The financial crisis, and the response to it, raises a number of important issues over and above the narrow economic impacts described in the previous blog.
Firstly, we badly need a new policy paradigm and social policy model to properly evaluate the impact of this new economic reality on different households. Narrow economic paradigms and limited quantitative models do not help us fully understand the wider financial, economic, social, psychological, cultural, and generational effects of major crises and policy responses.
Secondly, while much of the responsibility for the financial crisis can be laid fairly and squarely at the door of financial institutions, we entered the financial crisis in an extremely vulnerable state mainly due to the level of household overindebtedness caused by massive property market overvaluation. We have simply not come to terms with the distorting effects of the property market on our society – whether in terms of financial vulnerability, propensity to save, pension accumulation and social and cultural norms. To use the cliché, it is the elephant in the room. The obsession with property pervades much of our financial, social and cultural lives and needs to be dealt with or else we are condemned to repeat the mistakes of the past.
Thirdly, some of the groups who have suffered, and will suffer, most in the aftermath of the financial crisis seem to be relatively powerless and invisible – the groups that spring to mind are younger generations and the ‘working poor’ who are in the shadow of the now famous ‘squeezed middle’. They lack a voice in the political arena compared to other more influential groups whose cause is championed by well-resourced campaigning and representative organisations in the media and corridors of power. With this in mind, to counter this imbalance, wherever relevant we will ensure that the interests of these groups are properly reflected in our future work.