Noreena Hertz: The Economist We Need NOW

I’ve known Noreena Hertz most of my (and her) life. She’s always been my most mentally able friend. I don’t know what her IQ is, except that it’s off the charts. Her list of achievments at early ages is beyond prodigy. There was a risk, though, of going off the rails, and no doubt some of the more establishment politicians and economists thought that was exactly what she had done when she started writing and speaking about how the underpinnings of modern capitalist economies were unsustainable and inevitably heading towards massive crises.

Well she’s finally getting her dues, as this profile in Fast Company shows:

Not long ago, economist Noreena Hertz lived at the lefty margins of her field. But her (widely ignored) prediction of the credit crisis and her call for a more evolved form of capitalism have suddenly put her at the center of the universe.

Noreena Hertz had to seduce Bono. The Cambridge University economist was writing a book on the developing world, and Bono’s personal saga of getting the U.S. government to cancel more than $400 million of debt was just the pop-culture bridge she needed to move her ideas beyond the wonkish corridors of academia. After all, Hertz’s motive for The Debt Threat — a deep dive into the debt trap that, she argued, would have global consequences for all — was to juice the campaign that had been building slowly in activist ranks. The book itself would be a battle cry (a postcard inside made it easy for U.K. readers to urge the prime minister to cancel billions owed by the world’s poorest countries), and its release was pegged to hit before the 2005 G8 meeting. Hertz sent Bono an email, unsure if it would find him. To her astonishment, it did: “I’m so glad you got in touch,” read the rock star’s reply. “I’m a real fan of your work. Bono.”

Few academics have leaped from the critical fringes to the role of prophet as adroitly as Hertz. Wielding her contrarian message — that markets need to serve the interests of people as much as they serve companies or shareholders — Hertz has been campaigning for the past decade against the mantras of mainstream economists, urging a more ethical form of capitalism. But her message isn’t some yoga-infused spiritual quest. As she explained in her 2001 European best seller, The Silent Takeover, it is about the unsustainability — environmentally, socially, and economically — of laissez-faire capitalism and the idea that markets are stable…

[continues in Fast Company]

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10 Responses to Noreena Hertz: The Economist We Need NOW

  1. chaz1 October 20, 2009 at 11:31 am #

    this is vacuous. her analysis, summarised, reads as: bad stuff is awful; do good stuff. there's no power analysis, there's no pondering on why complex societies work in the way they do. instead she simply repeats “bad is bad” and “good is good”.

    her “insights” might be marginally less annoying than naomi klein but that's not saying a great deal. both have made careers rebranding and profiting from a certain dumb leftist critique which appeared out-dated a decade ago.

    this might sound a bit spiky but telling truth to power involves more than a petulant whine. it requires critical thinking.

    • jahson October 20, 2009 at 12:16 pm #

      Chaz, it may sound like a petulent whine but if she's laying out a fundamental philosophical difference from the capitalism that's being done today, I don't know that a dense, numbers laden presentation is necessary. The economists that support and uphold the current paradigm certainly use the types of critical thinking I think you're alluding to and look where it's gotten us. As for your 'dumb leftist critique which appeared outdated a decade ago', what exactly would you consider about Naomi Klein's ideas outdated (much less, dumb)? Hertz predicted the economic crisis. Seems pretty relevant to me. Naomi Klein may not have been the first person to point out that people in power use crisis to push their agenda but it's true and it was happening for basically the entire Bush presidency. Outdated? nah, you're just a hater.

      • chaz1 October 21, 2009 at 6:41 pm #

        not a hater, just serially disappointed by how low people's standards are. yeah she “predicted” the crisis but so did everyone. I'm a financial journalist. I nailed most of the big issues about the credit crunch in 2003-05. We knew about it, we told you about it. You didn't want to hear.

        What we didn't do — and maybe this was our mistake — was get on our high horses and make self-righteous judgements about the behaviour of others.

        I read Hertz and find disinformation, and that's not in a good way. She's never really got to the heart of why people do what they do, instead she stops at level, say, 2 (klein stops at 1). Problem is there's 5 levels and by stopping so soon and making judgements without explaining issues readers of her work are learning little.

        I've spent a dozen years of my life explaining debt and credit. It's my job and now I work for one of the world's largest news organisations doing it. Unfortunately, because of that I can't say who I am!

        Anyway, Klein. Her latest book is probably the worst of the lot. It's thesis is so weak I'm surprised the pages stay together. She cherry picked so hard it made me laugh. Like Chomsky on a really bad day. If you have to selectively edit that bad there's little difference between you and a flat lie. Oh well, it served all the no-brainers wanting to hate the hated Milton Friedman. Now you guys don't have to read a word he ever actually said! Disinformation, anti-learning and anti-freedom of thought. It's like the left has turned itself inside out.

        Not in my name.

        • chaz1 October 21, 2009 at 6:45 pm #

          “She's laying out a fundamental philosophical difference from the capitalism that's being done today, I don't know that a dense, numbers laden presentation is necessary.”

          No … she's just having fantasies. without critical thinking and analysis (and that doesn't mean numbers) it's just dreaming. the left have given into dreaming and self-righteousness. it's an ugly mix. turning back on rationality is helpful to no-one, except the self-righteous who profit from telling you what you want to hear.

          • jahson October 21, 2009 at 9:26 pm #

            I'll have to take your word for your credentials since you won't reveal your name. Based on what you say, I'll admit that my knowledge of the inner workings and details associated with the state of the economy, economic theory and capitalism in general is much more superficial. You obviously have a firm grasp of this kind of information and can call b.s. when you see it. From more of an outsider's perspective, it seems pretty clear that massive deregulation as well as inside, behind closed doors deal making has shifted the scales on the supposed democratic laissez faire workings of the economy. You're welcome to your informed views about lefties' having fantasies about the way the economy works but tell me why you think this way. And what exactly can be done about it the current state of things? Is the system we have reformable? I think what you may consider dreaming and self righteousness is more of a passionate and sincere exploration into what can be done differently about an essential mechanism of our society. As someone as educated in this arena as you are, help me out. Send me some links or something to read.

            As an aside, it's true that the media didn't do its job when it came to reporting warnings about the impending financial collapse and I'm sure it has something to do with the media's desire to support the system rather than scare people. Don't financial folk always say confidence is essential to a strong economy?

            In regards to your remarks about the left, personally I found the economists and economic pundits to be pretty self righteous too so I wouldn't be quick to label the left that way. Laying a blanket statement like that isn't exactly the type of critical thinking you complain is missing on the left now is it? If you're gonna posture as someone above the fray with inside knowledge about the real goings on in economic matters I wouldn't stoop to cheap shots. 'Cause believe me, I've got plenty for the right too.

            I was curious about something you wrote. You said there's 5 levels of why someone will do what they do. I wonder what those levels are and where you got that info. I'm with you on being disappointed at the low standards people have.

          • chaz1 October 22, 2009 at 3:08 am #

            The five layers point was more a rhetorical device than a fully-worked out schematic! However, I would say the top/fifth layer is probably unknowable, and so means anyone trying to explain ‘how the world works’ should keep their minds open to unexpected views and ideas.

            Indeed, as someone that works inside a large media organisation, I am painfully aware that many (most?) of the issues debated in newspapers and the internet are ephemeral bubbles irrelevant to the wider scheme of things. We talk about what we want to talk about and sometimes this is at the cost of what we need to understand.

            Editors know this and pander to it. There is no conspiracy; they want readers. Try selling a story about restructuring synthetic commercial mortgage backed securities to a general news editor (the type of thing I do) and you’ll understand much!

            And readers may think they want to understand how the world works but few understand that complexity is sometimes inevitable and needs to be embraced. Retreating to simplistic answers (ban bankers’ bonuses!) may put satisfying populists at the expense of the wider polity.

            This helps explain why the financial crisis mounted without ‘anyone’ noticing. The mainstream financial media generally focus on equities/shares and have never looked at debt, mainly because it has usually been the tail of the dog (metaphorically speaking). But at some point around 2003-2005, massive doses of cheap central bank money switched this around, and the debt tail began to the wag the corporate dog.

            Analyses based on monolithic analyses of “corporate interests” (hello Noreena!) entirely miss this.

            Anyway, so who’s good?

            From my side of the Atlantic: John Kay, Paul Collier and Fred Halliday are all great.
            http://www.johnkay.com/
            http://www.guardian.co.uk/profile/paulcollier
            http://www.opendemocracy.net/author/Fred_Hallid

            On yours, Nicolas Nassim Taleb and Paul Krugman are educational. Joseph Stiglitz is, curiously, not so good. His political writings are weak.

          • jahson October 22, 2009 at 4:49 am #

            OK, good. This is meat I can chew on. Thanks for the links.

            If I understand you correctly, between 2003-2005 the Federal Reserve offered money to banks and investment firms..a.k.a. 'cheap money' in your words (does this mean they allowed investment firms/banks to take on enormous loans?). This meant that the firms and banks now acquired tremendous debt on their books but they risked it to get the returns. What happens then? Confidence drops when the investment community finds out that these companies are actually in debt then coupled with a slowed and overinflated real estate market made up of a significant number of adjustable rate mortgages to people who were not traditionally qualified to receive a mortgage and suddenly there's no money to fill the gaps. Am I on the right track here?

            It's interesting to hear you talk about the media needing to sell their product in lieu of what needs to be reported. Why wouldn't a paper like the Wall Street Journal address some of the concerns before the collapse? I always thought they were more nitty gritty with their articles and people interested in real financial information would want this kind of reporting.

          • chaz1 October 22, 2009 at 7:35 am #

            “What happens then? Confidence drops when the investment community finds out that these companies are actually in debt then coupled with a slowed and overinflated real estate market made up of a significant number of adjustable rate mortgages to people who were not traditionally qualified to receive a mortgage and suddenly there's no money to fill the gaps. Am I on the right track here?”

            Something like that. It was like boiling a frog slowly. Everyone got used to the warming temperatures and didn't realise the water was boiling until too late. It was too late in July 2007 when the Financial Times put “DEBT CRISIS” on the front page every day for two weeks (I'm not exaggerating) and suddenly everyone lost their nerve. The plates stopped spinning (to switch metaphor) and no-one would refinance anything. Sub-prime was only one element.

            “Why wouldn't a paper like the Wall Street Journal address some of the concerns before the collapse? I always thought they were more nitty gritty with their articles and people interested in real financial information would want this kind of reporting.”

            1. Media tend to benchmark against each other not against the 'truth'. 2. Explaining complex debt has never been big in mainstream journalism and probably never will be. Most financial players don't really look across at other bits of the industry. If you are a widget maker you don't really care about the workings of the cog maker's industry. 3. Most financial people only care about what might grow next that they can profit from.

  2. chaz1 October 22, 2009 at 11:35 am #

    “What happens then? Confidence drops when the investment community finds out that these companies are actually in debt then coupled with a slowed and overinflated real estate market made up of a significant number of adjustable rate mortgages to people who were not traditionally qualified to receive a mortgage and suddenly there’s no money to fill the gaps. Am I on the right track here?”

    Something like that. It was like boiling a frog slowly. Everyone got used to the warming temperatures and didn’t realise the water was boiling until too late. It was too late in July 2007 when the Financial Times put “DEBT CRISIS” on the front page every day for two weeks (I’m not exaggerating) and suddenly everyone lost their nerve. The plates stopped spinning (to switch metaphor) and no-one would refinance anything. Sub-prime was only one element.

    “Why wouldn’t a paper like the Wall Street Journal address some of the concerns before the collapse? I always thought they were more nitty gritty with their articles and people interested in real financial information would want this kind of reporting.”

    1. Media tend to benchmark against each other not against the ‘truth’. 2. Explaining complex debt has never been big in mainstream journalism and probably never will be. Most financial players don’t really look across at other bits of the industry. If you are a widget maker you don’t really care about the workings of the cog maker’s industry. 3. Most financial people only care about what might grow next that they can profit from.

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  1. In Praise of a More Evolved Form of Capitalism « The PSSI Blog - October 26, 2009

    [...] brings us to Noreena Hertz.  Hertz is a Cambridge economist who wrote “The Debt Threat” a tale of the global dive into [...]

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