Wednesday 24 February 2010
Economists- the real Nowhere Men
I just had to laugh when I read the economists’ letter to the Financial Times in support of Alistair Darling, Chancellor of the Exchequer, saying that this is no time to introduce budget cuts. So, with a deficit now at eye-watering levels these clots are effectively telling the government to spend away; to mortgage your future, to mortgage my future, looking always to the ‘long run’. That reminds me of something. Oh, yes, wasn’t it an economist who once said that in the long run we are all dead?
Is there, I ask myself, anyone who beats economists in the stupidity stakes? OK, there are climate-change scientists, but economists are in a unique category of their own. Gorbachev, of all people, used to tell a joke which featured economists in the punch-line when he was meeting other heads of state or government. It went like this. President Regan has a hundred security advisors. One of them is a spy, but he does not know which. President Mitterrand has a hundred lovers. One of them has Aids but he does not know which. He –Gorbachev- has a hundred economic experts. One of them is intelligent but he does not know which.
Yes, quite. But let Dismal Gordon take temporary comfort from the practitioners of the Dismal Science who came to his aid, all sixty of the clots. Yes, now is not the time to introduce cuts which may endanger a ‘fragile’ recovery; now is the time to chase away investors alarmed by the horrific growth in debt and borrowing. I would honestly say that economists act as a reverse barometer; whatever they say, expect the opposite, do the opposite. Because when they get it wrong they get it spectacularly wrong.
In 1981, when Geoffrey Howe was Chancellor, he was faced with a kind of charge of the dismal brigade, when no less than 364 of them, virtually the whole profession, not a stupid 60, wrote to The Times criticising the Budget, saying that “there was no basis in economic theory or supporting evidence” for the policy the government was pursuing. They did not stop there, no; there were also the Cassandra-like warnings that the Budget threatened Britain’s social and political stability and that an alternative course must be sought.
But the Lady was not for turning; strict fiscal and monetary policy was introduced over the squeals and moans. Alas for them what followed was not judgement day only morning, excellent and fair. No sooner had their miserable missive been published than the economy began to recover. No sooner had it started its recovery than all of the inherited Keynesian orthodoxy looked stupid and outmoded.
No, there was no increased expenditure. Instead the Budget deficit was faced with simple honesty. Taxes were increased and government borrowing brought back on course. Lower government borrowing meant lower interest rates, taking the pressure off business. Investors started to regain confidence in the will-power of the Thatcher government, that it would pursue its declared goals to a conclusion, not collapse into indecision; not be panicked by the advice of the ‘experts’. So, money was freed up as people planned a future on the basis of lower interest rates, lower inflation and lower borrowing. Intelligence, clear thinking and good-sense prevailed. The economists were ignored; so should they always be, because most of them are the captives of yesterday’s idea. Most of them truly are nowhere men. :-)
They’re as blind as they can be,
Just see what they want to see,
Nowhere Men can you see me at all?
Nowhere Men, don't worry,
Take your time, don't hurry,
Leave it all till somebody else
lends you a hand!