Illustration by Rachael Bolton

Britain is preparing to leave the European Union with no real plan and a government in disarray, writes economist, Ann Pettifor. How can we trust economists at the Treasury not to impose more disastrous policies?

If the British economy crashes as a result of Brexit, it will not vindicate economists. It will simply illustrate once again, their failure.

I and my colleagues at Policy Research in Macroeconomics (PRIME) believe there is urgent need for an independent, public inquiry into the economics profession, and its role in precipitating both the financial crisis of 2007-9, the subsequent very slow ‘recovery’; and in the British European referendum campaign.

Financial disarray is not unlikely under Brexit, but whether this turns into anything material depends in the first instance on economic policy. How can we trust economists at the Treasury not to impose more disastrous policies?

Economists have once again proved themselves not only irrelevant, but adangerous irrelevance.

For too long they have resisted call after call for reform. If they will not do it themselves then it is time for others to take control. The profession should be brought to account through a public inquiry into this failure.

In voting to leave the EU, England overwhelmingly has rejected economics – and in particular the dominant economic narrative.

Unfortunately, the economics profession as a whole cannot resign, though perhaps the President of the RES, Andrew Chesher, should consider his position.

Because this hardship is indirectly a consequence of the economics profession. Economists led the way to financial liberalisation of the past 40 years, which led to soaring levels of debt, crises and financial ruin. Economists dictated the terms for austerity that has so harmed the economy and society over the past years. As the policies have failed, the vast majority of economists have refused to concede wrongdoing, nor have societies been offered alternative economics policies.

Brexit and the economics profession

While it is risky to second guess public opinion, it may just be that the prospect of hardship to come might not have been very compelling for those already suffering the hardship of low wages, insecure low-skilled jobs, bad housing, high rents, an under-resourced and increasingly privatised NHS, and other forms of public sector ‘austerity’.

With this historic vote, the British people have not just rejected the EU. They have done something that should worry the British establishment, and their friends in the City of London, and internationally, far more.

Perhaps most symbolically, even the Queen suggested they did not know what they were doing.

It is hardly surprising, therefore, that the British public did not find the opinion of Remain ‘experts compelling’.

Remain chose to focus on the economy – to the exclusion of almost all else. All the heavyweights of the economics profession – 10 Nobel Prize-winning economists, the OECD, the IMF, the Federal Reserve, the Bank of England, the NIESR, the Institute of Fiscal Studies, the London School of Economics – were wheeled out to warn the British people of economic facts known, and understood apparently, only to “experts”. The Financial Times amplified their voices and repeated their dire threats and warnings over and over.

But the “experts” and the economic stories they tell, have been well and truly walloped by the result of this referendum. And rightly so, because while there is truth in the story that international co-operation and co-ordination is vital to economic activity and stability, there is no sound basis to the widely espoused economic ‘religion’ that markets – in money, trade and labour – must be unfettered, detached from democratic regulatory oversight, and must be trusted to ‘govern’ whole countries, regions and continents.

The British people have rejected this mainstream, orthodox economics, a strain of fundamentalism that they may rightly judge has proved deleterious to their own economic interests.

Some economists have been getting their retaliation in first. Chris Giles, chief economist at the Financial Times, argued that vindication or otherwise for the profession will depend on whether crisis materialises after Brexit. But at the same time the Chancellor (backed up by New Labour’s Alastair Darling, the Treasury and the Financial Times) threatened the British people with an intensification of austerity – a punishment budget. One in which public spending would be further slashed and taxes raised – the most punitive and counter-productive economic strategy imaginable. And in doing so, they, and the economists that advised them, affirmed once more their contempt for ordinary voters, and their irrelevance to serious economic analysis.

I voted to Remain. I do not believe that Brexit is a wise decision. I fear its consequences in energising the Far Right both in Britain but also across both Europe and the US. I fear the break-up of the United Kingdom, and the political dominance of a small tribe of conservative ‘Little Englanders’. They will diminish this country’s great social, economic and political achievements.

But the people are not to blame.

The economics profession, and their friends amongst the world’s financial elites, are to blame. They engineered their own political and financial bail-outs after the grave financial crisis of 2007-9. Economists cheered on politicians and effectively urged them to transfer the burden of losses on to those most innocent of the crisis. Conservative and Social Democratic politicians with friends in financial circles, were only too happy to oblige.

The economics profession encouraged the imposition of austerity, in both the US (Ken RogoffMr 90%, who called for a ceiling on public debt), the UK (see this letter to the Sunday Times from twenty of the most prominent British economists) and of course, from the OECD (see this “UK should press on with austerity”  issued just before the 2015 general election).

They – and we – are now paying the price for that calculated, reckless refusal to make the City of London and Wall St. accountable in full for the crisis – by restructuring and re-regulating both these financial entrepôts.

Above all, economists failed the British people by “pressing on with austerity”. They stubbornly refused to once again promote the subordination of the finance sector to the role of servant, not master of the British economy, and to use governmental monetary and fiscal powers to alleviate the impact of a crisis made in the City, on the majority.

That is why we urgently need a public inquiry into the role of the economics profession in Britain’s financial crises, the 2008 Global Financial Crisis, and the 30-years of crises which preceded it from Chile to Iraq, Afghanistan to Brazil.

This piece was originally published on Prime Economics and reprinted with permission of the author.

Ann Pettifor

Ann Pettifor

Ann Pettifor is an author, analyst of the Global Financial System and director of PRIME (Policy Research in MacroEconomics).
Ann Pettifor

29 thoughts on “We need a public inquiry into the economics profession

    1. “……..all UK unis should consider this, DEEPLY.”

      I think nowadays all they care to consider is your £9grand!

  1. The fears of Brexit are unfounded.

    Once freed from the neoliberal shackles of the European Union, the UK government can provide a job for anybody that wants one at the living wage, and which will be paid from the overdraft the UK government has at the Bank of England – the Ways and Means Account.

    Since the government owns the Bank of England, whatever interest rate it charges on that overdraft is returned to the owner as profit (less expenses). So the net rate is 0%.

    It is time for those on the Progressive side to stop defending the undefendable and heed the words of Kalecki.

    “We shall deal first with the reluctance of the ‘captains of industry’ to accept government intervention in the matter of employment. Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense. Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of ‘sound finance’ is to make the level of employment dependent on the state of confidence.”

  2. Thank you for this interesting article about the ethics of the mainstream economics profession.

    Noting Prof Keen’s recent article post below, about Australia’s ‘record recession free run’ as being linked to our having some of the highest (and unsustainable?) levels of ‘private’ (not public) debt in the world – do we perhaps also need an inquiry into the mainstream economics profession in Australia?

    What are the ethics principles/precepts, of economics as a ‘profession’?

    https://www.macrobusiness.com.au/2017/06/steve-keen-on-the-secret-source-of-eternal-australian-growth/

  3. Professor David Howarth (Cambridge University) has published ‘Law As Engineering: Thinking About What Lawyers Do’ (2013).

    A similar approach might be useful for economics, as a profession?

    Thank you for this article and opportunity for the public discussion of new and alternative ideas.

  4. What a load of rubbish.

    Economics isn’t to blame for the pre-conditions of Brexit, it is the politician and policy makers. Economics merely provide a justification for whatever policies a politician wants to implement. There is no single school of thought in economics, there are many. I can find economists that can justify nationalizing every single bit of infrastructure and conversely as well.

    Brexit wasn’t the rejection of economics, it was the rejection of the status quo via a referedum. People are fed up of the mismanagement of the economy and society as a whole. The worst part is that the anger is misplace. The “hardship of low wages, insecure low-skilled jobs, bad housing, high rents, an under-resourced and increasingly privatised NHS, and other forms of public sector ‘austerity’” is not the failure of the EU, it is the failure of the British policy makers.

    The way the Conservative Government and Theresa May is handling this situation is indicative of this. Its going to be more of the same but I’m just looking forward to see who the Government can blame now…

  5. It does not matter about all these economic theories or experts or Nobel prize winners or professors or public inquiries or even what the government chooses to think or believe. It is all irrelevant
    While the world is at the mercy of the central banking cartel and the aberration of fiat currency. The only change that will make a difference is from the ground up.
    People have to literally stop what they are doing and find out the truth between money and currency and extrapolate where they exist within that.
    The UK is not presiding over a massive housing bubble, student debt bubble, £1.6 T public sector debt and potential unfunded liabilities of £6T plus inflation from the 2007 bank bailout, because of Brexit . is it?.

  6. From an Engineering point of view, the entire field of Economics should be replaced with Systems Science or Systems Engineering. The description of Economics as a Dismal Science is partially true. It has been dismal all along, but a science? And by the way, please do not perpetuate the myth of a “Nobel Prize” in Economics. It is just a sham and has nothing to do with Alfred Nobel. But who am I to say all these, sitting in a remote corner of the former jewel in the crown which you all chose to forego 70 years ago?

    1. Ann’s public inquiry really needs to bring this into the open, but as an information systems scientist I would like to say mere “systems science” is too vague.

      What type of system are you talking about? A meaningless mathematical system, a balance of forces system, an energy transfer system (mechanical, electrochemical, steam, internal combustion, electromagnetic) or an information system (analogue or digital, manual or automatic channel switching, internet-style time-sharing packet system)? One can trace economic theory through the mechanics of production and distribution (Smith) through Malthusian population control (see Polanyi , 2001, pp.117-8) to railroaded commerce (with tickets but no engineering staff), to railroaded banking (since 1913 dominated by the Fed: watch The Money Masters), up to hints of an information system in Keynes (distinguishing employment from monetary equilibrium). To my mind an economy is trying to function like the internet, where everyone is free to do their own thing, with time-sharing and prioritising (giving way) making this possible. It can’t when the information-carrier (money) is stripped of its meaning (i.e. the prices of things in particular transactions); which information is now readily available through automated commerce.

      So I’m intrigued. Which corner of which crown of our brief intelligently socialist era?

      1. Thanks Aravind and Dave for these comments….Keynes was concerned with the logic / theory of systems dominated by human agency, beginning with his treatise on probability. His theory of monetary economics cannot be expressed algebraically (at least I don’t think so), but is still rigorous in the logical sense and can still lead to conclusions of immense practical importance. See diagram 1 in Geoff Tily’s ‘As if Keynes had never lived’: on the PRIME economics website: https://static1.squarespace.com/static/541ff5f5e4b02b7c37f31ed6/t/57fbce3e197aead299c495c9/1476120128630/Tily+As+if+Keynes+had+never+lived+v2+%28003%29.pdf

  7. It appears that I am no longer alone in my opinion of economists and economics.

    For many years I have held with the opinion (not mine originally) that economics was invented to make astrology look more respectable. Economists have one advantage in that they do not have to gut an animal to examine the entrails.

  8. So how to join in a communal public demand for this? Individuals writing to MPs get nowhere, especially when the MP is an economist and former banker.

    On Brexit, let us be clear that the EU is dominated by the same economic thinking as the US and UK. It seems the policy of depriving local government of the finance it needs is built into the Lisbon Treaty which we were never asked whether we wanted it ratified: see

    https://birdflu666.wordpress.com/2015/06/29/ecb-article-123-of-the-ecb-operating-rules-responsible-for-the-private-creation-of-money-in-eurozone/

  9. Fritz: Economics is easy to understand. Economists are intellectual prostitutes that will write a theory to prove anything if the price is high enough. Before 1980 all schools of economics taught that wealth and permanent jobs could only be created by production. Production by farming, ranching, mining, forestry, manufacturing, heavy industry, fishing and the energy sector. After 1980 we became a financial service economy and manufacture money. Wall Street created a bubble economy. Trump is gong to stimulate the economy by getting stock prices higher. It will end badly. Fritz

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