It is well known and generally accepted that despite warnings from China, Italy and elsewhere, the UK government were late in imposing a lockdown that reversed the march of the virus . That mistake cost tens of thousands of lives, and a severe hit to national output. You might have thought that this colossal error would have made the government fear the virus. Surely mistakes would not be repeated. But as Harvard epidemiology professor William Hanage notes, having not learnt the lessons from its neighbours its now failing to learn the lessons from itself. The Prime Minister, despite getting the virus in a life threatening way himself, is predisposed to tell good news stories, and so was too eager to relax the lockdown. Sunak egged him on, thinking… [Read More...]
Why do some find the economics/health trade-off so hard to get? Because it’s like the Phillips curve.
The distinction between the short run and long run traditional Phillips curve (not the New Keynesian variety) is so ingrained in economists that it seems obvious to us. We sometimes forget that it took many years for policymakers to understand it. I think something similar is happening with the economics/health trade-off in this pandemic. There is undoubtedly a short term trade-off between imposing greater restrictions (in extremis, lockdowns) to improve health outcomes (a good) and the negative effect that has on the economy (a bad). In much the same way as there is generally a short term trade off between expanding the economy to reduce unemployment (a good) and getting higher inflation (a bad). But in both cases that is not the end of … [Read More...]
Fiscal policy during and after the coronavirus pandemic
This post was partly inspired by this recent seminar, but also by thisexcellent paper from The Resolution Foundation. Apologies for the length, but there is a lot to cover. This post is in five parts. The first looks at how our understanding of fiscal policy has evolved over the last decade or so. It is an essential background to how fiscal policy should be employed during the pandemic. The second looks at fiscal policy support during the pandemic. The third looks at what could be quite a short period between when the pandemic is effectively over as a result of mass vaccination, and when the economy has fully recovered. The fourth asks whether, once the economic recovery is complete, we should attempt to gradually reduce the debt… [Read More...]
COVID, the US election and media balance
I want to start with my last post. It contrasted a minority of countries that were good, were not too bad and the majority that were terrible at handling the pandemic. What surprised me was how willing people were to believe that each of the good countries had some special attribute that explained their superior performance, rather than accept the more obvious explanation that they had more practice at handling pandemics, or just had better governance. These countries that have handled the pandemic well knew that you needed a good TTI operation, you needed to keep case numbers low, you needed strong border control and in most cases that if you lose control of case numbers you lock down quickly and hard. The UK has failed on… [Read More...]
Trump tries to incite a putsch, and his UK cheerleaders reveal their own contempt for democracy
It appears as if the Facebook ban on referencing this blog has been lifted. Many thanks to all those who complained to Facebook. I doubt I will ever know who persuaded them to ban it. Would be democratic dictators, elected heads of state who want to ensure they can never lose an election, should know the first rule to staying in power. It is to control a sufficient amount of the media. Convincing your faithful that the mainstream media is fake news is not enough. What that sufficient amount is will depend on many factors, including the voting system for President. It may be, for example, that given the advantagesa united right wing socially conservative party has in the UK, control of a majority of newspapers and … [Read More...]
Why does this government get away with murder?
In the government’s final press conference Chris Whitty, the Government’s chief medical officer, said““I would be surprised and delighted if we weren’t in this current situation through the winter and into next spring.” The significance of that statement cannot be overstated. Deaths in the UK from the virus are currently running 100 every day. (The true total may be higher.) The chief medical officer is saying don’t expect to see deaths running at an order of magnitude lower before the Spring of next year. I fear we have become desensitized over coronavirus deaths. We keep being told by the government that they are at a much lower level than they used to be, every graph shows deaths are much lower than they were at the peak, … [Read More...]
The reality behind fiscal scare stories, or mediamacro is alive and well
If you listen to the broadcast media, you will have almost certainly picked up the message that at some point in the near future the Chancellor is going to have to raise taxes or cut spending to ‘pay for’ all the support to the economy during the pandemic. At least the Financial Times has learnt the lesson of 2010, and notesin this editorial that the Chancellor“must hold the line and resist attempts to push the UK into a premature fiscal retrenchment. Cutting spending in the middle of the worst recession since the creation of the country would be a historic blunder and make Britain poorer in the long run through unnecessary unemployment and business failure.” If only they had said the same in 2010. But they add “Eventually … [Read More...]
The political economy and psychology of COVID rebounds
You can call it a second wave, or a resurgence of the first wave. But whatever you call it we are seeing in some European countries a steady (and occasionally rapid) increase in new cases after a longer period when new case numbers have been coming down or been stable. A good reason to not call this a second wave is that the first wave never went away. Changing social behaviour, aided by government support and a lockdown, reduced new case numbers rapidly. However governments relaxed the lockdown before new cases fell to almost zero, and so domestic transmission continued at a low level. But why have the number of new cases started increasing in the last few weeks in many countries, after a period of apparent … [Read More...]
Will taxes have to rise?
That is the question addressed in this debatebetween Jonathan Portes and Bill Mitchell. I found the discussion very frustrating, because it is really a debate about medium term inflation forecasts dressed up as something more fundamental. Both Mitchell and Portes agree that there is no need for taxes to rise to ‘pay for’ the fiscal costs of the pandemic. In an age of ultra-low real interest rates, shocks to the debt to GDP ratio like the Global Financial Crisis and the pandemic should be allowed to gradually wither away as growth outstrips interest rates on that debt. Trying to reduce debt by running deficits close to zero, or even surpluses, as Osborne tried to do, threatens to derail a full recovery. I think it would be … [Read More...]
Why neoliberalism can end in autocratic, populist and incompetent plutocracy
Is it a coincidence that the two countries that first championed neoliberalism (under Thatcher and Reagan), should end up with autocratic, populist and incompetent leaders (Johnson and Trump) in what is best described as a plutocracy? The thoughts below are, to use a phrase that Philip Mirowski once used about something I wrote, untutored, so comments via twitter (or DMs, or emails) will be gratefully received. Before addressing that question, there will be some who will think I am exaggerating. Both countries are still democracies after all. But being a democracy did not stop both Johnson and Trump being elected. Both leaders are undoubtedly autocratic, in the sense that they or a tiny group around them wield far more power than their predecessors did, and they spend… [Read More...]
The anti-lockdown crusade gains oxygen from this government’s ineptitude
If anyone still doubts that Brexit was our Trump moment, look at some of the same characters (Tory MPs, newspapers, even voters) who supported Brexit getting behind what has become an anti-lockdown crusade. I use the word crusade deliberately. Rather than religion it is ideology that drives most anti-lockdown proponents. That ideology is libertarian, although to borrow a phrase from Chris Dillowon mask phobia, this libertarianism is just solipsistic narcissism. What the crusade isn’t, for most of the anti-lockdown brigade, is evidence led. That is not to say that some scientists may genuinely believe that lockdowns are never worthwhile. Science shouldn’t be closed to heretical ideas, and there will always be scientists who put forward such ideas. Occasionally the heretical turns out to be… [Read More...]
How governments in the West failed to learn
You would think, after so many countries were taken by surprise by a pandemic caused by a new virus in the Spring of this year, these countries would resolve to never let it happen again. They would be mad, knowing what they now know, to let cases explode in a similar manner to they did earlier this year. In what we call the West we like to think we have reasonably rational governments that listen to expert advice on matters of life and death. Well at least some of us thought that. I am prepared to make an exception of the UK and US. The UK is run by fantasists who thought we would hold all the cards in any negotiations with the EU and there would… [Read More...]
Brexit may be pointless, but it will be with us for some time
You have probably read a lot of stuff asking what, precisely, are the benefits of Brexit. I’m going to make some points that try and look at this from the point of view of those who supported Brexit, whether we get a trade deal or not. For those who voted for Brexit the main concrete preoccupation was immigration. Here is the latest version of a chart I have shown before (source): Those voting for Brexit because they wanted low migration will have been disappointed (although I’m not sure how many realise this), because the fall in EU immigration has been matched by an increase in non-EU immigration. Net immigration is slightly higher than it was when the referendum took place. Seems to confirm that immigration really… [Read More...]
Politicians and experts: austerity, Brexit and the pandemic
I’ll be talking about fiscal policy during and after the pandemic at a Resolution Foundation/MMF event in a week’s time: https://www.mmf.ac.uk/resolution-foundation/ I have written quite a few posts on the relationship between policy and expertise, and between expertise and the media. The better ones are in my book, but they were all written before the COVID pandemic. How does the relationship between experts on the one hand and politicians and the media on the other that we saw with economists over austerity and Brexit play out with medics and the pandemic? All three cases are different from each other. Although the evidence set out in my book suggests that the majority of academic economists opposed austerity (a majority that got… [Read More...]
Why the UK’s COVID crisis should be personal for so many Tory voters
There are around16 million over 60s living in the UK, nearly a quarter of the UK population. They are the most at risk from COVID: catching the virus could be a matter of life or death. To them the government’s handling, or rather mishandling, of the pandemic should be a matter of acute personal concern. It certainly is for me. Around60% of over 60s voted Conservative in the last election. The NHS is currently at breaking point. Tired and demoralised after almost a year of COVID, doctors and nurses find their hospitals are full and we haven’t yet seen the impact of Christmas and New Year. Whereas Johnson acted in March to save the NHS, this winter he decided to save Christmas instead, until he was… [Read More...]
Did the UK really almost go bankrupt?
I normally publish posts in the first half of the week, but two separate attempts were overtaken by events, and they will have to wait for another day. I finally wrote somethingfor the Guardian on the Governor’s interview that led to nonsense headlines about the UK almost going bankrupt. The piece explains why they are nonsense, but I should note here that the headlines are classic mediamacro, appealing to the idea that governments are like households. Frances Coppola makesthe same point a different way. You could describe what happened in March this year as a short term liquidity problem. There is no suggestion the UK is insolvent. And the thing about countries with their own currencies is that they never have a liquidity problem because they create … [Read More...]
If the UK government fails to do a deal over unfair competition it is not because of UK sovereignty. It’s because of crazy stupidity.
Why do people keep saying the impasse over a trade deal with the EU has to do with UK sovereignty? I know the government says this, but the government says a lot of things that are just untrue. They are standard lines the go down well in focus groups. For those who are not paid to follow the government line, to repeat the government’s line seems odd. The current impasse seems to me to be about EU sovereignty, not UK sovereignty. As present (see date of post) the main stumbling block in agreeing a deal is the EU’s insistence that it should be able to increase tariffs if it feels that UK goods have a competitive advantage because of future UK government subsidies or rule divergence. Avoiding… [Read More...]
Why the election for a new Liberal Democrat leader could be the key to voting Johnson out
I would normally have commented on what the Chancellor announced last Wednesday, but much of it was covered in my post last Tuesday where I talked about vouchers, VAT cuts on social consumption, green investment, and unemployment support. The only issue with what he did was that he should have done more of all those things. I did not, in that review of interesting policy options, talk about his cut to stamp duty or his £1000 bonus if firms re-employ a furloughed employee, because the former is tried and tested and the latter is not a good policy. The number of firms where that £1000 will make a difference is likely to be very small. The main beneficiaries are companies that do not need help to … [Read More...]
Whether its COVID or Brexit, this government is continuing to fail terribly at everything it does. Will Conservative MPs do anything about it?
Testing failureSo for many visits to grandparents are off. No one should dispute that the government needed to do something after a sharp increase in the number of positive tests. However there is also no doubt that one of the factors pushing them to act was the partial collapse of the test and trace infrastructure. Stories of people being told their nearest test was tens or even hundreds of miles away, or that no tests were available, abound, and now we have leaks of hundreds of tests being thrown away because they cannot be processed and cases returning to care homes. The specific reason for this failure remains unclear. Keir Starmer tried repeatedly at PMQs to get some explanation from the Prime Minister, but the best Johnson … [Read More...]
Are there turning points in recent UK history?
This post follows on from my posttwo weeks ago, where I argued that there was a degree of inevitability that led us to governments led by Boris Johnson and Donald Trump. To summarise that argument, it is that right wing neoliberal governments in both countries have pursued policies that benefit the few rather than the many, and so to win elections they have pushed socially conservative ideas. But that push has been limited by a knowledge that some socially conservative policies can damage business interests: so in the US immigration control was not on the agenda and in the UK targets were missed. However neoliberalism also encouraged and legitimised wealthy individuals to meddle in politics, and some chose to push for even greater redistribution and less regulations. … [Read More...]