In the government’s final press conference Chris Whitty, the Government’s chief medical officer, said““I would be surprised and delighted if we weren’t in this current situation through the winter and into next spring.” The significance of that statement cannot be overstated. Deaths in the UK from the virus are currently running 100 every day. (The true total may be higher.) The chief medical officer is saying don’t expect to see deaths running at an order of magnitude lower before the Spring of next year. I fear we have become desensitized over coronavirus deaths. We keep being told by the government that they are at a much lower level than they used to be, every graph shows deaths are much lower than they were at the peak, … [Read More...]
Did the UK really almost go bankrupt?
I normally publish posts in the first half of the week, but two separate attempts were overtaken by events, and they will have to wait for another day. I finally wrote somethingfor the Guardian on the Governor’s interview that led to nonsense headlines about the UK almost going bankrupt. The piece explains why they are nonsense, but I should note here that the headlines are classic mediamacro, appealing to the idea that governments are like households. Frances Coppola makesthe same point a different way. You could describe what happened in March this year as a short term liquidity problem. There is no suggestion the UK is insolvent. And the thing about countries with their own currencies is that they never have a liquidity problem because they create … [Read More...]
What lockdowns do and what they don’t do
Just a short post to advertise my Guardian article‘Fear of coronavirus, not lockdown, is the biggest threat to the UK’s economy’. The key point I make is that the economy would suffer badly even if there was no lockdown. People, once they realised the extent of the threat, would stay at home. The three reasons I give for imposing a lockdown are classic reasons in economics for state intervention. The state has an information advantageThe government, because it talks directly to top scientists, can see the pandemic coming a lot faster than the majority of people. That didn’t work out too well in the UK, where people were leading the government, but if the state functioned well this would be true. The state deals with externalitiesWhile the … [Read More...]
Locking down too late but ending lockdown too early
The major reason we have one of the highest death rates as a result of the coronavirus pandemic is that Johnson/Cummings had an intense aversion to imposing a lockdown, and an unusual disregard for human life. Any decent politician, after being told at the end of February that 500,000 of their citizens might die, would have moved heaven and earth to stop that happening. Anyone watching the recent Despatches documentarywould have heard about scientists worrying about how to stop the pandemic, with little pressure from politicians to do so. It may have been an ultimatum from French president Macron that finally forced Johnson/Cummings to enact a full lockdown on March 23rd. Unfortunately the same factors that delayed a lockdown have led Johnson/Cummings to relax the … [Read More...]
How Cummings continues to gaslight the nation
There is little sign of anything that can dislodge Dominic Cummings, the Prime Minister’s adviser in chief, from his boss’s protection. Yet there is no doubt the episode has been costly in terms of the popularity of the Prime Minister and his government. It is dangerous for the gang who say they are on the side of the people against the elite to reveal themselves as an unaccountable elite who couldn’t care a damn about the sacrifices others have been making during a crisis whose severity is largely that gang’s fault. The cost goes beyond popularity. The government is desperate, far too desperate, to end lockdown well before the experts thinkit is safe and before common sense says it is safe. The Cummings affair will only make … [Read More...]
A government without common sense, and with class arrogance
Recently the Prime Minister urged workers and employers to use their ‘good solid British common sense’ to decide what was safe with the recent relaxation of the lockdown. Which prompts an obvious question (thanks @SuffolkJason). What has happened to the government’s common sense in dealing with coronavirus? When you see a pandemic sweeping China and with every chance of it coming to the UK, isn’t it common sense to prepare for that possibility by Checking your PPE stockpile and ordering what is missing Exploring how you could ramp up testing capacity quickly if that was needed When the first cases arrive in the UK, isn’t it common sense to do some things to help your test, trace and isolate (TTI) infrastructure by, for example, stopping flights coming … [Read More...]
On V shaped recoveries, and where the Treasury’s deficit obsession will matter
I should perhaps go through some of the thinking that lay behind my Guardian articleabout not repeating austerity, because I fear there is a danger of worrying about the wrong thing. I have always been reasonably confident that we would not get an exact repeat of 2010, where the Chancellor says at the low point of a recession (i.e. before a recovery has begun) that we have to start cutting back spending because the deficit is too high. There are two reasons for that confidence. First, the circumstances that allowed 2010 were uniquely advantageous. We had just had a global financial crisis, so false claims about what financial markets might do seemed plausible. There was also a Euro crisis. Everyone was saving more (or borrowing less) as a … [Read More...]
The government is responding to pressure and not thinking clearly about defeating coronavirus
In this articlein the Guardian I lay out what the optimal strategy for handling COVID-19 should be for a country like the UK. How does the Prime Minister’s statement on Sunday evening compare to that strategy? The key to relaxing a lockdown is having a test, trace and isolate infrastructure in place, and very low infection levels. We do not have either. So why was Johnson talking to the nation on Sunday? He set out a general framework for relaxing the lockdown, all conditional on some function of infection levels and R. (He didn’t specify what the function was.) To set out an approach makes sense. To not tell anyone what exactly the conditions for relaxation are does not make sense, but it gives him flexibility … [Read More...]
Why the media in UK and US has moved beyond manufacturing consent, and why that has led to a war about reporting COVID-19
Manufacturing Consent: The Political Economy of the Mass Media (hereafter MC) was a book published by Edward Herman and Noam Chomsky in 1988. From my point of view the key idea behind MC was that media organisations select the news and opinion that they show to viewers in a way that supports the existing economic, social and political system. This could be summed up as saying the mainstream media (MSM) is not subversive. The book talks about the “propaganda model for manufacturing consent” as involving various elements: the ownership structure and for profit goal, the importance of advertising, the importance of particular news sources, sensitivity to organised criticism, and organising filters like the cold war or terrorism. So, for example, in my idea of mediamacro you see the … [Read More...]
Did the scientists advising the government on COVID-19 make serious mistakes?
The government has now said it will begin to wind down the lockdown with an extensive test, trace and isolate (TTI) regime in place. Containment, having been abandoned on March 12th, is back but this time the UK government is serious about it. It has a much greater chance of success not just because there is more testing capability available, and there will be an app to help with tracing, but also because it will take place with a degree of social distancing. We can only hope that this works, and that government actions match their words. But what seems very puzzling to me is why the scientists advising the government seem to have been preoccupied with moderated herd immunity as the only way to deal with … [Read More...]
Now is not the time?
This post was written before the Sunday Times article on 19th April, and has been slightly changed as a result. The most serious failings of the government were already known to anyone who had the inclination to look. Rather than looking at the time line, this piece looks at the types of mistake made. We keep hearing the phrase in the title (without the question mark), particularly but not only from those sympathetic to this government. Now is not the time to talk about what could have been done given hindsight. Instead we need to focus on saving lives. You could see why this might be true. Resources are finite, and we would rather politicians were focusing on getting things done right now rather than defending themselves … [Read More...]
Some myths about government debt and how it is financed
That the Bank of England was temporarily eliminatingthe limit on the Ways and Means Facility caused a bit of a stir last Thursday (9th April). It in effect meant that the Bank of England could credit the government with as much money as it needed in the current crisis. That it should cause such a stir illustrates how pervasive many of the myths are around government debt. Here are three familiar examples. It doesn’t matter that we are in a developing economic crisis, like a recession or a health pandemic, we still need to worry about what is happening to government debt.This is false for any country that prints its own currency, like the UK. In a crisis you should worry about dealing with the … [Read More...]
Who still thinks austerity was a good idea?
It is getting towards autumn in 2020, and the new regime of test/trace and isolate with occasional local lockdowns seems to be working. The economy has begun to recover from the 30% fall in GDP compared to a year earlier in the second quarter. But the recovery is not what the media is talking about. Instead they are focusing on the massive government budget deficit that has been a natural consequence of that fall in GDP and the huge government support effort. In response to media concern, the government announces an immediate 5 year programme of cutbacks to government spending, although the NHS will be “protected”. If you think that last sentence is unlikely to happen, I would agree. But this is pretty well what happened in the … [Read More...]
Following the Science or a National Scandal
We can see in the United States right now the dangers of having a populist [1] president running the country during a serious pandemic. Incredibly 90% of Republicans trustthe president to give them accurate information about the outbreak. A president who first called the pandemic a Democrat hoax, and then said it was under control and now wants to end social distancing to celebrate Easter. Some of those people will be paying with their lives for this misplaced trust, but by the nature of pandemics plenty of those who are not Republicans will also share this fate. The UK also has a populist government. Johnson and his cabinet are where they are now because they championed a cause that pitted the elite and experts, who thought … [Read More...]
The economic (and political) effects of this coronavirus pandemic
This is an update of an earlier postwhere I described the results of a study I did with others on a flu pandemic. (It also appeared in a VoxEU ebook.) I have had a lot of enquiries from journalists in Europe about this blog and the paper, and of course what everyone wants to know is how similar is our modelling to the impact of this coronavirus. The features of this pandemic are now clearer than when I wrote the post, so I can say a few things on this issue. Our study looked at two cases: a base case and a severe case. The key parameters were the attack rate (how many get the virus) and the fatality rate (how many who get the virus … [Read More...]
Coronavirus and the consequences of a compliant media
This hasn’t been the new government’s first nationwide crisis. That was widespread flooding hitting many regions of the UK. As I explained here, that was partly a disaster created by the Conservative party (with a little help from their coalition partners). Journalists had their chance to make a story out of this by using the hook of Johnson’s non-appearance at any of the flooded towns, but it didn’t happen, just it didn’t happen on all the previous occasions we have had widespread flooding. Which is why spending on flood defences continues to be inadequate. Lack of criticism encourages a certain laziness, but also gives politicians the courage to do things that those in democracies with more accountability would not do. I think we can see both … [Read More...]
Fiscal rules: a primer for the budget
Do you want to know why fiscal rules should never involve targets for the debt/GDP ratio, or debt interest, or any stock measure, and why public investment should not be part of a fiscal rule? Read on, but first we have to establish two key principles. Principle 1: what are fiscal rules for? The way some economists are tempted to think about fiscal rules is in terms of economic optimality. What is the optimum debt to GDP ratio and what is the best way to get there? This misunderstands what fiscal rules are for. If every government was benevolent (always did the right thing for society) they would follow the optimal policy without the need for fiscal rules. Governments would just consult experts and do the right … [Read More...]
Low paid jobs for British born workers
I have always had a problem with those who focus on the need to reduce low skilled immigration. Skilled migrants are OK, so the argument goes, because the UK needs their skills, but we don’t need low skilled immigrants because British workers can do those jobs. At a microeconomic level it makes sense, and in a world where there is widespread unskilled unemployment it may make sense. But in a high employment economy like the UK today, it makes no sense at the macro level. To see this, let’s think about a stylised example. Suppose there are a fixed number of jobs at each skill level. You will always need the same number of engineers, care workers and so on. To make things easy suppose 50% of … [Read More...]
The UK’s place in the world
As an economist, I naturally focus on the economic aspects of the EU. The EU is mostly about economics. To counterpoise sovereignty as an alternative perspective to economics misses an important point: most EU rules stem from the economics of free trade within the EU. The EU wants common regulations to make it easier to trade. The EU wants restrictions on state aid to prevent countries giving their own firms an advantage over others in the union. Much the same applies to labour market and environmental standards. Economics is also involved in another aspect of being in or out of the EU, and that is how the UK sees its place in the world. Is the UK’s identity partly a European identity, or does the UK ‘stand … [Read More...]
The left needs to campaign for social liberalism
The continuingexpulsion of the Windrush generation from their home country to a country they hardly know, splitting up families in the process, is just a deliberateact of state cruelty. Why did the government go ahead with these deportations despite sitting on a report suggesting they should stop? Their pretext was that these individuals had at some stage in their lives committed a ‘serious’ crime, yet all had served their time for these offences. This act of cruelty is part of the Conservatives attempt to appeal to socially conservative voters, both traditional Tories and one time Labour voters. What do we call splitting up families just to make a political point? As Paula Surridge shows here, voters who were thinking of leaving Labour for the Conservatives in June 2019 … [Read More...]
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