I fully share the anguish of so many people over the madness of Brexit. All the evidence points to not leaving the EU, and the reasons given for leaving are generally vague or false. The vote on which this crazy policy is based was deeply flawed. As an economist I can clearly see the damage Brexit is doing, and will do.
While I could see the rationale for Labour’s triangulation strategy over Brexit before and immediately after the 2017 election, it stopped making sense in electoral terms as public opinion began to move during 2018. This is not to mention that its policy often appeared unicorn-lite or, more realistically, close to a policy of Brexit in name only, which only gives away control. Should the new party that will surely follow the formation of the Independent Group, continues to promote a “people’s vote”, it will likely be quite attractive to people like me.
But I’m in the more uncommon position of having been in the similar place twice before in the last decade. The reason is very simple. I have been all my life a macroeconomist, and for the last 20-odd years an academic. That gave me a perspective on 2010 austerity and the 2015 election that was largely absent from the popular debate. As a result, I can see that Brexit was not an isolated event, the result of one bad decision by Cameron, but part of a pattern suggesting deep problems with how UK politics works.
Understandably, most people are against austerity because of the impact it has had on those in need who depend on the NHS, local authority care and the welfare state. They are also now beginning to see its impact on schools, on our justice system and on much more. But that still leaves open the idea that somehow austerity was necessary for the good of the economy as a whole. As Conservative politicians never tire of saying, they came into office in 2010 with the country on the edge of a crisis created by the previous Labour government. As an academic macroeconomist, I know that is completely false.
Pretty much every first year undergraduate textbook tells students why in a recession you need an expansionary monetary and/or fiscal policy and you should ignore the deficit. When interest rates run out of road, as they had in the UK by 2009, then fiscal expansion is vital. One of my own specialist fields is fiscal policy, so I also know that state of the art models also suggest exactly the same thing as the textbooks. The insights of Keynes that have been accepted by most academics ever since remain valid today. It is this received wisdom that the UK followed in 2009 before the Coalition government came into power.
Just as many feel that Brexit makes no sense, I felt that austerity, which started in 2010, went against all our knowledge and evidence. The one doubt I had was that an irrational financial market might suddenly stop buying UK government debt, but this was dispelled when I realised the Bank of England’s unconventional monetary policy of buying government debt to keep interest rates low (Quantitative Easing) would quickly kill any panic. That analysis begins my book based on the blog I started as a result of austerity.
Just as both main political parties now support some sort of Brexit, so both at the time supported austerity. The argument was over how much, how quickly. Neither the Coalition nor the opposition argued for the right policy, which was to delay fiscal consolidation until the recovery was underway and the Bank started raising interest rates. Experts on trade or the EU Brexit negotiations…
