they didn’t, because ideologically, even if you’re in the Democratic party, you believe this idea that the free market can solve everything.”
Another factor in Donald Trump’s victory was the increasing disconnect between voters and mainstream media. In San Francisco last New Year’s Eve, on my way to a gig, I made my way past scores of homeless people in scenes reminiscent of the Depression era. There’s a lot of anger over the direction the country has been headed.
“I suppose the media in general is always going to be ideological,” says McWilliams. “The ideology of liberalism always felt it was attuned to the interests of the less well-off – that was an article of faith. At some stage since you and I spoke, liberalism became an elitist force, and turned its back on the very people it purported to represent. I actually think this was intentional, a strategy – it wasn’t just something that evolved over time.
“The Clinton type of liberals in the US started to embrace things like NAFTA, which would only make jobs less secure. It kind of said to the white working class guys, ‘Suck it up. Don’t worry, you can get a job across the road in McDonalds.’ But their assumption was those white guys would always vote for them. I remember years and years ago, going to America to work in kitchens in Boston. The working people were all voting Democrat and the rich people up the road were voting Republican – the professors, the architects, the lawyers.
“That has completely flipped. The working men, the cops and firemen, switched from Democrat to Republican, and the professional class went in the opposite direction. That’s an interesting flip since we last spoke.”
Complicating matters further – just to compound one giant pulsating headache – is that as disastrous as Trump’s views and policies are (and will no doubt prove to be again in his second term), his brash style of shameless bullshitting is tailor-made for both social media and YouTube. It is a recipe for disaster...
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TWILIGHT OF DEMOCRACY
While there are legitimate fears about the US far right sliding into fascism, what can’t be denied is that people were sufficiently engaged by Trump’s Joe Rogan appearance to view it over 50 million – 50 million – times. These are figures which now dwarf even the big US TV networks, providing even more bad news for legacy media.
“I really don’t know,” considers McWilliams, “but what I would say is that I’m not sure Donald Trump is a fascist. But I think Elon Musk is a fascist. I think Trump is many, many things – he’s a new form of president in the United States. What I’m more worried about is that there’s a lot of people he’s surrounding himself with, whose instincts are fascistic.
“By that I mean, they would quite happily go after their enemies and liberals. They would use the instruments of state against people. Elon Musk definitely strikes me as somebody who cannot understand how somebody can tell him he’s wrong. I think Trump, actually, might be quite a forgiving person. Because he’s been slagged off since he emerged and he’s kind of got on with it.
“The danger, I think, is not that Trump is a fascist – but Trump could be a fascist enabler. That is very worrying.”
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Having completely immersed myself in the media coverage following Trump’s election, one of the surprising things is that, among the more cerebral alt-right circles, a book being seized on to provide some intellectual ballast is The Sovereign Individual. It’s a 1999 work of political philosophy co-written by the journalist William Rees-Mogg – late father of Jacob – and American investor James Dale Davidson.
Recently repackaged and given a new introduction by PayPal co-founder Peter Thiel, the book has been particularly seized on by crypto-currency traders. They are excited by the book’s vision of the digital economy, which – in a kind of hyper version of Thatcherism – The Sovereign Individual sees as terminating the traditional relationship between the citizen and the state. Just to really put the shits up the rest of us, meanwhile, one of the chapters is titled ‘The Twilight Of Democracy’.
Has McWilliams read the book?
“I’m gonna name-drop now,” he replies. “Last Sunday night, Brian Eno came to Kilkenomics, an economics and stand-up festival I do. Brian came down with Bono, because Brian is very friendly with an Australian economist I know called Nicholas Gruen, who was at our gig. Brian Eno and I are sitting in the back of Tynan’s bar in Kilkenny, and Eno says to me, ‘Have you read The Sovereign Individual?’
“The interesting thing is I have read it, but not for about 30 years. So Eno and I were discussing that book. It’s amazing, I haven’t spoken about that book to anybody except you and Brian Eno – and I haven’t spoken about it in 30 years!”
• Money: A Story Of Humanity is out now.