November 12th, 2018
(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: email@example.com
I began writing my blog mainlymacro because of my anger at austerity, and the fact that the view of the majority of macroeconomists that it was a bad idea was largely ignored by the media. When the media did talk to economists, they tended to be from the financial sector. Financial sector economists are biased in two directions: they tend to be right wing and they tend to talk up the importance of a capricious financial market and their own ability to know its ‘needs’. I used the term ‘mediamacro’ to describe how most of the media seemed happy to tell the story of the deficit as if the government was a household, which any first year undergraduate textbook explains is not true.
Many used the Eurozone crisis as an excuse for austerity, but I quickly discovered that the line most journalists took was missing the key reason for that crisis. Eurozone countries cannot create their own currency, and the institution that could act as an unlimited lender of last resort to individual governments, the European Central Bank, was refusing to do so. The crisis ended when the Eurozone changed this policy and became a lender of last resort to most countries. The exception was Greece, and I tell their more complex but shocking story in a few posts.
Before the UK’s 2015 election the Conservatives talked about a strong economy, and talked up rising employment levels. The media went along with this narrative. In reality the recovery from the recession had been the weakest for centuries, in good part because of the policy mistake of immediate austerity. Strong employment growth combined with weak output growth meant productivity was stagnant, which in turn helped create falling real wages. Yet for mediamacro the government’s deficit was a more important goal of policy than economic growth or real wage growth, and as a result the economy was the Conservatives strong card that led them to victory at the election. Adapting an old Sun headline, I argued it was mediamacro wot won it, although luck also played its part.