Unofficial lockdowns, and Sunak’s deadly incompetence during the pandemic

 

It is now well established that Rishi Sunak as Chancellor played a significant role in increasing the death toll from the pandemic on at least two occasions. The first was to introduce ‘Eat Out to Help Out’ in the summer of 2020, and the second was to advise Prime Minister Johnson to ignore the medical advice from SAGE to impose a lockdown in the early Autumn and subsequently.

In both cases he will argue that, as Chancellor, his role was to protect the economy. Yet he did no such thing. As Chancellor, he failed to understand that to protect the economy you had to control the virus, which means keeping the number of people infected low. I and other economists argued this at the time, but in this post I want to set out the logic in a new way to show why there never was a health/economy trade-off.

A decade before the pandemic a group of us published an article on the economic effects of a pandemic. One of the main findings of the paper was that a severe pandemic can involve serious economic costs because consumers will avoid what we called ‘social consumption’. Social consumption involves anything that brings consumers into contact with others, so includes eating out, going to pubs or the cinema, using public transport etc. Social consumption involves a third of total consumption, so if people significantly reduce their participation in these activities the impact on the economy will be large [1].

We could call this effect an ‘unofficial lockdown’. Individuals stay at home rather than eat out or go to the cinema because they want to avoid catching the virus, not because they have been told to by the government. The key point is that if the government does nothing, individual actions attempting to avoid catching a potentially deadly virus will lead to a substantial economic slowdown. Swedish GDP fell by 7.6% in 2020Q2, even though no official lockdown was imposed.

This is why reducing the number of people infected also helps the economy recover. There is no health/economy trade-off in this kind of pandemic. If economic policy encourages people to put themselves at greater risk of getting infected, as Eat Out to Help Out (EOTHO) did, then any boost to the economy would have been limited to when the scheme operated, and thereafter there would only be economic damage as infections increased. The only situation where this might not happen is if R (the average number of people infected by one person) was sufficiently less than one and it remained below one despite EOTHO, but we know this wasn’t the case and Sunak made a point of not asking SAGE about it.

While EOTHO played some part in the second wave that grew during the Autumn of 2020, just as serious a failure was Sunak arguing against the SAGE proposal for a second lockdown in September. It is the case that an official lockdown has a bigger immediate negative impact on the economy than an unofficial lockdown. This is because, for example, in an unofficial lockdown

1. Many people will not be well informed, and will not reduce their social consumption much if at all

2. Some people will be well informed, but decide the risk to themselves is small so they will not reduce their social consumption, and discount the risk of them infecting the more vulnerable.

3. Employers may force workers to continue to travel work, even though both the work environment and travelling to it may risk infection.

Yet for the same reasons, an unofficial lockdown has less of an effect in reducing R than an official one. [2] This is what the UK experienced in the Autumn of 2020, even with the addition of some regionally based restrictions imposed by the government. With R>1, not only are more people being infected, with some dying or getting Long Covid, but the economic damage persists as individuals try to protect themselves by withdrawing from social consumption.

The UK and other countries experience of full official lockdowns is that they reduce R to less than one, so with a short lag infections start falling. This was the case for the lockdown at the end of March, the one month lockdown in November and the lockdown in January 2021. Because R<1, the number of infections fall and then the economic damage caused by individuals avoiding social consumption dissipates.

My focus on what happens to R is crucial, because there is a world of difference between R<1 and R>1. In the former the pandemic is being controlled, so that when lockdown ends the situation is manageable, and the hit to the economy from reduced social consumption will be relatively small. If R>1 the damage to the economy just keeps getting larger.

So while an official lockdown might do more damage to the economy than an unofficial one while it lasts, the official one deals with the problem, so reduces the time that Covid damages the economy. In contrast doing nothing, or taking measures that fall short of a full lockdown, allows infection numbers to increase and so allows damage to the economy to persist.

This is exactly what we saw in the Autumn of 2020. Thanks in part to pressure from Sunak, the government rejected advice from the experts to impose a full lockdown, and so infection numbers grew and consumption remained over 10% below its end-2019 level. When a sustained lockdown came in 2021Q1 consumption was only a few percentage points lower than 2020Q3 (GDP was actually higher), but that lockdown brought cases right down, and vaccines then removed the need for further lockdowns.

It is really difficult to rationalise what Sunak did during the summer and autumn of 2020. By deliberately not asking SAGE about the impact of EOTHO, he must have known this would increase infection rates. Did he really think the economy would be largely unaffected by a second wave? Unlikely, as in enacting EOTHO he was aware of people reducing social consumption because of the pandemic! Perhaps his actions were guided by perceived political advantage rather than economic or health impacts.

Gross incompetence is a strong term, but I fear it clearly applies to Sunak in these two cases. His thinking appears not to have got beyond the level of a right wing newspaper column, despite having the resources of the Treasury at his disposal. [3] His actions not only led to many people dying, but his actions also damaged the economy when he was the minister in charge of protecting it.

[1] This response modelled in our paper involves individuals trying to avoid catching the virus. It was not coordinated by governments in any way. In the paper we didn’t look at government imposed lockdowns beyond school closures.

[2] Obviously this judgement is country dependent. In countries where people and employers are better informed and more socially minded, unofficial lockdowns may come closer to replicating official lockdowns. This is why comparisons between countries that did lockdown and Sweden are potentially misleading, and why comparisons between Sweden and other Scandinavian countries are much more informative.

[3] Reporting on the Covid inquiry has naturally focused on political culpability rather than the advice politicians were being given. In this particular case it is inconceivable that the Treasury was unaware of the analysis I outline here. What happened to that analysis, and how far up the civil service hierarchy it got, are interesting questions we do not know the answer to. Until we know, we can only wonder whether senior Treasury officials' concern about higher government borrowing in lockdowns mattered more than the health of the economy.

Fiscal failures: The UK Autumn Statement and the German debt brake

 

Many people fear debt, because they worry about the consequences of not being able to pay the interest on it, or pay it back. However it is a huge mistake to let that fear override another truth, which is that debt is a brilliant device. It allowed me and millions of others to buy a house, and for many years continue to buy houses. More generally, it allows individuals to spend more money early in life, and pay for it during middle age when they are normally earning much more.

The extent to which we can transfer our own income intertemporally to smooth consumption over time has been growing over my lifetime. The opportunity to borrow when young is undoubtedly a good thing, yet despite this many on both left and right complain about the corresponding increase in debt that automatically comes from that.

Exactly the same is true for government debt. It allows governments to keep their spending on health, education and everything else stable when revenue streams fluctuate because of booms and recessions. In addition, it allows governments to cushion the impact of recessions on individuals who lose their jobs (unemployment benefit), and this ‘automatic stabiliser’ helps moderate the impact of the recession for everyone else. It allows the government to spread the cost of investment in roads and hospitals, so that those who benefit (current and future generations) help pay for it. It allows the government to respond effectively to a crisis, like the Covid pandemic.[1]

This is all possible because it is fairly costless to allow debt to fluctuate when revenue fluctuates or spending needs to temporarily rise. Imagine the harm that would follow if public service provision had to go up and down during the business cycle, with the NHS carrying out less operations in recessions, or children getting taught less.

A key corollary of the idea that debt allows smooth taxes and spending is that if debt increases substantially in a crisis it should be reduced back (if at all) very slowly. Debt to GDP can be reduced gradually over many decades (as UK debt from WWII was), or not reduced at all if there is no reason to think the level of government debt is excessive. [2] I have suggested that action to control climate change should also be regarded as a similar crisis.

Once this has become clear (as it will be to any economist), the idea of a debt target immediately becomes problematic. The whole point of debt is that it can go up and down depending on economic circumstance, so trying to fix it (or the change in it, the deficit) at some number is in danger of undoing all the good things debt can do outlined above. A target for debt is a bit like setting a target for how much fuel your central heating boiler can use, and as a result you freeze on cold days but get over hot on warm days.

So why do governments have targets for debt or deficits? The answer is that government debt can be abused by politicians for political advantage. In the early years of the Trump presidency he and the Republican Congress cut taxes for the better off, and paid for it by increasing the government’s deficit rather than raising taxes on everyone else. The political reasons why this was done are obvious, but this is an abuse of government debt, because there is no intertemporal smoothing involved.

Last week we saw our own government do much the same thing. The Chancellor cut taxes by pencilling in future public spending numbers that were pure fantasy. As these public spending numbers could never be implemented, taxes are bound to have to rise again after the election whoever wins it, to pay for more realistic public spending plans.

Why did the Chancellor do this? It’s a political win-win for him. He can claim that the Conservatives are the tax cutting party, and hope to get a bounce in the polls from voters who didn’t read the IFS, Resolution Foundation or another good analysis of what was going on. [3] He wins if that means the Conservatives stay in power. He also wins if they lose the election, because then it will be a Labour government that raises taxes and he can say I told you so.

This type of abuse of government debt by politicians is why we have debt or deficit targets. To put it starkly, if we always had governments that just acted in society’s interest, debt or deficit targets would not be necessary. It is also why saying we have to have these targets ‘because of the markets’ is quite wrong. For economies like the UK, the markets are not a kind of policeman taking action if governments abuse government debt.

Although this explains why targets for debt or deficits exist, the problem remains that trying to hit a target for debt or the deficit makes no sense in the short term, because debt is what allows the government to smooth its spending and taxes. There is a real conflict between allowing good governments to use debt wisely, and stopping governments abusing debt for political ends. [4]

There are three approaches to this conflict. The first is to ignore political abuse of government debt, and have no targets for the deficit or debt. This is kind of [5] what happens in the US, and leads to a bizarre situation where Republicans are seen as tough on the deficit but in reality are not and the Democrats have in the past reduced the deficit and suffered the associated political costs.

The second approach is to largely ignore the economic advantages of government debt and focus everything on controlling it. The clearest example of this approach is Germany, and its debt brake. (The historical background to its imposition is described by Adam Toose here. The brake is popular among the public, but not with economists.) Essentially this involves imposing a fixed path (strictly an upper bound) for nominal debt, with deviations only allowed in two circumstances..The first is a cyclical downturn, but any deviation (excess deficits) have to be corrected in the subsequent upturn (with deficits less than the target) . The second is a designated (by parliament) crisis, where any excess deficit has to be steadily paid back over a set time period (e.g. 20 years).

This debt brake has been made part of the German constitution, so the courts can overrule the government if it thinks the rules are not being obeyed. This happened very recently, where the court ruled that the government couldn’t use some of the unspent crisis money from the pandemic to spend on greening the economy. You can think of a constitutional debt brake as a natural expression of German ordoliberalism, or as just a huge mistake.

In an earlier post I described Germany’s debt brake as perhaps the worst fiscal rule ever applied by a modern government to itself. It turns government debt from a flexible instrument that allows various forms of beneficial smoothing into a rigid straightjacket that stops the government doing important things, like investing in greening the economy. Rigid targets for the total deficit or debt invariably lead to underinvestment in the public sector, and that is exactly what has happened in Germany. Lack of public investment in time leads to less private investment, and a weak economy. Germany is a textbook example of the problem I recently described here, where deficit obsession leads to economic stagnation.

The third option is to have some form of deficit target, but to make it as flexible as possible to allow the government to use its debt in a beneficial way. I have consistently argued that this is best done with a five year ahead rolling target for the government’s current deficit (excluding public investment), with no additional targets and to apply only outside recessionary periods. But I have also argued that any fiscal rule alone will always be inadequate, either because governments will always find ways to cheat or because occasionally even the best fiscal rule should be ignored. You also need a fiscal watchdog: an independent organisation that can act as a referee for aggregate fiscal policy. Osborne, when he set the remit for the OBR, ensured it would not be such a watchdog, but it would be quite easy to change its remit so it could become one.

This third, middle way can provide the benefits that government debt makes possible, but also ensure that debt is not abused by politicians for their own ends. The problem we have had in most countries that have imposed fiscal rules is that both politicians and the media have focused on the latter at the expense of the former, perhaps because they think about politics more than economics. As a result, these rules have done and are doing considerable economic harm, while any benefits remain difficult to see. [6] However, forsaking any fiscal rules would mean that the kind of fiscal deceit we saw in last weeks Autumn Statement becomes routine, rewarding irresponsible governments and penalising the more responsible.

[1] One or two economies have governments whose financial assets are greater than their debt, so they are able to finance investment and intertemporally smooth by changing their asset levels rather than their amount of debt. The political reasons why these countries are unusual will become clear.

[2] We have very little idea of what the optimal level of government debt is.

[3] As should now be clear, governments abusing debt works in political terms because voters do not regard increases in debt as future taxes. This in general is not completely irrational, because voters can always hope that someone else pays the future taxes. In the case of the Autumn Statement, however, because taxes will rise immediately after the election, then believing the Chancellor’s rhetoric or the right wing press is either being irrational or more probably reflects being ill-informed.

[4] This conflict is the basis of my paper with Jonathan Portes.

[5] Except when a Republican Congress tries to impose a debt ceiling.

[6] Advocates for rigid fiscal rules, like the German debt brake, normally count falling government debt to GDP as a benefit. This confuses means with ends. There is no solid evidence, or indeed relevant economic theory, that suggests countries with low debt to GDP derive any benefit compared to countries with higher debt to GDP.

Why does the political right have such a problem with reality, and how should experts respond?

 

The UK Supreme Court has ruled that the government’s plan to send some asylum seekers to Rwanda is illegal because the Court does not believe Rwanda to be safe for refugees. The evidence does indeed back this judgement. Part of the government’s immediate response appears to be passing a law saying that Rwanda is a safe place for refugees. The logic, presumably, is that if the law says something then the Supreme Court cannot say the opposite. As one former Supreme Court judge said, such a law would be “constitutionally really quite extraordinary”. But for politicians on the right, in the UK and US at least, denying reality and preventing people pointing out that they are denying reality seems increasingly par for the course.

The political right started ignoring experts well before Michael Gove said publicly that he had had enough of them. Mrs Thatcher had a well known problem with most economists after 364 attacked her economic policy, and Keith Joseph tried to close down the social science research council. Austerity was thought to be a big mistake according to a majority of academic economists at the time. By now the list of things that the political right in the UK have defied the expert consensus on is pretty long, with Brexit, climate change and lockdowns during a pandemic being major examples. [1] The US is much worse, of course: there we can add vote counts and whether vaccines work to the list.

Why does the political right increasingly seem to be on the wrong side of facts and science, and what should scientists do about it? One answer to the first question comes from asking another. Do some on the left, by which I mean those whose views are to the left of the positions adopted by the current Labour leadership, occasionally have problems with facts and science? My own answer would be that some can, at least in the area I know best which is economics. The example that is freshest in my mind is UK inflation.

As I have explained in earlier posts, the inflationary episode we have recently been through in the UK was in part generated by higher energy and food prices, but it was also a result of strong labour markets, where unemployment was low by recent historical standards and vacancies were very high. Nominal wage increases far exceeded what could be consistent with the inflation target. From my experience, some on the left were much happier talking about imported inflation than labour markets being too strong. Many claimed inflation was profit led. Yet the evidence so far for the UK is pretty clear that profit shares, outside of the energy sector, have remained pretty stable. (See most recently this Bank study, with a FT write up here.) Of course the monopoly power of many firms is part of the inflationary process, but in the UK there is little evidence that it has been a major driver of inflation.

My point is not that left and right are much the same. They are obviously not, and the right has power while the left do not. Instead it is to suggest one source of reality denial is ideology. The ideological source of the left’s focus on profits rather than a strong labour market is obvious. On the right, neoliberalism typically argues against state ‘interference’ with firms and markets. Both climate change and lockdowns are about the state taking measures to avoid extreme externalities. Equally a libertarian ideology would see both policies as restricting personal liberty.

Arguments I sometimes hear when I talk about how ideology may lead people to ignore evidence is that it is impossible to separate facts from values, or even that science itself is an ideology. I’m never sure how to take such points. If the argument is that ideology is bound to influence the priors that evidence confronts, then of course, but if the argument is that it’s OK to continue to always deny evidence because of these priors then I would strongly disagree.

However I don’t think ideology is the only reason why the political right has a problem with reality. Another, that is widespread in the US and is increasing in the UK (helped by GB news), involve conspiracy theories involving vaccines, 15 minute cities and so on. I think these are a continuing manifestation of what Richard Hofstadter called the “Paranoid Style” in American politics, which has a more limited purchase in the UK. This sits mainly [2] on the right because these involve an extreme distrust of the state, with conspiracies often involving malevolent (and secret) activity by the state. “A vast and sinister conspiracy, a gigantic yet subtle machinery of influence set in motion to undermine and destroy a way of life” is how Hofstadter described this paranoid style.

While many right wing politicians in the US are prepared to embrace this paranoid style, few in the UK do. Instead the current Conservative party leadership flirts with the paranoid style. When Conservative MP Nick Fletcher talked about the international socialist concept of 15 minute cities in the Commons, the then Leader of the House Penny Mordaunt replied that it was “right that people raise concerns about this particular kind of policy.” The same is true of the right wing press. The Daily Telegraph managed to get ‘climate lockdown’ into its headline about a proposed traffic scheme in Oxford. In both cases we have the established right in the UK trying to get the best of both worlds, in not openly leading with the conspiracy, but not knocking it down either.

To see how this paranoid style sits far too easily with today’s politics on the right we can look at right wing media, and in the UK with the strong crossover in recent years between those writing in that media and Conservative political leaders and their advisers. As James O’Brien says, a lot of what can be found in the right wing tabloid press is not about informing readers with facts, but about creating an emotional reaction. If the aim is to do this, then the more you can distort or invent facts to intensify this reaction the better. One of our former Prime Ministers made his journalistic reputation doing just this by making things up about the EU.

This kind of journalism is normally designed to appeal to readers’ social conservatism, rather than any right wing ideology. Here is a direct link with the paranoid style of politics. The best way of creating a feeling of fear and outrage among a socially conservative readership is to suggest that the way of life they have known is being threatened in some way. Unlike the paranoid style, this threat does not involve some conspiracy at the heart of government, but instead it comes from outsiders in some form, such as immigrants or the socially liberal ‘woke’ elite.

How should experts respond to this right wing disregard of both expertise and reality itself? I have lost count of the number of pieces I have read by scientists lamenting the decline in public trust in experts, and how experts should get that trust back. Many suggest that academics should engage more with the public to win back that trust. While I could hardly disagree that it’s good that some academics engage with the wider public, I’m not at all sure that most academics should. It is not, after all, their comparative advantage.

Despite their best efforts, academics will always be at a disadvantage compared to politicians or their side-kicks pushing snake-oil. The moment an academic loses their doubts and scepticism they stop being good academics, yet in argument doubt and uncertainty play less well than conviction among most of an undecided audience. In addition, public engagement takes a lot of time that might be better spent on research and scholarship.

I would also question, in the UK at least, whether there is a crisis of trust in experts. The UK government constantly pretended it was 'following the science' because they knew that is what people wanted to hear. The response to the first lockdown showed that most people were willing to follow government advice because they thought it was expert advice, and that trust only began to fall apart when it became clear the government was neither following the science nor even its own advice. It seems to me, following the first part of this post, that the problem for experts is political rather than about trust.

However there are still plenty of things that expertise can do more of to expose the snake-oil salesman. Unfortunately there will always be experts who are prepared to leave the science behind in exchange for money and notoriety. The best way to counter their influence is to ensure that the non-partisan media has easy access to what the scientific consensus actually is, and that is something that scientific institutions should constantly be doing. Initiatives like the Science Media Centre are worth extending.

In addition, the UK’s response to Covid has also shown us the danger of a right wing government misusing its own scientists or its links with scientists to give a false impression of what expert opinion is. Again scientific institutions informing the media can help counteract that (as well as ad-hoc groups like Independent Sage), but it also seems important for scientists advising the government to make sure they retain an independent voice, and that they are not used to give a policy the appearance of scientific merit when it has none.

As the Covid pandemic showed, a political right that has become increasingly hostile to expertise, science and even universities is very dangerous, because it can cost thousands of lives. Our current Prime Minister spent his time, in the middle of the pandemic, 'handling the scientists' rather than handling the virus. He was not favouring economics over medicine, because he didn't bother to consult economists who had studied pandemics, and so got the economics horribly wrong. The most effective way of tilting the scales back towards reality and science is to endeavour to ensure these politicians and this political viewpoint are kept well away from power in the future.

[1] Strictly most Conservative politicians don’t publicly deny the need to phase out burning carbon, but they just support giving subsidies to new oil fields and opening coal mines instead.

[2] The scare stories around Charter Cities would be an example of a left wing version of right wing fantasies about 15 minute cities. However this study for the US provides evidence that misinformation is much more prevalent on the right/social conservative divide than on the left/liberal side.

Current UK and EU stagnation are in part the consequence of deficit obsession

 

The rule of thumb journalists use to define a recession, two quarters of negative GDP growth, is unhelpful in many ways. If the economy grows by 0.1%, the headline is ‘UK avoids recession’, but if it grows by -0.1% in two consecutive quarters, the headline is ‘UK enters recession’. Yet the difference between those two, 0.2% of GDP, is well within the measurement errors typical associated with GDP growth. From an economic point of view there is no material difference between 0.1% growth and -0.1% growth, so calling the later a recession but the former not is rediculous.

Another problem with this way of defining a recession is that it makes no reference to trend growth. If the economy typically grows by 3%, then zero growth is a big difference (3% less than normal). However if trend growth is more like 1%, then zero growth is not such a big deal (just 1% less than normal). This can lead to serious misreporting when talking about a recovery from a recession. For example some have claimed that because GDP started growing in 1982 after the 1980/1 recession the famous letter from 364 economists was wrong. As I noted here, growth in 1982 was around the trend rate. The recovery, in the sense of getting back to trend, only really started in 1983.

One final problem with the ‘official’ definition of recession is that it refers to GDP, rather than GDP per head. The latter is far more relevant in almost every way.

UK Quarterly growth	Real GDP	Real GDP per head
2022Q1	0.5	0.2
2022Q2	0.1	-0.2
2022Q3	-0.1	-0.2
2022Q4	0.1	0.0
2023Q1	0.3	0.2
2023Q2	0.2	0.1
2023Q3	0.0	-0.1

As the table above shows (source), if we used GDP per head in the official definition of recession, then we had a recession in 2022, and we could be heading for a second recession in the second half of this year. Again this shows the nonsense of being so literal about defining a recession.

A much better way of describing 2022 and (so far) in 2023 is that the economy has flatlined. It is tempting to ascribe this period of very weak growth as a consequence of rising interest rates to combat high inflation. Growth in the major EU economies has also been weak over the last two years. However one important counterexample should make us question this simple explanation. As the graph below shows, growth in the US has been much stronger.

Martin Sandbu shows a similar graph comparing US GDP to EU GDP. While UK GDP per capita remains at similar levels to just before the pandemic, US GDP per capita is almost 6% higher. The UK recorded a slight fall in GDP per capita in 2023Q3, but US GDP per capita increased by over 1%!

As Martin notes, this is not because US GDP per capita growth is always higher than in Europe. Equally, as I showed here, UK growth in GDP per capita was at least as strong as the US before the financial crisis and austerity. Something has been happening in the US since the pandemic that has not been happening in the UK and EU.

As with any puzzle there are many possible answers, and not enough evidence to know for sure which is correct. One answer is that the energy price shock hit Europe much harder than the US, because gas markets are more local than the oil market and gas supplies were restricted by Russia’s invasion of Ukraine. If that was the case, then in 2023 we should be seeing some rebound in Europe relative to the US as gas prices came down, but as yet there is no sign of this. So this is only a partial explanation.

The argument I have made before, and Martin also makes, is that US fiscal policy has been much more expansionary since the worst of the pandemic than in Europe. The details are discussed at length in that previous post and in Martin’s article so I will not repeat them here, except to say that they involve a combination of the timing of fiscal stimulus and directing that stimulus to those who will spend more of it. Instead I want to broaden this out to make a much more general point.

One feature of Biden’s tenure as President is that policy has not put the budget deficit or debt at the centre of fiscal decisions. This is in contrast to Europe, where in both the EU and UK constraints on debt or deficits imposed by politicians always seem to bite, and also in contrast to previous Democratic administrations which have ‘worried about the deficit’ to varying degrees. In my view the strength of the US economy coming out of the pandemic owes a great deal to this difference, and this holds important lessons for European policymakers who remain obsessed with and constrained by deficit or debt targets.

What do I mean by deficit obsession? After all, I have consistently argued that setting fiscal policy over the medium term to follow the golden rule (matching day to day spending to taxes) during normal times is a good objective. Deficit obsession, by contrast, implicitly views public debt as always a bad thing, erects totally arbitrary targets to reduce that debt, and allows this to dictate policy at almost all times, which invariably means underinvestment in public services and infrastructure.

Deficit and debt obsession matters most after a severe economic downturn, caused for example by a financial crisis or a pandemic. After the Global Financial Crisis the key mistake was not the absence of fiscal support during the period when output was falling, but during the period after that when we would normally expect a recovery from that recession. This was because in the US and UK, Democrats and Labour were in power. However even in Europe there was some fiscal support during the worst of the recession. During the worst of the pandemic all governments offered considerable fiscal support. It is after the immediate crisis that mistakes were made. It is as if policymakers were prepared to suspend their deficit obsession while output was falling, but once output stopped falling that suspension ended. In a way, they were also being misled by the 'official definition' of a recession.

We know from the 1930s depression that the level of output after a crisis does not always bounce back to its pre-crisis trend. Thanks to Keynes we also know why. If consumers and firms think that perhaps such a bounce back will not occur, it will not, because consumption and investment will remain depressed. In the 1930s unemployment stayed high, yet wages and prices stopped falling. It needed a fiscal stimulus, in the form of the New Deal or a war, to reduce unemployment. Unemployment did fall after the Global Financial Crisis, but output did not return to its pre-crisis trend.

We are seeing the same pattern after the pandemic. We had a V-shaped recession, but output in Europe has not returned to its pre-pandemic trend, because in the EU and in the UK policymakers have returned to imposing deficit or debt targets that leave no room for encouraging a full recovery. The one exception is the US, and it is there that output has returned to something like its pre-pandemic trend.

In the EU and UK policy makers typically view the increase in debt during the crisis as an unfortunate outcome, rather than a beneficial means of softening the impact of the crisis. As a result, as soon as the crisis is over they try to reduce the new higher level of debt through fiscal consolidation rather than stimulating the recovery. We know that is unlikely to work on its own terms (fiscal consolidations when the output gap is negative tend to increase debt to GDP) , and it also risks permanently damaging average incomes.

I have been making this argument consistently over the decade I have been writing this blog, but for most of this time all the major economies have been afflicted by deficit obsession so I have been unable to point to a current example of how things could be done much better. Thanks to President Biden and Democrat policymakers, now I can, and the results speak for themselves.

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How could Johnson have become Prime Minister?

 

The Covid inquiry has become a trial of Boris Johnson, showing how hopeless and harmful a Prime Minister he was. If you are unconvinced, read this from Andrew Rawnsley. Johnson is not the first political leader whose only virtue was charming (some) voters, but the combination of refusing to delegate and being completely indecisive was a disaster. Combine that with the selection device, Brexit, that he imposed, and you ensure that only the worst of MPs would become ministers or advisors. That is a recipe for a calamitous administration, with or without a pandemic.

As many have noted, Johnson’s unsuitability to be a cabinet minister, let alone a Prime Minister, was well known before his rise to power. If you look back at past posts on this blog (e.g. here for example) you will see this spelt out, and I’m hardly a political insider. Everything I wrote there and more was well known to most Conservative MPs. So what is so wrong with our political system that someone so ill-suited to the job could become Prime Minister?

It is tempting to answer this question very simply with a single word, Brexit. Brexit was Johnson’s route to power, and indeed he probably chose to back the Leave side because it would advance that cause. While there is a lot of truth in that answer, to leave things there would in my view be a mistake. It suggests that Johnson became Prime Minister almost by an accident of history, and crucially that without Brexit he could never have become Prime Minister. I think there are more fundamental forces that propelled his rise to power. .

The most obvious point is that winning the EU referendum in 2016 did not bring Johnson the job he craved. In the election among MPs to replace David Cameron, Johnson withdrew before the first ballot because he lost the support of his partner in arms during the referendum campaign. Michael Gove, in announcing his own candidature, stated that Johnson could not "provide the leadership or build the team for the task ahead." At the time the Telegraph described this as "the most spectacular political assassination in a generation”, but the press cannot be trusted on this matter. Instead I suspect the absence of support for Johnson represented MPs doing their job of ensuring anyone as unsuited to being leader as he was did not get near No. 10.

What was rather more surprising than his failed leadership bid was that May appointed him Foreign Secretary. This promotion to what is traditionally regarded as a very senior ministerial position was unusual. As one commentator put it, this “made public what British diplomats have been trying to hide for years: The Foreign Office is a shadow of its former self.” May, who knew the Conservative party well, may have judged that Johnson’s popularity among the membership and press was a potential danger to her, and so it was better to have him inside the tent in a relatively harmless role.

Suppose Leave had not won the EU referendum, and Cameron had continued as Prime Minister. He may well have reasoned in a similar way, and given Johnson a senior post after the referendum. Even if Cameron had not held a referendum in 2016, and managed somehow to fend off calls to do so yet retained power, Johnson’s popularity with the membership and the press may have ensured that he would soon find himself in the cabinet. The key question therefore becomes why Conservative MPs, after failing to support him in 2016, changed their minds so dramatically within three years.

What changed between 2016 and 2019 was the obstruction by Brexit hardliners of May’s attempts to get a deal with the EU, and the electoral threat of Nigel Farage. After the disastrous European election results of 2019, a majority of Tory MPs decided that to defeat one hardline Brexit populist they needed another, and Johnson was the only candidate that could match Farage.

The combination of party unpopularity and a threat from Farage created by the inability of May to ‘get Brexit done’ was certainly intense. The key question again is whether it was a unique outcome that could not have occurred if Leave had not won the referendum, or if the referendum had never been called. A key reason that Brexit was popular was immigration, which was blamed by many voters for stagnant real wages and deteriorating public services caused by austerity. That would have remained the case even if Leave had narrowly lost the referendum (and a narrow loss was the only possibility given the campaign mounted by the right wing press), or if there had been no referendum at all. In either case the threat from Farage would have remained. It is not impossible to believe that without Brexit the government might have found itself losing many votes to Farage, and might have turned to Johnson as their best way of retaining power.

None of this implies that it was inevitable that Johnson became the leader of the Conservative party. For example, he could have made enough major blunders as a minister that his popularity among the Conservative membership could have waned. (Of course he did make blunders as Foreign Secretary under May, as Nazanin Zaghari-Ratcliffe found to her cost.) What I want to suggest is that it is more than possible that circumstances could have led Johnson to have become the leader of the Conservative party, despite most Conservative MPs knowing how unsuitable he was for that job. What we do know from 2019 is that when it comes to the choice between losing their seats or putting an incompetent into No.10, enough Conservative MPs will choose power over responsibility.

The argument so far has suggested that Johnson’s popularity among Conservative party members and voters, together with the active support of the right wing press, could have led to him becoming party leader without Brexit. [1] However that does not necessarily mean that he would become Prime Minister, at least for very long. We also have to ask why, given his known unsuitability for the post among political journalists and commentators, he was able to win a General Election.

Once again, I expect many would answer this with a single name: Corbyn. There was one last chance to stop Johnson being Prime Minister in 2020, and that was the 2019 General Election. I agree that Corbyn also had many faults as a potential PM, which is why I argued strongly against him during Labour’s 2016 leadership contest. However I also thought it was clear that he was preferable to Johnson. Even though expressing that view was enough to get me sacked from writing for the online edition of the New Statesman (here is the article they initially published and then quickly withdrew), I think I was right for two clear reasons. The first is that some form of hard Brexit was inevitable under a Johnson administration, but far from inevitable under a government led by Corbyn. The second was that there is no way Corbyn would have ever suggested that Covid was nature’s way of dealing with old people. Tens of thousands less people would have died if he had been PM. Now perhaps Corbyn would have done worse things than Johnson, outweighing the economic costs of hard Brexit and tens of thousands of UK lives lost to Covid indecision, but I have yet to hear any suggestions of what that might be that are at all convincing.

But this argument is really a distraction from the topic of this post. The reality was that in months before the election the media rightly spent plenty of time discussing Corbyn’s mistakes, particularly over the issue of antisemitism, but much less time talking about Johnson’s record, racist comments and past failures. If there were extensive discussions about how illegally proroguing parliament signalled an authoritarian style and a threat to parliamentary sovereignty I missed it. I also missed the constant questioning of whether you could trust someone who in the past had made stories up and had lost two jobs through lying.

Why did most of the broadcast media fail to warn the public about Johnson’s inadequacies? One reason is the power the government and their press have over the BBC in particular. The BBC’s obsession with balance rather than revealing the truth comes in part from the constant attacks on the BBC from the right wing press, attacks that are regularly backed up by threats from Conservative ministers and MPs.

Which brings me back to the Covid inquiry. Comments from various witnesses have shown us that perhaps the main influence on Johnson in government was the media, and in particular the right wing print media. He described the Telegraph as his real boss. Johnson was reluctant to lockdown in the autumn and winter of 2020 in large part because he read articles in the right wing press arguing against lockdowns.

Johnson’s premiership was the point at which the right wing press gained maximum influence. They knew Johnson would give them that, which is the main reason they boosted his career for so long. Prime Minister Johnson was in good part the result of a few press barons having immense power with little responsibility. The same press that was critical in giving us Brexit was also critical in giving us such a hopeless Prime Minister, and it was their influence that helped delay lockdowns leading to tens of thousands of unnecessary deaths.

In any assessment of how our political system could have allowed someone like Boris Johnson to become Prime Minister, the role of the right wing press should play a prominent part.

[1] An alternative line of argument, which I also find persuasive, is that the Conservative party was eventually going to support a referendum and Brexit even if Cameron had not promised one in 2013.

Covid and the unforgivable mistakes that cost tens of thousands of lives in the UK

 

As the Covid Inquiry progresses, it is clear the government led by Boris Johnson made two catastrophic mistakes during the pandemic of 2020. The first was to do virtually nothing until late March. The second was to encourage a second wave in the autumn, and again fail to take effective action to stem it during the rest of that year. With the first there are potentially many who contributed to that mistake, including our broadcast media. The second mistake was primarily the responsibility of Rishi Sunak and Boris Johnson.

As the second is simpler, I’ll start with that.

In June the first lockdown continued to be unwound, yet during June and July case numbers remained fairly flat. The reproduction number R was close to one. At the beginning of August Sunak introduced the ‘Eat Out to Help Out’ scheme, encouraging people to eat inside restaurants. That was not the only reason cases began to rise in August and September, but the evidence is clear that it helped. The current chief scientific adviser, Angela McLean, called Sunak Dr Death in one message. Incredibly SAGE, the government’s scientific advisers for the pandemic, were not consulted about the scheme. Here is one of its members, John Edmunds, describing to the inquiry his anger.

In September SAGE recommended a new lockdown to prevent “a very large epidemic with catastrophic consequences in terms of direct Covid-related deaths and the ability of the health service to meet needs.” Johnson, encouraged by Sunak, rejected that advice. Through September and October more minor, regionally based restrictions were imposed, but as the data shows clearly this failed to avoid a rapid rise in case numbers. At the end of October the crisis was so bad that Johnson was forced to impose a national lockdown. As the data also shows, cases started falling after the inevitable lag. Lockdowns clearly work in saving lives, but Johnson had resisted the recommendations of his scientific advisers for weeks before imposing one.

Worse was to come. This national lockdown ended at the beginning of December, even though case levels remained high. Cases started rising again soon afterwards, but Johnson was determined to avoid a national lockdown over Christmas. The third national lockdown began on 6th January, and once again it produced a rapid decline in cases, but only from a horrendously high level.

Not only do lockdowns work in saving lives in the short term, as they inevitably must because they reduce social interaction, but they also save lives in the long term if effective vaccines are developed. That this statement is not blindingly obvious to everyone is a testament to motivated beliefs. In the Autumn and Winter of 2020 it was clear there were good chances of a vaccine being developed. As a result, tens of thousands of UK citizens who died as a result of Covid during this period did so as a result of Johnson and Sunak ignoring expert advice. Outside of wars, other political mistakes don’t even get close to being as serious as this.

The earlier catastrophic mistake, doing nothing as the pandemic unfolded until mid-March, shares some similarities but there are important differences. The key difference is knowledge. In the Autumn nearly all experts, inside and outside of government, knew how the virus behaved and what was needed to control case numbers until a vaccine arrived. Johnson and Sunak went against this scientific consensus. This was less so in January, February and early March 2020 because much less was known.

This lack of knowledge was compounded by pre-pandemic planning, which had focused on a flu outbreak that was different in nature to Covid. Focusing on just one type of pandemic, rather than a range of possibilities, was an error that cannot be put at the feet of political leaders in 2020. Equally the degradation of the PPE stockpile, which led to the deaths of doctors and nurses during the early months of the pandemic, was mainly a consequence of the decisions of previous Conservative political leaders.

However, from the evidence I have seen, it is clear that ministers, and in particular the Prime Minister, were from the outset predisposed against taking large scale preventative measures. Herd Immunity, as the strategy became known, is really just a name for doing nothing unusual in a pandemic. As is often the case with ideologically led rather than evidence led governments, the rationale behind this strategy evolved not from evidence or from example (what other countries were doing), but from the need to support this predisposition.

A good example of this was the idea of behavioural fatigue: lockdowns could not be imposed because people would quickly tire of restrictions and the lockdowns would become ineffective. It is not clear where this idea came from, but it seems it was not from the behavioural experts who were part of SAGE or its sub-committees. As Christina Pagel notes here, the reality was the opposite, with 97% of people complying with the rules in the first lockdown. Trust only began to break down when the members of the government got caught breaking the rules.

Because the initial policy was not evidence led, the government made little attempt to talk directly to its own experts, or involve them in the decision making process. Professor Neil Ferguson talked of a “Chinese wall” between the experts on SAGE and the officials preparing for the pandemic. In early March “both John Edmunds and myself got concerned about the slight air of unreality of some of the discussions, and started talking in the margins to government attendees, saying: ‘Do you know what this is going to be like?’” Ferguson said.

It was in part these efforts, rather than the sea-change in the science that politicians and the media talked about, which led to the eventual imposition of lockdown. But it took some time to persuade Johnson that he needed to change his approach, and that two or three week delay led to tens of thousands of unnecessary deaths.

If Johnson’s predisposition against lockdowns is largely the cause of tens of thousands of unnecessary deaths in 2020, the broadcast media also failed badly in the early months of the pandemic. As a recent study by Greg Philo and Mike Berry shows, in those initial months the broadcast media largely became a mouthpiece for the government, with information about the pandemic mostly coming from senior political correspondents.

Above is a still from this clip from Irish TV from mid-March. As Richard Horton pointed out, the small amount of information required to do calculations of this kind had been available from studies published in the Lancet in January and February. As he put it, “any numerate school student could make the calculation”. Did no journalists from the MSM think to try to do similar assessments before mid-March, or just talk to experts outside government who could do so more easily? If they had, surely they would have realised that two million critical cases was way beyond what the NHS could handle?

If just one MSM journalist had done something like this before mid-March, it would have been something other journalists could have referenced when talking to officials and ministers. That, in turn, might have made ministers realise what the SAGE modellers later got them to understand. Each week’s delay in imposing a lockdown cost countless lives. Our broadcast media’s fondness of Westminster access and its aversion to talking to experts is also partly to blame for the mistakes government ministers made at the start of the pandemic.

Politicians and organisations are bound to make mistakes, as they are not superhuman. However I think there is an important distinction between mistakes where politicians or organisations act on or in accordance with expert or received wisdom, and mistakes where they ignored or went against that wisdom. In the first case the responsibility is shared, but in the second it rests with the politicians or organisations alone. When the advice and knowledge of the consensus of experts is ignored in a pandemic, and tens of thousands of people die unnecessarily as a result, then responsibility for those deaths lies squarely with the politicians and media organisations that ignored that consensus.