Winner of the New Statesman SPERI Prize in Political Economy 2016

Sunday, 3 May 2015

UK election: it was mediamacro wot won it

After the UK general election in 1992, which the Conservatives won to the surprise of many, the Murdoch owned tabloid newspaper the Sun splashed the headline “It's The Sun Wot Won It’. The headline is infamous enough to have its own Wikipedia entry. A few days ago I wrote what I hope was a calm, considered and rather academic post on the concept of mediamacro, following my posts on specific mediamacro myths, and I talked in abstract about the dangers it posed. Here I want to be more concrete.

Since the 2010 elections, YouGov has asked the following question: “Here is a list of problems facing the country. Could you say for each of them which political party you think would handle the problem best?” This is a simple table comparing the Labour lead in this poll just after the 2010 elections and today.

Lab lead 6/7 June 2010
26/27 April 2015
Law and Order
Economy in General
Source YouGov

Ignoring the normal academic caveats, the message is clear: the only topic on which the Conservatives are doing better today than shortly after they won the last election is their handling of the economy in general.

Yet when you look at any standard criteria of economic performance, the economy has done terribly during the coalition’s term of office. There is no doubt about this: numbers from GDP per head to real wages all tell a similar story. Average living standards have not increased, which means that they have fallen for many, a result which is almost unprecedented over a five year period. How much of this is the result of government policy is debatable, but that is not a debate that you see in the media. What you see in the media is an obsession with the government’s budget deficit, and on that criterion the coalition has left the economy in a better state than when it came in. So the only way to explain these poll results is that people have internalised the media’s obsession with the deficit.

Now normally you would ask how on earth something like the budget deficit could trump standards of living when judging economic performance. This is where the mediamacro myth of Labour profligacy is so important. One of the lasting images of this election was the man in the recent Leaders Question Time who accused Miliband of lying when he said that the global financial crisis rather than Labour profligacy had caused the deficit. (Second clip here.) He just knew that the last government had bankrupted the economy, and it appears many in the audience did too. And who could blame them: coalition politicians go unchallenged when they say it, and lots of newspapers repeat the line endlessly as fact.

It is a myth, pure and simple, but an important myth, because it places the blame for stagnant or falling living standards during the coalition government on their opponents. They created the mess the coalition had to clear up, and that was bound to be painful for a time. I’ve watched people who comment on this blog try to twist and turn figures in a desperate attempt to keep the myth alive. I’ve experienced being rubbished in the partisan media for trying to expose this myth. But in mediamacro this Question Time confrontation is described as an awkward moment for Miliband, rather than just the ranting of a bloke who had never looked at the numbers. I cannot recall any major coalition politician being seriously challenged for promulgating this myth.   

It is strange watching all this happen. I know that having written one of only 2 or 3 academic papers on Labour’s fiscal record does not guarantee what I say is correct, but it certainly gives me confidence that I am not talking rubbish. I write what I can, talk to any journalists who ask, trying to get the facts across. Facts like the deficit before the global financial crisis was only within a typical forecast error of its sustainable level. Facts like the debt to GDP ratio before the Great Recession was below the level Labour inherited.

Yet I know that this message will never be received, however indirectly, by the angry man in that debate, or by most of that audience. Perhaps some do not want to know the facts, but if they did, they are very unlikely to hear them. Instead they will get propaganda from most newspapers, and ‘views on the shape of the earth differ’ type comments from the TV, whose journalists are desperate not to appear to take sides. For that reason, if the coalition government remains in power after this election (or if the Conservatives win outright), then the title of this post will have rather more justification than the Sun’s original headline. [1]

[1] Although perhaps I should not be too rude about the Sun’s claim. Recent research suggests that readers of the Sun are considerably more trusting of the media than those who prefer other papers.


  1. Simon, thank you for writing your blog. It appals me that the Tories have the gall to put economic competence at the heart of their campaign. Your wonderfully accessible articles have been so helpful.
    I wonder if you might have a response to this nonsense in today's Telegraph?

    1. Yes, complete and utter rubbish.

    2. Simon, I agree with alienfromzog -- thanks for your informative, helpful blog posts that counter the mediamacro view. For a non-economist such as me (trying to understand a difficult subject) you in particular -- along with Chris Dillow, Tony Yates, Paul Krugman and (I think the definitely non-mediamacro) Martin Wolf -- have been a beacon of lucidity and rationality compared to the bulk of the mainstream media and blogosphere.

      In my opinion the "debate" on the UK's economy reached a new low when one member of the BBC's Question Time audience asked Ed Miliband to apologise on behalf of Ed Balls for saying that Liam Byrne's note -- "there is no money left" -- was a joke. The joke really is that David Cameron claims to keep a copy of the note in his pocket, and seems to think it reflects the true state of the government finances in May 2010.

      Please keep blogging whatever the outcome of the election.

    3. I agree, that note is another very good example.

    4. Just wanted to add my voice to the list, Simon - thank you so much for this. I'm pretty close to the academic macro debate, so very much agree with all you're saying. I've been trying to spread a bit of truth about the UK's economic situation to friends and family, and your posts are very useful, sum things up much more eloquently as I could have done.

      Just one request/piece of advice - in your introduction to the myths post, maybe you can add links to all 7 posts in the series at the bottom? Then those wanting to share can just send round a link to the introduction, and the rest of the articles can be reached easily from there.

      Many thanks again, and keep up the good work! Although I must say that telegraph article made me feel rather despondent... I mean how can you (I mean Lilico) even say something like this "Each additional percentage point of government spending, relative to GDP, cuts medium-term growth rates by around 0.1 to 0.15 percentage points. So the 5 percentage points or so rise in public spending, relative to GDP, that Gordon Brown’s government had allowed between 2007 and 2010 would have cut the growth rate by some 0.5 to 0.75 percentage points." Nonsense is really being too kind...

  2. Unfortunately, by committing themselves to reducing the deficit year on year (which was probably necessary in order to counter the perception of Labour on the economy) there is an implicit acceptance by the Labour party that the Conservative/mediamacro narrative is correct.

    That hamstrings the ability of the Labour party to rebuff the argument that it was the deficit that got us into the mess we are in.

    In other words, Ed could have easily rebuffed the audience member, but that would expose a logical incoherence between what Labour think and what Labour do.

    1. One of the unanswered questions is whether it is politically possible (in the mediamacro sense) to go for something in between full blown fiscal austerity and complete rejection of the austerity line. I think it is pretty clear that Ed Balls thought his 'too far, too fast' mantra did not cut it.

    2. This is important.

      I think Labour strategists this time fought the same war as they did in 1997. Position yourself epsilon to the left of the Tories, and win by virtue of having greater ideological space. Even though Ed Miliband was supposed to be a clean break from Blair, I think he lost his nerve on this and played the same suit.

      But as I think you intimate, this doesn't apply with austerity. Austerity-lite is to accept the premises of austerity. Labour could have and should have been much more aggressive on the economy.

    3. I agree from an economic point of view, but perhaps also from a political point of view. I think a line that said we only need to deal with the deficit once the recovery is assured could have worked.

    4. But this seems distinct from mediamacro. To what extent is the problem Labour strategy, and to what extent is the problem mediamacro? I am sure they are intertwined, but would have liked to see how things would have turned out had Labour been braver.

    5. I think the counterfactual where they had been braver, and what mediamacro's reaction might have been, may be worth exploring in a blog post

  3. This election does indeed seem to turn on myths and downright lies about Labour spending and the Coalition's economic performance. It was ironic in 2010 that a duped public's reaction to the finance crisis was to, almost, elect a party largely funded by the finance industry, but it is simply farcical now that the Conservatives benefit from the worst post-war record of any government.
    Simon is an outstanding economist and commentator, but perhaps the sincerity of his honest approach to analysis and evidence, as with Keynes, leads him to understate the sheer power of vested interest, not as some silly notion of sinister clandestine conspiracy but simply through a perceived self-interest of the rich and powerful. How can we, who cherish democracy, effectively counter such demagogy when we cannot even make the truth be heard? To what extent can an election result based on lying [not the sole preserve of any particular party of course] be considered a democratic mandate? Is the way forward to advocate a technocracy or is this an admission of defeat?

    1. My current view is that it may always be too tempting for parties of the right to advocate immediate deficit reduction following a recession (but as Nick Rowe points out, Canada was an exception), and this is why I'm a (recent) convert to helicopter money.

      Did Keynes understate the power of vested interests? Some of the stuff of his I've read seems pretty clued up.

    2. I do need to read more Keynes then, his belief that intelligensia could rule seems niave as does:
      "I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval is ideas, not vested interests, which are dangerous for good or evil."
      JM Keynes of course.
      But experience since the General Theory is that vested interest has, after a certain interval, used politics to overturn his ideas, even though the facts, that continue to support his insights, have not changed .

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  6. Strangely prophetic article Simon!

    I have a confession to make. I was so frustrated by "That bloke who never looked at the numbers" I looked up his number and text him the reality!

    So this message was received by "the angry man" and he did text back asking me to identify myself. No idea if the figures have sunk in however!

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  8. I agree with what you have said re mediamacro but it doesn't seem to be having much of an effect because the Conservatives can't seem to get more than 35% of the popular vote, which shows that, despite all the propaganda people don't believe it.

    Looked at historically most people in this country vote for Left, or Left inclined parties. The Tories, together with the DUP are the only right wing parties we had (and I speak before the advent of UKIP which seems to be a "None of the above" party. Mrs Thatcher, at the height of her popularity, never got more than 44% of the popular vote.

    Also of course most people don't have a great understanding of these issues and can be pardoned for their ignorance.

    1. I think the political position is a bit more complicated than that. My own view is that this government is quite far to the right. In addition, more UKIP support comes from Con than Lab. Given this, and their lack of success in pretty well every important dimension, their vote should be smaller than it currently is. So, therefore, the fact that it isn't has to be explained, and mediamacro can help do that.

  9. When Thatcher came into office with her St Francis of Assisi speech, and when Cameron said 'we are all in this together', they both took a communistic approach to politics.

    It is good to remember on these occasions Conservatism's origin in irrational romanticism, not in rational individualism.

    And as for Murdoch's backing of the SNP in the Scottish Sun, and the Tories in the rest-of-the-UK Sun while the Tories run Labour-SNP scare posters: that has nothing whatsoever to do with Miliband's attack on press barons and one in particular over phone hacking.

    1. "How much of this is the result of government policy is debatable.."

      How can you say such a thing? You have always said it was the government's fault and that it had robbed every British household of 4.000 pounds. What is there to debate about? Or was that campaign demagoguery?

    2. I meant what I said. Is it £4000, or more? I have always said £4000 was a conservative estimate, and said why in earlier posts, but I would be a fool to say that I knew the true number. What is extraordinary is that no one is discussing this.

  10. gastro george3 May 2015 at 09:04

    For the success of mediamacro, you only need to look at, for example, the output of Guardian "journalist" Patrick Wintour. A notorious critic of any part of Labour that even suggests leftness or an alternative to the Blairite legacy, today he declares that the words of a civil servant revealing that Labour did not overspend were "surprising remarks":

    This comes a few days after an astonishingly favourable article about George Osborne that could have been written by Central Office itself:

    1. I quite enjoyed this from Robert Peston

      "to be clear, neither George Osborne or David Cameron were at the time shouting that the Labour government was maxing out the credit card and was about to bankrupt Britain."

    2. gastro george3 May 2015 at 10:08

      Maybe enjoyable in the sense that it implicates Osborne and Cameron, but the rest is pure mythology.

  11. I was delighted to see that Newsnight correspondent Duncan Weldon has given you a good plug in his blog today. Too little too late?

    1. Both Peston and Weldon are good journalists. But both of them, in tackling these myths, have to write something like:

      The myth as stated is wrong, but ....

      so it appears as if there are two sides to this question. To quote Krugman, it is the equivalent to saying

      True, the world is not exactly flat, but its not exactly spherical either

      Perhaps as a result, their political commentator colleagues think its all a bit complicated and do not challenge the myth. Its a system problem. Neither journalist dares to just counter the myth, because that would be 'unbalanced' and the wrath of the Conservative party and most of the press would descend upon them. So they do what they can, but it is not nearly enough.

  12. I am just an 'ordinary person' who wanted to find out all about austerity back in 2010 when we were being told by the Conservatives that they had to take 'difficult decisions' which was the only way to save the country from bankruptcy. During the last 5 years I have explored the internet on this subject and find that academic economists such as yourself are all generally against austerity in these particular circumstances. I have subsequently been an avid reader of your blog, I think I have understood most of it! My problem is that friends and family think I am talking rubbish when I try to explain (perhaps not very coherently !) that Labour did not cause the crash, they did not spend too much etc. etc., and they generally go along with the Tory line. It is very frustrating and will be even more so if the Tories manage to win (or form a government) based on lies and spin. The Lib Dems haven't helped either with all their 'like Greece' and 'firestorm' language. I couldn't believe Question Time on Thursday when no-one in the media questioned what the man was saying and indeed, it was all about Ed Milliband faltering over it. And the letter...unbelievable they are bring that out at every available opportunity and are getting away with it!

    1. Do you mind me asking, why do you think your friends and family think you are talking rubbish? Is it because of what they read in the press, because of what they see on TV, or because they do not want to think the government is lying? Or is it something else? I would be interested to know.

    2. To be fair to the Tories, the banking crisis, which was the proximate cause of your current economic malaise, did occur on Labor's watch, for which they deserve some blame. Of course, the Tories may have done worse, but that is speculative whereas the economic crisis is real.

    3. The banking crisis that you refer to was actually the 'global financial crisis'. The clue is in the name 'global', it was not gordon's financial crisis. If labour are to take some blame for it, it would be for not renouncing neoliberalism which by that time had become fully established as the international world order, reinforced by policies of the IMF the WTO and the EU. Even countries not disposed to neoliberalism were forced to go along to some degree through the washington consensus. To expect a labour government in the 2000s to reject globalisation and neoliberalism when it appeared to be so triumphant everywhere would have been politically impossible. So, the crisis was global (and therefore pretty much inevitable, as was the recession generated). The only difference is how the recession would have been managed by each party.

    4. Since we're on the subject of myths, let's not ignore the "Global Financial crisis". It wasn't Global, its effects being largely confined to Europe and the US.
      In E Asia, at worst, there was a slight interruption to GDP growth in 2009. I am not aware of any SE Asian financial institution that was in undue difficulty during the crisis. Growth after 2009 has been very healthy, several East Asian economies are 40% larger by 2015

    5. Simon
      I'm Anonymous at 10:52 yesterday by the way...
      In answer to your question I think all three; it seems that Tory politicians take the opportunity in every tv interview to say that the reason they are having to make the ‘difficult decision’ when cutting this, that and the other is because of ‘having to clear up the mess they inherited’. Say it enough times, and it sinks in. Added to this is that no-one ever questions this on tv, and it is reinforced in the media. My sister, for instance, buys the Daily Mail for a few reasons, gossip, fashion, tv pages, she thinks of it almost as a magazine, but she can’t help but read some of the articles against Labour and for the government’s stance. When from time to time we talk about who to vote for she repeats what she has read there! I know some of my friends do like to buy The Mail especially, it appeals to ‘women of a certain age’ of which I am one, but they get all the one-sided politics view as well.
      Even on the BBC it is taken as a given that the Tories’ strength is the economy (and therefore one could think it is true what those Tory politicians say) but of course the flip side of that is that they say Labour’s strength is the NHS (which I happen to believe!).
      I was talking to a friend the other month about the outsourcing of some of the probation service as we had just heard it on the radio, we were both saying that can’t be right, but she said ‘but what can the government do, it’s all Labour’s fault, they overspent and so the government are clearing it up, and had to do that to save money’. It was just something that she knew!
      As regards the government lying, my sister for instance feels that the government must want the best for the country, they want people to vote for them again and so they will do what is best, so austerity must be the right thing, we don’t want to be borrowing so much! Why would they lie about that?
      On tv in various interviews it is taken as read that we must have cuts, the question is how much? It seems no-one is invited to question it. I for one would love to see you on tv in a head-to-head with George Osborne for instance! Have you ever listened to Radio 5’s ‘Wake up to Money’? Wall to wall ‘financial economists’
      Borrowing has become a very nasty word. When I venture to say perhaps it would be good if the government borrowed to fund infrastructure building and such, I am looked on as quite mad, so I have given up even mentioning it.
      So I would say to ‘Spinning Hugo’ I think you are right to say that voters do not have the time nor inclination to investigate these issues, but when all around you in the newspapers, tv and also government (including Lib Dems) spin, they are telling you the Tories are best at the economy, write articles on how Labour nearly/will bankrupt the country etc etc, and then Labour themselves do nothing to refute it (until now, a few days before the election) it gets into your head that it is probably true.

    6. Graham, Labour did not do enough to prevent the banking crisis in GB; problems from the fall-out in the other countries would have been far milder than what happened. For some reason, it appears that your media has focused on the relatively small deficits and ignore the issue of which party will do the most to ensure the stability of the banking system.

  13. I have a similar experience to Anonymous of 10:52.

    I had a bit of a get together with schoolfriends at the weekend and in a discussion on the election, it became clear that all intend to vote Conservative in part due to the way they have "fixed Labour's mess".

    I attempted to explain how this utterly was untrue on many levels but was ridiculed to some degree because they all just 'knew' this was the case. In particular, one of my friends has resolutely refused to even read any links to this blog I offered to send him because, well, I don't know why. For an otherwise intelligent person I find his behaviour in this respect to be extremely bizarre. I'd imagine he'll vote Conservative on social policy in any case, but it does strike me as very strange that he (and the others) just don't want to even look at the facts.

    1. Dysrationalia in general and refusing even to consider contradictory facts/arguments in particular isn't unusual.

  14. Interesting choice of words by Ken Clarke in the Guardian today:

    “By traditional politics, which we were used to until about 20 years ago, this would have been a walkover for us. The one it reminds me most of is 1987. We have an economy that is doing well, has a long way to go and we took over a catastrophe of which the Labour party are still blamed by many people".

    ... "by many people". But what do you think Mr Clarke? Too much to gain from a stupid and docile electorate, perhaps, to want to enlighten us?

  15. Thanks again Simon for another great article. This afternoon, before I had read the above I did some loose postulating on why the macromedia (thanks for defining the term, last week) choose the economy to spin with such gusto. First, there's the 'it's the economy. stupid' perspective. Then, I thought, what other area of policy could the Conservatives spin so far from reality and hope to get away with it. There are, as I read it, three aspects that make this possible. It's a complex topic that most the populous have very limited knowledge and experience of, which leaves them particularly reliant on experts. Unlike in many other policy areas there is a body of 'professionals' whose interest is to support the Tory economic myth. Namely, financial experts within the City of London and those who are dependent upon it's cornucopia of wealth for funding etc. There is too the British (or is that just English) belief that to have a benefit you must go through a degree of pain and discomfort: as the 'working man' does when he toils all day for his pay. This is what propels the Tory line of suffer today for 'Jam tomorrow' . There are problems with this later point for my proposition and the Tories. And this is that sooner or later the populous will expect some 'jam'. Or to put this another way they may not know much about economics, but its consequences are acutely obvious to them. My guess is that if the Conservatives do not get into power after the General election, George Osborne will regret those early years where he unnecessarily cut too deep and for too long (though not because it cost most of us around £4000). The Prime Minister will learn that there are limits to what media macro can achieve when it runs contrary to what people are experiencing at a given point in time. Though I suspect the ignorance of time-lags will hit Labour hard, should it gain power, and a recession or slump does set in later this year.

  16. Assuming, arguendo, that everything you say about the economic issues is correct Is this mismatch between reality and perception the fault of 'mediamacro' as you claiim?

    It seems extremely unlikely to me.

    What if you are someone with only a passing interest in politics, and a vague notion of economics. How would you form a view about the economy? Would it be from reading Chris Giles in the FT, or even listening intently to such Tory stooges as Paul Mason and Duncan Weldon on the TV? Does 'mediamacro' go around saying that 'Labour caused the crash'?

    Seems very doubtful to me. What the busy voter may notice is a media story about an enormous crash. You also may notice the inflation and unemployment figures. That will be it. You probably won't notice or understand growth or productivity figures. You certainly won't even notice a blog like this.

    So, before the Tories have even opened their mouths, the perception, however, unjustified, will be that things seems to go a bit more smoothly when they are in charge.

    Now, I know that must be galling for someone who is an expert in the field. It will also, I suspect, be tempting to look around for someone to blame (media bias? Rupert Murdoch, the dastardly Tories? Robert Peston?) but the truth is both banal and frustrating.

    Voters don't have the time or inclination to investigate these issues. If you happen to be in government during a downturn you'll get the blame, during an upturn the credit. (A classic example of this is how the Tories reaped the benefit of the long 1950s recovery). The people who win elections are those skilled at winning election, not those good at governing. These were the arguments Plato had against democracy.

    Again, as so often, your real complain is with democracy itself. It is, I'd readily accept, quite frustrating in the results it gives.

    1. gastro george4 May 2015 at 00:53

      Of course, because Obama is president, there's no problem with racism in the US.

    2. Hugo--do people watch the news? Do they read newspapers? Then they are exposed to media narratives. These can shape public opinion. Do you believe that 5 years of the media reporting on stagnating living standards and the harm caused by cuts, with no mention of the deficit, would have no effect on the views of the electorate?

    3. Despite Labour introducing "Civics" lesson into schools, vast numbers of people still pay little attention to politics; it's about serious things that require a lot of thought.
      So how do you get them interested ? It's not easy, but that's not too important when there's something even better. How do you get them to vote Conservative?
      Millions of people buy newspapers to entertain them every day as they eat at work. The Tory tabloids entertain and, between the football and the celebrity stories, slip in the anti-Labour stuff: "man of the people" Andy Burnham couldn't even answer simple questions on Coronation Street. Football comes first because many readers start with the sport and work their way backwards to the front page.

      The Daily Mirror is always at a disadvantage because it includes things like our responsibility to the disadvantaged of the world or that delayed gratification generally leads to the greater happiness of the many. It's a bit disturbing to read such stuff and such newspapers simply don't offer enough instant fun to a lot of people, who nevertheless feel slightly ashamed about being uncharitable. 
That's why it's necessary for the Tory press to create the impression that all foreign aid is wasted, there is massive benefit cheating and all immigrants are illegal. After all the world is a big place and you can always find waste and cheating somewhere. There's certainly enough to produce one tabloid story per week.
If you challenge Tories about the way their newspapers influence the electorate they always accuse you of "patronising people who are quite capable of making up their own minds". 
They didn't think like that during World War 2 though when millions of British service personnel were given unbiassed lectures on politics by institutions like the Army Bureau of Current Affairs. Many wartime Tory MP's complained about the content of the lectures. 
However when Murdoch switched The Sun over to Labour during the Blair years and the number of Labour-supporting newspapers sold every day rose to 43% of the total, the Tories made no comment. Murdoch is simply too powerful for them to criticise, and anyway after ten years or so of supporting New Labour he reverted to normal practice and went back to the Conservatives. 

      Nevertheless social media are, very slowly, publicising attitudes other than those approved by the right-wing non-dom billionaires who control the British press. 
Yet the non-doms are not all-powerful all the time; even they couldn't save John Major in 1997. Murdoch bowed to the inevitable and jumped ship to support Blair.

  17. gastro george4 May 2015 at 00:51

    John Humphrys currently haranguing Miliband on the deficit on BBC radio news (bangs head on table).

    1. gastro george4 May 2015 at 01:17

      Typical question: "The other reason people did not trust you in the Question Time debate was because you said the last Labour government did not borrow too much. You must be the only person in the country who thinks that."

  18. While I find your defence of the previous Labour government's spending illuminating, an interesting thread has developed on moneyweek about PFI. If you add in these debts (largely, I believe, incurred by Labour), how does the picture change? The perception is that, off-balance-sheet or not, these are real liabilities to the tax payer and should be included. Worth an article?

  19. This is perhaps a narrow point, but I do think that the way that the data on public finances are presented doesn't help journalists and the public to grasp what is really going on with public finances - or at least it fails to make the right conclusions absolutely blindingly inescapable.

    I've tried to explain what I mean on the link below and had a go at putting together a better presentation of the data. I'd be interested to know if anyone can do better than this.

  20. I feel depressed when I read posts like this. Fair analysis of macro in my home the Usa is just as bad. I think what hurts most is the mean spirited morality. The government has debt so let's bleed people with macro leeches. Efff aggregate demand, they,the takers, deserve to suffer.

    Reminds me of a funny scene in "Airplane". The plane is crashing and a right wing talk show guy says "They bought their tickets , they knew what they were getting into, I say, let them crash!

  21. On the 'myth' of Labour profligacy, it's interesting to note how in previous decades the growth of public spending appears to have mirrored quite closely growth in Nominal GDP.
    NGDP grew by 168% between 79/80 and 90/91, government spending by 144%. From 90/91 until 00/01 there was growth in NGDP of 64%, government spending was 50% higher.
    The years from 00/01 until 09/10 show a quite different picture. NGDP grew only 50%, yet government spending rose 97%.

    1. It called the Great Recession- AME goes up and GDP goes down, so no wonder G rises as a percentage of GDP, very little to do with profligacy. The truth is as Simon explains in his excellent blog: "the deficit before the global financial crisis was only within a typical forecast error of its sustainable level"

    2. No, the % of the growth in GDP during the years Labour were in power that was accounted for by Government spending was quite unprecedented. As Brown followed Tory spending plans for his first few years in office let's commence in 2000/01 when GDP was £969 billion, by 2009/10 it was £1.45 trillion, an increase of £481 billion. Between those years government spending rose from £341 billion to £671 billion, an increase of £330 billion. Therefore 69% of the increase in economic activity was accounted for by higher public spending, a quite unprecedentedly high figure, that is surely more reminiscent of a Stalinesque 5 year plan than a thriving mixed economy.

    3. Stephen, that's just ridiculous. You ignore the first two years of Gordon Brown's stewardship but include the post crash years!

      Ok, I'll bite. What was GDP and the level of public spending in 2008? In this context - i.e. Labour profligacy pre-crisis 2008/9 and 9/10 cannot possibly be relevant. Logic failure there, I'm afraid.

    4. Oh and by the way, you are conveniently leaving out that public sector spending as a proportion of GDP *FELL* 1997-2000 (I think, it might be 2001 but I can't be bothered to look it up right now).

    5. My figures are as fair as Prof. W-L's comparison of the deficit during the entire period the Conservatives were in office, with Labour's record from 1997 until 2007/8. It's patently unfair to claim we should stop at 2007/8 because there was a serious economic crisis: there have been many crises in the Uk economy
      The relationship between increase in GDP (not adjusted for inflation) and government spending has not varied greatly in the past.
      From 1970/71 until 79/80 GDP grew by £166 billion, public spending increased by £71 billion ( 42.8%).
      1979/80 until 90/91, GDP increased by £370 billion and public spending by £134 billion (36%).
      1990/91 until 1996/7 GDP increased by £220 billion and public spending by £88 billion (40%).
      I've already explained why I omitted the first two years of Brown's stewardship-he acknowledged he was following Tory spending plans. Why does he deserve credit for that?
      It's shocking how much of the growth in GDP from the year 2000 was due to increased government spending, not real, sustainable wealth creation. No wonder the FTSE 100 Index performed so atrociously over that decade!

    6. Stephen, that's just ridiculous.
      The charge is that Labour was profligate prior to the crash. Therefore the crash is in itself irrelevant. The point is this nonsensical profligacy argument is what the Tories resort to when you call them on the fact that the financial crisis of 2008-9 was the biggest economic shock in 2 generations and world wide and hence cannot possibly be solely the fault of the contemporary UK government.

      You insist on arguing that Labour spent too much by including the post crash figures. And then you claim the crisis was like any other 'there have been many crises in the UK economy.' Really?

      And that's before you get in to the argument that the Conservative government 1979-97 had very similar deficits as the Labour one 1997-2008 but also had both peak North Sea oil revenues and privatisation receipts. Whatever the rights and wrongs of privatisation, you can only sell things once.

      All of what you've put is incoherent. You think just by putting the numbers of billions in you can impress us? Nothing you've said here has any meaning.

    7. After the Iranian revolution, oil prices rose very sharply , interest rates in the US rose to 20%, the financial sector experienced heavy losses in both the S & Ls and Latin America. All outside the control of the UK government. If you can justify the exclusion of 2007-2010 from Labour's record then why not 1979-82 from the Conservatives?
      The highest growth achieved whilst the Conservatives were in office was in the late 1980s Lawson boom. Government revenue from North Sea Oil in 1988/9 was actually very low at that time as the oil price languished around $10 . Privatised companies contributed nothing to the exchequer in 1980, in fact they absorbed £483 million of public funds in the year to March 1980. On any rational basis they were obviously worthless at that time so it's to the then government's credit that the exchequer benefited enormously from privatising them.
      If you are so concerned about balance why no mention of Labour's 3G auction in 2000 that netted the Treasury £23 billion?
      It's grossly inaccurate to claim the 2008/9 crisis was "Global" in nature. I've spent much of the last decade in E Asia and its effects there were minimal.
      Primarily, my argument (which you wilfully misrepresent) is that the relationship between growth in GDP and the proportion represented by government spending changed markedly during Labour's years in power.
      Under the Conservatives (1979-97) government spending accounted for 38% of the increase in GDP. The comparable figure for Labour (1997-2010) is 56%-a quite unprecedented increase. Where was the private wealth creation so necessary in a healthy mixed economy. The balance was massively skewed towards the public sector. No wonder the UK stock market performed so poorly over those years.

    8. Nice try.
      I agree with one part of that. You use of the £23Bn 3G licence revenue to reduce the debt was indeed wise (and opposed by one party, I can't quite remember which).

      In 1979 UK public sector spending was 42.75% of GDP.
      This then varied a bit before finishing at 37.15% in 1997.

      One could argue (and I would) that this fall was only achieved by slashing public services to an unacceptable extent but let's leave that point for a moment.

      In 2008 it was 40.61% of GDP. This is the massive increase that we'll talking about. I have to say, I'm not impressed.

      It is true to point out that different parts of the world were affected to a different extent by the crisis but to imply that the Labour are solely responsible is at best bizarre. And once again you are shifting the argument - the idea is that Labour were proliferate prior to the crisis. This is simply not supported by the data. At all.

      Let's look at another piece of data
      UK national debt 1997: 41.81% GDP
      UK national debt 2008: 38.93% GDP.

      Your argument is just obfuscation. Nothing more.

    9. It's due to the fact that the oft-quoted comparison between 1997 and 2008 so obviously distorts the true picture that I presented the figures above. Clearly, the increase in economic activity between 1997 and 2010 was dependent on government spending to a quite unprecedented degree.
      Labour were certainly not solely responsible for the 2008 crisis but they did leave us unnecessarily exposed. We'll never know, but leaving banking regulation in the hands of the Bank (seemed to work rather well for 150 years) might have seen a better outcome. How on earth the FSA allowed RBS to proceed with the ABN Amro acquisition remains a mystery. HBOS was essentially bailed out (much to their fury) by Lloyds shareholders-it looks like UK plc will earn a profit on that intervention.
      As for your comment about public services suffering with public sector spending at 37% of GDP, tomorrow I shall be leaving here, travelling back to a tiny nation of 5 million with far higher per capita GDP than the UK where the top rate of tax is 20% yet public transport and education are among the world's best....

    10. Ahh now I understand. It's public sector spending that's the problem. It's just bad. Why? Because you say so. I should presumably take your word for it? I think you're tending towards a crowding out argument but I'm not entirely sure.

      I think what's so startling is the logic failure of your argument. Or should I say 3-5 arguments because you keep mixing them up. Hence my charge of incoherence.

      What you are basically saying is that Labour spent too much prior to the crisis and we can tell this by comparing post crisis levels of spending with 1997. Or you are trying to say that Labour spent too much and we can tell this because when tax receipts completely collapsed we had a deficit and they should have stopped all spending or not bailed out the banks or something? It's quite hard to tell what you are saying.

      Your next argument is around bank regulation. If you are saying there was a failure of bank regulation, I don't think you'll find any argument here. On the other hand I have yet to see any evidence that the specific arrangement with the FSA and the Bank of England made any material difference. I have heard this stated many times - care to support that assertion?

      So, I'm going to be generous; For the sake of argument, please demonstrate (with meaningful numbers) how the UK fiscal position would be better if there had been a balanced budget in 2008. I will let you assume that the lower level of public spending in 2008 would have no macroeconomic effects (something that is definitely not true).

  22. Thanks for a lucid explanation of current politics especially regarding public opinion in recent years. By way of introduction, I am originally from the USA now having been in the UK 10 years and trying to understand this election. Also a Prof in Oxford, but in the Medical Sciences and with no special knowledge of economics. However given the current economic numbers and the anecdotal evidence that life is much harder financially in the UK now for many people than it was 10 yrs ago, it is hard for me understand the politics of the situation.

    That said I have a somewhat different take on the Question Time episode that you cite. First Mr Miliband indeed argued that the recession was not initiated by the deficit albeit with a very tentative delivery. But then throughout his time he appeared to say that reduction of the debt/deficit was a major priority, if not THE major priority for a future Labour government. So in the end even if he didn’t take the blame for the deficit on behalf of his party, he accepted the argument that it was very important. For me this diluted his argument. I would be interested to understand if this partially explains why arguments about the current state of the economy have little political traction as everyone except the most left leaning parties agree that the current problem is the deficit regardless of how it developed.

  23. Labour politicians, I believe, feel trapped by the pervading media narrative. For 5 years (and especially so in the first 2 years of the coalition) whenever addressing economic issues the interviewers would constantly ask "Yes, but WHAT will you cut?"

    In 2010 when running for leader, Ed Balls made this speech - which I think shows what he would try in an ideal world. By the way, this is leagues better than anything Osborne has ever said about the economy

    And yet, Osborne is more trusted by the British people - in poll after poll.

    So Labour have made a calculation that they have to appear both radically different to the Tories and 'responsible' (whatever the hell that means!). If you look at the manifesto, they have been quite clever and given themselves significant wiggle room - to the tune of £30Bn according to the IFS.

    For me, this isn't a good as it could be - I would rather a proper Keynesian approach but I think the strategists may well be right that they can't win that way. I, for one, would far rather see this rather than the really dangerous further cuts Osborne has pencilled in.

  24. Sad thing is nobody in politics is talking about making people better off. The Tories can't because that would admit living standards are under pressure; Labour won't because Milliband's strategy seems to be only to counteract what the Tories say. The Lib Dems are unable to because they are trying as hard as they can to follow the coalition line.

    Somebody needs to follow the Obama 2008 strategy "It doesn't have to be like that!"

  25. Hi Simon,

    I wrote a much longer comment but sadly the commenting system lost it when I attempted to preview it.

    I've been reading your blog since finding it via The Guardian article by Krugman and have much enjoyed the education.

    The reason I comment is as it happens I am aware of the man you reference as he is married to my partners friend. I was watching the debate when he grilled Miliband on the failure of Labour and it was incredible how much it reminded me of your recent posts. There were no facts and it was simply stated as truth, any attempt to explain was shouted down and applauded, it's awfully depressing!

    You might be interested that he was subsequently inundated with requests to write for right wing news papers as has since done so here:

    I will attempt to direct him to your post and hope that should he reads it.

    Thank you.

    1. I'd love to hear his reaction: whether he reads anything, and if he does, what he thinks, and if he doesn't, why not.

    2. gastro george5 May 2015 at 01:45

      He certainly needs to read something. That Daily Mail article launches straight into the "government as a household" trope, followed by some alternative reality:

      "They spent 13 years in power buying the public vote with unfunded, unaffordable spending".

  26. You and your friends on this blog must be living on another planet. How can you write nonsense like this and get away with it?

    "When you look at any standard criteria of economic performance, the economy has done terribly during the coalition’s term of office".

    The unemployment rate was 8% in 2010 it is now nearly 5%.
    And there are 10% more people in work than back then.

    1. So far I have not credited this government with stopping productivity growth, but you clearly want me to add it to the list.

  27. A standard, the standard, criteria of economic performance ... one of the Fed's two goals no less ... is employment. A rational person could argue all is noise, even inflation.

    1. Not if it happens because productivity does not grow. Ask ANY economist.

    2. gastro george5 May 2015 at 07:34

      I presume that's a rhetorical answer. If I were you I really would ask a marginally employed person - about the difference between being unemployed and put through the wringer each week by IDS and his acolytes, and a few hours a week on a zero hours contract and trying to extract credits from the same. Not much.

    3. Of course, I forgot the mantra here of it being the "wrong type" of economic growth, the "wrong type" of employment growth.

      More seriously, have you analysed the nature of the productivity growth under Labour up to the GFC? Bankers and oil rig workers.

      At least I will admit that "productivity" then and now is a very tricky concept when so much of the economy is in the service sector. I haven't seen much about this head-scratchingly, micro-foundational, complexity around here.

    4. I haven't but others have - contribution of those sectors small. But small is enough to build another mediamacro myth.

    5. Is there a productivity problem? When there is so much uncertainty about the cause of it, perhaps the problem doesn't exist.

      One thing is certain, pontificating about the problem looks very odd when most (non-mediamacro) economists seem to admit it is highly perplexing. And if you don't know the cause, then cures are potentially damaging shots in the dark.

    6. James, this is not a rhetorical trick -- if employment growth is accompanied by no rise in living standards (which is the case), it means that having a job is not necessarily making your life better. That should concern us.

      "Is there a productivity problem? When there is so much uncertainty about the cause of it, perhaps the problem doesn't exist."

      ??? My shower doesn't work and I have no idea why. Maybe my shower actually does work. <--this is your reasoning

    7. Employment is a fairly concrete number, notwithstanding, the employed/self-employed issue. "Living standards", "productivity", "inflation", "GDP deflator", these are all tricky concepts. I'd advise a brief read of the ONS methodology for calculating service sector output or their approach to hedonic adjustments and you'd soon see the complexity of the underlying concepts that macroeconomists like to toss around with such ease and confidence.

      A shower is a physical thing, if no water comes out there's something wrong. Agreed. Productivity is more like trying to measure whether you have washed in your shower.

    8. gastro george5 May 2015 at 11:31

      The methods used for calculating statistics may be labyrinthine and arcane, but they have the merit of being consistent. In order to argue that somehow the measured level of productivity has dropped because the methods of calculation have somehow missed something, you'd have to show what is new that is being missed, rather than just hand-wave.

  28. It's interesting that Krugman has almost single handedly changed the narrative in the US, where the Keynesian story seems to have much more prominence in the mainstream media. That at least shows that it can be done. Perhaps if you had started this blog a few years earlier Simon it might have helped :-)

    It may not yet be too late.

    1. Although his combination of enormous economic credibility, large circulation newspaper column and astonishing ability to communicate clearly and powerfully to a wide audience is admittedly fairly hard to replicate.

  29. My 2c: these narratives are deeply entrenched, I think the mythical trust in the Tories wrt to the economy goes back 50 years. (There was a post I recall reading about how the underlying message of their campaigns hadn't changed in 50years - trust us with the economy.)
    Keep up the lucid good work, I wish I had this source or you as a tutorial prof during my student days (although Wendy Carlin was notably excellent, and we were taken through early drafts of the textbook you reviewed so highly).
    I tend to agree with many here that the danger has become how the entire fiscal discourse is poisoned, people cannot differentiate between household and govt balance sheets, and are afraid of debt (you can see this fear post depression as well). Just look at the insane situation in Europe, everyone becomes German and runs c/a surpluses, how the hell are they supposed to sucessfully internally devalue if the Germans (lets not forget the Dutch) refuse to reflate?! Apols, rant over.


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