Monday, January 28, 2013

Economically illiterate "Osbornomic" propaganda and the Guardian newspaper

A few months ago I lambasted George Osborne for repeating his economically illiterate fallacy about the all time record low cost of government borrowing representing "market confidence" in his fiscal austerity experiment. The full article about George Osborne's "market confidence fallacy" is here: The gist of it is that Osborne's "market confidence" claims rely upon a brazen conflation of fiscal policies with monetary outcomes. In essence, what George Osborne is asking us to believe is that the recent record low interest rates being paid on UK government bonds have absolutely nothing to do with the monetary policy at the Bank of England, the sustained strategies of holding the base interest rate at an all time historic low (0.5%) since 2009 and "magicking up" £375 billion (via Quantitative Easing) in order to manipulate the UK bond market.

Osborne's fantasy is that "market confidence" in a Chancellor's fiscal policies is best measured through UK bond prices, that these record low prices have nothing to do with sustained record low interest rates or quantitative easing and instead represent "market confidence" that he is doing pretty much the best job any Chancellor of the Exchequer has ever done in the history of the UK economy.

Anyone with the slightest understanding of how quantitative easing and the zero lower bound actually effect government bond yields must be able to see that these all time record low bond yields are occurring because of QE and the sustained all time low BoE interest rate (just as they are in other QE economies such as the US, Japan and Switzerland) and that this low cost of borrowing comes in spite of, not because of Osborne's ideological austerity experiment.

It must surely be agonising to anyone with a smattering of economic literacy, to hear Osborne endlessly repeating this naive and economically illiterate propaganda about how low borrowing costs demonstrate that "the markets" have vastly more confidence in his fiscal austerity agenda than "the markets" ever had in, lets say, the economic policies put in place by  Tory Chancellor Harold Macmillan between 1955 and 1957, before he became Prime Minister and famously informed the British people that they'd "never had it so good" six months later. How real economists teeth must grind when they hear Osborne insinuating that his fiscal policies are more "confidence inspiring" than any fiscal policies in the entire history of the United Kingdom. According to Osborne's absurdly narcissistic justification narrative, the all time historic low cost of government borrowing demonstrates that no Chancellor, not even when Britain was leading the industrial revolution and the British empire was at the peak of global domination, has ever inspired greater "market confidence" with their fiscal policies than himself.

If it really were the case that "the markets" had unprecedented confidence in Osborne's fiscal policies, do you really think that the IMF would be repeatedly pleading with Osborne to slow down his fiscal austerity experiment? That the Chairman of of Goldman Sachs Asset management would be worrying that "Osbornomic" austerity is likely to cost the UK a "lost decade"? Or that the Credit Rating Agencies would be threatening to revoke the UK's cherished AAA credit ratings?

Osborne strikes me as exactly the kind of weak minded and self-important individual that would blindly overlook a mountain of evidence that his policies are failing in order to cherry-pick any sliver of positive economic date (no matter how tenuous) to weave it into a web of solipsistic confirmation bias, constructed in order to congratulate himself on what a wonderful job he is doing.

It doesn't matter a jot to Osborne that this absurd fiscal policy/monetary outcomes narrative he has created, exposes him as the n -1th grade economic thinker that he clearly is. He doesn't even seem to have the economic nous to understand how idiotic these delusional comments about "market confidence" make him look. Osborne is a man that publicly demonstrates his inability to differentiate between (or a man that chooses to willfully misrepresent) the distinct consequences of monetary and fiscal policies. Someone openly flaunting this level of fundamental level of economic illiteracy shouldn't even be near an undergraduate course in economics at an under-performing economics department in some backwater, chronically under-funded university campus, let alone be serving as the Chancellor of the Exchequer for the World's 6th largest economy.

What is infinitely worse than this pompous self-entitled fool repeatedly making these economically illiterate pronouncements, is not that his political party and the ever loyal right-wing press see fit to disseminate similar pseudo-economic justification narratives to defend Osborne's ideological austerity experiment; it is that so-called left wing press choose to  repeat these facile and misleading assertions uncritically. The specific instance I'm invoking is the Guardian article on the 24th of January entitled "Britain's national debt tops £1 trillion".

The uncritical repetition of Osborne's brazenly pseudo-economic "market confidence fallacy" occurs in the fifth paragraph of the article, where someone called Daniel Solomon of the Centre for Economics and Business Research (we'll come back to them) was quoted as saying:
"at least the government's focus on fiscal prudence had resulted in low interest rates on its debt."
I would like to know how the Guardian found themselves printing this disturbingly illiterate Tory justification narrative without anything approaching critical appraisal, and as if it represented some kind of unbiased economic viewpoint from a legitimate sounding economic organisation. Given that this is actually the view of a very recent economics graduate (BA completed 2009, Dphil completed 2011) who has demonstrable links to several hard-right Conservative affiliated economic Think Tanks such as the Adam Smith Institute and the Institute for Economic Affairs, I find the whole thing as distasteful as I find it concerning.

The exact same Tory propaganda narrative is uncritically quoted again in another Guardian article, this time without even the facility for below-the-line commentators to point out what abject nonsense it is. In this one Solomon is actually referred to as an "expert". From a newspaper that provides column space to genuine economics experts with real credentials like Paul Krugman, Nouriel Roubini and Ha-Joon Chang, describing a barely out of university right-wing wonk like Solomon as an expert is frankly atrocious.

What makes the Guardian's uncritical repetition of Solomon's propaganda narrative so worrying is that it demonstrates the abject level of economic illiteracy across the whole political spectrum. If transparent conflations and misinterpretations like Osborne's "market confidence fallacy", spoken by free-market fundamentalist wonks that are barely out of university are presented as an unquestioned economic viewpoint from a reliable source even in the so-called left-wing press, it shows that economic illiteracy is desperately ingrained across the entire political spectrum. That such abjectly nonsensical Tory propaganda goes unquestioned even it the publications that should be using such transparent economic gibberish to expose the fundamental illiteracy of "Osbornomics" is a very sad indictment of economic discourse in the UK media.

The fact that the Guardian have now taken to churning out misleading "Osbornomic" propaganda from recently graduated free-market wonks like Daniel Solomon, as if it were actually unbiased commentary from an economic "expert" leaves us with a few questions:
Firstly: Who, other than me, is lambasting Osborne for repeatedly asserting this lazy and economically illiterate "market confidence fallacy"?

Secondly: Why does the Guardian not disclose that their source, Daniel Solomon, is actually a very recent economics graduate with a short employment history littered with hard-right Tory party affiliated Think Tanks, or that the employers that provide him a veneer of legitimacy, the CEBR, are actually a Think Tank with close links to the right-wing business lobby group the CBI?

Thirdly: Why was the obvious and economically illiterate conflation that underlies this "Market confidence fallacy" not picked up upon by a single person working on the Guardian economics desk before the article went out for publication?

Fourthly: What does an oversight that allows such brazen and illiterate Tory propaganda, from such an inexperienced and clearly biased source, to go to press totally unchallenged tell us about the current level of economic analysis at this once proud left-wing newspaper?


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