Economics and the Election

Economic issues are, as usual, of vital importance in the current UK election campaign. Both leading political parties have been lambasted by a major independent think-tank for their very evident failure to provide clear costings for their policies, and vagueness about how they would pay for them. This has been particularly shameful in the shoddy manner in which Mrs May's personal office - apparently transcendent in its power over the party machine - has mishandled the question of how much of the 'value' of a person's home can fairly be put into the pool of deferred resources that would notionally fund social care for the elderly. The question of how such a pool would be managed, over the generations to come, has not even been addressed. Yet the Tories are still slated to win, though at present the polls indicate a narrowing of their once-dramatic lead over other parties.

Behind this very worrying issue - of how the policies presented by the politicians stack up economically - lies the more fundamental question of what economic advice would be acceptable to the electorate, as representing a sound assessment based on serious data. The Brexit vote showed that the electorate was unconvinced by the Economists, who almost-unanimously promised that Brexit would be an unmitigated disaster. The vote can, indeed, be seen as an expression of no confidence in the 'Economics Profession' and in politicians [quintessentially George Osborne] who deploy their arguments.

This is in total contrast the the situation in the early nineteen-sixties, when a few economic think-tanks - notably the National Instititute for Economic and Social Research - and the Treasury produced closely convergent and highly detailed forecasts, on the basis of which Chancellors of the Exchequer purported to 'fine tune'  the economy so that it kept to a stable growth-path. That heyday of neo-Keynesianism collapsed in the disaster of inflation in the late 'sixties and 'seventies; such that in the 'eighties all forms of Keynesianism were set aside. The sorry story is told in my book: NO CONFIDENCE: the Brexit Vote and Economics, as advertised alongside this blog.

The point I want to make this morning is the simple one: that the over-confidence of an alliance of Economists and politicians in the nineteen-fifties and early 'sixties led to the chaos of the nineteen-seventies, which led to the repudiation of the purported Keynesians. They were replaced by a school of Economists known as Monetarists, who then mutated into the free-market advocates of the Econocracy who claim that the models that they have cribbed from physics [and grotesquesly misapplied to economic data] contain deep truths. On the basis of those claims, the present British policy of austerity is based: and that is now close to the point where it will be destructive of social cohesion: despite which, if the Tories win the election, the austerity policy will be continued. This is not emphasised in the Conservatives' propaganda, but it is their policy [though it is probable that Mrs May has no comprehension of its implications]. Labour do not like austerity, and promise to overset it; but they leave it clear that they have no idea how this would work, and what would be its long-term effects.

An over-mighty Economics Profession allied with politicians to plunge the country into the inflation of the nineteen-seventies. Now the eclipse of a disbelieved Econocracy leaves the electorate with no neo-scientific means of judging between two completely incredible manifestos. What prospect does that offer the youth of the soon-to-be adrift United Kingdom?