The Michael Howard of economics
A couple of weeks back I took David Blanchflower of the New Statesman to task over the failure of his recent attempt to justify his infamous 2009 prediction that “unemployment could easily reach four million”. Blanchflower responded on Twitter: “If spending cuts are made too early and the monetary and fiscal stimuli are withdrawn “if crucial- buffooonery” (sic).
In fairness to Blanchflower he did preface his 2009 doomsday scenario with exactly those words. But let’s look a little more closely at Blanchflower’s warnings of the twin evils of tight money and spending cuts.
First, monetary policy. Who, in 2009, was advocating the tightening monetary policy? Possibly a few Austrians (though not all of them). Not many others. Certainly, as far I recall, no one in the Conservative Party as Blanchflower claimed. If I am wrong (and I have scoured the internet) and there were leading Conservatives advocating monetary tightness in 2009 then please, let me know.
But if, as I’m pretty sure is the case, nobody in the Conservative Party was advocating the early withdrawal of monetary stimuli then why on earth did Blanchflower waste anyone’s time warning them about it?
And what about the fiscal side of Blanchflower’s prediction? He loudly and regularly makes the point that ‘Slasher’ Osborne (I know, not much as nicknames go) has cut government spending and plunged Britain into renewed recession. I asked Blanchflower once or twice (or thrice) by how much ‘Slasher’ Osborne has cut government spending to send us into recession.
The answers I got ranged from “go and look it up yourself” to “go back into your hole” and “If you want to hire me to do consulting work for you I will bill at my normal high rates min 3hrs half up front”. How sad that when given a chance to engage and educate, a man who holds a teaching position chose instead to act in such a petulant and childish manner. How terrifying that someone so shifty, evasive, and brittle under pressure, was once a member of the Monetary Policy Committee.
Well, I went and looked up the numbers and the reasons for Blanchflower’s reticence quickly became apparent. In the fiscal year ending April 2010, Labour’s last in office, the British government spent £660.8 billion and in the year ending April 2012 it was £688 billion: an increase of 4.1 percent. Over the same period, however, we have had above target inflation which has given us a real terms cut in government spending of of 2.7 percent.
That’s it. After a decade which saw Labour double government spending in real terms it has been pruned by 2.7 percent. Hardly ‘slashing’ and all delivered by Mervyn King and his failure to keep inflation at 2 percent. If he had we’d have had a very slight real terms increase in spending; but that, presumably, really would have meant the monetary tightness Blanchflower was wailing about back in 2009.
I don’t suppose the monikers ‘Slasher King’ or ‘Trimmer’ Osborne would be much LOLZ for the Prof on Twitter. You can see why he was desperate to avoid giving a straight answer; his whole shtick would collapse if he did.
Blanchflower might argue that some areas of government spending have been cut quite drastically but there are two points to be made there. First, The Master himself, John Maynard Keynes, famously said that it didn’t matter too much what you spent your fiscal stimulus on, whether it’s Pyramids, wars, or burying old bottles full of cash and digging them up again. The key thing was to get the money spent.
Second, you have to wonder what else Blanchflower expects. Even with record low interest rates, British government debt, for which we are all liable, has risen so vertiginously that by 2015 it is estimated that we will be spending £70 billion a year on debt interest, up from £31 billion in 2008. To some extent we are seeing spending on welfare being cut so we can give the money to bond investors instead. Don’t like it? Don’t run up a load of debt.
Of course, Blanchflower would argue that we don’t actually need to worry. We just keep printing and borrowing the money we need. The £450 billion the coalition will have added to the national debt by April 2013 is too stingy; the doubling of the national debt over its lifetime too miserly. With views like that you can understand why Blanchflower runs scared from any rational discussion.
So, back in 2009, Blanchflower was warning us about something that wasn’t going to happen. After trying and failing to exonerate his 2009 prediction his argument now is that he wasn’t wrong, just irrelevant. But then you might find yourself asking why we should pay much attention to a slippery peddler of irrelevancies. Why indeed.
With his affected rudeness and terror of reasonable discussion with anyone who might disagree with him, Blanchflower is a sort of pound store Paul Krugman. But, without a bestselling book, a Nobel Prize, and with a column in the Independent rather than the New York Times, that’s a bit like comparing Donovan to Bob Dylan.