I fully share the
anguish of so many people over the madness
of Brexit. All the evidence points to not leaving the EU, and the
reasons given for leaving are generally vague or false. The vote on
which this crasy policy is based was deeply flawed.
As an economist I can clearly see the damage Brexit is doing
and will do. While I could see the rationale for Labour’s
triangulation strategy over Brexit before and immediately after the
2017 election, during 2018 as public opinion began to move it stopped
making sense in electoral terms, and of course their policy often
appeared unicorn-lite or, more realistically, close to a policy of
Brexit in name only which only gives away control. The new party that
will surely follow the formation of the Independent Group, if it
continues to promote a People’s Vote, should be quite attractive to
people like me.
But I’m in the
more uncommon position of having been in the similar place twice
before in the last decade. The reason is very simple. I have been all
my life a macroeconomist, and for the last twenty odd years an
academic. That gave me a perspective on 2010 austerity and the 2015
election which was largely absent from the popular debate. As a
result, I can see that Brexit was not an isolated event, the result
of one bad decision by Cameron, but part of a pattern suggesting deep
problems with how UK politics works.
Understandably, most
people are against austerity because of the impact it has had on
those in need who depend on the NHS, local authority care and the
welfare state. They are also now seeing its impact on schools, on our
justice system and much more. But that still leaves open the idea
that somehow austerity was necessary for the good of the economy as a
whole. As Conservative politicians never tire of saying, they came
into office in 2010 with the country on the edge of a crisis created
by the previous Labour government. As an academic macroeconomist I
know that is completely false.
Pretty well every
first year undergraduate textbook tells students why in a recession
you need an expansionary monetary and/or fiscal policy and you should
ignore the deficit. When interest rates run out of road, as they had
in the UK by 2009, then fiscal expansion was vital. One of my own
specialist fields is fiscal policy, so I also know that state of the
art models also suggest exactly the same thing as the textbooks. The
insights of Keynes that have been accepted by most academics ever
since remain valid today. It is this received wisdom that the UK
followed in 2009 before the Coalition government came into power.
Just as many feel
that Brexit makes no sense, I felt that austerity which started in
2010 went against all our knowledge and evidence. The one doubt I had
was that an irrational financial market might suddenly stop buying UK
government debt, but this was dispelled when I realised the Bank of
England’s unconventional monetary policy of buying government debt
to keep interest rates low (Quantitative Easing) would quickly kill
any panic. That analysis begins my book
based on the blog I started as a result of austerity.
Just as both main
political parties now support some sort of Brexit, so both at the
time supported austerity, with the argument being over how much, how
quickly. Neither the Coalition nor the opposition argued for the
right policy, which is to delay fiscal consolidation until the
recovery was underway and the Bank started raising interest rates.
Experts on trade or the EU Brexit negotiations are infrequently heard
in the media, but they were almost never seen over austerity.
My point in making
these parallels is that evidence based policy making on major issues
didn’t end with Brexit, but six years earlier with austerity. In
both cases these are policies that create great harm to all, and
acute harm to many. I calculate austerity cost the average household
£10,000, and NEF using similar methods get an even larger
figure. No government since the war, including those of Thatcher, has
embarked on prolonged austerity during an economic recovery, and so
it is no surprise we had the weakest recovery for centuries.
Brexit is therefore
not the exception in a period of otherwise normal government. If you
ask why Brexit happened, it was not that David Cameron made one
mistake in an otherwise capable period as Prime Minister. There is
evidence
that austerity encouraged the growth of UKIP and by implication the
Brexit vote. I remember often hearing people in areas that are
described as ‘left behind’ dismissing the economic impact of
Brexit by saying things could not possibly get worse than they are
now. But austerity was not the main cause of why Brexit happened.
To see what was we
need to look at the second period where I felt similar to how I feel
today about Brexit, and that was the run up to the 2015 general
election. Political commentators had decided from polling that the
economy was the Conservative’s strong point, indeed perhaps their
only strong point going into that election. To a macroeconomist that
made no sense. Not only had we had the worst recovery for centuries
but real wages had suffered their worst fall since records began. The
government extolled record employment growth, but given the slow
recovery they were in reality just celebrating the flatlining of UK
productivity that was a key factor behind falling real wages.
Economists like
David Blanchflower, John Van Reenen and myself set out just how bad
UK economic performance had been over the previous 5 years, but once
again expertise was ignored. As far as the media were concerned
reducing the deficit had become the most important priority for the
economy, and that was how they judged politicians. You will not find
that in any textbook either, but the media had either sold or been
sold a narrative and they didn’t want to know any different.
That narrative said
that the Coalition had brought down the deficit that the previous
government had allowed to grow out of control. Of course in reality
the worst recession since the Great Depression of the 1930s caused by
a Global Financial Crisis had pushed up the deficit, but the media
had pushed, or accepted, the idea that the Coalition was clearing up
the mess that a profligate Labour government had left. I had written
a paper
on fiscal policy under the Labour government and there was no way
they were profligate, but because Labour didn’t challenge the
accusation the media accepted something as true that was obviously
false.
To the media the
fact that the Conservatives were thought to be strong on the economy
only confirmed their narrative. In reality the causality was the
other way. There is a growing literature
identifying the power the media has to influence elections and shape
popular narratives. The 2015 election was a precursor for Brexit in
three important ways. First, and most obviously, the media helped
elect a Conservative government that was committed to an EU
referendum. Second it showed that politicians could tell huge lies
and get away with it. Finally it showed the power the media had to
influence a popular vote.
Brexit would not
have been possible without the UK media. A large part of the press
pushed anti-EU propaganda, and the broadcast media balanced the view
of the overwhelming majority of experts against the lies of a few.
Viewers desperately wanted information, and the broadcast media gave
them politicians rather than experts and balance rather than facts.
Fear of immigration was important in deciding how many people voted,
and it was the right wing press that had since the beginning of the
century pushed
countless negative stories about immigrants. Although austerity may
have played a role, it was the media that played the major part in
giving us Bexit.
Although the
Independent Group (IG) may have a more attractive policy on Brexit,
and they will talk
the talk on a broken politics, the group is made up of
politicians who either believe their government did the right thing
over austerity, or who in opposition urged accepting
Osborne’s policy. Deficit obsession is damaging to the economy, but
it also shuts the gate to so much else that needs to be done. It
means the IG will be unable to undertake the far reaching and radical
industrial policy that is needed to tackle the huge regional
inequalities within the UK, and help those left behind that voted for
Brexit. It means no Green New Deal. Although so far policy light,
they have pledged to keep our current ‘free media’, which will
mean they would do nothing to mend much of our dysfunctional press
that acts as a propaganda vehicle for their owners, or a broadcast
media that balances truth with lies and is largely expert free.
Brexit was not an
aberration in an otherwise well functioning UK democracy, any more
than Trump was in the US. They are symptoms of a deeper malaise. I
cannot put it better than Anthony Barnett when he says
if all you want to do is stop Brexit and Trump and go back to what
you regard as normal, you miss that what was normal led to Brexit and
Trump. Unless we have politicians in power who understand the need
for radical change, the snake oil sellers who sold us Brexit and US
voters Trump will happily carry on plying their wares.
