The launch of a new – and factual – report on the EU reminds us how slippery truth has become in the economic debate
The late senator Daniel Patrick Moynihan once told an opponent: "Everyone is entitled to his own opinion, but not to his own facts." This astute comment came to mind when that great pro-European Peter Sutherland – he who, among other things, licked the World Trade Organisation into shape – made a nice observation at the recent launch of The UK & Europe: Costs, Benefits, Options, under the auspices of Regent's University, London.
Sutherland recalled an exchange with a Eurosceptic – or "Euroseptic", as Sir Edward Heath would have said – in which his interlocutor accused him of being "biased towards facts".
Subtitled The Regent's Report 2013, the 237-page document is going to be useful to all sides if we do have to go through what I myself regard as an unnecessary and time-wasting referendum on our membership of the European Union.
For a group of authors who are largely pro-European – and some, even now, pro-eurozone – they have produced a remarkably balanced document, with the emphasis on – wait for it – facts. There is plenty of acknowledgement of the tiresome aspects of the EU, and among a plethora of statistics, some obvious ones stand out.
These will not be new to students of the EU, but you can be sure they will not be highlighted by the anti-Europe brigade – many of whom have very nice houses in France, Spain, Italy and other parts of the EU. Suffice it to repeat here that, for all the fuss made by the anti-European press and Ukip, the entire "Brussels budget" amounts to 1% of EU gross domestic product.
Confusion can be worse confounded when it comes to facts. With economic statistics, we are often talking about estimates rather than facts. I have never found any evidence that Keynes made the remark often attributed to him: "When the facts change, I change my mind. What do you do, sir?"
The explanation is simple: Keynes was far too intelligent to believe that facts could change. Facts are facts. Circumstances can change, and new information or more refined calculation can alter previous estimates.
Which brings us to the present position, and what one has to admire as the superb propaganda of the chancellor. According to George Osborne's interpretation of events, the recent crisis was caused by the profligacy of the Brown government, as was the putative need for austerity. And, hey presto, thanks to his brave programme of austerity, focused to a considerable extent on short-sighted cuts in public sector investment and mean-minded attacks on welfare, austerity has produced "recovery" and growth.
On the subject of mean-minded attacks on the poor, my old friend Sir John Major is to be congratulated for his recent observation that too many vulnerable citizens face a choice this winter as to whether to eat or heat.
Far too many people have swallowed Osborne's line, failing to appreciate that, with the obvious exception of Greece, the crisis was caused by the banks and other financial institutions, not public spending. It was the financial crisis that caused the bulk of the increase in the public sector debt. Moreover, a recovery was under way three years ago, until Osborne took measures to abort it.
Now, within a matter of months, some commentators have moved from talking up a recovery that wasn't there to worrying about the pace of the recent upturn, with GDP estimated to have expanded at an annual rate of 3.3% in the third quarter (in real terms). But, as Russell Jones points out in the latest bulletin from Llewellyn Consulting, "issues of the balance and sustainability of [UK] growth remain".
Investment and construction generally are way below their pre-crisis levels, the emphasis being on an old-fashioned consumer boom, but one that is being fuelled not by real incomes – which are depressed – but by cheap credit and consumer decisions that rely on the persistence of unusually low interest rates.
The biggest scandal of all is that policy is concentrating on encouraging a boom not in housebuilding, but in house prices. Like the Bourbons, the coalition and the Bank of England have learned nothing and forgotten nothing.
The Bank of England? In his early days the new governor, Mark Carney, talked about the need for "escape velocity" in the economy. His innovation was "forward guidance", which was supposed to reassure people that interest rates would remain low for a very long time. But already his chief economist is talking about moving to more "normal" levels of interest rates – which will be a blow to many – and speculating about the end of forward guidance when it has hardly begun.
However, the real coup for the Bourbon strategy is Carney's quite remarkably complacent attitude towards the future of the City of London. He seems to see a future in which a still largely unreformed banking system gets bigger and bigger, with even more of the leverage that made such a marked contribution to the financial crisis. True, he believes there can be reform. I wonder.
This is a dangerous game. Meanwhile, though Labour worries that Osborne may get away with his pre-election boom, the chancellor may be hoist by his own petard. It was Osborne who insisted on a five-year term. I have a feeling that by the summer of 2015 his cynical and reckless policy will have blown up in his face, and be seen for what it has always been.
AusterityEuropean UnionEuropean monetary unionEuropean banksEconomic growth (GDP)Economic recoveryGeorge OsborneEconomic policyEconomicsEuropeWilliam Keegantheguardian.com © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds |
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