...In August 2011 he denounced the ‘delusions’ of the chancellor whose ‘experiment in austerity’ was ‘going really, really badly’.... Mr Osborne was worrying needlessly about business confidence. ‘The confidence fairy’ was the term Mr Krugman coined to ridicule anyone who argued for fiscal restraint. Unfortunately for Mr Krugman, the more he talked about the confidence fairy, the more business confidence recovered in the UK. In fact, at no point after May 2010 did business confidence sink back to where it had been throughout the past two years of Gordon Brown’s premiership.... UK unemployment is now 5.6%, roughly half the rates in Italy and France.... Weekly earnings are up by more than 8%; in the private sector, the figure is above 10%. Inflation is below 2% and falling...
The graph that Ferguson is looking at: READ MOAR
And so the Financial Times has issued a correction, retracting some of Ferguson's claims:
Correction: UK business confidence: "An article by Niall Ferguson...incorrectly stated...:
...that at no point after May 2010 did business confidence sink back to where it had been throughout the past two years of Gordon Brown’s premiership. Confidence had risen from the third quarter of 2009 until the end of 2010, according to the ICAEW/Grant Thornton UK Business Confidence Monitor. We also wish to clarify that Prof Ferguson’s statement that weekly earnings were up by more than 8 per cent referred to nominal earnings growth. Real wage growth was negative from 2010 until September 2014.
Jonathan Portes expands:
Jonathan Portes: http://aboutus.ft.com/files/2010/09/Ferguson-Adjudication-with-PS.pdf: "There is no possible interpretation of Professor Ferguson's statement...
...under which it is correct... (or even close to being correct). So not entirely sure what to do here. On the one hand, this is an (even more) obvious breach of the Code. Again, as with the earnings data, the FT should have spotted this and asked Professor Ferguson to provide source data to substantiate. On the other hand, I don't want to unnecessarily prolong [this editorial complaints adjudication] process, which I'd hoped might be nearing a conclusion...
This goes to the core of Niall Ferguson's argument. Fiscal austerity will shrink the government's demand for currently-produced goods and services. In normal times this contractionary impact is partly offset by "crowding in", as interest rates fall and that encourages private spending. Under the conditions that have prevailed since 2008, however, interest rates are already at their minimum: they cannot fall any further. The argument that Conservative fiscal austerity did not harm the British economy over 2010-2015 therefore hinges on the forlorn hope that fiscal austerity will somehow improve business confidence relative to the no-austerity baseline, and improve business confidence enough that increased investment spending relative to the no-austerity baseline will take up the slack.
Since business confidence is now lower and has been lower than it was at the end of Gordon Brown's term for fifteen out of twenty quarters, there is indeed no way to honestly argue that: "the more [Krugman] talked about the confidence fairy, the more business confidence recovered in the UK..."
Greg Callus also wrote, apropos of Ferguson's "Weekly earnings are up by more than 8%; in the private sector, the figure is above 10%. Inflation is below 2% and falling...":
Prof. Ferguson’s reliance on nominal average weekly earnings... is not so strong or so obvious a point that I think it would have occurred to most informed readers of the Financial Times.... Inclusion of this statistic was not a distortion, but... given the context of lauding the Chancellor’s management of the economy, a boast of growth in average weekly earnings would ordinarily have been understood by a reasonable reader as a reference to real wage growth rates. My initial impression was firmly that way, such that I expected to be told the use of the nominal statistics was a mistake.... ‘Real wage growth’ is the more usual source of an economic boast in an OpEd than nominal growth that is overborne by high inflation. I am satisfied most readers would have read it as such...
(And that has been corrected in the Financial Times to: "Weekly earnings are up by more than 8 per cent in the period 2010-2014; in the private sector, the figure is above 10 per cent. Inflation is below 2 per cent (per annum in 2014) and falling..." Let me note that I am annoyed silent corrections rather than use of the strike tag.)
Simon Wren-Lewis, I think, put it most concisely. If one is just reporting wage numbers, one reports real numbers. If one is reporting nominal wage numbers and inflation, and thus inviting people to calculate real wage numbers via subtraction, one reports annual nominal wage growth and annual inflation figures for the same time period. One does not report total cumulative wages for 2010-2014 and inflation for 2014 alone:
Blaming Keynes: "[Ferguson reports] earnings growth over the whole period is quoted (but without saying it is nominal growth), but only inflation over the last year! Presumably this is done to create the impression of real wage growth, when in reality this period has seen unprecedented falls in real wages...:
Ferguson's response has been in four parts:
First, Ferguson attacks the Financial Times: With respect to Greg Callus, stuck in the middle of this as an adjudicator tasked with writing a sixteen-page report, this:
the FT ‘complaints commissioner’ turned out to be a lawyer and, as lawyers will, opted to write 16 circumlocutory pages and split the difference...
God alone knows what those scare quotes are doing in there...
Second, Ferguson claims that his errors do not matter:
Jonathan Portes, master of the political correction: "These days, when lefties are losing an argument, they nitpick until it looks as if they’ve won...:
It used to be that the most annoying thing in academic life was political correctness. But a new irritant now threatens to supplant it: the scourge of correct politicalness. The essence of correct politicalness is to seek to undermine an irrefutable argument by claiming loudly and repetitively to have found an error in it...
This is, simply, a non-truth:
As Ferguson knows as well as I do, whether business confidence under Cameron-Osborne-Clegg has been higher or lower than under the continued-Gordon-Brown baseline is not a nitpick. It is of the essence of Ferguson's argument. If Ferguson's claim of better business confidence relative to the baseline is wrong (as it is), his argument as a whole falls.
Third, Ferguson moves the goalposts. He claims that the Cameron-Osborne-Clegg austerity program was necessary in order to keep business confidence in Britain from collapsing back down to the levels of the deepest panic in 2009. Ferguson wrote to adjudicator Greg Callus as follows:
Niall Ferguson: "On the issue of confidence I wrote...
..."Unfortunately for Mr Krugman, the more he talked about the confidence fairy, the more business confidence recovered in the UK. In fact, at no point after May 2010 did it sink back to where it had been throughout the past two years of Gordon Brown’s catastrophic premiership.”
The last sentence was erroneous and the result of an over-hasty rewrite. I should have written: "at no point after May 2010 did it sink back to where it had been at the nadir of Gordon Brown’s catastrophic premiership."
I am quite content to have that corrected.... Of course, this is no way alters my point about Krugman. He did not begin talking about the "confidence fairy" until the 3rd quarter of 2010, after Cameron and Osborne were in Downing Street. And he kept talking about it even as confidence rallied...
Once again, a non-truth:
This in fact greatly alters Ferguson's point against Krugman. For more than two and a half years after the advent of the Cameron-Osborne-Clegg government, the trend of business confidence was down. Ferguson's claim that "the more [Krugman] talked about the confidence fairy, the more business confidence recovered" was simply false.
Fourth, Ferguson writes a 900-word profile of Jonathan Portes. As Jonathan writes:
New prize competition from @spectator. Spot the errors in @nfergus article (PhD not reqd) & win a full-page profile! http://www.spectator.co.uk/features/9555142/jonathan-portes-master-of-correct-politicalness/