The UK’s place in the world

As an economist, I naturally focus on the economic aspects of the EU. The EU is mostly about economics. To counterpoise sovereignty as an alternative perspective to economics misses an important point: most EU rules stem from the economics of free trade within the EU. The EU wants common regulations to make it easier to trade. The EU wants restrictions on state aid to prevent countries giving their own firms an advantage over others in the union. Much the same applies to labour market and environmental standards.

Economics is also involved in another aspect of being in or out of the EU, and that is how the UK sees its place in the world. Is the UK’s identity partly a European identity, or does the UK ‘stand alone’, independent of all multinational blocs. Anyone interested in this question should read an excellent and compact essay by the ‘Red Historian’, Robert Saunders.

Those who want us out of Europe need to address why the UK became part of Europe in the first place. After the war, the UK had tried a different strategy. After all, being part of Europe did not look very attractive in the aftermath of a war that had destroyed large parts of it. Instead the UK tried to forge its place in the world based on its history, a history of empire.

This involved three elements: the remains of Empire, the Commonwealth, and our special relationship with the US. Harold Macmillan spoke of Britain playing ‘Greece’ to America’s ‘Rome’, acting as a wise counselor to its idealistic but naive successor. But that strategy failed, because neither the Commonwealth or the US were particularly interested in playing their allotted roles in this scheme.

Two quotes from Saunders’ essay are indicative. The American Dean Acheson said ‘The attempt to play a separate power role’, he declared, ‘a role apart from Europe, a role based on a “special relationship” with the United States, a role based on being the head of a “commonwealth” which has no political structure, or unity, or strength … this role is about played out’. Privately, Harold Macmillan agreed: ‘all our policies at home and abroad’, he lamented, ‘are in ruins’.

This is why we became a part of the EU. The UK wanted to continue to play some significant role in the world, and our attempt to do so independently of Europe had failed. So now we have left the EU, is there any coherent vision of an alternative strategy?

In the Brexit debate you can hear an echo of the failed post-war strategy. No trade deal with the EU is now apparently called the Australian relationship, because that sounds better. We also hear an echo of an even earlier history, when appeals are made to the UK’s buccaneering spirit. However, as Adam Curtis explored in a 1999 documentary (HT Adam Tooze), there is a modern counterpart to this, which is the story of how we ended up selling weapons to Saudi Arabia. But as Robert Shrimsley points out, this vision conflicts with the government's new found need to worry about left behind regions with what some ministers call 'legacy industries'.

Yet stories and exceptions apart, the truth is UK industry is not particularly buccaneering. This has nothing to do with being constrained by the EU, as a comparison with Germany makes obvious. In fact the opposite is the case. One of my first jobs after I graduated was looking at the steady and significant decline in the UK’s share of exports in world trade, which was something of an obsession among UK policymakers.

The UK’s weakness is perhaps not surprising in a country where the middle classes regard an engineer as someone who fixes your washing machine. What the UK does well is produce financial, business and other services. But to successfully export these often requires pretty deep trade agreements, like the EU single market. Which is why our export share within the EU rose so substantially after the Single Market was formed. Which major economies are going to enter into the equivalent of the Single Market with the UK?

There is little sign that the current government, and particularly those who lead it, understand anything of this. Comic book stories substitute for solid evidence. They have shown us nothing to suggest that the UK can continue to have any voice among those of dominant players like the US, EU, China, India, Russia and Japan. As Robert Saunders writes

“In writing a history of Britain as a small power, it pretends that nothing has changed: that a nation stripped of its colonies, its industrial power and its control over global finance has the same options today as in the age of its pre-eminence. That means that we are not being serious about the choices in front of us.”

Does the UK need to have a special place in the world? Can we not accept that others will take the key decisions, and we will just have to do what we can in a world over which we have no control? As Saunders notes, in a benign world this might be tenable, but we no longer live in a benign world. This is where the economics of trade re-enters the equation. A UK with no big country or union to help protect it will be at the mercy of any big global player that wants to gain some trade advantage at our expense.

For many in the ERG the implicit answer to this problem is the United States. They are encouraged by Trump’s enthusiasm for Brexit. They fail to see that his enthusiasm is based on antagonism towards the EU and his desire to exploit our weakness. For those who have a nostalgia for days of glory that weakness will be hard to take, as it will be when our legacies of empire are gradually taken off our hands along with the trappings of international influence.

For all these reasons, Brexit is not tenable in the long term, as those who tried and failed to make it work after the war finally understood. Their conclusion will be our conclusion after Brexit: for the UK to flourish in a secure environment it has to be part of the EU. The only question is how long this realisation takes and the manner of our rejoining.

Are the EU wrong to make things easy for May?

Most experts who follow the Brexit negotiations think the Withdrawal Agreement (WA) will sketch in pretty loose terms what the final relationship between the UK and EU will be, although some EU politicians have indicated a reluctance to do this..A vague WA has been called a ‘Blind Brexit’ (ht Chris Grey). While a blind Brexit might help in May’s efforts to achieve an agreement and (maybe) to get parliamentary approval for it, it remains a very undemocratic way forward [1]. Here is why.

Suppose there are only two types of Brexit possible: a No “not the end of the world” Deal or BINO (staying in the single market and customs union). All the polls suggest No Deal is not the will of the people, and its support is in any case dependent on a false view of its economic consequences. Equally it is difficult to understand why anyone would support BINO compared to EU membership, as the only major difference is that we no longer get a say on how the rules we have to obey are changed.

A result of keeping the WA vague about the final relationship is that this binary choice is not apparent to many voters. In particular the UK government is still peddling various halfway houses that the EU is very unlikely to agree to, but we will not know for sure that they will be rejected until after the WA. If we did know it before the WA the number of people who had changed their mind would be greater than it is now, which in turn might embolden parliament to call the whole thing off.

Thus we will leave under false pretenses, of exactly the kind that led to the narrow vote to Leave in the first place. When it does become clear that there are only these two choices, it will be too late to change our mind without new costs. Re-entry into the EU might require becoming part of the Eurozone for example. So we will could end up with BINO plus face saving details forever, and pretty well everyone (including No Deal advocates) will agree we are worse off than we were before.

A similar problem happens if parliament does not approve the WA and we end up with a second referendum. The logic of a second referendum is clear. In the first in 2016 the promises made about what leaving would mean were various and many were untrue. Now we know what leaving does involve it makes sense to ask the people once again. Except in any referendum held after the WA fails to be approved, we will not know what the final deal will be, and that will give May the chance to spin her deal in any way that gets votes. Rather than a referendum on a final deal, it will in fact be a second referendum with unicorns only slightly less outlandish than in the first referendum.

This is what I mean by a very undemocratic procedure. The fault lies first with David Cameron, who should never have agreed to a referendum where the type of Brexit was unspecified. It then lies with May, who initially prefered Brexit fantasy to reality and despite Chequers still panders to the Brexiters. Above all it is the fault of the Brexiters, who by going back on an agreement made in December wasted precious time so they had more chance of getting No Deal.

The EU cannot really be blamed for going along with a vague WA. They are quite happy with BINO, and it avoids a No Deal accident. For that reason they may feel it makes sense to help May. The alternative of insisting on a detailed WA on future trade is high stakes: it could end Brexit, but could lead to No Deal. It is not surprising that most EU politicians would take the less risky option.

It remains the case, nevertheless, that by allowing May to have a vague WA on trade they are assisting in the deception of UK voters and MPs, who will be leaving the EU without knowing what is going to take its place. I hope that is something the EU recognises if we do leave in March 2019 and subsequently want to return. I suspect, however, that this is a vain hope.

[1] It is also costly in economic terms, because it prolongs uncertainty about what future trade relationships will be. Some of the issues I describe here may also divide those who voted Remain over whether the WA should be passed in parliament or not. 

Jeremy Corbyn cannot end Brexit

There is a cheap jibe that responds to the title of this piece by saying that Corbyn does not want to end Brexit. It is cheap because what Corbyn wants above all else is power. It is difficult to imagine this government surviving the collapse of Brexit, so ending Brexit is a means to that power. 

Another idea that some Remainers have is that if only Corbyn had campaigned against Brexit from the moment the vote to stay in the EU was lost, the Labour party could have somehow swung enough public opinion such that support for Brexit would by now be collapsing, and the resultant pressure on Remain-at-heart Tories would be so great that they would have been prepared to bring down their government just to stop Brexit.

To see why this makes little sense start with the 2017 election. May wanted this campaign to be about Brexit. She would have wanted nothing more than Corbyn to oblige by supporting Remain. The reason is straightforward. The Brexit vote divided the electorate on social conservative/liberal lines, with social conservative (anti-immigration) Labour voters supporting Leave. May knew that in a general election right wing social liberals would return to the Conservative fold, but left wing social conservatives could have been persuaded to vote Conservative, or at least not vote for an anti-Brexit Labour party. As a result of all this, the only choice Corbyn had before the election was to triangulate over Brexit, and it is only because of this that May did not get her landslide.

The only possibility is therefore if Corbyn had campaigned for Remain from the moment Remain lost the vote, and that as a result he had been sufficiently stronger in the polls by the following spring to dissuade May from holding an election. This seems very improbable for two reasons. First, immediately after the poll many who voted Remain believed the referendum result should be respected. Second, the Brexit vote has stayed pretty firm despite a fall in real wages. Once you recognise that, Corbyn had no choice but to triangulate over Brexit. That may have been an easy choice for him to make, but it was also the wise political choice. Had he not done so, May would have got her landslide in 2017. If Owen Smith had become Labour leader he might have made an anti-Brexit campaign work, but that is now irrelevant speculation.

That is why wishing Corbyn had not triangulated is in effect wishing May had got her landslide. Triangulation is why Corbyn has endorsed staying part of a customs union (although he could have done so sooner). As one of the reasons Labour gave for doing that is to avoid any infrastructure on the Irish border they have effectively endorsed staying within the EU’s Single Market for goods: the so-called Jersey option.

But triangulation is a dangerous game, particularly if your core support is not clear that is what you are doing. You have to convince socially conservative Leave voting Labour supporters that you will respect the vote, but at the same time convince your Remain voting core supporters that you will always push for a softer Brexit and take any realistic chance you are given to stop Brexit.

That was why sacking Owen Smith was foolish. The general belief of most Remainers is that they only way Brexit can be stopped is a referendum on the final deal. Sacking Smith because he advocates this just weakens Labour’s support among Remainers for the forthcoming local elections. Maintaining shadow cabinet discipline gains him nothing, while appearing to cast aside the hopes of many loyal Labour party members is a big deal. You do not win votes by shattering dreams.

However Remainers also need to realise another important political fact. The remaining slim chance that Brexit can be stopped requires Corbyn to remain passive. The only people who can stop Brexit happening will be the handful of Conservative MPs that have in the past voted against May’s wishes. They need to support moves that initiate the circumstances that lead to a popular vote on the final deal. Those Conservative MPs will only support such moves if they come ‘from parliament’, and not if they come from Jeremy Corbyn directly. Anything that comes from Corbyn is too toxic, as George Eaton notes here. All that Corbyn can do is leave it to others to do what they can to facilitate that moment, and then go with it if it comes. And he will go with it, because it increases the chances that the government will fall.

Whether that moment will come depends not so much on Corbyn or Labour, but more on the EU. So far the EU have allowed May to pretend that there is another solution to the Irish border question than the Jersey option. They have even gone as far as to set out what any free trade agreement (FTA) between the UK and EU would look like. They must know that the only way that FTA could ever happen is if there was a border in the Irish Sea, and they must also know by now that this is politically impossible for May. To go down the FTA route when May will have to concede something like the Jersey option for the whole of the UK is a waste of their time.

The EU therefore has two options. It could force the issue, and make May choose between the DUP and Liam Fox, or it could allow her to continue to fudge the issue until after we leave in 2019. Remainers should stop using Corbyn as a punchbag for their frustrations as time runs out to stop Brexit, and focus that frustration where it may belong, which is in the EU’s apparent willingness to indulge May’s desire to keep her party together.

Here is why the EU should not allow this charade to continue. Brexit is and will always be a right wing fantasy project. It is an attempt by a small group of newspaper owners and politicians with Little Englander fantasies to persuade the country that by leaving the EU the UK could become more wealthy in economic terms and more powerful in political terms. In reality precisely the opposite is true. In order to keep the fantasy in tact the Brexiters have tried to vilify experts, take power from parliament and intimidate judges, and have called any dissent they face unpatriotic. In other words the attempt to make this fantasy work has required its opponents to threaten almost every aspect of our parliamentary democracy.

If such tactics are seen to be successful they will only be repeated elsewhere. It is therefore not in the EU’s interest to allow May to keep her party in one piece. Brexit has to be seen as a failure, just as it is essential that Trump is seen as a failure. That has to mean that the Brexiters lose what matters to them most: political power. [1] It is not in the EU’s interests to allow May to appease her Brexiters. The possibility that by not indulging May the EU risks a No Deal outcome is now non-existent.

One thing above all else Remainers need to see. Even if Brexit cannot be prevented in 2019, it is essential that those who masterminded it suffer for the harm they will inflict on the UK. The only way they will suffer is if they lose power, and Conservative party members come to see the Brexiters as the source of their subsequent misfortune. To imagine, as some Remainers seem to do, that this can come about in first past the post UK by some kind of centrist revolution is as mad a fantasy as Brexit itself. [2] Whether they like it or not, the Brexit project will only be seen as a political failure if it leaves its leaders hollow, and the Conservatives out of power for a decade, and that can only happen one way.

[1] The idea that Brexit needs to be seen to fail in economic terms with the Conservatives in power is misguided. Economic failure will be gradual, and as with Brexit itself the government will deflect economic problems by finding scapegoats that play well with social conservatives, and by ramping up nationalism. As Simon Tilford argues, Brexit poses a real threat to pluralistic democracy. This is the strategy that Republicans have followed in the US, and right wing governments in Hungary and Poland are also following with some success.

[2] If centrists are uncomfortable with what Labour has become, think instead about what the Conservatives will become once May finally goes. The top three favourites to succeed may are all Brexiters, and for a good reason.

Tangled up in red

There have been three constants in the Brexit negotiations so far. The first is that the UK side makes speeches, and the EU side drafts agreements. In a way this is logical, because of the second constant, which is that the clock is always ticking. The ticking clock means the EU has nearly all the power in these negotiations. That leads to the third constant, which is that whatever is finally agreed is pretty close to the original EU drafts. It is obvious if you think about it. The EU side has the power and they also have a clear purpose and unity in achieving it. The UK side is weak and divided with no clear purpose, so the best it can do is to give speeches so UK voters get the impression the UK is influencing what is going on.

The EU published yesterday a framework for an FTA between the UK and the EU. Given the logic above that means any agreed FTA will be pretty close to this framework. It has been designed by the EU to be compatible with Theresa May’s red lines. The EU is quite clear that it would be possible to have fewer barriers to trade than this FTA framework involves, but this would require changing the UK’s red lines. These red lines include that the UK will not be part of any customs union with the EU or the Single Market for goods.

Some have interpreted this framework as implying that the EU is prepared to compromise on the hard line it took on the Irish border last week. However the document starts by noting that “negotiations can only progress as long as all commitments undertaken so far are respected in full”. That includes the first stage agreement involving the Irish border, which gave three possible options: an agreement between the UK and EU so strong that it meant no hard border was required, a technological solution, or Northern Ireland staying in the EU customs union. The second option is magical thinking. 

What the EU FTA framework shows is that the first option is not going to happen. The UK are not going to get an FTA much better than this, precisely because they are not as yet prepared to accept the obligations that go with a customs union or the Single Market. So Northern Ireland has to remain in a customs union with the EU to avoid a physical border, and there is no reason why the EU should compromise over this. 

That means that the EU's FTA document is for the remaining UK, and would involve a customs border between two parts of the UK. It seems incredible that the Conservative party could accept that, and the DUP will certainly not. As a result, the UK will carry on pretending that an alternative solution is possible, and saying that the EU should “get on with” looking at the first two options for the border. The EU has no intention of doing that, because the EU does not do magical thinking over Brexit.

This impasse could be broken by parliament if enough Conservative MPs had the nerve to vote for the UK to remain in the customs union, as Labour now wish. That would be absolutely the right thing to do, because the arguments that we should stay out of a customs union are absurd. We are likely to get much better trade deals with third countries as part of the EU than outside. It already looks like we will lose deals the EU has already made. And with Trump in the White House raising tariffs it is crazy. 

Ironically one reason Tory rebels may fail to rebel is that the delusion that there are other solutions to the Irish border problem will be broken sometime in the autumn anyway because of the second constant, the ticking clock. The clock in this case is that the EU will not agree to a transition period until the UK signs up to the legal version of the first stage agreement. So sign the UK will.

Whenever the UK government is finally forced to concede that it will have to agree to stay in a customs union with the EU the Brexiters should finally break with the government. That is the event that May has been so desperately trying to avoid, which is why she has got herself so tangled up with her red lines. If May understands what is going on, then she will spend the next few months trying to convince the Brexiters that signing the legal version of what she already agreed in December is not the commitment to the UK staying in a customs union that it in fact is. Declaring that it was something the UK could not sign was not a wise way to start that process. May is all tangled up in her red lines, and the country is all tangled up in blue. 

Postscript (09/03/18) Yesterday Donald Tusk said he was putting "Ireland first". The UK had to provide "specific and realistic" plans to avoid a hard border in Ireland before Brexit talks could make any progress. 

Theresa May’s Brexit choice

William Wallace asks whether Brexit could split the Conservative party, even though we have voted for Brexit. The reason why this is still conceivable is clear to all except those who tweet ‘get over it’ or who are silly enough to think Brexit means Brexit has any meaning. There is, in economic terms at least, a world of difference between a Norway style deal or hard Brexit: thousands of pounds worth of difference for the future average UK household in fact. (Making trade more difficult with your immediate neighbour will reduce trade overall, which in turn will hit productivity growth and therefore living standards.)

Which option Theresa May chooses will be down to politics rather than the economic welfare of UK citizens. This is why the Conservative party will not split. Divisions over Europe have not split the party for the last two decades, and are much less likely to now that the Europhobes have had their victory. Nor will any decisions be made quickly, because the exact trade-off between single market access and free movement depends on the stance taken by the EU.

The EU could conceivably rule out membership of the single market under any account, in which case some form of hard Brexit would be inevitable. If the main objective of the EU is to ensure that the British economy does badly as a result of leaving, to offer a warning to those in other EU member states tempted to go down the same path, then the UK is simply screwed. However if the EU takes a more constructive line, along the lines of this Breugel paper, then the issue becomes how much of the single market the UK can get with some form of limits on EU migration. A simple model of the subsequent debate will be that Remainers within the cabinet will push for more single market and less restrictions on migration and the Leavers vice versa.

At first sight it appears bleak for the Remainers. Two Leavers, Fox and Davis, have been put in charge of working out what Brexit actually means. Are there any reasons to be optimistic from a Remain point of view? The answer is that there are quite a few.

1. Remainers have the big guns at the cabinet table: principally Hammond as Chancellor and Johnson at the Foreign Office. (Yes, Johnson was the lead campaigner for Brexit, but he neither wants to leave the single market nor restrict immigration. He did, however, want to become Prime Minister.) No Prime Minister likes overruling her Chancellor on economic matters. It will be May, not Fox or Davis, that will make the final choice of the point on the trade-off she is given in negotiations with the EU
   
   
2. UK business will overwhelmingly want to retain single market access, and in many cases also free movement, and this would normally be a powerful influence on any Conservative government. Some Conservative MPs are prepared to argue this case.
   
   
3. At their meeting yesterday the cabinet agreed that restricting immigration will be a red line in any negotiations. But this is the same party, led by the same politician, that has put immigration control as a key objective for the last six years, and has in practice failed to control non-EU immigration. Judged by what she has done during her period as Home secretary rather than what she has said, May is not too concerned with actually reducing immigration.
   
   
4. Part of the reason the Conservatives have focused on immigration in the past is because of the UKIP threat. But it has become clear that UKIP in practice is probably more of a threat to Labour than the Conservatives.

Yet having said all that, I cannot help feeling that I’m clutching at straws here. The Treasury nowadays often seems to only really care about the deficit and the City, and it is highly unlikely other EU countries will pass up the opportunity of stealing a lot of City business The rest of UK business can perhaps be bought off in other ways. As home secretary May’s efforts to restrict immigration may have been hampered by the concern of others (including Osborne) to help business, and she may be itching to now call the shots. And with Corbyn as Labour leader, she really has nothing to worry about in electoral terms. UK productivity stagnated under Cameron and Osborne for the first time since WWII, and she may be content to just be no worse that her predecessors on that score. So from a Remain perspective, and the prospects for UK living standards, hope is not yet lost but it is walking out of the door.

Fiscal rules should target the deficit, not spending

This jointly authored VoxEU piece on making the EU more resilient after Brexit that came out nearly two months ago has already had some unfavourable comment: Paul Krugman calls it timid, and Brad Delong does not like it much either. I want to pick out one particular idea, which I think is simply wrong and dangerous, and which I find it extraordinary that so many economists signed up to. Here is the relevant passage, in a section about the public finances.

“In most countries, the level of [government] expenditure – rather than the deficit – is the main problem. High expenditure makes it difficult to raise taxes and balance the budget, leading to dangerous debt dynamics. Thus, a focus on expenditure rules, linking expenditure reduction to debt levels, appears to be one of the most promising routes.”

Now this sounds to me like saying two things. The first is that the size of the state is too large in most countries. [1] The second is that we can use the need to bring government debt down as a way to correct that. It sounds to me exactly the policy that I accuse US and UK governments of following, although in their case the linkage is generally concealed. In this article it is suggested it should be explicit.

Whatever your views about the size of the state (including having no a priori view), it seems obvious that this is an intensely political issue. In contrast questions about the appropriate long run size of government debt are not so political, but more importantly they involve a completely different set of issues to those involved with the size of the state.

That is why policies or fiscal rules that aim to stabilise or bring down government debt focus on the budget deficit. It keeps the issue separate from the appropriate size of the state, and hopefully takes a good deal of the politics out of that issue. Linking the two issues makes it very easy to fall into what I call deficit deceit: saying we must cut government spending because government debt is too high, rather than because the state is too large. Even if that is avoided, associating the two sets back the cause of sensible debt management by needlessly politicising it.

That is why sensible fiscal rules target the deficit in some form, and allow how that deficit is achieved to be a political choice. I know this may seem obvious to me because I have written a lot about fiscal rules, but I would have thought the point might have also occurred to one of the economist authors of that article. When heterodox economists argue that the mainstream is hopelessly embroiled in the neoliberal project, they will be able to cite this article as evidence.

[1] You might say that, perhaps with certain European countries in mind, this is just a recognition that there is too much inefficiency and needless bureaucracy within government, rather than being a deeper statement of what governments should and should not do. If that is the case the authors should say so, but even then the coupling with debt control is problematic.

Port Talbot and Neoliberalism

Brief synopsis for non-UK readers. Port Talbot is the latest UK steel plant to face closure at least partly as a result of dumping by Chinese steel producers. While the US government seems quite prepared to place high compensating tariffs on Chinese steel, the UK government had blocked EU attempts to do the same.

I used to think I knew what neoliberalism was. True it is a term that is employed far too liberally (no pun intended), but I thought neoliberals had a clear idea of what they were about. This was to keep markets free from government interference, and also to prefer almost without question market processes based on private property over state action. As a result, it was neoliberal to want to shrink the state as much as possible, as long as its role in defending markets and private property was preserved.

It was for this reason that I could say that the UK government’s actions in blocking tariffs on Chinese steel were nothing to do with neoliberalism. If China was a capitalist country where independent (from the state) producers received no state subsidies, then that would be different. But it appears that what we have instead is an all powerful state rigging a market. That couldn’t be neoliberal, surely?

I am aware that neoliberalism has a blind spot when it comes to what economists would call market imperfections. That seemed to me one difference between neoliberalism and ordoliberalism, with the latter seeing a clear role for the state in restricting monopolies. The way you could characterise this is that neoliberals started Econ 101 but skipped before the lessons on market failure, while ordoliberals held out a little longer to hear about monopoly.

That, at least, is how I saw it. I had also seen the Institute of Economic Affairs, a London think tank, as being a bastion of neoliberalism. Although often a supporter of Conservative government actions, they were not in favour of caps on immigration or Osborne’s hike in minimum wages. I was therefore rather surprised to hear its director say that the EU government would have been wrong to impose tariffs on Chinese steel. True, the idea that a producer in an oligopolistic market with high entry barriers could use its deep pockets to drive out other producers by temporarily cutting prices, and subsequently use its new monopoly position to raise prices by much more, might have been one of the economic lessons that were skipped. But when one of the most powerful states in the world does it? I would have thought that would have raised alarm bells for any neoliberal.

Either I am missing something, or I am being a typical academic (economist) in expecting an ideology and those who uphold it to be internally consistent. After all, another major example of large states interfering with markets is the implicit subsidy provided to ‘too big to fail’ banks, but I do not remember neoliberals attacking that much either. Neoliberalism is whatever neoliberals do?!

Or maybe not. I think critics of this UK government miss a trick when they call its failure to defend its steel industry as the actions of a “failed, laissez-faire Thatcherite ideology”. That gives it a kind of respectability it does not deserve. Instead it is a government that seems to have decided that defending the interests of China are more important than its own steel industry. When China announced on 1st April that it was imposing high tariffs on a type of steel produced in the UK, the only thing that looked like an April fool were the actions of the UK government.         

Media myths

At first sight the research reported here is something that only political science researchers should worry about. In trying to explain election results, it is better to use ‘real time’ data rather than ‘revised, final or vintage’ data. But as the authors point out, it has wider implications. Voters do not seem to respond to how the economy actually is (which is best measured by the final revised data), but how it is reported to be. (This does not just matter for elections: here is a discussion of some other research which suggests how the way recessions are reported can influence economic decisions.)

Just one more indication that the media really matters. I would not bother to report such things, if this point was generally accepted as an obvious truth. That it is not, in the UK at least, reflects various different tendencies. Those on the right know that the print media is heavily biased their way, and that this has a big impact on television, so they have an interest in denying that this matters (while funding think tanks whose job is in part to harass the BBC about its alleged left wing bias). Those on the centre left often react negatively to a few of those further left who discount all awkward facts by blaming the media. And the media itself is very reluctant to concede its own power.

As an example, here is Rafael Behr in the Guardian talking disapprovingly about Labour supporters:

“I heard constant complaints about failure to “challenge myths” about the economy, benefits, immigration and other areas where Labour is deemed unfit to govern by the people who choose governments. The voters are wrong, and what is required is a louder exposition of their wrongness.”

What is really revealing about this paragraph is what is not there. We go straight from myths to voters, as if no one else is involved. I doubt very much that many who voice the ‘constant complaints’ Behr is talking about think that voters created and sustained these myths all by themselves.

The discussion of issues involving the economy, the welfare system and immigration among most of the ‘political class’ is often so removed from reality that it deserves the label myth. In the case of the economy, I provided chapter and verse in my ‘mediamacro myth’ series before the election. It was not just the myth that Labour profligacy was responsible for austerity, but also the myth about the ‘strong recovery’ when the recovery was the weakest for at least a century, and that this recovery had 'vindicated' austerity. Given the importance that voters attach to economic credibility, I do not believe I was exaggerating in suggesting that the mediamacro myth was in good part responsible for the Conservatives winning the election.

The media is vital in allowing myths to be sustained or dispelled. That does not mean that the media itself creates myths out of thin air. These myths on the economy were created by the Conservative party and their supporters, and sustained by the media’s reliance on City economists. They get support from half truths: pre-crisis deficits were a little too large, GDP growth rates for the UK did sometimes exceed all other major economies.

Myths on welfare do come from real concerns: there is benefit fraud, and it is deeply resented by most voters. But who can deny that much of the media (including the makers of certain television programmes) have stoked that resentment? When the public think that £24 out of every £100 spent on benefits is claimed fraudulently, compared with official estimates of £0.70 per £100, that means that the public is wrong, and we have a myth. (An excellent source for an objective view of the UK’s welfare system is John Hills’ book, which has myth in its subtitle) As I noted in that post, when people are asked questions where they have much more direct experience, they tend to give (on average of course) much more accurate answers. Its when they source the media that things can go wrong. It is well known that fears about immigration tend to be greatest where there is least immigration.

Of course reluctance to acknowledge myths may not be denial but fatalism. Fatalism in believing that voters will always believe that migrants want to come to the UK because of our generous benefit system because it suits their prejudices. Encouraging those beliefs will be in the interests of what will always be a right wing dominated press. Some argue that myths can only be changed from a position of power. But myths are not the preserve of governments to initiate. According to this, over 60% of Trump supporters think their president is a Muslim who was born overseas. [1]

Myths need to be confronted, not tolerated. The initial UK media coverage of the European migrant crisis played to a mythical narrative that migrants were a threat to our standard of living and social infrastructure (to quote the UK’s Foreign Secretary!). This reporting was not grounded in facts, as Patrick Kingsley shows. That changed when reporters saw who migrants really were and why they had made the perilous journey north. It changed when Germany started welcoming them rather than trying to build bigger fences. These facts did not fit the mythical narrative.

The UK government was clearly rattled when it realised that many people were not happy with their narrative and policies. Myths can be challenged, but it is not easy. Policy has been changed somewhat, but attempts are also being made to repair the narrative: to take some of those who have made it to the EU will only encourage more (a variant of the previous European policy of reducing the number of rescue boats), and a long term solution is to drop more bombs. Such idiotic claims need to be treated with contempt, before they become a new myth that the opposition feels it is too dangerous to challenge. Challenging these myths does not imply pretending real voter anxieties about migration do not exist, but grounding discussion and policy around the causes of those anxieties rather than the myths they have spawned.

Yes, the non-partisan media needs to recognise the responsibility they have, and use objective measures and academic analysis to judge whether they are meeting that responsibility. But more generally myths are real and have to be confronted. The biggest myth of all is that there are no myths.

[1] The probability pedants among you who read the link will know that I’m actually making an assumption in writing this!