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The New Depression

The business and political elite are flying blind. This is the mother of all economic crises. It has

We are living through a crisis which, from the collapse of Northern Rock and the first intimations of the credit crunch, nobody has been able to understand, let alone grasp its potential ramifications. Each attempt to deal with the crisis has rapidly been consumed by an irresistible and ever-worsening reality. So it was with Northern Rock. So it was with the attempt to recapitalise the banks. And so it will be with the latest gamut of measures. The British government – like every other government – is perpetually on the back foot, constantly running to catch up. There are two reasons. First, the underlying scale of the crisis is so great and so unfamiliar – and, furthermore, often concealed within the balance sheets of the banks and other financial institutions. Second, the crisis has undermined all the ideological assumptions that have underpinned government policy and political discourse over the past 30 years. As a result, the political and business elite are flying blind. This is the mother of all postwar crises, which has barely started and remains out of control. Its end – the timing and the complexion – is unknown.

Crises that change the course of history and transform political assumptions are rare events. The last came in the second half of the 1970s, triggered by the Opec oil price spike and a dramatic rise in inflation, which marked the end of the long postwar boom. Its political consequences were far-reaching: the closure of the social democratic era, the rise of neoliberalism, the discrediting of the state, the embrace of the market, the undermining of the public ethos and the espousal of rampant individualism. For the next 30 years, neoliberalism - the belief in the market rather then the state, the individual rather than the social - exercised a hegemonic influence over British politics, with the creation of New Labour signalling an abject surrender to the new orthodoxy.

The modalities of this present crisis are entirely different. Extreme as they may have appeared to be at the time, the economic travails of the 1970s were progressive rather than cataclysmic. The old system did not hit the wall, but became increasingly mired and ineffectual. What swept the social democratic era away was not the force de frappe of an irresistible crisis but that it was accompanied by the steady rise of a new ideology and political force in Thatcherism - and Reaganism in the United States - and its victory in the 1979 general election.

In contrast, the financial meltdown of 2007-2008 demolished the neoliberal era and its assumptions with a suddenness and irresistibility that was breathtaking. The political class, from New Labour to the Conservatives, is standing naked. They are still clinging to the wreckage of their old ideas while acknowledging in the next breath that these no longer work. The financial crisis is a matter of force majeure; political ideas and discourse change much more slowly, even when it is obvious that the old ways of thinking have become obsolete. Meanwhile, there is no political alternative waiting in the wings, refining its radical ideas in think tanks ready to storm the citadels of power as there was in the 1970s, notwithstanding the fact that think tanks are now far thicker on the ground. Instead, it has been the mainstream which senses that neoliberalism no longer works, fatally undermined by events and, ultimately, the author of its own downfall. This crisis will have the most profound and far-reaching political consequences and will in due course transform the political landscape, but it remains entirely unclear in what ways and when that might be.

In all these senses the financial meltdown has far more in common with the Great Depression than the Great Inflation. When the financial crisis consumed Wall Street in 1929 and proceeded to undermine the real economy, engulfing Europe in the process, it was not accompanied by a radical shift towards Keynesianism, but rather a reassertion of sound finance orthodoxy, followed in due course by the adoption of protectionism. The political mainstream as represented by Labour's Ramsay MacDonald and Philip Snowden and the Conservative Stanley Baldwin all sang from the same hymn sheet. Only Keynes and a faction of the Liberal Party enunciated a plausible alternative. Eventually a programme of fiscal deficits and public works was pursued by Franklin D Roosevelt in the United States, but in Britain Keynesianism was not properly embraced until rearmament and the approach of war. Indeed, it was not until 1945 that the combined legacy of war and the Depression belatedly resulted in a fundamental political realignment and the birth of the social democratic era.

The Grim Reaper has finally spoken:

a boom pumped up by credit steroids and a bust that takes us back to the 1930s

Since the financial meltdown dramatically intensified in September 2008, Gordon Brown has managed to ride the economic storm rather more successfully than the Conservatives, or, for that matter, than Tony Blair would have done. It is Vincent Cable, the Liberal Democrats' econo­mics spokesman, however, who has indubitably emerged as the political sage, unafraid of confronting neoliberalism's shibboleths, demonstrating a clarity of mind and the political courage to tell things as they are, in a way that has escaped all other prominent politicians. Although Brown was the economic architect of the past decade and was responsible, more than anyone else, for its excesses and was shaping up to be a rather disastrous Prime Minister, he displayed last autumn, at least initially, an agility of mind and nimbleness of foot that defied the expectations of those who believed he was capable of neither. He revelled in the sense of purpose and vision offered by the crisis, seemingly prepared to jettison the thinking that had imbued his previous decade as chancellor.

But Package Part I, widely hailed at the time and imitated elsewhere, proved woefully inadequate, and the financial system remains frozen. Meanwhile the waters are rising up the Good Ship UK, threatening to transform the banking crisis into a fiscal and currency crisis. It seems unlikely that, if that should happen, Brown will survive the next election.

Even if it does not happen, Brown faces a serious problem about his own past role, because Britain’s crisis has been greatly exacerbated by the soft-touch regulation, easy credit, runaway house inflation and overexpansion of financial services over which he presided and for which he is accountable. So far he has refused to admit or accept responsibility for his actions – he initially had the temerity (or foolhardiness) to argue that the UK was better placed than other countries to deal with the credit crunch, even though it has become abundantly clear since that the very opposite was the case. So while Brown remains in denial, the plausibility of his new turn, and his understanding of what is entailed, must be seriously doubted.

Indeed, after its initial boldness, the government now seems trapped by its past actions and its former ways of thinking. Brown's failure to accept the need to nationalise the banks suggests the limits of his new-found political courage, and his inability to embrace the logic and imperatives of the new situation. He is still a prisoner of his old timidity and his conversion to the neoliberal cause. It is his good fortune that the Cameron Conservatives have been hugely wanting in their response to the financial meltdown. Having spent his first years as leader of the opposition seeking to reassure the country of his centrist credentials, David Cameron, at the first whiff of gunfire, has turned on his heels, rejected Keynesianism and, at the very moment when events have shown Thatcherism to be deeply flawed and historically out of time, headed back to the Thatcherite womb of sound finance, arguing that a government must balance its books and that deficit financing, Keynesian-style, is reckless and irresponsible.

But all this, it must be said, is the small change of politics. The crisis threatens in time to sweep away the political world as we know it and those who fail to grasp its magnitude and meaning. Far more is at stake than the fortunes of a few leaders, be their name Brown or Cameron. Who knows where things will be this time next month, let alone next year or, indeed, in 2012? The financial meltdown now rapidly plunging the western world into what increasingly looks like a depression is the first great crisis of globalisation. There was plenty of warning. The Asian financial crisis of 1997-98 proved a salutary lesson about the dangers posed by huge capital movements that were subject to precious little regulatory control. Three economies capsized (South Korea, Thailand and Indonesia) and others stood on the brink.

There were other earlier warning signs, notably Mexico in 1995, when GDP fell by 9 per cent and industrial production by 15 per cent, following a run on the peso. These crises were blamed on the immaturity and fecklessness of national governments - in the case of east Asia on so-called crony capitalism (which, incidentally, prompts the question of how we should describe Anglo-American capitalism) - which the International Monetary Fund obliged to engage in swingeing cuts in public expenditure as a condition of their bailouts.

Yet what if such a crisis were to be no longer confined to the peripheries of global capitalism but instead struck at its heartlands? Now we know the answer. The crisis has enveloped the whole world like an uncontrollable virus, spreading from the US and within a handful of months assuming global proportions, at the same time mutating with frightening speed from a financial crisis into a fully fledged economic crisis. In so doing, it has undermined the foundations on which the present era of globalisation has been built, namely scant regulation, the free movement of capital, a bloated financial sector and immense reward for greed, thereby bringing into question the survival of globalisation as we now know it.

Enormous international flows of unregulated capital have capsized the international financial system - with disastrous consequences for the real economy - in a manner akin to the effect of a roll-on, roll-off ferry shipping too much water. We can now see the cost of free-market capitalism and light-touch regulation. Iceland may provide an extreme example of the consequences of the credit crunch but it also illustrates the dangers facing the more vulnerable economies, the UK included, in a deregulated world where the market rules: a small, open economy; a large, internationally exposed banking sector; an independent currency that is not a serious global reserve currency (of which there are only three); and limited fiscal strength. These propositions have constituted the core economic beliefs - from Thatcher and Lawson to Blair and Brown - that have informed policymaking over the past three decades and without which, it was claimed ad nauseam, an economy could not succeed. Heavy-handed regulation and an overbearing state would serve only to frighten off capital and condemn a country to slow growth, stagnation and global marginality. Now we know the fallaciousness of these claims and the consequences of "letting the market decide".

Like Iceland, albeit not as extremely, Britain has been living in a fool's paradise. A failure to regulate the banks and other financial institutions in any meaningful fashion allowed bankers to behave in a grossly irresponsible and avaricious fashion; a boom that was made possible only by a government-enabled credit binge in which people borrowed recklessly; a bloated financial sector that grew to represent over 8 per cent of the total economy and which was found to have been built on foundations of sand; an overvalued currency that made manufacturing exports uncompetitive and thereby resulted in an unnecessary and counterproductive contraction in the manufacturing sector which must now be reversed; an absurd belief that boom and bust had been banished for ever, allowing the banks to turn a blind eye to the inflating of various asset bubbles and display a profound ignorance of the history of capitalism; a persistently chronic current account deficit that can no longer be compensated for by inward capital flows; monstrous salaries for those at the top of the financial and corporate tree, which were justified in terms of a trickle-down effect that remained a chimera, and as the reward for risk which was, in fact, a reward for greed and failure; growing inequality, which was justified in the name of a more competitive economy accompanied by declining social mobility in the cause of an open and flexible labour market; and, finally, the mushrooming of what can only be described as systemic corruption on a mega-scale as the state ignored the gargantuan abuses of those who ran the banks and other financial institutions, while regulatory authorities willingly colluded in their excesses.

This is the sad story of the New Labour era.

The ultimate cost of this debacle as yet remains unknown. What began as a financial crisis is threatening, as the government seeks to bail out a bankrupt financial sector, to become a currency crisis, with foreign investors concerned about the effects this might have on the value of sterling, and perhaps even worse, ultimately a sovereign debt crisis, with growing doubts about the UK’s financial viability. Until there is some end in sight to the financial crisis, and a line can be drawn under the banks’ indebtedness, we will not know the answer to these questions. One thing is clear, however: whatever the limitations of the social democratic era, it was never responsible for such an all-enveloping and cataclysmic crisis as the one that the neoliberal era – and the Thatcherites and New Labour – have managed to produce. After all the boasting about the virtues of the Anglo-American model of capitalism, the Grim Reaper has finally spoken: a boom pumped up by credit steroids and a bust that takes us back to the 1930s.

There are two key aspects to this crisis: national and global, with the latter promising to be rather solutions are concerned, we are in uncharted territory, with close to zero interest rates, a Keynesian-style fiscal boost that may prove inadequate to the task and could well fail, a hugely indebted financial sector that threatens to leave us with an enormous future tax burden and a greatly expanded national debt. All of this, furthermore, must be addressed in the context of an open-market regime which is very different from those of previous eras, and which could render Keynesian-style national solutions ineffectual. What would greatly assist any national recovery is a co-ordinated global response to the crisis; in other words, global co-operation at the highest level. This cannot be ruled out, but it would be a brave person that would bet on it. It was exactly the lack of international co-operation that bedevilled recovery in the 1930s and eventually led to the Balkanisation of the world into regional currency and trading blocs.

The most important single question in this context is the relationship between the US and China. Will the Obama administration be able to resist the slippery slope of creeping protectionism? Will arguments over the revaluation of the Chinese renminbi be resolved amicably? If the answer is in the negative, then the global outlook will be very bleak indeed and so, also, as a result, will be the prognosis for national recoveries. Indeed, the prospects would look disturbingly like those of the 1930s, with growing international antagonism and friction and a continuingly intractable crisis at a national level, with only the very slowest of recoveries.

Around the world there is growing evidence by the week of a resort to national solutions at the expense of others: measures to subsidise industries that are in severe difficulties; the Buy American clause that was inserted by the House of Representatives into Barack Obama's latest package (though since weakened); the industrial action in Britain against foreign workers; the withdrawal of banks to their national homes; the attack by Timothy Geithner, the US treasury secretary, on China as a currency manipulator. No Rubicon has been crossed but the warning signs are clear. A retreat into protectionism and beggar-thy-neighbour policies will deliver the world into a second Great Depression.

So what will be the political effects of the financial meltdown? Some are already evident. Just as the Great Inflation of the 1970s played to the tunes and concerns of the right, with its invocation of the market, the New Depression suggests the opposite, the inherent limitations of the market and the indispensability of the state. Indeed, the speed with which the neoliberal refrains and invocations have unravelled has been breathtaking. The single most discredited aspect of the social democratic legacy was nationalisation, and yet the government, with the most extreme reluctance, has been obliged to nationalise Northern Rock and partially nationalise the Royal Bank of Scotland and the merged Lloyds TSB and HBOS. Who would have ever imagined, at any point during the past 30 years, that no less than the financial commanding heights of neoliberalism would have ended up in the hands of the state, with precious little opposition from anyone except a few disgruntled shareholders? Even now, however, the Labour government, still trapped in the ideological straitjacket of New Labour and displaying extreme timidity in the face of powerful vested interests, which has always been a New Labour characteristic, is running scared of the inevitable logic of the situation, namely that all the high-street banks should be taken into public hands until the mess is sorted out. Anything else leaves the public responsible for all the debts and risks, while the banks continue to be answerable to the very different interests of their shareholders. But such is the fury and depth of the crisis that this scenario is highly likely.

The state is experiencing an extraordinary revival. The credit crunch is the most catastrophic example of market failure since 1945. It became almost immediately obvious to wide sections of society that there was only one institution that could potentially sort out the mess: the state. Far from being a rational distributor of resources, the market had proved the opposite. Far from bankers and financial traders embodying the public interest, they have been exposed as irresponsible and dangerous risk-takers whose primary motivation was voracious greed. If trade unionists and the nationalised industries were the demons of the 1970s, bankers and the financial sector have assumed the mantle of public enemy number one in the late Noughties. In fact, the irresponsibility of bankers, and the damage they have inflicted on the economy, hugely exceeds anything that the unions could possibly be held responsible for in an earlier era. Meanwhile, the fallen heroes of the pre-Thatcher era, most notably Keynes, are duly being exhumed, restored to their rightful position, and pored over for their ability to throw light on the present impasse and what might be done; if the recession turns into a depression, Marx will once again become required reading.

This political shift is not just a British phenomenon, but a more general western one. The most striking feature of President Obama's inaugural speech was the way in which it embraced and legitimised African Americans for the first time in American history. But it also had another powerful theme, namely its invocation of the public interest and public service. After decades during which American political discourse has been dominated by the language of individualism and the market, it came as a shock to hear a US president articulate a very different kind of philosophy, renouncing private greed in favour of the public good. Obama's election can in part be seen as a response to the failure of the neoliberal era, as well as of Bush's neoconservative agenda; certainly his election represents a remarkable shift to the left in US politics, in contrast not just to Bush, but every recent US president, including Reagan, Bush Sr and Clinton. That Obama is the first African-American president also represents a remarkable redrawing of the political landscape. There is no more powerful - nor difficult - way of redefining society or to embrace a new form of representivity than to include a racial minority that has been excluded.

This brings us finally to what might be the longer-term global consequences of the crisis. Again, we are inevitably stumbling around in the dark because so much depends on whether the recession metamorphoses into a fully fledged depression and in what way and shape the world eventually emerges from the debacle. That said, two key points can be made. First, the credit crunch signals the demise of the Anglo-American, neoliberal model of capitalism, which has exercised a hegemonic influence over western capitalism and been the blueprint for globalisation since 1980. Because of its catastrophic failure there seems very little chance of its resurrection. The process of recovery - whenever that might be - will be accompanied by an overriding concern to ensure that the events of 2007-2009 are not repeated in the future, just as happened in the US in the 1930s with the strict regulatory framework that was introduced for the banks after their comprehensive failure in 1929. This will include the search for a new global regulatory framework that controls and constrains international movements of capital, as well as strict controls over the financial sector at a national level. A new set of political priorities - and with it a new political language - will be born.

Meanwhile, the influence and prestige that the US, and to a far lesser extent Britain, have enjoyed will vaporise in the same manner as their neoliberal model. Their 30-year project has failed and they will be obliged to pay the price in their reputation and the esteem in which they are held. The countries of the former Soviet Union and the casualties of the Asian financial crisis that were forced to swallow the neoliberal medicine will have good reason to feel aggrieved and resentful. The west has been forthright in accusing the non-western world of corruption. The financial meltdown suggests that the west has been guilty of huge hypocrisy. Systemic corruption has lain at the heart of the western financial system. An entirely disproportionate and extortionate level of bonuses has ensured the enormous enrichment of top executives in the financial sector, all in the name of reward for success, when in fact it was the reward for failure. In addition, we have had the collusion of the credit-ratings agencies; a regulatory system characterised by its failure to act as any kind of constraint; and governments that ensured the continuation of this web of relationships and applauded its achievements. The corruption was on a breathtaking scale as evidenced by the size of the bailouts required to rescue the banks. It will be difficult for western governments to make these kinds of accusations of others in the future. That Obama represents such a voice of hope will help to mitigate the inevitable ill-will towards the US, but this should not be exaggerated amid the euphoria surrounding developments in Washington.

The second point is more far-reaching. It is doubtful whether we can still describe ourselves as living in the American era or, indeed, the Age of the West. If not yet quite over, both are certainly drawing to a close, and it seems likely that the effect of the financial meltdown will be to accelerate the rise of China as a global power. The contrast between the situation in China and that in the US could hardly be greater, even though it has been partially obscured by the depressive effect of the western recession on Chinese exports and on China’s growth rate. While the US economy is contracting, China’s grew at roughly 9 per cent in 2008 and is projected to grow at about 6 per cent in 2009. Its banks, far from bankrupt like their US counterparts, are cash-rich. China enjoys a large current account surplus, the government’s finances are in good order and the national debt is small. This is a crisis that emanates from the US and whose impact on China has been essentially indirect, through the contraction of western markets. It is the American model that has failed, not the Chinese.

One of the factors that intensified the Great Depression, and indeed was part cause of it, was Britain's growing inability to continue in its role as the world's leading financial power, which culminated in the collapse of the gold standard in 1931. It was not until after the war, however, that the US became sufficiently dominant to replace Britain and act as the mainstay of a new financial system at the heart of which was the dollar. The same kind of problem is evident now: the US is no longer strong enough to act as the world's financial centre, but its obvious successor, namely China, is not yet ready to assume that mantle. This will undoubtedly make the search for a global solution to the present crisis more difficult and more protracted.

Martin Jacques's new column will be published fortnightly in the New Statesman. His book "When China Rules the World: the Rise of the Middle Kingdom and the End of the Western World" will be published in June (Allen Lane, £25)

the global downturn in numbers


    IMF prediction for global growth in 2009 - worst since WWII

    Up to 40 million

    Number of people who will lose their jobs this year, according to the International Labour Organisation


    Total pledged by the US alone towards solving the crisis


    Proportion of GDP pledged by the G7 and BRICs countries towards fixing the crisis (1.5% this year)


    Number of US properties that received a default notice or were repossessed in 2008. In the UK, 45,000 homes were repossessed - another 75,000 are expected to be taken in 2009


    Number of major global banks which collapsed, were sold or were nationalised during 2008


    Number of European companies expected to fail this year; an additional 62,000 are expected to fail in the United States. These figures represent record levels of insolvency


    Increase in UK company failures between late 2007 and late 2008


    Drop in level of Chinese exports during January


    Current UK interest rates (down from 5% in October 2008). In the US, rates have fallen to between 0 and 0.25%

How the crisis unfolded

13 September 2007 Run on Northern Rock begins when it is revealed that the bank has requested emergency support from the Bank of England

21 January 2008 FTSE suffers worst falls since 11 September 2001

February 2008 Northern Rock nationalised

17 March 2008 JP Morgan Chase takes over the US investment bank Bear Stearns

12 July Mortgage lender IndyMac collapses - second biggest US bank in history to fail

9 August 2007 European Central Bank pumps ?95bn into banking market

7 September Financial authorities step in to rescue Fannie Mae and Freddie Mac

9 September Bradford & Bingley becomes second British bank to be nationalised

15 September Lehman Brothers files for bankruptcy

16 September AIG, biggest insurance firm in the US, receives $85bn rescue package

3 October 2008 US government announces $700bn Troubled Assets Relief Programme

8 October UK launches its first bank bailout plan, making £50bn available

October 2008 Iceland's banks collapse. IMF extends £1.4bn ($2.1bn) loan a month later

24 November Alistair Darling announces a temporary cut in VAT from 17.5 to 15 per cent

23 January 2009 UK enters recession

28 January US Congress passes Barack Obama's $819bn stimulus package

5 February UK Monetary Policy Committee votes to cut interest rates to 1 per cent - the lowest in over three centuries

Michael Harvey

Martin Jacques is a journalist and academic. He is currently a visiting fellow at the London School of Economics Asia Research Centre and at the National University of Singapore. Jacques previously edited Marxism Today and co-founded the think-tank Demos in 1993. He writes the World Citizen column for the New Statesman. His new book on the rise of China, When China Rules the World, will be published in June.

This article first appeared in the 16 February 2009 issue of the New Statesman, The New Depression

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Why don’t we learn from our mistakes – even when it matters most?

Juan Rivera served ten years of prison time until DNA evidence overturned his sentence. But even now, some maintain his guilt.

On the afternoon of 17 August 1992, an 11-year-old girl called Holly Staker walked from her home to a neighbour’s apartment in Waukegan, a small town in Illinois. She had been asked to babysit two children, a girl aged two and a boy of five. By 8pm Holly was dead. An unidentified intruder had broken into the apartment, violently raped her, and stabbed her 27 times. The local police force pursued 600 leads and interviewed 200 people, but within a few weeks the trail had run cold.

Then, through the testimony of a jailhouse informant, police happened upon a new suspect: Juan Rivera, a 19-year-old man who lived a few miles south of the murder scene. Over four days, Rivera, who had a history of psychological problems, was subjected to a gruelling examination by the Lake County Task Force. At one point it seemed to get too much for Rivera. Officers saw him pulling out a clump of hair and banging his head on the wall.

On the third day, as the interviewers’ tone became aggressive, Rivera finally nodded his head when asked if he had committed the crime. By this time, his hands and feet were tied together, and he was confined to a padded cell. On the basis of his confession, police prepared a statement for Rivera to sign.

There were no witnesses to the crime. There was no physical evidence. But there was a brutally murdered young girl, a community still in mourning, and that signed confession. The jury didn’t take long to make up their minds. Rivera was convicted of first-degree murder and sentenced to life in prison.

Many journalists who covered the case were uneasy. They could see that the case hinged on the confession of a disturbed young man, who had retracted hours after signing it. But the police and prosecutors felt vindicated. It had been a troubling crime. A man had been sentenced. Holly’s family could find closure.

Or could they?


Eight years earlier, in 1984, Alec Jeffreys, a British scientist, had the insight that would lead to DNA fingerprinting – a technique that would transform the criminal justice system. In the absence of contamination, and provided the test is administered correctly, the odds of two unrelated people having matching DNA is roughly one in a billion. In certain cases, such as rape, it would in time be possible to identify the attacker conclusively, based on DNA extracted from the crime scene. After all, if the police swabbed the sperm found in the victim, they could narrow the number of potential suspects to just one. This is why DNA fingerprinting has helped to secure thousands of convictions – it has a unique power in establishing guilt.

But it also has implications for cases that have already been tried: the power to exonerate. If the DNA from the sperm in a rape victim has been stored, and if it does not match that of the person serving time in prison, the conclusion is difficult to deny: it came from a different man, the real criminal.

In August 1989, just months after DNA fingerprinting technology became advanced enough for use in the criminal justice system, Gary Dotson, who had been convicted of a 1977 rape in Chicago, was released from jail, having consistently proclaimed his innocence. Underwear worn by the victim had been sent for DNA testing, which showed that the semen belonged to a different man. Dotson had served more than ten years in jail.

The first DNA exoneration in the UK involved Michael Shirley, a young sailor who had been convicted of the rape and murder of Linda Cook, a barmaid working in Portsmouth, in December 1986. A simple DNA test performed in 2001, after police finally admitted they had stored swabs from the crime, proved that the semen found in the victim did not belong to Shirley. He had served 16 years at the time of his release.

By 2005, in the United States alone, the convictions of more than 300 people had been overturned following DNA tests. It seemed that the criminal justice system was getting it wrong repeatedly. In situations where evidence had been kept, clients of the Innocence Project, an American charity that helps prisoners who say they were wrongfully convicted, were exonerated in almost half the cases. A study led by Samuel R Gross, a professor at the University of Michigan Law School, concluded: “If we reviewed prison sentences with the same level of care that we devote to death sentences, there would have been over 28,500 non-death-row exonerations [in the US] in the past 15 years rather than the 255 that have in fact occurred.”

At that point, Juan Rivera, the man convicted of killing Holly Staker, had been in jail for almost 13 years. His lawyers decided to apply for a DNA test. It hadn’t been performed at the trial because techniques were not, at that time, sufficiently advanced to analyse very small samples of tissue. When the results came back they were conclusive: the semen found inside Holly Staker did not belong to Rivera.

He was yet another victim of wrongful conviction.


When a system produces an error, it is a tragedy for the person on the wrong side of the mistake. But it is also a precious learning opportunity, a chance to figure out what went wrong, and make reforms to the system to ensure that the same mistakes don’t happen again.

Aviation is a powerful model in this respect. Every plane is equipped with two black boxes, which record vital information. If an accident occurs, these boxes are recovered, the failure analysed, and reforms implemented. Pilots report near-miss events, too, which are statistically analysed in order to help prevent accidents.

In 1912, eight of the 14 qualified US army pilots died in crashes. In 2014, the accident rate for major airlines had dropped to just one crash for every 8.3 million take-offs. That’s the power of learning from mistakes.

Broadly speaking, this is how science works. Scientists make testable predictions; when these fail, the theories are reformed. As the philosopher Karl Popper put it: “The history of science . . . is a history . . . of error. But science is one of the very few human activities – perhaps the only one – in which errors are systematically criticised and fairly often, in time, corrected. This is why . . . we can speak clearly and sensibly about making progress there.”

But there is a practical problem with adopting this model of progress. Many people don’t like to admit to their mistakes. They do not meet their failures with intellectual honesty and a willingness to understand what went wrong, but with back covering and defensiveness. This has a simple consequence: if mistakes are not learned from, they will be made again and again. And again.

In his famous studies of “cognitive dissonance” in the 1950s, the sociologist Leon Festinger discovered the array of tactics used by people to spin, reframe and cover up their mistakes. A classic example involved a small group of cult members. They had left their families to live with a housewife called “Marian Keech” (real name: Dorothy Martin), who had predicted the world would end before dawn on 21 December 1954. She had also prophesied that the members of the cult would be saved from the looming apocalypse by a spaceship that would land at Keech’s small house in suburban Minnesota at midnight.

Neither the apocalypse nor the spaceship materialised (Keech’s husband, who was a non-believer, had gone to his bedroom and slept through the whole thing). This was an unambiguous failure. Keech had said the world would end, and that a spaceship would save true believers. Neither had happened. The cult members could have responded by altering their beliefs about Keech’s supernatural insights.

Instead, they altered the “evidence”. At first, the cult members kept checking outside to see if the spaceship had landed. Then, as the clock ticked past midnight, they became sullen and bemused. Ultimately, however, they became defiant. Just as Festinger had predicted before he infiltrated the cult, the faith of hardcore members was unaffected by what should have been a crushing disappointment. In fact, their faith seemed to grow stronger.

How is this possible? As Festinger recounted in his book When Prophecy Fails, first published in 1956, they simply redefined the failure. “The godlike figure is so impressed with our faith that he has decided to give the planet a second chance,” they proclaimed (I am paraphrasing only a little). “We saved the world!” Far from abandoning the cult, members went out on a recruitment drive. As Festinger put it: “The little group, sitting all night long, had spread so much light that God had saved the world from destruction.” They were “jubilant”.

This may sound bizarre, but it is, in fact, commonplace. Festinger showed that this behaviour, though seemingly extreme, provides an insight into psychological mechanisms that are universal. When we are confronted with evidence that challenges our deeply held beliefs we are more likely to reframe the evidence than we are to alter our beliefs. We simply invent new reasons, new justifications, new explanations. Sometimes we ignore the evidence altogether.

Think, for example, of health care. In her book After Harm, published in 2005, the American researcher Nancy Berlinger investigated how doctors reframe their mistakes. “Observing more senior physicians, students learn that their mentors and supervisors believe in, practise and reward the concealment of errors,” she wrote. “They learn how to talk about unanticipated outcomes until a ‘mistake’ morphs into a ‘complication’. Above all, they learn not to tell the patient anything.”

This is partly about fear of litigation, but also about the protecting ego. Think of the language associated with senior physicians. Surgeons work in a “theatre”. This is the stage where they “perform”. How dare they fluff their lines? As the safety expert James Reason put it: “After a long education, you are expected to get it right. The consequence is that medical errors are marginalised and stigmatised.”

But if doctors do not learn from their mistakes, they are destined to repeat them. A report by the UK National Audit Office in 2005 estimated that up to 34,000 people are killed each year as a result of human error in the health-care system. It put the overall number of patient incidents (fatal and non-fatal) at 974,000. In the US, annually, 400,000 people die because of preventable error in hospitals alone. That is the equivalent of two jumbo jets crashing every day.

Another example is economics. In 2010, a group of influential thinkers, including Michael J Boskin, a former chairman of the US president’s Council of Economic Advisers, and the historian Niall Ferguson, wrote an open letter to the chairman of the Federal Reserve. The signatories were worried that a second tranche of quantitative easing would “risk currency debasement and inflation” and “distort financial markets”. The letter was published in the Wall Street Journal and New York Times.

At the time, inflation was running at 1.5 per cent, but what happened in the aftermath? Did inflation soar? In fact, by December 2014, inflation had not merely stayed at historically low levels, but had fallen to 0.8 per cent (soon after that, it fell into negative territory). The US economy was creating jobs at a fast rate, too, while unemployment had dropped and companies were reporting record profits.

This was a stark error in prediction, an opportunity to revise theoretical assumptions (just as mistakes in medicine provide an opportunity to revise procedures). But the signatories saw it differently. David Malpass, a deputy assistant secretary to the Treasury under Ronald Reagan, said “the letter was correct as stated”. John Taylor, an economics professor, said: “The letter mentioned many things – the risk of inflation . . . to employment . . . – and all have happened.”

Again, like revered clinicians, these prestigious thinkers could not bear that they had got things wrong. So, instead of learning from their mistake, they spun it. Some of the signatories came up with detailed graphs and tables to show that they were right all along.

Consider that if inflation had soared, they would have claimed this as a vindication for their prediction (as the cult members would have said the apocalypse had materialised). Yet these eminent thinkers also claimed vindication when inflation fell (just like the cult members when the spaceship didn’t turn up). Heads I win; tails I don’t lose.

And this is why it is the social pundits with the most prestigious reputations – as measured by how often they tour the television studios – who often make the worst predictions. They have the most to lose from mistakes and are therefore the most likely to come up with ex post explanations for why they were right all along. And because these pundits are clever, their rationalisations sound plausible.

But it is also why they don’t learn from their mistakes. After all, if you can’t admit when you are wrong, how can you ever put things right?


This brings us back to the criminal justice system. Many of these DNA cases show unequivocal failures. They demonstrate almost beyond doubt that mistakes were made by the police, prosecution and courts. This should have led to an acknowledgement of error, and meaningful reform. In fact, the astonishing thing is not that the system – or at least the people behind it – learned, but the extent to which it continued to evade and deny.

When the DNA results came back for Juan Rivera, state prosecutors offered a new story to account for the evidence – a very different story from the one that they had presented at the original trial. Holly, an 11-year-old child, had had consensual sex with a lover a few hours before the attack, prosecutors claimed. This accounted for the semen. And Rivera? He had happened upon Holly after intercourse had taken place, and murdered her.

“It was a grotesque way of squaring the new evidence with their unshakeable belief that Rivera was guilty,” Steven Art, one of the jailed man’s lawyers, told me. “But it was also totally inconsistent with the overwhelming evidence that Holly had been raped, quite brutally. There were signs of vaginal and anal trauma and stab wounds in her genitals.”

The prosecutor’s new story may have seemed outlandish, but the consequences were very real. Rivera was not released from prison for another six years. “I got stabbed twice and endured three attempted rapes,” he told me during a phone interview last year. “People wanted to hurt me; they thought that I was a child rapist. But perhaps the toughest thing of all was knowing that I was innocent.”

Rivera’s experience was far from unusual. The vast majority of exonerations through DNA evidence were met with breathtaking obstruction. Nothing seemed to budge prosecutors from their conviction that the man who had been sent to prison was guilty. Even after the test had been performed. Even after the conviction had been overturned. Even after the prisoner had been released from jail.

The problem was not the strength of the evidence, which was often overwhelming; it was the psychological difficulty in accepting it.

The process often took a distinctive path. First the prosecutors would try to deny access to DNA evidence. When that strategy was batted away, and the test excluded the convict as the source of the DNA, they would claim that it had not been carried out correctly. This didn’t last long, either, because when the test was redone it would invariably come back with the same result. The next stage in rape cases was for the prosecutor to argue that the semen belonged to a different man who was not the murderer. In other words, the victim had consensual sex with another man, but was subsequently raped by the prisoner, who used a condom.

The presence of an entirely new man, not mentioned at the initial trial, for whom there were no eyewitnesses, and who the victim often couldn’t remember having sex with, may seem like a desperate ploy to evade the evidence. But it has been used so often that it has been given a name by defence lawyers: “the unindicted co-ejaculator”.

In an adversarial system you would expect any new evidence secured by the defence to be looked at with healthy scepticism by prosecutors. You would expect them to give it scrutiny and to look at the wider context to be sure it stacks up. But in case after case, the sense of denial from prosecutors and police went a lot further.

And this explains, in turn, why the system was making so many mistakes. Proper investigation into wrongful convictions by the Innocence Project in recent years has discovered profound weaknesses in forensic science, police detection methods, eyewitness testimony and more. If these investigations had taken place earlier, and reforms been introduced, untold suffering could have been averted. But these opportunities were missed repeatedly, on both sides of the Atlantic.

This is why legal campaigners argue that the most robust way to improve the system, so as to reduce wrongful convictions and simultaneously increase rightful convictions, is to establish innocence commissions. These are independent bodies, mandated to investigate wrongful convictions and to recommend reforms, along the lines of air accident investigation teams. As of publication, only 11 states in the US had such commissions.

In the UK, a reform commission of sorts was set up in 1995 after a series of spectacular miscarriages of justice, including the Birmingham Six and the Guildford Four. The Criminal Cases Review Commission, an independent body, has the authority to refer questionable verdicts to the Court of Appeal. Between 1997 and the end of October 2013 it referred 538 cases in total.

Of these, 70 per cent succeeded at appeal.


More than 20 years after Juan Rivera was sentenced, a DNA test was conducted on a bloodstained piece of timber that had been used in a different murder. In January 2000, a man called Delwin Foxworth, who also lived in Lake County, was beaten savagely with a plank, doused with gasoline and set on fire. He died of his injuries, having suffered burns over 80 per cent of his body.

The DNA of the blood found on the wood matched that of the semen found in Holly Staker. Police are now almost certain that the man who got away with the rape and murder of an 11-year-old girl in 1992 went on to commit another murder eight years later. Foxworth may be yet another victim of the wrongful conviction of Juan Rivera; it allowed the real culprit to get away with it, and kill again. (The murderer has never been found.)

But what about those who were responsible for sending Rivera to jail? How do they feel about it today? Perhaps it should come as no surprise that even now many remain convinced of his guilt. In October 2014, Charles Fagan, an investigator who helped obtain Rivera’s confessions, was asked if he still believed that he committed the murder. “I think so,” he told a local newspaper.

And what of the prosecutors? Even after Rivera was released, Lake County lawyers wanted to put him back on trial. Only with a further conviction would they be able to say that they had been right all along. Only with a conviction could they quell their dissonance. Rivera walking around free was like an accusation against their competence.

It was left to the Illinois Appellate Court to take what might otherwise seem to be an astonishing step: it barred Lake County from ever prosecuting Juan Rivera for the murder of Holly Staker again.

Matthew Syed’s latest book is “Black Box Thinking: the Surprising Truth About Success” (John Murray)

This article first appeared in the 12 November 2015 issue of the New Statesman, Isis and the threat to Britain