Ed Randall replied to Stephen Tall’s Liberal Democrat Voice piece – ‘The 5 myths about the UK economy’ in the comments section of the story. This response is reproduced in this post.
Stephen, I think it’s too easy – I’d call it lazy thinking – to label them myths when each is a fine example of a Straw Man.
I know that your analysis has gone down well with many in our ranks but it is more a case of mythologizing differences over economic policy than getting to the nub of important issues.
On what you call myth 1: I think that you are confusing spin, over broad public spending totals, with the real political and economic cleavage: a political and economic argument about the damage done (to the poorest and most disadvantaged) by changes to the pattern of public spending and taxation.
The serious dispute – amongst serious folk, from all the political parties – is about the distributional impact of changes in taxation and spending. Liberal Democrats need to focus on who is being hurt and who is not…and how badly.
Because so-called Keynesian stabilisers account for such a high proportion of our public expenditure only a fool/spinner would subscribe to the proposition that government can wave a policy wand and transform the ratio of public spending in the economy in a few short years and least of all in an economic trough.
Although they may often fail to put it clearly the anger coming from Liberal Democrats who find themselves at odds with their colleagues in government is about the extent to which ‘we are all in it together’, rather than about crude totals. While you are undoubtedly correct about what has happened to the broad totals I think you have missed an opportunity to raise the quality of the debate and get to the nub of the political differences (which do exist).
On myth 2 what you’ve written also looks more like mythologizing than myth spotting. Serious observers of the economy – from across the political spectrum – know that public expenditure isn’t plummeting. Your ‘myth’ is a fine example of spin – a bit like scoring a goal…but it’s into an open goal; you’re just confirming what almost everyone who lives beyond the world of sound bites knows. It rather looks, to me at least, as though this piece of mythologizing is aimed at enabling you to move smartly on to your ‘myth 3’ – what appears to be the real political purpose of your journey into myth making and myth debunking.
On myth 3 – cutting too far and too fast – it seems to me you have seized on an opportunity for a bit of Punch and Judy. If I may render part of what you say in street lingo: ‘Ed Ball’s got it wrong – ya boo and sucks to him (and to them)’. Unfortunately it is precisely the kind of knock about that frustrates me – Liberal Democrats should be doing their best to get away from it. The big issue is how much more government should be spending (rather than how much it is cutting) AND what that spending should consist of. In truth that is the ground onto which the serious and informed economic debate has moved. Just consider the two Mansion House speeches for example and Martin Wolf’s increasingly strident columns in the FT.
What is particularly worrying – to me at least – is that this is the point where you join the ranks of the myth makers. Apparently each ‘new’ job (what about the ones that have been lost and are being lost?) will cost £370,000. Do you really want to rest your case on nonsense figures plucked out of the air, just like the OBR, which is now so thoroughly discredited and having to constantly revise its estimates to catch up with reality?
The truth is that our party is part of a Government that is cutting – when it should be boosting the economy. It is time for a Liberal Democrat (Keynesian inspired of course) to offer lessons on counter cyclical monetary AND fiscal policy; there are occasional hints that Vince Cable wants to do so, but – for some unaccountable reason – feels inhibited in doing so. Vince has heard of the multiplier, the liquidity trap and the paradox of thrift – even if many of his fellow Liberal Democrats have not.
We face a massive under-utilisation of our national resources. The trough in economic activity, which we entered some years ago, needs to be counteracted in ways that invest for the nation’s future at historically low public borrowing costs. We need to spend (and we can spend) in ways that begin to restore public revenues and help limit growing dependence
on welfare benefits. When we start to climb out of the dead zone then it will be time to cut public sector debt. Ask Richard Koo about the logic of such a strategy – in ‘a balance sheet recession’, take a look at what Bill Martin and Robert Rowthorn of University of Cambridge have recently had say about unused capacity in the UK economy Is the British Economy Supply Constrained? and read Mervyn King’s Mansion House speech really carefully.
When the UK economy starts to climb out of the dead zone (the NIESR have a rather nice monthly chart showing where we are – and have been) let’s get stuck into an intelligent and informed, an unspun, debate about substantial rather than spectral political differences over economic policy making. In the meantime – as we have our own currency and it floats freely against other currencies – we are in a position to cope, as a nation, with adjustments in its value.
We can put our national interest first, and for Liberal Democrats – in the current environment – there should not be too much doubt about where that lies.
If the pound falls further that will help rebalance the UK economy – something as a party we say we want.
Of course the relative value of the currency is of particular concern to very powerful asset holding interest; those interests are arraigned against pursuing policies that hurt ‘the City’. As a Liberal Democrat I want to focus on the balance of interests for the nation as a whole, rather than on smoke screens. Don’t you really want to do the same?
The real myths (the two principal myths) are that government is powerless (before wholesale money markets) and that adding to government debt is equivalent to a private household borrowing beyond its means. These are the myths that your piece give a remarkably good impression of wanting to perpetuate/leave unchallenged. The latter is the myth that Osborne and company believe has a real grip on the British public imagination, based on focus group research. Unfortunately I think Osborne and company are right about that…and we must shoulder some of the blame for its perpetuation. It is a myth that is becoming increasingly difficult for them to square with panic announcements from the Bank of England and the Chancellor himself about what we need to do to stimulate economic recovery in the UK and in the Eurozone.
On myth 4 – you begin by giving yourself an intelligent warning: US politics is different. Unfortunately you go on to ignore that warning. What Obama would like to do and what he has been able to do are two completely different things.
Obama’s people get it – at least they do now. Unfortunately Larry Summers only really got it after he had left the White House. Obama is locked in. What he can do and what he would like to do are very different things. It isn’t a case of a myth…it’s, I am very much afraid, another case of a convenient misrepresentation and inexcusable simplification.
On myth 5 – mythologizing appears to have taken the lead again. There is no-one I take remotely seriously, including those I disagree with very strongly, who subscribes to the proposition that ‘There’s an easy, immediate solution’. This is exactly the kind of nonsense (playground) allegation – about the mind set of those who disagree with us – which gives popular journalism and political speech making their (well deserved) bad name.
There are alternative strategies and there are profound disagreements about them; none of the alternative strategies – that includes the approach I favour – are being promoted seriously by people who pretend they are a magic fix for the British economy. For those who go just a little way below the surface the alternatives currently being advanced by economically and politically literate people come with substantial economic health warnings.
Lining our political opponents up in order to shoot them down because they are dishonest spinners…and doing it by spinning hard ourselves simply devalues the political currency we all have to use.
I am desperate to see more Liberal Democrats challenging economic mythologizing but we have a clear political responsibility to begin by stopping adding to it.
Ed Randall was Liberal/SDP Alliance, then Liberal Democrat, Councillor in the London Borough of Greenwich, 1982-98, and now Senior Lecturer in Politics and Social Policy at Goldsmiths, University of London.
