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How I learned to stop worrying and love Amazon

The online retailer has reshaped bookselling since it entered the trade in 1995. But Amazon’s aggressive and “anti-competitive” tactics, especially for selling ebooks, are raising hackles in an industry under stress. What is the future of the book busines

Photo: Ralph D Fresco / Reuters

I have a confession. I like buying books online. From Amazon. Such an admission may seem unremarkable, indeed banal, to many book buyers, but offering it in the presence of book industry folk would be the equivalent of informing New Statesman readers that one admires Donald Rumsfeld or Rupert Murdoch. One cannot exaggerate the fear and loathing that Amazon inspires among publishers and rival booksellers. “I hate them,” one publisher who deals with Amazon regularly told me the other day, and many others have offered similar views – off the record, of course.

The story of contemporary publishing is largely that of what Amazon has done to it and of what it threatens – in publishers’ and booksellers’ nightmares – to do. It is the story of a huge contrast between the perceptions of readers, authors and Wall Street, and those of publishers and booksellers.

At first, in the 1990s, Amazon seemed cool – no doubt it still does to a good many people. There was romance in the company’s founder, Jeff Bezos, typing a business plan while his wife drove him in a Chevy from Texas to Seattle, and in his setting up a web retailer in a garage where the computers were powered by extension leads from the house. He was a geeky guy, with a weird, explosive, humourless laugh, but nevertheless came across as more personable than most executives.

In the book world, which Bezos had selected as the ideal entry point for his planned giant operation, Amazon’s cool image lasted only until the first of his company executives took the floor at an industry conference and spouted what was to become a familiar litany of unilluminating corporate jargon. Amazon, we realised, was remote and secretive. In a friendly industry, it had no interest in being collegiate. It played hardball. Fail to grant it the discounts it wanted, and it launched a battery of unpleasant correctives, chillingly outlined in Brad Stone’s recent book The Everything Store: Jeff Bezos and the Age of Amazon (Bantam Press). And, as we also learned, it was a tax avoider. (Amazon.co.uk accounts for its sales in Luxembourg.)

Worse, it appears to have ravaged the industry’s ecosystem. Because Bezos has so successfully trained investors to wait for returns, he has been able to offer loss-leading discounts beyond the scope of companies with the conventional imperatives of making profits. When Amazon arrived in the UK in October 1998, the leading specialist booksellers included the newly merged Waterstone’s (as it was then known) and Dillons (with 500 branches), Borders and Books Etc, Hammicks, James Thin and Ottakar’s. Now the only one left is Waterstones, with fewer than 300 branches – and recently it laid off 200 of its managers. There were 1,535 independent bookshops in the UK in 2008 and now there are 1,028. The rate of attrition in the United States has been similar.

The digital reading revolution, which Amazon kick-started by introducing the Kindle, has accelerated this process. Ebooks now account for a third of fiction sales in the UK, and by the end of 2014 the proportion will go up to half. These sales have mostly left terrestrial bookshops and gone to Amazon, whose Kindle has become the generic term for all e-reading devices. Furthermore, customers who have migrated to Amazon to buy ebooks there have bought more print books on the site, too. Amazon has at least 90 per cent of ebook sales in the UK. Overall, its UK book sales are worth roughly the same as the value of sales through all terrestrial bookshops put together.

Booksellers are crying foul. Tim Godfray, the chief executive of the Booksellers Association, has called for the Office of Fair Trading to re-examine Amazon’s dominance of the ebook market. Quoted in the Bookseller, he argued: “Booksellers are finding it impossible to compete against such a huge player that has such a stranglehold on the book market . . . Consumers are being left with a reduced choice of book suppliers and communities are losing their bookshops.”

To adapt the words of the sports commentator Chick Hearn, Godfray has two chances of getting what he wants: slim and none, and slim just left the building. It left when regulatory authorities on both sides of the Atlantic ruled against leading publishers in disputes over pricing policies that they had adopted, seemingly in an effort to curb Amazon’s discounting, following the opening of Apple’s iBookstore. All the evidence we have is that the authorities look benevolently on Amazon and its aggressive competitiveness over prices, and treat with hostility most attempts to blunt the retailer’s edge.

Digital publishing threatens to undermine their power. The first sign of danger, or confirmation of it, came when Amazon promoted its new Kindle device by pricing New York Times bestsellers at $9.99 – less, in most cases, than it was paying the publishers for each sale. Sure, Amazon was taking the hit; but what if it gained the power in the future to get publishers to lower their wholesale prices? At the same time, Amazon introduced Kindle Direct Publishing, encouraging many thousands of aspiring authors, by no means all of them talentless, to self-publish their work. Many did so at very low prices and some, trying to build an audience, gave their ebooks away.

It was horribly apparent to publishers that readers expected ebooks to be cheap. When the US publisher of a novel by Ken Follett tried to give the ebook roughly the same price as the hardback, readers bombarded Amazon with one-star reviews. Ebooks cost nothing to print and distribute, readers reckoned. Publishers would reply that most of their other costs remained the same, and that they had many additional costs, too: digitisation in various formats, software and hardware updates, constant monitoring of the internet for copyright infringements. Plus, they were still bringing out print editions. But this argument has not found a sympathetic audience.

The arrival of Apple as a seller of ebooks, following the launch of the iPad, seemed to offer a chance of alleviating the problem. Under the “wholesale model” by which publishers sold to Amazon, the US publisher of a potential New York Times bestseller put a price on the ebook of $25, sold it to Amazon for $12.50, and allowed Amazon to sell it for whatever price it liked.

However, Apple had sold everything on iTunes through an “agency model”: the manufacturer set the price, from which Apple took a 30 per cent cut. So now the publisher could ensure that the book sold at, say, $14.99, from which Apple took 30 per cent. Yes, the publisher, and the author – whom we shall discuss later – earned less (the publisher got $10.50), but it was worth taking the hit in order to preserve the perceived value of ebooks. Otherwise, Amazon would keep slashing prices until there was no publishing industry left. Publishers negotiated agency deals with Apple, and then some of them went to Amazon and insisted that Amazon switch to the agency model, too.

These deals looked highly suspicious to the US department of justice, which in 2012 sued five of the six biggest publishers in the country for collusion. The European Commission, too, investigated agency pricing in the European Economic Area. Offices were raided and computers seized. Unfortunately, the late Apple boss Steve Jobs aided the regulators’ case, telling his biographer Walter Isaacson in an unguarded moment: “We told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30 per cent, and yes, the customer pays a little more, but that’s what you want anyway . . .’ They went to Amazon and said, ‘You’re going to sign an agency contract or we’re not going to give you the books.’”

This did not look good. In both the UK and the US, the big publishers – while furiously denying that they had done anything wrong – nevertheless reached settlements with the authorities, agreeing to renegotiate contracts; in the US, publishers have paid more than $160m (£98m) to consumers to make up for the higher prices charged while agency deals were in place. But Apple fought on, and lost. Passing judgment in July, Judge Denise Cote of the federal district court in Manhattan was scathing: “With Apple’s active encouragement and assistance, the Publisher Defendants agreed to work together to eliminate retail price competition and raise ebook prices, and again with Apple’s knowing and active participation, they brought their scheme to fruition . . . Through their conspiracy they forced Amazon (and other resellers) to relinquish retail pricing authority and then they raised retail ebook prices. Those higher prices were not the result of regular market forces but of a scheme in which Apple was a full participant.” Apple has lodged an appeal, bringing to mind again the phrase concerning slim and none.

Amazon, above the fray, was the victor in these cases, though in negotiating new contracts with publishers it does find itself landed with some restrictions on its ability to discount. While governments may amend the rules that allow Amazon to pay only minimal corporation tax, no authority is going to curb competitive aggression. The authorities are unconcerned about what share Amazon takes of the book market, provided book buyers continue to have choices. Those choices include bookstores at Apple and Google, which are unlikely to persuade anyone that they require protection from a predatory rival.

Of course, Tim Godfray was talking about protection not for the likes of Apple and Google, but for businesses that may achieve not even a six-figure turnover in a year. Independent bookshops were struggling before Amazon came along, however, in part because of their inability to compete with chains such as Waterstones, and in part because of trends – superstores, rates and rents, parking restrictions, and so on – which have been hostile to so many high-street businesses, and which prompted the government to call in the retail expert Mary Portas to see if she could conceive a plan to revitalise them. Chain booksellers were growing, but largely by opening branches and merging with each other. It was a bubble, and Amazon’s market share was still relatively modest when Waterstones and the book/stationery/enter­tainment retailer WHSmith became the only chains left standing.

The best bookshops have found ways to remain attractive. They stage readings and festivals. They incorporate coffee shops. They recommend distinctive titles that you don’t see on the front tables at Waterstones or Smith’s, or on the Amazon home page. Mr B’s in Bath offers “reading spas”: one-on-one chats in its “bibliotherapy room”. It has also commissioned bespoke editions of books. Daunt Books has its own small publishing operation, which has brought back into print the kinds of literature that a chain of shops in well-heeled areas of London can sell. In September, the Booksellers Association launched an initiative called Books Are My Bag, which consists of only a slogan and a supply of canvas bags, but which the BA hopes will gain enough currency – as “Go to work on an egg” once did – to promote the joys of browsing and buying in real bookshops.

That Amazon has taken business away from these shops – well, that’s competition, and, as we’ve seen, we are going to have to live with it. The other day, I decided I wanted to read John Mullan’s What Matters in Jane Austen?. I looked on Amazon and I looked on the rival ebookseller Kobo; Amazon’s price was £4.63 and Kobo’s was £7.07. I bought the Amazon Kindle edition, with a single click; when I switched on my tablet, my book was there. My nearest bookshop, a Waterstones, is a 20-minute bus ride away, and it is not always guaranteed to have the book I want. If it does, it may be selling it at the recommended retail price – £8.99, in this case.

Price and convenience point me towards Amazon. I enjoy reading ebooks, and if the print equivalents are bulky and have small type, I prefer to read them on a lightweight device with adjustable fonts. I love browsing in bookshops, but I love browsing online, too, and get a small thrill every time I make an order that enables an instant download or a posted parcel. Furthermore, Amazon’s service is superb. Its website is the best, its Kindle Paperwhite is by reputation the best e-reading device of its kind, and its prices are usually the lowest.

My point is that this is what the overwhelming majority of Amazon’s customers feel about the company. Yes, we disapprove of its tax avoidance, but we have learned that every multinational will behave in this way, given the opportunity. It is for governments to sort out. But giving publishers a hard time? Why should we care about that? And if we felt that Amazon did not deserve to take business from the terrestrial bookshops, we would click on those Buy buttons less frequently.

The consolidation of power in retailing is in part responsible for a consolidation of power in publishing. Penguin and Random House confirmed their merger this summer, creating the largest publisher in the world; industry insiders expect there to be further mergers at the top – Simon & Schuster and HarperCollins are names that are often put together. Penguin Random House, which is home to a significant number of the most celebrated authors in the English language, has clawed back some of the negotiating power that Amazon had assumed. The company also believes that, thanks to “efficiencies” (cost-cutting) in its merged operations, it will have more resources to put into the acquisition and promotion of books and into “discoverability”, a buzzword that has become an obsession as book buyers have moved online. How do you ensure that people see your books? Publishers are desperate to be the facilitators of this process. They do not want Amazon to control it.

In addition to the power of Amazon, they have three significant fears. The first is piracy. Once, pirating a book involved printing it. Now, all you have to do is copy a computer file and you have an edition that is no different from the authorised version. The pirates have created jobs in the book industry: the leading publishers employ people whose sole responsibility is to trawl the internet searching for illegal editions. Fear of piracy is responsible for digital rights management, the annoying code that prevents you from reading an Amazon ebook, say, on anything other than a Kindle-enabled device. It also lies behind publishers’ wariness about allowing their ebooks to be lent through libraries.

The new wave of digital entrepreneurs is, on the whole, sceptical about copyright, in a bedrock of industries ranging from publishing to football (think of the importance to football of TV and image rights income). Google, which no government can ignore, scanned millions of in-copyright books without bothering to ask the rights-holders’ permission. The British government is planning to introduce copyright exceptions following a 2012 report into intellectual property by a panel under the leadership of Professor Ian Hargreaves; its draft proposals have alarmed bodies including the Society of Authors and the Publishers Association. “Fair dealing”, which Google cites in its defence, may be fair to the people who want to use the material, but is less fair to those who created it.

However, publishers could relax a little. People want to get things for free or cheaply, but they are also happy to pay what they see as fair prices. Getting most of my books free when I was young did not dissuade me from becoming a book buyer, and listening to pirated music did not prevent my purchasing records. My daughters, who no doubt consume illegally shared material, spend fortunes through iTunes. When I began reporting on the book industry, Delia Smith featured in ubiquitous ads for book clubs that were offering her Complete Cookery Course for a nugatory sum. Yet the same book, at full price, appeared in the bestseller list week after week. Free or cheap does not necessarily undermine paid-for. Imagining an ideal world in which every consumer would pay a recommended price for every cultural item is futile.

The second significant fear, though, is the lowering of the recommended prices that consumers are prepared to pay. The average price paid for an ebook in the UK is about £3. The average price paid for a bestselling paperback novel is about £4.20, and the average price paid for a bestselling hardback novel is about £11. As ebooks take a larger share of the market, will publishers suffer a decline in revenues, and will they find, as booksellers did in the 1990s, that the only way they can grow is through mergers? Penguin Random may be an early symptom of such a trend.

The third fear is of becoming irrelevant. The rise of the publishing conglomerates has not been as hostile to independent houses as many had feared, partly because distribution has become more egalitarian (smaller houses have more chance of getting their authors discovered now, through Amazon and other sites, than when their only way of selling was by begging booksellers’ support) and partly because there are so many successful titles that the conglomerates miss or never see. But all publishers must be aware that authors have what appears to be the increasingly viable choice of self-publishing. Since internet distribution has vastly reduced the cost and difficulty of getting a manuscript into book form, self-publishing has lost its reputation as exclusively the last resort of the hopeless and deluded. Every week, it seems, one reads a story of an unknown author who has sold tens of thousands of copies of his or her self-published books, particularly through Amazon. Amanda Hocking, an author of paranormal romances, earned $2.5m from Amazon sales in under two years; even more famously, E L James first published online the story that became the Fifty Shades of Grey trilogy.

Publishers hope that the self-publishing world can become a training ground for writers, and last year Penguin’s parent company bought Author Solutions, the world’s largest self-publishing service (which at that point had a mixed reputation). Hocking and James went on to sign conventional publishing deals. Yet some self-publishers have not, while others have signed print book deals but retained their ebook rights. Few authors can have failed to notice that self-publishing offers higher royalties. Kindle Direct Publishing can pay up to 70 per cent of the returns from sales, and offers at least 35 per cent. Until recently, publishers were distributing to authors just 15 per cent of the returns; only under pressure, and not universally, have they raised these royalty rates to 25 per cent.

While publishers may have good arguments to explain why their royalties should remain at this level, they have not succeeded in making their case to authors and agents. At present, most authors crave the imprimatur, the editorial expertise, the marketing and the distribution that established imprints can provide. But publishers’ claims that they “add value” to the publishing process – value that self-publishing services cannot replicate – are not as incontrovertible as they once seemed.

In the ways described, the disruption that Amazon has caused the book industry has been welcome for readers and authors. Culturally, the picture is more confused. Some authors who might never have seen their books in print a few years ago have thrived through self-publishing, but others – who enjoyed a brief period when advances rose, as the big publishers grew bigger and the book chains expanded – are in trouble. They can no longer afford to spend a year or longer writing books, because no one will pay them to do so. Fashions are changing quickly, and many authors who were under contract a few years ago can no longer get their manuscripts accepted.

It is a harsh world, but whether it is barbaric, as some disillusioned authors believe, is debatable. Pitifully low sales of literary fiction are not a new phenomenon: George Orwell’s early novels sold only a few hundred copies each. When one reads of the long exile from print of Barbara Pym in the 1960s and 1970s after Tom Maschler at Jonathan Cape had decided that her novels were hopelessly old-fashioned, one recognises a story with contemporary resonances. It is very hard to determine whether an industry that produces more than 100,000 titles a year is lowering its standards. Regular reading of the literary pages, and scanning of book-prize shortlists, suggests that there remains plenty of quality about. I once heard someone say that Paul McCartney, an acquaintance of his, was “as nice as you’d expect him to be”. Amazon is certainly no nicer than you would expect a Wall Street-quoted giant with a market capitalisation of $135bn to be. But I don’t feel guilty about being its customer.

Nicholas Clee, a former editor of the Bookseller magazine, is the joint editor of BookBrunch, a book industry news service

Nicholas Clee, the NS food columnist, is the author of Don’t Sweat the Aubergine: What Works in the Kitchen and Why (Short Books). He is a former editor of The Bookseller, and writes about books for papers including the Times, Guardian, and Times Literary Supplement.
MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

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The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

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In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt