Winner of the New Statesman SPERI Prize in Political Economy 2016

Tuesday 28 June 2022

The origins of mediamacro, and how to consign it to history

Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back”

For those new to this blog, mediamacro is a term I coined for how macroeconomics is generally talked about in the media, particularly when discussing the general direction of fiscal policy. By implication it is very different to what economics students are taught. What I mean by mediamacro will become clear in this discussion.

The famous quote from Keynes is relevant, because with mediamacro the practical men were the vast majority of journalists who were convinced after the Global Financial Crisis (GFC) that governments had to tighten their belt, and the madmen were of course the politicians who made this their policy. But mediamacro survived the demise of the Cameron government, and continues to dominate the way many political journalists talk about the budget and other fiscal issues. A big reason for this is that many politicians, in all parties, still think keeping government debt to GDP falling is synonymous with being responsible.

To understand mediamacro you have to recognise that its origins are, in part, the academic consensus that was dominant before the GFC. Governments have two ways they can attempt to manage the aggregate economy: by changing fiscal policy (tax and spend) and by changing interest rates. There are other means (some often called unconventional monetary policy), but none are as reliable and therefore as effective as these two methods. The academic consensus that preceded the GFC was that interest rate changes, delegated to an independent central bank with an inflation target, was a better way to manage the economy than the government changing fiscal policy.

So in this pre-GFC consensus view what should govern fiscal policy at the aggregate level? How big should government deficits be? The pre-GFC academic consensus said that over the long term government debt should be sustainable, which is a jargon word for the ratio of government debt to GDP being stable in the long run, rather than either steadily rising or falling. Of course government debt to GDP could be stable at high or low levels, but academic theory had no strong message on what the optimal level of this ratio should be. In the UK the 1997 Labour government devised fiscal rules to ensure this goal of long run stability was met.

From an academic point of view was there an equivalence in importance between the goals of interest rate policy and fiscal policy? Absolutely not. Academic macroeconomists wrote volumes about what interest rates should be and how central banks should make decisions, because macroeconomic stability was very important. In contrast, debt sustainability was nice to have but, except in rare cases where political failure led to uncontrolled large scale fiscal profligacy, failure to achieve it was no big deal as it could be subsequently rectified. After all, between the 1970s and the 2000s government debt to GDP had almost doubled in the OECD, but economists had no strong evidence that this had had any serious impact on macroeconomic performance. One prominent idea, that higher debt to GDP would raise real interest rates (interest rates less expected inflation), turned out to be a false alarm as global real interest rates fell over this period.

The very long run need for debt stability left journalists with a problem. How were they meant to talk about fiscal policy at the aggregate level if the only test of its appropriateness was some long term goal of sustainability which wasn’t that important anyway? The collective solution they devised was to turn a long term goal into a short term goal, and to overemphasize its importance by morphing sustainability into responsibility. This was so attractive because it made aggregate fiscal policy easily understandable for non-economists: the government became like a household. If its borrowing was too much, journalists could write articles about how taxes would have to rise if the government was to remain fiscally responsible, and if its borrowing fell they could write articles about tax cuts to come. Mediamacro was born, and it was very easy to write and understand.

As long as the pre-GFC academic consensus held, mediamacro was irritating but not wildly wrong. Of course no government is like a household (it is longer-lived, it can create money, and it large relative to the economy), but as long as central banks were doing the stabilisation job this analogy wasn’t doing serious harm. Journalists, it is important to remember, have a difficult job to do in explaining macroeconomics to non-economists.

The academic consensus was shattered by the GFC, although many macroeconomists had seen the writing on the wall well before this by looking at what had happened to Japan. As I have already noted, the global level of real interest rates seemed to be on a downward trend, something macroeconomists often call secular stagnation. With inflation targets at 2%, a real interest of 1% would imply central banks setting a nominal interest rate of 3%. However in a recession, inflation would often be below target, and the central bank needed to achieve real interest rates well below normal levels to generate an economic recovery.

This just wasn't possible, because central bankers also thought there was a lower bound to nominal interest rates at around zero. That meant that central bankers could only achieve at best slightly negative real interest rates, which proved totally inadequate to lift Japan out of its 1990s stagnation and to combat the deep recession that followed the GFC. The upshot was that interest rate changes could no longer be effective at fighting recessions.

As a result during the GFC interest rate policy stopped working, so fiscal stimulus was the only reliable policy in town for stopping the recession and generating a recovery. Any first year economics student would tell you that, and state of the art macro concurred. Macroeconomists whose field this was (like myself), and/or who had seen what had happened in Japan, understood this immediately, although it perhaps took a few years from other economists to get the message that the old consensus was dead.

The Prime Minister at the time of the GFC, Gordon Brown, understood this and used fiscal stimulus as a tool to limit the size of the 2009 recession. The Conservative opposition found it politically convenient not to understand, and instead focused on rising government debt as a sign of 'government irresponsibility' and pledged to introduce tough fiscal contraction (austerity) instead. There were now two different, and competing, stories about what fiscal policy should be doing: the old and much exaggerated story about long run sustainability, and the more relevant story about using fiscal policy to get out of recession. In academic terms the first was downright dangerous during a recovery from recession, while the second was correct.

I invented the term mediamacro because almost all journalists during the austerity period decided to stick with the old story. Mediamacro was now the opposite of the truth, and a deeply damaging message for the public to hear. I tried very hard, along with other more famous macroeconomic bloggers located mainly in the US, to both educate journalists about this error and work out why it persisted.

Unfortunately we faced an uphill struggle for three related reasons. The first was that some well known macroeconomists backed austerity, at least initially. It was clear to me from surveys and other evidence that they were in a clear minority, both in the UK and US, but from 2010 they were in tune with the political consensus so they got a lot of publicity. In the early stages we spent much time successfully debunking their ideas, such that by 2013 Paul Krugman could convincing argue that the intellectual case for austerity had crumbled.       

The second reason was that proponents of austerity claimed that without it chaos would occur because the markets would stop buying government debt. Our attempts to explain why this was highly unlikely were unpersuasive after the shock of the GFC. A better approach was to explain why, even if it did happen, it didn’t matter because the central bank would buy the debt under its Quantitative Easing Programme, a point I made in one of my first blog posts

The third reason this was an uphill struggle was the Eurozone Crisis, where particular EZ governments were having problems selling their debt. To many, including those who should have known better in the IMF, this seemed to validate the austerity narrative. In reality it didn’t, because the European Central Bank did not at the time have a Quantitative Easing programme, and was not providing unlimited support to member countries. The moment the ECB changed its policy in 2012 to do this, the Eurozone Crisis came to an end. (For more detail, see here or here.)

The damage done by austerity, backed up by mediamacro, was huge in economic and political terms, and the mistake was not repeated during the Covid pandemic. Yet mediamacro lives on. Governments still have deficit targets that are too short term, and journalists still write up monthly (!) deficit outturns in terms of their implications for future taxes. Only policy makers in the US understood the need for a fiscal stimulus during the recovery from the pandemic, and as a result major European countries look like they will permanently lose percentages of GDP compared to the US, while still suffering from high inflation.

There are now some very good economic journalists in the media. But how do other journalists move beyond mediamacro, without having to explain everything I have written in this post so far? I think above all else they need to do two things. The first is to understand that the old academic consensus is dead. In simple terms the new academic consensus is that interest rates are still the favoured instrument to deal with inflation (as we are currently seeing), but it is fiscal policy that is the main weapon needed to fight recessions. As a result, if there is a risk of recession or during the recovery phase from recession, deficit targets reflecting debt sustainability go out of the window, and macroeconomic recovery becomes the only sensible goal of a government’s fiscal policy.

The second thing journalists need to do is to stop treating increases in government debt as bad, and falls in government debt as good. It’s just terrible macroeconomics, and will mislead your audience. Is it always bad if a government buys a financial or physical asset by issuing debt? Of course not. Is it bad that government debt rises in recessions? Quite the contrary: if it didn’t because the government stopped it happening the recession would be far worse. Is the high level of most government’s debt today a problem? Not obviously given how low long term interest rates remain. As there is no academic consensus about what the optimal level of government debt is, it would be just wrong for journalists to imply government debt is 'too high'.

Of course what I’m suggesting is not necessarily how policymakers talk about the world. It is also the case that a large part of the print media will persist with mediamacro because it serves a certain ideological perspective. However knowing what the academic consensus is can only improve the quality of impartial economic and political journalism. Good journalists should never just follow a political consensus when it goes against expert opinion without at least recognising what experts are saying. Ignoring knowledge is not being impartial. The austerity period represented, among other things, a major failure of mainstream journalism in the UK and elsewhere.

When there is a consensus among economists does that consensus deserve to be acknowledged? I think among some political journalists there is a cynical view about economics in general, and academic economists in particular. Do they deserve to be called experts when they are always disagreeing with each other and failed to predict the financial crisis (and so on). It would take another post to fully debunk that view. But all I need to say here is that on the two major economic policy issues in the UK over the last 12 years, first austerity and then Brexit, it is the consensus among academic economists that has been proved right, and those that dismissed this consensus as ‘out of touch with the markets’ or ‘project fear’ respectively that have been proved very wrong. 

Monday 20 June 2022

Why has UK real wage growth been so low?

Some people have expressed surprise that UK real wages have recently fallen during a period when the UK labour market was pretty tight. (That tight labour market may be coming to an end as unemployment has begun to rise). Here is the real (in terms of consumer prices) level of the monthly average earnings data for regular pay (excluding bonuses) ending in April this year.

Levels of this measure are a little messed up in 2020 because of the pandemic, but the recent fall in real wages is real enough, reflecting consumer price inflation rising more rapidly than regular pay. In April consumer price inflation was over 3% above the increase in regular pay.

That real wages should be falling even though the labour market is tight is no surprise when we recognise that a key reason why inflation is rising so rapidly is a huge hike in the price of energy. Higher energy prices represent a transfer from consumers of energy to producers of energy. Unless you can stop that transfer happening by some means (by, for example, taxing energy producers making unusually large profits), then consumers have to pick up the tab.

That in turn must mean a reduction in real consumer wages (nominal wages less consumer price inflation). That is likely to happen because in most cases firms set wages, and in looking at what they can afford to pay they will not look at consumer prices, but at the prices of the products they produce, which are rising less rapidly than consumer prices. They may be forced to raise wages above this and productivity growth in a tight labour market, but they have absolutely no reason to compensate workers for a rise in energy prices. Equally, to argue that workers on average do not have to take a real (consumer) wage cut in these circumstances is at best wishful thinking, which is why I didn’t sign this letter.

Does this reflect weak union power?

But why should workers shoulder all the higher costs of energy? What about those living off rents or dividends, or pensioners? Well landlords and shareholders consume energy as well, so they will pay, although as they tend to be richer than average they will feel it less. In the UK, however, the government has said that state pensions will be protected from higher energy prices (with a delay) because pensions are indexed to either earnings or consumer prices, whichever is the higher. This illustrates a more general point, which is that the government can (and indeed should) adjust who pays for higher energy prices among the population by altering taxes or benefits. [1]

What would happen if some or all workers did manage to persuade companies to keep nominal wages at the level of consumer price inflation? Consider the case where only some rather than all workers did this first. It is just possible that the companies they work for would absorb higher wages through lower profits, but the more likely outcome is that their prices would rise by more than other firms. Consumers would pay those higher prices, so this is another way besides government action of redistributing the cost of higher energy among consumers. (Workers who get a high pay rise gain, those that don’t lose.)

But belonging to a union is not the only way some workers can transfer real income falls due to higher energy prices to others. In terms of the current situation it also matters how much personal bargaining power they have, which in turn depends on how tight particular labour markets are, how much money their employers are making or whether their employer is the state. This last factor is particularly important at the moment, as the following chart shows (from here).

Currently it is public sector workers who are really being hit by higher energy prices, while workers in finance are (on average) getting wage rises that are at least keeping pace with inflation. The former is untenable if we want good public services, and the government can hardly argue that bringing public sector pay in line with the private sector will be inflationary (although that probably won’t stop them trying!). The latter raises a question over why financial firms think they can afford such pay rises, and whether recent fiscal transfers from the government to banks (e.g.) have been wise.

Now consider what would happen if all workers managed to emulate their comrades working in finance? Would all workers avoid an immediate fall in real wages? In this situation it is then even more likely that firms would raise their prices to protect profits, producing a wage price spiral. [2] The Bank of England would raise interest rates sufficiently high such that unemployment rose, and aggregate demand fell, substantially, persuading enough workers to accept lower real wages and some firms to accept lower profits. This 1970s scenario will not happen today, because unions are not nearly as strong now as they were then.

While the reduction in union power since the 1970s will help avoid the kind of wage-price spiral we saw then, it is also reasonable to suppose that a tight labour market will have some effect on nominal wage inflation. This in turn could lead to higher domestically generated excess inflation (threatening the inflation targets of central banks). In addition when inflation is high firms may find it easier to raise profit margins. Arguments about whether its wages or profits being too high that is risking persistent excess inflation are not very helpful when the only solution we currently have to reduce inflation from either source is to reduce the aggregate demand for goods and services. [3] Equally, arguments that generally higher wages or profits will have no consequence for the economy are simply false. [4]

This is why in the US and UK short term interest rates are rising. In general it is hard trying to decide how far interest rates need to rise (and economic activity to be correspondingly lower) to avoid a large temporary energy price shock and temporary supply side shock (and temporary Brexit inflationary shock in the UK) leading to permanently excess inflation. That also means it is possible to make big mistakes, allowing either inflation to persist or creating an unnecessary recession. Given the mandates of most central banks, the latter is more likely than the former.

So why have real wages grown so little over the last 15 years?

If we return to the first chart, we can see that basic real pay is now around where it was before the Global Financial Crisis. (Total pay, including bonuses, would be a little higher.) Does this reflect a general shift in GDP from labour to profits?

Here is the share of corporate income in GDP since 1970 (source ONS).

There has been no trend rise in the share of GDP going to profits since 1970, so rising profits are not why real wages have grown so little over the last decade and a half. Where there is a problem is that this steady profit share has been accompanied by a recent slump in business investment.

By far the most important reason for stagnant real wages can be seen by looking at an old favourite, real GDP per capita, over the same period as the first chart..

You can see from this that there just has not been much growth in national output per head after the GFC. GDP per head was about 6% higher in the first quarter of this year than at its pre-GFC peak, which is pretty pathetic over a 14 year period. The UK economy has been hit by one disaster after another: the GFC, then the austerity period that squashed growth during what should have been the recovery period 2010-2013, a certain vote in 2016, and then Brexit and the pandemic.

Why is GDP per capita 6% higher since the GFC compared to no growth for average real earnings? The most obvious reason is the decline in the terms of trade caused by higher energy prices at the end of the period, which reduces the real wage when deflated by consumer prices but does not reduce the amount produced in the UK to the same extent. Other reasons include a slight fall in the share of wages in income caused by a rise in indirect taxes (e.g. the 2010 increase in VAT). In addition I have already noted that there is some small positive growth in total real earnings once we include bonus payments.

The main message is that a lack of growth in real wages over the last 15 years reflects a lack of growth in the economy as a whole. The current cost of living crisis is all the more painful because of this lack of real growth over the last decade and a half. No one should be fooled by government ministers talking about ‘a strong economy’: on this like much else they are lying. Furthermore we know why the UK economy has been so weak since the GFC. First austerity severely limited our ability to recover from the GFC recession, and then Brexit has cut UK growth and increased UK inflation.


David Edgerton wrote recently in the Observer about the dangers of declinism (in short, the UK economy has suffered because of deep longstanding and particular problems that we have never solved) and its opposite, revivalism (from cool Britannia to Brexiter hype). Both as generalities are nonsense, and as he points out there is a danger of looking at the UK independently of trends in other major economies, particularly those we trade a great deal with.

So, for example, our economic performance after the GFC crisis was terrible because of austerity, but austerity also happened in the US and was perhaps more severe in the Eurozone, where it generated a second recession. As I noted recently, since the pandemic the US has grown more rapidly than Europe (including the UK) in part because of a fiscal stimulus that spurred the post-vaccine recovery.

Declinism stems in part from not seeing the UK in an international context. Of course the UK has many deep seated problems, but the same is true in most other countries. This chart, from here, can perhaps make this point more clearly than any words.

Compared to the original EU countries, UK growth was lower before we joined the EU, but since we joined the EU it has at least kept pace with those countries. I suspect this overstates the beneficial impact of joining the EU, as the EU5 were recovering from a much lower base after WWII and therefore could grow faster. But what it does show is that from the 1980s onwards, for whatever reasons (and there were probably many) the UK was actually doing rather well compared to our European neighbours. As I noted here, the same was true relative to the US. So stories about some unique UK national economic decline that starts well before 2010 are simply wrong. It is why we should not regard accounts like this as applying to the UK alone.

But while this chart may exaggerate the beneficial impact of EU membership, those benefits are real enough, and what we may already be seeing since the GFC and particularly Brexit is the beginning of another period of relative UK decline. Italy may save us from being the sick man of Europe once again, but if we want to see reasonable real wage growth again we have to do something about improving trade with our neighbours, which means getting rid of a hard Brexit, which in turn inevitably means removing from power the political party that delivered Brexit.

Postscript (23/06/22) The key difference between public and private sector pay

From comments I think it is worth expanding on a point I made briefly in the main post. I suggested that while high (i.e. matching inflation) private sector pay awards would generate domestically generated inflation, and therefore prompt yet higher interest rates and increase the probability of a recession, this was not true for higher public sector pay awards.

The intuition is very straightforward. Widespread private sector pay awards that matched inflation would prompt firms to raise their prices by a lot more than the inflation target of 2%. In contrast, if most public sector pay goes up, there are no prices to increase. In that very simple sense you just cannot get a public sector wage-price spiral.

Of course higher public sector pay will increase aggregate demand, which adds to inflation. But keeping public sector pay well below inflation should never be a demand reduction tool. That is the job of interest rate and fiscal policy. It is totally inappropriate to hold public sector pay well below both private sector pay and inflation as a means of regulating aggregate demand.   

In different situations it might be the case that high public sector pay awards might encourage those in the private sector to seek matching increases. But that will not happen this year, because public sector wage increases have been so much lower than private sector wage increases. Most of the public sector is playing catch-up, or to put it differently, the public sector is currently being asked to shoulder much more of the energy price hike than those in the private sector. As a result, the knock-on effect of higher public sector pay awards on private sector pay, and therefore inflation and interest rates, is likely to be minimal.

What will happen if public sector pay awards begin to match those in the private sector is that the government will need to find the extra cash. But we know that it has the money, without having to increase taxes, because the Chancellor has made no secret that he is assembling a large sum of money for additional tax cuts before the next election. So the choice is in many ways a very simple one. Do we want public sector workers to be paid more, like nurses and doctors where there is a current chronic shortage of staff, or do we prefer tax cuts to help the Conservative party win the next election?


[1] It could also shield all consumers by borrowing, transferring some of the cost of higher energy into the future, although that would make no sense if higher energy prices were permanent.

[2] The employment contract is not symmetric in terms of power between employee and employer, which is why trade unions are important in improving terms and conditions, preventing exploitation etc. However if union membership was widespread, the ability of unions to improve the real wages of workers as a whole is severely constrained by the fact that firms set prices.

[3] What about passing laws to prevent excessive increases in profits or wages? They were tried in the 1960s and 1970s, and they failed because they require the state to work out, product by product or worker by worker, what reasonable profits or wage increases are. Over the longer term it is better to ensure excessive profits are controlled through competition (enforced, if necessary, by breaking up monopolies) or, when competition is impossible, through forms of regulation.

[4] If the aim is to reduce the proportion of profits going to dividends, or share buy backs, high nominal wage demands is a very uncertain method of achieving this (as firms set prices). A more inevitable outcome is widespread unemployment as the central bank attempts to control inflation.

Tuesday 14 June 2022

In praise of Biden’s fiscal stimulus

The wisdom or otherwise of the American Rescue Plan, which included $1,400 direct payments to individual Americans, has been a constant debate since it was enacted at the end of 2020 and the beginning of 2021. The main criticism has been that it overheated the US economy, and therefore added to inflation already high because of post-pandemic supply problems and energy price hikes. That increase in inflation has led the Fed to increase short term interest rates, and how high those interest rates will need to go to stabilise inflation, and/or whether they will lead to a US downturn, we are yet to see.

In much of Europe, by contrast, there has been no equivalent fiscal stimulus. Instead there was much more general fiscal support, in the form of the state paying a large proportion of many workers salaries to stay at home. Yet while the net effect on the public finances may have been broadly similar, the impact on GDP has been very different. As I noted here, for example, the US recovery from the pandemic has been much stronger than in Europe.

One reason involves the standard observation that the propensity to consume out of a temporary increase in income rises as incomes fall. Give the same amount to rich people rather than poor people and you will see a lot less consumption and a lot more saving among the rich. With the American Rescue Plan, the amount people received actually fell as their income levels rose. That is why it makes sense to talk about that plan as a fiscal stimulus (as well as being an effective anti-poverty measure) while the European style salary payments were more in the nature of general fiscal support.

So we might expect stronger post-vaccine growth in the US compared to Europe, but equally higher inflation in the US compared to Europe. We have seen much higher US post-vaccine growth in the US than in Germany, France and the UK. It is also true that inflation increased earlier in the US than in Europe, and the stimulus is one reason for that. But if (and I know it’s a big if) OECD forecasts released last week prove accurate, then the total amount of inflation experienced by US consumers in the three years after the pandemic will be no greater than in Germany, as the second column of the table below shows.

OECD Economic Outlook forecasts June 2022*

Total GDP growth 20-23

Consumer deflator  increase 20-23

Employee Compensation increase 20-23

Real wage growth 20-23





















*Figures obtained from adding annual growth rates, so I have rounded to nearest 0.5.

If we think in terms of a relative growth/inflation trade-off, then these forecasts suggest the US is going to get considerably more growth than Germany or France with little cost in terms of higher inflation compared to those countries over the 2020 to 2023 period. One reason of course is that the Fed has raised interest rates, while so far they remain stuck at their lower bound in Europe. This superior growth performance means that workers in the US are going to be considerably better off than their counterparts in the major European economies.

Of course this is only a forecast. But it does allow me to make two points that are sometimes missing from a lot of the US debate. The first is that post-vaccine inflation has been a world-wide phenomenon, and whether inflation turns out to be worse or not in the US is at least open to question, as these forecasts show. (Latest data on US wage inflation suggests that it is past its peak and slowing.)

Second, fiscal stimulus to enable interest rates to rise above their lower bound is good macroeconomic policy if you believe (as most politicians in all these economies do) that interest rates should be the tool of choice in managing the economy. As long as interest rates are stuck at their lower bound, they are powerless at countering negative economic shocks. Quantitative Easing is a very poor substitute, simply because we have much less experience of its (probably non-linear) impact, and fiscal stimulus in some countries is often in practice a poor substitute because of politics. So ideally we would want interest rates well above their lower bound, and a fiscal stimulus is how you get there.

Will this argument prove incorrect if the US ends up in recession? It’s worth noting that while the OECD are expecting modest US GDP growth through the rest of this year (between 3% and 1,5% at an annual rate), they are expecting very low quarterly growth rates (less than 1% at an annual rate) through 2023. Based on the past reluctance of forecasters to predict recessions, this forecast is a flag that some more quarters of negative growth are quite possible. But for a prospective US recession to unwind the advantages of the Biden stimulus we have seen so far, it would need to be (a) very large, (b) be accompanied by good positive growth in the major European countries, and (c) US inflation would nevertheless have to be more persistent than in Europe. That combination of events is possible, but at this point seems rather unlikely.

In macroeconomic terms the best argument against Biden’s stimulus is that its timing was unfortunate, because it coincided with post-pandemic supply side and energy price inflation. However this largely supply side inflation was not widely predicted, and from a political perspective no other timing for such a fiscal stimulus may have been possible. So from the point of view of the major European economies, the US position at the moment looks a lot better than their own, and the Biden stimulus is the most obvious reason for this.

There may be a more general lesson here. When interest rates are stuck at their lower bound, economies that experience severe recessions (like that created by the pandemic or the GFC) may require a strong fiscal stimulus to successfully recover from those recessions. In the absence of such a stimulus (or worse austerity) the recovery will be weak, will certainly be slower, and may even result in a permanent loss of real income for most of those in the economy. This happened across the world after the GFC, and it seems to be happening in Europe following the pandemic.

If, as some are expecting, the ECB raises rates in a misguided attempt to reduce inflation, this will make the growth gulf between the US and major European economies greater still. Quite what the macroeconomic logic is for the ECB to raise rates following an energy and supply side shock, when the OECD expects demand in the Eurozone to be around 2% below potential this year and next, is difficult to fathom.

What about the UK? In growth terms it is stuck in the doldrums with Germany and France, yet it is expected to suffer the biggest increase in inflation. As I noted here, the UK is unusual because of Brexit, which has both reduced growth and increased inflation. For those who remain unconvinced that Brexit is a key factor, look at the performance of regions since before the pandemic. Besides London, Northern Ireland is the only area to show positive growth probably because it remains in the Single Market. Or look at CER analysis by John Springford that compared the UK to economies that had performed in a similar way in the past, and finds that since Brexit a gap of over 5% has opened up between GDP in these economies and the UK, with the gap in investment much wider.

As long as the UK government remains in denial about this, the UK is likely to stay in the position of having a worse combination of growth and inflation compared to either the US, Germany and France. Instead of modifying Brexit in order to reduce these economic costs, the government is instead starting a new dispute with the EU by breaking the Northern Ireland protocol it signed just two years ago. Unfortunately the main result of the confidence vote against Johnson is that he has become beholden to the largest cohesive group of Tory MPs, and those are the Brexit hardliners in the laughably named European Research Group. Before it entered the EU the UK was called the sick man of Europe, and after Brexit it is taking up that title once again.

Wednesday 8 June 2022

The appalling autocracy of Alexander Boris de Pfeffel Johnson continues, thanks to Conservative MPs


It is common to talk about how UK Prime Ministers have become more presidential over time. Cabinet government, where the PM is first among equals, has gradually been replaced by a more presidential system where the PM is more influenced by those working in No.10 than those around the cabinet table. However, to describe the system as presidential, with an obvious comparison to the US, is misleading because Congress can severely limit the power of the President. A presidential PM with a large majority in parliament has much more political power over legislation than most US Presidents.

Is Johnson’s time at No.10 just another point on that steady progress away from cabinet government? In two important senses it represents more of a step change, a change which hopefully is reversible. The first is that Johnson has chosen a cabinet based on loyalty to him and an idea (a hard Brexit), both designed to elevate the less able to be ministers. That is the reason why there are no obvious candidates to replace Johnson in the cabinet. The second is that Johnson has very little time for a powerful parliament, as was very evident when he suspended it when he first became PM. He increasingly sees it not as a place where legislation gets initiated, amended and improved but as an audience for his Oxford Union style debating skills.

For this reason it makes more sense to describe Johnson’s period in office as an autocracy rather than as an example of presidential government. Unfortunately, autocracy comes naturally to Alexander Johnson. In his so far short term as leader he has passed legislation which requires evidence of identity before being able to vote, ended the independence of the body that runs elections and allowed the police to declare any demonstration illegal if they think it will be noisy. All these measures have been voted through by his MPs. He has installed friends or donors to countless positions of power, including running the BBC. As Robert Saunders writes: “The ballot box, the right to protest, and the equality of the vote are among the most powerful ramparts yet constructed against tyranny. We should not tamper with them lightly.”

Why does autocracy come naturally to Johnson? His ambition is driven by a belief in his own unique self-importance, yet in reality his performance in leadership roles is best described as incompetent. He masks this by being a congenital liar who gets away with lies because of a combination of privilege and charm. People who naturally tell you what you want to hear or what they want you to believe, when either may be the opposite of the truth, are always at risk of being exposed. Accountability is Johnson’s enemy, and his actions attempt to limit accountability as far as he can.

Alongside autocracy often comes corruption, and Johnson is no exception to this rule. Donors to the party who have deep pockets enjoy privileged access to ministers. Friends and donors also get fed contracts from the government, as became very evident with the VIP lane for PPE contracts at he start of the pandemic. MPs can, if they wish, get paid by companies to obtain access to ministers, or for lobbying ministers. For all these reasons Johnson’s government acts like a plutocracy, where influence comes from donations to either Johnson himself, ministers, MPs or the party. Money has always bought a degree of influence in the UK, but as with his own autocracy, Johnson has taken things to a different level.

The corruption that has come closest to threatening his position as Prime Minister is partygate. As Andrew Rawnsley points out, it is inconceivable that you would have had illegal party after illegal party in No.10 under any previous Prime Minister. To quote: “When that person is Mr Johnson, you get a culture of selfish, arrogant, entitled, amoral, narcissistic rule-breaking that combines, in the true spirit of the Bullingdon Club, snobbery with yobbery.” Cameron was also a Bullingdon member, but unlike Johnson Cameron chose his lies very carefully because he did not believe that he could avoid being found out or charm his way out of the consequences of doing so. That Johnson knew about the No.10 parties and knew they were illegal is beyond doubt whatever he or his ministers might say now, and the fact that he did nothing to stop them while the rest of the country followed his rules is quite shocking, and almost unbelievable. In addition, it was a terrible way to manage such an important part of government, as the many cases of COVID in No.10 or the Cabinet Office over the partygate period testify.

What is also unbelievable, if you hadn’t been closely following the Brexitification of the Conservative party, is that only a minority of Conservative MPs seem prepared to get rid of someone who could do such a shocking thing, let alone worry about the UK turning into an autocratic plutocracy. Yet Johnson ensured the Brexit campaign would be in his own image (almost nothing that was claimed for Brexit was actually true and was often the opposite of the truth) and he subsequently did his best to ensure that Conservative MPs bought into that culture of falsehood. For many MPs, therefore, if they get rid of Johnson they risk exposing the reality that their Brexit is responsible for many of the country’s current predicaments.

Ultimately, however, Conservative MPs are interested in retaining power, which is why so many decided electing Johnson in 2019 was a necessary evil. As Tim Bale wrote in April, for many Conservative MPs “Johnson has become what we might call a talismanic leader, one who, possessed by powers that sometimes seem superhuman, even supernatural, to his friends and foes alike will, whatever the current evidence to the contrary, supposedly see their party through the very worst of times and into the sunlit uplands.” They will also note that a combination of certain friendly newspapers and very rich donors remain steadfast defenders of Johnson (to such an extent that their copy could have been written in No.10) in part because Johnson has made a point of giving them exactly what they want in terms of policy and money.

Will enough Conservative MPs realise before the next election that the magic has gone, destroyed by a combination of partygate, Johnson’s own incompetence and the cost of living crisis? In any case the magic attributed to him in bringing down the red wall had rather more to do with longstanding but not immutable trends, a commitment to Brexit that has now faded, and the unpopularity of Corbyn. Or do they think that, despite Johnson's own unpopularity, a combination of their own money, media power and corruption will be enough to drag any opposition leader down to his level, enabling Johnson to still win an election? It is a testament to the current state of UK politics that we cannot be certain that this belief will prove incorrect. 

Unfortunately for this country, nothing that has happened or will happen under Johnson’s rule should have been a surprise. As I noted in 2016, a former boss of Johnson, Max Hastings, wrote that if Boris Johnson is the answer, “there is something desperately wrong with the question.” The question to which Johnson became the answer was how the Conservative Party could implement a hard Brexit, and there was indeed something very wrong with that question. Indeed all those that supported Brexit, from whichever political direction, should have foreseen that Prime Minister Johnson was a very likely consequence.

His Trump-like traits of habitual lying, incompetence and ruthlessness were all noted in my short 2016 post. The similarities between Johnson and Trump are many, as I noted here three years later. Let me just add one more to that already long list. Trump was notorious for ignoring briefing provided by the machinery of government, and instead getting his information from Fox. Likewise Johnson is hopeless at reading his red box, and before partygate at least, would start the day with senior officials looking at the daily press and the issues they raised.

I ended my 2016 post with this sentence:

“Boris Johnson plays the cultured aristocratic fool, and many love him for that. But if he becomes Prime Minister, as now seems almost certain, it may be the British public that ends up feeling played and foolish.”

I suspect that after Brexit and partygate enough of the British public now feel played and foolish to have ever entrusted Alexander Boris de Pfeffel Johnson to such a powerful position. 

What I hope they don’t forget is that most Conservative MPs, who knew much more about him than voters did in 2019, seemed not only happy to have him as their leader, but have supported and enabled his autocratic style of government, and have now been remarkably reluctant to get rid of him after he knowingly broke a law he himself had imposed on others. Once upon a time the Conservative party used to worry about being seen as the nasty party. Today in flaunts its nastiness with pride, and a majority of its MPs have decided to turn our parliamentary democracy into a government in one person's image, a person who is way more corrupt, disorganised, authoritarian and dishonest than any previous post-war UK Prime Minister.