Winner of the New Statesman SPERI Prize in Political Economy 2016

Wednesday, 12 November 2014

Why are the Conservatives so incompetent at running the economy?

If that question seems odd to you, you are one of the majority in the UK who think the Conservatives are better at managing the economy than Labour. Why do people think this? My guess is that it is very simple. The financial crisis happened while Labour was in power. This led to the largest recession since the Great Depression.

But surely everyone knows that the financial crisis was a global phenomenon that started in the US? Surely everyone knows that if the Conservatives had been in power there would have been just as little financial regulation, so the impact of the crisis on UK banks would have been much the same?

The problem is that most people do not know this. What they hear is the Conservatives repeating relentlessly that it was all Labour’s fault. In his latest party conference speech Cameron says: 
“A few weeks ago, Ed Balls said that in thirteen years of Government, Labour had made ‘some mistakes’. ‘Some mistakes’. Excuse me? You were the people who left Britain with the biggest peacetime deficit in history…who gave us the deepest recession since the war…who destroyed our pensions system, bust our banking system…who left a million young people out of work, five million on out-of-work benefits – and hundreds of billions of debt. Some mistakes? Labour were just one big mistake.”
This line is repeated by the majority of the UK press. It is hardly ever challenged by reporters in the BBC or other TV media. It has become so pervasive, that even some of my non-macro colleagues repeat elements of it back to me. [1]

So what if we take the financial crisis out of the equation, on the basis that it would have happened whoever had been in power. Here is average UK output per head (GDP per capita) since the 1970s.


I have drawn a trend line at 0.55% per quarter, so we can separate any evaluation into trends and deviations from trends. In terms of trends, there is no obvious difference between administrations. The Conservatives were in power from 1979 to 1997, but the trend rate of growth was not obviously better or worse during this period compared to the 1997 to 2007 period that Labour were in power. Fortunately that broad diagnosis is confirmed by those who look at these things more scientifically. [2]

In terms of deviations from trend, we have the major recessions of the early 1980s and 1990s, and the period since the Great Depression. Now the early 1980s was a global recession following a second oil price shock, where all countries were trying to get inflation down, so in fairness I ought to take that period out of the equation along with the Great Recession. However it should be noted that this period of Conservative administrations started with a radical new macroeconomic policy of targeting the money supply, which in its own terms was a disaster as the targets were never met, and the policy was abandoned after a few years. Hardly a great example of being able to manage the economy.

The 1990 recession was more home grown. It was partly a result of excessive inflation caused by bad fiscal and monetary policy under Conservative chancellor Nigel Lawson, but it was made worse by fixing Sterling to the DM at an overvalued exchange rate. So a pretty clear case of macroeconomic mismanagement under a Conservative administration. Then we have 2010 onwards. Rather than recovering from the recession, income per capita has diverged further away from its pre-crisis trend. Now you might say in mitigation that this disappointing post-recession performance has been global, but the UK has been more disappointing than either Japan or the USA. Although the UK, the US, the Eurozone and Japan suffered a major recession, by 2013 both the US and Japan had exceeded their 2007 level of GDP per capita. Furthermore the recovery in the Euro12 was also more rapid than in the UK, but then fell back following the Eurozone crisis. As a result GDP per capita in both the Eurozone and the UK remains well below 2007 levels. The best that can be said for the UK recovery is that it has been as poor as the Eurozone, without the excuse of a government funding crisis. 

Of course there is much more to say about all this, but the point I want to make here is fairly simple. Once we recognise that the financial crisis was a global event, then the three remaining major departures from trend growth happened under Conservative led administrations. In all three cases they can be associated with poor policy decisions taken by those administrations: money supply targets under Thatcher, ERM entry under Major, and austerity under Osborne.

So the idea that the Conservatives are more competent at macroeconomic management is a myth, and if anything the opposite appears to be true. Now I’m not going to discuss here why recent major mistakes seem to happen under Conservative administrations, although that would be an interesting question. Instead I want to focus on why the myth of Labour incompetence persists in mediamacro, and therefore in the minds of most people? There are two obvious explanations. The first is that the media is totally incompetent, and thinks that because the Great Recession happened under Labour, it must all be Labour’s fault. The second is that the media takes its cue from either the right wing press, or from a financial sector that also has clear interests to pursue.

A third explanation I have heard on the few occasions I enter Labour circles is that they are partly to blame, perhaps because they allowed the Conservative narrative about fiscal profligacy to go unchallenged for too long, or because they fail to campaign strongly enough on issues that matter to voters. If you think that, you should read this article by the Australian economist John Quiggin. He says that complaints that the Australian opposition are pursuing a ‘small target’ strategy, focusing on minor differences with the government, rather than confronting the government on the major issues are misplaced. “In reality, some version of the small target strategy is effectively forced on the main opposition party by the way in which our political system and media now operate.”

As evidence for that in the UK, just think of Ed Miliband’s last speech, and the media reaction. As I wrote about here, after the speech the left of centre journalist Jon Snow asked Miliband what the greatest issue facing the next British government is. Miliband responded that it is getting the country to work for most working people rather than be stuck with a more unequal country. There it is - inequality - put at centre stage. But all Snow could do was respond that this was the second time Miliband had forgotten to mention the deficit, and proceeded to rant on about this.

When I wrote that post, it was before Cameron’s speech. I suggested that Cameron would fail to mention the productivity slowdown that is a key factor behind the UK’s poor recovery from the recession, but no journalist would bother to even mention this. He didn’t, and I do not remember anyone even noting this failure, even though Labour talk all the time about the decline in living standards that it has produced. In mediamacro, the deficit is all important, but the decline in average living standards not so much. And people wonder why many potential voters are disaffected from mainstream politics.

In a recent post, the US economist Robert Reich berates the Democrats for failing to campaign on falling median wages and the growing inequality that lies behind it. The reason he gives is simple: money buys votes in the US system, which Jeffrey Sachs calls a plutocracy. In the UK Labour has tried to raise the link between inequality and falling real wages, as my example above shows, but the UK media does not appear to want that discussion to take place. I would really like someone who knows the UK media from the inside to explain why.

 

[1] Isn’t the bit about the deficit just a little bit true? Yes exactly that. Labour’s fiscal policy could have been better, particularly in hindsight, as I detail here. But did it amount to fiscal profligacy - absolutely not. Did it have anything to do with causing the recession - absolutely not. Could a tighter fiscal policy have allowed Labour to do a little more in terms of fiscal stimulus to fight the recession - maybe, but remember that Cameron and Osborne opposed the countercyclical fiscal policy Labour did enact. In what world does that opposition show economic competence?

[2] See, for example, this from John Van Reenen. A less scientific response would be to claim that trend growth was falling under Labour, and that 2007 represented a large macroeconomic boom. You will find many in mediamacro who assert this as a fact, but the evidence just does not support this claim.

Postscript 13/11/14. To reinforce my point about inequality and Labour, here is an extract from Miliband's speech at the Senate House today: "Now I have heard some people say they don’t know what we stand for. So let me take the opportunity today to spell it out in the simplest of terms. It is what I stood for when I won the leadership of this party. And it is what I stand for today. This country is too unequal. And we need to change it." It will be interesting to see how this rather important statement is reported. 

39 comments:

  1. It feels like we in the UK are living in a post-media media environment, where the numbers reading the press has fallen over the last generation yet they continue to exert undue influence especially on the state broadcaster (which has been allowed to remain immune from FOI requests to its own and our detriment).

    The media has a similar trust level to that of estate agents, bankers, politicians, second-hand car dealers, and yet, and yet...



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  2. Conservatives have the easier (but mostly wrong) arguments. People lack the interest, the knowledge or simply the time to search for holes in them. The US midterm elections just proved that depressingly. And there's the problem of the two-party-system. If there are only two parties, the one associated with the second-to-last crisis will always defeat the one associated with the last crisis.

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  3. "Surely everyone knows that if the Conservatives had been in power there would have been just as little financial regulation, so the impact of the crisis on UK banks would have been much the same?"

    The major problem with this argument, and it is obviously made a lot, is that there is no equivalence between a person who punches you on the nose and another person who would have done so if the first had not.

    Like it or not, Labour was responsible for the regulatory situation in 2007. Brown had instituted the tripartite regulatory system that failed.

    Labour again had been in power for 13 years by 2010, and so were the party primarily responsible for the fact that the UK was peculiarly badly exposed when the crash came (nobody says they caused it, and it is to mischaracterise the criticism to say they did).

    Now it may well be that if the Tories had been in power during those years these features of the UK would have been just as bad, or even worse. Maybe.

    But so what? It is a feeble argument we know as children is a bad one. The Tories were not in power. They were not responsible. Labour was.

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    1. Yes, I wanted to say this as well. If the best defence of the Labour government is that it is interchangeable with a Conservative government, what's the point of the Labour Party. For those of who used to Labour supporters, Labour should be held to a higher standard, that of actually getting the policy right.
      Light touch regulation was a policy failure.
      Would you say the invasion of Iraq a good idea, just because a Conservative government would have done the same?

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    2. I do not understand the point here. Who said the financial crisis was a good idea, or that the government should be excused for letting it happen. Not me! The issue here is which party is better at managing the economy, which is rather an important issue at election times. You might want to hold one party to higher standards to the other, but that is not what I am talking about. People do not (mistakenly) think the Conservatives are better at managing the economy because they hold them to a lower standard!

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    3. I suspect the reason you don't understand is because of the remorseless forward looking utilitarianism of the economist. So, from that perspective, the past is only of importance to the extent that it tells us something about how things will go in the future. That a person or a party deserves something for past behaviour is neither here nor there.

      So, from that perspective, that a particular party is responsible for the worst regulatory failure in modern times, that it left the country in the worst position of any major economy to weather the storm when the crash came, or even that it was guilty of, say, the worst foreign policy disaster since WW2 is irrelevant. So much spilled milk. If another person or party would have behaved no better (we guess) they are to be judged in the same way.

      Only someone so highly trained could no longer see what children know. The party responsible for the worst domestic and foreign policy disasters in 40 years was the party I vote for: the Labour party. It deserved to lose in 2010.

      It does not exculpate your wrongdoing to say that someone else would have been just as bad given the opportunity.

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    4. Hugo.

      Of course there's equivalence. The economy went tits up because light regulation. The supported light touch regulation. They can't then argue in good faith that it would have been different with them.

      Perhaps people don't see it like that (most don't) but they're wrong..

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    5. Anybody who maintains that regulation under a conservative administration would have been stronger or smarter than it is under labour displays an eye-watering degree of either historical ignorance or willful blindness. The point is not that things would have been "just as bad" under the Tories; when you look at the etiology of the crash/epidemic, the conclusion is inescapable:it would have been an awful lot worse. Not convinced? Well, this isn't all blithely counterfactual: Look at what they're pushing for now—and how splendidly *that's* working.

      Yeesh.

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    6. Goodness, Hugo, it really isn't that hard to find Osborne or Cameron back in the day, on the record, criticizing Brown "from the light" on the issue of financial regulation. And I'm supposing that you are too well-informed not to be aware of it.

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    7. Of course ultimately the blame for the UK's involvement in the financial crisis lay with Blair/Brown and Thatcher before. They did not have to pursue deregulation and privatisation combined with policies that created excess liquidity.

      But as you say, now, with Labour putting inequality to the front, this changes everything.

      I think, at last, Milliband is a leader with a message and agenda, based on a different ideology (and economic theory - which is the same things) that is fundamentally different to the Conservatives. In macro-economic thinking that is much closer to Keynes and Myrdal, extreme inequality is actually economically inefficient.

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    8. Whether the financial crisis would have been worse or not have happened at all under the Tories is neither here nor there. This is a political debating point and not an economic one.

      Do recall that Labour spent 20 years benefitting from the Tory economic disaster of Black Wednesday, an event that would have almost certainly happened under their watch too.

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    9. Hang on a moment. Despite the "light touch" rhetoric, regulation (and regulatory activity) actually increased, and by 2007 were at an all time high. It wasn't very good or intelligent regulation or focussed on the right things (nor is it now), but there *was* a lot of it.

      "Deregulation" is a misleading term. Paradoxically it led to more regulation, because it was about permitting things that were previously forbidden. Those activities were then carried out under regulation (it wasn't a free for all). Forbidding things tout court involves a fairly minimalist regulatory regime. It's allowing them that increases the quantity (and difficulty) of regulation.

      At the same time the old informal system where self regulation and custom played as a big a role as statutory regulation and official control (and which was pereceived as having failed anyway - think of all the City scandals in the 1970s) clearly wouldn't work in the new era, so it was replaced with a more formal system. Result: again more regulation.

      The problem is not the quantity of regulation, but that the regulatory model that came into being in finance in the 1980s doesn't work. The same model has been applied in many other areas (in part as a consequence of privatisation) and it doesn't work there either.

      I see no sign that either Labour or the Conservatives are prepared to recognise this fact, let alone move to a different approach. The whole question of more/less regulation is a red herring.

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    10. You can ask two useful questions here.

      1) Did Labour carry out a specific change in regulation or other governance that contributed to the severity of the crisis in the UK?
      2) Are they culpable for not noticing an incoming crisis and should have regulated?

      In the first case, I do not believe this is the case (but I may be wrong). Not least because the crisis was caused by problems in another country that Labour had no ability to regulate.

      In the second, given that it seems that bar only a few isolated voices the crash and/or its magnitude was not predicted. Not by the US authorities, Eurozone authorities, anoy ohter authorities, major independent economic analysis organisations, or of course the very banks themselves. So it seems unreasonable to hold Labour to a standard no-one else met.

      Given these, it seems to me hard to view Labour as "responsible" (as you put it) or blameworthy for it.

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    11. George Osborne, from Hansard, May 6th 2004:

      "It strikes me that, in the 1980s, the Labour party did not really understand macro-economics. Indeed, I listened to the speech made by the hon. Member for Bexleyheath and Crayford (Mr. Beard), and, as far as I can work out, he still blames the gnomes of Zurich for the problems that the Wilson and Callaghan Governments ran into. He has not learned the proper lessons of macro-economics.

      The single greatest achievement of this Labour Government was to put the levers of macro-economic power out of their reach by giving the Bank of England independence, and it was a jolly good thing that they did. The problem now, however, is that the Labour party does not understand micro-economics. Labour Members do not understand what it takes to run a successful business. They do not understand that regulation and taxation undermine the ability of companies to compete.

      The Chancellor lamented in his Budget the fact that Britain and Europe still had a productivity gap of 20 to 30 per cent. with the US economy. He said that we need to learn from America about innovation, competition and enterprise. I very much agree with him, but, frankly, with billions of pounds in extra taxes, thousands of extra regulations and a Budget that makes it more and more difficult for British businesses to compete, the Chancellor does not seem to want to learn the lesson."

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    12. Sorry, Hansard, May 6th 2003. Finance Bill

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  4. Here's a fourth reason why the media isn't objective.

    The BBC, our largest broadcaster, is to some extent at the mercy of the party in power. This risk isn't symmetrical though. The Conservatives are naturally against the public sector and Labour for it.

    Of course this is balanced by the fact that voters generally quite like the BBC. The Tories couldn't abolish it without losing votes. But under current economic circumstances they can get (and have gotten) away with cuts.

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  5. I think the stigma that Labour have in the public's mind is that they will always eventually spend more money that they really have.

    Last time round they ran a pro-cyclical fiscal policy in a boom when they should really have been saving for a rainy day (simplistically). The economy was fine while in the early days they stuck to Tory spending plans but then they couldn't help themsleves. All this meant the crisis - when it came - was harder to deal with.

    Not saying this narrative is true - would appreciate your thoughts - but I think this is what interested non-experts (e.g. me) would level at them.

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    1. S W-L's interesting, if exceedingly generous, views on this are linked above.

      http://oxrep.oxfordjournals.org/content/29/1/25.abstract

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  7. Perfect symmetry in France, as Hollande was elected in 2012 on this single leitmotif: debt = Sarkozy, unemployment = Sarkozy, recession = Sarkozy.
    We all know the disastrous result of the socialist governance in late 2014 = everything is worse than under Sarkozy. Who care?

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  8. Perhaps Hobson (1902) is relevant here:

    “The direct influence exercised by great financial houses in " high politics " is supported by the control which they exercise over the body of public opinion through the Press, which, in every '' civilised" country, is becoming more and more their obedient instrument. While the specifically financial newspaper imposes '' facts " and '' opinions " on the business classes, the general body of the Press comes more and more under the conscious or unconscious domination of financiers. . . .

    “Apart from the financial Press, and financial ownership of the general Press, the City notoriously exercises a subtle and abiding influence upon leading London newspapers, and through them upon the body of the provincial Press, while the entire dependence of the Press for its business profits upon its advertising columns involves a peculiar reluctance to oppose the organised financial classes with whom rests the control of so much advertising business. Add to this the natural sympathy with a sensational policy which a cheap Press always manifests, and it becomes evident that the Press is strongly biassed . . . .”


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  9. I find this somewhat unpersuasive - and I'm of the centre-left in views, so should have a natural affinity for this argument, but I don't.

    A few unstructured points:
    - Pointing out that the past three recessions have occurred under a Tory government isn't in itself a particularly strong argument. Two of the growth periods (late 1980s and mid-1990s occurred under Tory governments)
    - The Labour party is still tainted by the legacy of socialism, nationalisation, union power etc from the 1970s. That's not just the media, even right-wing Labourites are nervous about this perception, rightly.
    - The Tories did promote the inflation-targeting, deregulation regime which arguably led to growth in the 1990s, albeit continued by New Labour. But the Tories can still fundamentally say it was "more their idea".

    So in conclusion, probably the reason the Tories are still perceived as better at economic management is:
    a) Most informed commentators probably realise that the picture is more complicated than simply "who's in power when a recession happens"
    b) So they judge it on who has persuasive ideas.
    c) Labour definitely didn't in the 1970s.
    d) Labour may have had in the 2000s, but fundamentally they were copying/taking over Tory economic ideas.
    e) Commentators still give credit to the Tories, rather than Labour.

    It'll take more time to change perceptions.

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    1. Maybe you find the arguments unpersuasive because you do not read them properly. It is not just that recessions occurred under a Conservative government - the biggest one happened under Labour! My point is that poor performance was a result of clear policy errors associated with that party (monetarism, entering a fixed currency regime at an overvalued rate, austerity).

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    2. Though it was also Labour policy to enter the ERM at what was clearly an over-valued rate. In fact Gordon Brown was the biggest cheerleader for the policy. As was most of the serious financial press. Yet the Tories got stuck with all the blame for its failure.

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    3. The 1990 mistake was a combination of two things. (1) inflation needed to be reduced because of previous lax fiscal and monetary policy. The former included substantial tax cuts, which it is unlikely Labour would have made. (2) ERM entry at an overvalued exchange rate. Labour supported ERM entry, but the entry rate was very much the government's choice.

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    4. "ERM entry at an overvalued exchange rate. Labour supported ERM entry, but the entry rate was very much the government's choice."

      I remember my old supervisor in Cambridge at the time saying that the real problem was German reunification which had greatly raised German interest rates and was drawing capital flows in its direction. Perhaps it was not so much the rate but the timing.

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  10. It's a really interesting question. My own view, as someone who's paid to analyse the media industry, is pretty straightforward: there is a substantial right-wing bias in the media, and it has two sources:

    1. The press is right-wing dominated, and the press still wields huge power in the UK's media ecosystem, for two related reasons: i) freedom to editorialise, and ii) the ability to deploy journalistic resources to agenda-shaping effect. By that I mean the fact an editor can send a reporter off to investigate a story, or a person, and uncover something that is news. Generally, the right-wing 'quality' press does this less than the Guardian, but it can still do it - consider the Mail's hit-jobs on people like Ralph Miliband and David Bell (one of Leveson's assessors - http://www.dailymail.co.uk/news/article-2233681/Leveson-Inquiry-Mail-dossier-raises-disturbing-questions-influence-quasi-masonic-nexus-people-know-best.html). The BBC is constrained editorially by impartiality requirements, and I think those requirements may also mean there's a reluctance to do investigative journalism of a really probing kind, perhaps out of a fear it looks too 'political'. They've been cutting back on in for a while, and look at the recent cuts to Panorama. It's also worth saying that, though newspaper circulation has shrunk dramatically (by May 2015 it'll be about a third less than it was at May 2010), newspapers are still widely read by the UK's political and media elite. And the constraint of impartiality limits the ability of broadcasters to set a different news agenda to 'what the papers are leading with'.

    2. The BBC, in addition to impartiality constraints, tends to exhibit a slight bias in favour the government of the day for obvious reasons, but also a slight bias towards the Conservatives (http://theconversation.com/hard-evidence-how-biased-is-the-bbc-17028). Those are effects of the same cause: the BBC will, even if unconsciously, avoid annoying anyone likely to reduce its funding or downsize it. Governments can do that, and of the two main parties, the Conservatives are more likely to do either of those because fewer of them believe in the idea of public service broadcasting, and they have less to lose if the BBC ceases to exist or goes private, since privately owned media tends to favour them more. So they loudly complain about the BBC's supposed 'left-wing' bias and don't worry have to worry that doing so might undermine public support for it - either way, they win. It's worth also saying that the newspapers have liked bashing the BBC for as long as I can remember; now that they compete directly with it in the provision of online news, that's only going to intensify.

    Why do we have the distribution of media power we have? Well, Labour had plans to reform media ownership laws in the mid-90s, but dropped them when it became clear it was necessary to in order to win over Murdoch. They should have followed through with those plans. More broadly, Labour has long neglected the question of media power in the UK. At a stroke they could force Murdoch, the Barclay brothers and Viscount Rothermere to sell their papers if they said you should only be able to own UK media if you have a British passport, live in the UK and don't claim non-dom status. That law would command overwhelming public support.

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    1. Leo, in France we got all the clichés during the Sarkozy presidency:

      - The wall of money
      - The control of the media by the "Grand Kapital"
      - The Black hand of "the Zionists" as it must be said here in leftist Newspeak

      And finally, you know what, Sarkozy was broken by Hollande.

      This Manichean vision is comfortable but mistaken and futile.

      The problems are holistic while the elections are local. But the median voter in general has a local and opportunistic vision that led to that L/R succession of cycles without anything being resolved.

      A perfect example: the Euro. French Socialists are totally responsible for all that mess:

      - Single currency
      - Status of the ECB,
      - Fiscal constraints of the Stability Pact
      - Growing inequalities between the peoples of the so-called EMU

      And today These are the same French Socialists who moan and vituperated the European straitjacket they designed and built themselves.

      You are familiar with Maastricht, Amsterdam, Nice, and In these three cases there is the innocent hand of our poor French Socialists governments!.

      It is time to leave this purely ideological politician reading , and to move to nitty-gritty, and to fight with the real problems; left and right is no longer appropriate.

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  11. One thing I've noticed is that the right seem to have a self confidence in discussing the economy that the left do not. I think this lack of confidence is quite cleary visible in the Labour party (Prawn Cocktail offensive,BoE Independence, more recently In the Black Labour).

    I think a lot of this is down to the fact that the Conservatives have done a far better job of defining recent economic history in their favour. The 70s are defined by runaway inflation, the IMF bailout, strikes and the three day week, the mistakes of the 80s are finessed over with emphasis placed on the opportunities. We can see similar attempts to define a historical narrative now in the way the Tories talk ("clearing up the mess", "paying our debts" etc).

    For my part I think the mainstream left has been far too timid, especially recently when it comes to challenging the right's narrative.

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  12. I think mainstream economists have to share some of the blame for what happened under Thatcher and Blair. It was too obsessed with comparative advantage theory and the ability of the market to reallocate resources efficiently. I believe had they really understood Keynesian theory (and by that I do not mean New Keynesian) and were a little bit more historically literate a lot of those mistakes may have been avoided, or at least, coherently articulated.

    Many economists opposed Thatcher's privatisations, and signatures were presented to her saying as much. But I think they were largely Post-Keynesians that still survived in UK universities. At the same time as Thatcher, a new type of economics was appearing (or returning - it was largely pre-Keynesian and restored things like Ricardian Equivalence as an analytical framework) and claimed with algebra that Keynesian ideas were outdated and wrong.

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  13. Back to the 'media news' , I think its a kind of 'commodification' in the Marxist sense of the term where unlikely , intangible things are turned into market commodities. In this case its BBC 'News'. Of course the daily press, ITV and certainly SKY are commodities. What has happened more recently is the BBC copying their competitors, adopting their popularist values, even going for a quick, hard sell and using young inexperienced coffee drinking metro reading staff, cheap sources in the morning with their obsession over the 80% Tory papers. .

    So previously we had impartial BBC journalists & researchers who would not just 'take' & replicate stories from the Tory Mail, Tory Express and now more so the Tory Times. The BBC news agenda has lost its impartiality so it's now a Tory tabloid news agenda - for example the Bulgarian/Rumanian influx which was unfounded back in Jan., the coronation of UKIP and Farage since the European /local may elections and the denigration of the leader of the Labour Party; all the origins of this are the tory Tabloids....so missing from the BBC agenda.

    If they were really on top of things they would use sources like the FT which generally is objective, factual and forward looking.

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  14. Just to give you a little more flavour of what I mean ( and I will not mention covering inequality in the UK which the FT has done vigorously since Thomas PIketty's 'Capital' (2014) and which this week became their FT 2014 business book winner) but just to look at their coverage this week on the impending big cuts which will come in next year if the Conservatives win. So today we had fears of disaster after Cameron tax cut vow. Unlikely this was covered even by the prancing Today program ranting on about Miliband's ratings ( not Labour Lead) for ever...

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  15. Leo and Peter from St. A, highlight many of the structural issues in the media environment.

    Another Anonymous raises the key point that the economics profession has been entirely complicit in the focus on "deficits etc" over the welfare of ordinary people.

    What we can see in Spinning Hugo is how people are unable to think beyond "parties" to "philosophies." The reality is probably that neither party (Tory or Labour) is inherently more competent. The problem is (see once again Anon's comments about economists) that the 2007 crisis was entirely a product of the Tory philosophy on economics. This may explain why non of the causal factors are being addressed by Osbourne and we are heading for the next crisis.

    But understanding all that would entail admitting:

    a) The philosophy was wrong.
    b) New Labour was following said philosophy.

    To conclude on a real downer. The whole "small target" thing means until we have another crisis, we're unable to make a significant shift in policy away from the Hayekian agenda.

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  16. I often find it interesting that Conservatives, or people that are ideologically right-wing in their views often denigrate 'the Left' as being economically illiterate, frequently at the same time as invoking the Laffer Curve and claiming that lower taxes = higher income.

    It makes me wonder if they've actually seen the Laffer Curve, and noticed what shape it is?

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  17. There's a lot of talk about the effect of light or heavy regulation.
    I wonder how much difference it would have made?
    All of the banks had access to their own information, including data they would have regarded as confidential.
    There are well-substantiated reports of experts in the banks telling their boards about their risk exposure and being ignored.Largely because most of the people at the top were locked into bonuses which required ever-increasing revenue.
    So can anyone tell me how an external regulator, trying to monitor all of the banks, could have changed this?
    Brown as Chancellor, made the disastrous but understandable, mistake of believing that the banks would be responsible and well-managed enough to prevent them wrecking their own businesses.

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  18. There is plenty of voluntary regulation that could be effective, for example banning bailouts unless certain conditions are met. Or in order to receive deposit insurance banks have to contribute money towards a fund with other banks and the government matches money 1 to 1 with the fund. The fund is used if to fund if "bailout conditions" are met. What are your views on regulations based on voluntary principles combined with a ban on bailouts so incentives are correct, Simon?
    What should governments do to prevent a repeat of 2008-2009? What are your views on building more social housing (high fiscal multiplier) or a land value tax? What about immigration and its effect on the economy?

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  19. Glad you found it helpful. do not forget to advocate it to your professors.


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  20. Thanks For Your valuable posting, it was very informative. Am working inCloud Erp In India

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  21. Why start with 1979 when one can go back to the Barber Boom and Reggie Maudlin's infamous note to Jim Callaghan in '64.

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