Paul Krugman, professor, journalist and Nobel Prize, in his column in the New York Times has mentioned an economic analogy that has served well the majority-winning Conservative party in the UK as a way to shortcut the logic around austerity: the finances of the county are like the finances of your household. In your household, in the running of your family, would you like to stay in debt? Surely not. Live within your means? Obviously yes. Is borrowing too much very bad? You bet. Would you not like to control the deficit, the borrowing? Clearly yes.
OK, dear voter, here are ‘the facts’ : the previous government borrowed too much, increased the debt, lived outside their means, and did not control the thing. Would you like to go back to them? Surely not, you just have said, you would not like to run your family, your household in that way.
Now, (don’t worry, the next bit won’t take much effort): we are the ones who will control the country finances exactly as you would like to do with your household, get rid of debt, borrow less or nothing, control the deficit and live within our means. And your choice, dear voter, is?
Just in case, and if in doubt, the UK Primer Minister spent that last days of campaigning showing to crowds and cameras a letter from the previous Chief Secretary to the Treasury, left in his desk when leaving office. The letter says: “Dear (next) Chief Secretary: I’m afraid there is no money. With kind regards – and good luck! Liam.”
Now, imagine just that in your kitchen table at home! The Opposition candidate, prospective Chancellor of the Exchequer (UK term for Finance Secretary and second in command in the government) reacted in another form of uncritical thinking, lending his gasoline to the fire: ‘It was a joke!’, he said. A joke! Again, imagine you come home and see a letter from your bank on the table: ‘Dear Mr Smith, I am afraid you have no money in your account’.
My large community of followers of my ‘Daily Thoughts’ and the Pulse postings in Linkedin, know well that this is not an economics or political blog. However I am these days in a Little Crusade Against Uncritical Thinking. And the analogy engine used by politicians/policy makers is full of unthinking traps. I agree with Krugman on the unthinking, whatever the merits of the economics arguments that he uses.
The Unthinking Power is so strong that very few voices dare to say, excuse me, I am not sure a household is a country or a country is a household. How governments borrow (at near zero cost today for some) is not the same as how I walk into my local bank branch and ask for a loan or a mortgage.
The power of the Black and White Analogy clouds any other angle: is borrowing always bad? Does the pace of reduction matter? Does the size matter? Would you trade off a bit of slowing down of the debt reduction for something morally just? (Sorry -I can hear – I though we were talking about balance sheets). What about a trade off of, say, two years, for the addressing of this appalling statistic: In the UK, there are today 3.5 million children living in poverty. That’s 27 per cent of children, or more than one in four. [Figures provided by the very same Department of Work and Pensions of the current UK government that proposes Austerity Plus from now on]
I am not an economist. Not even in a possible reincarnation. But I know that there are many interpretations of the Economics of the Country, that Paul Krugman represents a minority voice, and that there is a political View of The World that presides and frames the approaches. My contention here is no economics or politics, is the mental traps that prevent us from seeing alternative worlds.
We have lots of them inside the micro-cosmos of the organization. Krugman quotes a lovely phrase from Keynes: ‘Words ought to be a little wild, for they are the assault of thoughts on the unthinking’.
That’s my plan.
PS. Policymakers love analogies (‘a new cold war’ for example)
But, in their power, analogies may create a metal alibi to avoid critical thinking.