The war that changed us

It began with a blinding flash and promises of speedy victory. Five years on the mission far from ac

The show began with blinding flashes, heart-stopping thunder, sparks which had been palaces and hovels soaring up to decorate the night sky. The Shock and Awe military tattoo had started. It was only a few weeks until its climax as the great black evil one, suddenly floodlit, bowed to the crowd and fell slowly forward on his face.

Author, director! In flier's kit, backed by a chorus line of cute American sailors, the boss advanced downstage to harvest the cheers. "Mission accomplished!" But the noise was not all applause and was not coming from the audience and seemed, improperly, to persist. Something was wrong. Would the audience please remain in their seats until a technical problem with the exit was sorted? We are still there.

What have we done to Iraq? Until we are allowed to escape from the arena, it is impossible to look back and guess. What has Iraq done to us? Here it is easier to study the damage. The fearful act of 9/11, the utter success with which that spear of hatred pierced America's heart, left the United States a smaller country. But by joining in the retaliations for that act, Britain also became smaller. "Britishness", supposed to be a brand or a list of values, was already in a poor state. Iraq - and Afghanistan - diminished the probity and reliability of the United Kingdom in almost all its overseas dealings. In European but also Atlantic affairs, the UK has become a slighter, less interesting partner in the past five years.

At home, if that's the right term for a house that has become so draughty and noisy, democracy has diminished. In the vapid lists of "British values" served up by the Prime Minister and his supporters, "fair play" always recurs. It is not fair for civilians in Peterborough to abuse RAF men and women in uniform because of Iraq and Afghanistan. But the government has not played fair with the public, or even with the politicians, over those wars. The citizens are aware that they have been lied to and misled, that the independence of the British state has been rendered hollow, that control of the executive through parliament has become an old bedtime story told to make them close their eyes, that the five-year narrative of British military success in those two countries - still ela borated every day in the media - is no more than propaganda to conceal long-term mission failure, that a people can march in millions and be ignored.

All Blair's fault? All caused by what John Major's election team used to call the "Tango Bravo Factor"? Not entirely. Every one of these offences originated before 2003, some in new Labour's handling of power from 1997 onwards and others inherent in Britain's archaic institutions. The importance of Iraq was that it violently accelerated democratic decay and linked it to a short-term crisis in government ethics. People felt the jar of wheels falling off and asked: "Why are we being lied to?" Then they asked: "Who will tell us the truth about these wars and speak for us?" It's wrong to say that nobody did. At different moments, individuals such as Sir Menzies Campbell, Robin Cook or George Galloway spoke truth both to power and to the people. But none of them was able to wipe away the sense of national and personal humiliation that Iraq has left behind. Too many big men and women, who could and should have spoken out too, kept silent.

So Britain is smaller abroad. For the first time (as many commentators have pointed out), Britain abandoned its balance-of-power tradition and identified completely with the foreign policy of a stronger state. The UK was not the victim of 9/11 and had no direct motive for armed conflict with al-Qaeda or the Taliban, let alone with Saddam Hussein. The decision to go along with American retaliation through regime change did not defend British interests in the region but sacrificed them.

Sir Geoffrey Howe, speaking a few days after 9/11, listed four conditions that could justify American military action. These were that the action should be deterrent or self- defensive and not retaliatory, that there should be hard evidence of the target's responsibility for the 2001 atrocity, that long-term international support could be guaranteed and that any attack should be accompanied by a new effort to solve the Palestine question. None was fulfilled. Blair did attempt to link a token Middle East initiative to his support for Bush over Iraq, but it was never - could never have been - taken seriously by either Israel or the United States.

In spite of these omens, Tony Blair took Britain to war. His rhetoric changed from "humanitarian rescue" to "the defence of civilisation and civilised values". Many voices, from foreign statesmen to our own Foreign Office, tried to warn him that George W Bush and the neocons were an entirely new species of American leadership. It would be a fatal mistake to think he could steer and persuade them, as he had persuaded Bill Clinton and his White House over Kosovo in 1999.

Uncritical loyalty

Blair ignored them. The statesmen shrugged. The Foreign Office put its face in its hands, suddenly feeling very old. For 50 years, British diplomats had acted as the rearguard, preventing Britain's long retreat from power from turning into a rout. Now this! In the years that followed, the FO watched Blair govern from a sofa; few if any of its careful, brilliant position papers reached him or his inner circle. The vital connections between a prime minister and the "great offices of state" - Foreign Office, Home Office, Treasury - fell into neglect.

What has Britain got out of the Iraq War? Uncritical loyalty is always abused. The June 2003 extradition agreement deman ded by the US is a horrifying abdication of legal self-respect. Perhaps the most shaming, revealing moment came when Donald Rumsfeld placed his tactless call to London on the eve of war, suggesting that British troops were not really needed for the fighting and that if Blair was under pressure at home, they could restrict themselves to rear-area guard duties. But the British did fight, and Britain's reward has been to be loathed and dismissed throughout the Muslim world as America's poodle, to suffer a small but very painful Islamic terror campaign at home, and to lose credibility in Europe. It is noticeable, for example, that Angela Merkel and Nicolas Sarkozy are now given much warmer welcomes in Washington than British visitors; German and French opposition to the Iraq War in 2003 turns out to have cost them nothing in American attention. (One of the most stubborn British myths is that the Americans want the UK to remain semi-detached from Europe, loyally preventing the formation of a rival superstate. On the contrary, the Americans have always wanted Britain to get closer in there, and they long for a coherent EU with a single voice.)

So the wars in Iraq and Afghanistan have left the relationship less "special" than ever. Britain is weaker and more suspect in the world, and therefore less useful to American policies. Even the promised Trident warheads, token of renewed British nuclear dependence, are held up because the Americans have apparently used the wrong detergent to clean them up. Meanwhile, British forces have retreated into Basra airbase - the longest wait for a return flight in history - and in Afghanistan they do their best in a pointless war that everyone knows will be settled by a deal between the Pashtun and the other warlords.

How about the impact of the Iraq War on Britain itself? More accurately, how has this highly unpopular war affected the political climate, especially on the left? Organised pro-test against wars, especially expeditionary ones, has a long history in Britain. None of those movements succeeded, and yet the legacy of the protest has sometimes been as potent as that of the war itself. The "pro-Boer" campaigns against the South African war were a nursery for radical Liberal and socialist policies in the next generation. The "Law Not War" protest against the Suez invasion in 1956 abruptly ended the innocence of the postwar young, who had not imagined that the police could club women or that a British government could use criminal deceit to invade another nation. The Vietnam demonstrations were an induction into the social critique of the 1960s, even if the marchers learned little about Vietnam.

But "Not in My Name" was not the same as "Law Not War". To start with, these demonstrations were far bigger. They were also peaceful, marches of the non-marchers, whereas the Suez crowds tried to storm Downing Street and fought the police. Last, but very important, the Iraq protest had almost no articulation within parliamentary democracy. In 1956, the main opposition party - Labour, headed by Hugh Gait skell and Aneurin Bevan - used the whole labour movement infrastructure to pull people out on to the streets. In 2003, the Tories completely failed to recognise that the Iraq War was not a matter of "supporting our boys", but a menace to international order and a threat to their vision of Great Britain as a sovereign and independent state. A few - Malcolm Rifkind and Geoffrey Howe among them - saw what was at stake. But by refusing to support the Liberal Democrats and Labour rebels against the war, let alone to endorse the sea of outraged citizens with banners, the Conservatives betrayed their principles and, perhaps, their country.

Hate figures

War, which had rescued Margaret Thatcher's popularity in 1982, did the opposite for new Labour. Tony Blair became a hate figure in the same working-class parts of the United Kingdom that had once anchored their politics on hatred of Thatcher. But his grand "modernisation" project has driven ahead apparently undeterred; under Brown as under Blair as under Thatcher and Major, public services continue to be devolved to private speculators in spite of an accumulating pile of failures. New Labour's migration to the right leaves formations like the Scottish National Party commanding the social-democratic heights. At the 2005 elections, this convergence with the Tories made Tony Benn write in his diaries that "it's like three managing directors competing for the job of running Tesco's".

Has the war hastened the process? New Labour operates within exactly the same dialectic as Thatcher's governments did: as the state retreats from public service, so it advances its powers of social control. More "freedom of choice" for the consumer turns out to mean less freedom for the citizen. Fewer subsidies means more policemen. The Iraq War tempted the Blair governments and especially their home secretaries to snatch up the "war on terror" fantasy and use it to justify one repressive measure after another: extended detention without trial, new powers to search, bug and deport, the national identity database scheme, the crackdowns on asylum-seekers and immigrants, and all the other threatened or real erosions of civil liberty.

No wonder Baroness Thatcher said that new Labour was her greatest achievement. No wonder Tony Benn, looking back at the long disaster of the Iraq War, observes that, for the first time ever, the public has ended up to the left of a Labour government. Could this be the same party that, within months of winning power back in 1997, boldly handed over so much of the central state's authority to Scotland and Wales?

The outlook, after five years of war in Iraq and seven in Afghanistan, is dingy. Gordon Brown has missed the un repeatable opportunity for a new prime minister to de-nounce the war and promise "never again" for a slave rela tionship with an American president. Had he done so, he would have "spoken for Britain", transforming politics and his own prospects overnight. As it is, there are actually more Establishment voices in the US confessing that the Afghan and Iraq ventures are hopeless than there are in Britain. The longer we cling to false optimism, the harder it will be to extract ourselves from this mess.

And you happy, angry millions who flooded the streets five years ago - what do you feel now? "Not in My Name"? But a few days later it was done in your name, in spite of your passion. Blair pretended to take no notice; the next election did not throw him out; the killing has not stopped.

Does that mean that it's time to shrug and move on, that all passion against unjust war is futile? I don't think so. Demonstrations frighten governments more than they admit. Those who take part in them are changed, remembering a sense of strength that can last a lifetime. Meanwhile, the world has not moved on, but continues to burn; the madmen on all sides do not shrug but are laying new plots. Marchers with a passion for justice will be needed again, perhaps sooner than we think.

This article first appeared in the 17 March 2008 issue of the New Statesman, Iraq: the war that changed us

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