Franz Alekseyevich Roubaud's panoramic painting The Siege of Sevastopol (1854-55) shows the Charge of the Light Brigade. (Image: Bridgeman Art Library)
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Defend the west: is it time to re-arm?

Europe should not underestimate the Russian threat, argues historian and professor of international relations Brendan Simms. We must show how seriously we take Putin’s assault on Ukraine by working towards unification and moral and military rearmament.

“When a man sticks in a bayonet and strikes mush, he keeps pushing,” Lenin once remarked approvingly, “but if he hits cold steel, he pulls back.” His successor Nikita Khruschchev was fond of repeating this remark as he tested the west in Berlin, Cuba and elsewhere during the cold war. For some years now, the Russian leader and former communist counterintelligence agent Vladimir Putin has also been sticking in the bayonet and, so far, he has encountered only mush. In 2007 he was almost certainly behind a “cyber attack” on the Baltic republic of Estonia. A year later his placeman Dmitry Medvedev invaded the sovereign state of Georgia and in effect annexed the territories of Abkhazia and Georgia, after the Georgians responded to years of provocation. Most recently, he has invaded the sovereign state of Ukraine, sending troops not only all over the Crimean Peninsula, but also into some parts of the southern coast. His agents are fomenting unrest in eastern Ukraine. At every stage, Putin has proceeded carefully, using hooded “deniable” units in the Crimea, throwing off the mask and proceeding to full annexation only when he thought it was safe to do so.

In the first phase of the Crimean crisis, western mushiness has been palpable. Initially, the European Union and the United States confined themselves to a largely symbolic rap across Russian knuckles, with sanctions targeted against a small number of Kremlin and former Ukrainian officials. Many European countries and their governments, such as those in Italy, Spain and Croatia, regard Ukraine as a far-off and irrelevant place. Of those states capable of thinking more broadly, France has been very muted. Britain, swayed as leaked briefing notes suggest by the financial interests of the City of London, which handles so much Russian money, has soft-pedalled on action if not rhetoric. President Obama, whose interest in Europe was never particularly pronounced, has been concentrating on his “pivot” against China in Asia. The worst offender, however, has been Germany, whose trade with and energy dependency on Russia make the country highly averse to any confrontation. The chancellor, Frau Merkel, pleaded with Putin at length over the phone but came away empty-handed, remarking that the man in the Kremlin seemed “to live in another world”. The sad truth, however, is that it is Putin who lives in the real world of hard power, whereas Merkel inhabits an alternative EU reality of norms and values that have no standing beyond our ability to defend them.

Moscow could have been stopped by early action. If Russia had been deterred from attacking Georgia, or put under such intense political, economic and military pressure as to force it to withdraw, Putin would never have dared invade Ukraine. If the Americans, who must have seen the build-up on their satellites, had deployed their Mediterranean fleet to the Black Sea just before or immediately after the Russian incursion into Crimea, while it was still being conducted at arm’s length by Moscow, Putin’s men could have been overpowered, probably without the use of firearms, and he would probably have disavowed them. The sham “referendum” would never have happened. In a similar confrontation at Pristina Airport in 1999 at the end of the Kosovo crisis, Nato intervened to prevent reinforcements from reaching the Russian advance guard, which prompted a compromise solution. Failure to respond robustly in the early stages of this crisis, by contrast, has emboldened Putin and made the situation far more intractable than it needed to be.

The west was temporarily disorientated by Russian propaganda that the Ukrainian revolution was dominated by “fascists” and that intervention was necessary to rescue the Russian population from them. Putin spoke of “reactionary, nationalist and anti-Semitic forces going on the rampage in certain parts of Ukraine, including Kyiv”. It is true that there are some very unpleasant right-wing extremists in western Ukraine – I saw a few of them on a visit there last September – but they made up a minority of the protesters against the regime of Viktor Yanukovych. Anti-Semitism exists in Ukraine, as elsewhere, but it has been maliciously blown out of all proportion. Far from welcoming Russian intervention, one of the chief rabbis of Ukraine, Yaakov Dov Bleich, compared Putin’s behaviour to that of Hitler over the Anschluss of Austria in 1938. There was never any grave threat against Ukrainian Jews, the Russian population, or any other minority group.

Europe’s far-right parties have aligned themselves not with Kyiv but with Moscow. Marine Le Pen, the president of the French extremist Front National, rushed to endorse the outcome of the Crimean plebiscite and denounce the EU’s “hypocrisy” in the matter. She also expressed concern about the “neo-Nazis” in the Ukrainian government, a startling remark from the leader of a party with very senior members who have a long record of anti-Semitism and Holocaust denial. The far-right and openly anti-Semitic Hungarian party Jobbik has praised the vote as “the triumph of a community’s self-determination”, and a precedent for similar moves in Hungarian areas of settlement in Slovakia and Romania. None of this is in the least surprising, because the far right sees in Putin’s action a valuable precedent for its own irredentist projects, and generally applauds the Russian leader for standing up to the decadent and plutocratic west. Indeed, Moscow specifically invited representatives of European far-right parties, including the Front National and Austria’s Freedom Party, to observe the 16 March referendum in Crimea, hardly the action of a government concerned about fascist “extremism”.

So let us be clear about what is happening. Putin, the authoritarian leader of a great power, has just invaded another European country and annexed a sizeable chunk of it. He is being cheered on by the continent’s revanchist extreme right. Thus far, the muted response of the west has merely invited further aggression. There is no sign of it showing the steel that would cause Russia to desist. One way or the other, what we are witnessing is the biggest crisis of the European order since the cold war, with the potential to shred the reputations of the governments and national security establishments of Europe and the US.

The US and Britain have failed to honour a commitment made in Budapest in 1994, when they (and Russia!) promised to uphold the territorial integrity of Ukraine in return for the removal of all nuclear weapons on its soil, then the third-largest arsenal in the world after the US and Russia. This agreement is registered at the United Nations as the “Memorandum on Security Assurances in connection with Ukraine’s accession to the Treaty on the Non-Proliferation of Nuclear Weapons”. Globally, the implications for the non-proliferation regime are enormous, because who now will surrender their nuclear weapons programmes in return for security “assurances”?

Much more serious, however, is the message sent about western credibility in Europe. No doubt Foreign Office and US state department lawyers will find ways of wriggling out of their contract with the Ukrainians, arguing that we are dealing with a mere memorandum and not a fully fledged and ratified international treaty, and that the signatories pledged to do no more than “consult”, which they have done. Welshing on a public security guarantee is not the same, however, as repudiating a warranty on a washing machine; you cannot just refer the plaintiff to the small print. The world may now conclude that the Anglo-Americans’ word is not their bond. It is a junk bond.

This matters because the European security order is akin to a sophisticated financial system. It is built on trust and the existence of a credible lender of last resort. During the cold war and after, Nato provided the necessary backstop, deterring aggression and even, as in the cases of Bosnia and Kosovo, eventually intervening “out of area”. So long as it is credible, this kind of system is relatively cheap to run and provides huge benefits. The buyers are released from the need to maintain expensive national armouries, including, in the case of Ukraine, nuclear weapons. The providers – the Nato powers and, to a lesser degree, the EU – don’t actually have to expend any military capital, though they need to hold it. These securities can be bought at different levels, the best cover being provided by Nato membership and the coveted “Article 5” collective security guarantee, with less firm bilateral guarantees such as the Budapest Memorandum. Nobody in central, northern and eastern Europe expected Britain and the US to go to war solely over Crimea on the strength of the 1994 agreement. What they were quite unprepared for was that the “security assurances” were entirely worthless. This realisation changes the entire strategic political economy of the continent. Now that London and Washington have defaulted on a subordinate strategic debt, other parties, including principal security bondholders, are reconsidering their own position.

The alarm is being sounded across the eastern flank of Europe. In their “far north”, the Norwegians worry about what Russian resurgence means for resource distribution in Arctic waters. The Swedes are bucking the European trend by increasing defence spending. Finland, in a state of permanent readiness during the cold war, is once again examining its options, with supporters of entry into Nato contradicted by those who believe that the country should rely on itself only. The Baltic states are the most anxious of all, their small size and large Russian minorities rendering them especially vulnerable, and sceptical about whether the vaunted Article 5 guarantee of the North Atlantic Treaty will be honoured. The Poles, with their long record of partition and occupation by Russia, regard the Ukrainian cause as their own. It is no accident that their foreign minister, Radek Sikorski, has been the most eloquent voice for a common front against Russia.

Further south, Moldova is terrified by the implications for its own breakaway territory of Transnistria. Here local authorities have just called for a similar referendum in advance of union with Russia. This would not only amputate another European sovereign state but also threaten Ukraine from the south-west. Romania is deeply concerned about Russian encroachments as well. She is also wondering what remains of the 2009 judgment of the International Court of Justice, which defined her maritime boundary with Ukraine – a boundary part of which faces the waters of Crimea now controlled by Russia. Turkey, too, has been following the crisis closely, conscious that an armed conflict on her northern border would put the threats posed by Syria and Iraq in the shade. It would also force the labile Erdogan government, which has trumpeted support for oppressed Muslims abroad for some time now, to take up the cause of the Crimean Tartars currently threatened by Russian nationalism. The ripples of Putin’s actions, and the west’s appeasement of them, are felt as far away as Bosnia-Herzegovina, where Serb separatists have been emboldened by the prospect of Russian backing to step up their demands.

In order to explain how we got here we need to go back to the immediate post-cold war settlement. The collapse of the Soviet Union in 1991, which Putin described about a decade ago as the “greatest geopolitical catastrophe of the 20th century”, led to the independence of Ukraine, Belarus, Moldova, the Baltic states and the Caucasian and central Asian republics. In effect, it reduced Russia to its territorial limits at the start of the reign of Peter the Great in the late 17th century. It was he who seized the Baltic provinces and broke through to the Black Sea. His successors expanded further in all directions, including Crimea, which was annexed by Catherine the Great in 1783. The loss of these territories, and particularly Ukraine, was a severe blow to the Russian psyche. The trauma was aggravated by western mistakes in recommending neoliberal shock therapy for Russia and generally not doing enough to support the democratic transition there. So, once the brief honeymoon with the west ended, Russia’s leaders set about trying to recover their influence in the post-Soviet space, frequently referred to as the “near abroad”.

Various economic and political association agreements were signed with Ukraine, Belarus, Kazakhstan and other neighbouring states throughout the 1990s. Moscow’s project soon ran up against the eastward “double enlargement” of the EU and Nato. Unlike the Kremlin’s schemes, this was – as the Norwegian historian Geir Lundestad once put it – very much “empire by invitation”. The newly liberated countries of central and eastern Europe were desperate to join “the west”, for cultural, economic and especially for security reasons. Moscow was at first relatively relaxed about the expansion of the EU, much less so about Nato, which it still regarded as a hostile alliance. There was initially considerable scepticism in London and Paris about the wisdom of provoking Moscow by extending Nato to the former German Democratic Republic, let alone Poland, the Czech Republic and Hungary. The strongest advocate of the move was Germany, which wished to have a Nato partner on her eastern border as a buffer. Berlin was then willing to ride roughshod over Russian sensitivities in order to secure her own borders. She was absolutely right to do so, because the space “between” would otherwise have been filled with uncertainty and instability, as the terrible example of Bosnia further south showed. In the 15 years or so after the collapse of communism, the EU and Nato expanded eastwards to include not only Poland, the Czech Republic and Hungary, but Slovakia, the Baltic states, Bulgaria and Romania as well.

The west’s mistake lay not in advancing so far so quickly, but in not advancing far enough. Rather than thinking in terms of neutral buffers, a permanent invitation to instability, it should have sought a clearly defined border with Russia. The US was sympathetic to such an enlargement into Ukraine, but then the Germans and the French intervened. In advance of Nato’s Bucharest summit in April 2008, Chancellor Merkel insisted that no state with pre-existing disputes should be admitted to the collective security cover of the alliance. This was directed primarily against Georgia, which had lost control of large parts of its territory to Russian-backed separatists, but also at Ukraine, which was deeply divided between a “European”-oriented west and a Russian-leaning east of the country, or so it seemed.

It was an odd requirement from the leader of a state, the Federal Republic of Germany, which had once benefited intensely from Nato protection even as it maintained a (justified) claim against a neighbouring state, the “German Democratic Republic”. The chancellor’s move signalled to Moscow that Europeans were sceptical about bringing Ukraine into the fold. Germany, having used the Nato ladder in the cold war and immediately afterwards, now pulled it up behind her.

Over the past few years, Vladimir Putin has moved steadily into the vacuum the west refused to fill. In October 2011 he announced the launch of a new, “many-tiered, multi-speed integration process in the post-Soviet space”, primarily designed to bring Ukraine more closely into his orbit. Putin’s language explicitly mimicked that of the rival EU. He spoke of “adapting the experience of the Schengen Agreement” to secure freedom of travel, noting that “it took Europe 40 years to move from the European Coal and Steel Community to the full European Union”. The instruments here are economic, but the aims geopolitical. Putin’s objective is nothing less than to create what he calls “a higher level of integration – a Eurasian Union”, a “powerful supranational association capable of becoming one of the poles in the modern world” alongside the EU, China and the United States. What he is driving at, in short, is not the reconstitution of the Soviet Union, still less world
hegemony, but a Russian-dominated Eurasian commonwealth, which would give him some kind of global parity with the other world “poles”.

The problem is that Putin’s ambition can only be achieved through the subjugation of neighbouring countries, in flagrant disregard of western values and interests. Late last year it led Moscow to coerce or bribe Ukraine’s ex-president Viktor Yanukovych into abandoning plans for closer association with the EU, a move that provoked the protests leading to his downfall. Even if we were to be brutal “realists” and throw the Baltic and eastern European states to the wolves, they would not all submit meekly. The western and central Ukrainians may fight, even unaided, if Putin tries to invade them, too. The Poles will resist under all circumstances, and may not wait for the threat to come to them. Indeed, failure to resolve the Ukrainian crisis might well lead to a unilateral Polish intervention further down the line and another huge crisis that would ultimately drag in Nato whether it liked it or not. We saw the bankruptcy of a narrow “national interest” realism over Bosnia in the 1990s, when the west was eventually compelled to use force though it had said for years that it would do no such thing. This sort of “realism” is not very realistic.

Besides, Europe needs to recognise Putin’s gamble not merely as a challenge but as an opportunity. History shows that successful unions have usually come about in the face of powerful external threats. In 1707, for instance, the English and the Scots came together to form the United Kingdom in order to repel the absolutist expansionism of Louis XIV. In 1787-88, the Americans did the same to prevent their young republic from being swallowed up by a hostile world. In both cases, the establishment of a strong executive, common representative institutions responsible for the common debt, and a robust military created states that have proved extraordinarily resilient on the world stage.

The eurozone should therefore move to the establishment of a cognate polity with an elected presidency, Union-level representation, a consolidated debt and a single army. This is the only way of mobilising all the energies of the common currency area for wider European projects, such as saving the euro and containing Putin.

It may be objected that the differing European interests make such a state impossible, witness Poland’s objections to the intervention in Libya in 2011, Mediterranean indifference to what is happening in Ukraine and Germany’s reluctance to do anything much, anywhere. Let us recall, however, that the Americans sought full political union precisely because they feared that the varying strategic and economic concerns of the individual states would set them at odds with each other and deliver them back into the hands of Britain or some other European empire.

Why, the founding fathers asked, should New Yorkers worry with Georgians about the Spanish threat to the South, or the Southerners with New Englanders about the British in Canada, or the inhabitants of the interior about the depredations of the Barbary pirates, unless they had truly national institutions to articulate a national interest? Likewise, only a single national security establishment will enable, say, the Spaniards to think about Putin and the Poles about North Africa. Above all, a single state would enable, or compel, the Germans – now nestling snugly within a buffer of friendly Nato democracies – to act strategically in defence of Europe as a whole.

In the meantime, the eurozone must join with Great Britain and the United States to restore Ukrainian sovereignty over the entire national territory, or at least to exact such a high price from Moscow that it desists from further expansion. The first step must be “target-hardening” along the entire eastern rim of the EU, and its friendly borderlands. Substantial trip-wire armoured forces from robust Nato countries such as the US, UK and France should be stationed in Poland, the Baltic states and Romania. Europe’s energy will have to be sourced elsewhere, perhaps from shale gas in the US or Europe. The entire Russian elite should be subjected to a comprehensive transatlantic “super-Magnitsky Act”, based on the legislation passed by the US Congress to punish those involved in the death of a Russian tax lawyer investigating corruption, which will restrict their travel and access to bank accounts. All investment and trade with Russia, especially in arms and technology, should cease until it withdraws from occupied territories in Ukraine. In order to sustain this effort, Europe must embark on a comprehensive campaign of moral and military rearmament.

All this will require sacrifices, including much higher defence expenditure, econo­mic dislocation for thousands of large and medium-size enterprises that trade with Russia, and perhaps also higher energy bills. In the UK it will entail tackling the “Russian lobby” – a nexus of oilmen, estate agents, fund managers, bankers and independent schools, as well as the lawyers, advisers and politicians who service them. Britain can be trusted to do this under its own steam. In the early 19th century it cast off the powerful “slave interest”, which reached much more deeply into society, economy and politics, and banned the international slave trade. As the author of a fine biography of the leading abolitionist William Wilberforce, the Foreign Secretary, William Hague, knows this better than anyone else. Whether Germany, the other major dependant on Russia, can rouse itself from its torpor, or move beyond its economic self-interest, is more doubtful. This is another reason to see it safely bound into a single eurozone state.

In Ukraine itself, we should deploy a substantial Nato force into western and central regions of the country to deter further aggression. We should look favourably on requests for huge economic support, which should not be subject to the usual IMF conditionalities, and military aid. Nato and EU membership should be fast-tracked for the parts of Ukraine under the control of the legitimate government in Kyiv. The intermediary end-state here may be partition, with a dividing line running through the country, and perhaps even through cities such as Kyiv and Dnipropetrovsk. If so, we must ensure that, as in the cold war, western and central Ukraine become a showcase for western prosperity and stability, while the annexed territories remain mired in the poverty, repression and backwardness that will characterise Putin’s Eurasian Union.

It is often said that we should not humiliate the Russian leader or “back him into a corner”. In truth, our weakness, not our strength, has encouraged him to put himself in that corner of his own free will. We need to ensure that the Russian people know he will lose, that he is in fact humiliated. The Crimean war against tsarist Russia is controversial for the incompetent way in which it was fought. What is often forgotten, however, is that Russia was roundly defeated, an outcome that led directly to the emancipation of the serfs in 1861. This is a precedent that Mr Putin, and those who resist resisting him, would do well to ponder.

The looming confrontation with Russia is best understood, however, not as a repeat of the past but as the beginning of something new: a European (cold) war of unification. Waging it successfully will consolidate the eurozone, just as the contest with France made Great Britain, and the American project in the world made the United States. Conversely, failing to take up the challenge, or doing so incompetently, may damage the European project beyond repair. History is littered with defunct polities that failed to cohere in the face of a powerful external threat, such as the Holy Roman empire and, most relevantly here, the Polish-Lithuanian Commonwealth. Europe will not prevail simply by virtue of what it is. It will also finally have to do something.

So what is it to be? Will the challenge from Putin’s Russia unite Europeans today, or will it drive them further apart, perhaps irreconcilably? Will the Union meet the threat by expanding east until it hits natural geographical or impermeable political borders? Will Ukraine be admitted to the European Union and Nato to end instability and forestall its absorption by Moscow? Above all, will the EU become a more cohesive international actor, particularly in the military sphere? Will its army and navy serve as the “school of the Union”? Will the Ukrainian revolution and our defence of it become the first “lieu de mémoire” of a new continental narrative? Will we recognise, as the French philosopher Bernard-Henri Lévy told a crowd in Kyiv, that the Ukrainians were the first to “die clutching the blue flag of Europe” in their hands?

Or will Europeans duck these challenges, retreat into themselves and even split apart? Will the Ukrainian crisis then join that long list of points at which the integration project failed to turn towards the creation of a single state capable of defending its values and interests? If that happens, history will judge the European Union an expensive youthful prank that the continent played in its dotage, marking the completion rather than the starting point of a great power project. 

Brendan Simms’s “Europe: the Struggle for Supremacy (1453 to the Present)” is newly published in paperback by Penguin (£10.99)

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.

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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