It is now forty years since the Oil Shocks ushered in an era of turbulence and change. Following the end of the Bretton woods arrangements and the start of the secondary banking crisis, a period of social and economic turbulence arose that we still live with today.

The post war political consensus in the UK, “Butskellism” came to an end. An era of rising and widening prosperity, commitments to full employment and the deepening of the welfare state was replaced by mass unemployment and rampant inflation. In retrospect, it is clear that the Friedmanites and radical free market thinkers were better prepared for the crisis. While attempts were made to “put Humpty together again”, those who envisaged a different future won the day.

There was also a similarity in thinking about the state of economics in the late 60s as in the run up to 2007. If the future was not predictable it was manageable. For instance, there was a simple linear relationship between export growth and GNP. There were shocks of course, but the models worked well.

So here is my “Elephant in the room”. While any return to growth is to be welcomed, the nature of the recovery is as contested as the causes and remedies for the 2007 crash. Phrases are used such as: “it will be many years before the economy is back to normal”. Predictions on dates for unwinding QE or what constitutes normal are becoming vaguer with time. My reading of the narrative being spun leads me to one major conclusion. Looking at economic history the time to restore the health of the economy is now looking longer than the economic cycle. My guesstimate if that we now face a 60% chance that the next downturn and deleveraging (in the current policy framework) will occur before the economic recovery is fully back to whatever constitutes normal. Last month I was in both Barcelona and Athens. Despite the severity of the crisis in these countries the atmosphere is calm and people are going on with their lives. Compared to visiting Toxteth in the 80s, I felt safe and welcomed.

I find it fascinating that 6 years on, the debate over who saw the crash coming and what caused it and what the remedies may be is still as tribal as 2007. We may have avoided a double dip in the short term, but what might be the consequences of the next deleveraging and bust?

This is where I turn to the butterflies. In the recent past, we have seen the Coalition government make the case for capping pay day loans interest rates. What happened to “you can’t buck the market”? The sale of Royal Mail on the grounds that the State shouldn’t run these services ignores the inconvenient truth that the French state owns much of UK utility sector. The Chinese state is being invited to take ownership of UK assets. Add to this, the payment to BT of £1bn to create a monopoly in rural broadband and the picture is that the powers that be are again “trying to put Humpty back together again”. Why aren’t the advocates of open free markets up in arms?

The lack of coherence reminds me of a similar problem of the 70s. I once asked a Trade Union Leader to reconcile campaigning for maintenance of differentials alongside redistribution of wealth and income. I suggested that if the rich organised a “National Union for the Wealthy” and applied to the TUC supporting maintenance of differentials what would his answer be. I was not popular…

Opinion polls show a growing support for the public ownership of the utilities including transport.

The lack of trust in finance since 2007 has spread to government and industry. Functioning societies are built on a bedrock of trust and for me that is in decline. It has been a long-term trend since the 70s.

Governments, businesses and societies in upturns succumb to the illusion of control and mastery. I’m not clear whether a currency crisis, a resource shock, civil unrest in the Middle East or BRICS, or a stock market crash will precipitate the next challenge, or indeed when will it be.

There is often a big mismatch between the dominant political narrative and the underlying reality. “You’ve never had it so good”, “No more Boom and Bust”, “The pound in your pocket” spring to mind.

Consider this. The dominant narrative of the last 30 years has been as follows. The Trade Union movement was the enemy of progress. It held back economic prospects and the state had to be rolled back. So presumably GVA and GDP growth has been greater since the 80s than it was in the 70s? Whichever year you want to start the old and new era, it’s hard to see any significant difference either way. The current incoherence in the debate smacks of the “emperors new economics”.

For me, this feels like the struggles of the early 70s. If I’m right and the next crunch comes before “normality” has returned then a shift equivalent to the rise of the “neoliberal agenda” could be nearing. Fortune favours the prepared mind. Where is the group who will be ready and with what agenda?

Growth will happen and so will busts. I just think it would be nice to prepare for the next bust and not be arguing over it 6 years after it’s happened. In an earlier post I looked at the next golden age.

I remain eternally optimistic but am reminded of H G Wells: "Civilization is in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have."

Have a good 2014 if not a normal one.