As I have reported on this blog, there have been letters supporting the debate created by Corbynomics, including one notable one from more than 40 academics in the Observer.
Tonight the near inevitable response has come in the FT, from 55 academics. I can't help but be amused by it. They start by saying:
Sir, We wish to register our opinion that the economic policies sketched by Jeremy Corbyn are likely to be highly damaging, and send this message to counter the impression that might be got from the previous letter of “41 economists” that Mr Corbyn's policies command widespread support in the mainstream of the discipline.
We've suddenly realised someone has had the temerity to challenge what we say and have finally got ourselves sufficiently together to draft some sort of response.
Renationalising industries is highly unlikely to improve the performance of its targets, and very likely, if history is anything to go by, to make things worse. If compensation is paid, it will be a waste of fiscal space, even unaffordable; in case it is not, it will be extremely damaging to the climate for enterprise in the UK as other companies fear the government would get a taste for it.
How dare you suggesting nationalising things? If you do there's a good chance things might work out for the best and that will prove we're wrong in saying the market has all the answers, once and for all, and we really don't like that so don't upset us, or else
“People's QE” would be a highly damaging threat to fiscal credibility, and unnecessary, since at this time of very low interest rates and tolerable debt/GDP public investment – in many areas much needed – can be financed conventionally.
This also needs a bit of translation. What it means is:
We want you to believe that we think that the Bank of England is indepedent even though there's a whole pile of paperwork showing all decisions on QE were taken in the Treasury , and in case you rumble us we'll pretend we're all in favour of bond borrowing that's more expensive than PQE even though we actually think austerity and cutting the deficit is vital to UK recovery, and we just hope you won't notice the flipping great hole that creatwes in our argument
And finally they say:
Figures put on money that could be found from ending “corporate welfare” and combating tax evasion are almost unbelievable and add to the sense that Mr Corbyn's plans have not been seriously thought through.
The corporate welfare figure is not mine, so I will leave it aside. Let me address the other part on the tax gap. What this says is:
We can't possibly believe that there can be a tax gap, or that the return on investment to recover it is at least 18 to 1 even though HMRC staff do believe theere's such a gap and the recovery rate is the one HMRC uses.
I suppose some people think this letter is telling: the FT is giving it headlines. But seriously, is this really the best they could do? If so there really is nothing to worry about.
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Except that presumably a whole load of people will be inclined to believe it as it fits with the existing narrative. Given Yvette Cooper’s inability to understand PQE there clearly is a hurdle to climb to get significant current thinkers to consider alternatives.
The presence of such a hurdle might imply that they are not ‘significant current thinkers’.
A group of left wing economists supported your views. Why are you surprised a group of right wing economists opposed it? In terms of tax gap your numbers are isolated in terms of size. In terms of corporate welfare the author(not you I appreciate) includes capital allowances and in his commentary he doesn’t seem to even understand how they work. I don’t see why it is controversial for people to observe this?
If you’re saying this letter is not academic but is pure politucs, I agree
This sentence is confusing:-
“If compensation is paid, it will be a waste of fiscal space, even unaffordable; in case it is not, it will be extremely damaging to the climate for enterprise in the UK as other companies fear the government would get a taste for it.”
I think what they mean is:- if compensation is not paid it will be damaging to the climate for enterprise in the UK as other companies fear the government would get a taste for it.
However that one short sentence quoted contains a few commas and a semi-colon, so it’s open to interpretation.
In my opinion, it’s a highly political letter. The signatories oppose Jeremy Corbyn and the letter is purely designed to undermine his campaign and makes no attempt to start a scholarly debate about his economic policies. I question the signatories’ strategic thinking skills- what’s the point of writing this letter when the vast majority of members/supporters have already cast their votes?
To be polite, it’s a lousy bit of writing
It reads to me as though the writer’s first language(or second !!!) is not English.
When it definitely is
You gotta love the credibility of academics that can’t write. This letter reminds me of things I have seen that were written are under duress (false confessions etc.)
I get the feeling that something else is going on here. That there was some kind of pressure to get a response to the original (supportive) letter and pressure to get it done faster. Either that or they really are shoddy.
It would be interesting to know how the research and Chairs of the 55 academics are funded.
I agree, hardly heard of the first group of 55 academics.
The second group of 40 in the FT – heard of some of them.
A timely intervention.
Aye. Shame it was so incoherent.
I’ve heard of the Chuckle Brothers, but it doesn’t make them funny.
Slightly off topic (sorry about that) but I was just wondering if anyone is taking seriously the suggestion in the New Statesman that Rachel Reeves, Chris Leslie and Chuka Umunna are the leading candidates for the key job as Shadow Chancellor.
These three are economic illiterates!
Please Jeremy don’t do it! If you must offer them a job, keep them well away from anything to do with money and finance!
I have, I can assure you, not a clue
Chuka Umunna is my MP fpr Streatham so I have a lot of first hand knowledge of this Blairite policital climber. He totally opposed JC, verbally damning his politics but now everyone is starting to realise that bullying the public doesn’t work anymore, he just jumped ship. He is only interested in himself and was only elected because Streatham couldn’t bear the alternative .. this current government. The real labour supporters have fallen out with him, even some of his closest supporters as they now see him in his tru colours.
He also supports TTIP and has been very evasive when challenged about tax justice.. a typical neo liberal.
On the main subject of the FT letters, the subject would make a great spoof viral!
To Digress, Regardless of who,s Economic Policies are right or wrong, any government that allows the head of a department to remain in office, when those he is in charge of print lies about how sanctions are good for you and then refuses to publish a report about people on Benefits, despite the I.C.O saying clearly they should, and it would seem that there is at least some correlation between I.D.S policies and some 4,000 Deaths, those who had their Benefits stopped were found to be “Fit for Work” under the “So Called” WCA medical (its computer based and has nothing to do with your illness) only to die within a 6 week period of either their benefits being stopped or winning their Tribunal Appeal,obviously these deaths were going to happen anyway, Right? and had absolutely nothing to do with the extra stress,worry, or anxiety which these people were under when they were found fit to work by “Healthcare Professionals” employed by Atos and now Maximus, for the sole purpose of doing just that.how do you explain away the “FACT” that some of these people have committed suicide and left notes to that effect clearly stating that the system has ground them down and they have simply had “Enough” Don,t believe me? Mr I.D.S and this Government are to be Investigated by the U.N for Human Rights Abuses, please read this brief article and Click on this Link. Thank You. author: Beth Granter
Breaking news: The UN will investigate the British Government over human rights abuses caused by Iain Duncan Smith’s welfare reforms. Disabled People Against Cuts said, “This inquiry is the first of its kind-it has… view full update https://%20http//bit.ly/1Q6tAfXhttp://www.care2.com/go/z/e/ARBGw/zoAq/Cifah
“Figures put on… tax evasion are almost unbelievable…”
almost unbelievable… which is the same as saying they are believable.
if the MSM do pick up on it then maybe advocates of the scheme will get the chance to dispel some of the nonsense being written about PQE. first they ignore you…
Nice pick up.
I am really very shocked and disappointed in this post.
You have been criticising people for years. You should have expected people not to share your views based on your experience. If you want to support any political party then you need to expect that not everyone holds your views. Its like that in real life not everyone agrees with each other.
There will be more people sharing their views over the next few months and possibly years. It doesn’t make them any more a bad, then yourself and you sharing your views.
Maybe in your limited business life you didn’t come across people holding different views. Even Accountants do things differently and hold different views.
I am not supporting a political party
I am not a member of any party
I am saying this is a really poorly drafted letter that fails to make its point, whatever that was
Unfortunately, despite the letter in question being clearly political in its objectives – which deliberately sets out to frame the issue of being one of differing political opinions – this is not an issue about opinions per se in that context.
The points at issue are about the structure and processes of how a system functions and operates and how different inputs and variables interact within a system and it’s sub systems and what the resulting features from those interactions look like, or should look like.
We have had the best part of forty years of a system paradigm in which there exists a growing and overwhelming body of evidence conclusively demonstrates that it does not, cannot and never will do what it says on the tin.
The problem is that because economics is, and has not been for some considerable time, a science, subject to the normal scientific methods, any critique of, what would in scientific terms be referred to as the (currently) dominant paradigm but what in economics is actually more akin to a religious doctrine, is framed as mere opinion.
For sure there can be disagreements about whether a+b = c, d, or e. But the proof of the pudding is in the testing and the paradigm represented in this letter has been found wanting. When it comes to the actual testable evidence, a legacy of the scientific enlightenment, there is no room for an opinion that disagrees with the evidence just because the evidence does not fit a particular belief system.
The standard model says inflation should take off when employment grows because that’s what has been observed in the past because in the past when employment has gone up so have wages compared to profits. Therefore the standard model and it’s adherents dictate this will always be the case despite the evidence that wages are not growing alongside employment and inflation has not appeared.
Ditto with the level of QE which has been pumped out in recent years which adherents of the standard model say should instigate inflationary armagedden. Where is the inflation? It’s not a matter of opinion. It’s a matter of observable reality.
The letter is long on rhetoric and short on detail. It’s even arguable whether or not those who have signed it would support any proposal to invest by borrowing if it looked likely. In fact it’s a dead cert that at some point in the future one or more of the signatories to this will appear either in print or in the broadcast media belly aching about the Labour Party borrowing money for the infrastructure they currently claim to support.
The letter is in fact devoid of any serious detailed rebuttal of what it criticises, as would normally be the case in the standard scientific method. It’s merely an opinion price and in the words of Harry Callaghan, opinions are like arse holes, everyone’s got one. Though it’s rare to see both sharing the same space.
I couldn’t possible comment!
To be honest, anybody who knows anything about the way (most) economics departments operate in this country, with a systematic right-wing neoclassical bias, will be surprised that *only* 55 economists signed up. What’s more, some of them are total fruitcakes e.g. Philip Booth (Cass Business School, ex-IEA) and Patrick Minford (ex-Thatcher adviser). What’s sad is that some relatively sensible people (e.g. John Van Reenen – ex-supervisor on my (uncompleted) PhD) have agreed to sign this, throwing their lot in with the far right. It looks like that’s where the battle lines are drawn – Jeremy Corbyn and left economics on one side, and the neoliberals on the other. So be it!
Indeed
I commented last night on Tony Yates blog:
Good to see debt/GDP described as tolerable with support for extending public investment. This would seem to confirm that — whether funded conventionally or through PQE — anti-austerity has broad support within the economics profession.
On the missing taxation, Richard Murphy now seems to be suggesting that — whatever the total might be — perhaps £20 billion a year is recoverable, which is a more credible number but still enough to build 100,000 homes.
I trust that the comment referring to you is correct (it seemed to be from a recent blog) bus please take the opportunity to correct me if it is not.
I am happy with that
Thanks
“To be honest, anybody who knows anything about the way (most) economics departments operate in this country, with a systematic right-wing neoclassical bias”
So what is the “mainstream view” then? Didn’t the original letter by 41 economists claim that the mainstream view was that austerity didn’t work?
Yet the likes of Richard and you have long complained that “mainstream economics” is neoliberal.
In the long history of economics it is entirely reasonable to say the mainstream would say austerity does not and cannot work
Indeed the 55 seem to almost be saying that
BUT there is no such thing in modern economics as apolotical discussion and these 55 present a firmly political view within a distinctly normative neoliberal framework which demands that although they know investment is necessary a political narrative of austerity and the small state must have priority
Their polotical judgement will, although they will always debny it, rule their eocnomic logic
And that is the mainstream narrative at present
So mainstream means more than one thing
That’s the reality of life. Like street language, words have multiple meanings here
This is largely harmless, knock-about stuff and is to be expected when some of the economically damaging features of the current orthodoxy are exposed using eye-catching and possibly slightly exaggerated numbers and when remedies are advanced that are either unorthodox, but feasible and necessary, or are revived versions of remedies the defenders of the current orthodoxy thought they had banished forever. There is no possibility that one side will totally vanquish the other; the objective is to shift the terms of policy debate to overturn damaging policies and to facilitate the development and to secure consent for the implementation of policies that are in the broad public interest. And that may involve both sides taking position that may be viewed as extreme.
The traditional model of neoclassical economics was holed below the waterline in 2008, but those who cling like limpets to it are not prepared to accept the overhaul that is required. The required overhaul of the model will have to be imposed politically. And that’s what we’re beginning to see.
But the resistance to the overhaul will be ferocious. My preference is to label them as the Forces of Darkness and Resistance (FODAR). Therefore, it will be necessary to expose the self-serving and politically motivated, but economically asinine elements of the case advanced by the FODAR. For example, the authors of this letter, as you have noted, accept that investment is “in many areas much needed”, but fail to explain why it is not happening and disparage a perfectly feasible means of financing this investment.
Proposing the renationalisation of energy companies probably provided what the FODAR think is a soft target. But they cannot conceal the abject failures of the British model of privatisation, faux competition and ineffective regulation in the utility and infrastructure service sectors. And their efforts either to dismiss the need for efective remedies or to generate some remedies benefitting powerful special interest groups actually highlight the failures even more. For example, the Competition and Markets Authority (CMA) is conducting a politically driven investigation of the electricity and gas markets. The disgust and anger of ordinary households was being aroused by the price-gouging of the big energy companies and by the unnecesary costs of the government’s dysfunctional energy and climate change policies – and it was being exploited by Labour. Ofgem’s arm was twisted to ask the CMA to initiate an investigation in June 2014 which would continue long after the general election.
The CMA published its provisional findings and proposed remedies early in July. Not surprisingly – given the extent to which the industry has captured governing politicians, policy-makers and regulators, the CMA has given the industry an (almost) clean bill of health. Apart from some tidying up measures and some tinkering around the edges, the principal remedy the CMA is proposing to apply is a ‘regulated safeguard tariff’ (RST) to protect the majority of consumers who are either “disengaged” or “inactive” and, ss a result, are being gouged by the energy comapnies. This is economic nonsense on stilts. It is being opposed ferociousyy by the energy companies – and the armies of well-heeled consultants, advisers, tame academics and other lackeys they retain. Even if some version of this RST is put in place it will be gamed aggressively by the energy companies.
As an alternative, I have proposed a statutory electricity and gas buyers’ collective to protect the interests of these consumers:
https://assets.digital.cabinet-office.gov.uk/media/55e6bdcbe5274a558000001c/Paul_Hunt_resp_to_PFs.pdf
Not only will it protect consumers from the current gouging by the energy companies, but it will also confirm the almost indefinite commitment of these consumers to pay for electricity and gas services and re-establish the assurance of investment recovery this commitment provides. I would argue that remedies along these lines should be explored in advance of consideration of renationalisation. But, in the currently politically charged climate, I accept proposing extreme positions may be necessary to shift the terms of the policy debate.
Jeremy Corbyn’s macroeconomic policy is Keynesian in character; that’s mainstream in the sense that a large number of journalists, some key academics including Nobel Prize Winners (Krugman, Stiglitz for example) and international institutions such as the IMF agree with the insight that austerity can be self-defeating due to its impact on demand. However, within (most) academic economics departments, Keynesian ideas are largely ignored (there are honourable exceptions e.g. Kingston, Greenwich.) The signatories to the FT letter are mostly academic economists from the neoclassical school – this is “mainstream” within academia, but not so much outside it. So as Richard suggests, it’s two different definitions of “mainstream”.
By ‘financed conventionally’ do they mean through increased taxation, or increased borrowing (both of which the signatories and their ilk all seem to have set their caps firmly against)?
And by ‘much needed investment’ do they perhaps refer to areas such as our creaking rail or energy infrastructure, over which any Government has little control whilst they languish in the control of profit driven private corporations?
I think all your assumptions are right
To understand why that letter was so incomprehensible one could begin by asking two questions:
How many of those academics forecast the GFC? And how many predicted that conventional QE would be inflationary?
To which the answer would probably be zero to the 1st question and quite a few to the 2nd.
These people have gotten used to the idea of being wrong and it quietly eats away at them. The letter is a mess because it devotes most of its attention to being evasive. Its easier to be articulate when your actually saying something. That letter goes to torturous lengths in ensuring that it does not commit itself strongly to anything that will turn out to be wrong in the
future. That’s why it uses phrases like “almost unbelievable”.
On a positive note, however, there is something quite reassuring in the disapproval of those who are consistently wrong. If they agreed with you there might be cause to worry.
🙂