March 06, 2003

Right-Wing British Financial Newspaper Calls Bush Economic Policy "Lunacy"

Gerard Baker, the Washington correspondent for the Financial Times, calls the Bush Administration's economic policy "lunacy."

Note that Gerard Baker is not a partisan Democrat. Gerard Baker is a normal, smart, conservative, keen-eyed financial reporter who is trying to give the largely well-off European readers of the Financial Times some idea of what is going on in economic policy in Washington. The fact that he is reduced to words like "lunacy" and "utterly out of touch" and "engaged in one of those psychological exercises where if you say something patently false enough times you eventually start to believe it" should give anyone who is still inclined to credit Bush Administration economic policy with any competence at all a great deal of pause. Home Global: ...the more important lesson of all this is how utterly out of touch with economic reality those on the ideological Republican right have become. They now regard the most obvious and widely accepted nostrums of fiscal economics as tantamount to treason.

For the past two years, they have been engaged in one of those psychological exercises where if you say something patently false enough times you eventually start to believe it. Deficits do not matter. They do not matter because, if you cut taxes, you will raise economic activity by enough to raise the total tax take.

Furthermore, just in case this may turn out to be nonsense, deficits actually do not matter because they have no effect on interest rates. That is to say, the price of a security (in this case government debt) is completely unrelated to its supply. And if you deny that, you automatically disqualify yourself from consideration to be the head of the central bank.

Some day, at great cost to the American taxpayer and the economy, someone will have to deal with the consequences of this lunacy. It will make running Iraq's central bank look like a breeze by comparison.

Posted by DeLong at March 6, 2003 11:59 AM | TrackBack


The FT is many things. "Right-Wing" is not one of them.

Posted by: George Zachar on March 6, 2003 02:32 PM

May I too, as regular reader of the Financial Times - and this blog, take serious exception to your characterisation of the paper as "right wing"? Its columnists write from a variety of political standpoints and manifestly don't necessarily follow whatever the paper's editorial line happens to be. To give the most obvious example, Ed Balls was a regular columnist on the paper prior to becoming Gordon Brown's economic adviser in the run up to the 1997 and is now the Labour government's Chief Economic Adviser.

Posted by: Bob Briant on March 6, 2003 02:44 PM

I was going to post about FT not being a right-wing paper. However, informative, reasonable, high quality, and an excellent source of unbiased business and financial news are characterisations I've heard in reference to FT. These are all characterisations I would also attach to the article.

Posted by: Dan on March 6, 2003 02:50 PM

We're going to have to cook up a new word for what used to be the right-wing, Professor DeLong. Nowadays, right-wing refers to to what Gerard Baker (himself a -brilliant- right-winger according to our usual definition of left-right) decries. Let's see if we get censored if we call the FT and Gerard Baker right-of-the-center instead....

A little while ago, a leftist (American) friend of mine was reminding me how prior to WWII, the concept of completely privitizing the American economy would have been deemed fascist.

And now, let me take off my "I love Democracy" T-shirt before I get arrested for subvertion...

Posted by: Jean-Philippe Stijns on March 6, 2003 03:44 PM

P.S. Remains that from an international perspective, the FT is a right-wing European paper... Not your Guardian or your le Monde, by far. But from this side of the Atlantic it sometimes reads like the NYT. Not that all EU members are comparable in this respect. Think of Berlusconiland for example...

Posted by: Jean-Philippe Stijns on March 6, 2003 03:55 PM

While I would agree that Bush's economic appear to be lunacy, I don't think it is an accurate characterization of them to do so.

I believe this a kind of madness to which there is some method. Specifically, it bears consideration that deficits may lead to a decline in the value of the American dollar while at the same time giving a reason to deeply cut social programs in the future to balance the budget. I believe the routine has already been used once.

Posted by: Lorenzo Dei Medici on March 6, 2003 04:13 PM

Yep, the FT is centre(center?)-right by the rest of the world's standards, centre-left by US standards. The US really is different.

I do also agree with Bob Briant, though, that its columnists are more diverse and (in recent years) its editorial line is less predictable, than most.

Posted by: derrida derider on March 6, 2003 04:22 PM

Good to read it in the FT. Now I know I'm not the only one that doesn't understand Bush fiscal policy.

Posted by: bakho on March 6, 2003 04:27 PM


how can you call the Financial Times a right-wing newspaper?
The counterpart of the Financial Times in the US, The Wall Street Journal is a true right-wing and partisan newspaper, that might well resemble the Soviet "Pravda" in being the party newspaper of the Republican National Committee. The Financial Times is much more unbiased and objective in its reporting than the WSJ could ever be and that is why I prefer the Financial Times as a business newspaper. And yes, I completely agree with the observations of Gerard Baker. But somehow I am pretty sure that this lunacy will end in November 2004. Karl Rove can't fool the voters forever.

Posted by: Nescio on March 6, 2003 04:31 PM

I thought that the WSJ was more an ideological supply-side newspaper (e.g. I think it was decrying TIPS before most), and the "Republican Pravda" was more like the Washington Times or something...

The amazing thing, to me, is that no one actually seems to believe the Bush administration's lies, from the left, right, or center, yet they always seem to be able to get what they want. Weird.

Posted by: Julian Elson on March 6, 2003 04:46 PM

Most comments seem to pick up on the use of "Right Wing" in the Headline with no acknowledgement of the balanced description of the author and the paper in the text or the real substance of the remarks.

What is the implication of the comments? Is it that serious people of different nauances in ideology and even partisanship think that the proposed fiscal policies of the Bush Administration are an unmitigated disaster?

Is there serious disagreement with this assessment?

Posted by: Sam Taylor on March 6, 2003 06:53 PM

What is the implication of the comments? Is it that serious people of different nuances in ideology and even partisanship think that the proposed fiscal policies of the Bush Administration are an unmitigated disaster?

When you see something amazing or noteworthy, you look around to see if anyone else noticed it. At the Grand Canyon, you say, "Wow, isn't that beautiful!" At a concert you say, "Wow, what a performance!" Lately, I have been watching the incredible, bone-chillingly inept economic "policy" of the current administration and have been looking around saying "Hey, are you guys seeing what I'm seeing? This is frightening."

Yep, I guess Gerard Baker and Sam Taylor notices it.

Posted by: Troy McClure on March 6, 2003 08:06 PM

The FT is right-wing somewhat in the way that the Economist is right-wing, in that it's fiscally diehard-neoliberal, and socially libertarian. You don't get many editorial voices that take that tone in Europe -- right-wing papers such as the Torygraph are socially conservative and fiscally conservative. And yeah, the WSJ is basically rabble-rousing conservatism.

But when the FT tells you that your economic policy is lunacy, that must bloody well sting.

Posted by: nick sweeney on March 6, 2003 11:13 PM

I think you just dropped a bit of a clanger Brad. And I'm glad to see that there is more or less a consensus on this.

As someone who spends a good deal of the day trolling the net looking for interesting material I can tell you: the FT has the best on-the-fly global commentary you can get. Bar none. In particular the euro and Japan commentary. The FT takes Japan seriously as a problem in a way that few other papers do. Oh yes, and the FT is one of the best places to look if you're worried about deflation.

It is not only the news, but the standard of the analysis which is worthy of note, and in this sense it is now well ahead of it's 'cousin' the Economist. (It is also important to note that a good newspaper is always a lot more than the expressed opinions of its editor. Editorial stance is to do with the spread and balance of material: ie one day it's Delong, another it's Hubbard, another it's Cecchetti etc).

Fortunately or unfortunately, economics is neither dismal, nor is it a science in the hard nosed meaning of the term. But if it is ever to reduce the number of topics that remain 'poorly understood' then it could use less ideology and more out-of-the-box, critical thinking.

Put another way: we could do with less 'crackpot ideas' and more eccentricity. Perhaps this distinction - rather than the right-left model - offers the possibility of a better reading on the US/UK 8or FT/WSJ) economics divide. In the UK it is hard to find equivalents for the Laffer curve, or serious economists to provide elegant equations to justify the latest round of absurd tax cuts. Britain is unlikely to be the place where they invent a dollar-peso peg as the guaranteed cure for Argentina's long standing social and political problems, nor are you likely to find ardour for the 'helicopter money' approach to Japan's demographically driven deflation. It is not an accident that the WWW was (partly) a UK invention, while the euro wasn't.

Britain is not 'crackpot', it is eccentric. In economics there is a long and noble line to exemplify this: from Marshall to Keynes to Robbins to Ormerod to Godley.........

In resting my case I cannot do better than offer as evidence, your own and much beloved 'D-squared'Daniel (with or without the linnen shirt).

Posted by: Edward Hugh on March 7, 2003 12:03 AM

How did Edward know that I happen to be wearing a linen shirt today?

Nick wrote:

>>But when the FT tells you that your economic policy is lunacy, that must bloody well sting.<<

In actual fact, a clear-headed look at the record reveals that if the FT tells you that your economic policy is lunacy, you're probably doing something right. It's a great paper, but in terms of its record of backing wrong horses, it's right up there with the Economist.

Posted by: dsquared on March 7, 2003 12:30 AM

More on things that are popular in the US but not likely to be invented in the UK: the UK is unlikely to be the home to economic thinking of the 'foolproof path' variety. And this for a variety of reasons.

Firstly the pragmatic one that the 'fools' in question are more than likely politicians, and it's probably a better strategy not to let a 'fool' know you think s/he's a fool (if in doubt see the BBC series yes minister, or if this is not available the John Cleese/Monty Python 'Ministry of Funny Walks' sketch will do nicely).

Secondly because this type of 'ready-made' perfect solution is far more typical of a kind of European rationalism that has been out of fashion in the UK since the time of Berkeley and Hume.

Lastly, since it's never wise to imagine any rule as 'foolproof'. As Russell discovered to his cost, and Wittgenstien painstakingly elaborated, you can normally find a meta rule which trumps it. I really have no idea where the Murphy's Law thing originated (although the meta-law here that states that laws are never invented by the person to whom they are attributed: Reaganomics I guess is a good case in point(also think Gresham, think Say, think Pigou)) but in my heart of hearts I have to imagine it was a Brit: if it can go wrong it will.

Finally, a plea. (Wer, wenn ich schriee, hörte mich denn......). Prodi is wrong. The stability pact is not 'silly', but the left-right distinction is. Let's move on shall we.

Posted by: Edward Hugh on March 7, 2003 12:35 AM

Oh yes, one more thing on the 'foolproof path'. It isn't foolproof: coz you can't all devalue at once. That's the part of the thirties message some conveniently forget, but it's a part which a child of ten with no 'background' in economics could probably understand. In other words it could, in principle, (and with a lot of qualifications) work for a case of isolated deflation (as with Argentina before the devaluation) but with the kind of generalised deflation we seem to be facing now..........

By the way Daniel, I didn't, let's just call it an 'inspired' guess.

Posted by: Edward Hugh on March 7, 2003 12:53 AM

>What is the implication of the comments?

That the headline is simply false.

Posted by: George Zachar on March 7, 2003 03:29 AM

>What is the implication of the comments?

That the headline is simply false.

Posted by: George Zachar on March 7, 2003 03:30 AM

Please, Americans, start slowly digesting the implications of that last sentence: "It will make running Iraq´s central bank look like a breeze by comparison."

Julian Elson said: "...yet they (the Bushies) always seem to be able to get what they want..." That includes the votes - and the level of Democratic vote abstention - they need to stay in power.

When I read about Hillary Clinton´s support for the Bush war stance, I - being German - feel reminded of how German Social Democrats fell for patriotic warmongering when WWI started.

Afterwards - during the Weimar republic - worker income per head was almost reduced by half - and basically remained at that level.

Historical research generally considers 1890 to have been an epoch-defining divide in terms of a disintegrating multi-polar power equilibrium - and credits Wilhelm II for bearing the greatest portion of responsibility for this change for the worse.

Wilhelm II is the one historical figure GWB keeps reminding me of all the time. The level of blindness to economic facts being displayed by American "national greatness" non-patriotism certainly indicates that there is a genuine possibility of America destroying its "top of the world"-position within a very short timeframe. The international monetary system post-Bretton Woods has been decreasing in stability - an effect that may now start to influence trade relations for the worse.

Seems like this pre-"nuke thy neighbour" international world order will not be positively affected by an administration that seems to conceive of NATO as America´s very own Warsaw Pact.

As evidenced by his choice of words, Bush is a Manichaean: "The president since 9/11 has uttered the phrase "He who is not with us is against us" -- mind you, "He who is not with us is against us," anyone who disagrees with us is against us --no less than 99 times." (I think Brzezinski wrote this).

I do not see the major American Democratic presidential candidates telling the truth about the state of the economy - let alone figuring out how to resolve the constitutional crisis Bush plunged America into when taking the presidency without the majority vote. What does it take to concentrate their minds on revitalizing American democracy and avoiding imperial overreach?

Worrying about prescription drug benefits while being politically marginalized makes American Democrats resemble German Social Democrats of the late 1920s.

As hard as it may be - given the deep-seated emotional instincts inherent in any nation´s character -, the big lie has to be exposed. The big lie is that Bush´s vow to "export death and destruction to the four corners of the earth" - as quoted in the Woodward book - serves the defense of the great nation the United States is.

It should be obvious that he is initiating the downfall of America - however long and painful that may prove to be.

Can Bush´s course of action be reversed? Only if Democrats name it what it is - and make a foreign and military policy reversal a top priority.
If they ask why the American nuclear arsenal has recently been stripped of its special status and is now considered to be not restricted to an "assured destruction" response to an attack but part of other military conflict scenarios as well. If they do not get sidetracked into petty issues. If they do not avoid taking a moral stance.

Posted by: Joerg Wenck on March 7, 2003 05:12 AM

>I do not see the major American Democratic presidential candidates telling the truth about the state of the economy...

This is not true. The Democrats have been very much "on message" and consistent in attacking the Bushies on the economy, detailing all the foibles you would characterize as comprising "the truth".

> the constitutional crisis Bush plunged America into

Google up a copy of the constitution and do a Ctl-F for "electoral college".

>When I read about Hillary Clinton´s support for the Bush war stance, I - being German - feel reminded of how German Social Democrats fell for patriotic warmongering when WWI started.

And now, to defend my junior Senator. Mrs. Clinton is by all accounts one of the sharpest, most ambitious politicians to come down the pike in a generation. While I do not personally share many of her views, and did not vote for her, it is a comic misunderstanding to describe her political positioning as "patriotic warmongering".

She calculates, likely correctly, that the US public will support an open-ended anti-terror war that includes attacking Iraq. She calculates, likely correctly, that an attack on Iraq will succeed, and that periodic reports of captured/killed terrorists will earn public kudos for those backing the effort. It would be political suicide for someone with national political ambition to oppose these efforts.

Posted by: Bucky Dent on March 7, 2003 06:54 AM

Google up a copy of the constitution and do a Ctl-F for "electoral college".

That phrase isn't there, is it?

This is, though:

"Each state shall appoint, in such manner as the Legislature thereof may direct, a number of electors..."

Hmm. Says it all, Bucky.

Posted by: nick sweeney on March 7, 2003 10:47 AM

Would people be happier if I had called the Financial Times a highly-competent keen-sighted center-right financial newspaper?

I mean, you can be right-wing without being insane, can't you? I have always thought that the FT was part of (most of?) the sane right wing...

Posted by: Brad DeLong on March 7, 2003 10:54 AM

Hmm...with this global capacity glut and the Fed rates so low could the spectre of inflation be driven off? I know! Oil at $50 a barrel would work!

Posted by: Lorenzo Dei Medici on March 7, 2003 10:57 AM

>Hmm. Says it all...

Not exactly. From your link:


Section. 1.

Clause 1: The executive Power shall be vested in a President of the United States of America. He shall hold his Office during the Term of four Years, and, together with the Vice President, chosen for the same Term, be elected, as follows

Clause 2: Each State shall appoint, in such Manner as the Legislature thereof may direct, a Number of Electors, equal to the whole Number of Senators and Representatives to which the State may be entitled in the Congress: but no Senator or Representative, or Person holding an Office of Trust or Profit under the United States, shall be appointed an Elector.

Clause 3: The Electors shall meet in their respective States, and vote by Ballot for two Persons, of whom one at least shall not be an Inhabitant of the same State with themselves. And they shall make a List of all the Persons voted for, and of the Number of Votes for each; which List they shall sign and certify, and transmit sealed to the Seat of the Government of the United States, directed to the President of the Senate. The President of the Senate shall, in the Presence of the Senate and House of Representatives, open all the Certificates, and the Votes shall then be counted. The Person having the greatest Number of Votes shall be the President, if such Number be a Majority of the whole Number of Electors appointed; and if there be more than one who have such Majority, and have an equal Number of Votes, then the House of Representatives shall immediately chuse by Ballot one of them for President; and if no Person have a Majority, then from the five highest on the List the said House shall in like Manner chuse the President. But in chusing the President, the Votes shall be taken by States, the Representation from each State having one Vote; A quorum for this Purpose shall consist of a Member or Members from two thirds of the States, and a Majority of all the States shall be necessary to a Choice. In every Case, after the Choice of the President, the Person having the greatest Number of Votes of the Electors shall be the Vice President. But if there should remain two or more who have equal Votes, the Senate shall chuse from them by Ballot the Vice President. (See Note 8)


So, the electors elect the President, not the public in a direct vote.

This is something every elementary school child here learns.

Posted by: Bucky Dent on March 7, 2003 11:08 AM

The point is by every bit of economic knowledge I have the Administration budget plans are lunacy!

Posted by: jd on March 7, 2003 12:24 PM

"Would people be happier if I had called the Financial Times a highly-competent keen-sighted center-right financial newspaper?"

Nope. Why not just keep it to highly-competent keen-sighted financial newspaper. (among other reasons since I don't know if its possible to have a 'left wing' financial newspaper, maybe this is were the difficulty we have starts, it would sound like a contradiction in terms). But it is possible to think carefully about stock markets, interest rates, monetary policy etc without being either on the left or on the right. (Incidentally many here in Europe looking at the image of the towers on your site and reading your views on globalisation would say that you were on the right. Now obviously I don't agree with them, but this is exactly why I'm having difficulty with this way of seeing things).

I reiterate my point, the WSJ is lamentable not for the political opinions of its writers, but for the quantity of superficial 'spin' and the crackpot nature of many of the ideas you'll find in there. Would quality newspapers like the NYT and the Washington Post gain anything if we referred to them as right (or left) of centre? Depends where the centre is, and as Krugman doesn't tire of telling us in the US it just shot way over in one direction, my guess is that in the UK in the last decade it has moved in the other.( I mean, please tell me because I am confused, from over there is Blair right, or left, of centre?).

Posted by: Edward Hugh on March 8, 2003 12:03 AM

Please excuse me abusing the comments column, but Morgan Stanley's Takehiro Sato is another one having difficulty with the right-left schema, this time in the Japanese context. It's hilarious.

"Let’s look at recent remarks by an opposition party official regarding the Industrial Revitalization Corporation of Japan (IRCJ).

“The plan put forward by the government calls for dividing bank lending that has concern for recoverability into two categories, with the genuinely bad loan going to the RCC and other watch list loan being handled by the IRCJ. Yet banks should be responsible for the job of lending. In this plan, however, the government-owned corporation will be assuming the responsibility of banks and shouldering the credit risk and then using public capital to cover losses if companies fail, instead of the banks. Rather, banks should be doing the job of industrial revitalization. It does not seem appropriate for such a special public corporation to take on this role.”

Takehiro Sato continues:

"It is rather confusing in Japan that the right-wing “conservative” party is pressing for revision of the national constitution, while the left-wing “reformist” party wants to leave the current constitution intact, for example. We find a similarly ironic contradiction in the party that stands for “liberalism” relying on government control in both macro and micro policy, while the socialist party fights for market principles and resists the takeover of excessively indebted companies by such a government-owned entity. Currently, a conservative to center-right coalition cabinet backs a socialistic economy despite the prime minister’s resolution, while left-wing opposition parties criticize these policies, therefore calling for a market mechanism. Such a distorted situation came to be a normal state of affairs, and the PM has aptly acknowledged that Japan has a socialistic economy along the lines of the former Soviet Union and East Germany."

I rest my case.

Posted by: Edward Hugh on March 8, 2003 12:18 AM

Weird to have someone quote the opening of Rilke's Duineser Elegien: "Wer, wenn ich schriee, hoerte mich aus der Engel Choeren?".
"Who, if I cried out, heard me among the angels' choirs?"
It seems a bit surreal stuck into this debate. But maybe the FT has been heard, pink paper and all. I can't imagine Wall Street's executives going to work with a pink newspaper tucked under their arms. To me, that is its eccentric manifesto.

Posted by: John Isbell on March 8, 2003 12:49 PM

This is a good newpaper. But try to publish some entrepreneurship articles in the newspaper.

Posted by: paramjit singh on October 24, 2003 12:12 AM
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