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Game, set . . . and Scottish flag

Andy Murray may be wishing he’d never raised his nationality – but the worlds of tennis and politics

1 In 2008, the Williams sisters declared their enthusiasm for Barack Obama but surprisingly declined to vote for him. As Jehovah’s Witnesses, they insisted, they were barred from voting in any election. Serena explained: “I’m a Jehovah’s Witness, so I don’t get involved in politics. We stay neutral. We don’t vote. So I’m not going to necessarily go out and vote for him. I would if it wasn’t for my religion.” Jehovah’s Witnesses have consistently cited John 17:16, in which Jesus says of his followers: “They are not of the world, even as I am not of the world” as a call to refrain from such lowly matters as the governance of world superpowers.

2 If the British player Buster Mottram had had his way, Wimbledon would have been all-white in more than just dress code. A member of the National Front from 1975 onwards, he once remarked:“I hope Enoch Powell will never die, just as his namesake in the Bible never died.” Mottram subsequently attempted to redeem himself by performing with the black singer Kenny Lynch. But he was shamed again when he was expelled from the UK Independence Party (which David Cameron once described as a “bunch of . . . fruitcakes and loonies and closet racists”) for attempting to form an electoral alliance with the British National Party.

3 The German player Gottfried von Cramm had much to be nervous about ahead of his 1937 Davis Cup match against the American Don Budge, so it hardly seemed worth taking a phone call from Berlin minutes before he strolled out on to the Centre Court at Wimbledon. But as he swatted the phone away, von Cramm feared the unknown identity of the caller would distract him yet further. He turned back, to find Adolf Hitler on the line. Von Cramm was a noted anti-fascist, but after Hitler revealed his fantasies of a victory parade, he was forced to reply through gritted teeth: “Ja, mein Führer.” A pallid, trembling von Cramm emerged on court and lost the match by six sets to eight.

4 Alan Johnson soon came to regret applying tennis analogies to Gordon Brown halfway through last year’s Wimbledon. Speaking shortly after Brown’s first anniversary as Prime Minister, the then health secretary declared that Brown was not “interested in playing on the Centre Court of politics”. Johnson insisted that he’d meant the Prime Minister was “just interested in getting on with the job” – but couldn’t resist adding that Brown would “achieve the results and serve more aces than Andy Murray, whether it’s on the outer courts or whether it’s on the Centre Court”. Given Brown’s recent woes, one doubts that Murray has lost much sleep over the challenge posed by his fellow Scot.

5 Fred Perry, the last British player to win the men’s singles title at Wimbledon, is also the only one to have had a Labour MP for a father. A cotton spinner radicalised by the co-operative movement, Samuel Perry was elected the Co-operative Party’s first national secretary. In 1923 he became the Labour MP for Kettering. Perry fils was himself anti-establishment; Greg Rosen’s book Serving the People: a Co-operative Party History from Fred Perry to Gordon Brown unravels the red thread that links the two men.

6 Burdened by debts of £17.8m last year, Labour was forced to investigate novel means of fundraising, including auctioning off a game of tennis with Tony Blair. The offer helped the cash-strapped party secure at least £10,000 in new funding. Lord Levy, Blair’s usual tennis partner, expressed polite bemusement at the auction, declaring that “desperate times require desperate measures”.

7 Last year, the nine times Wimbledon women’s champion Martina Navratilova announced that she had regained Czech nationality more than 30 years after she fled a communist regime she compared favourably to that of her adopted country, the United States, under President George W Bush. Navratilova was born in Prague; she fled in 1975 after being denied the right to compete in professional tennis in the US, the scene of most serious tennis tournaments. She subsequently became a US citizen. The star, who supports charities devoted to children, animals and gay rights, told the Czech newspaper Lidové noviny: “The thing is that we elected Bush. That is worse. Against that, nobody chose a communist government in Czechoslovakia.”

8 In February, the United Arab Emirates caused controversy when it denied the female Israeli tennis star Shahar Peer a visa for the Dubai Tennis Championships. The world number 48 had been drawn to play the 15th seed, Anna Chakvetadze of Russia, in the first round of the event, which includes the world’s top ten women players. A month before the ban, Peer was the focal point of protests in New Zealand after Israel’s offensive in Gaza. The tournament organisers claimed that they feared public fury over Gaza would threaten Peer’s safety.

9 Tony Blair may have left office with the pay gap between men and women standing at 17.1 per cent, but when it came to Wimbledon he was a consummate redistributionist. Until 2007, the men’s champion was awarded £30,000 more in prize money than the women’s. The All England Club attempted to justify this disparity with reference to men’s best-of-five-set matches compared to women’s best-of-three, but the club finally caved in after Blair “fully endorsed” players’ demands for equal pay.

10 Is he a British champion? Or a Scottish loser? The question of Andy Murray’s national identity may be the source of innumerable jokes, but it is perhaps also a microcosm of the fraught relations between the two members of the Union. As the young star prepares to compete for Wimbledon glory, the bookmakers Paddy Power are holding a survey on whether the public – and especially the English – think Murray is British or Scottish. Speaking for Paddy Power, Darren Haines said: “Middle England has taken a while to warm to Andy but if he serves up a Wimbledon win, they’ll consider him as British as the Union Jack. An early exit, and they’ll consider him Scottish again. And who’s to say Scottish fans won’t vote to keep him for their own?” Here’s one sportsman carrying the weight of a 202-year-old political union on his 22-year-old shoulders.

George Eaton is political editor of the New Statesman.

This article first appeared in the 29 June 2009 issue of the New Statesman, The Great Escape

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

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The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

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In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

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