If you're comparing the economy to a handbag, you don't understand the economy. Or handbags. (Photo: Flickr/varga.halec)
Show Hide image

Nation-states aren't households: debating their economies as if they are is stupid

Our economic debate is conducted in terms of household budgets - a handbag economy. But the economy isn't a handbag, and this "debate" closes down real alternatives to the neoliberal consensus. 

Politics is becoming unpredictable, we are told, yet as the election approaches, political interviews have started to follow an identical script. The party leader or minister in question announces their policy: lowering student fees, say, or building social housing. Immediately the interviewer barks back: ‘And how are you going to pay for that?’

On Radio 4’s Today, on Question Time, even on Channel 4 News, politics is now universally presented as a household budget. The BBC’s Robert Peston responded to Ed Miliband’s announcement on student fees with a characteristic raised eyebrow and sucking-in of breath: “To be a credible commitment - at a time when the public sector deficit is £91bn - Labour would have to find a new tax to cover the significant cost … so Ed Balls has been asked to make the sums add up”. Credibility, covering costs, sums adding up: this is the banal weekly-shop lexicon of the contemporary political imagination. Having signed up to the Coalition’s priority of a balanced budget, Ed Miliband has explained that he will ‘pay for’ the policy with a tax on pensions. ‘Good lord, where would you get the money from for that?’ was Nick Ferrari’s reply to Natalie Bennett’s plan to build 500,000 new social homes.

This line of questioning sounds so much like straightforward common sense that we are scarcely aware of the stealthy alchemy of consensus-formation that has produced it. The Coalition has repeated its austerity mantra with admirable message discipline. The nation has maxed out its credit card, the story goes; we need to pay down our debts, balance the books and live within our means. After five years, these myths masquerading as reality checks have become thoroughly internalised by politicians, the media, and the public. Even the Greens, ostensibly the only party now thinking outside the neoliberal box, are trapped in this paradigm, stressing that their plans will be ‘fully costed” in their manifesto.

But all this is economic bunk. Government spending is not a zero sum game in which individual policy costs must be matched by corresponding ‘savings’ elsewhere. Governments can raise money not only through taxation but also by borrowing, creating money, and investing for growth. Contrary to his proclamations, Osborne has merrily carried on borrowing billions, not only because he’s a hypocrite, but also because it’s the rational thing to do. As the New Economics Foundation has pointed out, the UK’s debt-to-GDP ratio is not high by historical and international standards, and with interest rates so low the cost of servicing the debt remains eminently manageable.

The most powerful riposte to handbag economics is quantitative easing. The cognitive dissonance between ‘the British government has run out of money’ and ‘the Bank of England has just created £37bb’ is so great that we tend to just stick with the handbag as the simplest model. But the parallel between economics and a household budget breaks down when you realise there’s a money-printing machine in the garden shed. The European Central Bank is about to conjure a trillion euros out of thin air. This elastic fiscal latitude is what makes Nick Ferrari’s question to Bennett – "500,000 homes, £2.7bn? What are they made of, plywood?" – so maddening: it’s false, yet irresistibly tangible.

There is a debate among economists about the extent to which money grows on trees in an economy like the UK, but we certainly have enough monetary freedom to conclude that Osborne’s crust-and-gruel economics is not only unnecessarily punitive, but also fiscally illiterate. The classic risk of QE is inflation, but that is at an all-time low. We were sold austerity on the grounds that we might otherwise become like Greece, but Greece’s problem is that its hands are tied by being in the Euro. The IMF has since admitted that austerity was a mistake in countries that have control over their currency. Positive Money is rightly arguing for money to be created by governments rather than by commercial banks, so it can be used for investment that actually benefits people, rather than flooding financial markets, pushing up asset prices and making the rich even richer, which is what has happened to all that QE. Adair Turner is advocating helicopter money – yes, literally dropping money out of a helicopter for people to spend, arguing that this would kick-start the economy and lead to growth. But God forbid that wealth might actually be more evenly distributed.

“Balancing the books” has little to do with economics, and everything to do with a political desire to cut public spending and shrink the state. But countering it is difficult, because its metaphors have such visual and moral clarity. In reality, macroeconomics is counterintuitive.

In 2011, Cameron had to hastily rewrite a speech stating that “the only way out of a debt crisis is to deal with your debts. That means households – all of us – paying off the credit card and store card bills” after economists pointed out that this would massively exacerbate a recession fuelled by lack of demand. But two years later the penny had still not dropped. “Labour say that by borrowing more they would miraculously end up borrowing less,” Cameron said in 2013. “Let me just say that again: they think borrowing more money would mean borrowing less. Yes, it really is as incredible as that.” What is really incredible is that either Cameron doesn’t understand the economics of investment, or he’s misleading the public.

“It is well enough,” Henry Ford once said, “that the people of the nation do not understand our banking and monetary system; for, if they did, I believe there would be a revolution before tomorrow morning.” Grasping how the economy actually works would open up a policy space that is entirely absent from current political “debate”.

Right now, if anyone suggests a progressive alternative to the austerity straightjacket they are dismissed as a naïve fantasist, but that is a reversal of the facts. This is not even about daring to dream. It’s about daring to be an economic realist.

Eliane Glaser is a senior lecturer at Bath Spa University and author of Get Real: How to See Through the Hype, Spin and Lies of Modern Life.

Photo: Getty
Show Hide image

Michael Carrick is the “Geordie Pirlo” that England misunderstood

The Manchester United legend’s retirement announcement should leave Three Lions fans wondering what if?

That it came in the months leading up to a World Cup arguably added an exclamation point to the announcement of Michael Carrick’s impending retirement. The Manchester United midfielder, who is expected to take up a coaching role with the club afterwards, will hang up his boots at the end of the season. And United boss Jose Mourinho’s keenness to keep Carrick at Old Trafford in some capacity only serves to emphasise how highly he rates the 36-year-old.

But Carrick’s curtain call in May will be caveated by one striking anomaly on an otherwise imperious CV: his international career. Although at club level Carrick has excelled – winning every top tier honour a player based in England possibly can – he looks set to retire with just 34 caps for his country, and just one of those was earned at a major tournament.

This, in part, is down to the quality of competition he has faced. Indeed, much of the conversation around England’s midfield in the early to mid-noughties centred on finding a system that could accommodate both box-to-box dynamos Steven Gerrard and Frank Lampard.

As time went on, however, focus shifted towards trequartistas, advanced playmakers and those with more mobile, harrying playing styles. And the likes of Jack Wilshere, Ross Barkley, Jordan Henderson and Dele Alli were brought into the frame more frequently than Carrick, whose deep-lying capabilities were not utilised to their full potential. That nearly 65 per cent of Carrick’s England caps have come in friendlies shows how undervalued he was. 

In fairness, Carrick does not embody similar characteristics to many of his England midfield contemporaries, including a laudable lack of ego. He is not blessed with lung-busting pace, nor is he enough of a ball-winner to shield a back four solo. Yet his passing and distribution satisfy world-class criteria, with a range only matched, as far as England internationals go, by his former United team-mate Paul Scholes, who was also misused when playing for his country.

Rather, the player Carrick resembles most isn’t English at all; it’s Andrea Pirlo, minus the free-kicks. When comparisons between the mild-mannered Geordie and Italian football’s coolest customer first emerged, they were dismissed in some quarters as hyperbole. Yet watching Carrick confirm his retirement plans this week, perfectly bearded and reflecting on a trophy-laden 12-year spell at one of world football’s grandest institutions, the parallels have become harder to deny.

Michael Carrick at a press event ahead of Manchester United's Champions League game this week. Photo: Getty.

Where other players would have been shown the door much sooner, both Pirlo and Carrick’s efficient style of play – built on patience, possession and precision – gifted them twilights as impressive as many others’ peaks. That at 36, Carrick is still playing for a team in the top two of the top division in English football, rather than in lower-league or moneyed foreign obscurity, speaks volumes. At the same age, Pirlo started for Juventus in the Champions League final of 2015.

It is ill health, not a decline in ability, which is finally bringing Carrick’s career to a close. After saying he “felt strange” during the second-half of United’s 4-1 win over Burton Albion earlier this season, he had a cardiac ablation procedure to treat an irregular heart rhythm. He has since been limited to just three more appearances this term, of which United won two. 

And just how key to United’s success Carrick has been since his £18m signing from Tottenham in 2006 cannot be overstated. He was United’s sole signing that summer, yielding only modest excitement, and there were some Red Devils fans displeased with then manager Sir Alex Ferguson’s decision to assign Carrick the number 16 jersey previously worn by departed captain Roy Keane. Less than a year later, though, United won their first league title in four years. The following season, United won the league and Champions League double, with Carrick playing 49 times across all competitions.

Failing to regularly deploy Carrick in his favoured role – one that is nominally defensive in its position at the base of midfield, but also creative in providing through-balls to the players ahead – must be considered one of the most criminal oversights of successive England managers’ tenures. Unfortunately, Carrick’s heart condition means that current boss Gareth Southgate is unlikely to be able to make amends this summer.

By pressing space, rather than players, Carrick compensates for his lack of speed by marking passing channels and intercepting. He is forever watching the game around him and his unwillingness to commit passes prematurely and lose possession is as valuable an asset as when he does spot an opening.

Ultimately, while Carrick can have few regrets about his illustrious career, England fans and management alike can have plenty. Via West Ham, Spurs and United, the Wallsend-born émigré has earned his billing as one of the most gifted midfielders of his generation, but he’d never let on.

Rohan Banerjee is a Special Projects Writer at the New Statesman. He co-hosts the No Country For Brown Men podcast.