Kelvin MacKenzie isn't a good macroeconomist

Transfers from rich areas to poor ones are really very useful for not screwing up the economy.

Former Sun editor Kelvin MacKenzie wrote a silly column yesterday. In it, he argued that "the middle class of London and the South East" are underserved by politicians, and called for a new political party which "believes that the striving classes in the South are overtaxed and overburdened".

It was, clearly, bunk. Charlie Hallam took most of it apart yesterday, pointing out that high pay is not the same as a large contribution to society, and that much of the boost London and the South East gets is merely entrenched advantage:

A start-up will find loans easier to obtain with a London address. Contacts are easier to make. Lobbying is easier. And there's that whole prejudice thing you don't have to deal with if you're based in the south.

The Economist's Daniel Knowles also points out that:

Every example he offers of London and the south being attacked takes the form of taxes on the rich—stamp duty for example—which also apply in the north. Meanwhile, the subsidy he says that the north gets is in the form of public spending: welfare benefits or social housing for example, which also apply in the south.

That is, far from wanting to fight for the South, MacKenzie is arguing for the rich of Britain and against the poor, wherever they actually are.

But there's a far simpler reason why MacKenzie is talking crap. The Telegraph's Ed West touched upon it in an otherwise faintly patronising post, writing:

Different parts of the economy require different economic policies, which is why the convergence of interest rates made the euro such a fundamentally bad idea for those countries on the fringe, such as Greece and Spain, since monetary policy would be set by people in Frankfurt and Brussels and therefore would be suited towards Frankfurt and Brussels. That’s a model that will work fine so long as the Greeks are prepared to live in perpetual poverty in the name of European solidarity, and that Germans are happy to pay the Greeks’ welfare bills.

The north and south of Britain are, by virtue of sharing the same currency, yoked to the same monetary policy. Short of some extraordinarily unorthodox economics – banknotes which catch fire south of Watford Gap? – that policy will be suboptimal for one or both areas of the country. Aggregate demand shocks rarely affect the nation uniformly, and so the Bank of England has to decide whether (say) inflation in the south is worth preventing a recession in the north.

But one way of lessening that impact is with common fiscal policy. That way, shocks in part of the country can be dealt with more quickly by transferring revenue from the healthy part to the struggling part. Which is, of course, exactly what MacKenzie was complaining about.

(It is worth noting that this analysis is roughly that which was relied on by every anti-Euro economist ever, who all feel very smug these days as Greece needs continual fiscal transfers just to stay in the economic bloc.)

The alternative – giving the north its own currency and monetary policy – may, I suppose, be what MacKenzie was angling for all along. It would certainly get those pesky Scousers out of his hair.

The North. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Donald Trump brings home his dark vision of America at the Republican convention

The Presidential nominee pledged: "Safety must be restored."

Donald Trump brought home the Republican convention Thursday night with a dark vision of contemporary America – a darkness he claimed only his leadership could lift. It was a lengthy, tightly-scripted speech framed around polarities – insiders and outsiders, criminals and victims, the United States and the rest of the world – and infused with righteous anger. And yet against the darkness, he offered not lightness but “greatness” – a bombastic, personalistic vision of how through sheer force of will he could right the American ship before it plunged irretrievably into the depths. “I alone can solve,” he famously tweeted earlier in the campaign. This was the 80-minute version.

Any presidential challenger, of course, has to lay out a set of problems they believe need fixing and a case for why their leadership might make a difference. It was the breathtaking scale and intensity of Trump’s diagnosis, and the lack of optimistic alternative to counterbalance it, that was notable compared to other acceptance speeches. He portrayed the United States as a country riddled with crime and corruption, a “rigged system” in which politicians like Hillary Clinton can evade justice, while police officers trying to protect its citizens become targets; a fearful country, its economy sluggish, its infrastructure crumbling, its security an illusion, and its international stature in freefall

For a candidate who has mocked the soaring rhetoric of President Obama (the “hopey-changey stuff,” as Sarah Palin once called it), it was perhaps not surprising that Trump’s speech would be short on uplift. It was at least more disciplined than his other campaign speeches, if in keeping with their tone and content – the much-maligned teleprompter rolling a script to which he largely stuck. (“He sounds presidential,” a lady behind me remarked, though his press conference Friday morning marked a reversion to free-wheeling form).

It was short on substance too, though acceptance speeches aren’t designed to be policy laundry lists like a State of the Union. Still, there were few specifics, beyond a pledge to revise tax laws which inhibit religious groups from political advocacy, and a newfound concern with student loans. It was daughter Ivanka’s speech that had the greater substantive heft, promising her father would push for new labour laws to help working mothers, and for affordable childcare in the US. Neither are traditional Republican positions, but the crowd seemed on board for anything Trump might offer.

He even had them cheering for LGBTQ rights, after recalling the tragedy in Florida last month, and the need to protect gay Americans from a “hateful foreign ideology” in radical Islam. “It is so nice as a Republican to hear you cheering for what I just said,” he commended the delegates in an unscripted moment. But whether they had really embraced this unexpected message – or if it was the anti-terror chaser that really got them on their feet – remains to be seen. In either case, it was a rare grace note in an otherwise bruising speech.

Presenting himself repeatedly as the candidate of “law and order,” Trump evoked Richard Nixon’s 1968 presidential campaign. At a time when American cities were erupting in race riots and protests over the Vietnam War, Nixon had pitched himself as the face of stability and security. Likewise Trump has reacted to the simmering racial tensions and terrorist attacks this summer with a hard-line stance on “lawlessness.” “Safety must be restored,” Trump said, in one of the eerier lines he delivered. Yet in his convention speech, Nixon had balanced his tough talk with a positive message – speaking of love, courage, and lighting a “lamp of hope” in partnership with the American people. 

Trump channeled another president in his speech, too, when he promised to give voice to “the forgotten men and women of our country” – drawing on the language of Franklin Roosevelt. Roosevelt had promised to aid “the forgotten man at the bottom of the economic pyramid” during the 1932 campaign. But Roosevelt’s solution to the forgotten man’s distress was economic internationalism – tearing down tariff walls and trading freely with the world – which the Republican Party then opposed. Trump’s solution is the protectionist policies Roosevelt had railed against.

Trump’s economic and security philosophy is encapsulated in another, more notorious phrase associated with that era: “America First.” A rallying cry for isolationists seeking to avoid US entanglement in World War II, it acquired an anti-Semitic taint. But Trump has employed it nonetheless, capturing as it does his core argument that America must do more to protect its own citizens against threats from within and without – from illegal immigrants, from radicalized Islamic terrorists, from the downsides of free international trade. Little wonder that former George W.

Bush staffer Nicolle Wallace announced that the Republican party she knew “died in this room tonight.” In embracing elements of isolationism, protectionism, and nativism, however, it is perhaps truer to say that Trump’s Republican party reverted to an earlier form.

Often disconcerting, at times mesmerizing, the question remains how effective this speech will be. The delegates responded enthusiastically to Trump’s fierce rhetoric, but many prominent Republicans had stayed away from the convention altogether. Combined with Senator Ted Cruz’s non-endorsement, Trump goes into the general election campaign without a fully united party behind him. For both partisans and the public, Trump’s speech offered a cast of villains to rally against, but no positive, unifying vision to rally behind – beyond the much-touted yet elusive “greatness,” of course. In a typical election year, that would seem a critical flaw in a campaign – but Trump loves to confound the naysayers. As his convention speech showed, he thinks the formula that got him this far - showcasing his fame and fanning Americans’ fears – can land him in the White House.