Tuesday, 22 January 2013

Debating debt ratios with Michael Fabricant

Last night I got into a Twitter "debate" with Michael Fabricant, who is Vice Chairman of the Conservative Party.   I replay it here to set out the facts (which are fairly simple) and perhaps to give Mr Fabricant one more change to correct his position gracefully.  

[Updated, 2.45pm: Mr Fabricant has done exactly that, tweeting: 
"Lesson learned. NEVER take a 'fact' from a colleague at face value. I withdraw the remark on Debt to GDP ratio. Apologies to all."
This is both gracious and appropriate in content and tone, and I am grateful to Mr Fabricant. So what follows is now simply for the record; if you just want the facts on debt/GDP, no need to read past the chart.]

It started when Mr Fabricant tweeted the following:
"GDP to debt ratio almost as big now as WW2. Total war achieved the same debt ratio as total incompetence achieved in 2000's by Gordon."
II responded, I thought factually, politely, and self-explanatorily, as follows: 
"I hope  will retract that last tweet; simply wrong, as chart shows."
and provided this chart, showing the debt to GDP ratio from 1900 to 2011:




[Note: the source for this graph is the excellent ukpublicspending.co.uk, which is reliable and uses Treasury and other official figures where possible; this chart and variants of it (they have one which goes back to 1692) is frequently reproduced.  There is no question mark over this data as far as I know, and certainly not over the broad picture]

The chart shows the debt-GDP ratio (not the GDP to debt ratio, which of course goes up when debt goes down, so presumably was not what Mr Fabricant meant).  UK debt rose from well over 100 percent of GDP before World War 2 to over 230 percent of GDP immediately after. This compares to a current level of about 75 percent.   Note that even if you use gross debt - which neither the government or economists usually do, since net debt is fairly obviously the more useful concept  - the current level is only slightly over 90 percent (international organisations sometimes use gross debt because it is easier to get comparable data across countries).   


You can also read Martin Wolf on the topic of debt and deficits in the 1930s here; as Martin says, the result of "fiscal famine and monetary necrophilia" was that:
"By 1930, debt had reached 170 per cent of GDP. By 1933, it had reached 190 per cent of GDP. (These numbers put the panic over today’s far lower ratios in perspective.) In fact, the UK did not return to its pre-first world war debt ratios until 1990."
So the facts are absolutely clear.  Mr Fabricant was simply wrong - and not by a small margin, either. You'd have thought that would be it.  But no. The next thing Mr Fabricant tweeted was this:
"This chart chart does not relate to what I tweeted. Either you deliberately set out to mislead or did not read what I wrote."
I responded by retweeting this tweet, so people could see that Mr Fabricant was responding with abuse and further error, rather than a correction. I then tweeted, again I thought clearly and politely:
"You said debt to GDP ratio. That's what the chart shows."
[I didn't see the point of also correcting his odd reference to the "GDP to debt" ratio].

Mr Fabricant's next tweet further compounded things, by showing that he didn't understand either the chart, the figures, or even the concept of a ratio: 
"Remarkable how people choose to confuse public net debt with the GDP to Debt ratio. My last tweet is correct. Only the ignorant are howling."
Of course, what the chart shows (and it is clearly labelled as such) is indeed the ratio of public sector net debt to GDP; the standard debt-GDP ratio generally referred to by the government, and indeed the one covered by the government's (now abandoned) "debt target".  

Mr Fabricant then compounded this by tweeting (truly bizarrely) the following: 


"This man  says "That chart does not relate to what I tweeted." Then claims the chart shows I am wrong! What pervt'd logic is that?"
Of course that quote is his, not mine. [Note: I thought originally Mr Fabricant had deleted his original tweet, but apparently I got this wrong: I misunderstood precisely how the twitter settings work, and it is still visible to some. My mistake.]  

What can we conclude from this episode?   


First, that Twitter brings out the worst in some people. I will try to avoid the temptation to be too self-righteous on my own behalf, but it is pretty poor form for Mr Fabricant to describe the numerous other twitter users who made the same point as me as "ignorant" and "howling", given that is their taxes that pay his salary and fund his public displays of genuine ignorance.  If Mr Fabricant has any intellectual self-respect at all, he will correct his original assertion, and apologise to the people he's insulted. 

Second, that as Fraser Nelson and Patrick O'Flynn have repeatedly pointed out from a somewhat different angle, politicians frequently confuse debt and deficits.  And third, that the economic history of the UK, and in particular the fact that by historical standards UK public debt remains relatively low, should be better known. Let's hope this episode addresses to a very modest extent the last of these.  

22 comments:

  1. I was watching the exchange and was struggling to see what he was on about. Reading the exchange again he does not actually say public sector net debt. Possibly he is aggregating private + public debt and come up with a big scary debt to GDP ratio. More likely he has just read or heard something and completely misunderstood. The love of big scary numbers does strange things to some minds.

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  2. His problem is he's trying to justify austerity - and he can't.

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  3. I did consider briefly that he might mean private debt, but I'm not aware of good historical stats that would enable one to make that comparison (and I doubt it would be accurate anyway). I'm sure you're right that he just misunderstood. What I still don't get is the denial - everyone's entitled to make mistakes, but refusing to acknowledge them when they're pointed out is far less excusable.

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  4. Slightly off topic, but the graph Ann Pettifor chose as her pick of 2011 for Newsnight last year...

    http://www.debtonation.org/2011/12/my-graph-of-2011-along-with-top-economists/

    ...shows private debt to GDP back to 1987. In response to your comment above, are those figures dubious? Or is your point that we don't have historical data on private debt to GDP?

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    1. The latter: I don't know of any decent historical series. In any case, the original tweet said "total war achieved the same debt ratio as total incompetence achieved in 2000's by Gordon." I would take that as referring to govt/public sector debt. In common usage, the debt/GDP ratio, unless qualified, generally refers to govt debt: http://en.wikipedia.org/wiki/Debt-to-GDP_ratio

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    2. Oh I wasn't doubting that. I just wanted to take a look at the private debt data. Thanks!

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  5. My advice to Fabricant is don't drink and tweet at the same time.

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  6. Maybe 75% is "almost" 230% in Fabricant's opinion?

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    1. Maybe he's using a Log Scale. 2.3 is not far from 1.8...

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  7. Either he really doesn't understand or he doesn't want facts to confuse the story. In fairness it could be both. Either way he can't be accused of inconsistency as these views fit the party narrative since the election

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  8. What about the absolute debt in GBP, not corrected for inflation? Just trying to make sense of that tweet, absolutely astonishing.

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  9. Does anybody know what Mr Fabricant was referring to? What was his mix-up do we reckon?

    Also, a word on behalf of the Tory vice chairman: He was clearly rattled by your, no doubt, correct intervention. And his subsequent tweets certainly rub against the thigh of offensiveness.

    However, I'm not convinced your original tweet to him was as polite as you portray in your blog. Inviting someone to retract something is fairly confrontational.

    It certainly doesn't excuse his subsequent intransigence. But it might help explain his cornered beast demeanour.

    Mark

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  10. Hmmm.... Mark, this reminds me of the faux evenhandedness characterised by Paul Krugman as "opinions differ on the shape of the earth". What do you say (in 140 characters or less) that won't offend the recipient, when he's made an assertion, not that you just disagree with, but is just objectively plain wrong?

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  11. Hi James. Do we actually know that the earth is round? Just kidding. To make clear, if there was a side I was taking, it would be Jonathan's - both in terms of content and tone.

    However, I do maintain that calling out someone's error then publically making a demand they retract it, is a little confrontational - particularly since the tweet is about Mr Fabricant rather than to him.

    Therefore: "I hope @Mike_Fabricant will retract that last tweet; simply wrong, as chart shows."

    Might have been better as: "@Mike_Fabricant I hope you will retract that last tweet; simply wrong, as chart shows"

    However, less confrontational again might have been: "@Mike_Fabricant Think you might have your numbers a little mixed up. Chart shows different"

    It would still be humiliating for Mr Fabricant, but not so aggressive. Perhaps something similar might have yielded the retraction Jonathan clearly wanted.

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  12. Fair enough. I did tweet to him direct first, I think. But I think the general principle that one should be civil on twitter, while factual and direct, is quite right

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  13. Big Bill (near top of page): "His problem is he's trying to justify austerity - and he can't" hits the nail on the head. When the current government's (and their supporters) ideology and austerity policies are challenged, leave alone proved decisively incorrect, they behave as Mark (above) describes in a "cornered beast demeanour"; resorting to aggressive, rude and general ad hominem comments to whoever is illuminating the incorrectness of their views and proving how wrongheaded their logic and policies actually are. Worrying, it seems no amount of data/evidence which illustrates how incorrect and damaging their policies are will cause them to question their own views and therefore amend their policy stance.

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  15. My guess is his colleague confused the US and UK. The US ratio peaked at about 120% at the end of the war and it's now racing back up to 100%:

    http://en.wikipedia.org/wiki/United_States_public_debt

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  16. The graph says at the top, "Public Net Debt". You have to look at the y axis to see that it is expressed as a %age of GDP.

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  17. Thanks for the update. Glad to know that there are those in power who can still say "mea culpa".

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  18. Just followed the link here from the HuffPo article and the first thing I read is this hilarious thread about Fabricant! I will be around plenty

    Those saying they (the Tories) are trying to 'justify austerity but can't' are very close to the mark but not quite right

    they have chosen 'austerity' due to their political and ideological beliefs and they are persistently claiming that it is the only choice and that all other options would be worse

    effectively they are claiming that there is no choice than to carry on down this self defeating downward spiral

    I can't for the life of me understand why (well obviously apart from politics)

    Anyway, great to be here!

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  19. My advice to Fabricant is don't drink and tweet at the same time. debt settlement companies reviews

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