Why you might not want to get your economic analysis from the New Statesman

There are limits as to how far into the wilds even we’re willing to go in order to study economic incomprehension which is why we’ve only just discovered Grace Blakeley, economic correspondent at the New Statesman.

Her analysis of what ails Britain makes the usual British left wing mistake of confusing the capitalism/socialism divide with that of markets and planning. The first is about who owns and there’s no doubt that swathes of the economy do work better if it’s the people doing the actual work. What is self employment, or even a partnership, other than worker ownership? Equally, the workers in a steel plant or oil refinery are going to have serious trouble in raising the capital for the tools they work with. Outside capital is a necessity and that’s capitalism. The second is really about the information flow in the economy. Who makes what, how, where and at what price? To be against markets is to claim that John McDonnell, or Sajid Javid, know all those answers better than the people who actually do and desire things. A difficult contention to support.

But there’s that lovely signifier of someone who doesn’t know what should happen - they don’t know what has happened.

This inherently unsustainable system collapsed in 2008. The economic malaise we have experienced since the crash – characterised by stagnant wages, falling investment, the growth of international monopolies, rising consumer debt and huge increases in inequality – simply represents a deepening of trends visible before it.

Inequality has decreased since 2008. This is obviously true globally as the higher growth of the poor countries compared to rich ensures it. It’s also true within the UK.

Income inequality has increased by 1.3 percentage points over the past three years. However, despite this small rise, it remains lower than the 34.1% it reached just prior to the economic downturn in FYE 2007.

It shouldn’t be difficult to understand this. Inequality does fall in recessions. Profits and capital incomes fall faster and further than labour incomes, both more than benefits. Thus a recession is associated with a compression of inequality.

We’ve not had huge increases in inequality, we’ve had a reduction in it.

And if your economic analysis starts from facts that just aren’t so then it’s going to be terribly difficult to navigate through to a useful prediction for a path for future policy.

We’re left therefore with merely wondering at how there can be such an echo chamber of groupthink leading to substantial numbers of people gaily repeating as facts things that simply are not so. Not in this universe at least.