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A debt spiral we could have avoided

Economists simply would not accept that their model could fail

Who, five years ago, would have predicted the part-nationalisation of private banks, the UK Treasury considering abandoning its fetish of “inflation targeting”, and prudent Gordon Brown breaching the EU cap on government spending?

Well, some economists did, and five years ago the New Statesman ran a piece about their concerns.

In September 2003, I edited a book for the New Economics Foundation called The Real World Economic Outlook. It warned of "a collapse in the credit system of the rich world, led by the US, leading to soaring personal and corporate bankruptcies . . . The risks of a debt-deflationary spiral in the rich world are significant."

In a New Statesman article based on the book, I wrote: "If unemployment were to rise here, that could lead to a downward spiral in . . . house prices, making it harder to pay off debts [and] a debt-deflationary spiral.

"This threat is very real. But few economists, politicians and consumers appear to understand the nature of the risk." The cover carried a picture of a middle-class dinner party with the caption: "Coming soon. The new poor."

And so it has proved.

For more than two decades, economists operated behind an intellectual blockade where their theories calcified into an ideology that, remarkably, made no provision for systemic economic failure. Instead, powerful "security services" such as monetarists and their successors enforced strict global adherence to a theory of fantastic, always self-adjusting and self-regulating markets that could be relied upon to act efficiently. Mathematical models always allowed a return to equilibrium. There was no theory for systemic economic failure.

Those who still had time for the ideas of Karl Marx, John Maynard Keynes or J K Galbraith were denied professional posts, journal publication and media commentary. As a result, mainstream economists were not analytically equipped for near-systemic global economic failure and thus failed to alert their masters in the banks, central banks and finance ministries. They still do not fully grasp the scale of the crisis (after each of six bailouts, beginning with Bear Stearns, we were promised that the bottom had been reached and recovery was nigh).

The big US and EU bailouts treated the symptoms, not the disease. The disease is debt, and though it takes two to create debt, the bailouts helped only creditors, not debtors; banks, rather than homeowners or companies; the world of finance, rather than workers or industry. There remains a high risk of a systemic meltdown and a severe and prolonged global recession. One reason is that central banks have lost control over real interest rates. Their co-ordinated lowering of rates was followed by an immediate spike in mortgage rates. These are based on the privately set British Bankers' Association's Libor rates. The committee of bankers that raised them was serving the interests of the finance sector - not those of homeowners or companies. But high rates of interest exacerbate the disease of unpayable debt.

The very opposite is needed if we are to avoid ten years or more of sustained economic failure.

Interest rates rose because of risks posed to banks by indebted homeowners and companies, and by plummeting property prices. Bailing out banks, and not private and corporate debtors, means property prices will continue to "deleverage" chaotically and destructively.

Faced with these falling property prices, compounded by extensive fraud and deceit within the financial system, nobody can calculate the scale of outstanding financial liabilities; the probability that liabilities will, or will not be met; or the timing of such payments.

Property prices have been falling in Britain for just one year now, but have fallen for three years in the US. More disturbingly, prices in Japan (as Graham Turner points out in his book The Credit Crunch) are still falling, fully 18 years after Japan's credit bubble burst in 1990.

Only by bailing out homeowners and companies can we arrest chronic property deflation, and restore confidence and solvency to the international capital markets.

Fortunately, there is a simple, cheap policy that would address property deflation. It is based on Keynes's monetary theory, which has always been sidelined, but which he considered even more essential for breathing life into the corpse that was the global economy in the 1930s than his proposed fiscal policies.

Cheap money, ie, very low rates of interest, will help make mortgage and corporate debt repayments affordable. To achieve low rates, we first have to abandon the cross of "inflation targeting" on which the economy is being crucified. Second, the government must remove from the private British Bankers' Association the power to set interbank lending (Libor) rates. If it is to help homeowners and businesses, the government must restore to the Bank of England, accountable to society as a whole (not just the finance sector), the power to set all interest rates.

Only then can we hope to regain financial stability.

Ann Pettifor is a political economist

www.debtonation.org

This article first appeared in the 27 October 2008 issue of the New Statesman, The death of Gucci capitalism

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Fitter, dumber, more productive

How the craze for Apple Watches, Fitbits and other wearable tech devices revives the old and discredited science of behaviourism.

When Tim Cook unveiled the latest operating system for the Apple Watch in June, he described the product in a remarkable way. This is no longer just a wrist-mounted gadget for checking your email and social media notifications; it is now “the ultimate device for a healthy life”.

With the watch’s fitness-tracking and heart rate-sensor features to the fore, Cook explained how its Activity and Workout apps have been retooled to provide greater “motivation”. A new Breathe app encourages the user to take time out during the day for deep breathing sessions. Oh yes, this watch has an app that notifies you when it’s time to breathe. The paradox is that if you have zero motivation and don’t know when to breathe in the first place, you probably won’t survive long enough to buy an Apple Watch.

The watch and its marketing are emblematic of how the tech trend is moving beyond mere fitness tracking into what might one call quality-of-life tracking and algorithmic hacking of the quality of consciousness. A couple of years ago I road-tested a brainwave-sensing headband, called the Muse, which promises to help you quiet your mind and achieve “focus” by concentrating on your breathing as it provides aural feedback over earphones, in the form of the sound of wind at a beach. I found it turned me, for a while, into a kind of placid zombie with no useful “focus” at all.

A newer product even aims to hack sleep – that productivity wasteland, which, according to the art historian and essayist Jonathan Crary’s book 24/7: Late Capitalism and the Ends of Sleep, is an affront to the foundations of capitalism. So buy an “intelligent sleep mask” called the Neuroon to analyse the quality of your sleep at night and help you perform more productively come morning. “Knowledge is power!” it promises. “Sleep analytics gathers your body’s sleep data and uses it to help you sleep smarter!” (But isn’t one of the great things about sleep that, while you’re asleep, you are perfectly stupid?)

The Neuroon will also help you enjoy technologically assisted “power naps” during the day to combat “lack of energy”, “fatigue”, “mental exhaustion” and “insomnia”. When it comes to quality of sleep, of course, numerous studies suggest that late-night smartphone use is very bad, but if you can’t stop yourself using your phone, at least you can now connect it to a sleep-enhancing gadget.

So comes a brand new wave of devices that encourage users to outsource not only their basic bodily functions but – as with the Apple Watch’s emphasis on providing “motivation” – their very willpower.  These are thrillingly innovative technologies and yet, in the way they encourage us to think about ourselves, they implicitly revive an old and discarded school of ­thinking in psychology. Are we all neo-­behaviourists now?

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The school of behaviourism arose in the early 20th century out of a virtuous scientific caution. Experimenters wished to avoid anthropomorphising animals such as rats and pigeons by attributing to them mental capacities for belief, reasoning, and so forth. This kind of description seemed woolly and impossible to verify.

The behaviourists discovered that the actions of laboratory animals could, in effect, be predicted and guided by careful “conditioning”, involving stimulus and reinforcement. They then applied Ockham’s razor: there was no reason, they argued, to believe in elaborate mental equipment in a small mammal or bird; at bottom, all behaviour was just a response to external stimulus. The idea that a rat had a complex mentality was an unnecessary hypothesis and so could be discarded. The psychologist John B Watson declared in 1913 that behaviour, and behaviour alone, should be the whole subject matter of psychology: to project “psychical” attributes on to animals, he and his followers thought, was not permissible.

The problem with Ockham’s razor, though, is that sometimes it is difficult to know when to stop cutting. And so more radical behaviourists sought to apply the same lesson to human beings. What you and I think of as thinking was, for radical behaviourists such as the Yale psychologist Clark L Hull, just another pattern of conditioned reflexes. A human being was merely a more complex knot of stimulus responses than a pigeon. Once perfected, some scientists believed, behaviourist science would supply a reliable method to “predict and control” the behaviour of human beings, and thus all social problems would be overcome.

It was a kind of optimistic, progressive version of Nineteen Eighty-Four. But it fell sharply from favour after the 1960s, and the subsequent “cognitive revolution” in psychology emphasised the causal role of conscious thinking. What became cognitive behavioural therapy, for instance, owed its impressive clinical success to focusing on a person’s cognition – the thoughts and the beliefs that radical behaviourism treated as mythical. As CBT’s name suggests, however, it mixes cognitive strategies (analyse one’s thoughts in order to break destructive patterns) with behavioural techniques (act a certain way so as to affect one’s feelings). And the deliberate conditioning of behaviour is still a valuable technique outside the therapy room.

The effective “behavioural modification programme” first publicised by Weight Watchers in the 1970s is based on reinforcement and support techniques suggested by the behaviourist school. Recent research suggests that clever conditioning – associating the taking of a medicine with a certain smell – can boost the body’s immune response later when a patient detects the smell, even without a dose of medicine.

Radical behaviourism that denies a subject’s consciousness and agency, however, is now completely dead as a science. Yet it is being smuggled back into the mainstream by the latest life-enhancing gadgets from Silicon Valley. The difference is that, now, we are encouraged to outsource the “prediction and control” of our own behaviour not to a benign team of psychological experts, but to algorithms.

It begins with measurement and analysis of bodily data using wearable instruments such as Fitbit wristbands, the first wave of which came under the rubric of the “quantified self”. (The Victorian polymath and founder of eugenics, Francis Galton, asked: “When shall we have anthropometric laboratories, where a man may, when he pleases, get himself and his children weighed, measured, and rightly photographed, and have their bodily faculties tested by the best methods known to modern science?” He has his answer: one may now wear such laboratories about one’s person.) But simply recording and hoarding data is of limited use. To adapt what Marx said about philosophers: the sensors only interpret the body, in various ways; the point is to change it.

And the new technology offers to help with precisely that, offering such externally applied “motivation” as the Apple Watch. So the reasoning, striving mind is vacated (perhaps with the help of a mindfulness app) and usurped by a cybernetic system to optimise the organism’s functioning. Electronic stimulus produces a physiological response, as in the behaviourist laboratory. The human being herself just needs to get out of the way. The customer of such devices is merely an opaquely functioning machine to be tinkered with. The desired outputs can be invoked by the correct inputs from a technological prosthesis. Our physical behaviour and even our moods are manipulated by algorithmic number-crunching in corporate data farms, and, as a result, we may dream of becoming fitter, happier and more productive.

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The broad current of behaviourism was not homogeneous in its theories, and nor are its modern technological avatars. The physiologist Ivan Pavlov induced dogs to salivate at the sound of a bell, which they had learned to associate with food. Here, stimulus (the bell) produces an involuntary response (salivation). This is called “classical conditioning”, and it is advertised as the scientific mechanism behind a new device called the Pavlok, a wristband that delivers mild electric shocks to the user in order, so it promises, to help break bad habits such as overeating or smoking.

The explicit behaviourist-revival sell here is interesting, though it is arguably predicated on the wrong kind of conditioning. In classical conditioning, the stimulus evokes the response; but the Pavlok’s painful electric shock is a stimulus that comes after a (voluntary) action. This is what the psychologist who became the best-known behaviourist theoretician, B F Skinner, called “operant conditioning”.

By associating certain actions with positive or negative reinforcement, an animal is led to change its behaviour. The user of a Pavlok treats herself, too, just like an animal, helplessly suffering the gadget’s painful negative reinforcement. “Pavlok associates a mild zap with your bad habit,” its marketing material promises, “training your brain to stop liking the habit.” The use of the word “brain” instead of “mind” here is revealing. The Pavlok user is encouraged to bypass her reflective faculties and perform pain-led conditioning directly on her grey matter, in order to get from it the behaviour that she prefers. And so modern behaviourist technologies act as though the cognitive revolution in psychology never happened, encouraging us to believe that thinking just gets in the way.

Technologically assisted attempts to defeat weakness of will or concentration are not new. In 1925 the inventor Hugo Gernsback announced, in the pages of his magazine Science and Invention, an invention called the Isolator. It was a metal, full-face hood, somewhat like a diving helmet, connected by a rubber hose to an oxygen tank. The Isolator, too, was designed to defeat distractions and assist mental focus.

The problem with modern life, Gernsback wrote, was that the ringing of a telephone or a doorbell “is sufficient, in nearly all cases, to stop the flow of thoughts”. Inside the Isolator, however, sounds are muffled, and the small eyeholes prevent you from seeing anything except what is directly in front of you. Gernsback provided a salutary photograph of himself wearing the Isolator while sitting at his desk, looking like one of the Cybermen from Doctor Who. “The author at work in his private study aided by the Isolator,” the caption reads. “Outside noises being eliminated, the worker can concentrate with ease upon the subject at hand.”

Modern anti-distraction tools such as computer software that disables your internet connection, or word processors that imitate an old-fashioned DOS screen, with nothing but green text on a black background, as well as the brain-measuring Muse headband – these are just the latest versions of what seems an age-old desire for technologically imposed calm. But what do we lose if we come to rely on such gadgets, unable to impose calm on ourselves? What do we become when we need machines to motivate us?

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It was B F Skinner who supplied what became the paradigmatic image of ­behaviourist science with his “Skinner Box”, formally known as an “operant conditioning chamber”. Skinner Boxes come in different flavours but a classic example is a box with an electrified floor and two levers. A rat is trapped in the box and must press the correct lever when a certain light comes on. If the rat gets it right, food is delivered. If the rat presses the wrong lever, it receives a painful electric shock through the booby-trapped floor. The rat soon learns to press the right lever all the time. But if the levers’ functions are changed unpredictably by the experimenters, the rat becomes confused, withdrawn and depressed.

Skinner Boxes have been used with success not only on rats but on birds and primates, too. So what, after all, are we doing if we sign up to technologically enhanced self-improvement through gadgets and apps? As we manipulate our screens for ­reassurance and encouragement, or wince at a painful failure to be better today than we were yesterday, we are treating ourselves similarly as objects to be improved through operant conditioning. We are climbing willingly into a virtual Skinner Box.

As Carl Cederström and André Spicer point out in their book The Wellness Syndrome, published last year: “Surrendering to an authoritarian agency, which is not just telling you what to do, but also handing out rewards and punishments to shape your behaviour more effectively, seems like undermining your own agency and autonomy.” What’s worse is that, increasingly, we will have no choice in the matter anyway. Gernsback’s Isolator was explicitly designed to improve the concentration of the “worker”, and so are its digital-age descendants. Corporate employee “wellness” programmes increasingly encourage or even mandate the use of fitness trackers and other behavioural gadgets in order to ensure an ideally efficient and compliant workforce.

There are many political reasons to resist the pitiless transfer of responsibility for well-being on to the individual in this way. And, in such cases, it is important to point out that the new idea is a repackaging of a controversial old idea, because that challenges its proponents to defend it explicitly. The Apple Watch and its cousins promise an utterly novel form of technologically enhanced self-mastery. But it is also merely the latest way in which modernity invites us to perform operant conditioning on ourselves, to cleanse away anxiety and dissatisfaction and become more streamlined citizen-consumers. Perhaps we will decide, after all, that tech-powered behaviourism is good. But we should know what we are arguing about. The rethinking should take place out in the open.

In 1987, three years before he died, B F Skinner published a scholarly paper entitled Whatever Happened to Psychology as the Science of Behaviour?, reiterating his now-unfashionable arguments against psychological talk about states of mind. For him, the “prediction and control” of behaviour was not merely a theoretical preference; it was a necessity for global social justice. “To feed the hungry and clothe the naked are ­remedial acts,” he wrote. “We can easily see what is wrong and what needs to be done. It is much harder to see and do something about the fact that world agriculture must feed and clothe billions of people, most of them yet unborn. It is not enough to advise people how to behave in ways that will make a future possible; they must be given effective reasons for behaving in those ways, and that means effective contingencies of reinforcement now.” In other words, mere arguments won’t equip the world to support an increasing population; strategies of behavioural control must be designed for the good of all.

Arguably, this authoritarian strand of behaviourist thinking is what morphed into the subtly reinforcing “choice architecture” of nudge politics, which seeks gently to compel citizens to do the right thing (eat healthy foods, sign up for pension plans) by altering the ways in which such alternatives are presented.

By contrast, the Apple Watch, the Pavlok and their ilk revive a behaviourism evacuated of all social concern and designed solely to optimise the individual customer. By ­using such devices, we voluntarily offer ourselves up to a denial of our voluntary selves, becoming atomised lab rats, to be manipulated electronically through the corporate cloud. It is perhaps no surprise that when the founder of American behaviourism, John B Watson, left academia in 1920, he went into a field that would come to profit very handsomely indeed from his skills of manipulation – advertising. Today’s neo-behaviourist technologies promise to usher in a world that is one giant Skinner Box in its own right: a world where thinking just gets in the way, and we all mechanically press levers for food pellets.

This article first appeared in the 18 August 2016 issue of the New Statesman, Corbyn’s revenge