Getting away with murder

Simon reminds us of the massive costs of fiscal austerity: not just a loss of around £10,000 per household, but tens of thousands of deaths, despair for millions of victims of a harsh benefits system, and the economic cost and social divisions caused by Brexit which would almost certainly not have happened were it not for austerity.

Austerity, then, must be one of the most catastrophic policies in peacetime British history. Which poses the question. How have the Tories – not just Cameron and Osborne but their Cabinet colleagues who are still in government – escaped the censure they deserve? Why are they not universally regarded with abject contempt?

There are, I suspect, many possible reasons. Here are a few.

One is plain deference. We have, wrote Adam Smith, "a disposition to admire, and almost to worship, the rich and the powerful":

We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous. We see frequently the vices and follies of the powerful much less despised than the poverty and weakness of the innocent.

If you went to the right schools, are in the corridors of power, and give the impression of entitlement and confidence you’ll get a free pass. There's a reason why the word "confidence" is in the phrase "confidence trickster."

Secondly, there’s been a handy scapegoat. As Simon says, blame for stagnant real wages and pressures on public services have been shifted from the Tories and Lib Dems onto immigrants.

Thirdly, there’s adaptation and a “devil you know” effect. The costs of austerity crept up on us gradually rather than as a sudden shock, so voters became accustomed to them. And we never see the road not taken. There’s no Jim Bowen telling us “here’s what you could have won.” The costs of austerity are underweighted because there’s no clear contrast in the public mind between actual policy and the feasible alternatives.

Fourthly, there are many political commentators – not just on the right – who don’t think of politics as a matter of real lives and genuine hardship but as a cosy parlour game in which what matters is who’s up and down, and who can present a “credible” image. To them, talk of “sound finance” matters more than human suffering, just as “sovereignty” trumps hard cash.

This is magnified by a perhaps unavoidable bias in even the so-called impartial media. What I mean is that the news is “flat”. A policy that costs 10% of GDP doesn’t get 100 times the coverage of one that costs 0.1% of GDP. A “car crash interview”, a “gaffe” or a minor ministerial resignation are all treated much the same as a genuinely disastrous policy. The BBC is lousy at distinguishing what matters from what doesn’t.

And then there’s class. There is always class. The cost of austerity is, as Simon says, “concentrated on those at the bottom end of the income distribution.” Those at the top end, by contrast, have done OK. Osborne’s “fiscal conservatism and monetary activism” helped to raise share prices and house prices to the benefit of the rich.

And it’s these that shape the public discourse. They have vastly more voice than the poor, and not just because they own the press. Just listen – if you can bear to – to any BBC politics programme: Question Time, Today, Sunday Politics, whatever, and ask yourself: what is the average income of the speakers? It is, quite likely, ten times that of a minimum wage worker. People on six-figure salaries account for less than three per cent of the workforce but, I suspect, well over half of the political voices we hear on the BBC. The interests and concerns of the Bubble are thus grossly over-weighted relative to those of the victims of austerity.

I don’t pretend this is a complete list of the reasons why the Tories have escaped so lightly. But the fact is that they have done so. They have, almost literally, gotten away with murder.

Comments

[windsock]

Well, I regard them all with abject contempt - Cameron, Osborne, Duncan-Smith, Green, Gauke, May, Hammond - and Miliband and Balls who went along with the crap. That is why Labour did so badly in 2015. And members of the community groups with which I am involved also regard them with abject contempt. The problem is that austerity has not been felt in the shires. Yet.

[Luis Enrique]

under what conditions do you ever think there is a case for cutting public expenditure because, in some sense, the public finances are up against a budget constraint?

I think it's reasonable to assume that material public expenditure cuts will always cause hardship and even deaths, so the question is: when should the state (almost literally) commit murder?

I don't have in mind a political choice of the sort "the people have decided they want a smaller state" - I'm interested in whether you think it ever makes sense to say "we can't afford this".

Reason I am asking is that I guess some people might genuinely have thought that in 2010 if we did not cut expenditure then we would be forced into larger expenditure cuts later, in some sort of public financial crisis. In which case the choice would be between more or less murder, but no murder was not an option.

I should probably stress I am not among those people, although I would be uncomfortable claiming the government faces no budget constraint (please MMTers, don't jump in, I know your answer).

I guess it's hard to ask that question without having a view on how high taxes could go, of course some direct money financing could be done, more borrowing of course, and then there's where you choose to cut too, so maybe this is too large a question but I would be interested to know if you'd have chosen some austerity in 2010 (albeit of a less dramatic nature that the Tories did)

[e]

You're letting self styled 'centrists' off the hook – one of the more glaring reasons why – Windsock above is correct (though I would be kinder to ED Miliband). It really is a wonder Labour MPs who argued against Gordon Brown (he said we'd lose a decade), and then in support of welfare cutbacks, don't burn with shame. They should cross the floor to the LibDems where they perhaps belong, or sit in on SWL lectures and learn what they seem not to know.

[e]

@Luis Enrique: You seem to be ignoring pace. Following which, an earlier 2010 question for policy makers on considering where any necessary cuts might fall, would be what's the end point? I think I'm right in saying Cameron is on record somewhere saying “continuing austerity” might be better put as continual transfers from poor to rich – we work (and die untimely deaths) for them yes?

[Matthew Moore]

'Why are they not universally regarded with abject contempt?'

Isn't the simplest and most likely reason because you are wrong?

[Luis Enrique]

e you're right of course, speed is part of the equation too (and presumably safe to assume slower equals less suffering)

[Dipper]

We can only prove this policy has cost lives by comparing to the alternative. Fortunately for us Corbyn, as well as the likes of Diane Abbott and Owen Jones have been very clear that the alternative is demonstrated in Venezuela. So what does the comparison with Venezuela look like?

And my personal choice would be for a north-European model with substantially more private involvement through a state-insurance style model. I believe that would be more efficient and hence save lives. So if the government are to have any blame attached to them for excess deaths in the NHS, surely it is for failing to challenge the notion that soviet-style organisation can deliver efficient solutions?

[Mike W]

'under what conditions do you ever think there is a case for cutting public expenditure because, in some sense, the public finances are up against a budget constraint?'

It is a very good question Luis,for Simon Wrenn Lewis above. I say this, as I am left wondering about this bit of your post:

'I would be uncomfortable claiming the government faces no budget constraint (please MMTers, don't jump in, I know your answer).'

This attitude seems strange here, but is in fact embedded in the Wrenn-Lewis blog too. You may like it. He writes essays about 'understanding the Heterodox economists',even, and all credit to him on this, uses the K word: stating the Economics discipline, as a whole, was close to a Kuhnian shift. He suggests this, on the one hand may well be progress,then, in his next paper concludes there is no alternative: deficit reduction is just a logically deductable rule; its just economics mate!

'Reason I am asking is that I guess some people might genuinely have thought that in 2010 if we did not cut expenditure then we would be forced into larger expenditure cuts later, in some sort of public financial crisis.'

For whatever reason you don't want to discuss your problem/questions in the form of a social science like, sociology, where there is more than one school of thought, but in the form of Neo Lib Econ 101, I will respect the rule you impose on us here.

But thinking of imposing rules, you may like to ask Wrenn Lewis, when you pop over, which branch of enquirey provided the intellectual underpinnings to the, 'you do know, don't you, Government is just like big old household, only a fool says otherwise' public meme, that Osborne and co trotted out?

Just to add, not a MMT 'stormtrooper', never tweet, never posted on his blog, not even a sociologist talking his/her subject. Although it would be intellectual progress if Wrenn Lewis's economics school was consumed by the sociology department of his university :)

[Daisuke Aramaki]

How did the Tories get away with Austerity, or "murder" as you say it? There is an unsettling explanation and that is its unfortunately in our natural survival instincts to endure whatever hardship unless the situation completely overwhelms and incapitates us. The Tories haven't really done anything of the sort yet with their Austerity policies, hence saying that they are "getting away with murder" may be true for a minority, but not for the majority yet enough to cause day-to-day disruption.

Furthermore, most of the lower class see themselves as "temporarily embarrassed millionaires", because they have the ingrained belief that they too can become rich and part of the elite if they only just worked a little harder. Hence the reason why they would rather support/praise tax cuts for the rich but instead vilify an increase in unemployment benefits for example, even though it may ironically help them.

Cognitive dissonance amongst the lower classes is a tough wall to break, which unfortunately can only be swayed by rhetoric, not facts. Austerity is a seductive policy which the average person can intuitively rationalise, and in turn, not bother to do any actual research behind it. Since the Tories have generally been winning the argument for the last 8 years, they would have to do something really disastrous that changes the narrative. But even then, austerity will not be blamed. Its a part of zombie economies that will keep getting resurrected again and again purely for political reasons.

[e]

@Daisuke Aramaki: Your exclusive “us” with “survival instincts” may not be overwhelmed but plenty beyond a minority you acknowledge recognise a damaging direction of travel as others are forced to experience it. On the other hand, a few – generally well-fed contemptuous dullards – will forever remain oblivious until the wall hits them personally..such is life.

[Dave Timoney]

I think it's important to remember that the Tories failed to win a majority in 2010 with their pro-austerity platform, and only secured a majority in 2015 because of the LibDem collapse (and, arguably, a timid Labour). At best, they've fooled some of the people some of the time.

Since 2015, they have relegated austerity as a concern behind Brexit. This obviously wasn't intended to be a cunning distraction, but that is what it has become.

[Ralph Musgrave]

Two further reasons Tories have got away with it: first, the political left world-wide (i.e. not just in the UK) has been forced to go along with the daft "we must balance the books" story because that is a very plausible story. It appeals to lefties and "righties" alike.

Second there is grotesque incompetence at the top of the economics profession. Indeed that's where the real scandal is. That is, the IMF and OECD were spouting nonsense about the need to balance the books at height of the recession. Plus there is a clutch of economists at Harvard (e.g. Kenneth Rogoff and Carmen Reinhart) who were spouting the same "balance the books" nonsense.

[e]

@Ralph Musgave: Accusing economists is a cop-out. God forbid we should expect them all to agree, such a thing could close off more than just a few good books. Its precisely because there was/is abundant, persistent, and loud controversy (but truth be told held within places inhospitable to average voters) that we can and should blame our corrupted mass media. Most particularly the BBC.

[Luis Enrique]

Mike W

I think you are projecting a lot on to me.

I do not think asking not to have explained to me (at length, usually) something I am already very familiar with is a strange attitude.

And when you write "which branch of enquiry provided the intellectual underpinnings to the, 'you do know, don't you, Government is just like big old household, only a fool says otherwise'" in reference to what you call " Neo Lib Econ 101" you are wholly and verifiably wrong.

Here are three differences between government finances and household finances:
1. there is feedback in both directions between expenditure and income
2. the market for government debt differs from the market for household credit
3. governments can finance expenditure by printing money.

you will encounter all three of these ideas in the first year of undergrad econ. You will likely be told that 3. is a bad idea, which you may not agree with.

[Diarmid Weir]

Luis Enrique

The simple answer is that unless you are up against real resource constraints, no 'rationing' of public provision is justified. Indirect indicators of this in a monetary economy will be rising prices and interest rates. If these are absent and people are dying the verdict should be 'guilty'. http://www.futureeconomics.org/2017/05/bad-targets-for-policy-1-government-debt/

[Luis Enrique]

at least you were succinct Diarmid, so I shan't grumble.

[Mike W]

Luis, I am sorry to offend. Perhaps you should say, not so much my 'projection', but YOU did not appreciate my bit of 'theatre' on what you saw as only a matter internal to the economics profession. Fair enough. But the rule thing - my god – the bitch monster -economic rules in the hand of ministers, is the issue Luis. Google ‘functional finance’ or Abba P. Lerner.
But, ‘olive branch’ here. Do you think Wren Lewis above, is correct, Kuhn's, Structure of Scientific Revolutions, 1962-ish, has something to teach us about ‘rules’ and economics today? Better economics as a branch of sociology?
On being 'succinct' I bet my post, minus your quotes about what your rules were, is the shortest 😊 I also meant no offence with the misspelling of our man's name as 'Wrenn', a the now defunct British toy firm. I accidently pressed publish without checking. The rule here Luis will be reply in less than 192 words, even though I don’t know what you have to say on the matter, what the results or outcome of your answer to my olive branch may be. Or you could ignore me.

[Luis Enrique]

Mike, no offence was taken but I am afraid you have lost me. I don't know what I "saw as only a matter internal to the economics profession" or what my rules are

[Blissex]

«unless you are up against real resource constraints, no 'rationing' of public provision is justified.»

Is a large trade deficit a clear-cut indication of "resource constraints"?
(when answering please considering carefully the difference between "general glut" and "partial glut").

«If these are absent and people are dying the verdict should be 'guilty'»

What if the people who are dying are in Sudan or Laos because they don't have access to the NHS "free at the point of service", isn't every UK taxpayer then "guilty" of causing their death?
Or is is that the deaths of people in Sudan or Laos don't matter because they look different?

[Ralph Musgrave]

e,

It is complete nonsense to say that accusing economists is a cop out. The fact is that numerous economists at the top of the profession were advocating austerity during the recent recession.

As for your suggestion that some disagreement among economists is inevitable, that’s almost as daft as saying we can expect disagreement among mathematicians as to whether two plus two makes four.

I.e. any economist who argues for holding back on stimulus during a recession is grotesquely INCOMPETENT.

[Jo Park]

Still looking for evidence that real public spending per head today is lower than the last complete year before the crash ( 06/07 given that recession started in Nov '07 iirc ).
And when that evidence is not forth coming, could people wailing about government spending being insufficient recognise that it's been plenty sufficient, just spent on the wrong people.

[Keith]

No almost, totally successful; just like thatcher before them.

[Keith]

Of course the real issue is not incompetence but one of morality. When is there a real budget constraint? If you are short of nurses and equipment today you have a real constraint today on medical provision. But if you merely have a deficit in trade because you are importing TVs or some luxury goods the state can reduce imports by raising taxes, credit controls, or even tariffs or rationing to increase the supply of medical equipment and train more nurses. Austerity in the UK simply means increasing the consumption of the well off by tax cuts and monetary creation partly financed by cuts to social security and public services and investment. It does not involve any real constraint but an immoral choice.

In contrast the austerity of the Attlee government was actually caused by real import limitations created by the national import surplus and debts created in war time. The way Attlee and his cabinet handled this problem was to cut the consumption of the well off via taxes and rationing, placing the burden as far as possible on to those best able to bear it to loud protests from those people. I would prefer this approach should it be required to that of our recent tory liberal shambles.

[Dipper]

"Of course the real issue is not incompetence but one of morality. "

and we are back to politics as goodies vs baddies.

Surely morality would oblige us to implement the most efficient health service available, which is a continental-style state insurance service with more extensive private sector involvement?