The austerity delusion. Why does Britain still believe it?

The case for cuts was a lie.

Paul Krugman in The Guardian

In May 2010, as Britain headed into its last general election, elites all across the western world were gripped by austerity fever, a strange malady that combined extravagant fear with blithe optimism. Every country running significant budget deficits – as nearly all were in the aftermath of the financial crisis – was deemed at imminent risk of becoming another Greece unless it immediately began cutting spending and raising taxes. Concerns that imposing such austerity in already depressed economies would deepen their depression and delay recovery were airily dismissed; fiscal probity, we were assured, would inspire business-boosting confidence, and all would be well.

People holding these beliefs came to be widely known in economic circles as“austerians” – a term coined by the economist Rob Parenteau – and for a while the austerian ideology swept all before it.

But that was five years ago, and the fever has long since broken. Greece is now seen as it should have been seen from the beginning – as a unique case, with few lessons for the rest of us. It is impossible for countries such as the US and the UK, which borrow in their own currencies, to experience Greek-style crises, because they cannot run out of money – they can always print more. Even within the eurozone, borrowing costs plunged once the European Central Bank began to do its job and protect its clients against self-fulfilling panics by standing ready to buy government bonds if necessary. As I write this, Italy and Spain have no trouble raising cash – they can borrow at the lowest rates in their history, indeed considerably below those in Britain – and even Portugal’s interest rates are within a whisker of those paid by HM Treasury.

On the other side of the ledger, the benefits of improved confidence failed to make their promised appearance. Since the global turn to austerity in 2010, every country that introduced significant austerity has seen its economy suffer, with the depth of the suffering closely related to the harshness of the austerity. In late 2012, the IMF’s chief economist, Olivier Blanchard, went so far as to issue what amounted to a mea culpa: although his organisation never bought into the notion that austerity would actually boost economic growth, the IMF now believes that it massively understated the damage that spending cuts inflict on a weak economy.

Meanwhile, all of the economic research that allegedly supported the austerity push has been discredited. Widely touted statistical results were, it turned out, based on highly dubious assumptions and procedures – plus a few outright mistakes – and evaporated under closer scrutiny.

It is rare, in the history of economic thought, for debates to get resolved this decisively. The austerian ideology that dominated elite discourse five years ago has collapsed, to the point where hardly anyone still believes it. Hardly anyone, that is, except the coalition that still rules Britain – and most of the British media.

I don’t know how many Britons realise the extent to which their economic debate has diverged from the rest of the western world – the extent to which the UK seems stuck on obsessions that have been mainly laughed out of the discourse elsewhere. George Osborne and David Cameron boast that their policies saved Britain from a Greek-style crisis of soaring interest rates, apparently oblivious to the fact that interest rates are at historic lows all across the western world. The press seizes on Ed Miliband’s failure to mention the budget deficit in a speech as a huge gaffe, a supposed revelation of irresponsibility; meanwhile, Hillary Clinton is talking, seriously, not about budget deficits but about the “fun deficit” facing America’s children.

Is there some good reason why deficit obsession should still rule in Britain, even as it fades away everywhere else? No. This country is not different. The economics of austerity are the same – and the intellectual case as bankrupt – in Britain as everywhere else.

Stimulus and its enemies


hen economic crisis struck the advanced economies in 2008, almost every government – even Germany – introduced some kind of stimulus programme, increasing spending and/or cutting taxes. There was no mystery why: it was all about zero.

Normally, monetary authorities – the Federal Reserve, the Bank of England – can respond to a temporary economic downturn by cutting interest rates; this encourages private spending, especially on housing, and sets the stage for recovery. But there’s a limit to how much they can do in that direction. Until recently, the conventional wisdom was that you couldn’t cut interest rates below zero. We now know that this wasn’t quite right, since many European bonds now pay slightly negative interest. Still, there can’t be much room for sub-zero rates. And if cutting rates all the way to zero isn’t enough to cure what ails the economy, the usual remedy for recession falls short.

So it was in 2008-2009. By late 2008 it was already clear in every major economy that conventional monetary policy, which involves pushing down the interest rate on short-term government debt, was going to be insufficient to fight the financial downdraft. Now what? The textbook answer was and is fiscal expansion: increase government spending both to create jobs directly and to put money in consumers’ pockets; cut taxes to put more money in those pockets.

But won’t this lead to budget deficits? Yes, and that’s actually a good thing. An economy that is depressed even with zero interest rates is, in effect, an economy in which the public is trying to save more than businesses are willing to invest. In such an economy the government does everyone a service by running deficits and giving frustrated savers a chance to put their money to work. Nor does this borrowing compete with private investment. An economy where interest rates cannot go any lower is an economy awash in desired saving with no place to go, and deficit spending that expands the economy is, if anything, likely to lead to higher private investment than would otherwise materialise.

It’s true that you can’t run big budget deficits for ever (although you can do it for a long time), because at some point interest payments start to swallow too large a share of the budget. But it’s foolish and destructive to worry about deficits when borrowing is very cheap and the funds you borrow would otherwise go to waste.

At some point you do want to reverse stimulus. But you don’t want to do it too soon – specifically, you don’t want to remove fiscal support as long as pedal-to-the-metal monetary policy is still insufficient. Instead, you want to wait until there can be a sort of handoff, in which the central bank offsets the effects of declining spending and rising taxes by keeping rates low. As John Maynard Keynes wrote in 1937: “The boom, not the slump, is the right time for austerity at the Treasury.”

All of this is standard macroeconomics. I often encounter people on both the left and the right who imagine that austerity policies were what the textbook said you should do – that those of us who protested against the turn to austerity were staking out some kind of heterodox, radical position. But the truth is that mainstream, textbook economics not only justified the initial round of post-crisis stimulus, but said that this stimulus should continue until economies had recovered.

What we got instead, however, was a hard right turn in elite opinion, away from concerns about unemployment and toward a focus on slashing deficits, mainly with spending cuts. Why?


Conservatives like to use the alleged dangers of debt and deficits as clubs with which to beat the welfare state and justify cuts in benefits

Part of the answer is that politicians were catering to a public that doesn’t understand the rationale for deficit spending, that tends to think of the government budget via analogies with family finances. When John Boehner, the Republican leader, opposed US stimulus plans on the grounds that “American families are tightening their belt, but they don’t see government tightening its belt,” economists cringed at the stupidity. But within a few months the very same line was showing up in Barack Obama’s speeches, because his speechwriters found that it resonated with audiences. Similarly, the Labour party felt it necessary to dedicate the very first page of its 2015 general election manifesto to a “Budget Responsibility Lock”, promising to “cut the deficit every year”.

Let us not, however, be too harsh on the public. Many elite opinion-makers, including people who imagine themselves sophisticated on matters economic, demonstrated at best a higher level of incomprehension, not getting at all the logic of deficit spending in the face of excess desired saving. For example, in the spring of 2009 the Harvard historian and economic commentator Niall Ferguson, talking about the United States, was quite sure what would happen: “There is going to be, I predict, in the weeks and months ahead, a very painful tug-of-war between our monetary policy and our fiscal policy as the markets realise just what a vast quantity of bonds are going to have to be absorbed by the financial system this year. That will tend to drive the price of the bonds down, and drive up interest rates.” The weeks and months turned into years – six years, at this point – and interest rates remain at historic lows.

Beyond these economic misconceptions, there were political reasons why many influential players opposed fiscal stimulus even in the face of a deeply depressed economy. Conservatives like to use the alleged dangers of debt and deficits as clubs with which to beat the welfare state and justify cuts in benefits; suggestions that higher spending might actually be beneficial are definitely not welcome. Meanwhile, centrist politicians and pundits often try to demonstrate how serious and statesmanlike they are by calling for hard choices and sacrifice (by other people). Even Barack Obama’s first inaugural address, given in the face of a plunging economy, largely consisted of hard-choices boilerplate. As a result, centrists were almost as uncomfortable with the notion of fiscal stimulus as the hard right.

In a way, the remarkable thing about economic policy in 2008-2009 was the fact that the case for fiscal stimulus made any headway at all against the forces of incomprehension and vested interests demanding harsher and harsher austerity. The best explanation of this temporary and limited success I’ve seen comes from the political scientist Henry Farrell, writing with the economist John Quiggin.Farrell and Quiggin note that Keynesian economists were intellectually prepared for the possibility of crisis, in a way that free-market fundamentalists weren’t, and that they were also relatively media-savvy. So they got their take on the appropriate policy response out much more quickly than the other side, creating “the appearance of a new apparent consensus among expert economists” in favour of fiscal stimulus.

If this is right, there was inevitably going to be a growing backlash – a turn against stimulus and toward austerity – once the shock of the crisis wore off. Indeed, there were signs of such a backlash by the early fall of 2009. But the real turning point came at the end of that year, when Greece hit the wall. As a result, the year of Britain’s last general election was also the year of austerity.

Chapter twoThe austerity moment



rom the beginning, there were plenty of people strongly inclined to oppose fiscal stimulus and demand austerity. But they had a problem: their dire warnings about the consequences of deficit spending kept not coming true. Some of them were quite open about their frustration with the refusal of markets to deliver the disasters they expected and wanted. Alan Greenspan, the former chairman of the Federal Reserve, in 2010: “Inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.”

But he had an answer: “Growing analogies to Greece set the stage for a serious response.” Greece was the disaster austerians were looking for. In September 2009 Greece’s long-term borrowing costs were only 1.3 percentage points higher than Germany’s; by September 2010 that gap had increased sevenfold. Suddenly, austerians had a concrete demonstration of the dangers they had been warning about. A hard turn away from Keynesian policies could now be justified as an urgent defensive measure, lest your country abruptly turn into another Greece.

Still, what about the depressed state of western economies? The post-crisis recession bottomed out in the middle of 2009, and in most countries a recovery was under way, but output and employment were still far below normal. Wouldn’t a turn to austerity threaten the still-fragile upturn?

Not according to many policymakers, who engaged in one of history’s most remarkable displays of collective wishful thinking. Standard macroeconomics said that cutting spending in a depressed economy, with no room to offset these cuts by reducing interest rates that were already near zero, would indeed deepen the slump. But policymakers at the European Commission, the European Central Bank, and in the British government that took power in May 2010 eagerly seized on economic research that claimed to show the opposite.

The doctrine of “expansionary austerity” is largely associated with work byAlberto Alesina, an economist at Harvard. Alesina used statistical techniques that supposedly identified all large fiscal policy changes in advanced countries between 1970 and 2007, and claimed to find evidence that spending cuts, in particular, were often “associated with economic expansions rather than recessions”. The reason, he and those who seized on his work suggested, was that spending cuts create confidence, and that the positive effects of this increase in confidence trump the direct negative effects of reduced spending.


Greece was the disaster austerians were looking for

This may sound too good to be true – and it was. But policymakers knew what they wanted to hear, so it was, as Business Week put it, “Alesina’s hour”. The doctrine of expansionary austerity quickly became orthodoxy in much of Europe. “The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, then the president of the European Central Bank, because “confidence-inspiring policies will foster and not hamper economic recovery”.

Besides, everybody knew that terrible things would happen if debt went above 90% of GDP.

Growth in a Time of Debt, the now-infamous 2010 paper by Carmen Reinhart and Kenneth Rogoff of Harvard University that claimed that 90% debt is a critical threshold, arguably played much less of a direct role in the turn to austerity than Alesina’s work. After all, austerians didn’t need Reinhart and Rogoff to provide dire scenarios about what could happen if deficits weren’t reined in – they had the Greek crisis for that. At most, the Reinhart and Rogoff paper provided a backup bogeyman, an answer to those who kept pointing out that nothing like the Greek story seemed to be happening to countries that borrowed in their own currencies: even if interest rates were low, austerians could point to Reinhart and Rogoff and declare that high debt is very, very bad.

What Reinhart and Rogoff did bring to the austerity camp was academic cachet. Their 2009 book This Time is Different, which brought a vast array of historical data to bear on the subject of economic crises, was widely celebrated by both policymakers and economists – myself included – for its prescient warnings that we were at risk of a major crisis and that recovery from that crisis was likely to be slow. So they brought a lot of prestige to the austerity push when they were perceived as weighing in on that side of the policy debate. (They now claim that they did no such thing, but they did nothing to correct that impression at the time.)

When the coalition government came to power, then, all the pieces were in place for policymakers who were already inclined to push for austerity. Fiscal retrenchment could be presented as urgently needed to avert a Greek-style strike by bond buyers. “Greece stands as a warning of what happens to countries that lose their credibility, or whose governments pretend that difficult decisions can somehow be avoided,” declared David Cameron soon after taking office. It could also be presented as urgently needed to stop debt, already almost 80% of GDP, from crossing the 90% red line. In a 2010 speech laying out his plan to eliminate the deficit, Osborne cited Reinhart and Rogoff by name, while declaring that “soaring government debt ... is very likely to trigger the next crisis.” Concerns about delaying recovery could be waved away with an appeal to positive effects on confidence. Economists who objected to any or all of these lines of argument were simply ignored.

But that was, as I said, five years ago.

Chapter threeDecline and fall of the austerity cult



o understand what happened to austerianism, it helps to start with two charts.

The first chart shows interest rates on the bonds of a selection of advanced countries as of mid-April 2015. What you can see right away is that Greece remains unique, more than five years after it was heralded as an object lesson for all nations. Everyone else is paying very low interest rates by historical standards. This includes the United States, where the co-chairs of a debt commission created by President Obama confidently warned that crisis loomed within two years unless their recommendations were adopted; that was four years ago. It includes Spain and Italy, which faced a financial panic in 2011-2012, but saw that panic subside – despite debt that continued to rise – once the European Central Bank began doing its job as lender of last resort. It includes France, which many commentators singled out as the next domino to fall, yet can now borrow long-term for less than 0.5%. And it includes Japan, which has debt more than twice its gross domestic product yet pays even less.

The Greek exception

10-year interest rates as of 14 April 2015

Chart 1Source: Bloomberg

Back in 2010 some economists argued that fears of a Greek-style funding crisis were vastly overblown – I referred to the myth of the “invisible bond vigilantes”. Well, those bond vigilantes have stayed invisible. For countries such as the UK, the US, and Japan that borrow in their own currencies, it’s hard to even see how the predicted crises could happen. Such countries cannot, after all, run out of money, and if worries about solvency weakened their currencies, this would actually help their economies in a time of weak growth and low inflation.

Chart 2 takes a bit more explaining. A couple of years after the great turn towards austerity, a number of economists realised that the austerians were performing what amounted to a great natural experiment. Historically, large cuts in government spending have usually occurred either in overheated economies suffering from inflation or in the aftermath of wars, as nations demobilise. Neither kind of episode offers much guidance on what to expect from the kind of spending cuts – imposed on already depressed economies – that the austerians were advocating. But after 2009, in a generalised economic depression, some countries chose (or were forced) to impose severe austerity, while others did not. So what happened?

Austerity and growth 2009-13

More austere countries have a lower rate of GDP growth

Chart 2Source: IMF

In Chart 2, each dot represents the experience of an advanced economy from 2009 to 2013, the last year of major spending cuts. The horizontal axis shows a widely used measure of austerity – the average annual change in the cyclically adjusted primary surplus, an estimate of what the difference between taxes and non-interest spending would be if the economy were at full employment. As you move further right on the graph, in other words, austerity becomes more severe. You can quibble with the details of this measure, but the basic result – harsh austerity in Ireland, Spain, and Portugal, incredibly harsh austerity in Greece – is surely right.

Meanwhile, the vertical axis shows the annual rate of economic growth over the same period. The negative correlation is, of course, strong and obvious – and not at all what the austerians had asserted would happen.

Again, some economists argued from the beginning that all the talk of expansionary austerity was foolish – back in 2010 I dubbed it belief in the “confidence fairy”, a term that seems to have stuck. But why did the alleged statistical evidence – from Alesina, among others – that spending cuts were often good for growth prove so misleading?



The answer, it turned out, was that it wasn’t very good statistical work. A review by the IMF found that the methods Alesina used in an attempt to identify examples of sharp austerity produced many misidentifications. For example, in 2000 Finland’s budget deficit dropped sharply thanks to a stock market boom, which caused a surge in government revenue – but Alesina mistakenly identified this as a major austerity programme. When the IMF laboriously put together a new database of austerity measures derived from actual changes in spending and tax rates, it found that austerity has a consistently negative effect on growth.

Yet even the IMF’s analysis fell short – as the institution itself eventually acknowledged. I’ve already explained why: most historical episodes of austerity took place under conditions very different from those confronting western economies in 2010. For example, when Canada began a major fiscal retrenchment in the mid-1990s, interest rates were high, so the Bank of Canada could offset fiscal austerity with sharp rate cuts – not a useful model of the likely results of austerity in economies where interest rates were already very low. In 2010 and 2011, IMF projections of the effects of austerity programmes assumed that those effects would be similar to the historical average. But a 2013 paper co-authored by the organisation’s chief economist concluded that under post-crisis conditions the true effect had turned out to be nearly three times as large as expected.

So much, then, for invisible bond vigilantes and faith in the confidence fairy. What about the backup bogeyman, the Reinhart-Rogoff claim that there was a red line for debt at 90% of GDP?

Well, in early 2013 researchers at the University of Massachusetts examined the data behind the Reinhart-Rogoff work. They found that the results were partly driven by a spreadsheet error. More important, the results weren’t at all robust: using standard statistical procedures rather than the rather odd approach Reinhart and Rogoff used, or adding a few more years of data, caused the 90% cliff to vanish. What was left was a modest negative correlation between debt and growth, and there was good reason to believe that in general slow growth causes high debt, not the other way around.

By about two years ago, then, the entire edifice of austerian economics had crumbled. Events had utterly failed to play out as the austerians predicted, while the academic research that allegedly supported the doctrine had withered under scrutiny. Hardly anyone has admitted being wrong – hardly anyone ever does, on any subject – but quite a few prominent austerians now deny having said what they did, in fact, say. The doctrine that ruled the world in 2010 has more or less vanished from the scene.

Except in Britain.

Chapter fourA distinctly British delusion



n the US, you no longer hear much from the deficit scolds who loomed so large in the national debate circa 2011. Some commentators and media organisations still try to make budget red ink an issue, but there’s a pleading, even whining, tone to their exhortations. The day of the austerians has come and gone.

Yet Britain zigged just as the rest of us were zagging. By 2013, austerian doctrine was in ignominious retreat in most of the world – yet at that very moment much of the UK press was declaring that doctrine vindicated. “Osborne wins the battle on austerity,” the Financial Times announced in September 2013, and the sentiment was widely echoed. What was going on? You might think that British debate took a different turn because the British experience was out of line with developments elsewhere – in particular, that Britain’s return to economic growth in 2013 was somehow at odds with the predictions of standard economics. But you would be wrong.

Austerity in the UK

Cyclically adjusted primary balance, percent of GDP

Chart 3Source: IMF, OECD, and OBR

The key point to understand about fiscal policy under Cameron and Osborne is that British austerity, while very real and quite severe, was mostly imposed during the coalition’s first two years in power. Chart 3 shows estimates of our old friend the cyclically adjusted primary balance since 2009. I’ve included three sources – the IMF, the OECD, and Britain’s own Office of Budget Responsibility – just in case someone wants to argue that any one of these sources is biased. In fact, every one tells the same story: big spending cuts and a large tax rise between 2009 and 2011, not much change thereafter.

Given the fact that the coalition essentially stopped imposing new austerity measures after its first two years, there’s nothing at all surprising about seeing a revival of economic growth in 2013.

Look back at Chart 2, and specifically at what happened to countries that did little if any fiscal tightening. For the most part, their economies grew at between 2 and 4%. Well, Britain did almost no fiscal tightening in 2014, and grew 2.9%. In other words, it performed pretty much exactly as you should have expected. And the growth of recent years does nothing to change the fact that Britain paid a high price for the austerity of 2010-2012.

British economists have no doubt about the economic damage wrought by austerity. The Centre for Macroeconomics in London regularly surveys a panel of leading UK economists on a variety of questions. When it asked whether the coalition’s policies had promoted growth and employment, those disagreeing outnumbered those agreeing four to one. This isn’t quite the level of unanimity on fiscal policy one finds in the US, where a similar survey of economists found only 2% disagreed with the proposition that the Obama stimulus led to higher output and employment than would have prevailed otherwise, but it’s still an overwhelming consensus.

By this point, some readers will nonetheless be shaking their heads and declaring, “But the economy is booming, and you said that couldn’t happen under austerity.” But Keynesian logic says that a one-time tightening of fiscal policy will produce a one-time hit to the economy, not a permanent reduction in the growth rate. A return to growth after austerity has been put on hold is not at all surprising. As I pointed out recently: “If this counts as a policy success, why not try repeatedly hitting yourself in the face for a few minutes? After all, it will feel great when you stop.”

In that case, however, what’s with sophisticated media outlets such as the FT seeming to endorse this crude fallacy? Well, if you actually read that 2013 leader and many similar pieces, you discover that they are very carefully worded. The FT never said outright that the economic case for austerity had been vindicated. It only declared that Osborne had won the political battle, because the general public doesn’t understand all this business about front-loaded policies, or for that matter the difference between levels and growth rates. One might have expected the press to seek to remedy such confusions, rather than amplify them. But apparently not.

Which brings me, finally, to the role of interests in distorting economic debate.



As Oxford’s Simon Wren-Lewis noted, on the very same day that the Centre for Macroeconomics revealed that the great majority of British economists disagree with the proposition that austerity is good for growth, the Telegraph published on its front page a letter from 100 business leaders declaring the opposite. Why does big business love austerity and hate Keynesian economics? After all, you might expect corporate leaders to want policies that produce strong sales and hence strong profits.

I’ve already suggested one answer: scare talk about debt and deficits is often used as a cover for a very different agenda, namely an attempt to reduce the overall size of government and especially spending on social insurance. This has been transparently obvious in the United States, where many supposed deficit-reduction plans just happen to include sharp cuts in tax rates on corporations and the wealthy even as they take away healthcare and nutritional aid for the poor. But it’s also a fairly obvious motivation in the UK, if not so crudely expressed. The “primary purpose” of austerity, the Telegraph admitted in 2013, “is to shrink the size of government spending” – or, as Cameron put it in a speech later that year, to make the state “leaner ... not just now, but permanently”.

Beyond that lies a point made most strongly in the US by Mike Konczal of the Roosevelt Institute: business interests dislike Keynesian economics because it threatens their political bargaining power. Business leaders love the idea that the health of the economy depends on confidence, which in turn – or so they argue – requires making them happy. In the US there were, until the recent takeoff in job growth, many speeches and opinion pieces arguing that President Obama’s anti-business rhetoric – which only existed in the right’s imagination, but never mind – was holding back recovery. The message was clear: don’t criticise big business, or the economy will suffer.
If the political opposition won’t challenge the coalition’s bad economics, who will?

But this kind of argument loses its force if one acknowledges that job creation can be achieved through deliberate policy, that deficit spending, not buttering up business leaders, is the way to revive a depressed economy. So business interests are strongly inclined to reject standard macroeconomics and insist that boosting confidence – which is to say, keeping them happy – is the only way to go.

Still, all these motivations are the same in the United States as they are in Britain. Why are the US’s austerians on the run, while Britain’s still rule the debate?

It has been astonishing, from a US perspective, to witness the limpness of Labour’s response to the austerity push. Britain’s opposition has been amazingly willing to accept claims that budget deficits are the biggest economic issue facing the nation, and has made hardly any effort to challenge the extremely dubious proposition that fiscal policy under Blair and Brown was deeply irresponsible – or even the nonsensical proposition that this supposed fiscal irresponsibility caused the crisis of 2008-2009.

Why this weakness? In part it may reflect the fact that the crisis occurred on Labour’s watch; American liberals should count themselves fortunate that Lehman Brothers didn’t fall a year later, with Democrats holding the White House. More broadly, the whole European centre-left seems stuck in a kind of reflexive cringe, unable to stand up for its own ideas. In this respect Britain seems much closer to Europe than it is to America.

The closest parallel I can give from my side of the Atlantic is the erstwhile weakness of Democrats on foreign policy – their apparent inability back in 2003 or so to take a stand against obviously terrible ideas like the invasion of Iraq. If the political opposition won’t challenge the coalition’s bad economics, who will?

You might be tempted to say that this is all water under the bridge, given that the coalition, whatever it may claim, effectively called a halt to fiscal tightening midway through its term. But this story isn’t over. Cameron is campaigning largely on a spurious claim to have “rescued” the British economy – and promising, if he stays in power, to continue making substantial cuts in the years ahead. Labour, sad to say, are echoing that position. So both major parties are in effect promising a new round of austerity that might well hold back a recovery that has, so far, come nowhere near to making up the ground lost during the recession and the initial phase of austerity.


For whatever the politics, the economics of austerity are no different in Britain from what they are in the rest of the advanced world. Harsh austerity in depressed economies isn’t necessary, and does major damage when it is imposed. That was true of Britain five years ago – and it’s still true today.

Cricket: What is Momentum and how relevant is it?

Mark Nicholas in Cricinfo

What exactly is momentum in sport and how relevant is it? Do New Zealand's cricketers have enough momentum to carry them past Australia this weekend? Can momentum overcome talent?

Essentially momentum is form and confidence. It is usually associated with a winning streak, a succession of performances that either truly reflect ability or, better still, lift that ability beyond its norm. This is presently the case with Brendon McCullum, whose bravado is driven by the need to prove to his team that anything is possible. He wants them to play without inhibition of any kind and if that means breaking boundaries (metaphorically and literally) then so be it. This is because most cricketers play with traffic in their head. The game bares heart, mind and soul. Insecurity, affectation and failure are the enemies. The enemies play tricks and cause confusion. A clear head is the holy grail.

McCullum might as well be saying: "If you think you can or you think you can't, you are probably right."

In Riding the Wave of Momentum, American author Jeff Greenwald says: "The reason momentum is so powerful is the heightened sense of self-confidence it gives us. There is a phrase in sports psychology known as self-efficacy, which is simply a player's belief in his or her ability to perform a specific task or shot. Typically, a player's success depends on this efficacy."

I once asked Andy Flower what he thought was the most important part of his job as the England coach. He said it was to have the players ready and able to make the right choices under pressure. This caught me off guard but the more I thought about it, the more it made sense. Single moments define cricket matches. At critical times these may be any one of a brave shot made, or one not attempted; a brilliant ball that outthinks the batsman; smart anticipation by a fielder that leads to a run-out; a masterly move by the captain who understands what the opponent likes least.

Flower felt that for a period under Andrew Strauss, England consistently made good choices. This led them to become the No. 1 team in the world. The flaw in Strauss' team was the formulaic nature of the play. If an opponent had the mind to challenge it, and the efficacy to pull it off, the England team seemed oddly unable to react. Witness Hashim Amla's 311 at The Oval, during which Graeme Swann, a key figure for Strauss, was so comfortably played from a guard on and outside off stump. In all the time I watched Swann bowl, I never saw him so witless in response. And by such a simple tactic!

During a momentum shift, self-efficacy is very high as the players have immediate proof of their ability to match the challenge. They then experience subsequent increases in energy and motivation that lead to a feeling of enthusiasm and control. The corollary is that a sportsman's image of himself changes. He feels invincible, which, naturally enough, takes him to a higher level.

David Warner is a good illustration of this. First a devastating T20 batsman, then a prolific Test batsman and now an intimidating 50-over batsman. With the various ages of Warner have come a variety of changes - some to technique and application, some to attitude, others to fitness, health and lifestyle. His momentum has run parallel to the improved performances by the Australian team. This is no surprise. They go hand in hand. The trick for Warner now is to retain - some might say regain - humility.

In his formative years Robin Smith was coached by the highly intelligent former Natal player Grayson Heath. Probably Robin was over-coached. Heath grooved technique and shot execution. But he did not free the mind. This is less a criticism than a reflection of the time. It was a more respectful age, both in society and of bowlers, whose examination of technique was greater than it is now.

Heath - a wonderful man, with cricket set deep in his soul - would marvel at McCullum, or AB de Villiers, as much for their carefree approach as their inspirational effect. Heath preached an equation: A + H = C. Arrogance plus humility equals confidence. Both de Villiers and McCullum perfectly reflect the equation. Humility in a sportsman is paramount. Without humility, momentum will easily be derailed. After all, momentum is winning and no person or team wins all the time.

The key to not losing momentum is to retain perspective and to remain grounded. Why do Chelsea, dominant in the Premiership, suddenly concede four goals and lose to Bradford in the FA Cup? I wasn't there but the fair bet would be indifference (inexcusable) or complacency (believable). Hard as José Mourinho must work to avoid this, even he cannot invade the heads of his players and correct them in a season of some 60-odd matches.

The other explanation for such a defeat is fatigue. Mourinho watches this closely but tends to play his MVPs for long stretches. No sportsman can beat fatigue. It is inevitable. The point is that you will lose some time. How you lose is what matters. Did you cover all bases? If so, momentum need not be lost.

The test for New Zealand, though it may not apply to Saturday's group match, will be to deal with the pressure of an event that troubles the mind. Australian cricketers trouble the mind. McCullum's assault against England was a real f*** you of a performance. It said to his men: "They are not worthy." Had he got out cheaply, it would have said the same dismissive thing - like his approach in the chase against Scotland. Had New Zealand lost, it would have been awkward and may have derailed the team. But he didn't think for a minute they would lose and his innings sent that message loud and clear.

His captaincy does much the same: "We are all over you and don't forget it." His tactics challenge prosaic thinking. His bowlers are empowered to take wickets. His fieldsmen are inspired by his own startling fielding performances. This style is more All Black than Black Cap. But for Richie McCaw read Brendon McCullum.



All Black or Black Caps? © Getty Images





The journey has not been easy. Ross Taylor was popular and the fall-out from McCullum's obvious desire to take his job was unpleasant. Taylor withdrew into himself, a loss of cricket expression that New Zealand could ill afford. Former players raged against the machine. McCullum had to deliver or he was toast.

Like Taylor, he is a good man. Arguably, he is more secure. This tournament will define him.

In the face of Australia, the Black Caps must, and surely will, continue to play McCullum's game. This means sticking to the flow, not overthinking or overanalysing. The minute you change approach, or even marginalise, you screw up. If you focus too much on the outcome, it becomes difficult to play so freely. An attacking mindset can all too easily become a defensive mindset. The outcome needs to be a given. Concern for the consequences diverts attention from what must be done.

Australia are the more talented team but they have been sleeping for a fortnight; the captain has been immobilised for three months. This is the time to get them. Momentum should carry New Zealand over this line because the consequences are not a major issue. Come the knockout stage, the traffic will creep in. Creep, creep until the brain is scrambled. Can McCullum's bold interpretation of cricket remain New Zealand's force when the stakes are at their highest? Or will momentum suddenly count for nothing?

Spinners need intelligent, trusting captains to thrive

V Ramnarayan in Cricinfo

Anil Kumble set a fine example as captain in managing the slow bowlers  © AFP

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To consistently give their best, bowlers need their captains to have confidence in them. This is particularly true of spinners, who must rely on craft and cunning more than the quicker bowlers do. Rarely do we come across spin bowlers thriving under captains who do not believe in their ability or have an inadequate understanding of their trade.

For starters, the better captains allow at least four or five overs for the spinner to settle into an even rhythm. This is the time the bowler takes to ensure that every ball lands where he wants it to, before he can launch into any variations. Some of the greatest spinners in the game have been known to attempt nothing dramatic during this period. 

Only once he has found his length will the sensible bowler try out variations of flight and turn. He is aware of the subtle variations inherent in deliveries, even without his attempting them; no human can actually bowl six identical balls, though they may look similar to the naked eye. A good captain therefore starts with a fairly defensive field, and brings his men in only after the bowler has found his groove.

In contrast, not only do some bowlers, even at the international level, appear to try too many tricks too soon, some captains too expect their bowlers to start attacking from the word go, impatient with the relative lack of flight and turn in the early overs. The result can be overpitching, or bowling rank short balls, or bowling down the wrong line altogether, giving the batsman free runs and a bonus dose of confidence.

The ideal delivery by a spinner has the batsman playing forward but unable to reach the ball, the arc caused by the spin dropping the ball just short and deflecting it in a direction not intended by the batsman. The genuine spinner hates it when the batsman can play him off the back foot, a much more damaging prospect than being driven off the front foot.

While close catchers on either side of the wicket are essential for the bowler to have any impact on the batsman, the rest of the field is just as crucial to the effectiveness of the bowler, as we all know. In addition to slip (and gully) for the legspinner, or forward (and backward) short-leg for the offspinner, short extra cover and short midwicket are excellent attacking positions, ready to hold on to miscued drives. To a right-hand batsman, a sweeper on the off side for an offspinner, or a deep midwicket for a legspinner would indicate either a criminal lack of confidence on the part of the bowler or complete ignorance on the part of the captain and/or the bowler.

The question of who sets the field, the bowler or his captain, is something we hear discussed in the commentary box, and my view is that the bowler must bowl to his captain's field, assuming that the captain knows what he is doing.

This is where it is handy to have experienced bowlers in the side, because they can save the captain the trouble of setting their field, unless the captain is shortsighted enough to overrule the bowler who knows his bowling, and imposes his own views on him.

With young or inexperienced bowlers, however, the onus is on the captain to decide the line of attack, guide the bowler and set the field appropriate to the bowler, batsman, wicket, or state of the innings.

Mansur Ali Khan Pataudi and Ajit Wadekar - each in his own distinct way - were captains who knew how to bring out the best in their spinners. In his first stint as India captain, Pataudi was young and inexperienced, but by the time the new crop of spinners (soon to become known as the quartet) came into the side in 1967, he was five years old in the job, and I suspect had gained much practical wisdom in the company of such captains in the South Zone as V Subramanya of Karnataka and ML Jaisimha of Hyderabad. The famed close-in cordon of the Indian team perhaps had its origins there. Wadekar's captaincy was shaped in a relatively defensive mode, but when he took over from Pataudi in 1971, he had the advantage of leading a highly experienced combination of spinners, who helped deliver India's first series victories in the West Indies and England.

In the decades that followed, captains from Bishan Bedi down to Rahul Dravid led spin attacks in varying degrees of efficacy and different styles of handling, but I am partial to the manner in which Anil Kumble marshalled his spin resources, thanks to his superior domain knowledge. I believe he was the best when it came to managing the slow men. Unfortunately, the Indian captaincy came to him late in his career. After all, the idea of a bowler-captain is not the most popular theory around.

Why psychopaths are more successful

Andy McNab and Oxford psychology professor Kevin Dutton in The Telegraph reveal how acting like psychopaths could help us in work, life and love

Behaving like a psychopath could help you in your career and love life. It’s counterintuitive – who, after all, would hire Hannibal Lecter or want to date Norman Bates – but that’s the idea behind The Good Psychopath’s Guide to Success, part popular science book, part self-help guide fromAndy McNab and Oxford psychology professor Kevin Dutton.

“I wanted to debunk the myth that all psychopaths are bad,” says Dutton, who has explored this subject before. “I’d done research with the special forces, with surgeons, with top hedge fund managers and barristers. Almost all of them had psychopathic traits, but they’d harnessed them in ways to make them better at what they do.”

It was through this research that he met retired SAS sergeant and bestselling author McNab, who in tests exhibited many of these psychopathic traits, including ruthlessness, fearlessness, impulsivity, reduced empathy, developed self-confidence and lack of remorse.

“There’s no one thing that makes a psychopath,” Dutton explains. “You want to think of those traits being like the dials on a studio mixing desk, that you can turn up and down in different situations – if they’re all turned up to maximum, then you’re a dysfunctional psychopath. 

As one dysfunctional psychopath – who was serving a life sentence for multiple murders – put it to Dutton: “It’s not that we’re bad, it’s that we’ve got too much of a good thing.”

How, then, can you act more like a psychopath in your everyday life?

IN BUSINESS

Focus

“If I’m in a hostage situation I’d rather have a psychopath coming through the door than anyone else because I know he’s going to be completely focussed on the job in hand,” says McNab.

The ability psychopaths have to turn down their empathy and block out other concerns make them the best operators in high-pressure environments, he says. “If I was on trial, I’d want a psychopath [to represent me] too. I want someone who’d be able to rip people apart in the witness box, go back to their family and not think anything more about it, because it’s just a job for them.”

Fearlessness

The lack of fear which characterises psychopaths could also help people in the work place, says Dutton, who asks of the book’s readers: “What would I do in this situation if I wasn’t afraid?” (It matches, almost word for word, a sign which greets visitors to Facebook’s California HQ, “What Would You Do If You Weren't Afraid?” though Dutton insists this is coincidental.)

“If it’s asking for a raise or picking up the phone to call someone you wouldn’t otherwise, functioning psychopaths have a natural advantage in that they can turn this fear down.”

Lack of empathy

But it’s important, McNab says, not to turn down the ‘empathy dial’ completely when doing business. “You don’t want to be a Gordon Gekko character, screwing people over all the time. They get hurt once but you get hurt forever because they’ll never trust you again. That’s the difference between a good and a bad psychopath: knowing when to turn that up and when to kill it.”

IN RELATIONSHIPS

Fearlessness

One dysfunctional psychopath Dutton worked with used to have a competition when out with his friends: not to see who could get the most phone numbers from women but see who could get the most rejections. “It’s something anyone could learn from,” Dutton says.

“Once you get used to being rejected it doesn’t hurt, you realise it doesn’t matter. Then your confidence gets up and you start approaching everyone – you’re coming across as less confident, less worried and your hit rate starts going up. It’s a great example of how you can turn this fear down if you work on it.”

Ruthlessness

“A lot of the problems in relationships come from the fact that people stick in them when they’d be better off out,” says McNab, who had been married five times – though has been with his current wife for 14 years. “You have to know when to cut loose.”

Self-confidence

Psychopaths never mind striking out on their own – and this is a good example to follow, Dutton says, if you start feeling constrained by your friends. “Your friends might be smoking and drinking all the time while you’ve decided to get fit. You have to be prepared to stand apart sometimes. It doesn’t mean ditching them, it’s just healthy to be your own person once in a while.”

When it comes to self-confidence, as with all the psychopathic traits the pair explore, the most important thing is to be able to strike a balance. To anyone worrying that the book will create a wave of unfeeling monsters, Dutton says: “We are absolutely not aiming to turn people into psychopaths.

“It’s for people who have those mixing dials turned down too low and need to get them up.”

Is Britain's economy really on the path to prosperity?

Osborne's autumn statement will likely present a rosy picture of growth. But is it to be short-lived?

• 
• • Heather Stewart, economics editor
  • The Observer, Saturday 30 November 2013 23.12 GMT

George Osborne is expected to be in bullish mood when he delivers his autumn statement on Thursday. Photograph: Goh Chai Hin/AFP

Brightly coloured New Balance trainers are beloved of celebrities, from Ben Affleck to Heidi Klum. But if you buy a pair of the US firm's shoes in Europe or Asia they are most likely to have been made on the edge of the Lake District. From its British factory in Flimby, on the Cumbrian coast, the hi-spec trainer-maker will turn out more than a million pairs of shoes this year, with more than a third of those made from scratch – cut out and intricately stitched by its 245 skilled staff, who spend more than a year learning their trade.

Since the great recession of 2008-09, when production of the high-value "lifestyle" lines that occupy most of its machinists' time was slashed in half, factory manager Andy Okolowicz says things have gradually improved: "We have had three or four years now of very steady business, both in the UK and for export." It has stepped up output of these fashion shoes by 24% this year and hired more than 10 new staff.

This is the US firm's only European factory, selling to markets across the world, including Germany, France, Japan and Australia – and with the union flag stitched prominently on to the back of many of the models, it's exactly the kind of Made in Britain success story the chancellor hopes to see more of as economic growth picks up.

In George Osborne's 2011 budget speech, he laid out a stirring picture of a new model for the British economy: one driven by a "march of the makers", such as Flimby's trainer-stitchers, instead of what he called "debt-fuelled" growth: buy-to-letters, non-stop shoppers and high-rolling City gamblers.

Two-and-a-half years later, as he prepares to deliver his autumn statement on Thursday, the chancellor can finally boast that the long-awaited economic recovery has arrived: growth has rebounded sharply, unemployment is falling, and business surveys suggest confidence has been restored. As Simon Wells of HSBC puts it, the economy has moved "from a state of despair, to repair".

In March, the independent Office for Budget Responsibility, which draws up the forecasts Osborne uses to plan his tax and spending policies, was expecting negligible growth of 0.6% this year. City experts now forecast more than double that. Similarly, the OBR's 1.8% projection for 2014 now looks far too pessimistic. New forecasts, to be published alongside Osborne's statement, are expected to be rosier and the chancellor is likely to repeat his claim that the UK is now set firmly on the "path to prosperity".

In fact, with a number of eurozone countries barely out of recession, it would hardly be surprising if the chancellor allowed himself a Gordon Brown-style bout of economic Top Trumps, comparing the relatively upbeat outlook for the UK with the gloomy prognosis elsewhere.

"Osborne is probably looking forward to this autumn statement, because he doesn't have to announce that growth forecasts have been revised down for the umpteenth time," says Lee Hopley, chief economist at manufacturers' group the EEF.

Yet, as James Meadway of the New Economics Foundation puts it, "this is definitely not the recovery the coalition wanted or forecast". The breakdown of the latest growth figures showed that business investment – critical for rebuilding a new-style, more productive economy – is down by more than 6% year on year; exports are all but flat, despite the 20% fall in the value of the pound since the crisis; and manufacturing output remains 9% below where it was in 2008, despite the successes of the likes of New Balance and Britain's rampant car-makers.

In Flimby, Okolowicz explains that, while it's undoubtedly a success story, his factory is the final remnant of a much larger shoemaking industry in the area: K shoes and Bata once had plants locally, employing several thousand staff, instead of fewer than 300 at New Balance. Britain is a long way from recapturing its role as an industrial powerhouse.

Hopley, of the EEF, says for her members, this year has been, "good, but not spectacular".

Meanwhile, consumer spending is expanding strongly, borrowing is up and house prices are reviving across a swath of the country. Meadway says: "This is not a recovery, it's essentially a reversion: we're going back to the same kind of economy we saw in 2004 or 2005." Mark Carney, governor of the Bank of England, recently said he expected three-quarters of growth over the next year or so to come from consumption or housing – but many economists fear that's a risky model.

In the capital, some of the worst excesses of the property boom years are back. Aggressive estate agents are pushing leaflets through homeowners' doors and lining up scores of buyers to jostle with each other at "open days". Penthouses in the lavish Battersea Power Station redevelopment are expected to go on sale – most likely to overseas buyers – for £30m. And official figures show the UK now has a record number of estate agents.

In many parts of the country, the housing market is barely stirring from a five-year slumber. But the Bank's financial policy committee – the 10 people with the job of bursting future bubbles – have become so concerned about signs of froth that they have scaled back the government-backed Funding for Lending scheme so that it will no longer subsidise mortgages.

Some lenders have said the removal of the Bank's support, which Carney described as "taking our foot off the accelerator", will make little difference because the market has now gathered momentum of its own. But others believe the rise in mortgage rates that is likely to result will be enough to pour cold water on the growing mood of optimism.

As for consumer spending – the other major support for economic growth over the past six months – since wages have continued to lag behind inflation this latest shopping spree appears to have been fuelled not by consumers' growing spending power, but households dipping into their savings or taking out loans – including the short-term, high-cost payday loans that have caused growing political controversy.

"It feels as if there's a significant lag factor between the economic indicators and what it means for real people in their real lives," says Gillian Guy, chief executive of Citizens Advice, whose advisers see two million people with debt problems each year. She says that the spread of insecure, short-term contracts and part-time work, together with benefits cuts and paltry wage growth, have meant that many people in work are struggling to make ends meet.

That's a picture echoed by Chris Mould, executive chairman of the Trussell Trust, which runs 400 food banks up and down the country, providing three days' worth of emergency produce for people in dire straits. "We're seeing more and more people in crisis coming to food banks and we anticipate the numbers of people who find themselves in financial crisis as a proportion of the population to go up in the next few months. Generally, people are being severely squeezed by price rises – energy costs, rent, food – and the price rises in these areas are running way ahead of inflation."

Osborne hopes that, as the recovery gathers pace, employers will start to loosen the purse-strings, hiring new staff and offering more generous pay, helping to ease the squeeze for consumers and validating the mood of rising optimism. But both Guy and Mould fear it may be a long time before the people who come through their doors are able to make ends meet; and if rising real wages fail to materialise, the consumer upturn could prove short-lived. There's no doubt that the backdrop to the autumn statement is far rosier than anyone, not least Osborne himself, could have hoped six months ago. But Britain's economic resurgence is far less of a victory for the likes of Flimby's highly skilled machinists, and more of a blast from the "debt-fuelled" past than the coalition would have wished – and, as yet, there's no telling how long it will last.

Teaching philosophy to children? It's a great idea

Studying philosophy cultivates doubt without helplessness, and confidence without hubris. I’ve watched children evolve to be more rational and open-minded because of it

• 
• • Michelle Sowey
  • theguardian.com, Wednesday 20 November 2013 22.23 GMT

'I quickly saw that kids, too, have the capacity to enquire philosophically from an early age'. Photograph: Christopher Furlong/Getty Images

Recently I’ve seen a spate of articles along the lines of "what philosophy can do for you", focusing on the high results that philosophy students score on standardised tests, the marketability of philosophical skills, and the impressive earning potential of philosophy graduates. I’ve even seen pitches like: "If you want to succeed in business, don’t get an MBA. Study philosophy instead." I find this strange, because career advancement and commercial success are the most peripheral of the benefits of philosophy.

In my university days, still uncertain of my future directions, I came across an unforgettable quote by Alex Pozdnyakov, a philosophy student on the other side of the world: “I have this strange phrase I use when people ask me why I chose philosophy. I tell them I wanted to become a professional human being.”

Perfect, I thought. That’s what I want to be.

Since then, training in various jobs has made me into various kinds of professional, but no training has shaped my humanity as deeply as philosophy has. No other discipline has inspired such wonder about the world, or furnished me with thinking tools so universally applicable to the puzzles that confront us as human beings.

When I started running philosophy workshops for primary school children, I quickly saw that kids, too, have the capacity to enquire philosophically from an early age. They’re nimble in playing with ideas and deft in building on each other’s arguments. They’re endlessly inquisitive, wondering about values (“What’s the most treasured object in the world?”), metaphysics (“Is the earth a coincidence?”), language (“If cavemen just went ‘ugh-ugh-ugh’, how did we learn to speak?”) and epistemology (“Since you can have dreams inside dreams, how can you know when you’re dreaming?”).

In small groups, they’ve discussed artificial intelligence, environmental ethics, interspecies communication and authenticity in art. They’ve contemplated the existence of free will, the limits of knowledge, the possibility of justice and countless other problems from the history of philosophical thought. By continually questioning, challenging and evaluating ideas, the children have been able to see for themselves why some arguments fail while others bear up under scrutiny.

Studying philosophy cultivates doubt without helplessness, and confidence without hubris. I’ve watched kids evolve to be more rational, sceptical and open-minded, and I’ve seen them interact in more fair-minded and collaborative ways. As one 10-year-old said, “I’ve started to actually solve arguments and problems with philosophy. And it works better than violence or anything else.”

Over 400 years ago, the French writer Michel de Montaigne asked: “Since philosophy is the art which teaches us how to live, and since children need to learn it as much as we do at other ages, why do we not instruct them in it?” We urgently need to ask ourselves the same question today.

The central place of Theory of Knowledge in the International Baccalaureate (a globally recognised high school diploma) reflects a worldwide appreciation for the importance of philosophy – a discipline that underpins all other academic disciplines. A growing international movement is inviting young children to philosophise in primary schools in the USA, the UK and elsewhere – but Australia is lagging.

Although philosophy features on the high school curriculum in most Australian states, only a very few primary schools dedicate class time to broad philosophical enquiry or to the explicit teaching of critical and creative thinking.

If it were more widely embraced, the practice of philosophical enquiry in primary schools could make schooling a lot more meaningful and engaging for students. It would certainly promote the development of reasoned argument and higher-order thinking – skills which underlie learning in most other domains (including literacy and numeracy) and which are essential for responsible civic engagement.

By setting children on a path of philosophical enquiry early in life, we could offer them irreplaceable gifts: an awareness of life’s moral, aesthetic and political dimensions; the capacity to articulate thoughts clearly and evaluate them honestly; and the confidence to exercise independent judgement and self-correction. What’s more, an early introduction to philosophical dialogue would foster a greater respect for diversity and a deeper empathy for the experiences of others, as well as a crucial understanding of how to use reason to resolve disagreements.

The benefits to students would be there for the taking, if only philosophy educators in Australia could access appropriate funding and institutional support. Such support is provided by charitable organisations like the Philosophy Foundation in the UK and theSquire Foundation in the USA, which lead the way in embedding philosophy in primary school curricula. Unless funding is made available here to pay expert philosophy practitioners or to provide classroom teachers with rigorous training, our kids are condemned to forgo the many rich rewards that philosophy promises – or to suffer from the variable level of professionalism that characterises many volunteer-run educational programs.

Here’s something to think about on World Philosophy Day: while academic achievement, career advancement and financial success are no trifling things, they’re simply visible husks that may grow around a philosophical life. The hidden kernel is made of freedom, clarity of thought, and a professional mastery of what it means to be human. These are qualities we should seek for all our children, no matter what they grow up to become.