We've had the same myths about the UK's economy; the need to 'stay within our budget', reduce our debt, not spend any more money on public services, repeated over and over again in discussions on this forum in the past few weeks. I am asking if they are actually factual.
We have had 'austerity' imposed on us since the tories came to power in 2010, driven by an obsession with reducing the deficit, an objective which was promised, but deferred in budget after budget because it wasn't actually achievable. It even featured in Theresa May's recent ill fated manifesto. But now May has done an about turn and is promising an end to austerity.
This is from a long but easy to read article on 'austerity' by Simon Wren-Lewis. It demolishes many of the myths we've been living with for years, but I thought this extract about the role of the media in promoting 'austerity' was particularly interesting. Note the comments about the relative expertise of economists.
It will be some time before economists settle on a number for the total cost of the austerity mistake, but a conservative estimate would be that, in total, resources worth around 5 per cent of GDP will have been lost for ever by delaying the recovery. That’s about £100 billion, or £1500 for each adult and child in the country.
If any other government department had wasted that amount, there would be a huge outcry from the media. Yet when it comes to macroeconomics, the media seems to play by different rules. It continues to misrepresent economic ideas even though it has access to academic expertise. Why is this? It’s true that economists will always disagree, and there are some academic economists who will faithfully stick to a party political line. But there can be no doubt that at key points a clear majority of academic macroeconomists would dissent from mediamacro. For example, less than 20 per cent of academic economists surveyed by the Financial Times thought that the recovery of 2013 vindicated austerity, yet the paper’s leader took the line that it had. Part of the explanation, I think, is that we have a particular problem with macroeconomics, which is the influence of economists working in the City. There are some wise and experienced City economists, but there are also many with limited expertise and sometimes fanciful views. Their main job is to keep their firm’s clients happy, and perhaps to help traders improve their predictions of what might happen in the markets in the next few days. Their views tend to reflect the economic arguments of those on the right: regulation is bad, top rates of tax should be low, the state is too large, and budget deficits are a serious and immediate concern. And part of their job is publicity, so they are readily available when the media needs a reaction or a quick interview. There is obvious self-interest here: the more market reaction is thought to be important, the more the media will want to talk to City economists
Of course it is also the case that large sections of the print media have a political agenda. Unfortunately the remaining part, too, often seeks expertise among City economists who have a set of views and interests that do not reflect the profession as a whole. This can lead to a disconnect between macroeconomics as portrayed in the media and the macroeconomics taught in universities. In the case of UK austerity, it has allowed the media to portray the reduction of the government’s budget deficit as the overriding macroeconomic priority, when in reality that policy has done and may continue to do considerable harm.
www.lrb.co.uk/v37/n04/simon-wren-lewis/the-austerity-con
Dated 2015
It must be so frustrating for economists to be continually pointing out where policies are based on completely wrong assumptions only to have their informed views ignored by the media from which most people seem to get their ideas about the national economy.
Another week, another Tory MP sex scandal!
Nicola Sturgeon’s husband Peter Murrell re-arrested over SNP finances.
