Brexit has marked a new low in the abuse of economics in political debate. From politicians playing fast and loose with statistics to policymakers peddling opinions as ‘facts’ we are not just confused; we are disillusioned. More than ever, we need to explore new ways to engage the public in meaningful debate about the economy.
In politics, the economy matters. Ever since Bill Clinton’s campaign chief coined the phrase ‘The economy, stupid’, politicians have been ever more keen to assert their economic competence.
No surprise that the Brexit camps have chosen to fight much of their battles on the grounds of the economy. But in doing so they have managed to generate much heat whilst putting us further in the dark.
Only one in five of us feel well informed about the referendum, and perhaps even more damaging we simply do not trust our senior political figures to tell the truth about the EU. Even the Bank of England’s reputation has been diminished, with only 35% trusting Governor Mark Carney against 38% saying they did not.
In a scathing 83 page report on the Brexit debate, the Treasury Selected Committee concluded that the “arms race of ever more lurid claims and counter-claims” on the economy was impoverishing political debate.
Nowhere is this more evident than in the use of the ridiculous phrase ‘economically illiterate’ levelled against political opponents. Mastering a huge and diverse academic discipline, with at least nine different schools of thought, can hardly be equated with the ability to read. More importantly, who says you have to be a trained economist to have a valid view on the economy?
Economists generally behave better than politicians, but still project confusing and conflicting certainty. While Paul Johnson of the Institute for Fiscal studies argues that economists are almost unanimous in their view that Brexit would shrink the economy, former senior IMF economist Ashoka Mody attacks this apparent consensus as crossing the line into groupthink. In reality, economic predictions depend heavily on the assumptions made by their authors but these are rarely discussed or made transparent to the reader.
So when you hear a statement such as:
“Leaving the EU will make every household £4300 worse off”
You should interpret it as follows:
“To be honest we cannot tell what will happen in the future, but we have tried really hard to have a good guess. To make this guess we have made some assumptions that you may or may not agree with, and you should know that if we made different assumptions we might get a completely different result. We have also relied on some theories about the way the economy works that are contestable, and if you applied different theories you might also get different results. Good luck with all of that.”
You can see the appeal of the former.
At least Paul Johnson, a speaker at our forthcoming launch event for the Citizens Economic Council, injects a rare moment of humility into the debate when he recognises that ultimately this is a political decision. A smaller economy might be a trade-off some people are willing to make for more sovereignty and, as an economist, he says “I can’t tell you how to trade these things off, how to make this choice.”
In other words, if Brexit is the question, economics cannot give you the answer.
You might reasonably wish a plague on everyone’s economic statistics and just ignore arguments about the economy.
We claim the opposite. We should aim to demystify economics, make economic debate more meaningful and accessible, and find ways to engage more people in active deliberations on economic decisions.
And this is an urgent task. The need for greater democratic engagement on economic issues has become more pressing over time for at least three reasons
1. Erosion of public trust
Recent economic crises - banking, sovereign debt, Eurozone, scandals about tax havens, corporate asset stripping and persistent poverty even in rich nations, have damaged public trust in economic and political institutions. Doing better economic policy to citizens might help, but how about doing economic policy better with citizens
2. The rise of pluralism in economics
Apparent economic stability during the period of the Great Moderation was taken as proof of the validity of a package of policies to liberalise markets, trade and finance, reduce taxation and increase labour market flexibility while controlling inflation. These ‘unquestionable’ policies were themselves supported by an equally strong orthodoxy within academic economics.
However, the crisis challenged the idea of a singular, certain and infallible body of economic theory and many have now called for a more pluralistic approach to economic research and policymaking. Recognising this lack of certainty in economic theory magnifies the importance of being open and transparent about the methods and assumptions that have been used to make economic policy choices.
3. Coping with rapid economic transformation in the 21st Century
Even where economic theory and evidence is well established, the future is highly uncertain.
Disruptive new technologies such as genomics, data analytics, robotics and artificial intelligence may change the world of work and the nature of production and consumption in dramatic ways. Degradation of eco-systems and climate change may create increasingly severe and unpredictable impacts. A growing population may see rising migration resulting from conflict, climate change and the search for a better life.
To maintain social stability and allow communities to flourish in the face of such uncertainty and rapid change will require broad based support for economic decision making that has no guarantee of successful results. It will also arguably require more creative and innovative ideas about how to successfully organise and manage market economies.
The key to achieving this is to explore how deliberation and participatory methods can help bring clarity to our collective economic goals, generate better policies to achieve them, and bring more cohesion to our societal choices about the economy.
Too often we feel disempowered to express strong views about how to run the economy because we are not economists. But if we define economics in its broadest sense it is about how society allocates its collective resources to fulfil our needs and aspirations.
Surely everyone can have a legitimate view about that. What we lack are good processes for negotiating the sometimes difficult trade-offs involved – or in politician-speak the ‘hard choices’.
Well it does not seem that the referendum is providing a good process for this, so we will be exploring through the Citizens Economic Council, and a series of coming blog posts, how we can create better processes for economic debate and decisionmaking.
It is time for everyone to be an economist.
Book your free ticket for the launch event of the Citizens Economic Council on Wednesday 29 June from 6pm.