Thursday 9 February 2023

Burying the nugget of truth


The trouble with bizarre and delusional rants is that any nugget of truth contained therein can easily be obscured by the patent nonsense in which it is embedded. Liz Truss’s opus magnus in the Telegraph on Sunday (widely covered in other media) is a case in point. The idea that the OBR, the Civil Service, the media and the markets are all run by some sort of left-wing conspiracy, and the suggestion that the only thing she did wrong was to fail to communicate her 'brilliant' ideas effectively, would lead anyone to wonder what her home planet looks like. But the nugget of truth is this: there is an accepted consensus around economic policy, shared by government and opposition politicians, the civil service and the media, and it is difficult for any politician, whether in or out of government, to challenge that consensus.

‘Left-wing’, however, it most definitely is not. It’s a consensus around ‘sound money’ and ‘balanced budgets’ which dates back to Thatcher and has broadly been followed by all governments since. Suggesting that Thatcherite economic policy is ‘left-wing’ tells us more about Truss’s own position on the political spectrum than it does about economics, but portraying Thatcher as some sort of dangerous communist is not a picture that many will recognise. It’s a consensus which the Tory-led government of 2010-2015 tried to embed as some sort of unchangeable basis for the future by setting fiscal rules and appointing the Office for Budget Responsibility to assess all government action against those rules. I’m sure that Osborne intended this to make it very difficult for any future alternative government to do anything different, although he probably didn’t expect a PM from his own party to be the one caught out. The fiscal rules were set by the government; the remit for its work was set by the government; and its members were appointed by the government. If a new government comes along – led by a maverick such as Truss, for instance – and leaves the same rules in place, to be assessed by the same people, working to the same remit, it should hardly be a surprise if, when that government then takes actions contrary to the fiscal rules, the OBR criticises those actions. And it’s hardly evidence of some great conspiracy – it worked as the Cameron government intended it to work, which is to force the government back to the accepted normality.

Whether the economic view on which it was based – that of the Treasury, the media, and Tory, Labour, and Lib Dem politicians alike – is the right one is another question entirely. And it isn’t only Liz Truss who’s questioning it. Last week, the BBC itself published a report on the way it covers economic policy (and Prof Richard Murphy has a brief summary of some of the salient points here) in which it accepts that it has given too much credence to prevailing orthodoxy and not enough to alternative viewpoints.  Specifically, the report accepts that the BBC (while making the valid point that it isn’t the only transgressor) has given excessive credence to the ‘household analogy’ for government budgets, without pointing out that it is opinion rather than substantiated fact and that there are other views. It’s not exactly coming from the same perspective as Truss, of course, but the underlying point – that there is an Overton window outside which debate is rarely allowed to wander – is the same.

None of that is intended to in any way support the insane proposition put forward by Truss that decreasing taxation on the rich would magically lead to economic growth and increase government revenues. All the empirical evidence suggests that borrowing money to give tax cuts to the rich ends up simply increasing government debt and financial inequality; but the infamous Laffer curve continues to draw support despite the fact that it is entirely unevidenced in practice. The fact that Truss was, and is, utterly clueless about how to generate growth, preferring to believe dogma than look at evidence, doesn’t mean that she was wrong in principle to worry more about overall economic performance than about specific levels of government debt. It’s a pity that her failed experiment, coupled with her tendency to see dangerous lefties under every bed and in every institution, will actually make it harder, rather than easier, to debate alternative viewpoints.

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