The Bank of England’s chief economist, Andrew Haldane, has had the good grace to admit that the Bank’s forecast of the likely economic consequences of Brexit – that consumption, employment, share values and economic activity in general would fall – was, at least in the short term, mistaken. The British economy, since the Brexit referendum, has prospered and has out-performed most other developed economies.
In making his mea culpa, he acknowledged that the error had further weakened confidence in the economics profession, but it is not only economists who must shoulder the blame. There was no shortage of establishment voices – business leaders, media commentators and politicians in particular – who issued similar ill-founded warnings; remember George Osborne’s need for an “emergency budget” in the event of a decision in favour of Brexit?
In reality, Andrew Haldane did no more than concede the truth of what had already become apparent. But the interesting aspect of his admission is not the fact that he made it, but the explanation for the error that he offered.
The experts, it seems, did not take into account the “irrational behaviour” of those who live in the real economy, rather than in one of those economic models so beloved of economists. If only people had reacted to Brexit as the experts thought they should, the forecast would have passed with flying colours.
Let us pass over for the moment the irony that what was supposed to be an admission of error on the part of those who claim to know best became the vehicle for, yet again, shifting the blame for the error on to those who were supposedly too stupid to listen to what the experts told them and to know what was expected of them.
It is nevertheless worth pausing for a moment to unpick the convoluted logic employed by Andrew Haldane to explain what went wrong and presumably endorsed by those many others who are used to being taken very seriously on important matters.
The starting point, it seems, is that those who know best were agreed that Brexit would be an economic disaster. At this stage of the argument, facts and rational analysis were apparently not needed to validate this position. It was enough that they said that it was so – and they were then able to construct a whole supposedly “economic” forecast on the basis of this rickety and insubstantial foundation.
It was then assumed that this consensus on the part of the important people – those who just knew, whatever the arguments, that we must belong to a particular economic arrangement called the European Union (not the “Europe” to which we have belonged from time immemorial) – would be listened to and acted upon. It therefore followed that, in the event of a pro-Brexit vote, the British people would be so alarmed that they would lose all confidence in their economic future, and their reaction would produce such a downturn in economic activity as to validate the initial projection as to what would happen.
This circular process, where it was not the prediction itself but the response to the prediction that was at issue, was no more than an exercise in picking oneself up by one’s own bootstraps. The British people, however, failed to react according to the script.
Perhaps they were not impressed by a perennial deficit in our trade with “Europe” in manufactured goods, or by an unstoppable inflow from “Europe” of cheap labour, or by the prospect of further concessions to meet the interests of major corporations at the expense of working people.
Perhaps they sensed that they had lost what has long been an essential part of the British heritage – the power to govern ourselves – and that it had been lost to a hegemonic continental power which, parading as “Europe”, was in reality a direct successor to many earlier attempts to establish just such a hegemony.
Whatever the explanation, the fact is that they have so far reacted positively to Brexit when the experts said that they would pull in their horns. The lesson we should learn is that experts are valuable when they deploy their expertise accurately – but postulating an a priori position and then seeking to validate it retrospectively on the basis that – true or false – people will believe it and act upon it is not expertise but charlatanry.
Bryan Gould is a former Labour MP and former member of the Shadow Cabinet.
Not Paul Krugman. Go to the New York Times and search his column for “Brexit”. He has some choice things to say about those who predicted an immediate recession from Brexit. Unfortunately, he also thinks the long term effects won’t be good either.
Don’t go Soft on us now Labour
Soft Brexit will be the real disaster for Labour. Can you imagine continued membership of the ESM, all those fees to pay but no say on the leading bodies of the EU. Worse Brexit ever! `Tariff-free access to the ESM’ is not a slogan that is going to win hearts and minds for Labour. No, no. There are only two games in town Far Right Brexit by which Britain becomes an offshore tax haven for the super rich full of unemployed homeless slaves, a sort of fascist nighmare, or Socialist Brexit by which a regime of full-employment is established, a national bank with a monopoly of credit and the mega profits and property of the giant corporations and super rich are made the property of all and a New European Settlement that does not treat the working class like migrating cattle or tethered donkeys in sink communities is sought. The worse possible thing for Labour will be to get sucked into an Unpopular Front for Soft Brexit with the likes of the Lib Dems, the Greens, pro-EU Tories, Bob Geldof, Richard Branson and Corporate Capitalism. Ask Hillary Clinton how 90s neo-liberal throwbacks get on electorally against the proto-fascists. They don’t. They don’t want to. Look, fundamentally Britain voted Brexit because British capitalism is moribund and dead and cannot any longer compete in Britain let alone the ESM. Remain was never an option so the only logical response if we don’t want to end up in the capitalist version of North Korea is Socialist Brexit. Don’t let all this crap about triggering Article 50 just be a screen for capitulating to the wretched EU and Soft Brexit.
I supported Bryan Gould as left candidate for leader in 1992, but what he now writes is deeply reactionary and should not be appearing on a left wing blog.
No there wasn’t a downturn after the referendum vote,, although measures taken by the Bank of England probably helped to prevent one.This however is no proof that Brexit will not be economically disastrous.
But if Gould’s support for Brexit was on left wing grounds, that the EU was irredeemably neoliberal, then fair enough.But it isn’t.It is made on grounds of ‘British heritage, the power to govern ourselves, …..had been lost to a hegemonic continental power’. This is right wing nationalism, it is what UKIP and the Tory right say.Can we please have no more of this.
Presumably emailed from New Zealand too. I doubt he’d feel much of a downturn.
I agree with Peter Rowlands. This article would fit comfortably into the columns of the Daily Mail. We all know, if we know anything, that there are serious points of view on different sides of arguments about the EU. Instead of tackling those arguments Bryan Gould sets up an opposition between an elite that thinks it knows best and which thinks that “the people” are too stupid to understand versus the “British people” who refused to be conned and who just want to take back control of their own affairs. This line of argument is that adopted by UKIP and the worst of the right wing media. There are legitimate arguments in favour of Brexit but this isn’t one if them. I too think this is out of place in the columns of Left Futures.
It seems to me that if you don’t like the message, the answer is to shoot the messenger.
The reality is that Britain has lost sight of why we are here where we are at present.
We were told that when we became part of the now EU, we would be more prosperous, that we would have peace, that harmonisation would be beneficial.
In truth since we have been a member of the EU we have lost our manufacturing base, introduced free markets, deregulated our financial system, and gradually liberalised controls on industry and commerce.
In short, all this has happened whilst being a member of the EU. The EU hasn’t saved us from a government dismantling our public services and NHS, and has been actively negotiating with the USA secretly to subjugate people under the jack boot doctrines of the corporate sector.
The problems facing us are exactly the same inside or outside the EU.
Whilst people here are keen to highlight the fact that extreme right wing politics points a finger at the obvious flaws in the European model that we can just turn a blind eye to, isn’t facing up to what people themselves experience.
An example of what I mean is just how Trump gains support rightly pointing out that the media constantly fake the news, we all know it does, but sadly he’s one of the biggest culprits of it and yet astutely uses it to serve his own ends. The fact that what he says is true is the strength of his argument, the fact that he also fakes his side of reality is also a fact and that is what we need to expose, and we don’t do that such as by pretending the grass is greener in the EU when it suffers from all the defects we have in this country.
We as yet don’t know what the outcome of the European elections will be, but the fascist right are clearly exploiting the weaknesses of Neo-Liberal governments throughout Europe, yes it is easy to blame immigrants, but the economic flaws were there anyway that created grounds for discontent.
If anyone understands the history that brought us Hitler, I can say from the perspective of anecdotal experience, that a German work colleague came to me with tears in his eyes saying, that Hitler promised them bread. He said he couldn’t understand (I was a mere 22 at that time) why they could have ever killed people like me.
I was working in a famous Bavarian Brewery at that time, and little did I know I was living just across the lake from where the Night of the Long Knives took place, in Bad Wiessee.
Whilst we are all contemplating our navels over trivia, the Tories are relentlessly dismantling our state, and I don’t see the EU coming to our rescue as the people of Europe are engaged in exactly the same gameplay.
All we can do is present a workable alternative outside the EU, should the Tories use Brexit to impose harsh Neo-Liberal policies on the people of Britain we should all start shouting from the rooftops, explaining the alternatives.
I have said it many times, people think what is happening is inevitable, that we have not got the money to fund our needs, that we must all pay our way, if you can’t afford it you don’t deserve it.
All that is flawed economics, in reality the government creates money, we do not have to borrow our own money, that which we create through the Bank of England, we can never go broke, it is a physical impossibility, and don’t take my word for it, just google Alan Greenspan.
All that is standing in our way are right wing politicians that serve the interest of the Banks and corporate sector.
Poverty is political choice not a reality.
Much good sense in your post,Mervyn, BUT I have explained before, in great detail, how your claim that a government with its own sovereign currency, “can never go broke”, is just fundamentally wrong.
In an economy, fully integrated into a global economy, with a currency which fluctuates in value according to the capitalist market valuation of it relative to all other currencies, it is indeed possible for a government to print new money , particularly to develop new , productive infrastructure, WITHOUT causing the “Zimbabwean style hyperinflation” always warned about by the Tories and Labour Right when a Left Keynsian expansionary economic strategy is proposed.
But money printing without harm is dependent upon the state of each particular economy at the time, particularly the availability of “spare” labour supplies, and the hostile response of the global currency markets. There is a definite limit to how far any government can push money printing before its currency value will be seriously impacted, and hyperinflation will occur.
Today, a Left government could indeed combine considerable money printing (within limits) with extra borrowing , to fund a transformational major infrastructure programme. But to stick to your ideological belief in the ability of any government with a sovereign currency to print unlimited extra money to create prosperity is, I’m afraid, utter economic nonsense, and discredits your overall arguments. Yet you persist in claiming this simply wrong theory is correct.
@Mervyn H, I agree with some of your comment but I am not sure how any of what you say is a response to what I wrote or to Bryan G’s piece. I agree with John P about sovereign currency and the limitations thereof. And if I want to understand a point of economics I am unlikely to turn to Alan Greenspan.