#3 The Bitterest Medicine of the Financial Crisis: Our Rush to Action.

Whenever people in power, whether in politics or business, rush to answers, they only deepen divides. During the financial crisis, governments rushed to action, listening to experts instead of their citizens. Millions suffered this mistake, sparking protest. But there is another way.

#3 The Bitterest Medicine of the Financial Crisis: Our Rush to Action.
Indignados, Protesters in Barcelona Plaza Catalunya, 2011 (source: calafellvalo on Flickr)

I lived in Barcelona when the global financial crisis struck in 2007/8. For three decades, Spain had been a poster child for economic growth and success in Europe. Now, the country was hit hard. Like politicians everywhere, Spain’s leaders felt compelled to act fast. Overwhelmed by the collapse and complexity of the financial system, they yielded to the pressure and advice of international experts in economics and finance. They concluded that the only way to restore order was to invest billions of euros to bail out the banks that would otherwise put the whole economy at risk. In addition, they prescribed what became known as ‘the bitter medicine’: The government would have to take tough austerity measures, which meant higher taxes and deep cuts to public services. The goal of these measures was to reassure financial markets and the European Union, a big lender, that Spain would continue to pay interest on its mounting debt.

This bitter medicine brought little relief. Unemployment rose from 8% in 2007 to 21% by 2011, the number of people living in extreme poverty tripled over the same period. With every year, millions more people lost their jobs and had to rely on less and less government support. As cuts took hold, education, health and social services deteriorated. Spain soon became the country with the highest inequality in Europe. Young people were among those suffering the most, unable to build their lives. When in 2011 youth unemployment topped fifty percent, protests began to erupt. One morning in May, as I was walking my daughters to school, we stumbled into a newly erected protest camp in Plaza Catalunya, Barcelona’s main commercial square. Two hundred protesters, inspired by the Arab spring, had put up tents and tree houses overnight. Their occupation of the square, carried out simultaneously by activists in Madrid, had two goals. They wanted to force the government to listen to people hit the hardest by the austerity measures. And they wanted to create a new space for people to meet and develop their own ideas for the future. They called themselves ‘indignados’ (translates as indignant, outraged) and their anger was directed at politicians, officials, experts and the economy in general.

Frustrated by not being heard, at least seven million Spaniards, about fifteen percent of the population, joined the indignados in protests by 2015. At the outset, this movement had no clear vision or agenda for the future. It sprang out of a citizenry known for being among the least politically engaged in Europe. But the leaderless movement soon began to develop an agenda and grew into a significant political force. In 2015, they swept established political parties out of city halls across the country in municipal elections. In Barcelona, Ada Colau, a protest activist and leader of a new political party, Barcelona En Comú, was elected Mayor. She rejected the privileges and backroom dealmaking of her predecessors and instead insisted on holding all official meetings in public, on the street. Her message was clear: I am listening to you. Four years later, the general election results in Spain showed just how far the political transformation had gone. The socialist and popular parties, who for decades had divided 97% of the votes between them, had now lost half their seats in parliament to upstarts with roots in the protest movements. In 2020, after almost a hundred years, Spain’s prime minister had to share power for the first time in coalition with Unidas Podemos, one of the protest parties.

Indignados Everywhere.

As millions of people around the world were thrown into unemployment, spending cuts crippled their safety nets. To breathe life into the economies, and in addition to austerity measures, governments all over the world began printing trillions of dollars in new money to provide cheap credit to businesses. It seemed to work. Economies began to recover quickly, just as promised. But hidden in the overall economic growth was the same growing inequality that plagued Spain. Wages for workers stagnated as corporate profits and stock values soared. Trust in experts and institutions eroded as working- and middle-class people felt betrayed by what seemed more and more like a bail-out for the rich. Within a year, the Occupy Movement, an anti-capitalist protest movement with tactics directly inspired by the indignados’ occupation of squares in Barcelona and Madrid, spread to almost a thousand cities in eighty-one countries. A dangerous broad sentiment began to take hold that governments could not be trusted to put the needs of common people before those of banks and creditors. Frustration and distrust provided fertile ground for populism, conspiracy theories and identity politics that promised ever more radical fixes with wide-ranging consequences. In Spain, anti-austerity parties shook up a comfortable two-party political establishment. The Brexit referendum, followed by the election of Donald Trump in 2016, marked a notable turn not just toward protest and populism but away from truth.

I am not an economist. But I believe that much pain could have been avoided if, instead of rushing to action, public leaders had taken the time to listen to those who would be affected by their vast rescue plans. Many experts point to Iceland as an example of a country putting its citizens before the banks during the financial crisis. Instead of submitting to the demands of experts and lenders to bail out its banks, Iceland did what was deemed unthinkable in Spain: it let them fail. Instead of austerity, it expanded its social safety net. Instead of rushing to action in 2010, it invited citizens to participate in drafting a new constitution. Admittedly, such listening is easier in a small country of just 330,000 citizens. But the path paid off: Iceland's recovery was faster than expected. Youth unemployment Iceland peaked at 15% in 2010 and dropped to 6% by 2016. Spain's youth unemployment peaked four years later, in 2014, at 55.5% and remains at a painful 33% in 2021. Slowing down to listen helped Iceland not only lower the pain for citizens, it also delivered a much faster recovery. I like to think of this as the dividend of listening.

No Unicorns to the Rescue.

History may end up pinning blame on the political leaders and economists who led these austerity programs, for solving the wrong problem and accepting terrible human tragedy as a price for restoring their known order. But we should not overlook the role played by those who always insisted that business is the only credible force for the kind of creative disruption that our society needs. They talked up expectations that new startups would challenge the cushy corporate incumbents with new ideas. But just like politics, the world of business has also ended up failing to produce any real answers to the truly urgent problems of our time.

Our economy, despite its immense agility and disruptive power, simply isn’t designed to be an instrument of social change. Success in business is a race for dominance. Instead of empowering us, 'listening' at its business-best is a means of finding ways to manipulate our behaviors, lock us into products and services, extract data, or optimize sales. Over the past decade, this form of listening, when taken to its extreme, gave us fake news, unprotected gig- and underpaid warehouse workers, manipulation of regulators, the diesel emissions scandal and infinite scroll on our smartphones. More importantly, both politics and business seem to fall into the same trap: Instead of taking time to understand the root cause of a problem, they are quick to categorize it as a crisis and jump into action to fix it. But the label ‘crisis’ is often misused. Most of the time, the 'crisis' is a product of our very own society, a stress that has been in the making for years, decades or generations.

A Flawed Fixation on Quick-Fixes.

I experienced the years following the financial crisis with a lot of intensity, in part because my daughters were born into it, in part because I lived and worked in some of its hotspots, and in part because I had a good amount of agency as a social entrepreneur. Now, when I reflect on those years, I see a simple pattern emerge. Whenever people in power — whether in business, politics, prison or at home — try to rush to answers, they create divisions and produce failure. Our quest to improve things faster traps us like a hamster wheel. I myself travelled the world for over twenty years, telling people how to fix things faster. But it was only when I opened up to slowness that I discovered a different way. All around me, I suddenly began to notice communities that were much better at solving our truly urgent problems. These slow movers kept winning at the long game of pursuing audacious ideas by listening, extending trust and patiently empowering others. The more I learned about them, the more I loved their way.

I call it the Slow Lane.

In my next post, I will introduce the Slow Lane as an alternative to the quick-fixers. Disruptive innovators and start-ups promise the world – but never seem to manage to solve one problem without creating another. The Slow Lane operates by a different set of timeless principles that allow truly audacious ideas for social progress to become real. This is where the fun begins.

As always, I am eager for your comment and ideas! Please share this post if you think others might enjoy it. Thank you.