Many of the key events of the last eight years have a common thread to them. In the case of austerity, the Eurozone crisis, the 2015 UK election, the Brexit vote in the UK and Trump’s election, the media played a critical role in making them happen. This involved ignoring expertise, ignoring facts that didn’t fit the chosen narrative of one side, or simple lies. None of these events are mistakes only in hindsight, but rather errors that were predicted at the time. Documenting that is an important part of this book.
It was for that reason that I tell the story through my blog posts at the time, with additional postscripts, preambles and introductions that enable each chapter to tell a complete story. There seemed no better way of showing how all of these policy or electoral errors were understood at the time and therefore could easily have been avoided.
I began writing my blog mainlymacro because of my anger at austerity, and the fact that the view of the majority of macroeconomists that it was a bad idea was largely ignored by the media. When the media did talk to economists, they tended to be from the financial sector. Financial sector economists are biased in two directions: they tend to be right wing and they tend to talk up the importance of a capricious financial market and their own ability to know its ‘needs’. I used the term ‘mediamacro’ to describe how most of the media seemed happy to tell the story of the deficit as if the government was a household, which any first year undergraduate textbook explains is not true.
Many used the Eurozone crisis as an excuse for austerity, but I quickly discovered that the line most journalists took was missing the key reason for that crisis. Eurozone countries cannot create their own currency, and the institution that could act as an unlimited lender of last resort to individual governments, the European Central Bank, was refusing to do so. The crisis ended when the Eurozone changed this policy and became a lender of last resort to most countries. The exception was Greece, and I tell their more complex but shocking story in a few posts.
Before the UK’s 2015 election the Conservatives talked about a strong economy, and talked up rising employment levels. The media went along with this narrative. In reality the recovery from the recession had been the weakest for centuries, in good part because of the policy mistake of immediate austerity. Strong employment growth combined with weak output growth meant productivity was stagnant, which in turn helped create falling real wages. Yet for mediamacro the government’s deficit was a more important goal of policy than economic growth or real wage growth, and as a result the economy was the Conservatives strong card that led them to victory at the election. Adapting an old Sun headline, I argued it was mediamacro wot won it, although luck also played its part.
Defeat in 2015 led to Jeremy Corbyn being elected as leader of the Labour party. Although this took the commentariat by surprise, I argued it was the logical result of Labour’s weak or non-existent stand against austerity and a lot of what austerity required. When John McDonnell became shadow Chancellor, he invited me to be part of an Economic Advisory Council, and I explain how this led me to help create Labour’s fiscal rule, which is the first such rule that prevents austerity. I also explain why the Council came to an end.
A consequence of the Conservatives winning in 2015 was a referendum on Brexit. A few months before I wrote a post reproduced in the book which fairly accurately set out how the campaign would play out. Remain’s case was that leaving the EU would have serious economic consequences, and it was a very strong case, but I suggested the media would balance this case against nonsense from Leavers, and the electorate could convince themselves that the economics was not clear cut. The fact that free movement prevented controlling immigration from the EU was by contrast clear cut, but as the government had played up the negative aspects of immigration they could not credibly change course.
Alas the media’s failed to present near unanimous expert opinion in economics and elsewhere as knowledge, and instead it became just Remain’s opinion to be balanced by the other side. As a result the electorate, who craved information about the EU, did not get it from the broadcast media. In addition, those that read most of the daily papers by readership got propaganda pure and simple, and had been getting it for a year at least. I present strong evidence at how influential the media can be, and therefore argue that Brexit represented the triumph of the right wing press. I showed that the media were failing in similar ways in the US, and that therefore confidence that Trump would not get elected could be misplaced,
The book also has a chapter on the role of economists in influencing policy. Did the global financial crisis or the failures of macroeconomic forecasting discredit economics, and is macroeconomics influenced by ideology? I explain why the delegation of economic decisions can be partly about transparency, and why economics is most like medicine among the sciences.
While the media played an important role in Trump becoming President and Brexit it does not explain why those things are happening now rather than ten or twenty years ago. The final chapter in the book looks at what neoliberalism is, and why both austerity and using fear of immigration to gain votes despite austerity can be seen as neoliberal overreach, by which I mean taking deception of the electorate in order to pursue ideological goals to a dangerous extreme. Both austerity and anti-immigration feeling helped the cause of Brexit and helped elect Trump.
The Global Financial Crisis required a strong and quick recovery to avoid the dangers of populism. Austerity prevented a strong recovery, and it was undertaken as a cynical attempt to reduce the size of the state. The subsequent populist mood was directed towards the right by politicians and the media playing on racism and xenophobic fears. This was fertile ground for disasters like Brexit and Trump to happen. This suggests that even if we could go back to the world as it was before Brexit and Trump that is not enough to stop similar disasters happening again.
We sure are on the same side, your book is on my reading list: there's comfort in numbers! For me money is a tool to serve the needs of people, not people are there to serve the needs of money.ReplyDelete
Trump understands more economics than you, because he's been through bankruptcies and knows that bluster creates an unlimited supply of money. It's all lies; the story you tell is a lie too and deep down, I think you know it. Trump sells his lies better and is more self-aware to boot ...ReplyDelete
you are great economist Simon - but a rubbish businessman - "wot no link to the book"!! I'm looking forward to getting my copy next week!ReplyDelete
Yes, paradigms are in part created by the press. That is why austerity is good, supporting demand with expansionary monetary and fiscal measures is bad. That people should listen to a know-nothing partisan journalist instead of a Nobel Prize in Economics (e.g. Stiglitz on the Eurozone, Greece and austerity) is beyond me. Your note here makes similar points. It is in part German nightmares of hyperinflation of 100 years ago that govern the EU monetary and fiscal rules today...ReplyDelete
"This involved ignoring expertise, ignoring facts that didn’t fit the chosen narrative of one side, or simple lies."ReplyDelete
Ok, but that's been going on throughout the entirety of human history - well, at least the recorded part, anyway.
So what can be done to ameliorate this insanity and correct the dishonesty ? I don't reckon electing Corbyn would achieve much, would it ?
Now here's a thought: much the greater part of the human race has an IQ (in the original Binet meaning and sense) of less than 105. What level of IQ do you think is required to grasp and accept expertise, register all facts, supportive or otherwise, and show a developed 'bullshvt sensitivity' (as opposed to the simpleminded 'bullshvt receptivity' we currently suffer from) ?
And would it work on 'global warming' too ?
How is going against the classic, mainstream notions of using monetary stimulus and fiscal policy (in the sense of governing expenditures on activities with present costs and future benefits according to an NPV rule, which would be highly "anti-cyclical) and the equally mainstream economic case that migration is a net gain (at least for destination countries) "neo-liberal overreach?"ReplyDelete
Unintentionally apt title!ReplyDelete