Imagine my surprise to discover that Toby Young had not just bought and read my 10,000-word ebook, The Debt Delusion, as he’d promised to on Twitter, but penned a 3,000-word response on the Telegraph website, entitled “New Statesman’s political editor is wrong about the debt crisis” (note: I’m not, technically, the NS’s “political editor”.)
Young’s attempt to debunk my arguments, as outlined in the ebook, begin with some kind and appreciative words:
On the principle that you should know your enemy, it’s a must-read. It’s also pitched at a reasonably grown-up level, allowing room for serious debate – and that’s always welcome.
Young ends his post with equally high-minded and friendly words:
I hope he doesn’t consider this blog post too ‘hysterical’. This is an important debate and I look forward to his response.
It’s a shame then that he undercuts his own seriousness and maturity by using a photo of me, to accompany his post, with the words “Deficit Denier” stamped over my face. I guess that’s how he loses friends and alienates people. [Update: Young has since informed me, via Twitter, that he doesn’t “choose the pictures at the top of my blog posts. That’s out of my hands”.]
Young’s “critique” begins with him taking issue with my “over-reliance throughout the book on the economic ‘expertise’ of others.” Shock! Horror! I dared to quote economists, books, reports and studies to buttress my arguments. Outrageous! Disgusting! Note, however, how Young (proudly?)cites just one expert over the course of his 3,000 words: Warwick University’s Timothy Sinclair (who is, incidentally, a political scientist, not an economist). Is this going to be the approach at Young’s new free school, I wonder? Ignore academics! Ignore evidence! Make it up as you go along!
“Appealing to the authority of others,” harrumphs Young, “is to commit the fallacy of argumentum ad verecundiam” – a point I discuss in my recent NS column on experts and expertise. But Young – and his cheerleader, Paul Staines – fail to understand that arguments from authority, especially on complex subjects such macroeconomics and fiscal policy, can play an important and influential role; as the RationalWiki website points out: “(A)appeal to authority, when correctly applied, can be a valid and sometimes essential part of an argument that requests judgement or input from a qualified or expert source”. And this philosophy website defines the argument as “the fallacy of appealing to the testimony of an authority outside his special field“.
Yet Young, a writer and journalist, sets himself up as his own authority on economic issues which is as comical as it is egomaniacal.
He also disingenuously claims that I cited Johann Hari as an “expert” on the deficit. I didn’t. I quoted Johann Hari saying, in a March 2011 blogpost:
If we are ‘bust’ today, as George Osborne has claimed, then we have almost always been bust. We were bust when we pioneered the Industrial Revolution. We were bust when we ruled a quarter of the world. We were bust when we beat the Nazis. We were bust when we built the NHS.
Young then goes off on a self-confessed “comic digression” in which he mocks Hari for having confused “debt” with “deficit” in the opening paragraph of the blogpost – a paragraph, incidentally, nowhere referred to or mentioned or quoted in my ebook! – and then moves swiftly on.
Highlighting Hari’s name is a cheap if amusing shot from Young. But the points Hari posed still stand and are totally and utterly unrelated to his various scandals and subsequent downfall:
If we are ‘bust’ today, as George Osborne has claimed, then we have almost always been bust. We were bust when we pioneered the Industrial Revolution. We were bust when we ruled a quarter of the world. We were bust when we beat the Nazis. We were bust when we built the NHS.
Or is Young denying these points? Which ones? That our debt to GDP ratio was 200-per-cent-plus when the NHS was founded? We don’t know; he doesn’t deign to tell us. (He is, as he later admits in the blogpost, a master of the “sleight of hand”.)
Young then summarizes the arguments in my ebook as follows:
The first is that it’s simply not true that Britain would now be in the throes of a sovereign debt crisis if the Coalition hadn’t embarked on a programme of fiscal tightening. . . The second part is that the theory of “expansionary fiscal contraction”, i.e. the belief that you can stimulate growth by reducing public expenditure, is as oxymoronic as it sounds.
He then, however, bizarrely goes on to say:
I don’t want to spend too much time taking issue with Hasan on the second point.
Um, er, why not? Given that it is one of the two key arguments, as he himself admits, of the ebook, why not try and “take issue” with it? Dare I say, rebut it? Undermine it?. Young, instead, claims:
When it comes to macroeconomic theories, it’s impossible to prove or disprove them either way
Really? Then why did economists Ann Pettifor and Victoria Chick, having studied eight episodes between 1918 and 2009 over which changes in the UK’s public debt (as a percentage of gross domestic product) could be compared with those in public expenditure, conclude:
The empirical evidence runs exactly counter to conventional thinking. Fiscal consolidations have not improved the public finances… Consolidation increases, rather than reduces, the level of public debt as a share of GDP and is, in general, associated with adverse macroeconomic conditions.
Why did a study by the IMF of specific fiscal measures taken to reduce the deficit in 15 advanced economies between 1980 and 2009 find just two cases (yes, just two out of 170!) in which spending cuts turned out to be expansionary for the economy as a whole – in Denmark in 1983 and in Ireland in 1987 – and conclude:
Fiscal consolidation typically has a contractionary effect on output.
Now I’m starting to understand why Young is so allergic to citing experts or studies. They tend not to be on his side! But, as a very minimum, he could have at least have cited, in defence of his claims, the now-notorious paper by deficit hawks Alberto Alesina and Silvia Ardagna purporting to empirically demonstrate a link between cuts and growth (but, I should add, since debunked by the IMF and a study by the Roosevelt Institute). Reading Young’s post on the subject of cuts and growth, the words “cop” and “out” come to mind.
As with so many embarrassed and defensive deficit hawks these days, Young briefly concedes what those of us who he smears as “deficit deniers” have been concerned about, and warning of, for sometime now:
[I]t seems likely that the British economy will be plunged back into recession
before promptly – and defensively – adding:
but that won’t prove that a policy of “expansionary fiscal contraction” wouldn’t have worked in a more favourable economic climate, as it did in the case of Canada.
Canada? Young says in his blogpost that it too him “no more than a couple of hours to read” my ebook but, at this point, I started to wonder whether he’d read it or not. After all, I devote an entire chapter of The Debt Delusion to pointing out “the myriad ways in which Britain in 2011 differs from Canada in 1995” and I quote the opinion and analysis of Michael Mendelson, a Canadian academic and forner government adviser on fiscal consolidation, who wrote in May 2011:
None of Canada’s economic conditions in 1995 apply in the UK in 2011. The UK is not currently experiencing vigorous economic growth, to say the least. Unemployment is high and rising, not falling as it was in Canada in 1995. The UK’s main export markets are anything but booming: the US, Spain and Ireland alone account for about 25 per cent of UK exports. These countries are not going on an import binge anytime soon. The UK begins its fiscal consolidation with interest rates already more or less at zero. UK interest rates have nowhere to fall, only to rise. It is impossible for monetary policy in the UK to be deployed to counteract fiscal policy as occurred in Canada.
Young’s next para is difficult to disagree with:
I think Hasan is right when he claims that the reason David Cameron and George Osborne have embraced “expansionary fiscal contraction” is because it chimes with their visceral dislike of Big Government. What he neglects to say is that the reason Ed Miliband and Ed Balls favour a Keynesian approach is because it chimes with their visceral dislike of free market capitalism. In short, both sides are equally guilty of embracing a particular economic theory for ideological reasons.
I actually think there’s a lot of truth in this (although, conveniently, Young understates Cameron and Osborne’s dislike of “Big Government” and exaggerates the two Eds’ “visceral dislike of free market capitalism” – Balls, after all, is the former City minister who pushed for further deregulation of the banking sector). However, just because the “conflict is fundamentally an ideological one and the economic argument is simply a proxy war”, that doesn’t change the fact that economic history, empirical evidence and common sense all seem to be on the side of the Keynesian doves, not the deficit hawks. Facts are facts.
Young prefers speculation and counterfactuals to facts, figures and studies, writing:
Hasan is so plainly wrong on the first point. It really doesn’t matter who’s right on how best to deliver long-term growth because had Britain not embarked on a programme of fiscal tightening last year we would now be facing a sovereign debt crisis.
Really? How does he “know” this? Is this the crystal-ball theory of economics that will be taught at the West London Free School? In the very next sentence, Young admits that his claim is “a hard one to prove, I grant you”. Yep, it sure is. As Jonathan Portes, the former chief economist at the Cabinet Office and current director of the National Institute of Economic Social and Economic Research (NIESR), commented in a round-robin email this morning:
[A]nyone who thinks that the gilt markets would have panicked if we’d stuck with the trajectory we were on in June 2010 (before the Emergency Budget and Spending Review) has to explain why they’re not panicking now, when we’re on a trajectory that implies higher, rather than lower, borrowing than was projected then.
In June 2010, before the Budget/SR, the OBR [Office for Budget Responsibility] projected that PSNB [Public Sector Net Borrowing] in 2014-15 would be £70 billion; after the 2010 Budget, it projected £37 billion. Our forecast is now that it will be £90 billion, and still over £70 billion the year after. I imagine the OBR will be somewhat more optimistic, but we are clearly no better than back where we started. And the gilts market is doing what, precisely?
Young falls back on the credit rating agencies for support, and accuses me of being “particularly complacent about the risk of a credit-rating downgrade”. Yes, I am. I plead guilty. On Friday 5 August, I wrote a piece for the Guardian entitled, “The US should let its credit rating be downgraded – and shrug“. That afternoon, Standard & Poors downgraded the United States for the first time in the nation’s history. Guess what’s happened since? US borrowing costs have plunged to historic lows. The fact is that a country’s economic fundamentals have much more influence on the bond markets than the credit rating agencies – which is why, in my ebook, I cited a warning from Moody’s, in March 2011, that the UK economy could lose its prized triple-A rating if growth continues to stagnate – as it has done in recent months. It is a point that Young conveniently overlooks and omits to mention in his 3,000-word post.
Young then pompously pronounces that “the problem with Hasan’s argument is that his understanding of the bond markets isn’t sophisticated enough”. He’s got me there. Again, I plead guilty. I’m not very “sophisticated”. So am I allowed to invoke an expert? Please? Pretty please? Because Pimco’s Bill Gross, manager of the world’s biggest bond fund, told the Times in September:
The economy in the UK is worse off than it was when the plan was developed, so there should be at a minimum fine-tuning and perhaps re-routing of the plan
Gross added:
The UK is actually in the best position of all to make a mid-course correction.
Is Young going to accuse Gross of having an unsophisticated understanding of the bond markets too? Or how about Jonathan Portes who, according to the Financial Times:
has found a strong correlation between lower gilt yields and greater investor concerns about economic prospects.
Young mocks the view that these cuts are “monstrous – just monstrous”, rather than “fairly modest”, before conceding that the amount of money spent on public services is set to fall by 11 per cent (or 19 per cent, if you strip out the ringfenced departments) and admitting:
There’s no disputing that the government’s deficit reduction plan involves cutting public services by significantly more than the figures for the overall reduction in public expenditure would suggest – I myself have been guilty of that particular sleight of hand in the past.
There are a fair few sleights of hand from Young in his lengthy blogpost. For example, he claims:
[W]hat Hasan neglects to mention is that these “cuts” only pare down public expenditure to the level it was at a few years before the Coalition came to power. TME [Total Managed Expenditure], for instance, is forecast to be higher in real terms in 15/16 (£668.5 billion) than it was in 08/09 (£658.823), some 11 years after Labour had been in power.
Eh? Again I ask: has Young read The Debt Delusion? Or just flicked through it? In Chapter 8, I not only “mention” but rebut and refute this lazy, statistically-dodgy argument proferred by what Young’s fellow Tory, Tim Montgomerie, has rightly referred to as the “pain deniers”:
This is. . . a deeply flawed and misleading comparison: it doesn’t compare like with like. For a start, [it] doesn’t take into account the above-inflation cost pressures on public services – in particular, in the NHS – and nor does it adjust for a bigger population (in 2014/15 versus 2006/07).
There is also, again, the issue of how the spending breaks down – in 2014/15, a bigger chunk of the cash (£66bn) will go towards interest expenditure on the debt, compared to the much smaller chunk (£26bn) in 2006/07. This, in turn, will leave a much smaller amount of money to invest in public services.
As another of Young’s fellow Tories, Matthew D’Ancona, has pointed out:
Statistics conceal as much reality as they convey: the fact that public spending is rising in cash terms, or that it will still account for 41 per cent of national income as it did in 2006 is of no comfort to the public sector worker losing her job, or the commuter concerned about fare rises, or the victim of a burglary worried about police cuts, or the mother-of-three facing the loss of her child benefit, or the university applicant anxious about debt, or the RAF safety officer wondering if his career is over.
But Young continues to roll out the right-wing talking-points:
What Hasan and other left-wing critics of the “cuts” always gloss over is that public expenditure increased massively under the last government – more than 50% in real terms between 97/98 and 09/10. That’s why the UK had the third largest deficit in Europe last year, behind only Ireland and Greece.
1) The “50%” figure, of course, includes the costs of the credit crunch/bank bailout/stimulus, all of which were caused by the 2008 financial crisis, as Young well knows; 2) So what if “public expenditure increased massively” under Labour – has he forgotten how decrepit and crumbling our schools and hospitals were after 18 years of Conservative (mal)administration? I haven’t; and 3) the UK’s ballooning budget deficit was a consequence of a post-recession decline in tax revenues, rather than a pre-recession binge in spending. And, if New Labour under Blair and Brown was as spendthrift and wasteful as Young claims, why did the Cameroons pledge to match the government’s spending plans right up until the crash?
On cuts, Young concludes:
So the programme of cuts embarked upon by the present government last year is, in the grand scheme of things, fairly modest.
No wonder he has issues with argumentum ad verecundiam: he prefers to make sweeping value judgements without reference to any expertise or authority. Based on the numbers, however, the independent Institute for Fiscal Studies describes the coalition’s cuts as “the longest, deepest, sustained period of cuts to public services spending at least since World War II.” Young or the IFS? Sweeping statements versus empirical evidence? Take your pick.
Young asks:
Does Hasan really believe that if Gordon Brown had been re-elected – and made Ed Balls his Chancellor – Britain wouldn’t be in the same boat as Ireland, Greece, Portugal, Italy, Spain, Belgium and, now, Hungary?
Yes, I do. The evidence – darn, there’s that word again that Young seems to so despise – suggests the British economy wouldn’t be in such dire straits if Labour had been re-elected in May 2010. Young may have an irrational loathing for his late father’s party but the fact is that when Labour left office last year the economy was growing, unemployment was falling and inflation was under control. Under this Tory-led government of deficit fetishists and austerity junkies, growth has stalled, consumer confidence has plummeted, unemployment has ballooned to 2.6 million – a 17-year high – and inflation has crossed 5 per cent, helped on by Osborne’s VAT rise. Young makes no reference to any of this in his blogpost. Surprise, surprise!
18 months after Young’s hero, George Osborne, entered Number 11, the results are in: austerity has failed. The cuts aren’t working. The private sector hasn’t stepped in to plug the gap.
It’s time for Young to stop living in denial. He writes plays and movies for a living; he has set up a free school. But economics clearly isn’t his strength. Nonetheless, his lengthy and amusing blogpost was a good effort at a semi-rebuttal and a nice plug for The Debt Delusion so I applaud him for it and now await his response to my response to his response to my ebook.
(P.S. You can download The Debt Delusion at Amazon for just £1.79.)
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