Live the world, don't tell the story

The games industry doesn't need to model itself on the film industry, argues Bill Thompson

Around the turn of the century, people were encouraged to explore a new medium, one based around a technology that could tell stories in a way that tapped directly into the viewer's emotions.

The medium was not videogames but cinema. Between the late 1880s and the start of the 20th century, motion pictures developed from an experimental technology into an established entertainment medium. There were thousands of kinetoscope parlours around the US and Europe and, after Robert Paul introduced the projector in 1895, large audiences for the short films of the day.

The early years of the film industry were as chaotic as any high technology start-up of today, as new inventions flooded on to the market and audiences grew. In the US, film-making became concentrated around southern California.

The Hollywood studio system emerged, offering Ford-like production lines for films with vertically integrated giants controlling every stage of the process, a model that survived for decades.

The big studios remain, but today the film industry in the west is far more fragmented, with star directors and actors holding the real power. It is not even clear that Hollywood is profitable: in Do Movies Make Money? insider Roger Smith calculates that the 2006 releases from Hollywood will lose $1.9bn over five years, once every source of income is added up.

There are some obvious parallels between the film industry and the relatively young videogames industry. Early games were commissioned by the companies that built arcade systems or written by hobbyists for the home computers of the eighties, just as early films were made by the inventors who developed cameras and projectors. As the technology matured, many small companies were started, and a period of consolidation in the 1980s and 1990s created Electronic Arts and the other giants we see today. Major players like Sony, Nintendo and Microsoft funded games development for their consoles, hoping to bring audiences to their next-generation platforms.

Independent control

Now there are signs that the studio model is breaking down - as it did with film. Big name designers like Peter Molyneux are attempting to control their own destiny just as film directors do, although they remain reliant on the big-name publishers to distribute their work, in the same way as independent film-makers need a distribution deal.

From the outside, games seem very similar to films and, indeed, the term "cinematic" is often used approvingly in reviews and discussion. Both are industrialised forms of entertainment, which rely on sophisticated technology to create a product and advanced capitalism to provide a market within which the product can be promoted, sold and consumed.

However, the superficial similarity disguises fundamental differences between the two forms of entertainment which may lead the games industry to diverge from the path taken by film.

Back in 2005, film director Steven Spielberg announced a working partnership with games company Electronic Arts to develop three games, including one for Nintendo's family-friendly Wii. The attendant promotion gave the film industry another chance to claim superiority over mere games developers, and Spielberg remarked: "I am a gamer myself and game development has always intrigued me."

It may have intrigued him, but the assumption that being a good film director automatically equips him to design and develop games is not one that many in the industry would support. Respected games developers like Shigeru Miyamoto, Peter Molyneux, Andy Schatz and Jenova Chen could reasonably argue that their skills in creating engaging and interactive environments are somewhat different from those needed to persuade a bunch of highly-paid actors to sit up and beg in front of the camera.

Commercial relationship

One reason for the confusion may be that the commercial relationship between films and games has been very lucrative, and there is much at stake in encouraging the belief that the overlap is meaningful. Film tie-ins are among the most-hyped titles each year, with Star Wars and Lord of the Rings leading the sale charts and Spider-Man, Harry Potter and The Simpsons all crowding out other games from the shelves.

But a game is not a story. It is a space for interaction and exploration, a space that may be dressed as a medieval world or a vast alien planet, occupied by human-like characters or small yellow blobs. Games require a very different form of engagement from film. Do nothing in the cinema and the story will continue without you. Press no buttons in a game and the action pauses, at least until a character turns up and kills you.

Self-direction

The digital technology that supports film is now very similar to that used for gaming, but the end results are very different. The emotion felt by the audience at the end of Annie Hall was put there by Woody Allan. The sense of achievement my son felt when he completed Halo 3 in hero mode came from inside him, facilitated by developers Bungie - but not created by them.

This difference has provoked a wide-ranging debate online, much of it spurred by a blog entry from RJ Layton, a student at the film school at the University of Southern California.

Studio-system parallels

In a provocative post titled "movies suck" this experienced gamer expressed his profound frustration with the view that "film is something that videogames should aspire to", telling games developers that "instead of trying to make a video game that accomplishes things that films do, why not make a video game that accomplishes things films were never able to?"

Game developers could model their industry on Hollywood, but we should not assume that there are any necessary parallels between the two or even that the games developers of tomorrow would want to find themselves in the same situation as today's struggling, undervalued and exploited independent film-makers. In the fragmented multimedia online world we are currently creating, the space for gaming may owe more to web development and virtual worlds than the old media style of the film industry.

Gaming and me

When I was younger I played Doom and Quake, years ago, on Network Systems but I was never a hardcore gamer. In the eighties, there was a game I liked - an adventure text-based game, called Unix.

About four years ago my son got an Xbox and he insisted I played on Halo with him.

What I want for Christmas...

If I were to get a game for Christmas, I would like a preview of Halo Wars, which is a multiplayer game due out next summer.

Bill Thompson is a technology critic and a trustee of the Cambridge Film Trust

This article first appeared in the 17 December 2007 issue of the New Statesman, Christmas and New Year special 2007

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.

***

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.

***

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