Lynton Crosby, who ran Boris Johnson's 2008 and 2012 election campaigns. Illustration: Dan Murrell/New Statesman
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Lynton Crosby, David Cameron and the old dog whistle test

David Cameron and George Osborne agree with Boris Johnson on one thing at least: the Tories should pay Lynton Crosby “whatever he wants” to become their election strategist. So what is it about this rough-tongued Australian that so appeals to them?

It is not hard to imagine the torrent of disparaging comment that will break over the Tories if they put Lynton Crosby in charge of their 2015 election campaign. Many on the left would take the appointment of this rough-tongued Australian as proof that the Conservatives had “lurched to the right”. Crosby’s willingness to campaign on the issue of immigration, seen in elections he has run in both Australia and the UK, would be cited as proof of a disreputable urge to play the race card. Placing him in charge of the Tory machine would be treated as confirmation of a general coarsening, with the leadership adopting a narrow, retrograde and ultimately hopeless strategy of appealing to white-van man.

Nor is Crosby without his critics on the right. Peter Oborne, writing in the Sunday Telegraph, lamented that even though his appointment seems “almost inevitable”, it “would also mean a terrible defeat for everything that Cameron has stood for”, amount to “a public recantation” of the more generous approach adopted by the Conservatives after their general election defeat in 2005, and look “deeply inauthentic”.

Yet one might say the trouble with the whole Cameroon project is that it has seemed inauthentic. The manner of its leading exponents has often been so tentative as to suggest that even they do not really believe in what they are doing. This problem was exposed with embarrassing clarity during the 2010 general election campaign, which appeared to be based on the premise that David Cameron is a nicer man than Gordon Brown. As soon as Nick Clegg looked, on first gaining access to the nation’s living rooms through the leadership debates, as if he, too, might be nicer than Brown, the Tories were in trouble. They had no idea what they wanted to say. Veterans of that campaign recount with a shudder how, if in the space of a few days you’d asked four members of the Tory high command – George Osborne, Steve Hilton, Ed Llewellyn and Andy Coulson – to tell you the theme of the campaign, you’d have got four different answers.

Cameron and Osborne know that if they allow such a debacle to recur in 2015, their political careers will most likely be over. They are therefore desperate to obtain Crosby’s services, even though he worked with Michael Howard on the 2005 campaign, which ended in failure.

Ferocious discipline

So who is this highly prized but, to the wider public, still largely unknown Australian? He was born in 1957 in Kadina, South Australia, the youngest of a cereal farmer’s three children. Farming did not attract the young Crosby. He took a degree in economics from the University of Adelaide and, after standing once unsuccessfully for election in his own right, began work for Australia’s main right-wing party, the Liberals, in Queensland, where he swiftly rose through the ranks. His métier turned out to be winning elections for other people rather than himself. He is a witty, foul-mouthed, workaholic election addict, with deep insights into political strategy and a ruthless eye for the other side’s vulnerabilities: he likes nothing better than to peel voters away from opponents by forcing them to defend positions that will be unpopular with their own supporters. His appearance may be that of a nondescript man in his mid-fifties, but his talents have made him one of the most successful behind-the-scenes political operators of recent times. John Howard, who as Liberal Party leader won four successive general election victories in the period 1996- 2004, did so with Crosby at his side as his campaign manager.

If Crosby is to come and work again for the Tories, he wants to be paid a huge sum of money, to compensate him for the lucrative lobbying work he would otherwise be doing. He also insists on complete control of the campaign, including the polling that will help to inform it. This would have to be transferred from Populus – the company co-founded in 2003 by Andrew Cooper, Cameron’s present head of strategy – to Crosby|Textor, the company set up in 2002 by Crosby and his business partner Mark Textor. My expectation is that these demands will be met, which will dismay some of those who believe they are already doing perfectly good work for the Tories.

Michael Ashcroft, who used polling by Populus for Smell the Coffee, his study of what went wrong with the Tory campaign in 2005, has recently used the Conservative Home website, whose parent company  he owns, to declare: “I believe it would be a mistake to hire Lynton Crosby . . . I do not think he is needed and would become a distracting influence.”

Crosby could still refuse to work for the Tories. He has been known to say he is not going to rejoin the team, but my guess is that when it comes to it he will be unable to resist the temptation. Would this be the disaster that some so confidently predict? Nobody can know for sure how a campaign will turn out, but it would be foolish to count on Crosby getting things wrong. In the autumn of 2007, Boris Johnson’s first attempt to become Mayor of London was floundering, with critics suggesting that his eagerness to tell jokes betrayed a flippant amateurism that made him unfit to run a capital city. Osborne prevailed on Johnson to let Crosby take charge of his campaign.

The jokes ceased. For journalists covering the contest, this was an unwelcome development. We found ourselves cut off from our most reliable source of colour. For months at a time, it was impossible to get near Johnson. Crosby was subjecting him and the rest of the Tory team to the kind of ferocious discipline that used to be inflicted on languid recruits at the Guards Depot at Pirbright.

Johnson’s most recent biographer, Sonia Purnell, relates how, at his first dinner with Crosby, the candidate was told: “If you let us down, we’ll cut your fucking knees off.”
    
Before writing this piece I asked Johnson what it had been like having his campaign run by Crosby. He was “an absolutely brilliant campaign manager”, Johnson said. “I’ve never known anyone so good at motivating a campaign.” He had “a thing called the pink cardigan”, and “all these hordes of young people working for him”. At the end of each day, he would throw the pink cardigan to someone who had “monstered the Labour Party or done something particularly distinguished”.

Johnson recalled how, one evening, “I tottered to the end of a gruelling encounter with some Tory London councillors. I tried feebly to motivate them on various themes, and I was leaving them at about 9.30 at night, feeling rather wan about things, and I got a text from Lynton which said: ‘Crap speech, mate.’”

There is a bracing realism to Crosby’s style. He does not seek to evade inconvenient truths with English politeness. But I put it to Johnson that it was a pity Crosby had forced him to stop telling jokes. “This is all hysterical nonsense,” he said. “The awful truth is that the electorate won’t take you seriously unless you take yourself seriously. If you don’t take yourself seriously they don’t think you’re taking them seriously.”

Londoners reckoned Johnson was serious enough to elect as their mayor in 2008, and to re-elect for a second term in May this year when Labour had been well ahead in the polls. Some of the credit for turning Johnson into a professional belongs to Crosby, though Labour prefers to place all the blame for defeat on its candidate, Ken Livingstone.

Blow your own foghorn

Johnson told me the Tories should do “whatever it takes” to hire Crosby to run the 2015 campaign: “Push the boat out, break the piggy bank, kill the fatted calf.” One cannot help being struck by this rare example of Johnson agreeing with something that Cameron and Osborne want to do. The appointment would be popular on the Tory back benches, which assume Crosby would treat the Liberal Democrats far more roughly than Cameron has done. In the mayoral elections, he proved expert at harvesting Lib Dem votes for Johnson.

But what about Crosby’s first campaign for the Tories in the general election of 2005? To begin with, things went well. On 26 March 2005, Andrew Grice, in the Independent, wrote of Crosby: “Since the pre-election campaign began in January, he has helped the Tories to set the political agenda for a sustained period for the first time since Black Wednesday in 1992. He is credited with turning a rusty party machine into the Rolls-Royce it was in Margaret Thatcher’s heyday.”

But in his book The End of the Party, Andrew Rawnsley gives the liberal intelligentsia’s view of what happened next: “After a slick start that worried Labour, the heavy emphasis the Tories put on immigration made them look opportunistic, monomaniac and unattractive to centrist and floating voters. In a well-timed speech in Dover [delivered on 22 April 2005, Tony] Blair charged his opponents with seeking ‘to exploit people’s fears’ and skilfully punctured Howard’s posturing on the issue. ‘The Tory party have gone from being a One Nation party to being a one-issue party.’”

Michael Howard won 33 more seats than the Conservatives had got at the previous general election, but only 0.7 per cent more of the vote. He managed to scandalise the intelligentsia without gaining large new support from Labour voters who were indeed worried about immigration. Crosby denied after the campaign that he had used a “dog whistle” to send surreptitious messages: “It was more like a foghorn.” Whatever instrument it was, few voters obeyed its instructions.

Rupert Darwall, a former adviser to the chancellor Norman Lamont who worked for Crosby during that year, said the campaign “didn’t come off because the Conservatives didn’t have an economic policy”. There was a boom, and Gordon Brown’s reputation as chancellor was still intact. Like Johnson, however,
Darwall has the highest respect for Crosby. “I’ve never come across such a good manager,” he told me. “He inspires the people working for him. He selects people he trusts and he doesn’t micromanage. The irredeemable sin is screwing up and not telling him.”

On being asked what economic policy Crosby would wish to pursue in the 2015 campaign, Darwall said: “He would reconfirm the view that getting control of borrowing is crucial. Normal people don’t buy the Keynesian thing that to get borrowing down you have to borrow more. Ed Miliband and Ed Balls would have a very hard time. I think Lynton Crosby would be a nightmare for Miliband.”

When I protested that commending deficit reduction for month after month with workaholic discipline sounded dull, Darwall replied: “It is disappointing for the media. It is not disappointing for the people who work in the campaign.”

Crosby’s partner Mark Textor has expressed their contempt for much of what appears in the media. Writing in the Sydney Morning Herald this summer, he argued: “Most is borderline trivial, certainly irrelevant. But that has never discouraged the commentators.”

One of John Howard’s strengths, in the victorious campaigns he waged with Crosby’s assistance, was his ability to say things that antagonised the Australian intelligentsia but appealed to ordinary Australians. In 1996, Howard defeated the Labor leader Paul Keating, an eloquent figure much admired by the intellectual elite, by appealing instead to core Labor voters who became known as “Howard’s battlers”. Howard carried conviction by choosing what looked like big challenges – a major tax reform, for instance – and sticking with them rather than cutting and running. His opponents will never forgive the ruthless way he exploited the question of immigration in the election of 2001. Howard was not charismatic, but he convinced voters that he had the Australian national interest at heart.

Senior Cameroons hope Crosby can work out how to appeal to the “strivers” identified by the Prime Minister in his speech to the Conservative party conference in Birmingham last month. These Tories recognise that one speech does not constitute a campaign, and are confident that Crosby has the professionalism needed to construct the latter. A close observer compared No 10 to a country house where everyone is very friendly and polite but no one knows who is in charge, nor even whose job it is to do the washing-up.

Almost everyone is fed up with this situation. The Tories want to be told what they need to do to win the next general election, and they think Crosby can tell them.

Crosby naturally refused to talk to me before I wrote this profile. He said he is not running for anything and is sick of being misrepresented by British journalists. I did, however, manage to have an enjoyable and illuminating talk with him last December, when I was updating my biography of Boris Johnson. It was clear that he had a keen understanding of his candidate’s strengths, and of the need to stop Livingstone from turning this year’s mayoral election into a straight Labour-Tory fight. Johnson did not emerge from that campaign as a horrible right-wing extremist, but as a person some Labour voters in London felt comfortable about supporting.

At the end of our conversation, Crosby presented me with a Boris Johnson campaign mug. I remarked that when I got it home, my wife, who is a Labour councillor in London, might well smash it. He thereupon gave me a Boris Johnson umbrella, saying as he did so: “This’ll really piss her off.”

Here is a man who delights in provoking Labour. The cleverest way to oppose him might be to be very nice about him. I am not sure he would know how to deal with that.

Andrew Gimson is the author of “Boris: the Rise of Boris Johnson” (Simon & Schuster, £7.99)

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