Monday, 19 November 2012

Lines between macroeconomics and politics

The National Institute (NIESR) is old enough to count as a venerable British institution. I am a governor of that institution. The National Institute relies on research funding from a number of sources, which includes many that are directly or indirectly funded by the government. So when an MP of the governing coalition suggests publically that this institution should stop doing its job because its findings have political implications I have a direct concern.

Jonathan Portes today posted an extract from the (unedited) transcript of his recent appearance in front of the Treasury Select Committee. In the extract he is questioned by Jesse Norman, a Conservative MP. Mr. Norman finds it difficult to understand why Jonathan Portes does not credit the government for keeping interest rates on UK government debt low, and why he wrote an article for the Spectator (a right wing magazine) entitled ‘Plan A has failed’. But that is not the issue. What Mr. Norman suggests is that in saying such things Jonathan Portes is transgressing a line between the economic and the political, and to quote “My suggestion is that such things may not do the long-term well-being of the NIESR much good.”

I would suggest that it is Mr. Norman who has transgressed a line here. I have read a lot of what Jonathan Portes has written since he became director of NIESR in 2011. He and I obviously share the same views about Plan A and UK austerity, but on other issues that he writes about (like the impact of immigration) I have no particular views and can therefore be dispassionate. What strikes me about Jonathan’s writing is that he is not afraid to call a spade a spade, but he is also scrupulously careful to stick to the economics of an issue. That he is so good at that befits his previous experience as a senior civil servant working for governments of both major parties.

NIESR has always been the leading independent macroeconomics think tank in the UK. Macroeconomic policy is central for any government, and therefore it is bound to be political in that sense. Previous directors of NIESR have been equally forthright in public when they thought that the government was pursuing the wrong macroeconomic policy - I remember the two that I worked under being highly critical of the monetarism of Mrs. Thatcher’s government. As Jonathan Portes points out in the transcript, his predecessor Martin Weale was a constant thorn in the side of Gordon Brown’s fiscal policy, and with good reason.

In this sense, Jonathan Portes is continuing an honorable tradition, of running a politically independent think tank that is prepared to criticise the government when it thinks it is pursuing the wrong macroeconomic course. In today's world where think tanks often tend to have clear political agendas or allegiances, this is refreshing and publically valuable.

There are two things that are worrying about Mr. Norman’s line of questioning. The first is that he appears to be suggesting that because the macroeconomic judgements Jonathan Portes makes have political implications, he should keep quiet about them, or at least lose them in a fog of caveats. The potentially more serious is that by not keeping quiet he “may not do the long-term well-being of the NIESR much good.” But perhaps Mr. Norman was just offering some friendly advice, and intimidation was the last thing on his mind.

6 comments:

  1. Why aren't you more worried that Mr. Norman has no understanding of basic concepts in macroeconomics?

    It's astonishing that two and a half years after Cameron, Osborne and King implemented austerity and its consequences are clear, many senior policy makers and commentators are simply refusing to update their beliefs.

    I understand your reluctance to be rude about policy makers. But their ignorance is extremely damaging for our economy. Thus I would argue that being rude to policymakers and commentators with potentially damaging and spurious beliefs is a vital public good, which at present is under-provided.

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    1. Updating their beliefs would mean accepting the banking system at the heart of the fabled British Establishment has had its day. It would mean accommodating their own impending redundancy. Perhaps not surprisingly, they're not keen to adopt this approach. In fact, I expect they'd see us all burn before relinquishing the oligarchy which supports them. Since they're the PM and the Chancellor respectively and these on no more basis than that they have rich influential fathers... well, we might not actually burn individually but I fully expect them to be implementing a scorched earth policy on their way to history's dusty bin. Start prepping, I would.

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  2. Although the Chairman appeared to try to put some distance between the comments of Mr Norman and the committee as a whole by highlighting Mr Portes's independence, I would have thought an apology is in order from Mr Norman. Given the individual concerned, I doubt that that can be expected anytime soon.

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  3. I think you should expect that in the next 9 months or so, the Government will do their best to cut off funding to the NIESR. I hope you're ready to make a noise about it!

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  4. You can't separate economics from politics. Never could. Mill noticed this more than 150 years ago.

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  5. Norman should get a rep from the (selective reading of) Adam Smith Institute along to his committee if he just wants his prejudices rubbed up the right way. Someone from the reality-based community doesn't appear to suit. The implied threat to NIESR funding is a sure sign the old boy is rattled.

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