than the net UK contribution to the EU in 2018 – serve as examples. In all these cases, economic reasoning was not necessarily the main influence in the economic policymaking process. It is important to recognise that political decisions are often necessary when supported by the majority of the public, such as the need to stand up to communism or the UK’s desire for sovereignty from the EU, as governments should serve their citizens. Any supportive economic theory can only strengthen the case for the policy. But issues emerge when economics is not the key consideration in economic policymaking. This raises the question: can economics ever be apolitical? Economics can never be characterised as a truly neutral science. Economic theories often emerge due to political circumstances and are used when they can serve political goals. Keynesianism, for example, rose to prominence due to its macro- economic solution to the Great Depression
through increased government intervention. Yet, its application also aligned with the political need to reduce unemployment and social unrest. Even macroeconomic rules such as central bank independence or debt ceilings carry assumptions about what the government should prioritise. The US debt ceiling has been raised or suspended 103 times by Congress since 1939, showing that most economic systems can rarely stay neutral when run by an inherently political body. Economics is arguably more relevant than ever in government policymaking. But this increasingly lies in its rhetorical capacity, rather than its analytical one. It is used to support decisions, win debates, and claim victories. The danger lies in economics being a supporting force used to validate politically driven economic decisions, rather than the driving force. The question policymakers now face is whether they are willing to let economics challenge their decisions, rather than serve it. ◎
Issues emerge when economics is not the key consideration in economic policymaking
POLITICS: 1 – ECONOMICS: 0
Is economics truly relevant, or just convenient, in economic policymaking?
I began writing this piece with a simple belief: that economics is the driving force behind economic policymaking, while politics sits in the back seat. Specifically, I was examining recent trade stand-offs and confidently predicted that reason would prevail. After all, economic theory preaches the benefits of free trade and the regressive effects of tariffs. But then came the global “Liberation Day” tariffs, which completely upended my prediction. This moment made me wonder: has economics ever truly driven economic policymaking, or is it just a convenient justification for political decisions? Economics is seemingly more relevant than ever, appearing at the centre of public discourse due to numerous elections and controversial policies worldwide. Podcasts debate marginal tax reform, online forums argue over tariffs, and dinner tables analyse inflation statistics. But while economic theory is everywhere, one starts to suspect that it’s used more to support decisions rather than to guide them from the outset. The tariff, a tax on imports, is a prime example. Economists, armed with empirical evidence, have long agreed that they are harmful because they raise consumer prices and provoke retaliation. However, they offer attractive
short-term economic benefits like sector-specific job protection and government revenue, while also serving as a political expression of national strength. These benefits are emphasised around election time, often using selective economic reasoning to validate the political goals of the tax, not the other way around. Historically, politics has always been at the forefront of economic decision-making. Even in the 3 rd Century AD, Roman emperors continued to debase silver coinage (reducing their metal content to mint more money) to fund war and imperial survival, despite the hyperinflation and loss of public trust that ensued. Fast-forward to the Cold War era, when “military Keynesianism” was employed not just to stimulate economic growth through targeted military spending, but to stand up to communism. Economists warned that Brexit’s effect on trade would damage the UK economy, yet those warnings were dismissed as “Project Fear”. After the exit, politicians on both sides claimed victories even as key in- dicators suffered. The OBR’s estimate of a 4% hit to GDP over the next 15 years, and Cambridge Econometrics’ estimate that London’s economy has shrunk by more than £30bn–£19bn more
by Nikhil Shirgaokar, Year 13
Has economics ever truly driven economic policymaking, or is it just a convenient justification for political decisions?
Google: Global interest over time for the search term “Tariff”
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OPINION, INTERVIEWS & FEATURES
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