By William K. Black, Quito: May 10, 2015
I don’t know when the New York Times adopted the (obviously secret) rule that forbids its news staff that writes about the EU from reading Paul Krugman’s columns in that obscure newspaper named the New York Times. I can say that compliance with the rule appears to be nearly 100 percent. It is, of course, a mystery why the NYT would give Krugman, a Nobel Laureate in Economics; the most prominent position in the world to explain economics and then require its news staff covering Europe to ignore virtually everything he explains.
The latest example of this is Krugman’s column explaining that a mythical meme dominates the UK’s major media – who closely resemble in their conservative politics and utter disdain for professional journalism the oligarchs who still dominate the major media in much of Latin America. Krugman titled his article “Triumph of the Unthinking.”
And nowhere was the triumph of inanity more complete than in Keynes’s homeland, which is going to the polls as I write this. Britain’s election should be a referendum on a failed economic doctrine, but it isn’t, because nobody with influence is challenging transparently false claims and bad ideas.
Like Mr. Obama and company, Labour’s leaders probably know better, but have decided that it’s too hard to overcome the easy appeal of bad economics, especially when most of the British news media report this bad economics as truth. But it has still been deeply disheartening to watch.
What nonsense am I talking about? Simon Wren-Lewis of the University of Oxford, who has been a tireless but lonely crusader for economic sense, calls it “mediamacro.” It’s a story about Britain that runs like this: First, the Labour government that ruled Britain until 2010 was wildly irresponsible, spending far beyond its means. Second, this fiscal profligacy caused the economic crisis of 2008-2009. Third, this in turn left the coalition that took power in 2010 with no choice except to impose austerity policies despite the depressed state of the economy. Finally, Britain’s return to economic growth in 2013 vindicated austerity and proved its critics wrong.
Now, every piece of this story is demonstrably, ludicrously wrong. Pre-crisis Britain wasn’t fiscally profligate. Debt and deficits were low, and at the time everyone expected them to stay that way; big deficits only arose as a result of the crisis. The crisis, which was a global phenomenon, was driven by runaway banks and private debt, not government deficits. There was no urgency about austerity: financial markets never showed any concern about British solvency. And Britain, which returned to growth only after a pause in the austerity drive, has made up none of the ground it lost during the coalition’s first two years.
Yet this nonsense narrative completely dominates news reporting, where it is treated as a fact rather than a hypothesis. And Labour hasn’t tried to push back, probably because they considered this a political fight they couldn’t win. But why?
Save for the bizarre “no urgency” phrase and the not-so-small matter that Krugman still refuses to even consider, much less analyze the role of the three most destructive financial fraud epidemics in history that drove the actions of bankers that created the financial crisis, everything Krugman says is simply good economics.
Krugman’s comments about Labour not even trying to push back against economic malpractice is factually correct. On the paramount economic issue of the day, Labour strongly supported inflicting self-destructive austerity. This, and Labour’s role as the architects of the UK fraud epidemics and resultant financial crisis and Great Depression through its championing of the three “de’s” (financial deregulation, desupervision, and de facto decriminalization) under Prime Ministers Tony Blair and Gordon Brown led much of Scotland to label Labour the “Red Tories” and to massively reject the Labour Party in favor of the anti-austerity Scottish National Party (SNP).
As readers of NEP know, the SNP leaders’ comments indicate that they do not understand how modern, sovereign monetary systems work. If anyone has access to the leadership and can arrange for my colleagues to brief them on these matters we would appreciate the opportunity. The fact remains, however, that the SNP is the only party in the UK with a party policy opposing austerity. Even after its election debacle in Scotland and loss in England, the likely leaders of Labour are expected to champion austerity. The SNP, therefore, is the only party in the UK that is “thinking” in Krugman’s terms and courageous enough to take on the media myths about the supposed virtues of austerity.
So, if you are a NYT writer and you choose to propagate the UK media myths about Labour and austerity that Krugman described, you should have a steep, uphill road ahead of you. At the barest minimum, you have to explain why Krugman, and economists overall, who have studied the issue find each element of your myth “demonstrably, ludicrously wrong.” You have the data against you. You have to explain away the far greater success of the U.S. under (deeply inadequate) stimulus than the UK’s many lost years under austerity (and the even greater disaster that more severe austerity caused in the periphery of the EU). There is also the not so small fact that your knowledge of economics relative to Krugman (and the great bulk of economists who oppose austerity as a response to a Great Recession) is very weak.
Let’s Pretend that Krugman (and Economics) Doesn’t Exist
The answer to these crippling obstacles that the NYT’s writers about the EU have adopted is to never read, reference, or even attempt to respond to Krugman (or the consensus view of economists) or to the U.S.’s dramatically superior recovery because it rejected the most damaging forms of austerity in the early years of the Great Recession. Instead, the NYT’s writers copy their UK cousin’s approach, presenting a “nonsense narrative [that] completely dominates news reporting, where it is treated as a fact rather than a hypothesis”
The Claim that Labour Lost Because the Red Tories Weren’t Sufficiently Far to the Right
The latest example of this “nonsense narrative” in the NYT is entitled: “Appeal to Dwindling Core Proves Costly for Labour Party in Britain.” The nonsense narrative was written by two of the paper’s top European correspondents (long steeped in presenting Brussels’ catastrophic infliction of austerity as if “there is no alternative” (TINA) to austerity).
[Labour] was nearly wiped out in Scotland, long one of its strongholds. Some of its brightest and most experienced members of Parliament lost their seats, including its shadow chancellor and shadow foreign secretary.
Most important, it lost the argument about Britain’s best path toward the future and was left with no clear guiding philosophy.
Except that as Krugman pointed out, Labour never “lost the argument” about austerity with the Tories because it championed austerity. There was no “argument” against austerity presented to the voters – except “in Scotland” where the SNP’s arguments against austerity led to the greatest electoral triumph in modern UK history with the SNP going from a handful of seats in the Commons to winning 53 of 56 seats. So, the only voters presented with an “argument” about austerity overwhelmingly rejected it and supported the economically literate strategy outlining the “best path toward the future.”
Presented with a choice between imitation Tories (the Red Tories exemplifying “New Labour”) and full-fledged Tories, the electorate of any country tends to vote for the official conservatives. As I will soon explain, however, even that was not the dominant problem for Labour in the UK election. Mostly, the Red Tories of “New Labour” lost to real Labour in Scotland – the SNP. A few Red Tories lost because working class voters disgusted with the Red Tories selling out to the banksters joined a populist revolt by voting for UKIP. This allowed the Tories, for example, to defeat New Labour’s leading economic spokesman for austerity – the party’s shadow chancellor, Ed Balls. He lost his seat in Leeds, which has a strong working class.
New Labour has had “no clear guiding philosophy” from the beginning because its strategy of becoming Red Tories and joining the Conservative Party’s assaults on the working class and regulation and its championing of the most corrupt elite bank officers in the world is not a “philosophy.” At best, it is a craven political tactic that depends for its (temporary) electoral success on spectacularly unpopular Tory leadership. The fraud epidemics, financial crises, and severe recessions that result from championing the world’s most corrupt elite bankers ensure that New Labour’s electoral successes will end in repeated disasters.
The NYT authors assert that Labour lost because the number of industrial workers in the UK is a “dwindling core.” The most obvious problem with the claim is the immense surge in support for the NSP in Scotland running as a progressive party against the Red Tories (New Labour).
The UK election, therefore, did not represent the result of “dwindling” support for progressive policies, but a large increase in support for progressive policies. Indeed, another article in the NYT that the authors of the “dwindling core” article failed to read (or ignored) explained that the share of votes cast for Labour increased in this election – rather than “dwindled.” Indeed, the increase in the share of votes cast for Labour in this election was significantly greater than the increase in Tory voters.
Josh Barro’s article entitled “How Labour Gained Votes but Still Lost Seats” bears the date of May 8, 2015, while the “dwindling core” article is dated May 9, 2015. Barro, despite writing earlier, took the time to analyze the election data.
Not only did Labour take a larger share of the vote this week than it did in 2010, but it also improved its vote share by substantially more than the victorious Conservatives did.
It’s a surprising result — Labour improved its vote share by 1.4 points and still managed to lose 26 seats, while the Conservatives mustered a majority by gaining just 0.8 points.
It turns out that the big vote losers were the Lib-Dems. Like New Labour, the Lib-Dems moved far to the right to join the Tories in a coalition government. The voters decided to reject the imitation Tories in favor of the genuine Tories (and to a much lesser extent Labour) – and the Lib-Dems were annihilated as a major political party. Barro explains this point.
At the same time the Conservatives were losing votes [but not seats] to UKIP, they were taking votes away from the centrist Liberal Democrats. Those gains translated into a lot of actual Conservative gains of former Liberal Democrat seats, particularly in South West England. Labour also took votes and seats from the Liberal Democrats, but the party was less efficient at turning votes into seats.
It was the crushing of the Lib-Dems and the swing of so many of their votes to the Tories that gave the Tories majority control of the Commons. The party that claimed to have adopted a strategy, by going into coalition with the Tories, of moving to the middle, was annihilated as a political force in the election. The only large progressive party in the UK, the SNP, dramatically increased its total votes, voting share, and seats in the Commons.
But the “dwindling core” authors have swallowed whole the “demonstrably, ludicrously wrong” meme dominating the UK media about the glories of austerity and New Labour’s profligacy. The “dwindling core” authors are appalled that New Labour did not move even farther to the right by being even more zealous than the Tories in inflicting austerity on the UK. The authors treat as indisputable “fact” this “nonsense narrative.” Note the total absence of economics and the distorted history in the authors’ explanation of New Labour’s economic policies.
But Mr. Miliband’s campaign was also a challenge — and a rebuff — to the “New Labour” strategy of former Prime Minister Tony Blair, who won three elections by downplaying socialism, reaching for the center and convincing business that Labour was its friend.
In the end, the Conservatives appeared to succeed in much of Britain with their argument that Labour under Mr. Miliband could not be trusted with the economy, especially if prodded by the Scottish National Party.
Blair’s strategy was not “reaching for the center” in the context of “convincing business that Labour was its friend.” Blair and Brown (as Blair’s finance leader, and then as Prime Minister) went ultra-right wing in their embrace of the world’s most elite bank frauds. Blair and Brown successfully championed the City of London “winning” the regulatory race to the bottom.
In my next column I will quote extensively and analyze his infamous May 26, 2005 speech on “Risk and the State” to show how extreme Blair and Brown’s unholy war on financial regulation and the prosecution of elite white-collar criminals became. This made the City the most criminogenic environment in the world for elite financial frauds and made the City the financial cesspool of the world. The result was vast (net) harm to the UK – but it made the City’s banksters immensely wealthy. They proceeded to avoid and evade taxes on a massive scale. The combination of elite fraud by banksters, endemic tax evasion and avoidance by UK elites, and bankster strategies that made ripping off the UK customer (retail and small business) the paramount source of profits to UK bankers caused a financial crisis, threw the UK into a Great Recession, and caused inequality to surge. And the banksters did all of this at the most elite levels with absolute impunity from the laws because of New Labour’s fraud-friendly policies.
It should be, for example, an immense political scandal that one of the Tories’ early actions upon their coalition coming to power was to substantially reduce the budget of the Serious Frauds Office (SFO) – which is supposed to prosecute the elite banksters. Despite New Labour’s sycophancy to financial elites, the City’s elites overwhelmingly fund the elections of Tories. This is the perfect recipe for a scandal except for two small facts – the bulk of the most devastating frauds by the elite banksters happened under Blair and Brown’s rule – and Blair and Brown’s governments refused to prosecute any of the elite banksters whose frauds drove the UK crises. Blair and Brown’s appointees ruined the SFO before the Tories’ “wrecking crew” came to power.
The NYT authors quote with approval Blair’s “grandee and former strategist Peter Mandelson,” and note the populist success of UKIP in taking votes from New Labour in northern England, but they fail to tell the reader Mandelson’s (and Blair and Brown’s) contributions to the economic disaster for the UK and the political disaster for New Labour. Mandelson is infamous for his statement that New Labour was “intensely relaxed about people getting filthy rich.” One can defend Mandelson and Blair against any criticism based on hypocrisy, for both went on to parlay their public “service” into becoming “filthy rich” through ties with giant finance, fabulously corrupt Kazakhstan, and property investments. Mandelson moved into an “£8 million home in north London.” The Scots don’t call Labour’s leaders “Red Tories” without reason. The “red” part of the label is the joke. The “Tories” part of the label is the reality on the paramount economic policy issue – austerity.
The NYT reporters cannot understand why Labour would not continue Blair and Brown’s policies that devastated the UK’s people and brought the Tories to power. The real insanity, however, is the one Krugman explained. Labour did continue under Ed Miliband, at the worst possible time, among the most destructive and financially illiterate of Blair and Brown’s economic policies – austerity.
But that brings us to an even greater weakness in the NYT authors’ account of Labour policies – the authors evince zero interest in whether Blair, Brown, and Tory Prime Minister Cameron’s paramount economic policy – austerity – is a policy that the UK should follow. As the authors present the issue, the only issue is politics. If austerity is an economic disaster but politically popular, then the implication is that only an idiot would oppose austerity. The authors do not even contemplate the possibility that a politician should seek to convince members of the electorate – as did the SNP – that austerity was a disastrous policy.
In part, the authors evade the issue of whether austerity is a bad economic policy by conjuring up an alternate universe of fictional New Labour politics.
Mr. Blair won three elections, starting 1997, but inside the party there remained a sharp battle between the “Blairites,” who pushed outreach to business and the middle class, and the “Brownites,” who supported Gordon Brown, a defender of traditional policies. Mr. Brown succeeded Mr. Blair as prime minister.
Mr. Brown lost the 2010 elections, but because Mr. Cameron did not quite win it, having to go into a coalition with the centrist Liberal Democrats, the Brownites kept control of the party.
Yes, Blair and Brown were rivals as well as partners and their relationship was complex and varied over time. No, Brown was not the “defender of traditional [Old Labour economic] policies.” Brown was an active leader of New Labour’s embrace of three “de’s,” he was (and is) a fervent supporter of austerity in response to a Great Recession, and he was every bit as deep in the City of London’s (big finance’s) pockets as was Blair. Further, like Blair, Brown detests the SNP rather than seeing it as an ally.
The Labour party, under the supposed “Brownites,” that went into the recent election supported some modest increased financial regulation and taxes on the wealthy. On the paramount economic issue, however, it was fervently pro-austerity. It never repudiated Blair and Brown’s embrace of the regulatory race to the bottom in finance. It never led a serious effort to require effective enforcement and prosecution of the banksters.
The “dwindling core” authors fail to admit the simple truth that Labour embraced austerity under Blair, Brown, and Miliband. This is the key passage, and is dangerously misleading.
[Miliband’s] agenda was sold by Labour as a responsible alternative to the fiscal austerity imposed on Britain by Prime Minister David Cameron and the Conservative-led government of the past five years.
The sentence I have quoted is technically accurate, but sure to mislead entirely. Miliband tried to sell Labour’s embrace of austerity as superior to the Tories’ embrace of austerity. As Krugman accurately noted, New Labour under Blair, Brown, and Miliband always embraced this economically illiterate position that caused so much harm. None of these leaders was ever willing to make the argument for countercyclical fiscal policies even those policies have consistently proven themselves for 75 years. Indeed, the word “responsible” (and “competent”) are New Labour code words for pro-austerity. Blair, Brown, and Miliband implicitly defined the countercyclical fiscal policies that were vital and known to be effective as “irresponsible” and “incompetent.” They each spread the Tory falsehood that austerity was pro-growth.
Brown (the mythical Fabian socialist in this tale invented by the NYT reporters) drank the Tory nonsense about austerity and debt so deeply that he appointed Liam Byrne as his chief secretary to the Treasury (if you’re not from the UK do not mistake the word “secretary” for a minor position, it is the opposite in this case). Byrne made the single most revealing statement of any finance head in history as to the depths of his ignorance of economics and finance – and the dumbest political gift to an opposing party – when he left a note for his Tory successor saying “I’m afraid there is no money.” Byrne will be the subject of my third column in this series of articles. For now, I will say only that if Brown supposedly represents the “left” of New Labour, then the position of the “left” on austerity within the Labour Party is far to the right of the Republican Party in the U.S. (which virtually never adopts austerity when a Republican president confronts a recession).
In any event, the reader has figured out by this point that Blair is the supposed maestro is this fictional retelling of history by the NYT authors and Blair is a genius because, not despite, being in the City’s pocket. The authors toss off this line without any discussion of its irony.
In the end, the Conservatives appeared to succeed in much of Britain with their argument that Labour under Mr. Miliband could not be trusted with the economy, especially if prodded by the Scottish National Party.
Notice the confusing nature of the unexplained logic. Miliband’s fundamental economic policy was the same as the Tories – austerity. Austerity has proven, once again, to do terrible, gratuitous damage to the UK, so if the voters do not trust Miliband’s infliction of austerity they certainly should not trust Cameron’s infliction of austerity.
But it is likely that the authors mean to claim that the voters did not trust Miliband, because the media and Cameron caused them to fear that under the SNP’s “prod[ing]” Miliband might adopt an economically rational anti-austerity program. Under this false UK media meme everyone serious knows that we must continue to insist on inflicting self-destructive austerity on the UK. This claim of successful, albeit dishonest and destructive, fear mongering might have some truth, but the authors present no proof of it.
What we do know is that the only voters in the UK who were presented with a clear choice on austerity – the voters in Scotland – voted overwhelmingly against the three pro-austerity parties and in favor of the sole anti-austerity party. The NYT authors do not bother the reader with such facts because they refute their thesis.
The NYT authors then dismiss another fact inconvenient to their thesis.
Alan Johnson, a former home secretary for Labour, said on Saturday that the party needed “a proper rethink.”
The problem was not Mr. Miliband’s personality but policy….
Miliband’s Red Tory austerity policies and demonization of the Scots were horrible policies that cost Labour deeply. But it falsifies reality to ignore Miliband’s vibrant personal flaws, which became the story of the election. In American political terms, think Michael Dukakis in the tank – and then think of something equivalent occurring weekly – and you will have an idea of how spectacularly incompetent Miliband was as a campaigner. Then recall that the UK media is far nastier than Fox News and overwhelmingly Tory. Oh, and Cameron got to flash Byrne’s “I’m afraid there is no money” note at every campaign event.
Cameron and Nick Clegg (busily leading the Lib-Dems to political suicide) were also poor campaigners, but the public turned on Miliband with a vengeance based on his personality and his capacity to look bizarre when doing something as innocuous as eating a bacon sandwich. The Atlantic aptly calls the infamous photo “The Defining Image of the British Election.” The NYT authors are well aware of this fact and its crucial importance, so their effort to exclude the issue of Miliband’s personal unpopularity was calculated to mislead and advance their thesis. The top campaigner was Nicola Sturgeon, the SNP leader, which also explains part of the SNP’s extent of victory.
Notice how deliberately misleading the NYT authors’ next statement is.
The problem for Labour is deeper than just its abandoning the middle ground, said Steven Fielding, professor of political history at Nottingham University. “On one level they are seen as too left-wing in England and too right-wing in Scotland, but actually it is about the relationship the party had with the electorate in both countries,” he said.
Let us count the ways this phraseology is abusive. Labour, under Blair’s leadership, “abandon[ed] the middle ground” pursuant to his New Labour policies. Old Labour was not the “middle ground” either. It was a doctrinaire party of the left. But the New Labourites, rather than moving to the “middle ground” moved – on finance-related issues – ultra far-right. Their war on financial regulation, supervision, enforcement, and prosecution was a war of annihilation that George Stigler would have applauded. The results were catastrophic for the UK. Even Tories now call the City’s culture “corrupt.” But we know that the NYT authors do not intend to ask Fielding about New Labour’s abandonment of “the middle ground” in favor of ultra-right wing dogmas.
Next, notice what is not in quotation marks. It is the authors who assert as if it were undisputed fact that “Labour … abandon[ed] the middle ground” after Blair left office to cash in and be made wealthy by JPMorgan and a gang of the world’s worst kleptocrats. What the professor actually said, the part in quotation marks, doubly refutes the claim that “Labour … abandon[ed] the middle ground” after Blair’s departure. First, he portrays Labour as representing the “middle ground” between the Tories and the SNP. Second, he says that Labour’s problem was not whether it occupied the “middle ground,” but rather was Miliband’s inability to connect positively with voters in England and Scotland. This reinforces the importance of personality that the authors tried to dismiss by quoting Alan Johnson.
The NYT authors then use Alan Johnson again to try to bash Miliband’s policies and boost Blair (notice that they ignore Brown).
In some sense, [Miliband] was seen as running against Mr. Blair as much as Mr. Cameron. As Mr. Johnson said, if Labour was “suggesting that we failed in our 13 years in government it’s not going to do us much good.”
The authors do not inform the reader that Johnson resigned from his “shadow” position due to a dispute with Miliband and that Johnson is a testament to the weakness of the Labour leadership under Blair, Brown, and Miliband. Johnson held a variety of high level positions under each of these New Labour leaders. He screwed up repeatedly, but was simply recycled into a new senior position where he continued to blunder. He was part of the force pushing the party farther to the extreme right. In particular, his intervention in the scientific panel that was supposed to evaluate the risk of drugs to reject the science, his firing of the leader of the scientific panel, and the subsequent resignation of many of the panel’s members when he persisted as treating as highly dangerous drugs where the science said the opposite was a purely political move designed to make New Labour sound tough on drugs.
But let us ask the broader question that the NYT authors ignore. How could Labour ever (1) restore its credibility with the voters and (2) present an attractive alternative to the Tories (and the SNP) without “running against” Blair’s obscene policies on finance and his embrace of austerity? Again, the NYT authors’ exclusion of substance in favor of the most cynical of politics is breathtaking. Do they really think it would have been a good thing for Miliband to go back to supporting Blair and Brown’s disastrous policies that led to the City becoming the financial cesspool of the world, the fraud epidemics, the financial crisis, the Great Recession, and the gratuitous second Great Recession inflicted by austerity? The tenor of the article implies that is exactly what they think.
The NYT authors’ incoherence on this point was inadvertently revealed when they tried to buttress their thesis that Labour must endorse its inner Tory to win.
The left “has failed to capitalize on the crisis of 2008,” said Tony Travers, a political scientist at the London School of Economics.
The authors, again inadvertently, have already refuted Travers’ claim. “The left” is the SNP and it “capitalize[d]” in an extraordinarily successful fashion on “the crisis of 2008” and the second crisis inflicted gratuitously by self-inflicted austerity. It was New Labour’s policies, particularly its unholy war against regulation and accountability that Blair and Brown fought on behalf of their plutocratic patrons, the corrupt banksters; that caused “the crisis of 2008.”
It was New Labour’s leap to the far right to embrace austerity that left the party with no alternative to the Tories’ infliction of austerity and the resultant second Great Recession. The only way the Labour party could “capitalize on the crisis of 2008” was to repudiate its adoption of economically illiterate ultra-right wing dogma. But the NYT authors just got done claiming that it would be politically crazy for the Labour party to admit its fatal substantive mistakes and adopt economically literate policies. The SNP’s amazing success came about in large part because it repudiated these illiterate ultra-right wing dogmas. The Labour party candidates in Scotland refused to publicly break with Blair, Brown, and Miliband’s adoption of the right wing dogmas that caused the two economic crises and so much suffering.
The NYT authors inadvertently reveal their economic illiteracy in this passage:
Ed Miliband gave that traditional socialism a modern gloss, but he sometimes seemed less than comfortable dealing with issues like nurturing the economic recovery, shrinking the budget deficit….
The NYT authors write, without any appeal to economics or history, that in response to a Great Recession a nation like the UK with a sovereign currency should “nurture[e] the economic recovery [by] shrinking the budget deficit” when austerity does exactly the opposite, as we have known for 75 years. The word and the concept “demand” – as in “insufficient economic demand” – never appears in their article. They really must have signed some secret pact never to read Krugman or any credible economist.
Naturally, the NYT authors end by quoting and valorizing the most destructive politician in the UK – Blair.
Last December, Mr. Blair said presciently this election risked becoming one in which a “traditional left-wing party competes with a traditional right-wing party, with the traditional result.”
Asked by The Economist magazine if he meant that the Conservatives would win the general election in those circumstances, Mr. Blair replied: “Yes, that is what happens.”
Such a neat package on which to end an article. Except for three small bits.
- Blair’s embrace of ultra-right wing Tory policies caused catastrophic damage. The last thing the world needs is for another New Labour leader like Blair to be elected
- Labour ran under Miliband not as a “traditional left-wing party” but as Red Tories embracing the insanity of further austerity, indeed, austerity forever
- The party that ran most akin to a traditional progressive party, the SNP, swept to triumph
Again, UMKC economics offers to provide specialized economics classes without charge for any NYT writer who has signed the secret pact never to read Krugman. Your peddling of economic dogmas falsified decades ago harms your readers and the world.