Debts, deficits and Toby Young: Mehdi Hasan responds to a critic

The Telegraph blogger's response to my ebook on austerity is interesting but ill-informed.

Imagine my surprise to discover that Toby Young had not just bought and read my 10,000-word ebook, The Debt Delusion, as he'd promised to on Twitter, but penned a 3,000-word response on the Telegraph website, entitled "New Statesman's political editor is wrong about the debt crisis" (note: I'm not, technically, the NS's "political editor".)

Young's attempt to debunk my arguments, as outlined in the ebook, begin with some kind and appreciative words:

On the principle that you should know your enemy, it's a must-read. It's also pitched at a reasonably grown-up level, allowing room for serious debate - and that's always welcome.

Young ends his post with equally high-minded and friendly words:

I hope he doesn't consider this blog post too 'hysterical'. This is an important debate and I look forward to his response.

It's a shame then that he undercuts his own seriousness and maturity by using a photo of me, to accompany his post, with the words "Deficit Denier" stamped over my face. I guess that's how he loses friends and alienates people. [Update: Young has since informed me, via Twitter, that he doesn't "choose the pictures at the top of my blog posts. That's out of my hands".]

Young's "critique" begins with him taking issue with my "over-reliance throughout the book on the economic 'expertise' of others." Shock! Horror! I dared to quote economists, books, reports and studies to buttress my arguments. Outrageous! Disgusting! Note, however, how Young (proudly?)cites just one expert over the course of his 3,000 words: Warwick University's Timothy Sinclair (who is, incidentally, a political scientist, not an economist). Is this going to be the approach at Young's new free school, I wonder? Ignore academics! Ignore evidence! Make it up as you go along!

"Appealing to the authority of others," harrumphs Young, "is to commit the fallacy of argumentum ad verecundiam" - a point I discuss in my recent NS column on experts and expertise. But Young - and his cheerleader, Paul Staines - fail to understand that arguments from authority, especially on complex subjects such macroeconomics and fiscal policy, can play an important and influential role; as the RationalWiki website points out: "(A)appeal to authority, when correctly applied, can be a valid and sometimes essential part of an argument that requests judgement or input from a qualified or expert source". And this philosophy website defines the argument as "the fallacy of appealing to the testimony of an authority outside his special field".

Yet Young, a writer and journalist, sets himself up as his own authority on economic issues which is as comical as it is egomaniacal.

He also disingenuously claims that I cited Johann Hari as an "expert" on the deficit. I didn't. I quoted Johann Hari saying, in a March 2011 blogpost:

If we are 'bust' today, as George Osborne has claimed, then we have almost always been bust. We were bust when we pioneered the Industrial Revolution. We were bust when we ruled a quarter of the world. We were bust when we beat the Nazis. We were bust when we built the NHS.

Young then goes off on a self-confessed "comic digression" in which he mocks Hari for having confused "debt" with "deficit" in the opening paragraph of the blogpost - a paragraph, incidentally, nowhere referred to or mentioned or quoted in my ebook! - and then moves swiftly on.

Highlighting Hari's name is a cheap if amusing shot from Young. But the points Hari posed still stand and are totally and utterly unrelated to his various scandals and subsequent downfall:

If we are 'bust' today, as George Osborne has claimed, then we have almost always been bust. We were bust when we pioneered the Industrial Revolution. We were bust when we ruled a quarter of the world. We were bust when we beat the Nazis. We were bust when we built the NHS.

Or is Young denying these points? Which ones? That our debt to GDP ratio was 200-per-cent-plus when the NHS was founded? We don't know; he doesn't deign to tell us. (He is, as he later admits in the blogpost, a master of the "sleight of hand".)

Young then summarizes the arguments in my ebook as follows:

The first is that it's simply not true that Britain would now be in the throes of a sovereign debt crisis if the Coalition hadn't embarked on a programme of fiscal tightening. . . The second part is that the theory of "expansionary fiscal contraction", i.e. the belief that you can stimulate growth by reducing public expenditure, is as oxymoronic as it sounds.

He then, however, bizarrely goes on to say:

I don't want to spend too much time taking issue with Hasan on the second point.

Um, er, why not? Given that it is one of the two key arguments, as he himself admits, of the ebook, why not try and "take issue" with it? Dare I say, rebut it? Undermine it?. Young, instead, claims:

When it comes to macroeconomic theories, it's impossible to prove or disprove them either way

Really? Then why did economists Ann Pettifor and Victoria Chick, having studied eight episodes between 1918 and 2009 over which changes in the UK's public debt (as a percentage of gross domestic product) could be compared with those in public expenditure, conclude:

The empirical evidence runs exactly counter to conventional thinking. Fiscal consolidations have not improved the public finances... Consolidation increases, rather than reduces, the level of public debt as a share of GDP and is, in general, associated with adverse macroeconomic conditions.

Why did a study by the IMF of specific fiscal measures taken to reduce the deficit in 15 advanced economies between 1980 and 2009 find just two cases (yes, just two out of 170!) in which spending cuts turned out to be expansionary for the economy as a whole - in Denmark in 1983 and in Ireland in 1987 - and conclude:

Fiscal consolidation typically has a contractionary effect on output.

Now I'm starting to understand why Young is so allergic to citing experts or studies. They tend not to be on his side! But, as a very minimum, he could have at least have cited, in defence of his claims, the now-notorious paper by deficit hawks Alberto Alesina and Silvia Ardagna purporting to empirically demonstrate a link between cuts and growth (but, I should add, since debunked by the IMF and a study by the Roosevelt Institute). Reading Young's post on the subject of cuts and growth, the words "cop" and "out" come to mind.

As with so many embarrassed and defensive deficit hawks these days, Young briefly concedes what those of us who he smears as "deficit deniers" have been concerned about, and warning of, for sometime now:

[I]t seems likely that the British economy will be plunged back into recession

before promptly - and defensively - adding:

but that won't prove that a policy of "expansionary fiscal contraction" wouldn't have worked in a more favourable economic climate, as it did in the case of Canada.

Canada? Young says in his blogpost that it too him "no more than a couple of hours to read" my ebook but, at this point, I started to wonder whether he'd read it or not. After all, I devote an entire chapter of The Debt Delusion to pointing out "the myriad ways in which Britain in 2011 differs from Canada in 1995" and I quote the opinion and analysis of Michael Mendelson, a Canadian academic and forner government adviser on fiscal consolidation, who wrote in May 2011:

None of Canada's economic conditions in 1995 apply in the UK in 2011. The UK is not currently experiencing vigorous economic growth, to say the least. Unemployment is high and rising, not falling as it was in Canada in 1995. The UK's main export markets are anything but booming: the US, Spain and Ireland alone account for about 25 per cent of UK exports. These countries are not going on an import binge anytime soon. The UK begins its fiscal consolidation with interest rates already more or less at zero. UK interest rates have nowhere to fall, only to rise. It is impossible for monetary policy in the UK to be deployed to counteract fiscal policy as occurred in Canada.

Young's next para is difficult to disagree with:

I think Hasan is right when he claims that the reason David Cameron and George Osborne have embraced "expansionary fiscal contraction" is because it chimes with their visceral dislike of Big Government. What he neglects to say is that the reason Ed Miliband and Ed Balls favour a Keynesian approach is because it chimes with their visceral dislike of free market capitalism. In short, both sides are equally guilty of embracing a particular economic theory for ideological reasons.

I actually think there's a lot of truth in this (although, conveniently, Young understates Cameron and Osborne's dislike of "Big Government" and exaggerates the two Eds' "visceral dislike of free market capitalism" - Balls, after all, is the former City minister who pushed for further deregulation of the banking sector). However, just because the "conflict is fundamentally an ideological one and the economic argument is simply a proxy war", that doesn't change the fact that economic history, empirical evidence and common sense all seem to be on the side of the Keynesian doves, not the deficit hawks. Facts are facts.

Young prefers speculation and counterfactuals to facts, figures and studies, writing:

Hasan is so plainly wrong on the first point. It really doesn't matter who's right on how best to deliver long-term growth because had Britain not embarked on a programme of fiscal tightening last year we would now be facing a sovereign debt crisis.

Really? How does he "know" this? Is this the crystal-ball theory of economics that will be taught at the West London Free School? In the very next sentence, Young admits that his claim is "a hard one to prove, I grant you". Yep, it sure is. As Jonathan Portes, the former chief economist at the Cabinet Office and current director of the National Institute of Economic Social and Economic Research (NIESR), commented in a round-robin email this morning:

[A]nyone who thinks that the gilt markets would have panicked if we'd stuck with the trajectory we were on in June 2010 (before the Emergency Budget and Spending Review) has to explain why they're not panicking now, when we're on a trajectory that implies higher, rather than lower, borrowing than was projected then.

In June 2010, before the Budget/SR, the OBR [Office for Budget Responsibility] projected that PSNB [Public Sector Net Borrowing] in 2014-15 would be £70 billion; after the 2010 Budget, it projected £37 billion. Our forecast is now that it will be £90 billion, and still over £70 billion the year after. I imagine the OBR will be somewhat more optimistic, but we are clearly no better than back where we started. And the gilts market is doing what, precisely?

Young falls back on the credit rating agencies for support, and accuses me of being "particularly complacent about the risk of a credit-rating downgrade". Yes, I am. I plead guilty. On Friday 5 August, I wrote a piece for the Guardian entitled, "The US should let its credit rating be downgraded - and shrug". That afternoon, Standard & Poors downgraded the United States for the first time in the nation's history. Guess what's happened since? US borrowing costs have plunged to historic lows. The fact is that a country's economic fundamentals have much more influence on the bond markets than the credit rating agencies - which is why, in my ebook, I cited a warning from Moody's, in March 2011, that the UK economy could lose its prized triple-A rating if growth continues to stagnate - as it has done in recent months. It is a point that Young conveniently overlooks and omits to mention in his 3,000-word post.

Young then pompously pronounces that "the problem with Hasan's argument is that his understanding of the bond markets isn't sophisticated enough". He's got me there. Again, I plead guilty. I'm not very "sophisticated". So am I allowed to invoke an expert? Please? Pretty please? Because Pimco's Bill Gross, manager of the world's biggest bond fund, told the Times in September:

The economy in the UK is worse off than it was when the plan was developed, so there should be at a minimum fine-tuning and perhaps re-routing of the plan

Gross added:

The UK is actually in the best position of all to make a mid-course correction.

Is Young going to accuse Gross of having an unsophisticated understanding of the bond markets too? Or how about Jonathan Portes who, according to the Financial Times:

has found a strong correlation between lower gilt yields and greater investor concerns about economic prospects.

Young mocks the view that these cuts are "monstrous - just monstrous", rather than "fairly modest", before conceding that the amount of money spent on public services is set to fall by 11 per cent (or 19 per cent, if you strip out the ringfenced departments) and admitting:

There's no disputing that the government's deficit reduction plan involves cutting public services by significantly more than the figures for the overall reduction in public expenditure would suggest - I myself have been guilty of that particular sleight of hand in the past.

There are a fair few sleights of hand from Young in his lengthy blogpost. For example, he claims:

[W]hat Hasan neglects to mention is that these "cuts" only pare down public expenditure to the level it was at a few years before the Coalition came to power. TME [Total Managed Expenditure], for instance, is forecast to be higher in real terms in 15/16 (£668.5 billion) than it was in 08/09 (£658.823), some 11 years after Labour had been in power.

Eh? Again I ask: has Young read The Debt Delusion? Or just flicked through it? In Chapter 8, I not only "mention" but rebut and refute this lazy, statistically-dodgy argument proferred by what Young's fellow Tory, Tim Montgomerie, has rightly referred to as the "pain deniers":

This is. . . a deeply flawed and misleading comparison: it doesn't compare like with like. For a start, [it] doesn't take into account the above-inflation cost pressures on public services - in particular, in the NHS - and nor does it adjust for a bigger population (in 2014/15 versus 2006/07).

There is also, again, the issue of how the spending breaks down - in 2014/15, a bigger chunk of the cash (£66bn) will go towards interest expenditure on the debt, compared to the much smaller chunk (£26bn) in 2006/07. This, in turn, will leave a much smaller amount of money to invest in public services.

As another of Young's fellow Tories, Matthew D'Ancona, has pointed out:

Statistics conceal as much reality as they convey: the fact that public spending is rising in cash terms, or that it will still account for 41 per cent of national income  as it did in 2006 is of no comfort to the public sector worker losing her job, or the commuter concerned about fare rises, or the victim of a burglary worried about police cuts, or the mother-of-three facing the loss of her child benefit, or the university applicant anxious about debt, or the RAF safety officer wondering if his career is over.

But Young continues to roll out the right-wing talking-points:

What Hasan and other left-wing critics of the "cuts" always gloss over is that public expenditure increased massively under the last government - more than 50% in real terms between 97/98 and 09/10. That's why the UK had the third largest deficit in Europe last year, behind only Ireland and Greece.

1) The "50%" figure, of course, includes the costs of the credit crunch/bank bailout/stimulus, all of which were caused by the 2008 financial crisis, as Young well knows; 2) So what if "public expenditure increased massively" under Labour - has he forgotten how decrepit and crumbling our schools and hospitals were after 18 years of Conservative (mal)administration? I haven't; and 3) the UK's ballooning budget deficit was a consequence of a post-recession decline in tax revenues, rather than a pre-recession binge in spending. And, if New Labour under Blair and Brown was as spendthrift and wasteful as Young claims, why did the Cameroons pledge to match the government's spending plans right up until the crash?

On cuts, Young concludes:

So the programme of cuts embarked upon by the present government last year is, in the grand scheme of things, fairly modest.

No wonder he has issues with argumentum ad verecundiam: he prefers to make sweeping value judgements without reference to any expertise or authority. Based on the numbers, however, the independent Institute for Fiscal Studies describes the coalition's cuts as "the longest, deepest, sustained period of cuts to public services spending at least since World War II." Young or the IFS? Sweeping statements versus empirical evidence? Take your pick.

Young asks:

Does Hasan really believe that if Gordon Brown had been re-elected - and made Ed Balls his Chancellor - Britain wouldn't be in the same boat as Ireland, Greece, Portugal, Italy, Spain, Belgium and, now, Hungary?

Yes, I do. The evidence - darn, there's that word again that Young seems to so despise - suggests the British economy wouldn't be in such dire straits if Labour had been re-elected in May 2010. Young may have an irrational loathing for his late father's party but the fact is that when Labour left office last year the economy was growing, unemployment was falling and inflation was under control. Under this Tory-led government of deficit fetishists and austerity junkies, growth has stalled, consumer confidence has plummeted, unemployment has ballooned to 2.6 million - a 17-year high - and inflation has crossed 5 per cent, helped on by Osborne's VAT rise. Young makes no reference to any of this in his blogpost. Surprise, surprise!

18 months after Young's hero, George Osborne, entered Number 11, the results are in: austerity has failed. The cuts aren't working. The private sector hasn't stepped in to plug the gap.

It's time for Young to stop living in denial. He writes plays and movies for a living; he has set up a free school. But economics clearly isn't his strength. Nonetheless, his lengthy and amusing blogpost was a good effort at a semi-rebuttal and a nice plug for The Debt Delusion so I applaud him for it and now await his response to my response to his response to my ebook.

(P.S. You can download The Debt Delusion at Amazon for just £1.79.)

 

 

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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David Osland: “Corbyn is actually Labour’s only chance”

The veteran Labour activist on the release of his new pamphlet, How to Select or Reselect Your MP, which lays out the current Labour party rules for reselecting an MP.

Veteran left-wing Labour activist David Osland, a member of the national committee of the Labour Representation Committee and a former news editor of left magazine Tribune, has written a pamphlet intended for Labour members, explaining how the process of selecting Labour MPs works.

Published by Spokesman Books next week (advance copies are available at Nottingham’s Five Leaves bookshop), the short guide, entitled “How to Select or Reselect Your MP”, is entertaining and well-written, and its introduction, which goes into reasoning for selecting a new MP and some strategy, as well as its historical appendix, make it interesting reading even for those who are not members of the Labour party. Although I am a constituency Labour party secretary (writing here in an expressly personal capacity), I am still learning the Party’s complex rulebook; I passed this new guide to a local rules-boffin member, who is an avowed Owen Smith supporter, to evaluate whether its description of procedures is accurate. “It’s actually quite a useful pamphlet,” he said, although he had a few minor quibbles.

Osland, who calls himself a “strong, but not uncritical” Corbyn supporter, carefully admonishes readers not to embark on a campaign of mass deselections, but to get involved and active in their local branches, and to think carefully about Labour’s election fortunes; safe seats might be better candidates for a reselection campaign than Labour marginals. After a weak performance by Owen Smith in last night’s Glasgow debate and a call for Jeremy Corbyn to toughen up against opponents by ex Norwich MP Ian Gibson, an old ally, this pamphlet – named after a 1981 work by ex-Tribune editor Chris Mullin, who would later go on to be a junior minister under Blai – seems incredibly timely.

I spoke to Osland on the telephone yesterday.

Why did you decide to put this pamphlet together now?

I think it’s certainly an idea that’s circulating in the Labour left, after the experience with Corbyn as leader, and the reaction of the right. It’s a debate that people have hinted at; people like Rhea Wolfson have said that we need to be having a conversation about it, and I’d like to kickstart that conversation here.

For me personally it’s been a lifelong fascination – I was politically formed in the early Eighties, when mandatory reselection was Bennite orthodoxy and I’ve never personally altered my belief in that. I accept that the situation has changed, so what the Labour left is calling for at the moment, so I see this as a sensible contribution to the debate.

I wonder why selection and reselection are such an important focus? One could ask, isn’t it better to meet with sitting MPs and see if one can persuade them?

I’m not calling for the “deselect this person, deselect that person” rhetoric that you sometimes see on Twitter; you shouldn’t deselect an MP purely because they disagree with Corbyn, in a fair-minded way, but it’s fair to ask what are guys who are found to be be beating their wives or crossing picket lines doing sitting as our MPs? Where Labour MPs publicly have threatened to leave the party, as some have been doing, perhaps they don’t value their Labour involvement.

So to you it’s very much not a broad tool, but a tool to be used a specific way, such as when an MP has engaged in misconduct?

I think you do have to take it case by case. It would be silly to deselect the lot, as some people argue.

In terms of bringing the party to the left, or reforming party democracy, what role do you think reselection plays?

It’s a basic matter of accountability, isn’t it? People are standing as Labour candidates – they should have the confidence and backing of their constituency parties.

Do you think what it means to be a Labour member has changed since Corbyn?

Of course the Labour party has changed in the past year, as anyone who was around in the Blair, Brown, Miliband era will tell you. It’s a completely transformed party.

Will there be a strong reaction to the release of this pamphlet from Corbyn’s opponents?

Because the main aim is to set out the rules as they stand, I don’t see how there can be – if you want to use the rules, this is how to go about it. I explicitly spelled out that it’s a level playing field – if your Corbyn supporting MP doesn’t meet the expectations of the constituency party, then she or he is just as subject to a challenge.

What do you think of the new spate of suspensions and exclusions of some people who have just joined the party, and of other people, including Ronnie Draper, the General Secretary of the Bakers’ Union, who have been around for many years?

It’s clear that the Labour party machinery is playing hardball in this election, right from the start, with the freeze date and in the way they set up the registered supporters scheme, with the £25 buy in – they’re doing everything they can to influence this election unfairly. Whether they will succeed is an open question – they will if they can get away with it.

I’ve been seeing comments on social media from people who seem quite disheartened on the Corbyn side, who feel that there’s a chance that Smith might win through a war of attrition.

Looks like a Corbyn win to me, but the gerrymandering is so extensive that a Smith win isn’t ruled out.

You’ve been in the party for quite a few years, do you think there are echoes of past events, like the push for Bennite candidates and the takeover from Foot by Kinnock?

I was around last time – it was dirty and nasty at times. Despite the narrative being put out by the Labour right that it was all about Militant bully boys and intimidation by the left, my experience as a young Bennite in Tower Hamlets Labour Party, a very old traditional right wing Labour party, the intimidation was going the other way. It was an ugly time – physical threats, people shaping up to each other at meetings. It was nasty. Its nasty in a different way now, in a social media way. Can you compare the two? Some foul things happened in that time – perhaps worse in terms of physical intimidation – but you didn’t have the social media.

There are people who say the Labour Party is poised for a split – here in Plymouth (where we don’t have a Labour MP), I’m seeing comments from both sides that emphasise that after this leadership election we need to unite to fight the Tories. What do you think will happen?

I really hope a split can be avoided, but we’re a long way down the road towards a split. The sheer extent of the bad blood – the fact that the right have been openly talking about it – a number of newspaper articles about them lining up backing from wealthy donors, operating separately as a parliamentary group, then they pretend that butter wouldn’t melt in their mouths, and that they’re not talking about a split. Of course they are. Can we stop the kamikazes from doing what they’re plotting to do? I don’t know, I hope so.

How would we stop them?

We can’t, can we? If they have the financial backing, if they lose this leadership contest, there’s no doubt that some will try. I’m old enough to remember the launch of the SDP, let’s not rule it out happening again.

We’ve talked mostly about the membership. But is Corbynism a strategy to win elections?

With the new electoral registration rules already introduced, the coming boundary changes, and the loss of Scotland thanks to decades of New Labour neglect, it will be uphill struggle for Labour to win in 2020 or whenever the next election is, under any leadership.

I still think Corbyn is Labour’s best chance. Any form of continuity leadership from the past would see the Midlands and north fall to Ukip in the same way Scotland fell to the SNP. Corbyn is actually Labour’s only chance.

Margaret Corvid is a writer, activist and professional dominatrix living in the south west.