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Ben Clift discusses the competing constructions of economic reason that underpin models of British capitalism, and through that inform expert economic assessment of the UK economy.

Image courtesy of interviewee. April 15, 2024

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This video video discusses the role of the Office for Budget Responsibility (OBR), an independent fiscal council that oversees government economic policies to ensure adherence to fiscal rules and maintain public financial health. It highlights the growing importance of independent institutions like the OBR and central banks in ensuring accountability and confidence in government financial management, particularly given the pressures from global financial markets.

This video video also critiques the notion of apolitical economic governance, arguing that the policies and analyses produced by bodies like the OBR are inherently shaped by political assumptions and social constructs. It emphasizes that economic evaluations cannot be purely objective due to the influence of prevailing ideological perspectives within economics. The ongoing changes in these perspectives bring political elements to economic decision-making, with the OBR's evaluations reflecting particular normative viewpoints.

Moreover, the text touches on the rise of populism and its opposition to technocratic governance, suggesting that populists may reject expert opinions and undermine evidence-based policymaking. It discusses the OBR's increasing engagement with issues like climate change, advocating for urgent action based on economic consequences rather than just environmental concerns.

Overall, the argument posits that economics and economic policymaking are deeply political, suggesting that discussions regarding economic issues should acknowledge this inherent political dimension for a more honest and informed discourse.

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The OBR are an independent fiscal council, so they oversee

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the government's, running of its economic policies.

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The government has got a series of fiscal rules

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and the OBR are there to kind

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of run the rule over their budget plans

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and hold them to their rules

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to make sure they're keeping the public finances kind

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of in good health, if you like, and,

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and to oversee the long-term sustainability

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of the public finances.

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So bodies like the OBR

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and another equivalent will be independent.

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Central banks have grown up in the late 20th,

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early 21st century and have become pervasive

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across advanced economies.

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And largely I think that's happened because of the growth

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and importance of global financial markets, means

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that governments need to reassure investors

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and people who might buy their debt,

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that they're running sound

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and sensible policies so

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that the money is gonna get paid back in due course.

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So if you outsource your fiscal policy to a fiscal council

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to oversee it, if you outsource your monetary policy

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to an independent central bank, there's an idea there

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that you can get the experts

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to then make sure it's working properly

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and you don't get too much, political interference

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that might be kind of moving off the, the path

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of sound policy, if you like.

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Yeah. So, and, and

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because these new independent technocratic bodies have grown

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up a bo, a body

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of scholars in political economy have talked about this

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as whether it's a good development,

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basically asking questions about the democratic legitimacy,

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the democratic accountability of these bodies.

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So we used to kind of elect our governments

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and then they'd run economic policy from parliament,

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if you like, and that was accountable to the people.

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And if we didn't like it, we could get rid of them,

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but we sort of, we didn't elect the bankers

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and we didn't elect the fiscal technocrats.

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So there's a sense in which they're at one removed for the,

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from the democratic process.

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Now there might be some good reasons for that,

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but there are also problems it generates in terms of

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that political or democratic legitimacy

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and kind of how close they are to, the citizenry

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and how, what's their relationship

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to the broader political and parliamentary debate.

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And those things are kind of,

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they play out differently in different contexts,

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but it, there are questions to be asked,

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although I think they were quite useful bodies about their

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democratic credentials.

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I think, well, I think it was based on some flawed premises

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from sort of public choice theory, which is a version

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of go neoliberal political economy from the 1970s.

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And they basically thought

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that running the economy according to a set

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of rules would kind of tie the politicians to the mast

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and make sure that no one steers off the kind of sound path.

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But if you think about the actual politics of eco, of,

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of economic policy making, the nature

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of economic policy making means you kind

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of can't take the politics out of it.

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And so what I mean by that is that,

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any narrative about the economy

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or evaluation of the economy of the kind

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that the OBR comes up with is inherently a political

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and social construct.

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So there's no such thing as a kind of, of an

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Apolitical or scientific

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or technocratic truth about the economy

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because any analysis, the economy has to be built on a set

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of foundations that are chosen, set of assumptions

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that get chosen and others could have been chosen.

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And the reason they're chosen, they'll probably sound

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and sensible, but they are nevertheless entail a politics,

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entail an assumption about how the economy really works,

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how policy works, what role the state plays

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in relation to economic policy.

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And all of those are ultimately political assumptions.

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So economics is not nearly as kind of apolitical

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as it makes itself out to be,

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and neither is the OBR, I guess, is what I'd say.

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So the idea behind rules-based economic policy is similar to

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what I've just been saying about the need to kind of,

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to some extent tie the politicians to a mast

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and to ensure they're on a sensible path

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and to hold them to that path.

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The idea though is that this is a kind

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of iron fiscal discipline.

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That means they can't, they can't move too far so

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that you kind of impose limits on what they can do.

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But of course, fiscal rules are created

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by the governments themselves.

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And so in the sense they're imposing shackles upon

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themselves and therefore that gives them latitude.

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If they're feeling a bit too constrained by

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how much pot spending or, or,

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or tax raising they can do under their current rules,

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they have the latitude

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and the liberty to actually change those rules.

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So the idea is they're fixed, they're set in stone,

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they're kind of tablets on stone driven,

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delivered from on high.

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The truth of the matter is that fiscal rules are kind

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of much more changeable than that.

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So the rules that, that George Osborne introduced in 2010

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when he introduced the fiscal, the OBR, the,

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the fiscal council to oversee them,

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they've actually changed six times since then.

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So about they don't last 'em more than a year or two.

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And Rachel Reeves only day

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before yesterday announced what the new fiscal rules,

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different fiscal rules would be if labor win

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power next time out.

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So the kind of the, the theory is fixed and, and kind of,

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and and unchanging and,

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and iron discipline on, on chancellors.

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The truth is chancellors can kind

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of change them when they don't like them.

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And so that's one issue with them.

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And the other issue is that when you try

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and put them into practice

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and adjudicate upon how policy's going relative

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to the rules, that's a much less straightforward

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or mechanistic process than was assumed.

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It's actually a deeply political and interpretive process.

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There's lots of judgment involved.

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And therefore, again, we come back to the idea of,

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of economic analysis

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and economic evaluation being a kind of social

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and political construct construct

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and not something purely kind of mechanistic or scientific.

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I mean the, the important backstory to all

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of this going on is what's the dominant

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orthodoxy in economics, in mainstream economics

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that underpins A, what's in the rules

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and B how bodies like the OBR kind of evaluate

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and adjudicate an economic policy.

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And again, it's all based on

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some slightly flawed assumptions.

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I think the assumption is that that that kind

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of settled wisdom about the economy and

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and macroeconomics is, is kind of unchanging and enduring

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and and and permanent.

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And so any, any, overseer can come in bit like a surgeon

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and he knows how to, he knows

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How the body works and he can just kind of do his work in,

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in, in, in clinical fashion.

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The truth of the matter in relation to economic policy

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and economic ideas is they're not nearly

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as set in stone as, as you might think.

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And in the period of existence of the OBR since 2010,

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we've had some quite dramatic ebbs and flows

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and changes in economic orthodoxy brought about by a series

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of crisis from the global financial crisis to Brexit

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to covid to climate change.

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So there's actually a di a variety

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of respectable reviews about macroeconomic policy out there

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from kind of accredited, respected experts,

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not one single dominant view.

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And they actually come from quite different positions on the

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kind of ideological spectrum.

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So that makes it very difficult to kind of contain

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or maintain this kind of apolitical notion

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of the technocrats just going about their,

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scientific business

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because they're having to draw on one particular set

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of economic ideas, not another.

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And there's a kind of ideological or normative debate

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or difference between the ideas which they might choose from

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one time, from one time to the next.

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So they've got views about how things like the state has

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to step in, whether it's to tackle covid

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or whether it's to tackle climate change.

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That's a political view

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and a different view could be taken

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by a more free market economist

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that maybe we don't use the

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state, we leave it to the market.

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And again, they have to take a stance.

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I'm not questioning their stance.

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I think they take some quite sensible stances,

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but they are political.

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That's, that's the point. Yeah. Yeah.

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So the rise of populism has been pervasive across advanced

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communism around things like Trump

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and the kind of Brexit discourse in Britain

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all really took a mainstream, kind

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of ordinary stage politics by storm and,

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and caught it on off, off guard really, I think.

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And if we think about technocratic politics,

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that's about giving an important role to independent experts

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to oversee and adjudicate upon policy

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and have an input into policy.

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And that's kind of from a populist point of view,

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that's the worst thing you can do

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because the populists really don't like the elites,

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the outta touch dangerous elites.

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They like, supposedly prioritizing the interest of the,

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the people and the will of the people.

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Now the way they do that is all deeply disingenuous

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and dubious, but nevertheless,

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the people in their crosshairs are those,

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those establishment views.

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People like the treasury,

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people like the OBR people like the Bank of England.

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And so whether it was in the case of the Liz Trust,

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de Barlow, in the case of the Brexit debate,

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there was a great desire on a part of the populace to attack

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what the technocrats were saying, that

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because they were, these establishment elites,

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but then it was also the way they attacked them.

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So the point of technocratic economic governance is

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to bring fact and evidence

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and reason to bear on the policy debate.

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And the point of populist posty politics is

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to deny the relevance of fact evidence or reason.

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It's all about opinion and culture wars

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and kind of visceral anger.

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It's not really, you don't really care about the

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real world of economic policy.

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You just wanna start a fight with someone. And

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In the case of the populace, quite often it's been the OBR

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and in the case of the Liz trust moment, very much so.

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So they want to be a kind of, an apolitical kind of

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below the parapet body just calmly going about their

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business overseeing fiscal policy.

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But they're being dragged into a kind of political debate

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by the way, politics is changing.

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And so the kind of populist

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and post-truth political discourse in this country is kind

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of anathema to what the technocrats are trying to do.

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And it leaves them in a quite awkward position.

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Nevertheless, I think it's quite useful.

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They're there trying to evaluate policy in terms

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of fact evidence and reason.

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'cause I think there's quite good reasons to do that.

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But yeah, they are in a rather

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invidious position these days.

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Yeah. So another area where they've,

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where the OBR in particular have become much more vocal

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and involved is around climate change.

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And actually they're not alone.

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People like the IMF have become very,

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very vocal on climate change

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because all of those bodies see the very real economic

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and fiscal costs of climate change that aren't kind

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of 20, 30, 40 years and they're happening now

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and they're gonna get much, much, much worse.

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And, and so mainstream politics sort of wants

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to talk about climate change,

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but doesn't really wanna grasp the net of how much needs

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to be done, how quickly,

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how dramatically things need to change.

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And so what the OVR are doing is trying to force

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that reckoning on governments

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through just projecting forwards as they are mandated

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to do about what the cost of climate change are going to be.

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So they did some analysis about if you tackle climate

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change, how much will public debt rise across the century?

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And if you don't tackle climate change,

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how much will it rise by on a prompt action

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to tackle it scenario?

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Public debt at the end

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of the 21st century is about 20%

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higher than it was right now.

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Not great, but livable.

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If you do nothing, it goes to 300% higher than it is now

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and you still haven't tackled climate change.

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So it's a kind of unanswerable ques, kind

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of response to what is to be done.

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We must act urgently for economic and fiscal reasons not

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'cause you know, we wanna hug trees, but

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because the economy cannot survive in its

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current form if we don't.

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So there's a whole range of ways in which the OR OBR are

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mobilizing the ideas about,

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environmental tipping points as they're called.

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You know, if the ice sheets melt,

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we are never gonna get them back.

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Those kind of things to kind of urge a different

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and a more urgent, approach to managing the economy

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and to managing the public finances

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and to kind of force governments almost

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to do more than they've currently done.

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So one other thing they've done is around the time of the,

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Ukraine war

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and the massive spikes in energy prices that happened,

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they said, well, okay, that happened then.

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And then the fiscal cost of that

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'cause the government had to pick up

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some of the tab was huge.

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And let's say over the next 40 years, we get two

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or three more of those, you know, crises

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and big spikes in in in energy prices.

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If that happens, as might well happen,

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that is gonna be much more costly than all

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of the money it would've cost

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to achieve the transition to net zero.

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So the kind of status quo re retaining gas dependence

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That we've got in the minute, which many see as the kind

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of low cost option, actually cost nearly twice

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as much over the next 40 years as the transition

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to net zero will cost, even though

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that will be quite expensive.

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So they just wanna move the economic policy debate o out

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of its kind of bubble of its rather unrealistic bubble

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of just doing nothing is kind of okay.

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And they said it's really not look at the numbers.

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Well, what I want people to take from,

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from the book is the way

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or a recognition of just

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how deeply political all these debates around the economy

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and economic policy are.

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'cause economics as a discipline kind of buys into this idea

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that it's a bit scientific and it's all kind of hard science

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and it's not very normative and not very ideological.

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I really don't buy that. And,

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and for understandable reasons, if they're kind of authority

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and so on the OBR and others kind of buy into that.

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We are just, we are just kind of, we are just

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applying the settled wisdom of our, of our

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e expertise and that's all we're doing.

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They're not only doing that, they're also engaged in a kind

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of political process of narrating the economy

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and they're engaged in kind

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of policy recommendation even though that's kind

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of not their role because necessarily

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by narrating the economy in the way they do it privileges

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one, approach the economy not another,

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it privileges doing something about climate change,

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not not doing something about climate change.

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So I think we need to just recognize

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that there's an inherent politics in these bodies

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and in economic policy more broadly

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and kind of be aware of that

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and have a kind of grown up conversation about the economy

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in that line.

00:00 - The OBR are an independent fiscal council, so they oversee the government's, running of its economic policies. The government has got a series of fiscal rules and the OBR are there to kind of run the rule over their budget plans and hold them to their rules

00:16 - to make sure they're keeping the public finances kind of in good health, if you like, and, and to oversee the long-term sustainability of the public finances. So bodies like the OBR and another equivalent will be independent. Central banks have grown up in the late 20th, early 21st century and have become pervasive across advanced economies. And largely I think that's happened because of the growth

00:40 - and importance of global financial markets, means that governments need to reassure investors and people who might buy their debt, that they're running sound and sensible policies so that the money is gonna get paid back in due course. So if you outsource your fiscal policy to a fiscal council to oversee it, if you outsource your monetary policy to an independent central bank, there's an idea there that you can get the experts

01:03 - to then make sure it's working properly and you don't get too much, political interference that might be kind of moving off the, the path of sound policy, if you like. Yeah. So, and, and because these new independent technocratic bodies have grown up a bo, a body of scholars in political economy have talked about this as whether it's a good development, basically asking questions about the democratic legitimacy,

01:27 - the democratic accountability of these bodies. So we used to kind of elect our governments and then they'd run economic policy from parliament, if you like, and that was accountable to the people. And if we didn't like it, we could get rid of them, but we sort of, we didn't elect the bankers and we didn't elect the fiscal technocrats. So there's a sense in which they're at one removed for the, from the democratic process. Now there might be some good reasons for that,

01:49 - but there are also problems it generates in terms of that political or democratic legitimacy and kind of how close they are to, the citizenry and how, what's their relationship to the broader political and parliamentary debate. And those things are kind of, they play out differently in different contexts, but it, there are questions to be asked, although I think they were quite useful bodies about their democratic credentials.

02:14 - I think, well, I think it was based on some flawed premises from sort of public choice theory, which is a version of go neoliberal political economy from the 1970s. And they basically thought that running the economy according to a set of rules would kind of tie the politicians to the mast and make sure that no one steers off the kind of sound path. But if you think about the actual politics of eco, of, of economic policy making, the nature of economic policy making means you kind

02:41 - of can't take the politics out of it. And so what I mean by that is that, any narrative about the economy or evaluation of the economy of the kind that the OBR comes up with is inherently a political and social construct. So there's no such thing as a kind of, of an Apolitical or scientific or technocratic truth about the economy because any analysis, the economy has to be built on a set

03:06 - of foundations that are chosen, set of assumptions that get chosen and others could have been chosen. And the reason they're chosen, they'll probably sound and sensible, but they are nevertheless entail a politics, entail an assumption about how the economy really works, how policy works, what role the state plays in relation to economic policy. And all of those are ultimately political assumptions. So economics is not nearly as kind of apolitical as it makes itself out to be,

03:30 - and neither is the OBR, I guess, is what I'd say. So the idea behind rules-based economic policy is similar to what I've just been saying about the need to kind of, to some extent tie the politicians to a mast and to ensure they're on a sensible path and to hold them to that path. The idea though is that this is a kind of iron fiscal discipline. That means they can't, they can't move too far so that you kind of impose limits on what they can do.

03:55 - But of course, fiscal rules are created by the governments themselves. And so in the sense they're imposing shackles upon themselves and therefore that gives them latitude. If they're feeling a bit too constrained by how much pot spending or, or, or tax raising they can do under their current rules, they have the latitude and the liberty to actually change those rules. So the idea is they're fixed, they're set in stone,

04:18 - they're kind of tablets on stone driven, delivered from on high. The truth of the matter is that fiscal rules are kind of much more changeable than that. So the rules that, that George Osborne introduced in 2010 when he introduced the fiscal, the OBR, the, the fiscal council to oversee them, they've actually changed six times since then. So about they don't last 'em more than a year or two. And Rachel Reeves only day

04:38 - before yesterday announced what the new fiscal rules, different fiscal rules would be if labor win power next time out. So the kind of the, the theory is fixed and, and kind of, and and unchanging and, and iron discipline on, on chancellors. The truth is chancellors can kind of change them when they don't like them. And so that's one issue with them. And the other issue is that when you try

04:59 - and put them into practice and adjudicate upon how policy's going relative to the rules, that's a much less straightforward or mechanistic process than was assumed. It's actually a deeply political and interpretive process. There's lots of judgment involved. And therefore, again, we come back to the idea of, of economic analysis and economic evaluation being a kind of social and political construct construct

05:20 - and not something purely kind of mechanistic or scientific. I mean the, the important backstory to all of this going on is what's the dominant orthodoxy in economics, in mainstream economics that underpins A, what's in the rules and B how bodies like the OBR kind of evaluate and adjudicate an economic policy. And again, it's all based on some slightly flawed assumptions. I think the assumption is that that that kind

05:44 - of settled wisdom about the economy and and macroeconomics is, is kind of unchanging and enduring and and and permanent. And so any, any, overseer can come in bit like a surgeon and he knows how to, he knows How the body works and he can just kind of do his work in, in, in, in clinical fashion. The truth of the matter in relation to economic policy and economic ideas is they're not nearly as set in stone as, as you might think.

06:08 - And in the period of existence of the OBR since 2010, we've had some quite dramatic ebbs and flows and changes in economic orthodoxy brought about by a series of crisis from the global financial crisis to Brexit to covid to climate change. So there's actually a di a variety of respectable reviews about macroeconomic policy out there from kind of accredited, respected experts, not one single dominant view. And they actually come from quite different positions on the

06:34 - kind of ideological spectrum. So that makes it very difficult to kind of contain or maintain this kind of apolitical notion of the technocrats just going about their, scientific business because they're having to draw on one particular set of economic ideas, not another. And there's a kind of ideological or normative debate or difference between the ideas which they might choose from one time, from one time to the next.

06:58 - So they've got views about how things like the state has to step in, whether it's to tackle covid or whether it's to tackle climate change. That's a political view and a different view could be taken by a more free market economist that maybe we don't use the state, we leave it to the market. And again, they have to take a stance. I'm not questioning their stance.

07:16 - I think they take some quite sensible stances, but they are political. That's, that's the point. Yeah. Yeah. So the rise of populism has been pervasive across advanced communism around things like Trump and the kind of Brexit discourse in Britain all really took a mainstream, kind of ordinary stage politics by storm and, and caught it on off, off guard really, I think. And if we think about technocratic politics,

07:41 - that's about giving an important role to independent experts to oversee and adjudicate upon policy and have an input into policy. And that's kind of from a populist point of view, that's the worst thing you can do because the populists really don't like the elites, the outta touch dangerous elites. They like, supposedly prioritizing the interest of the, the people and the will of the people. Now the way they do that is all deeply disingenuous

08:04 - and dubious, but nevertheless, the people in their crosshairs are those, those establishment views. People like the treasury, people like the OBR people like the Bank of England. And so whether it was in the case of the Liz Trust, de Barlow, in the case of the Brexit debate, there was a great desire on a part of the populace to attack what the technocrats were saying, that because they were, these establishment elites,

08:30 - but then it was also the way they attacked them. So the point of technocratic economic governance is to bring fact and evidence and reason to bear on the policy debate. And the point of populist posty politics is to deny the relevance of fact evidence or reason. It's all about opinion and culture wars and kind of visceral anger. It's not really, you don't really care about the real world of economic policy.

08:52 - You just wanna start a fight with someone. And In the case of the populace, quite often it's been the OBR and in the case of the Liz trust moment, very much so. So they want to be a kind of, an apolitical kind of below the parapet body just calmly going about their business overseeing fiscal policy. But they're being dragged into a kind of political debate by the way, politics is changing. And so the kind of populist and post-truth political discourse in this country is kind

09:19 - of anathema to what the technocrats are trying to do. And it leaves them in a quite awkward position. Nevertheless, I think it's quite useful. They're there trying to evaluate policy in terms of fact evidence and reason. 'cause I think there's quite good reasons to do that. But yeah, they are in a rather invidious position these days. Yeah. So another area where they've, where the OBR in particular have become much more vocal

09:39 - and involved is around climate change. And actually they're not alone. People like the IMF have become very, very vocal on climate change because all of those bodies see the very real economic and fiscal costs of climate change that aren't kind of 20, 30, 40 years and they're happening now and they're gonna get much, much, much worse. And, and so mainstream politics sort of wants to talk about climate change,

09:59 - but doesn't really wanna grasp the net of how much needs to be done, how quickly, how dramatically things need to change. And so what the OVR are doing is trying to force that reckoning on governments through just projecting forwards as they are mandated to do about what the cost of climate change are going to be. So they did some analysis about if you tackle climate change, how much will public debt rise across the century? And if you don't tackle climate change,

10:25 - how much will it rise by on a prompt action to tackle it scenario? Public debt at the end of the 21st century is about 20% higher than it was right now. Not great, but livable. If you do nothing, it goes to 300% higher than it is now and you still haven't tackled climate change. So it's a kind of unanswerable ques, kind of response to what is to be done.

10:48 - We must act urgently for economic and fiscal reasons not 'cause you know, we wanna hug trees, but because the economy cannot survive in its current form if we don't. So there's a whole range of ways in which the OR OBR are mobilizing the ideas about, environmental tipping points as they're called. You know, if the ice sheets melt, we are never gonna get them back. Those kind of things to kind of urge a different

11:10 - and a more urgent, approach to managing the economy and to managing the public finances and to kind of force governments almost to do more than they've currently done. So one other thing they've done is around the time of the, Ukraine war and the massive spikes in energy prices that happened, they said, well, okay, that happened then. And then the fiscal cost of that 'cause the government had to pick up

11:32 - some of the tab was huge. And let's say over the next 40 years, we get two or three more of those, you know, crises and big spikes in in in energy prices. If that happens, as might well happen, that is gonna be much more costly than all of the money it would've cost to achieve the transition to net zero. So the kind of status quo re retaining gas dependence That we've got in the minute, which many see as the kind

11:55 - of low cost option, actually cost nearly twice as much over the next 40 years as the transition to net zero will cost, even though that will be quite expensive. So they just wanna move the economic policy debate o out of its kind of bubble of its rather unrealistic bubble of just doing nothing is kind of okay. And they said it's really not look at the numbers. Well, what I want people to take from, from the book is the way

12:19 - or a recognition of just how deeply political all these debates around the economy and economic policy are. 'cause economics as a discipline kind of buys into this idea that it's a bit scientific and it's all kind of hard science and it's not very normative and not very ideological. I really don't buy that. And, and for understandable reasons, if they're kind of authority and so on the OBR and others kind of buy into that. We are just, we are just kind of, we are just

12:44 - applying the settled wisdom of our, of our e expertise and that's all we're doing. They're not only doing that, they're also engaged in a kind of political process of narrating the economy and they're engaged in kind of policy recommendation even though that's kind of not their role because necessarily by narrating the economy in the way they do it privileges one, approach the economy not another, it privileges doing something about climate change,

13:07 - not not doing something about climate change. So I think we need to just recognize that there's an inherent politics in these bodies and in economic policy more broadly and kind of be aware of that and have a kind of grown up conversation about the economy in that line.

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