In defence of hypocrisy

In this week's look at the philosophy behind the politics Martin O'Neill examines the importance of

Contrary to what most people seem to believe, it’s a very good thing that politicians don’t always say what they really mean. (This isn’t to say that they shouldn’t always do what they say, which is a different question entirely, but the answer to that may not be so straightforward either).

For example, the doctrine of collective cabinet responsibility means that it behoves individual ministers to remain silent with their doubts about particular policies, not just for the good of their careers, but for the loftier reason of preserving the integrity of our mode of government.

Similarly, a commitment to the authority of party policy may necessitate the insincere defence of any particular policy, viewed as a legitimate means to a worthwhile overall end.

The structure of politics constantly puts politicians into situations where the right thing for them to do is to be less than transparently honest, or at least to be prepared to disguise what they really believe to be true.

Just as we would not want a politics in which politicians were always scrupulously sincere in what they say, so we should also not be too judgemental when politicians are prepared to – ahem – ‘borrow’ the policies of other parties.

It can, of course, be a political masterstroke to appropriate the policies of the opposition. But sometimes it is not only the most advantageous thing to do, but is also surely the morally right thing to do. Benjamin Disraeli may have thought that the 1867 Reform Act was the best way to “dish the Whigs”, but that hardly meant that extending the franchise wasn’t the best course of action, either for the country as a whole, or for the self-interest of the Conservative Party.

The theft of good ideas in politics isn’t particularly objectionable, as long as the ideas are good. After all, it would be strange if any particular party had a complete monopoly on imaginative policy ideas, or on legislative proposals that meshed deeply with the hopes and aspirations of the electorate.

Refusing to co-opt the best ideas of the opposition would involve a sort of puritanical intellectual preciousness, that prized ideological non-contamination above the virtues of enacting the best possible political programme.

My suggestion is that theft and insincerity are not always the sign of political vice, but can, on the contrary, be signs of considerable virtue. Given this, it is rather odd quite how powerful the charge of political hypocrisy can seem.

Everyone knows that politicians won’t always tell the truth, or at least won’t tell the full truth, and that there are things that they may do which they will not themselves be in full agreement.

And everyone knows that everyone knows this. Given that everyone knows that everyone knows this, accusations of insincerity or hypocrisy – or of being a “phoney”, to use the term with which David Cameron baited Gordon Brown at last week’s Prime Minister’s Questions – can themselves be the very epitome of hypocrisy.

For such charges of hypocrisy or phoniness can carry with them the suggestion that the accuser is himself above these sorts of failings, or denies the need for himself or others to operate within the world of political accommodation and compromise, with its attendant rejection of pristine political sincerity.

Whether or not we want to grant philosopher Harry Frankfurt’s arresting claim that “sincerity itself is bullshit” (the conclusionary remark of his splendid little book, On Bullshit), we should at least surely admit that there can be nothing so hypocritical as protestations of sincerity. (In support of either Frankfurt’s claim or mine, one need cast one’s thoughts back only as far as the rhetoric of sincerity deployed by the previous Prime Minister.)

Now, what I’ve claimed is only that there can be good reasons for theft, insincerity and hypocrisy in public life, which is very different from excusing all cases of these apparent vices. Some instances of hypocrisy are so grotesque, self-serving and venal as to be beyond any plausible form of defence.

Of this type, last week granted a wonderful example in the revelations of the expense account lifestyle of Sir John Bourn, the Comptroller and Auditor General, and as such the head of the National Audit Office.

A Freedom of Information request has revealed that Bourn spent £365,000 on foreign travel at public expense over the past three years, including junkets with Lady Bourn to (among many other places) Brazil, South Africa and the Bahamas.

He also went through an impressive £27,000 on dinners. What raises Bourn’s case above the standard case of an official with his nose in the trough is that, as head of the NAO, Bourn is the person whose public function is the protection of value for money in how the public finances are spent.

Here we have a clear case of objectionable hypocrisy of a truly stellar magnitude, so monstrous that it’s difficult to know whether to view it as farce or horror-show.

Anyone with any interest in standards in public life should hope that Bourn will be forced to pay back any part of those expenses that were not strictly necessary for the performance of his public role. (Which, one might plausibly think, is almost all of them.)

Gordon Brown’s recent problems are intimately connected with perceptions of theft and insincerity. But how far do these perceptions point towards deep problems of hypocrisy, like Bourn’s, as opposed to being political peccadilloes of limited significance?

Let’s start with insincerity. Brown’s insistence that the change in the election date was nothing to do with a panicked reaction to the polls certainly had the ring of untruthfulness. But what seemed especially damaging about these denials was that, by describing his reasons in terms of higher motives (wanting time to deliver on his vision of Britain, and so on), Brown created an uncomfortable juxtaposition of self-proclaimed high motives and all-too-obvious political expediency.

Just like John Major saying that it was time to get 'back to basics' or Blair insisting that New Labour would be 'whiter than white', there is nothing that primes the pump for perceptions of hypocritical insincerity better than the insistence that one has spotless motives.

If one does, indeed, act from the best of motives, this is something better shown rather than merely said. Similarly, the best way to make one’s actions appear to be nothing but spin over substance is to repeatedly insist that one has abandoned the former in favour of the latter.

The problems of theft are easier to deal with. Let us assume that political theft is fine if the ideas that are stolen are good ideas. The problem with stealing the Tory plan of changing inheritance tax thresholds is that this is simply a bad idea; or, at least, it’s a very bad idea if one has a commitment to social justice, which Brown claims to have. Moreover, to be done well, political theft has to done with energy and aplomb (here, Disraeli is a wonderful example), rather than awkwardly and in haste. It’s in no-one’s interests to be caught on the door-step with a bag marked ‘Swag’.

The story of Labour’s Pre-Budget Report, though, is a story both in one way better and in one way worse than that of a botched robbery. It’s better because, in fact, Labour’s changes to Inheritance Tax (IHT) were far less pernicious than the proposed Tory changes.

The Tory proposal was to increase the threshold for individuals to £1M. The headline-grabbing version of the Labour policy was that the married couple’s threshold had been increased to £600,000 (rising to £700,000 by 2010), which sounded as if Labour proposals were to double the IHT threshold, rather than trebling it as the Tories wanted.

But, as some Tories were quick to point out, Labour’s IHT changes were far less drastic, as there are already legal mechanisms (Discretionary Will Trusts and Deeds of Variation) that allow married couples to use each of their IHT allowances in full.

This means that, for the well-connected and well-advised, the de facto married couple’s IHT threshold was already £600,000; in effect, the PBR simply made it the case that every couple’s IHT threshold was the same, whether they had access to pricy legal advice or not.

It is plausible to assume that the distribution of financial and legal expertise within society tracks social class rather assiduously, and so the small print of Labour’s IHT reforms actually reveals them to be mildly redistributive, at least insofar as the children of a working class couple whose house is now worth more than the IHT threshold are no longer disadvantaged relative to the children of a couple who have a solicitor in the family.

Once things have settled down, and if clear thinking prevails, one may also hope that Labour really have “dished the Tories” on this issue, insofar as what the Tories are now campaigning for is a de facto married couple’s IHT allowance of £2M, which will be of any additional benefit only to that tiny proportion of couples who are likely to pass on more than £700,000 in capital.

That was the good news. The bad news is twofold. Firstly, given the many confusions that seem to exist in many people’s thinking about IHT, most people won’t notice the good news. The Tories may well remain “undished” among an electorate who don’t realize that the dispute is now simply over how to treat the seriously wealthy. The second bit of bad news is much worse.

It is that, whatever the real, concrete policy details regarding differences between Labour and the Tories on IHT, the moves made in the PBR have allowed the Tories to set the terms of the debate on the politics of taxation. If Labour had the courage of their convictions, they could make arguments about the fairness of IHT which would relocate the political battleground. Here, a recourse to political sincerity might actually prove to be surprisingly good politics.

Some forms of theft and insincerity may be politically expedient in the long run, but refusing to speak the truth about social justice and taxation cannot possibly be a sustainable long term strategy for a party (and leader) who sincerely believe in progressive goals of fairness and equality. And forms of political insincerity that are just bad politics have nothing to be said for them whatsoever.

Martin O’Neill is a political philosopher, based at the Centre for Political Theory in the Department of Politics at the University of Manchester. He has previously taught at Cambridge and Harvard, and is writing a book on Corporations and Social Justice.
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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