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John Thompson will first read a section of his own work, which was part of the readings that were
discussed at the Aftermath Network meetings. The intention is that all the contributions of the
members of the Aftermath Network will be published.
This is where we are today, in a very uncertain place. Not in the aftermath of a crisis, but in the
midst of one. Where the beginning can be analysed and documented with some precision but where
the end is not yet in sight, and the outcome by no means clear. What began as a financial crisis
apparently stemming from the reckless practices of bankers operating in deregulated financial
markets has metamorphosed into a much broader crisis that is financial, political and social in
character. Governments and politicians are now in the frontline of the crisis and they face enormous
challenges. Trapped by the Faustian pact, that ties their fate to private investors while at the same
time facing the wrath of citizens who feel unfairly treated and betrayed. And just is this crisis is now a
social crisis as much as it is a financial and political one. So too its future, is in the hands of ordinary
people, and the way they respond to the sacrifices that are being asked of them, as much as it is in
the hands of bankers and politicians. What happens on the streets of Athens and other cities may be
as important in the months to come, as what happens in the offices of governments and banks in
New York, Washington, London, Brussels, Berlin and elsewhere.

Could you tell me, do you remember the moment you first became aware of the crisis as a crisis?
That's hard to reconstruct that precisely but I remember some moments when I became acutely
aware that we were in the midst of something serious. And one was undoubtedly walking into the
centre of Cambridge one day in September 2007 and seeing a long queue of people at the street,
wondering what exactly they were cueing for, realising that they were queuing outside the door of
Northern Rock, the bank that had previously, the night before, requested a safety net for the Bank of
England in terms of backing up its precarious financial position. And it was my first witnessing of a
classic bank run of people afraid that their money, their deposits, might be lost. And so they were
queuing up to withdraw their deposits from a bank. And it was an extraordinary phenomenon. I was
just standing on the street and looking at this long queue of people, wishing to withdraw their money
from a bank. They were no longer trusting their savings in the bank were safe. And that was a
moment of realisation that we were in the midst of something serious.

So what did you feel at that moment?

Some anxiety, some worry, some uncertainty about savings more generally, including my own. It was
probably the only, I can remember, moment in my life when I have seriously began to wonder
whether something that I had always taken for granted, which is when you put money in a bank, its
safe, was a unreliable assumption. I wondered whether, in fact, it was perhaps not safe. And that a
traditional set of assumptions that we all have, which are that institutions like banks are reliable ones
that you can trust, these assumptions were called into question. So I did feel probably as I say, for the
first time in my life, an anxiety, uncertainty, about whether these pervasive assumptions that we
take for granted about institutions as reliable, were perhaps unsound or were being called into
question by a series of events that were taking place in distant places about which we knew relatively

Is that why you got involved in this Aftermath Network?

No! I mean I got involved in the Aftermath Network because I was asked to be involved and I
respected the individuals who asked me, and of course I appreciated and knew that it was a very
important set of issues that were being raised and addressed and I think anyone today should be
interested in these broad transformations taking place in the disruption caused by the financial crisis
and the escalating series of events surrounding it. So I knew that it was an important set of issues
and I was happy to be involved, simply because it seemed to me important to think about it in a
systematic way.

What exactly is the Aftermath Network? Why is it special?

If we can leave aside the name for the moment, which is a debateable point, I think the group of
people is a collection, diverse, of individuals who are interested in a common set of questions and
who are gathering together over time to think about these questions and talk with one another
about them and see if collectively they can gain any illumination about the events that surround the
financial crisis of 2007 2008, and the sequence of events associated with it. And I don't use the term
aftermath there intentionally because that as you may know is a debateable point. Whether we are
still living through an extended crisis or whether we are living in the aftermath of a discrete event
that took place in 2007 2008. I have my own views about that and feel that in fact we are living
through a sequence of events that cannot be described as an aftermath appropriately but are
connected to one another in a complex way.

You feel we are still in the crisis?

I do. I don't think that the crisis was a discrete event that occurred in 2007 2008, that came to an end
with the state rescue of the financial system and the banks in the course of 2008, and that has
produced a series of ripple effects that we might call the aftermath. I don't believe that. I think that
we are still living in the midst of a crisis that could be dated from 2007 2008 although the conditions
for that crisis go back much further than that, and this crisis has changed in form over the last few
years and so it has become a more pervasive and widespread crisis. But it was not an event that
terminated in 2008 and produced a series of aftershocks. I would argue instead that its an ongoing
crisis that has metamorphosed over time, that has assumed new forms. And the way that we
experience it today is in the form of a serious crisis around public expenditure and the curtailment of
public expenditure and the reactions produced to those curtailments in various cities around the
world, various places in Europe and elsewhere. This is a continuing expression of the same
underlying crisis.

So youre saying,.. Your contribution is titled Metamorphosis of a crisis, what is the metamorphosis
briefly summarised? From what to what? Where are we now in the crisis?
To understand, in my view, the connection between the bank run at Northern Rock in September
2007 and the protest and riots taking place in Syntagma Square in Athens in the end of June, 2011,
over 4 years later, you have to see that these events are connected by one common phenomenon,
which is the phenomenon of debt. Once you understand whats at the heart of the crisis we are living
through, is the phenomenon of debt, you can see the connection between them. What might
otherwise seem like a desperate series of events are in fact united by that common theme. So to
understand this, you have to see that capitalism as an economic organisation always depended on
debt. It relies on a structure of credit and debt, that is money that is borrowed from the banks and

financial institutions as well as the provision of credit, a continuous promised pay etc. Capitalism as
an economic system fundamentally depends on debt. And at the same time its not just capitalism
that depends on debt, modern states have always depended on it too. When you look at the
formation of modern states in the early modern period, you see that they relied on debt to finance
expenditure. And in the early modern period the primary demand for expenditure for states was for
the conduct of war in the building up of armies and navies and so on, this was an enormously
expensive undertaking for modern states and they had to borrow large amounts of money in order
to do it. And they borrowed money through various mechanisms but one was through the issuing of
government bonds. These bonds were bought by private investors and this created a growing
phenomenon of state indebtedness which has continued through to the present day. Now states
thereby relied on private investors to provide them with the money, resources they needed in order
to run their affairs. And the private investors required assurances from governments and states to
reassure them their money was safe. So what kind of assurances do they require? Well, they
required states to keep inflation down because since government bonds were of fixed interest, if
there was high inflation, their investments would be eroded, and they also required states to engage
in prudent fiscal policies of deficit financing. So they wanted to be reassured that states would be
able to meet their debt obligations to pay interest, and to pay back the investors when government
bonds had matured. So they required these various forms of reassurance from states. This historical
alliance between states and private investors continued from the early modern period through to the
present day. But it was a complicated alliance, a delicate balance between states and private
investors. And the greatest risk for banks and private investors in the early modern period was state
default. That states wouldn't be able to repay their debts. So this was a delicate process and from the
states point of view it also created what I call a kind of Faustian pact. That is, states now secured a
form of finance for their undertakings, whether it was military or subsequently other forms of state
expenditure ,like the building of infrastructure and the rise of the welfare state, they required a form
of finance, but at the same time they were now bound to private investors and they had to be able to
reassure them by keeping their government spending under control, by insuring that inflation was
low, and reassuring private investors that they would be able to repay their debts over time. So this
put states in an awkward position, especially when, with the rise of modern welfare states in the 20th
century, they faced growing demands from citizens for the provision of welfare services and health,
education etc., all of these things tended to produce an effect on public expenditure and yet on the
other hand they had to keep public expenditure down and reassure private investors that their
finances were in good order. So that was the tension modern states always faced. So what we see
when we now jump forward to the early 21st century and the series of crises that emanated from the
subprime mortgage crisis in the United States, is something like this.

Because now you say the tables have turned, right? That was new..
The tables turned in the sense that in the early modern period, in the 16th 17th 18th centuries, the
banks bailed out the states and the banks were the finance last resorts and the risk was that states
would go bankrupt. That states would default. And this would cause problems for the banks. But the
tables turned in the sense that in the 19th and 20th centuries it was the state that became the banks
last resort. That is if banks went bankrupt, the states would have to step in to support them. So in
that sense the tables turned. But to understand what happened in the early 21st century you have to
see that in the late 20th century, 1980s and 1990s, there was a growing process whereby the financial
sector became larger and more significant in Western capitalist societies and the banks, the financial
institutions, greatly increased their assets which means they increased their debts and there was a
huge growth in the assets of banks, which were basically their debts and this created a kind of asset
bubble. And what happened in the period of 2007-2008 was that the faults began to occur, initially in
the mortgage market and this created enormous problems for the banks and financial sectors which
now faced in some cases bankruptcy. So states had to step in to bail them out and to support the

banking and financial sector. But when states stepped in to do this, it shifted the burden of the crisis
into the political sphere: now states were in the front line of the financial crisis. They had increased
their vulnerability by funding the banks and financial sector and also with the recession that followed
the initial banking crisis, the tax revenues for states declined. So they were in a more vulnerable
position. The rating agencies shifted their focus to the creditworthiness of states. Especially on the
European periphery; states like Greece, Portugal, Ireland, Spain and so on, were now subjected to
scrutiny by the credit rating agencies and they downgraded their bonds at least in some cases like in
Greece and Portugal and by downgrading their bonds they increased cost of borrowing for those
states. Which meant that these states were now in a very vulnerable position. This vulnerability
meant that it was very costly for them to raise for their money and therefore they had to seek rescue
packages of one kind or another and these came with tough austerity measures at least in the case of
Greece. So this is the underlying connection between the Northern Rock crisis of 2007 and the
protests and violence in Syntagma Square, in Athens.

Where are we now? Youre from the United Kingdom, whats happening there right now? What does
it look like?
Well it is the crisis, it is continuing, and it is doing it exactly the way I suggested. That is, when states
and governments became indirectly involved in the financial crisis in the way that I have tried to
explain, they were now exposed on three fronts. First; they were exposed to the charge of a kind of
duplicity. That is, of favouring the banks. Of bailing out the banks and then letting them off too
lightly. Of bailing out the banks, securing them, propping them up and then not clamping down on
the banks to prevent them from continuing with a bonus culture of high payments to their
employees and of continuing to reproduce the same kind of culture within the banking and financial
sector that had led to the crisis in the first place. And so they were subjected and vulnerable to
criticism from citizens who feel that governments using their money, have bailed out the private
sector and now are not being tough on them.

This is all still very abstract I think. I am trying to get a little more concretely like, where does the
anger go?
The first place where the anger goes is resentment. Resentment to the government who is not
prepared to clamp down on the financial and banking sector, who is not prepared to reform them, or
to take decisive action. This is exactly one of the debates happening in the United Kingdom now that
the government is too timid with regard to the financial and banking sector and people are annoyed
and angry about that. Second place in which states become vulnerable is in order to respond to the
pressures on them, they are cutting significantly public spending, and seeking to reform arenas of
public spending. So from one sector after another, whether it was higher education, the health
service, pensions and so on, closing down of libraries, shifting the burden of cost of higher education
from the tax payer to the individual students and so on. One sector after another they are taking to
curtail public expenditure. This is eliciting reaction from individuals whose lives are directly affected
by it. So we saw only a week ago, the largest strike in the United Kingdom for many years: half a
million public sector workers came out on strike. They came out on strike because of proposals for
the reform of the pension system which would mean that they would have to pay more money and
they would have to work longer in order to get their pensions. And they also came on strike because
they were angry and worried about their own future as public sector employees, they knew that
their own jobs were at risk. That is that the government would have to, and in all likelihood curtail
and cut back on public spending and therefore put people out of work and restructure systems of
public services that would put people out of work or force them to move from one office to another,
consolidation, of the public services of one way or another. So they were worried and angry. So this

is a second arena in which it directly impinges on peoples lives. Same thing was happening in
Greece, where the austerity measures forcing the Greek government in this case a left of centre
government to impose swinging cuts in the public services, and to raise taxes in order to try to close
the budget deficit or to reduce the budget deficit. So this is when it begins to impinge directly on the
lives of ordinary people. Whereas back in 2007 2008 it was a crisis that seemed to take place in the
city of London or in Wall Street, and it was all very strange.. People don't understand what was going
on. Because these very curious financial instruments that people had never heard of, credit defaults,
what on earth are those? Didn't make any sense to people. But now it makes sense to people
because it affects their income, their jobs, the conditions into which their children can get education,
their ability to go to a library because it is about to be closed, it impinges directly on their lives. So
now they understand what the crisis means. It affects them directly. The third way in which states
and governments are now vulnerable is that the crisis is by no means over. We don't quite know
where this crisis is going. But it could get worse. Because the potential defaulters now, are no longer
subprime mortgage holders in the United States. But they are states. The Greek state could default.
What would happen if the Greek state defaulted? What would happen if the Greek and Portuguese
state defaulted? Maybe even the Spanish state.. That could not honour their debts. We don't know
what would happen. And we have to remember that its the banking sector which is deeply
implicated in these debts and so we don't know what the implications would be for the banking
sectors in France, Germany, United Kingdom which are heavily exposed to Greek debt. Could those
governments bail out their banks again? We simply don't know. So states are very exposed to the risk
of sovereign default. This is in some ways a more serious risk than they faced back in 2007 2008. This
explains why the German and French and other members of the European Union are so concerned
and try to roll over Greek debt and try to prevent a sovereign default. Because they are very worried
of what the potential implications of sovereign default might be at this point in time.

Also I think now governments have lost, are in the process of losing, the support of the population to
bail out the banks a second time, would be difficult.
Exactly because the crisis has metamorphosed: what was apparently a financial crisis, in 2007 2008, a
seizing up of the banking system, the credit crunch, has become a full blown political crisis because
states have become directly involved in sorting out the financial crisis and therefore the burden has
been shifted onto states and governments. Their vulnerability has been exposed and therefore in
some cases they have had to struggle to try to reduce their budget deficits in order to ensure or try
to prevent a sovereign default in the case of Greece, Portugal and so on. They had in some cases to
secure emergency loans; in the case of Ireland, Portugal, Greece in order to prevent a sovereign
default. So it has become a full blown political crisis. But its more than that. Its also a social crisis
because in order to respond to these demands that states now face, the Faustian pact as I described,
which is that now states are dependent on private investors and they have to satisfy the conditions
of private investors. In order to do that they have to clamp down on their public spending and they
have to try to raise taxes. This impinges directly on the lives of ordinary people, who feel that their
life conditions are now being threatened. Their wages, salaries are being cut. Their taxes are being
raised, their pensions are being changed, their jobs are now at risk, their children are asked to carry
the burden of their own education and so on. Its impinging directly on the lives of ordinary people,
and they are responding to that with anger, resentment, protest and one of the common refrains you
hear, whether it is in Greece or United Kingdom, Portugal, Spain, is: We are being asked to pay the
price for a crisis caused by others. That is: The bankers caused the crisis and we are being asked to
pick up the bill. This is how many people feel and therefore they feel angry and resentful and they
are showing that by going on strike, by protesting, demonstrating in one way or another their
dissatisfaction, with the way that the sequence of events have been managed by those in power. And
therefore it becomes a broader social crisis.

Are they right? Are they paying the bill for the banks?
To some extent they are. Because states have had to step in to rescue the financial sector and they
have also had to take measures in order to appease and assure or try to reassure their creditors, the
bond holders, that they have their finances under control. Or indeed in some cases like Greece they
are responding to demands that have been placed upon them by those who have given them
emergency loans. Like the European Union and the International Monetary Fund. So these are
constraints that are being imposed on these states by others and so people feel very resentful about

Is it fair to say that the budget cuts are directly related to the bailout of the banks?
It varies from one context to another. So in the case of the United Kingdom and Ireland there is a
connection in the sense that the English and Irish governments both had to bail out banks in a very
substantial way. But it is more complicated than that because the pressure on the public finances in
the United Kingdom is also related to the recession and the economic downturn which reduced the
tax take and therefore created a growing budget deficit in the United Kingdom and in the case of
Greece, the situation is more complicated than that. There wasn't a bank bailout in Greece so it is a
different set of historical conditions. It is more related to accumulated historical debt in the case of
Greece and to a very specific set of conditions surrounding the joining of the European Union in the
late 1990s, the ways in which joining the European Union created the conditions for increased
borrowing. So it's a complicated and rather different story in the case of Greece. That wasn't related
directly to the bank bailout.

How do you see the future? Is this the end of progress? Do you expect a revolution, violence,
Its very hard to predict how these events are going to unfold. I wouldn't expect revolution, I think
that's not on the agenda, I would expect continued protest, a continued uncertainty, and I honestly
think no one knows how these events are going to unfold. I think the crisis in the Euro-zone is a very
serious one, because the rolling over of Greek debt, should it occur, and the second bailout of
Greece, should it happen-and it seems likely to happen- will not solve fundamentally the problem. It
really postpones the problem. It buys time. And the scale of Greeces debt is so substantial and their
capacity to reduce that debt is so limited, that it is not at all clear how that problem is going to be
resolved. It may be that various institutions are going to have to absorb some losses. But we simply
don't know at this point in time how that's going to unfold. So a Greek default is not out of question
and we don't know what the implications of that would be, within Europe and more broadly within
the global financial system. So, I think were at a very uncertain moment now. And I think the pain is
going to continue for some time and I would expect continued protests against that. In Greece,
Spain, Portugal, United Kingdom, I think well see continued unrest.

But not revolution?

No I don't think so because I don't think that there is a clear enough concept today of what a
revolution would produce and of an alternative to the systems that we have basically today. So I
think what is more likely is that you are going to see a series of reforms of one kind or another, a
series of restructurings, of the institutions of capitalism, and indeed regulatory institutions within a
national and transnational context, you will see changes of this kind. But these changes are rather
slow to appear and the extent of political response to the initial crisis has been limited. So I think we

have a long way to go but I think that is what we are more likely to see in the coming years, are a
series of structural reforms of one kind or another and the development of alternative modes of
regulation of financial and other institutions. But I don't think were going to see a broader social
revolution if that's what you meant, I don't think that is likely.

What is the common ground coming out of this group?

Broad I would say there is a broadly shared understanding of the conditions that have produced the
kind of crisis that were experiencing today. There is a common understanding that the scale is
substantial, that the crisis is ongoing, that the outcome is not clear, beyond that I wouldn't say there
was a consensus about modes of response to it. I think there is a diversity of opinion about that.

Do politicians care more about banks and institutions than about people?
No I don't think they care more about them, but in some ways they are trapped between the two.
Politicians are trapped between financial institutions on the one hand and the citizens to which they
have to respond on the other. This is the outcome of a twofold historical process. On the one hand
the Faustian pact that I described; which tied states to private investors in order to fund their
activities. On the other hand with the development of modern representative institutions and the
growth of the welfare state and of citizenship rights as described by T.H. Marshall in the course of
the 20th century, they have had to respond to growing demands from citizens and from the members
of the populations which they are elected to represent. So they are caught between the two. On the
one hand trying to appease their creditors by the hearing to policies of low inflation and the norms,
the acceptable norms of deficit financing on the one hand, keeping their budget deficits under
control at the levels that will reassure the money markets and on the other hand trying at the same
time to respond to the expectations of their citizens. And they are trapped between the two, and
struggling to cope with the conflicting demands that are placed upon them. As the situation in
Greece illustrates perfectly.

Maybe the end of the welfare state?

No I don't think so, I think that many people have pronounced the death of the welfare state but I
think that is not correct, I think that citizens are mobilising to protect aspects of the welfare state
that matter to them and the ability of governments to wind down the welfare state has been shown
again and again to be limited. At least in many Western societies where the welfare state institutions
have become a major feature of modern states. And we should also remember that the kinds of
events that were talking about here and what were calling the crisis hasn't expressed itself in the
same way across different countries. Were talking about a particular subset of countries here. So if
you go to the Scandinavian countries you don't find the same pressures at all. Their welfare
institutions which are in many ways the most developed ones remain pretty much intact and are not
being wound down any serious way by the kind of pressures that were talking about here. But even
in the United Kingdom the welfare state remains a major institution, no question about it. And all
governments of whatever political hue, claim that they are defenders of the national health service.
Even if they are trying to restructure it in one way or another. Because this is a welfare state
institution which has very wide popular resonance and its very difficult for any government to claim
that they will systematically wind down the national health service because it would simply be
politically electorally unpalatable.

Is the crisis a deliberate coup by the elite?

No. I don't think so. I wouldn't have a conspiracy theory approach to this. I think what you see about
modern economic political social life is enormously complicated. There are many different actors
pursuing many different aims and objectives and no one really has a very good overview of all of this
and a very clear strategy about how to maximise their position within it. And so what we see here is a
series of displacements that were unanticipated. No one really expected them to happen. Very few
people, if anyone, really predicted the series of events that we are now living through. So I don't
think there was a kind of intentional conspiracy or scheme by some actors within our societies to pull
off some kind of coup here, I think what happened is a series of events that no one really fully
anticipated and a series of displacements that have occurred despite the intentions of others rather
than because of the intentions of others.

Some people did benefit from it more than others?

Some people have. No doubt about that, but that doesn't mean that they have manipulated the
situation to maximise their own positions. I think what happened was a series of events that caught
people by surprise and some people have benefited from that, others have suffered. There is no
doubt about that, but it wasn't because they had engineered the outcomes so that they would
ensure their personal benefit from it.

Some funds are speculating on the defaulting of Greece..

You can make money in all sorts of ways, you can also lose a lot of money. So it's a very complicated
arena in which a lot is happening that people don't fully understand. So I wouldn't suggest that there
was any elite who was managing to orchestrate the flow of events in such a way to maximise their
own positions. I think it's a more complicated situation than that and no one really has a proper
overview or understanding of where it is going to end up.

Just briefly your personal background, what are you bringing to the network?
I am a Professor of Sociology, and my area of interest is in social theory and in the sociology of media
institutions. I work specifically on the transformation of media organisations and in particular Ive
worked over the last 10 years on the structural transformation of the book publishing industry in the
Anglo American world. So Ive studied how the publishing industry has undergone massive
transformations since the 1970s, both economic and social transformation but also technological