"And thus I clothe my naked villainy
With odd old ends stolen out of holy writ;
And seem a saint, when most I play the devil."
The nation sighs with relief. After flirting with a triple-dip recession the British economy has experienced 0.3% growth in the first three months of 2013. Depressingly (more on that word later), given that stagnation has been the economic reality for twenty-two successive quarters (count them), 0.3% growth is in a literal sense a remarkable thing.
Don't break out the champagne yet. While we did narrowly avoid a triple-dip recession, this was the fourth contraction since the recession began: Quarters 1-4 in 2008, Q1 in 2011 (narrowly missing recession again) and Q1-3 in 2012. Growth, in fact, has not exceeded 1% since the autumn of 2007. Again, the difference here between 0.3% growth and 0.3% contraction is largely immaterial when set against the larger picture of general economic stagnation.
I would respectfully submit that there is no such thing as a triple-dip recession. It is not as if the periods of expansion separating the dips were characterised by Chinese (or even German) growth. We have instead been in a six-year economic stall where growth has barely fluctuated by more than a few tenths of a per cent either side of zero. Growth, or lack of it, has largely become a rounding error.
Six years of stagnation can only be categorised as a depression. We have effectively subsidised large business through the use of cheap (and sometimes free) money, and this has propped up large employers avoiding the mass lay-offs and bankruptcies seen in the late 1920s. This state-support to business is ironic given that many have advocated giving the money directly to consumers through direct transfers, tax credits or benefits, as consumers are likely to keep on spending the money on things like feeding their families and keeping roofs over their heads.
The Government has chosen a strategy that is both literally and figuratively obtuse by an ideologically-driven adherence to the belief that if government spends money to get the economy going it is always bad, and if business spends money to get the economy going it is always good. Never mind that government-spending might help the vulnerable quicker than the trickle-down of business spending, or that businesses might try to shore up their balance sheets rather than use bail-outs to invest, economic policy in Britain seems to be organised on the principle that FTSE 100 companies should have nothing to report, either good or bad, to their shareholders.
While we are on the subject of rounding errors, Paul Krugman has dubbed the ideological focus on austerity, and the refusal to consider its alternatives, the 'Excel Depression' following the discovery of coding errors in the data used in a famous paper, Reinhart-Rogoff, often cited by proponents of fiscal austerity for its claim that growth collapses when sovereign debt exceeds 90%.
Now a new paper, Herndon, Ash and Pollen ('HAP') that casts doubt on the conclusions of Reinhert-Rogoff ('RR') has caused enormous buzz, specifically by reproducing RR's statistics and noting that key variables were missing. In perhaps the most incendiary passage, HAP call RR's 90% debt conclusion a 'stylised fact', that is a memetic nugget of information that is both easy to take out of context and that quickly becomes a norm when used without reference to the original caveats that accompanied it and without due attention to the uses it could thereafter be put to.
HAP find that instead of growth slumping from an average of 2.8% to -0.1% when debt hits 90%, growth merely slows to 2.2% averaged over many countries and over long periods. It undermines the argument that high debt, specifically of the levels many countries found themselves after the crash of 2007-08, fatally constricts growth. HAP show that there is still correlation between high debt and slower growth, they just note that it is less extreme than posited by RR and that attempts to misrepresent RR as demonstrating a causal relationship between debt in excess of 90% and economic contraction are based on an erroneous assumption that this is settled science.
HAP acknowledge RR's caveat of potential reverse-causation in the debt-growth ratio, but they just don't think it is likely based on an honest reading of their initial (inaccurate) data. RR, in their response to HAP, issue an unqualified mea culpa to the Excel coding error that dropped a number of countries, thereby skewing their mean results. However, as they point out, a separate median result is given that is not so different to HAP and is not picked up by the later paper.
Both HAP and RR's response represent the actions of good scientists, but little of this got reported. RR's beef with HAP, and the media narrative accompanying it, is the suggestion that data was intentionally misrepresented in the paper to make an ideological case for debt reduction when there were caveats accompanying the original data. The whole saga has become a cautionary tale for the dangers of policy-based evidence-making.
Commentators and researchers eager to leap to a conclusion before the facts are in are exploited by the professional contrarians who feed on uncertainty, deliberately conflate it with inaccuracy, and make a living from exploiting the weaknesses of democracy and journalistic balance. Just witness the amount of disinformation spun on Climate Change by Christopher Booker or James Delingpole in the Telegraph, or the entire editorial voice on all manner of subjects taken by Sp!ked Magazine.
Booker and Delingpole, too easily dismissed as uninformed ignoramuses, are characterised not by their lack of information but by their command of some of it in order to spin their views. Delingpole actually takes care to calculate the amount of public subsidy contained in the Climate Change Act 2010. Booker is au fait with the minutiae of the EU Carbon Trading Scheme and its collapse into a big Enron-style mess. But the point is it is used selectively, and you have to be at least a little bit informed in order to avoid the mountains of evidence stacked up by the Intergovernmental Panel on Climate Change or to dodge the considered views of several National Academies of Science. Odd old ends stolen out of holy writ.
Camborne aren't sticking to austerity because they want an economic recovery, they want economic control, to remake the economy in the image of post-Thatcherite Toryism. To ensure the point is rammed-in that the poor, the feckless, and the weak created the inefficiencies in the great machine of British capitalism. Untermenschen who just won't play the game.
Camborne imagine a business-cycle rather than structural recession brought about by Labour's high spending, necessitating a massive liquidation of the state in order to stave off bankruptcy. Any moves to address the structural causes of the recession, or to constrain the financial sector that the Tories naively believe will owe them fealty once growth returns, only prompts fingers to be stuck in ears and loud humming.
This is mafia-economics. The mafia's business model is not about getting existing debtors to pay up. They don't really care if you pay back your loan or not, because if you don't they get to break your legs which serves as a useful incentive to other debtors to pay up at extortionate rates and cover their losses. They get their money either way, the wider point is about maintaining control.
As Kevin Spacey's character, the scheming Congressman Frank Underwood, says in the remake of House of Cards, what a waste of talent it is to choose money over power. These are not economic mistakes made in honest pursuit of the national interest, these are calculated decisions made through ideological rigidity blinding people to the consequences of actions and the dangers of error. It is done in the service of re-making Britain so that it suits some of the people better, and in as short a period of time as possible.Suggest a correction