Media radicalisation in the US and UK

 

Perhaps many people outside the United States do not realise how dangerous the attack on the United States Capitol was. The views from outside the Capitol, which is all the media could immediately show, seemed harmless enough. The reality was very different. Five people died, including one policeman. As one Republican described, seeing the faces of those trying to force their way through a police barricade to get into the House Chamber

“I saw this crowd of people banging on that glass screaming. Looking at their faces, it occurred to me, these aren’t protesters. These are people who want to do harm. What I saw in front of me was basically home-grown fascism, out of control.”

We now know that this was a well organised attempt to capture leading politicians. We don’t yet know, as some Democrats have alleged, whether the attackers had inside help from some Republican politicians. What we do know is that the attackers believed that the elections had been stolen from them, and these claims were repeated and acted on by a majority of the Republican politicians even after the Capitol attack. As there is not a shred of evidence that Biden’s election was illegitimate, those Republican members of Congress are guilty of supporting a democratic destroying lie that was behind the attack on Congress.

There are a minority among Republican politicians that would like to break from Trump. Liz Cheney, the House Republican Conference Chair, said

“There’s no question the president formed the mob, the president incited the mob, the president addressed the mob. He lit the flame”.

But only 10 Republicans in the House voted to impeach Trump, while the remaining 201 abstained or voted against. It is very unlikely that enough Republican senators will find him guilty in the Senate. A key question is why.

It should be in the interests of Republicans to impeach Trump, because that is the only certain way to stop him running again in 2024. Republicans shouldn’t want Trump to run again because his behaviour has put off a minority of Republican voters. That was true before the election (Trump did worse than the party in Senate and House races) and it is even more true as a result of his behaviour since. The two seats in Georgia, which looked like going Republican, voted Democrat after the events at the Capitol and Trump campaigned there. Immediately after the attack on the Capitol many Republican politicians disowned Trump.

But then the Republican base fought back. The reason why Republican politicians will not impeach him is the support he still enjoys among Republican voters, and particularly Republican activists. 64% of Republicans support Trump’s recent behaviour, and 57% want him to run again in 2024. As many Republican voters approved the attack on the Capitol as opposed it. There is a history of extreme Republican candidates defeating moderate candidates in primaries, so few Republicans want to upset the Republican base by opposing Trump, even after the attack on the Capitol. Trump himself is ready to finance campaigns against his critics in the Republican party.

So the Republican party are trapped by their pro-Trump base, and there is no obvious way out for those who oppose Trump. The Republican party therefore remains the party that does not respect democracy. A key question for the future of democracy in the United States will be whether voters understand that when they vote in two and four years time. Do they understand that a vote for the Republicans could be the last time they get a real choice in who governs them? As I argued some time ago, the only way you can rescue right wing political parties from the extreme place they have got to in the US and UK is to defeat them time and time again, or to change what is keeping extremism going.

Academic analysis of how the media influences people has normally focused on elections, and all of the studies I have seen suggest a strong influence on voters. I think their influence on party activists on the right is just as important. The traditional and respectable media in the US was clear that there was no evidence of fraud in the 2020 election, and that Biden won fairly. It was the extreme right wing media, including Murdoch’s Fox News but also One America News, Rush Limbaugh and numerous social media outlets, that pushed the idea that Trump had really won.

This media is crucial in allowing many Republicans to believe what Trump was telling them. I think this is the key difference between now and when the last Republican president was impeached. For a long time voters were reluctant to have Nixon impeached, but eventually they agreed it should be done. But back then there was no significant media pretending it was all a giant conspiracy. Back then there were no significant people or organisations with money threatening to bring down any politicians who voted to have Nixon impeached.

I doubt if Biden has the votes to curtail the ability of Fox News and others to continue to radicalise the Republican base, even if he was minded to do so. We therefore have to hope that voters will continue to vote against this Republican party. The danger is that the mainstream media begins to normalise the Republican party once again, and a President with a Senate that blocks many of his reforms finds his popularity falling, and ends up in the position Obama was for six of his eight years.

In the UK we do not have primaries, so the direct power of the Conservative Party base is much less. The way the authoritarian right was able to win power in the UK was through a new party of the right that threatened the hegemony of the Conservative party, and through a referendum. Yet voters still had to be convinced to vote for a Prime Minister that illegally suspended parliament. That happened in part because the media landscape in the UK is much worse than in the US. I thought otherwise when I first started this blog, but that was before the Conservative party started turning the screws on the BBC. While in the US both the Trump supporting press and broadcast media are in a minority, in the UK the right wing press is a majority of the printed media and the BBC finds it difficult to deviate from the lines pushed by the government and that press.

However the situation in the UK may be about to get a lot worse, with GB News headed by Andrew Neil and the Murdoch owned News UK TV. Both new channels look like they are pitching to a right wing audience, and both are funded by people or organisations that have funded other right wing endeavours. Ofcom is supposed to ensure balance in broadcasting, which is why Sky News has never become Fox News. But with comment rather than news outlets like LBC and Talk Radio, Ofcom has taken a less strict view about what balance is.

The danger is that the two new TV channels will try and push that boundary further to the right. This is the context in which totally unfit Paul Dacre’s rumoured chairmanship of Ofcom should be seen. The danger is the creation of a right wing media bubble, where people who read the right wing press do not watch BBC News but one of these two new channels. Coupled with a FPTP system which favours social conservatives, and a Conservative party that exploits that and a social liberal vote which is divided among many parties, if these new media outlets are successful such a right wing bubble could ensure Conservative governments for a very long time.

How the electoral system in the US, and to a lesser extent the UK, is biased towards social conservatism.

 

The UK is often torn between following the US or following Europe. We share a language with the US, and a lot of popular culture. But we also share a voting system that ensures the political right has a heavy built in advantage. The United States may be too far down that road to change, but in the UK there is still hope if only the current opposition leadership see sense.

Once we get over the relief that Donald Trump is no longer President, comes the realisation of just how bad the US election results really were for Democrats. Trump was a Republican, and the Republican party backed him almost without exception. Even in the current ludicrous situation where Trump is refusing to concede, many senior Republican politicians continue to back him.

It should come as no surprise that Republicans have an ambiguous relationship to democracy. Republicans see nothing wrong in distorting district borders to give themselves better election results in terms of seats than their polling numbers deserve. Gerrymandering is endemic, and it gives the Republicans an inbuilt advantage in one half of Congress, the House of Representatives. They also habitually make it hard for democrat voters (particularly black voters) to vote: the long lines we see during US elections are there for a reason.

Recently Republican senator Mike Lee said “Democracy isn’t the objective; liberty, peace, and prospefity [sic] are. We want the human condition to flourish. Rank democracy can thwart that.” This view is not unusual among Republican politicians, it is just that most are not so foolish as to say it out loud.

But Trump’s attempt to cling to power is not the problem. The problem is that the Republican party won seats in the House, and is likely to retain its majority in the Senate. Why the Democrats did so badly in both of these contests is something that will be analysed by others at length later. But I suspect what few outside the US understand is just how difficult it is for the Democrats to win big in the Senate.

As Shaun Lawson explains in an excellent piece, the Senate is constructed such that each state has two senators, whatever its population. To take the most extreme example, Wyoming with a population of 563,626 gets the same representation in the Senate as California with a population of 37,253,956. Now if political support was evenly distributed among big and small states alike this would not be an issue . However it is not: Wyoming has two Republican senators and California has two Democratic senators. The Senate structure influences the Electoral College used to choose a President.

The basic problem with the Senate is that it gives rural and small town states much more political clout than their population warrants. With political polarisation increasingly between liberals and social conservatives (the culture war), and with liberals concentrated in the big dynamic cities and conservatives in the rest of the country, anything that gives the latter an advantage relative to their number is a political problem.

The example of the US senate is far more extreme than anything in the UK, but that does not mean that the problem does not exist here. We saw that very clearly with Brexit, which is essentially a culture war issue. The referendum of course involved the whole population, and we all know the result of that. But if a general election had been held on just that issue, it is estimated that Leave would have won a landslide: 406 Leave | 242 Remain.

We can do a similar calculation for the 2019 election. If you add up the vote totals of parties supporting a second referendum, it was just more than 50%, but of course the Conservatives won a landslide and Brexit went ahead. That partly reflects the fact that the second referendum vote was more divided among different parties than the Brexit vote, but it also reflects the way the social liberal/conservative divide is split among parliamentary seats.

Socially liberal votes are concentrated in the cities. Seats outside the cities have many social liberals as well, but they are typically outnumbered by social conservatives. However you will find very few social conservatives in big city seats. That means that even if social liberals are in a small majority in the population as a whole, they are outnumbered in terms of seats. When it comes to culture war issues, the First Past The Post (FPTP) UK constituency system for general elections represents accidental gerrymandering favouring social conservatives.

An illustration of this is to compare the 2017 and 2019 elections. In 2017 both main parties backed Brexit and the Remain movement hardly existed, so Labour could focus on a relatively popular economic programme and do relatively well. In contrast, the 2019 election was mainly about Brexit, and the seat totals (once you allow for other parties) was not very different from those implied by the 2016 referendum result. 2019 also reflects the difficulty Labour had in focusing on economic issues given a slanted media.

If you think this is just about Brexit, or that Cummings’ departure means that Johnson will reveal his true social liberal self, think again. The Conservatives were using immigration as a weapon against Blair under William “foreign land” Hague, and will continue to try and capture socially conservative voters after Cummings' exit, because it works at winning elections.

One solution is for Labour to try and do what it did in 2017, and effectively match the Conservatives on the key culture war issues. However, that creates two related problems. The first is that Labour’s current base is very socially liberal. The second is that other socially liberal parties exist. The danger is that we see a repeat of what happened in the period before the 2019 election, where voters defecting over Labour’s socially conservative stance leads to lost votes whatever choice it makes. I'm not saying that Labour cannot succeed doing this, but it is hard and divisive. 

Both this problem, and the problem of the socially liberal vote being split among parties, can be overcome by elections determined by some form of proportional representation (PR).

A traditional argument for the UK’s existing first past the post system, and the constitutional system in the US, is that it keeps out political extremes as both major parties strive to capture the centre ground. This has been completely refuted by events over the last decade. It appears, in fact, that both systems allow governments that are politically extreme to capture power.

While there seems little chance that the US will change its system, there is more hope in the UK. It requires a Labour government to be elected that is committed to some form of PR. It has to be a commitment before they gain power, because once elected every Labour government believes it can now become the natural party of government. One advantage of a prior commitment to PR is that it makes cooperation between Labour and other socially liberal parties easier during the election.

There is considerable support for electoral reform within the Labour party. Unfortunately any Labour leadership that thinks it can win power is also a leadership that prefers to remain in power rather than becoming part of a coalition that any subsequent PR election is more likely to bring. While we can appeal to statistics to show the dominance of Conservative governments, political leadership is naturally focused on its own short term.

Why does this government get away with murder?

In the government’s final press conference Chris Whitty, the Government's chief medical officer, said ““I would be surprised and delighted if we weren’t in this current situation through the winter and into next spring.” The significance of that statement cannot be overstated. Deaths in the UK from the virus are currently running 100 every day. (The true total may be higher.) The chief medical officer is saying don’t expect to see deaths running at an order of magnitude lower before the Spring of next year.

I fear we have become desensitized over coronavirus deaths. We keep being told by the government that they are at a much lower level than they used to be, every graph shows deaths are much lower than they were at the peak, resulting in a danger that we regard daily deaths around a hundred as somehow inevitable. But they are not inevitable. They are an order of magnitude higher than deaths in other European countries. Here is a chart of a three day moving average of deaths per day in the UK and some of our nearest neighbours over the past month.

With the possible exception of Sweden, which chose not to lockdown, daily deaths in the UK are an order of magnitude higher compared to our neighbours. If you think this has anything to do with the UK’s population size, there is the same chart per capita.

The only change is that Sweden now leapfrogs over us. From all those who write for The Telegraph and other right wing outlets saying we shouldn’t have locked down I look forward to their profuse apologies.

This comparison shows there is nothing inevitable about a hundred or more people dying from coronavirus every day. Other countries have got numbers much lower, so why can’t we? The answer is that our government has chosen not to cut numbers further. Our numbers are higher because our lockdown was less severe than in other countries, and we started reducing an already weaker lockdown while deaths were still high. The government didn’t protect care homes, and it didn’t protect medical staff. And the government decided to farm out test, trace and isolate (TTI) to their private sector friends rather than expand experienced local authorities. In other words there are a host of government failures that have led to deaths going down more slowly than our neighbours.

What is equally scandalous, but largely unnoticed by the media, is the government intends to do little to rectify the situation. That was the gist of Chris Whitty’s remarks. Let’s put 100 deaths a day in context. On average 5 people die a day from road traffic accidents. Far fewer die on average from deaths as a result of terrorism. But just think of the media publicity each terrorist incident gets in the UK. Coronavirus deaths can be just as accidental, perhaps being in the wrong place at the wrong time and being infected by a complete stranger.

One reason the government gets away with it is by playing off the majority against a minority. People are desperate to get back to normal. Businesses fear for their existence if lockdown continues. It seems churlish to spoil the day by saying we need to wait for numbers to come down further. Another reason is that the media seems obsessed about a ‘second wave’, and fails to notice the first wave is still killing more than a hundred a day. But there is no getting away from the fact that the government by its actions appear rather indifferent to people dying.

Their excuse is that they are saving the economy. This is nonsense. If daily infection numbers remain high, people will be reluctant to resume social consumption. This in turn will threaten the viability of some businesses, and lead to a lot of unemployment as other firms slim down. The government, by ending lockdown too early, is creating an economic crisis that will hit the UK in the second half of this year.

The root causes of this failure are two basic flaws in the government’s thinking. The first is penny-pinching by the Chancellor and the Treasury. I hate the word, but the fiscal space is there to save around 500 lives a week by giving support to individuals and businesses. It was the Chancellor who initiated the first relaxation of lockdown by insisting those who couldn’t work from home went back to work. The second is the Prime Minister’s dislike of lockdown which allowed the UK to flirt with herd immunity at the beginning of the pandemic and is now ending the lockdown with too many people dying.

Yet the government remains ahead in the polls. They have allowed tens of thousands of excess deaths, and continue to allow people to die who needn’t have done so, yet more people would still vote for them than the only alternative, an alternative government that does not suffer from the same flaws as this one. Incredibly 44% approve of the government’s handling of the pandemic. Trump famously boasted that if he shot someone in Times Square his popularity would be undented. This government through their incompetence and ideological blinkers have killed tens of thousands and still voters would put them back into government. If tens of thousands of unnecessary deaths cannot do it, just what will it take to diminish the popularity of this government?

Can we think about politics from Blair onwards in one chart? and what it means for Blue Labour

This is an experiment. You can judge how successful it is. I am trying it because with this election there has been a lot of talk about a revival in Blue Labour to recapture the Red Wall. The Conservatives have been playing to socially conservative voters since at least William (‘a foreign land’) Hague. So why has the strategy succeeded so well in 2019 when it has had at best modest success before now?

We can represent all this in a simple diagram that is now widely used

The precise positions of the party leaders could be the topic of endless discussion, but for this post I just need them to be roughly right, and for the directions of travel to be right. Blair was fairly liberal but moderately left wing. The Tories since Thatcher have always been pretty right wing in economic terms, and where we have seen movement has been mainly on how socially conservative they are.

If people are uniformly distributed around this map, then the centre is the place to be in a two party, FPTP system. Parties do not go there because their ideology/principles, maintained mainly by their members, stops them.

Blair won because in economic terms he was closer to the economic centre ground than the Tories. After 18 years of Tory rule voters wanted better public services. Yet after the Thatcher revolution in the Conservative party the Tories were stuck with taking a right wing stance, so they tried to shift the debate on to social issues where either side was some way from the centre. A focus on immigration was a way of doing that, with the added advantage of being perceived to be pro-worker and pro-public services (the lie that immigration significantly reduced wages and put pressure on public services).

This move had some effect, reducing Labour’s vote. Yet under good economic times (and economic times were good under Labour for ten years) the immigration issue was not enough to defeat Blair. Public services were getting better. As Theresa May put it, the Tories were still known as the nasty party. This is why Cameron tried to portray himself as a liberal conservative. In opposition he tried to move closer to the centre in both economic terms (accepting Labour’s levels of government spending) and social terms.

But everything changed after the Global Financial Crisis. Regrettably, social conservatism has more appeal when times are bad, at least in part because the (incorrect) real wage/public service argument gains traction. Yet at first sight that should have been counteracted by Osborne moving sharply right with anti-Keynesian austerity (spending cuts in a recession). So although Cameron had tried to move nearer the centre on social issues, in economic terms by 2010 he moved further away.

Here is where we have to make an important modification to this apparatus. In a country where one party has a media that is very sympathetic to the right, it can change how its policies are perceived. Cameron dressed austerity in socially conservative terms (the government is like a household). For various reasons that I and others have documented at length, a policy that was sharply contrary to basic economic theory was adopted by most of the media as a necessity, and the media therefore turned it into a sign of good government.

So austerity was not perceived by most people as a right wing shrinking of the state at great social cost (higher unemployment and lower real wages), but as a neutral policy signifying economic competence. Once we allow for this it is clear that for many Cameron was now closer to the centre is perceived economic terms, and so became the government in 2010.

Austerity was so successful that Labour eventually concluded they would have to accept it to some extent. Miliband not only moved nearer the centre in economic terms by accomodating austerity, he also did so by trying to appear more hawkish on immigration (remember the mugs). But Labour do not have a means of influencing perceptions, so their perceived position was their actual position. In addition Miliband was tainted with the perceived incompetence of the Labour government and was not closer to the centre compared to Cameron’s perceived position, so he lost.

Ed Miliband’s defeat in 2015 was narrow but hard for Labour to take. Most of the political commentators (as they always do) said Labour should move to the right, and after the 2015 defeat they began to before the leadership elections. Recall that parties find it hard to move to the centre because their members will not allow it. That post 2015 rightward drift and the apparent acceptance of austerity was too much for the membership, and they voted for Corbyn.

There are more than two parties in the UK. So far we have been able to do the analysis without mentioning them but now they become crucial. Cameron by becoming more socially liberal allowed UKIP to gain votes. His response was to offer a referendum on the EU. Brexit, particularly a hard Brexit, should be an easy fail according to this diagram. It is socially conservative and right wing: trade restrictions are created so that labour and environmental regulations can be scrapped and not to preserve workers jobs. Its true position is close to Johnson’s in this diagram, while staying in the EU is a pretty centrist idea.

Brexit shows more than anything how we have to think about perceptions. What made Brexit a narrow winner when its true position suggested an easy loss? In short a brilliant if totally dishonest campaign that painted it as something it is not. Project Fear, with the help of the media, completely nullified the right wing economic dimension of Brexit, and turned it into a plus by talking about more money for the NHS. Staying in the EU was successfully painted as ultra liberal (letting the whole of Turkey come to the UK). As with austerity, the perceived position of parties and policies is what matters when it comes to winning elections and a referendum.

Now you could say that by allowing perceptions I can put party’s positions wherever I need to get the result I need. But just as we have good empirical evidence that austerity was perceived as economically neutral by much of the population, we also have good evidence that those who voted for Brexit thought it would have no negative impact on the economy or their personal incomes.

That Corbyn came close to defeating May was not a surprise if you look at his position on this diagram, once we recognise that what Corbyn managed to do in 2017 was neutralise Brexit as an issue. Because he remained as close to the centre as May, he gained votes once his policies became clear as a result of his manifesto. Without his portrayal in the right wing press he might have won.

So what changed by 2019? He was not able to neutralise Brexit, because parliament had agreed a deal. He had to choose, and whatever choice he made would lose votes. For that (not good) reason he delayed choosing, which allowed the resurgence of the Liberal Democrats (and Greens) who portrayed themselves as the true Remain party.

Yet Corbyn is still closer to the centre than Johnson. He lost badly partly because Brexit is perceived as neutral in economic terms by many, so Johnson’s perceived economic position has become synonymous with Brexit. However crucially he also lost because the UK is not a two party system. The Liberal Democrats, the SNP and the Greens are all perceived to be in liberal/left space, and together with Labour they won more votes than Johnson and the Brexit party put together.

The lesson of all this is twofold. First, this two-dimensional diagram can explain a lot, once you replace the parties’ actual position against their perceived position generated with a right wing media. Of course it leaves out a lot (the popularity of leaders, which is related to their charisma, the effectiveness of campaigns etc), but it seems like a good place to start. Second, as long as the Conservative party has the monopoly of the right wing/socially conservative vote, left social liberals cannot afford to split their vote among several parties. If Labour ever made a significant move in a socially conservative position, as Blue Labour wants, it would be defeated by yet more votes going to the other left/liberal parties.

Postscript. For an excellent discussion of some of the points made here, see this post by Marios Richards

How the left stopped being a party of the working class

I’ve been meaning for some time to write about a recent paper by Thomas Piketty, which looks at what characteristics influenced voters to vote for the left or right in France, the UK and US since WWII. (Simon Kuper has a nice little summary with a great title.) Here is a chart that shows how after WWII educated voters tended to vote right, but now tend to vote left (even after controlling for income, age etc - see box)

In all three countries, the number of educated voters increased in all three countries, reflecting in part the need for higher skilled workers.

In contrast (and if we exclude the most recent elections in France and the US) the income profile for voting has not changed very much over time: poorer voters are more likely to vote left than richer voters, particularly if we control for education, although poorer voters are increasingly unlikely to vote. So the shift in voting patterns among educated voters demands an explanation and has fascinating implications.

Unfortunately the paper does not focus on this question, but it does suggest that part of any explanation may reflect the fact that more educated voters tend to have more liberal attitudes in general, and more liberal attitudes to migration in particular (see here for example). The positive correlation between social liberalisation and education is well documented (see [1] for example), as was evident in the Brexit vote.

I suspect there are other factors as well. There are possible reasons why the interest of human capital (as economists would call it) are different from the interests of business or financial capital, or no capital at all. For example a more meritocratic education system suits them better than one where income buys education, so they are likely to be stronger supporters of a state based education system (or indeed they may be part of it). They will also be more likely to consume state subsidised culture. More generally there may be a wish to break down traditional class based networks and replace them with more meritocratic structures. On the other hand because human capital generates an income, they will be less keen on tax based redistribution than workers. All this may create what some might call an education ‘cleavage’.

The implication for parties on the left are that party members were increasingly from the educated middle class rather than working class, and this has gradually changed the structure, platforms and leaders of left parties. Together with the decline in trade unions, the counterpart to this will be a less visible representation of the working class. Piketty describes this as the emergence of the “Brahmin Left” elite, which can be compared to the “Merchant” elite on the right.

A consequence may be that the political elite as a whole becomes less interested in redistributive policies that used to favour the working classes, and helped continue the decline in wealth inequality before the 1980s that Piketty has famously documented elsewhere. That in turn makes it easier for the right to capture parts of the working class vote, particularly when these voters have socially conservative views. A recent book by Mark Bovens and Anchrit Wille takes a very dim view of these changes.

There is a less pessimistic take on all this. As right wing parties have increasingly relied on pushing socially conservative/authoritarian/anti-minority policies to gain votes, left wing parties find that this combined with wealth/income protection is an unbeatable coalition for their opponents. (Perhaps this helps explain the decline in so many centre-left European parties.) The only way to beat that coalition is to rediscover economic policies that help the working class.

This long paper has other interesting results. In France, like the UK, public attitudes have seen a decreasing hostility to immigration over time. He also notes that the right’s socially conservative turn has helped to sustain an almost complete loyalty to the left from Muslims in the UK and France, and from blacks in the US. Finally a parochial point of interest, which is also a point that Torsten Bell has stressed recently.

Piketty notes that the dominance of the left among the young in the UK in 2017, as well as being unprecedented in the UK, was higher than in any of the two other countries at any point in time. It may be that this is part of a trend since 1997, but it could be exceptional because of Brexit, which amounts to the old taking opportunities away from the young.

[1] Education-based group identity and consciousness in the authoritarian-libertarian value conflict. / Stubager, Rune. In: European Journal of Political Research, Vol. 48, No. 2, 2009. .

How the media helped turn the worst recovery in 100 years into a strong economy in stable hands before the 2015 election

Are you exhausted and exasperated by Brexit? Do you despair when our foreign secretary compares the EU to the Soviet Union just because the EU will not change their rules to give us what we want? Do you wish that we could go back to how it was before Brexit? If so, I wrote my forthcoming book “The lies we were told” just for you. (It can be ordered at a 20% discount here, rising to 35% if you join the publisher’s mailing list.)

One of the posts in the book, written at the beginning of March 2016, anticipated a lot about the forthcoming campaign and how it would play out. I wrote

“The EU referendum is therefore another test of how much economic expertise can influence public opinion. As regular readers will know, we have been here before, and not just on austerity.”

One of those examples was the 2015 general election, which forms one of the nine chapters in the book.

As background, here is I think the best illustration of how poor the UK recovery from the 2009 recession was (from The Resolution Foundation).

As we can clearly see, the post-2009 recovery was slower than anything we have seen in the last 100 years. Now sometimes governments can be unlucky, as the economy follows events that they cannot control, but the recovery after the Global Financial Crisis was not like that.

In this chart, using OBR data, I compare the cyclically adjusted primary balance during the last three recessions.

Take the ‘ERM recession’ first. Fiscal policy did very little until 1992, when both fiscal and monetary policy became expansionary, leading to a strong subsequent recovery. (Fiscal policy moving in a downward direction is expansionary and vice versa.) This is a classic expansion, with both fiscal and monetary policy providing a stimulus together.

The ‘monetarist recession’ is more complex. During 1982 interest rates were reduced steadily from nearly 15% to 10%, but famously the April 1981 budget led to a sharp fiscal tightening (leading to the famous 364 economists’ letter). Contrary to right wing and media myth, the economy’s response to this contradictory mix was to grow at around the trend growth rate, so not a true recovery (by which I mean growth above trend, so we catch up with that trend). We only got a true recovery from 1983, when fiscal policy relaxed alongside monetary policy.

This is textbook stuff (hence the 364 letter). In early 2009 UK interest rates hit their lower bound, so fiscal expansion was needed more than ever, and that is what happened under Labour. But the Conservatives bought the myth about 1981, carefully cultivated by the Institute of Economic Affairs and swallowed by the media, that the 364 economists had been wrong, so in opposition they opposed the 2008/9 and 2009/10 expansion and in government started a fiscal contraction, a contraction that only came to an end in 2017.

The inevitable consequence was the weakest recovery for a 100 years. Combining a weak recovery with a large 2008 depreciation of sterling meant incomes literally stagnated for 7 years, as another chart from the Resolution Foundation shows. The Conservatives did not admit their mistake and pledge not to do it again, but preferred to create a false narrative instead.

The lie was the story of a profligate Labour government and how the Coalition government had been forced to clear up the mess. Voters bought it. Coming into the 2015 general election, polls suggested the economy was the Conservatives' strong point. They did so in part because the media never challenged the story, which was obviously false from just a brief inspection of the data. Rather than look at the data they preferred to talk to City economists (and not academics), and most City economists have an interest in backing a Conservative line and talking up the power and threat from the market. In that sense the media played a key role in winning the 2015 election for Cameron, which of course was the only way a referendum could happen. Evidence to back up all this is in the book. 

The Conservative party has never acknowledged their austerity error, and so we have every reason to think they would do the same again if another recession came along. Much of the media still prefer to let politicians make any nonsense economic claim they wish, and they rely on other politicians to challenge them rather than confront them with the facts or expert consensus.  

Having leading politicians spin a disastrous economic policy with lies and without challenge from the media did not start in 2016, but in 2010. Elsewhere in the book I try and explain why politicians on the right went off the rails in 2010, and also why the media facilitated a majority of the country going with them

Nominal wages are not real wages, and why it matters in the UK

This post is just an extension of a recent tweet from Chris Dillow. I think it is worth writing more about it because it reflects on an issue that is widely misunderstood, by some on both the left and the right. Here is the share of employees compensation and corporate profits in total income since 1948. Note that everything below is about the UK experience: the US is different.

I have gone back to 1948 to show that the wage share can change, and has fallen from the 1950s until the end of the century, from 60% to 50%. But that has not been accompanied by a rise in the profit share, which has stayed pretty close to 20%. The missing pieces, that are the counterpart to the fall in the labour share over this period, are income going to indirect taxes, self employment and unincorporated businesses.

The key point I want to make is that neither the wage share or the profits share has changed over the last 15 years. This busts two myths that you will often see.

Myth 1 Immigration has kept real wages low.

There was a large increase in non-EU immigration at the end of the 1990s: if anything the wage share increased at the same time. The second large increase in immigration, this time from the EU, was from 2004, and there was no noticeable impact on the labour share. Immigration may have been depressing nominal wages, but those lower nominal wages were allowing lower output prices, leaving real wages unchanged. This is consistent with the econometric evidence that immigration has no significant impact on real wages.

This evidence is often dismissed in two ways. The first is that it does not correspond to workers 'lived experience'. But that experience reflects either the impact of immigration on their own nominal wage, or falls in real wages which reflect the lack of productivity growth and sterling’s depreciation. It is just possible that immigration might have discouraged firms from investing in higher productivity techniques, but it is rather more likely that immigration has allowed firms to produce in the UK who would otherwise have produced abroad. For other reasons why intuition on immigration may be misleading see here.

The second way that some people argue that there ‘must be’ a link between real wages and immigration is to invoke simple supply and demand. That is just fallacious: immigration shifts the labour supply curve but it also shifts the demand curve. A slightly more sophisticated argument is that the demand curve does not fully shift to compensate for greater supply immediately after an increase in immigration because it takes time to invest, but if that was the case we would see a temporary fall in real wages and a rise in the profit share following periods of immigration, and we do not.

Myth 2: Real wages have fallen because labour is now weak compared to employers.

Since the Global Finance Crisis (GFC) and subsequent recession, nominal wage growth may be slow because the labour market is weak, but the data shows that employers are not taking advantage of this to increase the profit share. Low wages are being passed on into lower prices.

There are two main reasons why real wages are currently low: almost non-existent productivity growth since the crisis and the depreciation in sterling which has raised the cost of imports and therefore consumer prices.

Note that I am not at all saying that the labour market is not as weak as it appears. In many areas conditions of employment seem to have deteriorated since the GFC. What I am saying is that real wages depend on prices as well as nominal wages, and in the UK at least there seems to be sufficient pressure on firms to pass on low wages into low prices, leaving the relationship between real wages and productivity unchanged.

It is also important to point out that the wage share is different from median wages. As the study by Pessoa and Van Reenen I examine here shows, median wages from 1972 to 2010  declined relative to the average compensation because of rising non-wage benefits and rising inequality. A good part of this rising inequality reflects incomes of the top few percent.  

It is often difficult to convince those on the left that weakening labour power over wages can be a good thing, if lower nominal wages are passed on to lower prices. It can be a good thing because it allows the central bank to raise demand and therefore output by more than they otherwise could while keeping inflation stable. It reduces the sustainable unemployment rate: the NAIRU. Furthermore lower wages are more likely to be fully passed on into lower prices if the goods market is highly competitive, and that is more likely to happen if the economy is open to overseas trade.