Arguing the counterfactual: a bootless pursuit

The difficulty of arguing the counterfactual could be one reason why political commentators talk about the leader of the opposition as the hardest job in Westminster. An opposition force of even modest duration will have to explain quite how things would have been different had their policies been taken up. Perhaps that’s why some politicians choose not to lay out policy platforms, or instead to discuss aspirations rather than defined positions.

‘Too far, too fast’

An obvious example is the failure of the Labour Party under Ed Miliband to explain how its stance on public spending, softer than that of the Conservative-Liberal Democrat government, would have helped the economy.  Then shadow chancellor Ed Balls’ opposition to the government’s spending cuts as ‘too far, too fast’ signalled a desire to avoid the hard edges of its programme while retaining fiscal credibility for the opposition party.

But many of the party’s supporters and critics took up the corollary of that statement: same cuts, but slower. The leadership struggled to shake this ‘austerity-lite’ criticism from the left, or convince the right that it would not return to the perceived overspending of the later years of the Labour government. But what compounded this was the failure to demonstrate, even when anti-austerity voices were growing louder, how this third way would have delivered a better outcome than the path taken by George Osborne.

The impact of severe austerity on Greece’s economy grew clearer during the 2010-2015 parliament, and the IMF admitted the terms of the original rescue package hurt just as they helped. The UK’s economy performed its slowest recovery on record. And yet it was impossible to strike a lasting political blow on the very reasonable grounds that extra spending on growth accretive projects could have improved things without the country’s creditors running for the hills. So unforgiving and lonely was this furrow that as the election approached, Mr Balls decided fiscal discipline was the more important message and mimicked his opposite number’s budget surplus target.

Lower for longer and longer and longer and lo

There are lots of reasons why lower-for-ever interest rates are a bad idea, and it’s been covered by many expert commentators (and by me). This is bad for any actor in the economy which relies on returns from long-term debt: retail bankers concerned about their margin may receive but crocodile tears, but these banks are crucial to our economy, as well as providing a chunk of tax revenue; not to mention that we own a good chunk of them.

Closer to home, these are bad times for savers wanting to get an income from their retirement savings, and for similar reasons these conditions have pushed employers’ pension scheme funding to breaking point, and have suppressed insurance companies. It has also kept the party going in areas of lending such as the residential mortgage market, where concerns had already been building about asset prices and income ratios. But perhaps more importantly, lower-for-the-forseeable interest rates mean our monetary authorities have less firepower to deal with the next crisis when it comes along.

There are few arguing that the Bank of England should never have cut interest rates during the financial crisis. Rather the question is what would have happened if the BoE had moved earlier in the recovery to increase rates, perhaps if it had stuck to its unemployment link in 2014, or even earlier. That alternative path might have led to a position of greater strength today. Again this is an utterly unsatisfying argument to make.

Brexit: the counterfactual to end all conterfactuals

Those who voted remain in the UK’s referendum on membership of the European Union may feel they are currently living in a counterfactual, the equivalent of Stranger Things’ ‘upside down’. Those who voted leave are already crowing that the predictions for immediate economic deterioration have proved wide of the mark. But the real experience of Brexit will depend on the deal that is negotiated with our European neighbours.

If the UK dispenses, or is compelled to dispense, with its membership of the single market, we will get some sense of how accurate those alternative realities feared by remain-advocating politicians really were. But it won’t matter: Brexit will be the reality. If that brave new world seems unnecessarily harsh, it will be the task of pro-EU politicians to describe how things could have been if the vote had gone the other way. Unless they have already moved on to other battles.

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