Winner of the New Statesman SPERI Prize in Political Economy 2016


Monday 5 September 2016

Why does anyone listen to Nigel Lawson?

The Financial Times let’s him write an op-ed which extols the benefits of a quick and hard Brexit. The reason they published it is presumably the one provided by Lawson himself in this piece:
“I was a member of the Thatcher government of the 1980s that transformed the British economy, an achievement acknowledged throughout the world at the time.”

That is indeed the received wisdom in much of the media, but of course they have axes to grind. If you look at the most basic measure of national prosperity, GDP per head, the underlying trend is remarkably constant from the 1960s until the financial crisis (see here). Now that itself does not prove anything, but it means there is no obvious sign of a transformation.

However we have to add, in this context in particular, that the UK had two things going for it during the Thatcher period which should have led to a more rapid growth in prosperity. The first is North Sea oil coming on stream. The second is being a member of the EU. Let me quote some recent analysis by Nick Crafts, perhaps the best economic historian in the UK today. (You will remember it from the extensive coverage it had in the media during the Brexit campaign. What, you missed it?)
“Joining the EU membership raised the level of real GDP per person in the UK compared with the alternative of staying in EFTA. The deeper economic integration that EU membership entailed increased trade substantially and this had positive effects on income. Using a variant of the standard methodology pioneered by Frankel and Romer (1999) suggests that the impact was an annual gain equivalent to about 10 per cent of GDP. This far exceeded the ‘membership fee’ required in terms of the net budgetary contribution and net costs of regulation which have totalled about 1.5 per cent of GDP.”

Given the lags involved, a substantial part of that benefit would have accrued in the 1980s.

I have a post looking at some of the failures and successes of the Thatcher era here. One failure I highlight was the 1980 recession. The scale and rapidity of that recession undoubtedly did some permanent damage to a large section of the UK population. However on this occasion the government was warned by economists in the Treasury that their policies would have this result, and these civil servants were ignored. One of the Treasury ministers at the time who arrogantly dismissed these warnings of a recession was Nigel Lawson.

Finally we come to climate change. In 2009 he founded an organisation dedicated to arguing against measures to tackle climate change (details here). That alone should mark him out as someone who is misguided, wrong and dangerous. Indeed just the character traits that help you become an advocate of a hard Brexit.



20 comments:

  1. Quite right. Which opens up a series of questions:
    1. Why do people still buy into the Thatcher myth, particularly after 2008? (A. the media)
    2. Why do people still believe the economy is safer under the Tories when Reggie Maudlin wrote the original Liam Byrne letter and almost all postwar Conservative Chancellors (with the honourable exception of Ken Clarke), have presided over manufactured booms and busts (Maudlin, Barber, Howe, Lawson, Lamont)?
    3. How can we puncture said myths when the media and, a clutch of deluded and domgmatic intellectuals continue to dominate the media and, to an extent, academia? (The latter is much more contested, of course, but it has taken a long time for revisionist accounts of the 1970s to come about).

    I raise these questions as it seems (judging by previous posts) to be a subject close to your heart. It's certainly close to mine!

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  2. Not forgetting the 'Lawson boom' and the resultant mess that didn't hit the fan until Lamont was in post to take the blame. He was the worst Chancellor I can remember, and with the memory of George Osborne so fresh in my mind that's really saying something.

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  3. And he lives in France.

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    1. There is irony....he wants the UK out of the EU...and no freedom of movement, and yet he makes use of it. If freedom of movement is gone, he should be repatriated...and I suspect the French would be likely to do so.

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  4. He was also the Chancellor responsible for the late 1980s property boom that collapsed disastrously in 1990. That was a much larger and deeper property price crash than 2008-9.

    I also wonder why it is that the Chancellor who was famously keen on the UK joining the ERM (unlike his successor) is now equally keen on leaving the EU.

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  5. Lawson is misguided, wrong and dangerous. So why on earth add more oxygen of publicity by commenting? @sjwrenlewis D_shariatmadari

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  6. From the south of France he foresees another of his Economic Miracles.

    'For Lawson, the answer is simple. Brexit is not about border controls or immigration, “important though they are”. It is certainly not about being anti-Europe. “I love Europe! That’s why I live in France.” It isn’t even about economics, although he has no doubt that “we’d be far better off out, economically. To suggest that the European Union is an economic success – well, it clearly isn’t. Look at unemployment rates around the EU, particularly very high youth unemployment rates. So the idea that somehow it’s an economic asset to us to be in the EU is, I think, bizarre. The EU has never made economic sense.”' (Guardian, Decca Aitkenhead, Saturday 2 April 2016).

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  7. No obvious sign of transformation? Here's a fair quote:

    "The Thatcher era saw the implementation of supply side reforms that ended and then reversed the relative decline of UK productivity"

    ... from another axe-grinder, I suppose.

    https://mainlymacro.blogspot.co.uk/2013/04/on-economic-achievements-and-failures.html

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  8. So Lawson is wrong to question the course that energy policy has taken in the last decade in this country? That is a very interesting assertion for you to make.

    I imagine that you are familiar with the IPCC and the Representative Concentration Pathways that they have drawn up. Currently the assumption appears to be that we will stay on RCP 8.5 for the foreseeable future.

    This is nonsensical, however, isn't it? RCP 8.5 is a disaster, RCP 6 isn’t entirely attractive, 4.5 would be an inconvenience and 2.6 we’d not really note. And everyone keeps predicting what will happen if 8.5 does. And yet we know, absolutely, without any shadow of doubt, that 8.5 simply isn’t going to happen. With what we’ve already done to energy generation it is simply not going to turn out that way. Something between 4.5 and 6 looks likely.

    Matt Ridley has pointed out that 8.5 requires that we not only burn more coal than we used to a decade back, but that we get a greater portion of our energy needs from coal. In 2070.

    If you criticise Lawson's involvement in this debate, that is the kind of belief that you regard as sensible.

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    1. Viscount Matt Ridley?

      https://anewnatureblog.wordpress.com/2014/12/22/viscount-matt-ridley-the-new-king-coal/

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    2. yes, up to a point. But all the scenarios except 8.5 presuppose much more action on climate change than Mr Lawson would allow. The 'exogenous assumptions' behind 8.5 are indeed implausible but that doesn't alter the fact that all the other pathways will need action.

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  9. Why does anyone listen to Nigel Lawson?

    Why indeed? Beats me. has he done ANYTHING - apart from the dubious climate stuff - since leaving the government before the Major Prime Ministership?

    But the media are desperate for someone on the Brexit side more credible than Duncan-Smith or Bernard Jenkin. Presumably they think that Lawson fits the bill. Not a happy situation.

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  10. You point out that the 1970s was a time when GDP growth per capita was very strong. It was also a time when the wage share was increasing. However it still gets talked about as a time of economic catastrophe. It was catastrophic if you think of everything in terms of returns on the FTSE share index or gilts adjusted for inflation. I think the key point is that so many commentators DO think of everything in those terms. I thought this gave a fascinating insight into that thinking https://www.chu.cam.ac.uk/media/uploads/files/1981_Budget.pdf . By the way Lawson was right about the dumbness of the Euro currency arrangement though and was also right that the SNP proposal for an independent Scotland being in a sterling currency union with the rest of the UK would be a recipe for a similar crisis.

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    1. Precisely on the 70s. The New Economic Foundation MDP 'shows that social progress in Britain has become increasingly decoupled from economic growth over the last 50 years and has stalled completely in the last three decades, never regaining its 1976 peak.'

      Similarly most of Britain's economic crises had been resolved by 1978: North Sea Oil saw to that.

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  11. http://discovery.nationalarchives.gov.uk/details/r/C13318082

    This explains the motives and real intent of the establishment and the fact they have to deceive people in order to fulfil their objectives, should be obvious to most now.

    The Neo-Liberal consensus throughout the world doesn't rely on factual information, in deed although from the Austrian School Hayek declared that recording of factual information was totally unnecessary, all politicians and economists need to do was to set up the framework to work within. Wherein lies the absolute fault, if you don't record what has happened, you can't define whether your policies work or not; but conveniently allow those who have always benefited from peoples ignorance to prosper unhindered.






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  12. I provided this information to you before and yet you never refer to it, clearly the whole Neo-Liberal agenda has nothing to do logic or fundamental economic principles, but serves the sole interests of a tiny elite. The Koch brothers for example set up bogus institutions to deliver power and control back to them, The Cato institute is a point in question, the whole idea of universities being mainly funded by private corporations is a also a case in point. ( He that pays the piper calls the tune)





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  13. Climate change deniers and those who argue against the consensus of economists use similar techniques. They point out the inaccuracy of forecasts and suggest that this is indicative of the disciplines as a whole. In other words, they say that because climate scientists and economists produce inaccurate forecasts they shouldn't be trusted at all and, by extension, they should be ignored when it comes to policy.

    This example from the Mail reads very similarly to the recent slew of 'economists are idiots' articles:

    http://www.dailymail.co.uk/news/article-2420783/Worlds-climate-scientists-confess-Global-warming-just-QUARTER-thought--computers-got-effects-greenhouse-gases-wrong.html

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  14. The Right has done a brilliant two generation job of pushing the idea that the 1970s were a catastrophe, that a revolution was needed to save us and that they achieved that task.

    The first and second parts of that legend have never been properly challenged, so the fact that we had ANY growth since then buttresses the third part.

    Andy Beckett's "When the Lights Went Out" is the only book I've ever read that makes a serious attempt to take on the first two themes. https://books.google.co.uk/books/about/When_the_Lights_Went_Out.html?id=d8qGAgAACAAJ&redir_esc=y

    The Left is hopeless at taking in these big historical scene-setting arguments and consequently, it lets the Right set the context of the argument. The Left (from Jenkins to Benn) in the 1980s indulged itself in internal finger-pointing and allowed the Right to have free rein to write the history of the 1970s.

    Labour in the summer of 2010 made a micro version of the same mistake when it opted out of the national discussion and allowed the Deficit Denier theme to become an accepted "fact".

    The current frenzy among the Corbynistas of painting the last Labour Govt as Red Tories and the failed counter-revolution is making a similar mistake. By descending into the internal blame game, we've helped the Right to cement the structure of the story that the basics of the economic model are fine and that it was only the incompetence of Labour that screwed things up. This will be the "fact" that shapes politics for the next half century.

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  15. The mythology of Thatcher is built up on the basis of a victory in the Falklands, a war that even right wing Max Hastings has argued was unnecessary and a result of a series of Foreign Office cock-ups.

    This 'national mood' point is also pertinent on the economic side. It is something related to Keynes notions of animal spirits and not unlike the change of mood in the US that started with the end of the hostage crisis/Reagan and so-called "Morning in America". Superficially the economy seemed to have recovered. A powerful financial/media establishment (eg the FT and The Economist) propagated this myth with the full advantage that it writes in the language that happens to be spoken in the world's sole superpower. Deregulation and Privatisation and Friedmanite policy were trumpeted around the world as a British success story and a triumph of Monetarism. Fundamentally what really happened of course was and acceleration of deindustrialisation and the disempowerment of labour and people across much of the country which became structural and from which the country never really recovered.

    Btw Nick Crafts - good on the big picture and a clever guy- but I think indulges in many practices that come from modern economics that would alarm a traditional historian. Also he is quite right wing. Read what Maddison and Rawthorn said about the consequences of Thatcherism on manufacturing at the time (1980s) - it is almost chilling in its foresight.

    NK.





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  16. He needs attention. That has always been his weakness.

    So now he takes the position re Europe that anything including destruction would be better than the status quo.

    As for the FT, I'm a long term reader and I'm glad they publish stuff from different perspectives but I didn't waste too much of my life reading that piece.

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