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Economic fake news

In the modern world, mainstream economic journalists have just two roles to perform – to convince the public that they have some clue about what is going on; and to maintain public confidence at all costs.  So it was, for example, that even as Lehman Brothers was collapsing a decade ago, mainstream economics coverage was still telling investors that their money was safe and that a new age of prosperity was dawning.

Ten years on, little has changed.  Despite the decimation of the retail sector on both sides of the Atlantic and the worst collapse in real wages since the 1890s, mainstream media continue to point to supposedly full-employment and artificially propped-up stock markets as evidence that all is well.  The trouble is that for millions of households, things are far from well.  In the course of the decade since the Great Financial Accident, foodbanks have mushroomed across every town and city in the country.  Official employment figures are high, but only because of part-time and zero-hours jobs.  As the Resolution Foundation recently reported:

“The Foundation cautions that while employment has provided a major living standards boost since the crisis, widespread insecurity has been a big setback with around 800,000 workers currently on zero hours contracts. It adds that Britain’s impressive jobs record contrasts with its dire performance on pay, with real average earnings still £13 a week lower than they were a decade ago.”

A key reason for this, in the UK at least, is that we have been creating the wrong kind of jobs.  The employment growth areas in Britain are in low-paid, labour intensive sectors – social care, retail and hospitality.  In the years prior to the Sex Discrimination Act, when official unemployment rates were last this low, these would have been regarded as “women’s work” in the sense that they were never expected to provide the main income for a household, but were regarded as an additional income to supplement the wage or salary of the main (usually male) breadwinner in the household.  Indeed, even in the more enlightened 1990s and early 2000s, many of these jobs would have been seen as “student jobs” – allowing the first generation obliged to pay for its education to add a small additional income to their maintenance loans.  The problem today is that millions of households are obliged to live entirely on the low wages paid by these supplemental jobs.  The result, for a growing army of people, is that they have to take on more than one such job and/or claim in-work benefits in order to get by.

In other words, the fact of full-employment is only “good news” insofar as things could be a lot worse.  As it is, the collapse in real earnings for the majority is conveniently hidden in media coverage by the use of average wage figures that are increasingly meaningless in a grossly unequal society.  As Sean Farrell at the Guardian reported earlier this month:

“A worker on a median salary of £23,474 would have to work 167 years to earn the median annual pay of a FTSE 100 boss – up from 153 years in 2016… The gap between bosses and workers widened despite government efforts to hold companies accountable for runaway pay.”

Indeed, the problem for those at the top is finding a means of holding onto their earnings over time in the face of inflation and very low interest rates.  The result has been the inflation of a series of asset bubbles in the stock market, property, fine art and collectibles in the hope that these will increase in value faster than inflation.  It is these assets that depend upon public “confidence” to maintain their value.

The wider population meanwhile has been feeling the squeeze as its discretionary income – the amount left over once essentials like housing costs, utilities and food have been paid – has fallen through the floor.  The result has been the so-called “retail apocalypse” that has seen retail and hospitality businesses bankrupted by a combination of falling sales and increased taxes levied by a government that believes its short-term balance sheet is more important than the long-term health of the economy.

For media editors, this poses a thorny dilemma.  Accurate reporting of the collapse of the consumer economy in the face of declining real incomes could trigger precisely the kind of drop in public confidence that bursts asset bubbles.  And to be clear, things are going to be a lot, lot worse than they are now when all of those bubbles finally pop.  On the other hand, denial is not an option; not least because lots of people are going to notice that House of Fraser has miraculously become Sports Direct or that Homebase has gone.

The answer is what PR people used to call “spin.”  However bad the economic news is, find a means of portraying it in positive terms.  So it was that one of my readers informed me ahead of time in July that:

“Tomorrow we will see the latest consumer spending figures. If they are better than expected they’ll say it was due to hot weather and the World Cup. If they are worse then they’ll say it was due to the hot weather and the World Cup.”

Lo and behold, the following day the Guardian business news began with the headline: “Pound hits 10-month low as World Cup fever hurts UK retail sales,” continuing:

“The World Cup and the summer heatwave kept British shoppers away from the high street last month, despite encouraging stronger sales of food, drink and barbecues across the country.”

The BBC took a similar line:

“The heatwave has spurred people into splashing out on fans, food and drink, but it has failed to prevent a slowdown in spending growth, a survey suggests.

“BRC chief executive Helen Dickinson said for many struggling retailers ‘autumn could not come sooner’.  She said the recent sweltering temperatures had put shoppers off browsing in shops, while the three-month long period of sunshine meant demand for many summer products had slowed.”

In most cases, mainstream media outlets are notified in advance of the formal publication of economic news; giving them time to construct this kind of narrative with which to frame the news.  Weather events – like the “Beast from the East” back in March or the heatwave in June and July – provide a plausible excuse for news that might otherwise shake the confidence of consumers and investors alike.  After all, it is not as if the media can simply ignore the devastation that is engulfing the UK retail sector.  For example, the BBC article conceded that:

“House of Fraser is urgently seeking fresh funding in order to survive, with experts warning it will collapse if it does not find a new investor.  The department store chain is one of a number of retailers struggling amid falling consumer confidence, rising overheads, the weaker pound and the growth of online shopping.

“Electronics chain Maplin and toy chain Toys R Us both collapsed into administration earlier this year.  Other High Street chains such as Mothercare and Carpetright have been forced to close stores in order to survive.”

With Britain well into its summer “silly season,” the hope had been that economic news would improve as autumn drew closer.  So it is that the mainstream media have latched onto the growth in so-called “staycationing” – people taking holidays in the UK rather than going abroad.

Once again, the BBC chose to frame this story in terms of the recent heatwave.  According the business news section on the Radio 4 Today programme, the reason why we are witnessing a collapse in the number of Britons heading for the continent for the August bank holiday weekend is that people decided to remain in the UK because of the hot sunny weather.

At half-past-six in the morning, when one’s brain is still half asleep, this explanation sounds plausible.  Until, that is, one looks out of the window at a grey, autumnal dawn.  The reality is that the heatwave is fast becoming a distant memory.  Temperatures returned to normal nearly a month ago, and we are back to the usual north Atlantic weather systems that bring regular low pressure (rain) fronts across the British Isles.  Nobody making an on the spot choice to stay in the UK for the holiday weekend is doing so because the weather is fine; because it isn’t.

Remember, too, that most holidays were booked back in January when there was no inkling of the turbulent weather experienced later in the year.  The reason why far fewer people booked to travel abroad had nothing to do with weather and everything to do with falling real incomes coupled to the declining value of the pound following the Brexit decision two years ago.

Travel – like eating out – is one of the few economic indicators that cannot be blamed on the Internet; so the weather is about the only thing left to blame for its decline.  Take a step back, however, and we see that the decline in holidaying abroad is entirely consistent with the broader retail apocalypse that has decimated the UK retail sector.

What we have been witnessing for nearly a decade now is the systematic hollowing out of the UK economy as an increasing number of households watch their discretionary income shrink.  With both oil prices and interest rates rising, far from expecting a growth in autumn retail sales, we can expect to see another round of store closures and redundancies.  Brexit is more a product of these trends than their cause; although uncertainty over Britain’s looming exit from the EU is now accelerating the process.  The question now is not whether the UK is going to experience an economic crisis; but how soon will it arrive?  But don’t expect to find much discussion of that question in a mainstream media whose economic coverage has been “fake news” for longer than the term has been in common use.

As you made it to the end…

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