I'm not sure I would call it "fun" to have spent the past week in the Economy Lab pondering the deeper meaning of the 2008 financial crisis and Great Recession. But digesting the insights that some of Canada's best economic minds shared with the Lab's readers, as they marked five years since Lehman Brothers' collapse triggered the crisis, it certainly has been illuminating.
McGill University's Christopher Ragan, channelling the wisdom of the great John Kenneth Galbraith, reminded us that every financial crisis for the past 400 years had shared key traits in common – among them being that we always seem to forget these 400 years of lessons. Armine Yalnizyan of the Canadian Centre for Policy Alternatives pointed out that the post-recession "recovery" has largely benefited the rich – even in Canada, as she showed in an infographic that, we believe, is the first summary of its kind of the startling post-crisis income disparity in this country.
Former central banker and Wall Street economist Sheryl King wondered aloud whether the U.S. Federal Reserve Board's more open communications, something the crisis all but forced it to adopt, would continue when (if?) monetary policy eventually returns to normal. The University of Ottawa's Miles Corak educated us on the 80-year-old debate between famed British economists John Maynard Keynes and Arthur Cecil Pigou over the nature of unemployment – and how it's critical to understanding the debate about the impact of government spending austerity in the post-crisis recovery.
And Linda Nazareth, whose diverse economic career has spanned from government to Bay Street to think tanks to BNN television, wrapped up the week Friday by addressing the enormous cost of a crisis and recession from which we still haven't recovered. (Indeed, The Globe's own Tavia Grant illustrated this last point, by showing us which Canadian economic indicators bounced back from the downturn and, more distressingly, which still haven't regained their pre-crisis health.)
Given such a breadth and depth of expertise that we were deeply fortunate to be able to tap on this subject, I don't presume that I, as little more than an enthusiastic fan by comparison, can add much to their economic analyses. My specialty is in words. And in the business of economic journalism, my most lasting impression of the financial crisis is how profoundly it transformed the language we use to talk about the economy with our reading public.
For a start, we now have a "Great Recession" to talk about – easy shorthand for the most severe economic and financial slump since the Great Depression. That's a term we may well have in the economic lexicon for decades, or more. (Unless we start having so many deep recessions that the identifier becomes meaningless. Let's hope not.)
Here's a quick list of terms that we rarely (if ever) heard in mainstream discussions of economic and financial matters before the crisis, but are now routine features of such conversations:
- The one per cent
- The 99 per cent
- Tail risks (and fat tails)
- Black swans
- Too big to fail
- Quantitative easing (QE, QE2, QE3)
- Guidance (in terms of central banks)
No doubt I've missed a few. But the point is, these are part of our shared language now – not just in the economics field, but in mainstream, popular discussions about the economy and the financial system. Try doing a Google search on "the one per cent"; you get 644 MILLION matches. "Too big to fail" produces 273 million. Even the newest term to enter the discussion, "tapering" (specifically applied to QE), garners 80 million hits. (By comparison, searches of "Paris Hilton" and "Kate Middleton" are each good for about 130 million matches.)
In normal times, such a collection of wonkish economic jargon would cause the average person's eyes to glaze over. The fact that it has become entrenched in popular culture is testament to just how transforming an event the financial crisis has been.
The change in language reflects that the crisis has altered the way we both talk and think about economics in our world – from the intellectuals in our ivory towers to the man/woman on the street. We are exploring concepts, test-driving theories and asking questions that we never have before, in front of a mass audience that very much has a stake in the results.
Is this evidence that, this time, we have learned something meaningful from the pain of the crisis – that we have started new conversations that will lead to expanded thinking that will steer us away from these economic and financial cliffs in the future? Maybe. But words, while meaningful, are still cheap. To know if they translate into better actions, unfortunately, we'll have to wait until the next crisis.
And as Mr. Ragan pointed out, there will be other crises; we might have changed the conversation, but we humans remain human.