MILES COLE
Show Hide image

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

reddit.com/user/0I0I0I0I
Show Hide image

We need to talk about the online radicalisation of young, white women

Alt-right women are less visible than their tiki torch-carrying male counterparts - but they still exist. 

In November 2016, the writer and TED speaker Siyanda Mohutsiwa tweeted a ground-breaking observation. “When we talk about online radicalisation we always talk about Muslims. But the radicalisation of white men online is at astronomical levels,” she wrote, inspiring a series of mainstream articles on the topic (“We need to talk about the online radicalisation of young, white men,” wrote Abi Wilkinson in The Guardian). It is now commonly accepted that online radicalisation is not limited to the work of Isis, which uses social media to spread propaganda and recruit new members. Young, white men frequently form alt-right and neo-Nazi beliefs online.

But this narrative, too, is missing something. When it comes to online radicalisation into extreme right-wing, white supremacist, or racist views, women are far from immune.

“It’s a really slow process to be brainwashed really,” says Alexandra*, a 22-year-old former-racist who adopted extreme views during the United States presidential election of 2016. In particular, she believed white people to be more intelligent than people of colour. “It definitely felt like being indoctrinated into a cult.”

Alexandra was “indoctrinated” on 4Chan, the imageboard site where openly racist views flourish, especially on boards such as /pol/. It is a common misconception that 4Chan is only used by loser, basement-dwelling men. In actuality, 4Chan’s official figures acknowledge 30 percent of its users are female. More women may frequent 4Chan and /pol/ than it first appears, as many do not announce their gender on the site because of its “Tits or GTFO” culture. Even when women do reveal themselves, they are often believed to be men who are lying for attention.

“There are actually a lot of females on 4chan, they just don't really say. Most of the time it just isn't relevant,” says Alexandra. Her experiences on the site are similar to male users who are radicalised by /pol/’s far-right rhetoric. “They sowed the seeds of doubt with memes,” she laughs apprehensively. “Dumb memes and stuff and jokes…

“[Then] I was shown really bullshit studies that stated that some races were inferior to others like… I know now that that’s bogus science, it was bad statistics, but I never bothered to actually look into the truth myself, I just believed what was told to me.”

To be clear, online alt-right radicalisation still skews majority male (and men make up most of the extreme far-right, though women have always played a role in white supremacist movements). The alt-right frequently recruits from misogynistic forums where they prey on sexually-frustrated males and feed them increasingly extreme beliefs. But Alexandra’s story reveals that more women are part of radical right-wing online spaces than might first be apparent.

“You’d think that it would never happen to you, that you would never hold such horrible views," says Alexandra. "But it just happened really slowly and I didn't even notice it until too late."

***

We are less inclined to talk about radical alt-right and neo-Nazi women because they are less inclined to carry out radical acts. Photographs that emerged from the white nationalist rally in Charlottesville this weekend revealed that it was mostly polo shirt-wearing young, white men picking up tiki torches, shouting racial slurs, and fighting with counter-protestors. The white supremacist and alt-right terror attacks of the last year have also been committed by men, not women. But just because women aren’t as visible doesn’t mean they are not culpable.  

“Even when people are alt-right or sympathisers with Isis, it’s a tiny percentage of people who are willing or eager to die for those reasons and those people typically have significant personal problems and mental health issues, or suicidal motives,” explains Adam Lankford, author of The Myth of Martyrdom: What Really Drives Suicide Bombers, Rampage Shooters, and Other Self-Destructive Killers.

“Both men and women can play a huge role in terms of shaping the radicalised rhetoric that then influences those rare people who commit a crime.”

Prominent alt-right women often publicly admit that their role is more behind-the-scenes. Ayla Stewart runs the blog Wife With a Purpose, where she writes about “white culture” and traditional values. She was scheduled to speak at the Charlottesville “Unite the Right” rally before dropping out due to safety concerns. In a blog post entitled “#Charlottesville May Have Redefined Women’s Roles in the Alt Right”, she writes:

“I’ve decided that the growth of the movement has necessitated that I pick and choose my involvement as a woman more carefully and that I’m more mindful to chose [sic] women’s roles only.”

These roles include public speaking (only when her husband is present), gaining medical skills, and “listening to our men” in order to provide moral support. Stewart declined to be interviewed for this piece.

It is clear, therefore, that alt-right women do not have to carry out violence to be radical or radicalised. In some cases, they are complicit in the violence that does occur. Lankford gives the example of the Camp Chapman attack, committed by a male Jordanian suicide bomber against a CIA base in Afghanistan.

“What the research suggests in that case was the guy who ultimately committed the suicide bombing may have been less radical than his wife,” he explains. “His wife was actually pushing him to be more radical and shaming him for his lack of courage.” 

***

Just because women are less likely to be violent doesn’t mean they are incapable of it.

Angela King is a former neo-Nazi who went to prison for her part in the armed robbery and assault of a Jewish shop owner. She now runs Life After Hate, a non-profit that aims to help former right-wing extremists. While part of a skinhead gang, it was her job to recruit other women to the cause.

King's 1999 mugshot

“I was well known for the violence I was willing to inflict on others… often times the men would come up to me and say we don’t want to physically hurt a woman so can you take care of this,” King explains. “When I brought other woman in I looked for the same qualities in them that I thought I had in myself.”

These traits, King explains, were anger and a previous history of violence. She was 15 when she became involved with neo-Nazis, and explains that struggles with her sexuality and bullying had made her into a violent teenager.

“I was bullied verbally for years. I didn't fit in, I was socially awkward,” she says. One incident in particular stands out. Aged 12, King was physically bullied for the first time.

“I was humiliated in a way that even today I still am humiliated by this experience,” she says. One day, King made the mistake of sitting at a desk that “belonged” to a bully. “She started a fight with me in front of the entire class… I’ve always struggled with weight so I was a little bit pudgy, I had my little training bra on, and during the fight she ripped my shirt open in front of the entire class.

“At that age, having absolutely no self-confidence, I made the decision that if I became the bully, and took her place, I could never be humiliated like that again.”

Angela King, aged 18

King’s story is important because when it comes to online radicalisation, the cliché is that bullied, “loser” men are drawn to these alt-right and neo-Nazi communities. The most prominent women in the far-right (such as Stewart, and Lauren Southern, a YouTuber) are traditionally attractive and successful, with long blonde hair and flashing smiles. In actuality, women that are drawn to the movement online might be struggling, like King, to be socially accepted. This in no way justifies or excuses extreme behaviour, but can go some way to explaining how and why certain young women are radicalised. 

“At the age of 15 I had been bullied, raped. I had started down a negative path you know, experimenting with drugs, drinking, theft. And I was dealing with what I would call an acute identity crisis and essentially I was a very, very angry young woman who was socially awkward who did not feel like I had a place in the world, that I fit in anywhere. And I had no self-confidence or self-esteem. I hated everything about myself.”

King explains that Life After Hate’s research reveals that there are often non-ideological based precursors that lead people to far right groups. “Individuals don’t go to hate groups because they already hate everyone, they go seeking something. They go to fill some type of void in their lives that they’re not getting.”

None of this, of course, excuses the actions and beliefs of far-right extremists, but it does go some way to explaining how “normal” young people can be radicalised online. I ask Alexandra, the former 4Chan racist, if anything else was going on in her life when she was drawn towards extreme beliefs.

“Yes, I was lonely,” she admits.                                                       

***

That lonely men and women can both be radicalised in the insidious corners of the internet shouldn’t be surprising. For years, Isis has recruited vulnerable young women online, with children as young as 15 becoming "jihadi brides". We have now acknowledged that the cliché of virginal, spotty men being driven to far-right hate excludes the college-educated, clean-cut white men who made up much of the Unite the Right rally last weekend. We now must realise that right-wing women, too, are radicalised online, and they, too, are culpable for radical acts.  

It is often assumed that extremist women are radicalised by their husbands or fathers, which is aided by statements by far-right women themselves. The YouTuber, Southern, for example, once said:  

“Anytime they [the left] talk about the alt-right, they make it sound like it’s just about a bunch of guys in basements. They don’t mention that these guys have wives – supportive wives, who go to these meet-ups and these conferences – who are there – so I think it’s great for right-wing women to show themselves. We are here. You’re wrong.”

Although there is truth in this statement, women don’t have to have far-right husbands, brothers, or fathers in order to be drawn to white supremacist or alt-right movements. Although it doesn’t seem the alt-right are actively preying on young white women the same way they prey on young white men, many women are involved in online spaces that we wrongly assume are male-only. There are other spaces, such as Reddit's r/Hawtschwitz, where neo-Nazi women upload nude and naked selfies, carving a specific space for themselves in the online far-right. 

When we speak of women radicalised by husbands and fathers, we misallocate blame. Alexandra deeply regrets her choices, but she accepts they were her own. “I’m not going to deny that what I did was bad because I have to take responsibility for my actions,” she says.

Alexandra, who was “historically left-wing”, was first drawn to 4Chan when she became frustrated with the “self-righteousness” of the website Tumblr, favoured by liberal teens. Although she frequented the site's board for talking about anime, /a/, not /pol/, she found neo-Nazi and white supremacist beliefs were spread there too. 

“I was just like really fed up with the far left,” she says, “There was a lot of stuff I didn't like, like blaming like males for everything.” From this, Alexandra became anti-feminist and this is how she was incrementally exposed to anti-Semitic and racist beliefs. This parallels the story of many radicalised males on 4Chan, who turn to the site from hatred of feminists or indeed, all women. 

 “What I was doing was racist, like I – deep down I didn't really fully believe it in my heart, but the seeds of doubt were sowed again and it was a way to fit in. Like, if you don't regurgitate their opinions exactly they’ll just bully you and run you off.”

King’s life changed in prison, where Jamaican inmates befriended her and she was forced to reassess her worldview. Alexandra now considers herself “basically” free from prejudices, but says trying to rid herself of extreme beliefs is like “detoxing from drugs”. She began questioning 4Chan when she first realised that they genuinely wanted Donald Trump to become president. “I thought that supporting Trump was just a dumb meme on the internet,” she says.

Nowadays, King dedicates her life to helping young people escape from far-right extremism. "Those of us who were involved a few decades ago we did not have this type of technology, cell phones were not the slim white phones we have today, they were giant boxes," she says. "With the younger individuals who contact us who grew up with this technology, we're definitely seeing people who initially stumbled across the violent far-right online and the same holds for men and women.

"Instead of having to be out in public in a giant rally or Klan meeting, individuals find hate online."

* Name has been changed

Amelia Tait is a technology and digital culture writer at the New Statesman.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt