Politicians and dodgy evidence – Cameron & Osborne and Reinhart & Rogoff

In 2010, David Cameron and George Osborne told us that there was no alternative to a program of austerity on a scale not seen since the 1920s. They said that it was necessary to tackle the deficit and debt first in order to get growth later.

 

The evidence is mounting, almost daily, that austerity is not working. Targets have been abandoned. There is bad news on unemployment, inflation and the standard of living. The country is on the brink of a possible triple dip recession. The IMF calls for Plan B. The UK’s credit rating has been downgraded twice.

As for the defining goal of the government, deficit reduction is stalled while the debt rises inexorably. Before the Crash of 2007/8, the UK’s debt was 36.2% of GDP, which was not excessive by historical standards. After the Crash the debt increased dramatically so that it was 53.4% of GDP by May 2010 but at that time the economy was growing. The economy has hardly grown at all since May 2010 and the debt now stands at 73.5% of GDP. Remember how the Tories used to shout down any critics as “deficit deniers”? These figures explain why they don’t dare do that now.

Cameron and Osborne always have an excuse when things go wrong. They often blame the poor state of the Eurozone which is the UK’s main export market. This argument has a number of flaws. Principally, the Eurozone is following the same policy of austerity. It is not working there either.

Those who said in 2010 that the Deficit Reduction Plan would prove destructive and self-defeating are being vindicated. The Tories economic policy has things in precisely the wrong order. It makes more sense to get growth first and that will ensure you can tackle the deficit and debt later.

The number of supporters for the policy of austerity is shrinking. Regrettably, however, much of the British press seem intent on sticking with Cameron and Osborne until the bunker at the end. Perhaps they confuse what is good for them with what is good for the country. The proprietors, editors and commentators across the national media all belong to the top 1% who, almost alone in the country, are doing as well as ever. 

When Cameron and Osborne said that there was no alternative to austerity they were wrong. But were they guilty of deliberate lying – “conspiracy” – or did they really believe they were telling the truth when they were not – “cock-up”?

Some people have always suspected that Cameron and Osborne cynically used the pretext of deficit reduction to give them political cover to dramatically cut the size of the State. This has been the dream for some Tories for decades. The problem for them has been that the British people value their schools, hospitals, libraries, police, army, parks etc. This is why the Tories did not dare seek an election mandate to cut the State. They are doing so under the guise of deficit reduction.

However, if one gives Cameron and Osborne the benefit of the doubt and say they are guilty of cock-up rather than conspiracy, then how is it possible that they could make such a terrible mistake?  

The most likely explanation is that they allowed their judgement to be distorted by confirmation bias. This is the tendency for people to subconsciously select evidence which seems to support their pre-existing view and reject evidence which undermines it. We all do it, of course, but people entrusted with great power have a particular responsibility to guard against it.

There was an abundance of evidence back in 2010 that their policy of so-called Expansionary Fiscal Contraction would be self-defeating, but Cameron and Osborne rejected it all.  Among the most important warning voices were those of Nobel Laureates Joseph Stiglitz and Paul Krugman and the Financial Times commentator Martin Wolf.  

When Cameron and Osborne found some evidence that supported their pre-existing views they seized upon it. In January 2010, two Harvard professors, called Carmen Reinhart and Kenneth Rogoff presented a paper called Growth in a Time of Debt. It said what Cameron and Osborne wanted to hear. Osborne on many occasions since then has cited this paper as providing intellectual justification for his austerity policies. 

From the beginning there were many criticisms of Reinhart and Rogoff’s paper which argued that high debt destroys growth. One obvious criticism was based on what happened in the   UK after World War Two. In 1945 the UK’s debt as a percentage of GDP was over 200%. This did not prevent there being high levels of growth which meant that both Labour and Tory governments were able to steadily reduce the debt to acceptable levels.

Last week, in an extraordinary development, a Ph.D. student called Thomas Herndon forced Reinhart and Rogoff to admit that their paper, which had been so influential, contains major errors. The professors had even missed out some important data altogether.

The professors have had to make a humiliating apology: - “…It is sobering that such an error slipped into one of our papers despite our best efforts to be consistently careful. We will redouble our efforts to avoid such errors in the future...”  

There are parallels between the behaviour of Cameron and Osborne in 2010 and Tony Blair in 2003. The evidence in support of there being no alternative to austerity was as thin as the evidence of there being WMD in Iraq. 

Some people think Blair deliberately lied to the British people in 2003, just as some think the same of Cameron and Osborne in 2010.

However, if one takes what Blair now says at face value, he did not deliberately lie as he genuinely thought Saddam had WMD.  If so, it seems likely it was his own confirmation bias which clouded his judgement. Blair rejected all the evidence that there were no WMD and, in particular, he seized on the evidence of an Iraqi codenamed Curveball which told him what he wanted to hear. This was despite the fact that there were clear warning signs that Curveball might not be reliable. 

Curveball provided dodgy evidence which a politician relied on to do what he wanted to do anyway. For Curveball 2003, should we read Reinhart and Rogoff 2010?

                                                                                                                              No. 302.

The Coalition, the rich, the poor and the Bible

The day after the Coalition’s formation in May 2010, I sent an email to some friends saying that the Coalition was going to adopt a biblical verse as their slogan. I said it was from the New Testament - Matthew 13:12.

When people looked up the reference they found it read: -

“For whosoever hath, to him shall be given, and he shall have more abundance:   
 but whosoever hath not, from him shall be taken away even that which he hath.” 

It was, back then, meant as a joke.

Almost three years on, the sentiments in the biblical verse are not a joke any more. In this month alone, the Coalition has shown conspicuous generosity to those who are already very rich. The richest 1% of taxpayers have had very substantial tax cuts - 13,000 of them are to benefit by more than £100,000 annually. The Queen, one of the richest people in the world, has had a £6 million annual pay rise from the taxpayer. Millions of pounds of public money will be spent on the funeral of Margaret Thatcher, without there even having been a parliamentary vote. 

When challenged on the cost of the Thatcher funeral, William Hague said that the country could “well afford it”. It can also well afford to treat its poorest and most vulnerable with decency and compassion.

The depredations visited on the poor increase daily. The welfare bill is being cut more drastically than at any time since the 1920s. The government justifies its actions by a cynical mantra. They say that the way out of poverty is to get a job but they ignore the facts that     a) most people in poverty are already in jobs on very low wages and  b) many affected - such as all children and some of the disabled - are not capable of work and c) in many parts of the country there are no jobs available.

Meanwhile the Coalition and its media allies suggest that the poor deserve their poverty and the rich deserve their wealth. The most cursory examination into the causes of poverty and wealth in the UK would reveal that this is a myth. For most people, it is the luck of the circumstances of their birth which is by far the greatest determinant of their likely future income – not their virtues or vices or how hard they work. The hardest working group in any society is the working poor.

The bedroom tax is one of the cruellest of all the Coalition’s reforms. The Department of Work and Pensions’ own impact assessment shows that 63% of those affected are disabled, out of which 17,000 are blind. Many will be forced to leave properties which have had expensive adaptations made specifically to help them. It is highly doubtful if this ill-thought out policy will even end up saving any money.

Since 2010, there have been dramatic rises in homelessness and in the use of food banks, the 21^st century’s soup kitchens. There has even been a sharp rise in pauper’s funerals, leading an academic quoted in the Telegraph to say –“it is becoming too expensive for poor people to die.”

Margaret Thatcher’s funeral will soon take place in St Paul’s. The symbolism is powerful. She is the political godmother of the Coalition’s policies towards the rich and the poor. St Paul’s was the site of the Occupy protest in 2011 and 2012. Occupy asked the Church the pertinent question “what would Jesus do” in the face of the greed of the rich and the suffering of the poor. In the end, the Church sided with the rich and powerful.

Thatcher made little pretence of caring for the poor. She attacked those who criticised her record on welfare as “people who drool and drivel”. 

She even declared, startlingly, that the moral of the story of the Good Samaritan was that it was important to make money in the first place. For centuries, bible study teachers have taught that the moral was that we all owe duties one to another. As, indeed, we do if we are to consider ourselves a civilised and decent society. 

Will someone read from Matthew 7:12 at Thatcher’s funeral? “Do unto others as you would have them do unto you.”  

Or would that be considered too controversial in the circumstances?

                                                                                                No. 300

The funerals of Nixon, Thatcher, Shakespeare and the royals

Richard Nixon resigned as US president in 1974. The evidence of his crimes had become so overwhelming that he knew that he was facing certain impeachment. He was disgraced and humiliated and he left the US and its political system in crisis.

When Nixon died in 1994, Bill Clinton was president. Clinton was a Democrat whilst Nixon was a Republican. Clinton made a fulsome speech to the nation when announcing his death and declared a national day of mourning. He delivered a eulogy at Nixon’s funeral which over 4,000 attended including all living ex-presidents.

By honouring their political leaders, Americans are honouring their democracy and we should do the same. If we did, I would have no quarrel with the Thatcher funeral even though I believe that she harmed the country. Whatever her faults, Margaret Thatcher was elected three times and served as prime minister for 11 years. 

As it is, we do not have the American tradition. The only politician in the last century to have a comparable funeral to Thatcher’s was Winston Churchill who, by the time of his death, was a unifying figure who was seen as having been central to the country’s victory in war. Thatcher is not being honoured as a democratic leader but is being put on a par with Churchill and royalty.

Peter Oborne, the Telegraph’s insightful political commentator, has pointed out the discrepancy in the respect accorded to Thatcher and Clement Attlee, the other transformative post-war prime minister. He specifically criticised the Queen for attending Thatcher’s funeral and not Attlee’s. Attlee should have had the honour of the same type of funeral as Thatcher is having.

However, no royal should be accorded such a funeral except for the Queen herself as she is Head of State. The Queen Mother and, indeed, Prince Philip when the time comes, should have private funerals which should not be paid for by the taxpayer.

It is probably universal for societies to honour the people they consider great by funerals with appropriately grand trappings. Such funerals should be reserved for those who have been democratically elected – whatever their faults – and rare exceptional citizens such as a Shakespeare or a Newton.

It is wrong for those who have merely been born into or married into inherited privilege to have such an honour. The cult of monarchy diminishes our democracy. Far better is the cult of democracy, albeit that our democracy is flawed and our politicians too.

                                                                                                                           No. 299