The politics of debt fetishism

November 28, 2017

One of the sillier sights of the last few days has been the media’s pestering of John McDonnell over the costs of government borrowing: I’m not just thinking of Andrew Neil’s childish “gotcha” question about current debt interest payments, but also the demand that McDonnell say how much extra a Labour government would pay in interest.

Such questions are a form of statistical fetishism – an obsession with numbers in the abstract whilst ignoring important realities.

What matters – insofar as they do at all – are the public finances as a whole, rather than any single line of them. It is possible that McDonnell’s extra borrowing will boost GDP and tax revenues, as 23 economists have argued (pdf).

Frankly, their claim is questionable. The Bank of England believes – maybe wrongly – that there’s little slack in the economy. It might well therefore respond to the incipient boost to GDP given by looser fiscal policy by raising interest rates. If so, the multiplier will be small and the 23 wrong*.

This, however, is what the debate should be about: how big is the multiplier? What exactly will we get with McDonnell’s extra borrowing? Reality-based journalism would ask these questions. The BBC, though, prefers statistical fetishism.

Let’s put this another way. How often have Tory chancellors been asked: “how much tax revenue are we losing because austerity is depressing economic activity? But this is the question that matters when thinking about the public finances. Debtint

There’s something else. The fetish of debt fails to ask the question: who is suffering because of debt interest payments? The answer is: nobody, not least because they are low by historic standards.

Meanwhile, of course, real people are suffering real harm because of Universal Credit and austerity. In fact, it’s quite possible that people are dying because of the latter.

What we have here is a clash of two different types of politics – one that troubles itself with abstractions, versus one concerned with real lives and ground truth.

The point here, of course, is not confined to government debt. It’s a more general issue than that. Jonathan Parry complains that politics is

dominated by a “lumpen intelligentsia”: “earnest types who enthuse about ideas, simplify them and believe fervently that their crude and wholesale application will solve complex social problems.” 

It’s this mentality which gave us Brexit.

It’s from this perspective that we see the BBC’s bias. In obsessing about debt (and about many other things such as the ups and downs of ministers’ careers) whilst under-reporting real suffering**, the BBC isn’t just making a choice between left and right. It is prioritizing the politics of fetishism and abstraction over the politics of real people. And this is anything but impartial.

* Update: Simon Wren-Lewis on Twitter corrects me here. At negative real interest rates, infrastructure spending pays for itself even if the multiplier is zero.  

** The BBC’s decision not to report the BMJ paper which claimed that austerity has killed thousands – on the grounds that its “conclusions were “highly speculative” and should be treated with “caution” – is of course laughable. It has not always applied such high standards.

A clarification: I’m not complaining here about right-wing bias. I would much prefer the BBC to have an intelligent and honest bias to the right than what we have now, which is a perhaps unthinking bias towards stupidity.

Article Categories:
Regional Economics Blogs

Leave a Comment

Your email address will not be published. Required fields are marked *