Doomsayer gets instant fame
Gerard Henderson
October 21, 2008
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Photo: John Shakespeare
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It had to happen. In the international financial crisis, it was always likely the cult of celebrity would merge with that of economic doomsayer. In Australia the leading doom-celeb is none other than Steve Keen, the associate professor of economics and finance at the University of Western Sydney.
What a month it has been for Professor Keen. In late September he was photographed in The Daily Telegraph along with his partner, Melina Forrest. He, looking at the camera, clad in a white T-shirt with a blue patch on which was printed a quote from the economist John Maynard Keynes. She, standing close and looking admiringly into his eyes.
It's not often that a middle-aged academic from a suburban university receives such coverage in the popular press. How did he get there? By predicting another Great Depression, like the one that devastated the Western world in the 1930s, that's how.
The immediate justification for the story was the announcement Keen had decided to sell his apartment in inner-city Sydney. There was even a touch of lament as the associate professor explained his reasoning to the avid reporter: "It breaks my heart. But I don't want to live my old age in poverty and there's no point in paying a mortgage on an asset that is going to fall by 40 per cent or so in the next few years."
You wonder precisely why this doom-celeb believes it is a good idea to advise potential buyers of his abode that any such purchase will decline in value by 40 per cent in but a few years. Perhaps he is not such a fatalist, after all.
Or, perhaps, he likes the media attention which he would not have received if he had predicted a recession (rather than a depression) with housing prices declining by, say, only 20 per cent. To receive maximum coverage, doom-celebs need to err on the side of hyperbole.
On Sunday night I learnt of Keen's forthcoming appearance on 60 Minutes by a Channel Nine promo which announced his prediction of a depression accompanied by "at least a 10 to 15 per cent level of unemployment".
The program titled "The Big Bust" certainly lived up to its heading. Presenter Liz Hayes referred to the current looming economic downturn as "the worst financial crisis the world has seen". It seems that she overlooked the Great Depression when, in Australia, unemployment rose to 30 per cent of the essentially male workforce.
Soon the sage shifted to Keen's domestic arrangements. Hayes reported that "he hasn't found a buyer yet" for his home but she seemed impressed he had put his property where his mouth was, so to speak. So much so that the presenter saw a lesson in such behaviour for 60 Minutes viewers, commenting: "It says a lot when you, the economist, decides that you have got to sell." Hayes then asked: "Is that something we should all be doing?" The answer was broadly in the affirmative.
Hayes' reference to Keen as "the economist" was revealing. It is true that he was the only economist heard in that part of the program which covered the Australian economy. However, many economists would take a less alarmist view of the Australian - and even the American - economy. For example, on 60 Minutes, Keen prophesised a depression lasting "about 10 years". Whereas the American economist Jason Weisberg predicted a world recession (not depression) and maintained that it would be "not long-lived".
In between his Daily Telegraph star coverage and his star billing on 60 Minutes, Keen was interviewed by the 7.30 Report's Kerry O'Brien on ABC 1. A Google search reveals Keen invariably receives soft interviews on the ABC and is rarely, if ever, subjected to a debate where another qualified economist can test his seeming hyperbole. Keen ran his familiar lines to O'Brien, except that he notched up his estimate of looming unemployment to 20 per cent. In Keen-speak that's not adding hyperbole, just rounding up.
The following evening, O'Brien interviewed Kevin Rudd. Instead of positing his own questions, the 7.30 Report presenter asked the Prime Minister to respond to Keen's views. It was as if Australia's leading doom-celeb is the only economist worth hearing.
On no fewer than three occasions, O'Brien asked Rudd about Keen's predictions that there will be a marked fall in property values. Not unexpectedly, the Prime Minister made it known that he was not in the business of providing predictions "about where house prices are going".
Put simply, Keen does not approve of debt. His predictions of a debt-induced decade-long depression, with home prices reduced by 40 per cent and unemployment rising to up to 20 per cent, may be correct.
But this doom-celeb's soothsaying may prove to be wrong. In which case The Daily Telegraph, 60 Minutes and The 7.30 Report will have run Keen's views virtually without challenge.
Keen has been able to get away with the view that there is something inevitable about the coming of a 1930s-style Great Depression. This overlooks the fact that governments can take decisions which may alleviate increases in unemployment or falls in property prices. Despite Keen's economic determinism, there is little that is inevitable about economics. The Australian media would be well advised to be more sceptical about economists with messages on their (fashionable) T-shirts.
