Lucky Osborne

Whilst I was away, the Times named George Osborne as its Briton of the year because he's "set the terms of political debate." This corroborates my prior belief that political reputations depend heavily upon luck.

To see what I mean, imagine that we hadn't seen productivity stagnate in recent years and that instead GDP per worker since the 2010 election had grown at the same 2.1% annual rate that it had grown by in the previous 30 years.

In this scenario, if output had grown by the same rate that it actually has since 2010, there would now be 1.85 million fewer people in work than there actually are, and employment would be 869,000 lower than it was when Osborne became Chancellor. If half those 1.85m were measured as unemployed, there'd now be 3.3 million unemployed - a record level.

This alternative world wouldn't be all bad: it would be one in which productivity growth had raised real wages and so there'd be no cost of living crisis. Nevertheless, it would be catastrophic for Osborne (though given the psychological cost of joblessness, this would be the least of our concerns.) His prediction that the private sector would create enough jobs to offset public sector cuts would be proved false, and the anti-austerians predictions of three million-plus unemployed would be correct.There'd be no "partial vindication" of Osborne. He'd be obviously wrong.

However, the fact that he has escaped this fate is pure luck. The causes of the productivity stagnation are obscure, but nobody believes Osborne's conscious policy decisions loom large among them. Neither Osborne's supporters nor detractors think he is responsible for flatlining productivity. And they are right.

In this sense, insofar as Osborne still has any sort of political reputation, it is thanks to the good luck of stagnant productivity.

In saying this, I don't mean that Osborne is uniquely blessed. I suspect that Thatcher's high reputation on the right is due in part to luck. And for years New Labour had the good fortune of a mostly benign global economic environment. Instead, my point is merely that in politics - as in life generally - luck plays an enormous role. Curiously, the rich and powerful, and their lackeys in the press, underplay this fact.

Comments

[Steve M]

Is it not possible that the models used by Osborne correctly predicted the productivity stagnation, even if not publicly expresded, while those used by the anti Austerians did not? Why assume it is just luck?

[chris]

@ Steve M - if Osborne did predict the productivity stagnation, he didn't tell anyone, not even the OBR. In its June 2010 forecast, it predicted productivity growth (GDP/employment) of 2% in 2011 and 1.8% in each of 2012 and 2013. See table C2 here:
http://budgetresponsibility.org.uk/wordpress/docs/junebudget_annexc.pdf

[Andrew]

Whilst not wishing to diminish the point about the importance of luch, isn't it a bit weird to use a counterfactual where you hold output constant but move productivity growth and allow unemployment to vary?

If productivity growth per worker had been better, I would have though a natural all-other-things-being-equal counterfactual would have yielded a stunning boom!

After all, output comes from each worker. Worker productivity is not caused by their aggregate output, it is merely estimated from it.

[Keith]

Why is this good? Low wage growth will surely lose the Tories votes.

Thatcher threw millions out of work but the employed enjoyed wage growth. The failure to increase living standards is a recipe for discontent.

The approval of a tame tory loving paper is no recommendation it is to be expected; the usual rich men back scratching each other. Covering up the lies.

[Deviation From The Mean]

Osbourne isn't the Briton of the Year because he reduced the unemployment figure!

He is Briton of the Year because he attacked the public sector and those at the very bottom of the luck ladder, which has been the goal of the Tory boys for nigh on a decade or more now. Note well, long before the 2007 crisis.

All this without any mandate whatsoever, so he also gets brownie points for sticking 2 fingers up to democracy.

The Anti Austerians claim that Obsourne actually delayed any recovery, made it weaker than it should have been and what he has created are the conditions for the next big crisis! But I couldn't possibly comment!

The next election will be interesting, the business world (CBI) are claiming that everything is hunky dory and soon wages will rise, so don't worry people that the wealth at the top has increased relatively because soon, very soon, you will be joining us!

Meanwhile, as I look along the high street and at the TV ads all I see is cash converters and discount stores. Welcome to the new normal.

Oh and what will become of interest rates I wonder?

[FromArseToElbow]

The Times could hardly be accused of being ahead of the curve. Osborne's true success in setting the terms of political debate came in 2009/2010, when he crafted the Tory strategy of claiming that Labour negligence was to blame for the banking collapse, and that the clear and present danger was government debt.

While he could point to the Austerian consensus in the EU for backing, his real luck was in having a supportive press that relished the opportunity to attack the public sector and the poor. Plus ca change. They are now willing to tub-thump that happy days are here again.

The over-use of the term luck implies arbitrary fate. The reality is more often structural bias (e.g. the "luck of birth"). While there is no single smoking gun to explain the collapse in productivity, it is pretty clear that productive capital investment remains too low, which is more likely to be cause than effect.

Ultimately, this stems from the privileged position of the City, which is a deliberate political strategy, clearly evinced in the decisions taken by Osborne & co and the adulatory response of the conservative media.

[gastro george]

The Times naming George Osborne as its Briton of the year says more about the Times than anything else.

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