If facts had anything to do with it, the economy should be the
Conservatives’ weak point in the forthcoming UK election. Since 2010 we have seen
the weakest recovery in at least the last 200 years. The government’s actions
are partly responsible for that, and the only debate is how much. Real wages have been falling
steadily, and only a fall in global oil prices might be finally bringing that
to an end. Living standards have taken a big hit. Yet I keep reading how
the economy is the Conservatives' strong card. How can this be?
What mediamacro generally fall back on are the polls, and it is
true that people still believe the Conservatives are more likely to
raise their living standards than Labour, even though they understand that they
have become worse off over the last five years. There is no factual basis for
the view that the Conservatives are better at managing the economy, and plenty to suggest the opposite. However this
belief is not too hard to explain. The Labour government ended with the Great
Recession which in turn produced a huge increase in the government’s budget
deficit. With the help of mediamacro, that has become ‘a mess’ that Labour are
responsible for and which the Conservatives have had to clean up.
The beauty of this story is that it pins the blame for the weak
recovery on the previous government, in a way that every individual can
understand. Spend too much, and you will have a hard time paying back the debt.
Those that read stuff about economics vaguely remember Gordon Brown taking
small liberties with his fiscal rules, and that half truth is enough to create a myth of past profligacy.
These myths and misunderstandings are easily dispelled with a
few facts. The two charts at the end of this post can do most of the work. So
it is an inevitable part of the Conservatives’ campaign to ensure that facts
are kept out of it as much as possible. Sound bites are great. Endless
discussion of so called ‘gaffes’ - perfect. Anything to keep the electorate
away from useful information.
Ruling out a leadership debate with Miliband is part
of this pattern. As Peter Oborne has observed, Miliband’s record as an opposition
leader has included some impressive accomplishments. But his opinion poll
ratings are low, because most people just see unglamorous pictures of him and
note that he does not have that Blair appeal. That could be changed if they saw
him in a one on one debate with Cameron, so there was never any chance that the
Conservatives would let this happen. The debates last time had huge audiences,
so no one can dispute that democracy has been dealt a huge blow as a result of
what the FT rightly calls Cameron’s cowardice.
Some people say I go on about the media too much, but in an
election like this you can see how critical a role they will play. If they see
their job as getting as much information as possible to the electorate, the
Conservatives will be in big trouble. If instead they go with stories based on
fake indignation over who said what when (like weaponising
the NHS) the Conservatives will be safe. If they do nothing but give
politicians sound bites that is also fine for the Conservatives. As Janan
Ganesh – always a useful barometer of the government's thinking - observed, the Conservatives can bore their way
to victory.
Cameron’s refusal to debate one on one with Miliband is a key
test for the media. Will they ‘play safe’ and let one side's spin doctors
dictate what people are allowed to see? That is what Cameron is counting on. Or
will they decide that it is their duty to allow the British people to see some
sort of intensive debate involving their potential future Prime Minister, and
that the ruling party is not able to decide how much democracy people are
allowed?
And this will continue for as long as people continue to publish graphs about 'budget deficits'. That is playing away from home. Stop it.
ReplyDeleteIn the UK the budget deficit is merely a residual value - there to make the numbers add up in the accounting. Like 'Taxpayer Equity'.
It tells you that the private sector isn't borrowing as much as it is saving in the financial circuit. And that's it.
The numbers are irrelevant to a government and should be made irrelevant in the minds of the population via education. The job of government is to deploy real goods and services for the public good. So start talking about them. Why is the private sector allowed to hire GPs and sell appointments to the highest bidder when there is insufficient GPs in the NHS to service the population.
There is no public value in that approach, since the limiting factor is trained GPs - a real item of value. So ban the private sector from doing so, eliminate that excess demand for a scarce good and transfer it to the NHS.
Stop banging on about mere entries on computer spreadsheets that can be created by government at will. Get Real. Then we can talk about priorities properly.
"And this will continue for as long as people continue to publish graphs about 'budget deficits'."
DeleteIn what way might the falsehoods perpetuated by David Cameron and the Tories regarding the economy and deficits be "continue(d)" by SWL publishing graphs which demonstate these falsehoods?
The Tories constantly refer to the budget deficit which is lapped up by an obedient media; SWL uses the very same indicator/measurement to show they are lying...and yet somehow Cameron's lies will "continue for as long as people (SWL) continue to publish graphs about 'budget deficits'."??
Objecting to the use/logic of referring to budget deficits is one thing, but blaming SWL for its continual use by the Tories because he uses the same indicator when illustrating the lies of the Tories is incoherent - especially since it is the Tories who insist on referring to the budget deficits and debts in the first place.
Or do you believe that if SWL and others stopped talking about budget deficits then the Tories would actually stop making their false claims about them?
Because for Neil (who is one of the MMT faithful) budget deficits don't matter *at all*.
DeleteFor S W-L, they do matter, but we should not be tightening fiscal policy at the zlb.
I hope that is fair to both?
A GP Surgery has five Doctors, two will be retiring in the next three years. The partners have already started looking for replacements. They have had no interested candidates so far this year. Statistically they will have even less takers in three years time, because there will be even less trained persons to pick from.
DeleteMeanwhile, the government's cunning plan to privatise the UK NHS, means some clinical services that were performed "in house" within a PCT local group of Surgeries, are now out to private sector tendering. So, the Doctors that currently form the group of Surgeries, that are currently supplying a particular service, are now forming a company to tender for the work that they are currently .... er.... doing.
Naturally, putting together a company and filling out Health Department "Sir Humphrey" type tender documents, takes up a lot of time and commercial research. The result is a lot of GPs who don't want to be Contracts Managers and Cost Accountants. They just want to continue to be Doctors, in what is a very cost effective primary health care model; your local "GP Surgery".
@Neil Regarding the below:
Delete"Stop banging on about mere entries on computer spreadsheets that can be created by government at will."
I don't understand this at all. Budgetary constraints are real, right? As in, governments can't spend infinite sums and do everything? Given this, presumably these constraints can be exceeded -- which would be a deficit. Where am I going wrong?
I think the history books will tell the story of the failed concept of "economics", which has rendered it on a par with Astrology and similar pseudo-scientific systems of divination. The last seven years have proved that economics has no Ohm's Law; no Boltzmann constant; no Avogadro's number. It has nothing you cam measure in the seven fundamental units, or any derivatives of SI System units.
DeleteThis has given a major advantage to Politicians, better than any religion even; who can bamboozle their electorates with economic ideologies, that can't be proved right or wrong; and hence, those politicians can't be called criminal liars or accused of financial genocide of a nation state. Economists are and will continue to be the "get out of jail" card for politicians.
How do we the little people change it? In the coming General Election every Party is a deficit Hawk. They have no idea that the budget "deficit", is just a scoreboard that tells us how much the non-government sector is going to save from the government's spending this year.
You really should have a read of the UK Treasuries "Whole of Government Accounts" https://www.gov.uk/government/collections/whole-of-government-accounts . It actually tells you on page 52 "Financed by Taxpayers’ Equity:
Liabilities to be funded by future revenues". And on page 12 "The primary
purpose of the tax system is to raise revenue to fund public services and other government activities".
Everybody I know and Neil Wilson knows, will tell you that those two statements are not true. They are in there to reinforce the myth for public consumption. If you spend some time studying the basic concepts of MMT, it will suddenly click that a company like UK plc, with a set of accounts like these, that show that it is totally broke; can continue to trade. And; it COULD actually trade in a manner where it would run out of workers!!!
Sam,
DeleteObviously “budgetary constraints are real” in the sense that “governments can’t spend infinite sums”. But that’s a straw man argument: i.e. the idea that any government can or might spend an “infinite” amount of money is clearly absurd.
The more important question is: what realistic constraint IS THERE on the size of the deficit given a serious recession? The answer given by Keynes and MMTers is that there’s only one constraint, namely inflation. As Keynes put it, “Look after unemployment and the budget looks after itself”.
Or as a typical MMTer would put it, “If turns out that a much larger deficit than ever experienced before is needed, so what? Go for it.” Or as leading MMTer Warren Mosler put it in his “Mosler’s law” which appears at the top of his site, “There is no financial crisis so deep that a sufficiently large tax cut or increase in public spending cannot deal with it.”
The response of macromedia to the latter sort of idea is predictable: to witter on about rising national debts etc. That macromedia type argument is easily demolished. E.g. I demolished it here:
http://ralphanomics.blogspot.co.uk/2013/03/the-national-debt-and-deficit-are-total.html
Hi Ralph,
DeleteThanks for your response.
"The more important question is: what realistic constraint IS THERE on the size of the deficit given a serious recession?"
OK -- but the original comment I was asking about made it sound as though the whole notion of a government budget deficit is just made-up accounting guff. That's the position I was trying to understand. Obviously the question of to what extent we can exceed the deficit in a recession is a sensible and important one.
When Have I got News for You replaced the absent Roy Hattersley with a tub of lard, perhaps in a similar way Cameron could be substituted for a pat of grease?
ReplyDeleteNo, no. Pats of grease have more IQ than Cameron. A pat of grease might give such a dazzling performance compared to Cameron that the Tories win the election.
Delete"[M]ost people just see unglamorous pictures of him and note that he does not have that Blair appeal. That could be changed if they saw him in a one on one debate with Cameron"
ReplyDeleteAs too often, you have combined some perfectly reasonable economic analysis, with some frankly crackpot political judgements.
If you think that the general perception of Miliband after five years as leader of the opposition is based upon some unglamorous photos, and that this could all be turned around by giving him more airtime, you are naive in the extreme. This is exactly the kind of pure nonsense Labour comforted itself with from c.1980-1994. Unpopularity was always the "media"'s fault, If only 'the truth' about Foot, Kinnock or various policies could be directly communicated popularity would ensue.
What is more likely? That the general perception, after many years, of Miliband as fairly useless is attributable to
(a) a media conspiracy,
or
(b) his actually being fairly useless?
As for the debates: this is cold political calculation. It makes no electoral sense for Cameron to put himself on an equal footing with Miliband, and so he won't. Blair made an identical calculation. Miliband will, I predict, also make an identical political judgement when it comes to debating with other leaders if Cameron is absent. He won't. He won't want to debate on an equal footing with Clegg, Farage et al without Cameron there as well.
On the economics, this might be decisive if a story could be told as to how it would all have been radically different if Labour had been returned to power. I don't really believe that. The electoral imperative to tighten fiscal policy early in the Parliament would still have been there. What Osborne did looks very similar to the Darling plan. The other factors in play (ez crisis, rise in commodity prices, de facto tightening of monetary policy through tougher bank regulation) would all still have been there. (Conversely, I don't think the fiscal position would have looked very different if Labour had not been in power at the time of the crash).
I don't want the Tories back in power, but Labour can only win based upon cold rational analysis, not with wishful thinking and a chart showing that Osborne abandoned any fiscal tightening three years ago (see above)..
How about a little of column A a little of column B, take this weeks PMQ's if someone like Iain Dale (not exactly a Miliband fan) can say something along the lines of:
Delete“I can’t think anyone can call today’s PMQs anything other than a total walkover for Ed Miliband. Not often one can say that”
And then Quentin Letts can report it as:
"Mr Miliband was again made to look a fool. The thrashing he received yesterday, so close to an election, was worse than I recall Iain Duncan Smith ever receiving from Tony Blair. Time and again Mr Cameron seized on things Mr Miliband had said and turned them to his advantage. Time and again the Government backbenchers cheered and the Labour lot sat in glumness"
I think it's fair to say the idea that the press has an anti-Miliband agenda is not exactly crackpot political analysis.
Well, Simon, I hate to say it, but this is where you need to turn to political science and sociology for more insight. It's not just the media (although they are not blameless). You are suggesting that if people had perfect information, they would act according to their interests. Which leaves in a black box what "interests" really are. Working class voters who lean to UKIP or BNP or EDL--do you think their interests are material (economics) or symbolic (identity), for example? In a way, you've crossed into pretty crude Marxism: voters should vote according to the interests of their class, as you happen to define it all. Blaming the media is fine--they deserve a whole lot of blame--but just getting the message out might not work much, if it all, and might backfire. You need to understand the construction of identity and interests, which is where economists fail big time (but sociologists, anthropologists, and historians come up fairly well).
ReplyDeleteBut we've had this discussion about disciplines before.
interestingly, people in the states are disappointed with Obama due to the poor economic record post-recession whereas the Brits are happy with Cameron whose record is worse. A tale of two countries.
DeleteSure. Partly that's ignorance of how economies work. Partly that's racism--people don't want to know the truth because it would contradict the racist narrative--in either direction ("Obama the socialist" or "Obama is incompetent"). The Southern Strategy has worked all these years not just because of media, but also because there are too many people who want to hear the Fox News message. Their interests are linked to race and racism. SWL won't convince those people with his data and analysis, because his invocation of "macromedia," while not invalid, is incomplete--he presumes to know what people's "interests" are and how they are constructed. As for the UK, I remember something about class that's not that distant from the American experience, but related to asylum seekers and immigrants--Labour had left behind the British (English) working class, so the working class was leaving behind Labour. Macromedia can play to that, but it did not create it entirely. More was/is going on
Deletei would not totally discount racism or the influence of Fox new, but I think that Obama's problem was due to excessively high expectations. He was supposed to fix things in 2 years, and when he did not; people got mad. You Brits are a very forgiving lot. If Obama or Bush had performed as well as Cameron, they would be gone in the next election cycle.
DeleteAmericans expect performance whereas the English prefer excuses.
DeleteNot sure it's that clear-cut. Obama is too cautious, and that ticked off progressives and anyone who takes social justice or macro seriously (like SWL or Krugman). As to racists, nothing he could do would satisfy them. He's coming for their guns, forcing them to marry others of the same sex, wasn't born in the USA, has Martian DNA...well, you get the picture. By all rights he should have lost in 2012, given the weakness of the economy--except Romney screwed up and turned enough people off with his classist attitude.
DeleteBy the way, don't buy the "performance" argument. Were this the case, every single Republican in Congress, and many in state offices, would have lost in the 2012 election.
Here's the thing about macromedia. Take the health care debate. The media over here were horrible in 2009-10--nothing of substance about the debate, and even less about other health care systems (UK, Canada, France!!!). So the media failed to help inform Americans. But when you start to inform them, too many of them don't care--they buy into this libertarian attitude of "me first" (sorry, "liberty from the government"). So even if a more state-centered health care system, such as the French system, would have been superior to anything we have now, there are enough Americans who just don't like it because it involves "government." Without going into too much detail, it's partly an issue of metapreferences, which is something SWL doesn't really take into account. And this isn't just an issue of "media."
take a look at the Fair Model, the model developed by Ray Fair at Yale: http://fairmodel.econ.yale.edu
Deleteif GB acted as the US does with the Fair model, you David Cameron would be looking for a job as we speak.
DeleteNothing particularly impressive in this one (of many) models. Didn't do badly in 2014, but other experts did just as well with other models (Silver, this fellow at Princeton, etc.).
DeleteObama was too cautious, but I think it is his nature and the reality of his unique situation. He couldn't be angry black man. He probably was taught that lesson all his life. Still, the US had a good jobs report Friday so we are doing better than most of Europe .
Deletethere are other economic models of presidential elections; they give similar results. Fair's is just the best known.
DeleteHow about talking about real deficits: deficit of jobs, deficit of good paying jobs, deficit of education, deficit of infrastructure.
ReplyDeleteSo, what deficits are more important to people? Budget nominal deficit or real deficits that matter to people. If "left" could learn for good that nominal deficits do not matter ever and start talking about real deficits that could be reduced with increasing nominal deficit then they might start geting votes.
Thank you a lot for the knowledge.I don't understand this at all. Budgetary constraints are real, right? As in, governments can't spend infinite sums and do everything. Given this, presumably these constraints can be exceeded -- which would be a deficit
ReplyDeletePersonalized Kids Scrubs
Toddler scrubs
Blaming Labour for the global 2008 debacle is misplaced. The blame is on Wall Street with MBSs, the housing bubble, the distortions between the EU core and periphery, and Hank Paulson failing initially with Lehman. The UK was just swept up. I cannot comment on UK Politics as an American but here you cannot duck a debate. We have too many debates, I think over 10 for the last Repub primaries. Seeing those lunatics 10 times is an assault on the nation's mental health. Your Conervatves enact bad economic policy, ours are simply insane. And there is an iron law with right wingers. It can always get worse. Bush 1? Bad but sane. Bush 2 ? Bad, stupid,and throw in war and torture. Bush 3? The bar is high young padawon, much evil you must do.
ReplyDeleteDebates are a red herring.
ReplyDeletehttp://www.telegraph.co.uk/news/uknews/1318367/Blair-refuses-TV-election-debate.html
If "MediaMacro" is so easy, so obvious, set up a television station yourself like ITV with endless celebrity shows and then hire the hacks from all the lefties at the FT, Mirror, Guardian and Socialist Worker to produce the "news" programmes. And see what happens.
He's got a blog;
DeleteSad thing is in politics, you seldom get the advertised product when it comes to political labels. We have a big problem with that in the states. We might better name them as red or blue puppets. That would be more honest. Have a good weekend.
ReplyDeleteThe conspiracy of silence continues. It is a fact of life that the media environment is now so negative that whatever they say, right or wrong will get picked apart. So the only winning strategy is to say the least. To quote War Games, "The only winning move is not to play."
ReplyDelete"The Labour government ended with the Great Recession which in turn produced a huge increase in the government’s budget deficit. With the help of mediamacro, that has become ‘a mess’ that Labour are responsible for and which the Conservatives have had to clean up."
ReplyDeleteWhen I read columns like yours I see denial. 2008 was a crisis in the global economy. But that does not get Labour off scot free. Nor does it get economists off. Had either been closely watching events in the world economy they would have been aware that major structural shifts were going on. Good historians could, and were for a long time picking them up. But no, Woodford et al carried on believing you could look at monetary policy in purely abstract terms and as a closed system. We should have been prepared for what happened. But economists and Labour were not. Labour deserved to be rejected and a new party given a chance. Economics and Labour failed, but democracy did not (this time). The Conservative austerity policies were misguided. But no-one has the stomach yet to put Labour back in power. I do not blame them. They still have a lot to make up for and a lot to learn.
The Party that was in power at the time was irrelevant. Exactly the same thing would have happened if the Conservative party had been in government. The same economists; Treasury civil servants; BoE apparatchiks and Spiv City of London Banksters; would have advised / demanded, the same actions to Conservative muppets, as it did to Labour muppets.
DeleteThere was no mess for the conservatives to clean up. In fact the economy was climbing out of its dive with an 11% deficit which would slowly auto corrected. Not that it mattered how big the deficit was and still doesn't today.
The REAL damage was done by Conservative austerity that killed the recovery stone dead in 2010 and flat-lined it for three years. They will repeat the same "slash and burn the public sector" madness again, if given the chance again in 2015. They always do it, every time they get elected. Look at an SW-L long term GDP plot; you can spot every Conservative election. (Acorn)
I don't understand. If the "great recession" occurred independently of the powers that be, regardless of political persuasion, why should we suppose that any consequent "recovery" (or not) has been specifically attributable to the Conservatives?
DeleteSimon-
ReplyDeletePerhaps if you would stop referring to government spending as a "deficit", Neil would have less to complain about.
Any professional macroeconomist must understand by now that a nation that issues its own currency need not worry about "deficits" and can spend up to the limits of its resources. Maybe if economists at Oxbridge, Chicago, Harvard, Stanford, etc. would point out the fallacy of the deficit argument clearly and constantly the general population would come to understand.
But then maybe these economists are restrained by the old Upton Sinclair syndrome: "It is difficult to get a man to understand something when his salary depends upon his not understanding it.".
I don't think Cameron is that worried about Miliband or ithe Conservatives about Labour. This is just strategic game play. On the economy Conservatives will come out on top because people remember what happened under Labour and also that Labour are not offering anything substantially different from the Tories' austerity.
ReplyDeleteWhat Cameron does not want to talk about is immigration or Europe. It is UKIP he is worried about. Having him humiliated like Clegg was against Farage is something he cannot afford to allow. Cameron wants immigration out of the election. He knows he cannot stop the free and rising inflow from Eastern Europe and his record on the matter has been a total fiasco. Labour, however, are not going to go at him on this because they cannot solve it either, and anyway they created the problem in the first place.
Cameron will eventually accept a head to head with Milliband, or a large group where UKIP will be swamped and incapable of barraging him with immigration.
One could list other areas which are strongly linked to economic performance and where Tory policy is an absolute disaster. The policy on housing is a prime example of complete economic illiteracy. In spite of the fact that their misguided approach in this one area only has so many direct and indirect consequences, leading to n-th best policies (n being a very large number) in social policy, regional development, migration etc., their "economic competence" seems to remain unaffected. I agree with Simon that this has a lot to do with media with even the best programmes falling well short of their holding politicians properly to account.
ReplyDeleteSimon is there a way that one can link directly to the second chart you make. It seems to me to illustrate your point really nicely for laymen and have the potential to become quite a nice internet meme but when I try and link to it on facebook all I get is a picture of a prof with a beard...
ReplyDeleteand what is with the picture of middle aged guy on motorbike when I try to post the article on FB. I know it seems trivial but this stuff matters, and I feel stupid posting an article with such silly pictures attached and it will totally distract frm the message
ReplyDelete"Some people say I go on about the media too much, but in an election like this you can see how critical a role they will play." I don't know how much is too much but I do wonder whether the frustration that you feel is because not everyone in the media or elsewhere has the same macro model in their head as you do. Your claim, I think, is that the evidence clearly points to economic incompetence on the part of the government yet other economists (e.g. John Fender) have argued that a measure of austerity was necessary in 2010 and others (e.g. Jonathan Portes) that the Chancellor was pragmatic in reducing the pace of public spending cuts in the face of the slowness of the recovery.
ReplyDeleteAs for the debates, I think it is simplistic to think that (a) Milliband would somehow demonstrate the fundamental incompetence of the government and his effortless superiority in a 90 minute television debate; (b) that a 90 minute television debate is the best way of deciding who should lead us for the next five years. The Labour leader and his shadow chancellor have had five years to make the points that you are making and the poll evidence is that he has failed to convince the UK electorate that you/they are right. Perhaps the frustration of Labour supporters would be better directed at the leadership rather than blaming macro commentary in the press (which is not out of line with what some other economists believe).
I think another point that's worth making about the recovery is the Kahneman idea about changes rather than levels being important to individuals' psychology: it is more salient to people that the economy is getting better rather than the fact that it's not that much better than it was 7 years ago. I can see how your second chart is intended to address this but really where would you rather be: in 2008 under Brown/Darling with 5 years of pain ahead or in 2015 under Cameron/Osborne with the economy poised to soar?