Thursday, 30 June 2011

Iain MacWhirter; a response

There was time, not so long ago, when the op-ed pages of the Glasgow Herald were actually worth reading. Commentary by experienced, knowledgeable journalists such as Alf Young regularly enlightened the reader on the big political, economic and social issues of the day. You might not always agree with the writer but investment in reading the piece was usually rewarded with some stimulation of the intellect.

No longer. As journalistic capacity declines with circulation, the tone of the op-eds becomes increasingly shrill. Provocation, not enlightenment, seems to be the order of the day for hitherto thoughtful writers.

Take renowned journalist and political commentator, Iain MacWhirter who today is responsible for the subtly titled piece, ‘Madness to go on strike over pensions’.  There has been much to admire about Mr MacWhirter’s writing over the years and recently he has been particularly effective in holding political and financial elites to account for their moral degeneracy and managerial hopelessness before, during and after the banking crisis. He has been less effective – embarrassingly so at times – on the wider economics of the crisis; a point I’ll return to later.

A recurring theme for Mr MacWhirter over the last year has been attacks on public sector workers and the Scottish public sector as a whole in which he has repeated a number of the tired myths so beloved of the Serious People of the Scottish right, to whom Mr MacWhirter appears increasingly anxious to ingratiate himself. Therefore, Mr MacWhirter’s criticism of striking public sector workers hardly comes as a surprise.

With characteristic elegance, today’s piece misrepresents both the trade union position and wider pensions issues. Public sector workers we are told have an ‘exaggerated sense of their own grievance’ and an ‘inability to see the situation in the round’. Unions are apparently invoking Upper Clyde Shipbuilders and the General Strike of 1926. Public sector workers are the only group of workers that are still ‘well organised’. Weirdly, Mr MacWhirter thinks the Tories have chosen the ‘battlefield’ of public sector pensions to defeat Bob Crow of the RMT a union which organises primarily in the private transport sector.

I have sat through numerous meetings of the STUC General Council and other gatherings of senior trade unionists in Scotland during which the pensions issue has been discussed. I have heard no invocations of struggles past but I have heard an awful lot about the wider economic and social context facing workers across the economy. I have certainly discerned a ‘sense of grievance’ but always rooted in a deep understanding of the pensions delinquencies visited on private sector workers by employers and government.  It may come as a surprise to Mr MacWhirter but private sector unions (yes, there are still large parts of the Scottish private sector with high union density) are solidly behind this action; they know more than anyone else that all workers suffer from the race to the bottom on pensions.

More than anything, I have witnessed trade unions anxious to explain their case as they did in this week’s Sunday Herald. I do not have the space to do so again here but after reading Mr MacWhirter’s article I would refer readers to the following for some much needed balance Nigel Stanley of the TUC; Nicola Smith, Dave Watson of UNISON Scotland; and for those of you with the time, the TUC response to the Hutton Review here.

Suffice to say that Mr MacWhirter completely ignores some key issues such as the reforms introduced by the previous Government which reduced the value of public sector pensions by around 10% and the present Government’s decision to replace RPI with the lower CPI to uprate pensions in the future; a reform which will further reduce the value of public sector pensions by 15%.

Similarly, Mr MacWhirter chooses to ignore the consequences for the recovery of further reducing real wages in a fragile economy for a significant section of the workforce.  This point has been cannily taken up by the Scottish Government who, to be fair to them, have consistently stressed the importance of buttressing demand throughout the economic crisis. They know that stripping more demand out the economy with the output gap and unemployment high and the bulk of spending cuts yet to bite, is potentially catastrophic

Rather pathetically for a big boy who has been mixing in the political world for some decades, Mr MacWhirter anticipates receiving ‘hate mail’ in response to this piece. This couldn’t be a pre-emptive attempt to undermine reasonable responses could it?  I can assure our unexpectedly timorous friend that this response has not been written in hate; only frustration and disappointment.

However, given Mr MacWhirter’s intellectual confidence and haughty dismissal of opposing views, I do feel justified in ending this response by reminding readers of a couple of his recent faux pas on the economy…

Example 1: on 29 September 2008, at the very height of the banking crisis, Mr MacWhirter argued that, ‘There are already rumours that the Bank of England will cut interest rates by half of one per cent later this week…this will push inflation through the ceiling – which is exactly where the Government wants it to be’.  

Push inflation through the ceiling?! Now for anyone with a passing interest in economics this risible attempt at sophistication was always ridiculous. The economy was collapsing round about us in late September 2008 and there was no prospect of cuts in interest rates feeding through into rocketing inflation. The imperative at the time was to stop the recession ( which we now know began in spring 2008 – many of us knew this at the time) becoming a depression and a massive monetary response was necessary – as I think most reasonable people on left and right can agree on.

Worth pointing out that the Bank did indeed cut interest rates from 5% to 4.5% in October 2008; to 3% in November and to 2% in December. Rates continued falling to reach 0.5% in March 2009 where they have remained ever since. This massive monetary response to the recession was boosted from March 2009 by a programme of Asset Purchases (or ‘quantative easing’).

What happened to inflation?

Yep, as interest rates were cut, inflation fell – as to be expected in a recession. Since autumn 2009, inflation has risen largely due to the pound’s depreciation (a good thing); higher than anticipated inflation has since been sustained by rising commodity prices and, more recently, the VAT rise.

But cutting interest rates in autumn 2008 did not lead to higher inflation! Mr MacWhirter clearly has no understanding of basic macroeconomics let alone the quirks of a liquidity trap.

Example 2: In writing about the Edinburgh Book Festival in August 2010, Mr MacWhirter wrote another strange piece on the economic views of Noble Prize winning economist Joe Stiglitz and Scottish historian Niall Ferguson. He seems to believe that Prof Ferguson was advocating an approach of ‘trying to solve the debt by piling on more debt’. Now, I didn’t hear Ferguson speak in Edinburgh but I have read his FT pieces over the last few years and he has never promoted a programme of fiscal expansion in response to our current situation. Quite the opposite. Maybe he was just trying to wind Mr MacWhirter up.

But, again, the main problem with this piece is Mr MacWhirter’s crushing ignorance of economics and economic history.  In the end, the stimulus offered by both Stiglitz and Ferguson is the old solution of trying to solve a debt crisis by piling on more debt. It didn’t work in Japan and I don’t see why it should work here’.

Oh my Lord, where to start. First, the UK is not, and was not, in a debt crisis. We are in a crisis of low growth and high unemployment. It gets so, so boring rebutting this nonsense that I can only refer to our previous work.

Secondly, it didn’t work in Japan because it wasn’t tried. See the work of Paul Krugman, Adam Posen and others.

Third and most importantly, Mr MacWhirter, when a country has weak or no growth, when unemployment is high, when interest rates are already up against the zero bound (meaning contractionary fiscal policy cannot be offset by expansionary monetary policy; unless its QE but, wait a minute, you don’t like that either), when there is little prospect of further currency devaluation, when our main trading partners continue to have weak domestic demand, when real wages are falling at their fastest rate since the 1920s (I could go on)…how do you get out of a crisis of low growth and high unemployment? Eh?

In breezily dismissing the views of a world renowned centrist economist (Mr MacWhirter describes Stiglitz as ‘left-wing’; for a Nobel Prize winning economist maybe but not in the usual Scottish sense) Mr MacWhirter displays the same hubris of which he has quite correctly accused bank executives. I’m sure he is well enough read to know what hubris leads to. Maybe he should stick to politics.

Stephen Boyd STUC
Twitter @stephenboydstuc

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