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Michael Gove had a point

Michael Gove’s comment that “we’ve had enough of experts” has come to symbolise everything that was wrong with the Brexit referendum result:

A bunch of knuckle dragging, fact-denying, racist proletarians who could barely muster a C grade GCSE between them – swayed by a cynical pack of lies from the likes of Gove, Farage and Johnson – were allowed to tip the balance (in England and Wales) in favour of what 97 percent of experts – most of them educated to PhD level – assuredly warned them would be economic and political suicide.

While this narrative may provide comfort to those desperate to avoid taking some responsibility for their own part in the result, it only works by cutting off Gove’s quote at the point where his interrogator interrupted him.  Taken in full, what Gove said was more nuanced:

“I think the people of this country have had enough of experts from organisations with acronyms saying that they know what is best and getting it consistently wrong.”

In the context of the EU referendum, the jury is still out.  Thanks to some quick intervention by the Bank of England, the initial stock market falls and crash in the value of the Pound were reversed.  The zombie apocalypse predicted by the Remain campaign failed to materialise (although, of course, Britain is yet to actually leave the EU).  Indeed, the UK economy has enjoyed a small rebound as a weaker Pound makes British exports cheaper while raising the price of imported goods.

In the wider context of a waning neoliberal global economic project, however, Gove was on to something.  In the course of three decades, organisations with acronyms like the G20, the ECB, the OECD and the IMF created a group-think echo chamber around the economists, journalists and politicians living within the various thought bubbles – the Washington Beltway, Silicon Valley, the Westminster Bubble, the Brussels Gravy Train, Davos, etc.  Each convinced the other that following the collapse of the Soviet Union the world had entered into The Great Moderation.  Francis Fukuyama proclaimed the end of history and Warren Buffett announced the global elite’s victory in the class war.  The world was moving ever onward and upward to the sunny uplands of globalism.

Then came what Bank of England Chief Economist Andy Haldane has recently called “the Michael Fish moment” – the spectacular US real estate and ensuing global banking crash of 2008; from which the world has yet to recover.

Thirty years ago, meteorologist Michael Fish rebuked an amateur weather forecaster for claiming a hurricane was about to hit Britain… a hurricane that materialised just a few hours later, causing widespread damage across Southern England.  In a similar manner, nine years ago the high priests of global banking and economics continued to reassure nervous investors that “all was well in the best of all possible worlds” right up to the point that the wheels fell off.  The models they had been using turned out to be just as mathematically exquisite, but a good deal less accurate than those used by the Mystic Megs who write newspaper horoscopes.  But, unlike the meteorologists, the economists and political theorists did nothing to improve their modelling.

It would be wrong to say that nobody saw the crash coming.  A small band of contrarian economists and investors from both sides of the political spectrum were shouting “fire!” at the top of their lungs.  The problem was that they were trapped on the outside of the mainstream ideological bubble where nobody else could hear them.  Over the last thirty years, these contrarians had been exiled to the fringes.  As an older generation of political economists had retired from academic positions, those remaining within the bubble tended to promote ideological clones whose belief in the Great Moderation and the triumph of neoliberalism was unwavering.  Those who questioned the economic orthodoxy could no longer get published in peer-reviewed economics journals because no mainstream insider was prepared to give a positive review to what amounted to religious heresy.

Where Michael Gove’ point is really telling is that after the forecasts made by those on the inside so spectaularly failed and with their global economic model lay in shards on the floor before them, these same “experts from organisations with acronyms” shamelessly appointed themselves to oversee the rescue.  They used taxpayers’ money to bail out the banks, and then berated taxpayers for over-borrowing and overspending.  They ushered in an austerity policy characterised by socialism for the rich and red-blooded capitalism for everyone else. Public services and social security were dismantled, wages driven to the floor while those on the inside of the bubble became even richer.  As Ann Pettifor – one of the few economists to correctly predict the 2008 fiasco observes:

“Economics is driven by ideology – it is ideology, not science, which drives them to assert that bank bailouts are tolerable but policies that protect the poor aren’t.  Unsurprisingly, these flawed theories and models are a great comfort to financial elites – which is why so many economists are hired and funded by big banks, corporations and the wealthy.”

Since the crash of 2008 and despite billions of dollars, euros, pounds and yen being pumped into the economy by central banks, only those at the top have benefited.  So at every opportunity, voters across the developed world have begun to rebel against the centre parties that support business as usual by voting for left and right wing alternatives.  The result was the rise of what Scottish-American economist Mark Blyth has called “Global Trumpism.”

Blyth predicted the outcome of the Brexit referendum.  He also predicted the even more traumatic victory of Donald Trump in the US election in November, together with Renzi’s defeat in the Italian referendum in December.  For Blyth, there is a simple explanation for these – and the very real prospect of LePen winning the French presidency in March and Merkel losing the German election in October – austerity.  Thirty years of financial deregulation and a huge transfer of wealth to those at the top has finally reached the point where a sufficient majority of the poor and the “squeezed middle” classes have put their respective national elites on notice.

The question now is whether those elites will instigate reform or whether they will double-down on austerity.  And even if reform is forthcoming, will it be sufficient?  As Pettifor warns:

“After the crisis, we were assured that markets could be relied upon to automatically restore “equilibrium” and that government intervention had to be resisted… Nine years later, economists are changing their tunes, but it may be too late. Falling incomes, expensive housing and rising debts have led to disillusionment with the establishment and helps explain the rise of political populism: a phenomenon for which the economics profession bears considerable responsibility.”

Michael Gove was wrong about Brexit, of course.  British people are not going to be better off outside the EU – although given that the EU is also in thrall to the same failed economic models and theories (as the people of southern Europe can testify) in the absence of radical reform there is little chance that we were going to be better off inside the EU either.  Indeed, a few more right wing populist election victories and the EU may well leave Britain before anyone gets around to spelling out what Brexit actually means.

Given his political track record as an insider’s-insider, it is highly unlikely that Gove could offer an alternative economic policy to the one that paved the way for his side’s pyrrhic victory last June.  Gove, after all, was one of the intellectual voices in favour of cutting benefits and public services and driving wages down while simultaneously shovelling quantitative easing into the already overflowing troughs of the elite.  But on “experts” – at least those in economics, politics and journalism – Gove was spot on.  It is time that we called them out on the failure of their models and forecasts.  After all, if you are going to pay someone a six or seven figure salary to manage an economy, run a state or tell you who is going to win a referendum or a presidential election, you would expect them to be more accurate than apes and monkeys.

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