Deficit

The time has come to talk of many things; of taxing and spending and an economic system that needs mending. 

Protest placard with a picture of the Earth in space and the slogan "One World"Photo by Markus Spiske on Unsplash

In the news, the Prime Minister tells millions of  WASPI women affected by the changes to the state pension age that he couldn’t promise to magic up the money for them despite having found lots in the magic money pot for Tory manifesto pledges; the Home Secretary, Priti Patel, whilst visiting a food bank, claims that the Tory government was not to blame for poverty in the UK and, shifting the blame onto local councils, forgets to mention that central government funding has been cut by nearly 50% since 2010/11.

After 9 years of austerity, the consequences couldn’t be starker for our public and local government services, however, it is UK citizens, families and their children who have borne the distressing costs of cuts to social security benefits, both on their health and financial well-being. It cannot be clearer that the steep cuts to tax credits, child and disability benefits, ESA and Incapacity benefit and housing along with the introduction of Universal Credit have been behind the increases in child malnutrition, food bank use, homelessness and suicide.

The IPPR this week published its report ‘Divided and Connected’ which reveals that the UK is more regionally divided than any comparable advanced economy.

In the same week, the Resolution Foundation published its report ‘The Shifting Shape of Social Security’ It notes in its analysis of the manifestos of the main parties that child poverty is set to continue rising under the Conservative Party’s social security plans, whilst Labour’s £9bn of extra spending would mean 550,000 fewer children in poverty, it would not reverse the effects of the £5bn benefits freeze and could still see more children living in poverty in 2023 than do today. It noted that major policy changes have reduced support for working-age households since 2010 resulting in overall spending in 2023-24 being around £34bn a year lower on current plans than if the 2010 benefit system had remained in place, and that the cuts in support had fallen almost entirely on low-to-middle income working age families. It also noted that the Conservatives’ 2019 manifesto makes no changes to existing policy and as a result child poverty risks reaching a 60-year high of 34%.

Although the conservatives are promising more spending on health and education, it seems clear that they intend to carry along the same policy paths they have followed since they came to power in 2010 which have involved cuts to benefits, conditionality, sanctions and welfare to work. Clearly, they have no intention either of reversing the already implemented cuts or reforms which have done so much damage and left a trail of devastation in many people’s lives. Priti Patel’s remark about who is to blame for poverty is indicative of Tory neoliberal credentials of denying governmental responsibility and passing the buck along to others, whether local government who have been firefighting for lack of funds or indeed shifting the blame onto citizens themselves. Her position has not changed much since 2015 when she said, ‘There is no robust evidence that directly links sanctions and food bank use.”

In the light of the very real consequences on people’s lives of government spending decisions and policies, it is all the more depressing to read the two analyses of the party manifestos by the Resolution Foundation and the IFS which instead of looking at the real effects of government spending policies on the lives of real people, examine them in purely financial terms and arbitrary fiscal rules which as we may now be realising bear no relationship with how money really works.

Hunkered down in household budget explanations, the IFS, rather than considering the spending promises of all three parties from the perspective of potential outcomes for the economy and its citizens, examines them in relation to the prospect of raising taxes or borrowing and the likely impact on the deficit and national debt.  As usual, the question, if not asked directly, is how will the parties pay for their spending plans? When, instead, they should be acknowledging that the real question is how will a future government manage existing resources to meet government goals? This will be the real constraint that any future government will face, however progressive that government may be. The resource balancing act will be key to maintaining spending within the productive capacity of the nation to deliver public purpose.

The Resolution Foundation summed it up depressingly in its conclusion in saying that:

‘The priority that both main parties have placed on credible fiscal frameworks in this campaign is laudable. Such rules are hugely important for the government’s overall economic priorities. In setting out new fiscal rules, it is vital that they provide a clear framework for sustainable public finances, constraining the temptation for policy makers to promise unfunded giveaways.’

Such institutions unsurprisingly have focused on the notion that it is the role of government to balance its budget rather than serving citizens and improving their economic and social well-being. It is regrettable that a recent poll has suggested that many people doubt whether such spending plans are affordable and yet given the reality of the consequences of not spending adequately how could we possibly afford not to?

The nation is now paying the price for politicians pedalling the lie of the last forty years that money is scarce, that there is no such thing as public money and that good government is about fiscal discipline. Even if changing that notion in the public consciousness will take time, in the light of the urgency of the challenges to address climate change and social inequality we need an urgent step change in economic thought on a planetary scale since it is our survival on this planet which is at stake.

This is not, however, a time to make compromises with an economic system which has already done such huge damage. The seeds of an alternative model are already being hijacked by companies cynically promoting their green credentials with one aim in mind: to create more growth to keep the profits rolling. Reducing our plastic use and buying electric cars will scarcely make a dent in the scale of the changes we need to implement. We may have a broad vision, but that now needs to be developed into concrete realities. It may be still a work in progress, but it is a vital one we must not ignore.

This is a time to reimagine the world. A fairer and more sustainable approach to replace the one of endless growth which currently defines our capitalist economic system and puts profit before people and the planet.

Progressives on the left are beginning to initiate a much-needed conversation about what we need to do to reverse the decades of social injustice and challenge the idea that we can maintain the engine of growth on a finite planet.

However, and most regrettably, politicians on the left are still trying to have that conversation stuck in old economic paradigms of how money works. When they are asked how they will pay for these vital programmes the response is always one of tax and spend or borrowing to invest. Raising corporation tax, bringing back the magic money tree from the Cayman Islands, taxing the rich until the pips squeak or borrowing on the markets because interest rates are low. Instead of talking about taxing the wealthy to redistribute wealth by removing their colossal purchasing power and ability to influence politicians, they talk about funding our public services with the proceeds.

Again, on the left some politicians are suggesting that the government is akin to a business and that renationalising transport, our utilities, mail and the NHS will allow the government to plough back the profits back into public services. Yes, we need to end the rip-off of privatisation which has not benefited citizens and has allowed public money to flow into private pockets for profit motives, but let’s not buy into the idea that the government resembles a large corporation with a profit and loss sheet. It doesn’t.

The government is the currency issuer and neither needs to tax nor borrow in order to spend and nor does it need the profits of renationalised industries for us to have public services.  It just needs the political will to deliver them.

The role of government is to create the framework for markets to exist and dictate through legislation how they will function and in whose benefit. It taxes the populace, not to fund its spending but to manage its economic policies, from the redistribution of wealth to expressing public policy and is one of the key tools it can use to manage inflationary or deflationary pressures.

Government not only has the power of the public purse to improve the lives of its citizens it also has the power to legislate to drive its political agenda. All a question of choices which are not dependent on the state of the public accounts. Indeed, not only does it have the power to spend for the public purpose, it has the power to change the rules of the game. For example, it might regulate the financial sector to ensure that when people’s savings of whatever kind are put to work it is done to shift our negative and damaging behaviours towards creating a positive impact on society and our environment instead.

Outcomes are the measure of any government’s success. With the political will it could:

  • create the framework for good quality universal public services provide a social security system which is both not punitive in its functioning but also ensures a decent standard of living for those unable to work through disability, sickness or old age,
  • pay for a just Green transition,
  • offer a Job Guarantee as standard to create price stability and act as an automatic stabiliser for the economy to give people the dignity of proper, well-paid employment when needed.

All of these things are fundamental to the good functioning of society.

What are we so afraid of? A better future for our children? A more sustainable and fairer economy for all? Indeed, a planet for us to live and breathe on? What is not to like? So, when you hear interviewers berating left-wing politicians (who have not quite made the leap into monetary realities) about how they will pay for their progressive agenda ignore those questions and remember instead that a government’s economic record will be defined by how it serves the nation’s economy as a whole, improves the lives of its citizens and how it uses the resources it has at its disposal to achieve its agenda – not whether it balanced the budget.

 

For more in-depth information about how money really works, you can find all you need on our GIMMS website.

https://gimms.org.uk/

 

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The post The time has come to talk of many things; of taxing and spending and an economic system that needs mending.  appeared first on The Gower Initiative for Modern Money Studies.

We don’t need a perfect world; we need a fairer and more equitable one. Understanding how money works is the first step.

Published by Anonymous (not verified) on Sun, 24/11/2019 - 12:02am in

Person at the bottom of stairs climbing from darkness into the lightPhoto by Free To Use Sounds on Unsplash

As the election campaign rolls on and party leaders battle it out on our television screens, the Liberal Democrats commit themselves to more austerity and Paul Mason, left-wing journalist and former music teacher, indulges in some fantasy explanations of how money works. More on that later….

In yet another indication of how the austerity has not only done grave damage to those who least deserve it, but also to the economy, two more reports have been published to add to the already long list exposing the consequences of cuts to public spending.

The Scottish based Poverty Alliance organisation which published its report Righting the Wrongs: A manifesto to tackle poverty is urging the next Government to ‘put solving poverty at the heart of all that it does, including by creating a more compassionate social security system, [and] building a labour market that works for everyone….’

When confronted with the realities of people’s lives through their stories we can see the real tragedy behind the policy decisions and cuts to public spending of the current Conservative government.

Jamie from Glasgow struggling to raise a family on a low income described it as ‘like being stuck in the middle of a spider’s web with no escape route’ and Jackie, a community activist commenting for the Poverty Alliance report, said that ‘more and more people are being locked into poverty by jobs that are low paid and insecure. When people can barely afford to put food on the table and when parents working full-time are struggling to cope, there is something very wrong that we have to put right.

An analysis published by the TUC, also this week, has revealed that the number of children growing up in poverty in working households has risen by 38% over the last decade, bringing it to 800,000 since 2010.

The study also showed that government policies account for the majority of rises in child poverty, with more than 485,000 children (in working households) having been pushed below the breadline, not only as a direct result of the government’s in-work benefit cuts but also as a consequence of other major factors which include weak wage growth and insecure work. The report also noted that over the past decade workers have suffered the most severe wage squeeze in two centuries and although wages have just started to grow, weekly wages are still £14 below pre-crisis levels.

Frances O’Grady, the TUC General Secretary, commented about the report that no child in Britain should be growing up in poverty and cuts to in-work benefits have come at a terrible human cost.

Overall the poverty figures are shocking. As GIMMS reported earlier this year following a report by the Social Metrics Commission, there are now around 14.3 million people living in poverty, of which 8.3 million are working-age adults, 4.6 million children (of which around 2.9 million are in working households as identified in the later TUC report) and 1.3 million pension age adults.

Aside from these shocking statistics which represent avoidable and unnecessary human degradation, the combined effects of government policies and cuts to spending on public services have had a damaging effect not only on the lives of those caught in the austerity crossfire but also on the economy as a whole. A decaying public and social infrastructure and toxic welfare reforms have had a significant impact on poverty and inequality and show clearly in whose interests the government has been acting. The promotion of individualism and self-reliance, along with decreasing state intervention to replace our public infrastructure with private, profit-motivated services has been a long-standing agenda of successive neoliberally inspired governments.

Access to high-quality health and social care, education and training, well-paid secure work and good quality, affordable housing all play a vital role in the health of the nation and its economy. When people are denied those basic support systems it can only, in the end, lead to more deprivation, ill health, hunger, homelessness and increased crime, the consequences of which ripple into every part of society burdening it with both additional financial costs and societal breakdown.

As was reported by the BBC only this week more than 2 million adults are unable to see a dentist either because they can’t afford treatment, find an NHS dentist or get care where they live as a result of underfunding and recruitment problems. It is claimed that many people are being reduced to practising self-dentistry to alleviate the pain of rotten teeth which can cause all sorts of other problems like periodontal disease which can, in turn, lead to an increased risk of heart disease.

After nine years of cutting NHS spending in real terms, creating a pressured working environment for staff, capping their pay, stopping nursing bursaries and driving people away because of stress, senior NHS leaders are warning this week that hospitals are so understaffed lacking sufficient doctors, nurses and other health professionals to provide services that the ‘safety and quality of care are under threat.’ The latest figures show that the performance against key waiting times for A&E, cancer treatment and planned operations have fallen to their worst-ever level and that this could deteriorate even further as winter approaches.

NHS mental health services which have borne the brunt of cuts have become little more than a firefighting service to deal with the ever-growing numbers of people needing support.

Earlier this month the organisation State of Hunger published its report, drawn up in conjunction with Heriot-Watt University and the Trussell Trust. It revealed that more than half of households referred to foodbanks were affected by poor mental health, predominantly anxiety or depression, while 23% of people referred to foodbanks were homeless. The report gives a voice to those people who have paid the price for austerity and welfare reform – the worry about paying bills, keeping a roof over one’s head or having a job which pays enough.

“If I don’t pay my bills, then I’ll get the house taken off me. After paying arrears, I’ve got £8 a fortnight and that’s to pay for gas, electric, water. It’s just impossible, it really is. I go to bed at night wishing I won’t wake up in the morning.”

 

“I’ve used the food bank because I was on such a low income before I got my disability benefit… I had a mental breakdown because basically the amount they give me doesn’t cover the costs of my rent.”

 

Education joins health in forming the backbone of a functioning economy and societal well-being and yet, it too has suffered from crippling cuts to spending. Kevin Courtney, the joint general secretary of the NEU said this week that ‘The future of education hangs in the balance’.  Despite government promises of more money, the School Cuts Coalition made it clear only last week that four in five state schools will be financially worse off next year than they were in 2015 and this will affect schools in areas where there are already high levels of deprivation.

Even with the additional funding promised by government, there will still be a shortfall of £2.5bn in the year ahead after years of already damaging cuts. The consequences for schools are grim. More pupils per class, fewer teachers and support staff and reduced curriculums with subjects like music, language, art and design being cut as a result of the pressure, not to mention the reduction in capital expenditure on schools’ estate which has left it in a bad state of repair and not fit for purpose.

Our children represent the future and yet they are the ones that will bear the brunt of lack of adequate government spending and planning for an education and training system to meet the challenges they will face in the future.

A healthy economy demands a healthy and educated nation as a prerequisite. It demands quality housing, good secure jobs and pay. The last nine years of austerity and forty years of the pursuit of neoliberal dogma have pulled that rug from under people’s feet, leaving them in a world of increasing uncertainty.

It is regrettable in this respect that the notion that the state has a responsibility to ensure the health and well-being of all its citizens through the provision of universal services and other state-provided interventions is being mistaken for a ‘nanny state’ rather than acknowledging the value of such investment in society and its economy.

Whilst government has pursued its handbag economic strategy and ignored monetary realities for the lie of balanced budgets, it has failed in its duty as an elected body to serve the interests of citizens and the economy as a whole.

Whilst pursuing austerity, it has ignored the fundamentals of macroeconomics which it won’t hurt to repeat. Spending, wherever it comes from, creates income for someone else, whether that’s government which starts the ball rolling by creating the money into existence to pay for its needs which flows in turn right down to businesses, working people or even those having the misfortune to be involuntarily unemployed or coping with a disability or illness which prevents them from working. Through its obsession with austerity and lowering deficits at a time when it should have been spending more, it has weakened the economy and wilfully left people without the means to provide themselves with sufficient income to meet their daily needs.

As data from last year shows, it has left British households collectively supporting their spending through reducing savings (if indeed they had any) and taking on more debt. Quite simply government austerity has transferred the burden onto households which as private debt levels rise will prove unsustainable.

The fragile house of cards which represents the economy after nine years of government folly will either stagger on or fall into another recession unless the next government deficit spends sufficiently to promote full employment and serve the public purpose.

In the light of this, it is all the more incredible to note that after Ed Davey, deputy leader of the Lib Dems said earlier this month that Labour and the Tories were ‘writing promises on cheques that will bounce’ they have decided to make austerity their USP (unique selling point) for their election campaign. Yes, you read that right!

In his recent speech he positioned the Liberal Democrats as the ‘party of fiscal rectitude’ and the Conservatives and Labour as the ‘parties of fiscal incontinence’. Davey is proposing to adopt a fiscal rule for day to day spending aiming for current account surpluses in every year of their five-year costings.

With yet more household budget accounting and to meet its objective will require tax rises and yet more spending cuts. Furthermore, on the basis that achieving a surplus is not a saving and removes money from the economy and if our trading partners don’t spend all they earn thus taking even more out of our economy the net result will be a severe recession (as if we weren’t already heading in that direction). A bit of an own goal and a very foolish one at that!

And yet depressingly it has to be said another own goal was scored this week by the journalist and self-styled economist Paul Mason who presented a short promotional video for Novara Media explaining the deficit and debt in the language narrative of overdrafts, loans and mortgages along with that old ‘canard’ about paying for public services by taxing the very rich.

This is indeed ‘fantasy economics’ of the most damaging kind.

In response, the economist Professor Bill Mitchell explains it very succinctly and it is worth printing it here in its entirety:

‘This is the classic ‘soft’ mainstream macroeconomics that assumes the government is financially constrained and is thus not dissimilar to a household.

It is ‘soft’ because, unlike the hard-mainstream positions, it allows for deficits (‘funded’ by debt) to occur in a non-government downturn but proposes them to be offset by surpluses in an upturn, irrespective of the overall saving position of the non-government sector.

None of this framing or language is what I would call ‘progressive’.

It has the hallmarks of the way neoliberals construct the concepts and the narrative.

The inferences are also plainly false when applied to the British government.

  1. It is not financially constrained in its spending.

The constraints relate to real resource availability.

In terms of restaffing the NHS, for example, are there qualified labour resources available? What training would be required? Would this mean that British Labour is also going to be advocating open borders to ensure the staffing is available? [….]

  1. There is no meaningful knowledge that be gained by comparing a household with a home mortgage and a currency-issuing government spending its own currency.

The household is the currency user and the government is the currency issuer.

Totally different constraints apply.

  1. It is false to claim that it is virtuous to ‘tax the rich’ in order to fund essential health and welfare services.

This is one of the worst frames that the progressives now deploy.

The British government might want to tax the rich to reduce their power and influence (exercised via their spending habits) but it never has to do that in order to fund essential services.

The only constraint that exercise involves is the availability of real resources.’

  1. The British government does not have to issue debt to ‘fund’ its deficits. The capacity of the non-government sector to purchase the debt derives from past deficits that have not been taxed away yet.

Even if the government issues debt to match its investment in essential infrastructure to deliver better housing, transport health care, and engage in climate action etc, this investment is not linked at all to the current interest rates in place.

 

There is no meaning to the term “cheap” finance, when the spending does not need to be financed (in the currency the government issues).

The issuing of risk-free debt from a currency-issuing government really amounts to the provision of corporate welfare and no progressive should advocate its continuance.

  1. There is no meaning in saying the recurrent deficit is like an overdraft or the capital deficit is like a mortgage. Those terms gain meaning when applied to units that are financially constrained.

While left-wing progressive parties continue to frame their election campaigns in neoliberal terms and thus erect unnecessary financial barriers to spending that will prevent them from achieving their goals, the public will also remain in the dark about a subject which is of vital importance; how to answer the question about how government really spends, how its policies can be paid for and what  the real constraints are.

That said and despite the deliberate misleading of the public by Paul Mason, the UK needs a progressive government prepared to act in the public interest through investment in our public and social infrastructure and ready to take action to tackle social injustice, ensure a more equitable distribution of wealth and address the biggest challenge we face – climate change.

 

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The post We don’t need a perfect world; we need a fairer and more equitable one. Understanding how money works is the first step. appeared first on The Gower Initiative for Modern Money Studies.

The Rise of the Right

Published by Anonymous (not verified) on Thu, 21/11/2019 - 8:30am in

GIMMS is pleased to be able to present for our MMT Long Read two chapters of the book “The Rise of the Right – English nationalism and the transformation of working-class politics” by Professors of Criminology Simon Winlow, Steve Hall and James Treadwell.

“Throughout Europe right-wing populism has grown to the extent that we can now legitimately begin to think about the very real possibility of a fascist future. The new right-wing nationalism will not be a carbon copy of 20th-century European fascism, but fascism it will be, nonetheless. For years this seemed unthinkable…We must recognise that the adoption of hippy counter-culturalism was a colossal error, and then begin to repair some of the damage it has caused. The first step is to reconnect with the working class with a renewed order of grounded universal ethics and truthful symbolism comprehensible to all cultural groups…the left can be rehabilitated. Reconnecting with the working class and persuading them to believe in its project is a very difficult task, but it can be done.”

The Rise of the Right – English nationalism and the transformation of working-class politics

The Rise of the Right cover

Originally published by Policy Press in 2017.  Permission granted by the publisher to use this content.

https://policy.bristoluniversitypress.co.uk/the-rise-of-the-right

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The post The Rise of the Right appeared first on The Gower Initiative for Modern Money Studies.

It’s not balanced budgets that will save us. It’s the power of the public purse and our human values.

Person at a demonstration holding a placard with slogan "What lessens one of us lessens all of us"Photo by Micheile Henderson on Unsplash

Charles Dickens began his novel ‘Hard Times’ thus:

“NOW, what I want is, Facts. […]. Facts alone are wanted in life. Plant nothing else and root out everything else. You can only form the minds of reasoning animals upon Facts: nothing else will ever be of any service to them. [….] Stick to Facts, sir!”

Whilst one might dispute Dicken’s character Gradgrind with his miserable vision of human existence, facts can be very useful. They can trace the human misery caused by 9 years of austerity and the last forty years of a pernicious market-oriented ideology which has led to vast disparities in wealth distribution and caused huge damage to society by encouraging the pursuit of self-interest.  And yet it has to be said as the election campaign gears up, that in terms of monetary reality, of facts there seem to be very few to be had.

As political and economic commentators, not to mention politicians on all sides, emphasise daily their claims that the government finances are like a household budget, the public has largely remained stuck in the quagmire which is presented as monetary reality and distrustful of a political system which has failed them.

Looking at newspaper front pages this week you could be forgiven for thinking that we are headed for bankruptcy if Labour were to win the election or that their spending plans would cost UK households £43,000 each. A ‘reckless spendathon’ is in the offing according to a government spokesperson in a recent BBC television interview.

Aside from such narratives being a fallacy, they are designed to put the frighteners on people who are already suffering financial hardship caused by years of austerity and ideologically driven government policies. Those with a political agenda shore up those false beliefs that borrowing too much will lead to government insolvency. They cynically and callously terrify people that they will be asked to pay for those spending programmes when they will not. This is an establishment that is running scared that their reign of power is coming to an end. The means justify the ends!

It cannot be denied that if we are to escape the worst effects of a coming global downturn, an incoming government of whatever variety will need to implement adequate spending programmes and increasingly fiscal policy is becoming the ‘mot du jour’. However, the message is reinforced daily by all sides of the political spectrum that there are still financial limits to that spending.

Last week Ed Davey, deputy leader of the LibDems said of Labour and the Tories spending plans that they are ‘writing promises on cheques that will bounce’. The very same party that joined in with Tory austerity during the Coalition and voted for public spending cuts and welfare reforms.

In the same week, the Greens promised welcome public investment of £1trillion over 10 years to fight climate change, the money for which it said would come from ‘borrowing’ and ‘tax’ changes.

Then the Chancellor of the Exchequer in a ‘give with one hand take back with another’ message promised to increase borrowing to fund billions of pounds to pay for new infrastructure but then announced three new fiscal rules to ‘control borrowing, to control debt and to control debt interest’.

Stuck in household budget la-la land he said without a hint of jest:

‘like anyone who budgets whether it’s a household, or small business or large business, I know that we must keep track of what we are spending and what we bring in…. We can’t run an overdraft forever on day to day spending, so I can confirm that our first rule will be to have a balanced current budget. What we spend cannot exceed what we bring in.

Never mind that you can build as many hospitals as you like as part of an infrastructure spending programme but if you make up foolish rules about day to day spending those hospitals will remain empty of nurses and doctors and other health professionals to staff them.  And let’s not forget the bailing out of the banks or successive wars funded without a taxpayer in sight.

The same tired old tropes abound about taking advantage of ‘historically low borrowing rates’ and ‘living within our means’ remain the context for Conservative spending plans and figure in one way or another in the language narrative of other parties too.

In a similar vein this week, the shadow chancellor reinforced that same story when he tweeted:

‘The Tories can’t invest in the public services we need because unlike Labour they won’t raise taxes on the super-rich and take on the international tax dodgers’.

The implication being here that he will bring back the magic money tree from the Cayman Islands to pay for our public and social infrastructure.

Even the Leader of the Opposition has suggested that if they don’t tax the very rich, then Labour won’t be able to pay for public services.

As Professor Bill Mitchell commented in a blog in response:

‘The British government does not need to tax the rich to pay for first-class public services. It can do that at any time it can muster the real resources to accomplish that aspiration. It issues its own currency.

It might want to tax the rich because they have too much power but that is quite separate from justifying such an action because the government needs their ‘money’.

Although without doubt the proposals on the progressive left to tackle social inequality, rebuild public infrastructure and address climate change are laudable and indeed vital, it is to be regretted that the arguments for public spending programmes are being reduced to household budget frameworks of monetary affordability, where the money will come from and economic credibility. We have become fixated by the single idea that the country’s economic ‘health’ hangs on whether or not we run a deficit.

GIMMS will say it again. In reality, the only analysis that really counts when deciding which way to vote in any election is not a judgement based on a government’s financial record or whether it balanced the public accounts but what its economic record was.

We as citizens should be examining where the money was spent and who benefited. Did that spending ensure that its citizens were in secure employment and fairly paid, had decent housing and sufficient food in their bellies? Did it create a healthy and more equitable economy in which wealth was more fairly distributed? Did it ensure that the vital public and social infrastructure such as the NHS, social care, education and local government were adequately funded to serve the public purpose and not fill the coffers of private profit? Or was that public money sucked up by the private sector in a big free for all in which the state serves the interests of the corporations rather than the interests of its citizens?

And what about government policies on health, education, welfare spending and the environment? Did they create stable lives by improving the material, financial, physical and mental health of citizens? Did they ensure adequate investment to ensure that the nation can be as productive as possible through good education and training both for present and future generations? And finally, the environment – what actions did they take to address the climate crisis?

In other words, we should be examining what the real economic outcomes were.

After nine years of telling the public that there was no alternative to austerity and cuts to public spending because the coffers were bare, it’s amazing what the prospect of an election can do to turn the spending taps on. And yet the smoke and mirrors, lies and deception about how government spends just carries on relentlessly.

But now it’s all OK (for the moment) the Conservatives have found the magic money tree, cutting the deficit has apparently given them some savings and the fiscal ‘headroom’ to spend. For those that know, this narrative is a fairy tale of epic proportions. For those that don’t, it should be enough to arouse a cynical response by a public which has been at the sharp end of those tax and spend myths which have formed the basis for its policies.

Indeed, only this week the following headlines should serve as the wakeup call for the public about Conservative economic credibility.

‘UK suffers biggest fall in jobs in four years’

‘UK avoids recession but annual growth slowest in almost a decade.’

‘Wage growth slows’

We can blame it in part on the uncertainty caused by Brexit, but the reality is that behind the faceless employment figures published by the Office of National Statistics are the lives of real people who have been affected by the government’s policies and spending decisions over the last 9 years.

To put it in basic economic terms, when a government spends it creates income for the private sector which is then spent into the economy. When it imposes spending cuts it is removing money from people’s pockets leaving them with only three options: Use their savings if they have any, take out credit or go without.

All spending, whether from government or the private sector, equals income for someone. What happens when you take that away? That’s people who lost their jobs in the public sector as local government, the NHS and schools were forced to pare down their budgets as a consequence of public spending cuts. That’s people constrained by public sector pay caps and pay cuts. That’s people who ended up working two or three jobs on low pay to keep a roof over their head and food on the table. That’s people working in precarious employment in the zero-hours or gig economy with no guaranteed decent income or sick or holiday pay. That’s people affected by the reforms to welfare and the introduction of Universal Credit, from those who are unemployed left with insufficient financial resources to make ends meet and those in work but not earning enough to keep their heads above the water to those left struggling to cope because of chronic sickness or terminal illness.

In seeking the nirvana of balanced budgets by cutting spending the Conservative government has not created a healthy economy it has done the very opposite. The statistics are the proof.  Without adequate spending, the economy suffers, and people pay the price.

And yet as political parties present their spending plans and worry about how they will demonstrate their economic credibility the elephant in the room is crashing about trying to make itself noticed. On one note it is pathetic to see the Conservative party take issue with the opposition’s spending plans calling them reckless and unaffordable whilst promoting its own as being fiscally responsible. On another, in their rush to spend, neither party seems to have considered the real resource factor and how that will be managed.

The IFS for all its neoliberal sins ‘gets’ the elephant in the room and recognises that whoever wins on December 12th their spending plans will be dependent on whether they have the right resources at their disposal to deliver.

After 9 years of insufficient spending into the economy to prepare for the future, will there be sufficient people with the right skills to meet the government’s needs? Whether that’s engineers and construction workers to design and build the proposed infrastructure or homegrown nurses and doctors already trained up to service the planned spending on the NHS? Or in these days of climate crisis we might also be talking about the resources needed to deliver the Green New Deal and ensure a just transition not just for those in the rich west but those in the global south whose countries have already been plundered of raw materials and impoverished so that we can maintain our standard of living.

For progressive parties like Labour and the Green Party who wish to deliver a left-wing agenda what they have to do is decide their key priorities, consider the availability of resources and how they could be freed up to deliver a future government’s objectives efficiently and effectively. A case in point this week is Labour’s plan for free broadband which has much to recommend it in terms of bringing communities together in an inclusive and connected society. Journalists and others predictably have asked the question where will the money come from? They have missed the point entirely and should be asking instead how many workers would we need to deliver it?

Ultimately, all sovereign currency-issuing governments don’t need to match their plans to tax revenue or determine whether the markets can lend them the money. The role of government in this respect is not to balance the budget but to balance the economy.

The public needs to understand that it isn’t the government’s ability to tax the rich but its power to run a deficit which determines the health of an economy. As the sovereign currency issuer, the UK government has the power of the public purse to fund the public works necessary to tackle social and wealth inequalities, deal with the current global economic uncertainty, and fund the Green New Deal, should it choose to do so.

However, at home, our public and social infrastructure is in a shocking state of decay caused by 9 years of cuts to public spending and lack of planning. Reversing that decline is not something that just promising to spend can solve in the short term.  There are important issues to consider for the long term which may not fit the short-termism of the political five-year framework and many politicians who have become used to serving other interests.  That is the scale of the challenges we face.

When all is said and done even though the Labour party persists with the household budget myths John McDonnell has it right in terms of what is required not just to reverse the social injustices heaped upon global populations because of pernicious ‘free’ market ideology or the threat to the human species at our own hand. As he said not only must the scale of investment match the scale of the crises we face both in ecological and social terms, but also if we don’t make these investments our future generations will never forgive us.

Let’s leave the final words to Professor Bill Mitchell who wrote a while back:

“My ideological disposition tells me that the pursuit of human values is the only sustainable way of organising and running a world. The neoliberal era has severely undermined that pursuit.

That’s what we must change and urgently if we want half a chance to save ourselves and our children’s children from disaster.

 

Note: GIMMS has a very good resource section on our website which takes you through how money works. From FAQS to resources sheets and external websites, videos and academic papers for those who want to take it further. For an introduction to how money really works follow the link here.

 

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If Medicare-for-All Were a War, No One Would Ask: How Do We Pay It?

Published by Anonymous (not verified) on Mon, 11/11/2019 - 6:52pm in

Whenever someone wants to start a war, nobody ever asks how we are going to pay for it. But when there is a proposal to help people with basic human needs, suddenly the budget becomes a top consideration.

We need to relearn the art of adequate spending for public purpose

Published by Anonymous (not verified) on Sat, 12/10/2019 - 9:30pm in

The GIMMS team have been away and had a very busy two weeks travelling between Brighton, London, Manchester, Leeds and Newport for a variety of events.  All in all, it has been very successful and well worth the effort. We’ve had the pleasure of meeting lots of enthusiastic and lovely people across the country and we hope that over time the interest can be carried forward into real action in local settings.

The recording of the Brighton Fringe Event at which Professor Bill Mitchell spoke is now available here and we are working on editing the training session in London and the recording of GIMMS event at the Green Party Conference.

So, from this week normal service is resumed for our MMT Lens with a round-up of the key events over the last two weeks.

 

Cardboard placard at a protest with the slogan "Fight today for a better tomorrow"Photo by Markus Spiske on Unsplash

Boris Johnson is spending. Well, not his own money, of course, but he has authorised a multibillion-pound government spending programme not to mention substantial tax cuts for the wealthiest. After nine years of unnecessary and harmful austerity politics a focus on fiscal rather than monetary policy, which is in a predictable dead end, is to be welcomed although strangely it seems to reflect many of Labour’s spending promises. They say that imitation is the sincerest form of flattery, don’t they?

As part of the spending review by Chancellor Sajid Javid some weeks back, Boris Johnson in his speech at Conference promised investment in the NHS and social care, education, transport and roads, local government, police and the environment. And again, strangely, all those things that it has been busily cutting over the last 9 years because it was claimed we couldn’t afford them are now back on the spending menu. It is tempting to ask the question but where will the money come from since it’s the one that the Conservatives have most often asked Labour when they have announced their policy and spending programmes.  It has also been tempting for some like Paul Johnson from the IFS to wonder whether Boris’s proposals for tax cuts were feasible given his public spending promises.  That is, of course, if like Paul Johnson you accept the too often trotted out household budget version of the state finances which says that government relies on tax and borrowing in order to spend which GIMMS readers surely must know by now they don’t in a country where the government is the sovereign currency issuer.

These spending promises and tax cuts drive a coach and horses through the notion that government spending is constrained by taxpayer revenue. It also tells us very clearly that some politicians know exactly how the money system works and let’s be honest it’s not been the first time that the Tories have opened the public purse to serve a specific political agenda! Those computer keys at the Bank of England will be red-hot if the promises are kept.

After having been told in no uncertain terms that there was no money and that we all had to pull in our horns to get the public accounts back into health suddenly there’s money but an equal question in people’s minds about how it will be paid for. And that cannot be surprising given that the household budget narrative reigns in the public consciousness.

As usual and in response to the government’s plans, some of which were announced prior to the Conservative conference, there have been alarm bells ringing in the usual quarters both political and institutional about the impact on the deficit and debt and borrowing levels.

The government’s spending plans sit contrary to the 2% of GDP limit which was set for the 2020-2021 fiscal year and suggests a rowing back from the traditional Tory mark of fiscal prudence. It remains to be seen how much of this is an electioneering ploy and whether it will translate into reality. However, interestingly, as government announced its spending plans there was trouble brewing in its own party as voices of dissent were being raised at a party fringe meeting where MPs, representatives from the Taxpayers’ Alliance and the Institute of Economic Affairs indicated that although they recognised that people had suffered through austerity they believed that the government had not gone far enough in cutting public spending. John O’Connell, Chief Executive of the TPA went as far as to reject the word austerity saying we should refer instead to ‘living within your means’.

It is shameful to note that there are people who, whilst acknowledging that austerity has caused suffering, want more of it. The household budget framework of taxing to spend and the resentment felt by some that ‘their tax’ is funding freebie public services for all lies at the heart of it and reflects the neoliberal ideology that the state should take a step back and abandon people as authors of their own fate. The idea that ‘living within one’s [financial] means’ is a better measure of economic success than pursuing public purpose to benefit people materially and in terms of well-being is an indication of how far we still have to go to challenge this narrative. Not only do we need to counter the notion of ‘taxing to spend’ with the correct description ‘spending to tax’ we need to correct the idea that living within one’s means relates to money. The only ‘living within our means’ we need to be doing relates to our resources whether that’s people or the materials used in the production of goods and services that we benefit from. The only balance we need to make is the one between spending and resources.

Predictably, news of the government’s spending and taxing plans brought out the debt sirens on the left who have been posting FB memes that the national debt has soared under the Tories to almost £1.8 trillion since 2010. It is disappointing to note in the face of the real consequences of austerity that the language narrative about how government spends is still dogged by household budget explanations, ‘rising deficits’, ‘increased borrowing’ and ‘mounting national debt’.

The Conservatives response has been that the government’s prudent management of the public accounts has given them the fiscal space to spend. In fact, the Prime Minister trotted out the usual nonsense that the Conservative Party had ‘tackled the debt and the deficit’ left by the last Labour government and suggested disingenuously that it has only been able to increase investment in schools and hospitals because it had ‘cleared up the wreckage they left’.

All these descriptions used by both the right and the left wing lie within a flawed mainstream paradigm. On the one hand, the Conservatives have used it to defend the need for austerity to deliver their own ideological agenda and claim fiscal superiority over their political rivals. On the other, Labour persists in the language of tax and spend and finding the magic money tree in the Cayman Islands to fund their laudable progressive programmes. Even John McDonnell could not resist saying that the proposed tax cuts would ‘rip out £10-£20bn a year from our already decimated public services’.  When clearly, they can’t and won’t!

It is regrettable that the public finds itself still caught in the headlights of a long deceased monetary narrative the consequences of which live with us now and will continue to do.

Instead of taking the debt sirens at face value in their criticism of the rising national debt under the Conservatives we should instead be evaluating their economic record. Who gained from their spending and taxing policies and who lost out?   Measuring success by the state of the public accounts from the size of the deficit/debt or whether the government has balanced the budget or achieved a surplus is quite simply incorrect and tells us nothing about the context of the state of the public accounts.

This can best be evaluated with a brief look at both the government’s spending plans, its policy agenda and the on-going consequences of cuts to public spending.

The government whilst it is planning to spend £25bn on improvements to the road network it has not been similarly generous to the bus network which amounts to only £220m. Combined with its already announced spending on the environment of around £432m which is a fraction of the amount needed to address the challenge of climate change demonstrates the Conservative’s complete disregard for the environmental challenges facing us. Apart from the fact that since 2010 government has cut spending on subsidies to bus companies which have forced the closure of 3000 bus routes (not to mention all the other consequences of cuts to public sector spending including the NHS, social care, education policing and local government) this would have been a good time for substantial investment in sustainable public transport instead of giving precedence to roads and cars.

Of course, as indicated earlier, it cannot be denied that a domestic spending programme is a good move at a time when the figures show that the world seems to be sinking towards recession. However, it should not be surprising, given who has authorised the spending, that it is still framed within a neoliberal framework of privatised public services and public money going into private profit whether that’s the NHS and social care or privatised transport networks. It does not suggest a reversal of neoliberally inspired agenda which the Conservatives have been pursuing under cover of austerity.

It also ignores the on-going consequences of public sector cuts, reforms to welfare and the introduction of Universal Credit on the well-being of citizens and indeed the economy.  The scandal of the huge rises in homelessness is bad enough (the Charity Crisis estimates some 24,000 people last year) but just last week figures published by the Office for National Statistics revealed that 726 homeless people died on our streets in 2018. The figures showed a 22% rise over 2017 which was the biggest increase since data was first collected in 2013

The Chief Executive of Crisis, Jon Sparkes, responding to the figures and at the same time putting a human face on the statistics said:

“It is heart-breaking that hundreds of people were forced to spend the last days of their lives without the dignity of a secure home. This is now the second year running where we have known the true scale of the human cost of homelessness, yet still the lessons from these tragic deaths go unlearnt.”

Add to this the record numbers of people, as reported by the Trussell Trust earlier this year, who are using foodbanks along with increasing food insecurity and the spectre of malnutrition, far from turning the page on austerity, the consequences of it remain with us and will do for some time to come unless we get a change in government.

Just a quick look at other news from the last couple of weeks emphasises that just the promise of spending is not going to fix the damage quickly. Behind just these few headlines lie the reality of the harm that has been caused by austerity and government policy choices.

“England sees ‘worst summer on record’ for A&E waits”,

“Alcohol tax cuts cause nearly 2000 extra deaths”,

“Severe obesity among children aged 10 to 11 at record high…. Figures highest among children from the most deprived communities”

 “Unprecedented’ rise in infant mortality linked to poverty”,

“Nursing vacancies hit record high leaving patient care at risk”

For the lie of balanced budgets our economy has slowed, people have got poorer and inequalities have risen, and our public and social infrastructure is cracking up. And all the while the rich have got richer and appropriated an immoral share of the country’s wealth – all with the helping hand of government.

But it doesn’t have to be like this. There is an alternative world and it is up to us to bring it about not just for our sakes but for our children who will bear the burden of our inaction if we turn away.

It starts by understanding these simple concepts:

“A sovereign government is never revenue constrained because it is the monopoly issuer of the currency. In other words, its public debt level is irrelevant in terms of its capacity to spend in the future, unless it deliberately constrains itself with voluntary fiscal rules.

Such a government is never financially constrained in its future choices by its past fiscal position. 

Fiscal Space is [not] about financial resources. It can only be about real resource availability in a modern monetary economy where the government issues its own currency.”

Bill Mitchell 2017

It is both encouraging and exciting that the orthodox narratives are being challenged now in the mainstream media as modern monetary realities get an airing even if sometimes critically. The debate is moving on. We just have to ensure it reaches a successful conclusion.

 

As we said in our introduction, the video of Professor Bill Mitchell’s talk on the Green New Deal has been published on our YouTube Channel.

 

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ONS confirms: loan sales now affect the deficit

Published by Anonymous (not verified) on Wed, 25/09/2019 - 10:39pm in

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Deficit

Everyone’s attention was elsewhere yesterday, but ONS’s monthly release on public finances included its promised update on the inclusion of student loans in the national accounts.

Its new methodology had been confirmed in July, but the relevant statistics were only updated in the new release. In addition to retrospective revisions of Public Sector Net Borrowing (back to 1999/2000), ONS announced that on their new approach the two sales of income contingent repayment loans had “lost” £1.2billion and £1.5billion respectively and that these sums had also been added to the deficit for 2017/18 and 2018/19 respectively.

I use “lost”, but the ONS put it as follows:

Where we identify that the sale price was significantly different from the value recorded in the national accounts balance sheet, we record a capital transfer equal to the difference in value between the realised sale proceeds and our estimate of the corresponding loan asset’s value, which affects PSNB.

Our analysis of the pre-2012 loan sales that took place in December 2017 and December 2018 shows that the difference in value on those occasions was £1.2 billion in 2017 and £1.5 billion in 2018; we recorded capital transfers of those amounts for each of the loan sales. (my emphasis)

The point being that the loans were sold for less than ONS thought they were worth.

National accounts are UK-wide and work differently to departmental accounts. These points explain the discrepancy between the £2.7billion sum above and the £2billion loss recorded in the Department for Education’s accounts. DfE only has responsibility for “English” loans (loans made to English-domiciled students at UK universities and EU students at English universities). Either way, it’s a significant loss: over 50 Garden Bridges.

As a result of the classification changes to sales and general student loan accounting, the deficit for 2018/19 (year ending March 2019) was pushed up by £12.4billion. (The estimated loss on issuing loans is now counted as expenditure in the year that loans are issued, rather than in the year that they are written off and, as a corollary, the government is only allowed to count interest it expects to be paid as income – rather than all interest accruing).

The Office for Budgetary Responsibility has not yet incorporated the loan sale change into its projections for 2019/20 (presuming a third sale goes ahead), but it anticipates that the impact will be slightly higher. Student loans will anyway push up the projected deficit from under £30billion to over £40billion. Public Debt is unaffected by this change (there is still a fiscal illusion at work there insofar as student loans as an asset are excluded from the calculation).

Government had previously stated that a loan sale should have no negative impact on the deficit. And this was originally formalised as a criteria that any sale would have to meet. Now that sales do count, it is clearer that the programme is generating a loss. Sajid Javid may still push ahead after deciding that reducing the debt is more important. It is clear that the spending restrictions outlined in the Fiscal Mandate championed by the former chancellors, Hammond and Osborne, are falling by the wayside. See my recent piece for London Review of Books for more detail.

In general, we now have national accounts that better reflect the nature of student loans at the time the loans are issued and capture the impact of sales. The opportunism of previous administrations is now curtailed and we can be a little more assured that the presentational advantages of certain policies have diminished.

To speak from a personal perspective, we now have an approach to sales for which I argued back in 2017.  Sales are now being treated as “capital transfers”, rather than “revaluations”. And we have now resolved most of the issues I raised at the Treasury and Economic Affairs committees back then.

More concretely, these changes mean that alternative proposals such as Labour’s pledge to abolish tuition fees become easier to implement, given the manner in which questions of fiscal competence have become focused on the “deficit” as measured by PSNB. In particular, a costing similar to the one prepared for Labour’s 2017 manifesto now becomes easier, because things that weren’t counted as expenditure previously now are and so can be offset against replacement policies. I will talk about this in a subsequent blog in relation to the Institute for Fiscal Study’s annual education report, which was published last week.

Getting our priorities right. Our planet or our lives.

Published by Anonymous (not verified) on Sat, 21/09/2019 - 7:45pm in

This week’s MMT Lens will necessarily be shorter as GIMMS is gearing up for a busy few weeks in Brighton, London, Manchester and Leeds not to mention Wales at the beginning of October.

Before we move on, we’d like to tell you that we still have tickets for our two seminar events and Talk and Social.

If you are in or near Brighton on the 23rd September and would like to find out more about the Green New Deal and the Job Guarantee and how they can be paid for, follow the link to register for our free event.

We also have some tickets left for our free Training the Trainers Seminar in London on the 24th September which will look specifically at how to discuss the Green New Deal and the Job Guarantee.

We also have a few tickets left for our talk and social in Leeds on the 28th so again please follow the link to register.

 

 

Electronic sign with the slogan "End Climate Injustice" sited by a habour on a cloudy dayPhoto by Jon Tyson on Unsplash

 

“when 1500 scientists, including 100 Nobel Laureates, petitioned the world in 1995 that serious remedies were required to halt the destruction of the living fabric of the Earth, their warning was ignored. Had it been 1500 economists warning of a stock market crash it would have got banner headlines and emergency government action.”

Robert James Brown – Optimism: Reflections on a Life of Action

 

It was probably impossible not to be aware of the two astonishing interviews that took place this week with the former Prime Minister David Cameron and one of his former coalition partners Jo Swinson who is now the leader of the Liberal Democrats. Swinson, a graduate from the London School of Economics and Cameron, who graduated from Oxford with a degree in Politics, Philosophy and Economics, displayed astonishing indifference to the consequences of austerity.

It was difficult not to be angry at Cameron’s lack of remorse or his regret that he wished he had implemented austerity harder and faster. Equally shameful was his claim that the strategy had worked and that it had been done in a fair and reasonable manner. As our social fabric and public infrastructure continues to unravel and citizens endure the consequences of cuts to public spending which have affected every corner of society and its public institutions, one has to wonder where he’s been hiding all this time.

His partner in the crime of austerity was equally unabashed about her contribution to the devastation caused by government cuts and intimated she’d not only be prepared to do it again, but also that the Liberal Democrats would be willing to cosy up to the Tories in coalition if and when necessary.

Taking a combative stance about government’s spending plans, she referred to the ‘magic money tree’ and criticised the government on the basis that they had given no indication about how they were going to pay for them. In her interview she said, without a hint of shame for supporting austerity, ‘sometimes it’s about making tough choices and about recognising where you had to make taxation and spending decisions’. This criticism of the loosening of the government’s purse strings (for what that is worth) is all the more puzzling given her promises on the enormous challenge of tackling climate change which surely will involve some government spending to achieve.

How shallow and self-interested our politicians have become. The ping pong game played about who can be more fiscally responsible has continued remorselessly, without a moment’s regard for those who have been hurt by it. Liam Byrne’s note left in the Treasury that there was ‘no money left’ has a lot to answer for. It gave the Tories just the narrative they needed to invoke household budget narratives and fear of deficits and debt, whilst suggesting that the government could go bankrupt without cuts to public spending.

It gave them licence to implement cuts to public services, reform welfare and sell off more of our public infrastructure. Some claim that this debt rhetoric was nothing less than economic illiteracy. However, one might also make the case for it being the perfect opportunity for the Conservatives to deliver a right-wing agenda aimed at diminishing the role of the state, shifting the burden onto citizens as agents of their own fate and operating as an agent of corporate welfare through pouring public money into serving private profit. The austerity lie has been the perfect cover for dismantling our public infrastructure and driving market solutions in its place.  And we all fell for it because we were taken in by false household budget narratives about how governments spend.

The MMT Lens has covered the price of austerity many times over the past year. The cold statistics on homelessness and people using food banks, the rises in poverty, the increasing waiting lists in NHS hospitals for life threatening diseases and the consequences of welfare reform all translate into the lives of real people whose existence has been shattered by cuts to public spending. When politicians coldly and without emotion indicate that they would do it again, it isn’t any wonder that people living with the consequences of a broken capitalist system have lost confidence in politics and in politicians to improve their lives. It isn’t any wonder that we are witnessing a rise in extreme right-wing politicians who cynically feed hate and division with the illusion that the problem lies with outsiders and immigrants and that they alone can protect the working class.

What is left if politicians have abandoned democracy to stuff the pockets of corporations, and their own, with public money whilst serving their own interests? What is left if they reject the only solutions that could bring about the radical change needed to address climate change and rising poverty and inequality? For too long, fiscal rules related to budget deficits and debt have dominated the spending decisions made by governments in their quest for the false holy grail of balanced budgets or surpluses. Heads have been buried in the sand as the consequences have rolled out on people’s lives and injustice prevails.

Monetary policy has run out of steam (if it ever had any at all) and fiscal policy is all that is now open to governments around the world if we are to face the stark facts and act. We must reject the narratives which ask how such a challenge can be paid for, or those that suggest that the immoral wealth of the few can be commandeered to do so.  These ideas do not represent modern monetary realities. As Greta Thunberg said if we can bail out the banks, we can save the planet. Paying for stuff is as simple as a computer keystroke but requires the political will to do so.

The stakes are now very high. In fact, to be blunt, the stakes are our planet and the survival of future generations as GIMMS last two blogs have already discussed.

Looking on the positive side, which we must always do, we are beginning to see the inklings of change; while politicians prevaricate, it is our children and our grandchildren who are at the forefront of the challenge being posed to the established economic order.

Yesterday, there were extraordinary scenes across the world as millions of people from Sydney to London and New York marched for urgent action on climate breakdown. It is heartening.

Earlier this week in a speech to the US Congress Greta Thunberg summed up her views saying:

“Don’t invite us here to just tell us how inspiring we are without actually doing anything about it because it doesn’t lead to anything.  If you want advice for what you should do, invite scientists, ask scientists for their expertise. We don’t want to be heard. We want the science to be heard. I know you are trying but just not hard enough.”

 And that is the crux of the matter. We have sat on our hands for too long enjoying the fruits of the planet without thinking about the consequences. Politicians fond of soothing platitudes and empty promises keep us in line at the ballot box. Climate deniers in big corporations and institutions manipulate the facts or downright lie whilst continuing to exploit the resources that have brought some of us the comforts we enjoy. They do so with short term profits in mind rather than the long-term consequences to the planet and people.

 In its report published this week ‘The Cost of Doing Nothing’ The International Federation of Red Cross and Red Crescent Societies reported on the escalating humanitarian cost of climate change and the consequences of failing to act.

It estimates that the climate crisis is leaving two million people a week needing aid as the extreme weather events batter communities with destructive force and cause inexcusable suffering and death. It also estimates in its most pessimistic scenario that the climate-related humanitarian costs could be as high as US$20bn by 2030 to deal with the aftermath of those afflicted by storms, floods and droughts.

The President of the IFRC, Francesco Rocca, said:

“These findings confirm the impact that climate change is having, and will continue to have, on some of the world’s most vulnerable people. It also demonstrates the strain that increasing climate-related disasters could place on aid agencies and donors.

The report shows the clear and frightening cost of doing nothing. But it also shows there is a chance to do something. But now is the time to take urgent action. By investing in climate adaptation and disaster risk reduction, including through efforts to improve early warning and anticipatory humanitarian action, the world can avoid a future marked by escalating suffering and ballooning humanitarian response costs,

It is sad to note given the time we have known about the threat of climate change, time that we wasted, we have reached a place where mitigation for our excesses becomes a solution. We need to do better than mitigation; we need to rethink the very basis upon which our societies function.

In another report published this week A Just(ice) Transition is a Post Extractive Transition the campaigning charity War on Want sets out to examine the social and ecological implications of climate change commitments to move towards renewable energy solutions.

It suggests that not only are those commitments in themselves weak and not enough to address the scale of the emissions problem, but that as we move away from fossil fuels the resource pressures will simply change as one is exchanged for another. This will cause yet more ecological damage and exacerbate the already existing inequalities and injustices arising out of further exploitation of metals and minerals in the Global South in order to deliver a Green New Deal in the Global North.

Those countries could yet again pay the damaging price for the Global North to perpetuate its love affair with growth, driving more inequality and pushing the planet beyond its ability to provide with ever more devastating consequences.

We don’t just need a Green New Deal, we need the will to deliver it in a way that brings social and economic justice for all, wherever they are on the planet. We must ensure that our shift towards sustainable economies is inclusive. We must reject a model that prioritises the wants and desires of the West at the expense of those who are exploited to provide them. As rich nations, we will need to consider ending our economic privilege in terms of the distribution of real resources and work cooperatively to deliver a steady-state global economy.

 

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Change is coming. Keep calm and keep on PUSHing

Published by Anonymous (not verified) on Sat, 17/08/2019 - 9:32pm in

Neon sign with the word "change"Photo by Ross Findon on Unsplash

Each week, GIMMS aims to keep its readers abreast of the latest stories in the news and they form the basis of our weekly MMT Lens.  Each week we search for positive signs that things are changing, given that it always seems to be a catalogue of increasing doom and gloom which can be depressing at times. However, this week we’d like to begin the lens on a positive note with reference to Professor Bill Mitchell’s blog earlier this week We are approaching an era of fiscal dominance’.  We can surely be encouraged by his words which suggest that we are observing a paradigm shift as the neoliberal narrative is failing big-time and the dissonance in mainstream economics and political debate is getting more intense and more public. It shows promise that such questioning is beginning to take place in public arenas.  Recent articles from Reuters and Bloomberg, along with the growing understanding of monetary realities by more and more people across the globe, must give us hope that the challenge to the mainstream macroeconomic consensus which has dictated government policies for decades is beginning to bear fruit. All we need now is to get the politicians on board! Alexandria Ocasio-Cortez in the US and in the UK, MP Chris Williamson, are already shining a light on how money works and how such an understanding will allow us to respond to the challenges we face and deliver progressive agendas to meet them.  To use an analogy from nature, a seed planted and nurtured will grow.

However, whilst bearing that in mind, we cannot ignore the daily news which demonstrates how the flawed economic system which has dominated the last four decades, along with the last 9 years of government-imposed austerity, have created vast disparities in wealth and increased poverty and inequality. Whilst Brexit thunders on in the political arena and mainstream news reporting the very real consequences of public sector cuts and government spending policies are increasingly in evidence. People are suffering, people are dying, and our public and social infrastructure is crumbling and breaking down. All those things which form the foundations of a healthy society and allow it to function are failing (although the government propaganda might lead you to think otherwise). These are the very real consequences of government cuts and policies and should be the wake-up call that shocks the nation into active opposition.

The government is promising increased spending on policing and proposes extended stop and search powers in response to rising knife and other crime. However, it has failed to acknowledge the role of austerity in rising crime and the drug crisis which has been termed as a public health emergency and has resulted from the decay of our publicly paid-for institutions, local government and other supporting organisations along with rising poverty and inequality. Over 760 youth clubs have closed and 3500 youth workers have lost their jobs as a consequence.  Nearly 130 libraries, which provide many other important services including access to the internet, were scrapped in 2018 alone and those that remain do so on reduced hours or are serviced by volunteers instead of a paid workforce. Our public land assets are increasingly being sold off, from our parks to playgrounds, police stations and NHS estate.  Developers are doing very nicely from this sell off of previously owned public assets.

As our communities start to shrink and die, crime rises, the old and sick become isolated and distrust and fear grows as the social frameworks which knit people together as communities are dismantled and fall into decline. The last 40 years, which have given precedence to business and profit seeking, have diluted the importance of the public institutions which lie at the heart of a healthy economy and national well-being.  It is withering away and with it any semblance of a civilised society. The neoliberal narratives of self-help and a blame culture have poisoned the concept of human cooperation, and are leaving us confused and lacking in hope.

As noted in last week’s blog, far too often the loss of this public and social infrastructure is explained away in financial terms of unaffordability; that expenditure on such infrastructure is reliant on an economy that is growing and a fiscally prudent approach to the state finances.  Indeed, Sajid David the new Chancellor suggested only this week that it was down to the hard work of the public that investment in public services could be made, once again making an implied but incorrect connection between tax collection and paying for public services.

The public has been bamboozled for far too long by household budget descriptions of how money works. It seems only right and proper to us that like private individuals and households, governments should behave the same and spend in relation to income.  However, instead of looking at the deficit and debt arguments which proliferate and determine the public response to a government’s actions we should be examining its economic record and ask ourselves whether it has delivered a healthy and sustainable economy that serves the public purpose? It’s what you do with your spending that really counts. Who benefits and who doesn’t? Not whether you balanced a budget or achieved a surplus. Deficits certainly matter but not in the way that most of us think they do.

In the case of the UK, the ones who have benefited from Tory policies are corporations, big business and wealthy people, not just in money terms but also through the influence that such organisations and private individuals exert on politicians to favour them.

Just a quick flick through this week’s newspapers brings to the fore the consequences of ideology, austerity politics and government spending decisions on people’s lives.

The founder of the Museum of Homelessness reports that one homeless person dies every 19 hours on average, while shamefully more than a quarter of a million homes lie empty. Matthew Downie, the director of policy and external affairs at Crisis, commented that was disgraceful that hundreds of vulnerable people across the country have died without the dignity of a secure home. He points out that many of these fatalities are occurring, not while people are sleeping on the streets but when they are in temporary accommodation that is not fit for purpose.  Most people don’t choose to live on the street or want to be shoved from pillar to post living in temporary accommodation or relying on the goodwill of friends, sofa surfing.  Families with children, young and older people have become victims of government spending choices, not because there was no money but because it suits an ideologically driven neoliberal agenda of a small state and self-reliance.

The Bureau of Investigative Journalism researching effects of poverty in Oxford which is a city with one of the highest average salaries in the UK has found that in its poorest wards, men die on average fifteen years younger than their counterparts living in Oxford’s more prosperous areas. It noted that the gap that had been recorded between 2011 and 2015 had increased by four times more than it had been between 2003 and 2007. Over England and Wales, differences in life expectancy for those living in the most and least deprived areas was nine and a half years for men and seven and a half years for women (2015-17). The increasing divide between the rich and the poor is conveyed in their stories which are distressing to read (link here).  While the public applauds fiscal prudence, people’s physical and mental health is declining, and people are dying as local authorities and organisations struggle to keep up with the demand for support because of cuts to government funding leading to cuts in social programmes designed to assist vulnerable individuals, families and children.

Added to this situation are the cuts to spending on a welfare system which, following reform, is not fit for purpose and has left people struggling financially and in fear of getting into debt. The bottom line is that when people don’t have sufficient monetary resources to live a decent and dignified life, not only do they suffer unnecessarily but the economy also takes a hit. Money removed from people’s pockets through spending cuts is money removed from the economy.

While the Chancellor of the Exchequer applauds the Conservative record on employment this week and thanks the public for their hard work, unemployment rises by 31,000, which is the biggest rise since 2017, vacancies are down and although earnings did rise once adjusted for inflation, they are still below pre-crisis levels. As usual, the government fails to acknowledge the working realities of those figures. People doing three jobs just to keep themselves and their families afloat, the increase in zero-hour contracts to near record levels, up 15% from 791,000 a year ago to 896,000 in the last three months, bogus self-employment and the gig economy which is increasingly being used to supplement people’s wages are the realities of the statistics presented by the government.

It was also revealed this week that NHS spending on private mental healthcare had risen by almost 30% to £100m in just one year. Sick and vulnerable patients are being sent hundreds of miles away from home away from their families for lack of sufficient local NHS beds to accommodate sick individuals who need expert care. The government’s pledge to end out of area care by increasing the number of beds has yet to be honoured and the NHS is paying huge amounts of public money to private, profit motivated companies whose rationale is deriving profit, not delivering first class, expert care.

Figures from the Department of Health and Social Care show that last year it handed a record £9.2bn to private providers such as Virgin Care and the Priory mental health group. When Matt Hancock pledged ‘there is no privatisation on my watch’ clearly his statement fails to reflect the policies of successive governments, including the current one, which has until more recently been a slow burn towards privatisation and is now speeding towards a successful conclusion – the creation of a two-tier health services ‘alla’ accountable care in the United States.  The media and the politicians have done an exceedingly good job at concealment of the intentions.

The beneficiaries of money from the public purse are not confined to the NHS and nowhere more evident is the outsourcing of children’s services. In 2014, despite opposition, changes to regulations made it easier for commercial companies to bid for contracts and for-profit organisations are now involved in the provision of foster care, children’s homes and children’s social services.  Ray Jones, Emeritus professor of social work at Kingston University and author of ‘In Whose Interest? The Privatisation of Child Protection and Social Work’ (link here) noted in an article last week:

“For the past 40 years, successive governments have pushed crucial services out of public ownership and into the private market. Despite the dismal track record of big outsourcing companies failing to deliver on their public service contracts, and overcharging central and local government, opportunities continue for private companies to make money from the public purse”

While this government has pursued austerity on the basis of money scarcity, the idea that public services can only be paid for if we have a healthy economy and the belief that the private sector is more efficient, the facts tell a different story. As Ray Jones notes:

not only are local authorities spending large sums with private companies, they are purchasing poorer quality services at a higher cost.’

Public money is being siphoned off into the private sector for profit whilst at the same time, the government plays the ‘Mikawber’ card which suggests that there is no money for public services and deceives the public with its lie. As was pointed out earlier, we should be less concerned about the size of the deficit which should always be seen in context and more concerned about what the government is spending on.

As fares are set to rise on a privatised rail network, a private company wins a ‘lucrative’ contract to run the HS2 and graduates in England face increasing debt burdens as total interest on undergraduate student loans is set to double, it is clear that the effects of the last 40 years of entrenched neoliberal dogma, combined with a deliberate political intent to use false analogies about how money works are now coming home to roost as daily we see evidence of the consequences.

This is not a time to watch as bystanders; this is a moment for action.  Some will tell you that ‘we can’t do anything so why try?’ But let’s not be defeatist. We are already making a difference, as activists and campaigners from around the globe work together to challenge an idea that’s had its day. As one of GIMMS’ favourite economists reminds us from time to time, we need to keep on PUSHing until something happens.

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The post Change is coming. Keep calm and keep on PUSHing appeared first on The Gower Initiative for Modern Money Studies.

The Strange Case of the Missing Money

Published by Anonymous (not verified) on Sun, 11/08/2019 - 11:58pm in

Woman holding coins and "make a change" written on a scrap of paperPhoto by Kat Yukawa on Unsplash

“Economics lie at the very root of practical morality”

Josephine Butler, English feminist, social reformer and campaigner against injustice.

Boris Johnson has been distributing largesse. Well, not quite distributing it; it’s still in the pot of promises. There will, apparently, be extra money for the NHS, money for policing and education and even some to manage Brexit. If it were true then potentially it’s a good thing, but of course like everything the devil is in the detail.

After 9 years of being told endlessly there was no money and that cuts were necessary to deal with Labour’s economic mismanagement suddenly it just appears out of nowhere. Shouldn’t someone be asking how are they going to pay for it? Has someone checked out their fully costed budget? If it were Labour doing the spending then, of course, these are exactly the questions that would be being asked, even though they don’t represent monetary realities.

Of course, in the lexicon of monetary orthodoxy, aka household budgets, we can all thank the previous Chancellor who squirrelled away money in the ‘rainy-day fund’ for just such an event! Except, of course, that the question of how we pay for it doesn’t reflect how money works at all; the rainy-day fund is a figment of former chancellors’ imaginations because governments don’t spend like households and neither have nor don’t have money; they cannot put money aside or save for future expenditure. Those of us who know how it works might suppose it is simply missing knowledge on both sides of the political divide but maybe it is just a torturous game played out in the Houses of Parliament over the despatch box to deceive the public and deliver political agendas.

On the other hand, the new Chancellor Sajid Javid doesn’t seem to get it at all – or maybe he does. Whilst Boris Johnson is going on a spending spree of promises to keep the nation sweet in the run-up to a possible election, deal with the initial fall-out from Brexit and avoid the possibility of recession (currently being blamed on Brexit by media pundits whilst carefully ignoring the impact of 9 years of cuts to public spending on the economy), Javid said this week that he’s not expecting a recession at all (he’s checked with the orthodox economic oracles). He has claimed that increased growth will allow the government to meet its spending pledges (despite a contraction in the economy between April and June). Presumably, he’s counting on the additional tax that will be poured into the government’s coffers in the event of the engines of the economy perking up. Just how that miracle will occur is anyone’s guess given that the government actually has to spend before anyone can even pay their tax! If he knew this long kept secret (except he probably does but must keep to the business of government’s fiscal discipline) he could increase spending at a stroke of a computer key to avoid or lessen the worst effects of any potential recession which of course he is denying is a possibility.

Apparently, according to him, ‘the fundamentals of the British economy are strong – wages are growing [and] employment is at a record high”. Did anyone tell that to the funeral director offering budget funerals in this the final episode of the BBC programme Broke who is working a variety of jobs over 120 hours a week to keep his and his family’s heads above the water? Or those other people featured in the programme series who struggle every day working long hours on low wages, on zero hours or in the gig economy to keep their household budgets balanced and out of debt or indeed live on the beach for want of proper accommodation? There is a huge dissonance between the spoutings of government ministers and the realities on the ground for ordinary people.

Now let’s get back to that extra money Boris Johnson was talking about. Boris made his announcement in an article in the Sunday Times saying, ‘It is thanks to this country’s strong economic performance that we are now able to announce £1.8m more for the NHS to buy vital new kit and confirm new upgrades for 20 hospitals across the country’. So here we are again back to the idea that a healthy economy with higher tax revenues allows a government to spend (not withstanding that the economy is currently spiralling downwards along with other economies across the world). The suggestion is that the Conservative government has been fiscally prudent and that its economic policies which have resulted in higher tax revenues allow it to spend more. Again, a typical household budget response to government spending which is a cynical deception to cover its ideological intent.

However, not long after this announcement it became clear that this £1.8bn cash injection for the NHS capital budget which covers buildings and equipment isn’t extra money at all. It isn’t even new money, and nor will it be sufficient to make up the loss of NHS funding after 9 years of cuts to public spending. Krishnan Guru-Murthy from Channel 4 in an excruciating interview with the health minister Chris Skidmore suggested that it was money hospitals had saved by cutting services that they were now able to spend on capital projects. Trying to get Skidmore to admit the truth he said:

“I’m trying to work out where this money has come from. Hospitals up and down the country have been saving money for years but have not been allowed to spend it. And the understanding from experts like the Nuffield Trust is that this is an accounting exercise which now releases that money to be spent. Money that they saved by cutting on services that they’re now able to spend on capital projects.”

It turns out that Trusts couldn’t spend the cash they had saved until of course Boris Johnson claimed in a fanfare of trumpets that he was giving the NHS more money. This is nothing but yet another act of sleight of hand meant to put the government in a good light in the event that it will have to fight an election.

And let’s not forget either that small issue of Boris Johnson’s big red bus and his promise of £350m a week for the NHS if we voted to leave the EU?  People may have thought it sounded a great deal of money when multiplied up but it wouldn’t even cover the real costs of the cuts the government has already made over the last nine years and is a few specks in the ocean compared to the annual government expenditure on the NHS which in 2017/18 was around £122bn, of which £108bn was spent on day to day running costs.  The well-being of the nation and the economy, which depends on a well-funded publicly paid for and managed NHS, has been at stake for the past nine years, while the government has pretended there was no money for our health service and pushed through reforms designed to irrevocably change it and finish the work of successive governments. The NHS has lost its ‘N’; services and treatments are being cut left, right and centre, hospitals closed or downgraded and ‘care in the community’ has become the next big byword for change to cut costs as private healthcare companies no longer taking over through the backdoor are brazenly and openly charging now through the front door.

In another analysis this week, on Johnson’s funding pledges for education it would also appear that things are not quite as they seem. The Prime Minister committed to ‘invest in our schools and close the opportunity gap in our country’. However, new research published by the Education Policy Institute this week has not only found that the pledge would cost double what the government has promised, but also that it would disproportionately benefit the least disadvantaged schools thus reinforcing the educational inequalities that prevent many children from getting the best start in life.

Furthermore, the proposed extra money fails to take account of the real-life circumstances of children who won’t only lose out from an unfair distribution of education funding. Combined with the cuts to public spending on services, reforms to the welfare system, poor wages, insecure employment, homelessness and poor housing not to mention children in temporary and unsuitable accommodation or coming hungry to school, the effects can equally compromise a child’s future life chances and ultimately that of the nation itself. Government cannot continue to ignore the social determinants of a healthy society which cuts to public spending have undermined.

GIMMS might have missed it, but the one spending commitment that seems to have been left off the list is the environment. If anyone can tell us differently then we would be pleased to stand corrected.

The most pressing issue that we humans face is global climate change and in the last few weeks our planet has been displaying extremes of heat, storms and flooding and wildfires in the Arctic. Professor Michael Mann at Penn State University, one of the world’s leading climate scientists confirmed in an interview last year that the impacts of global warming on our planet ‘are now ‘no longer subtle…[and] we are seeing them play out in real time’.

Scientists who were meeting in Geneva earlier this week are soon to publish a stark warning about the damage also being done to the land surface of our planet as a result of the human activities which have led to soil degradation and erosion, expanding deserts and the destruction of forests and biodiversity.  Land which has been an asset in combatting climate change has now been turned into a major source of carbon as the battle for land increases to grow biofuels, plant material for plastics and fibre, timber for paper and furniture and food for growing populations.

As citizens of planet earth, we should all be concerned about the lack of real action by governments across the world. Whilst we all can make our personal contribution to changing our own behaviours, the reality is that it is only government with its sovereign spending and legislative powers that can drive the level of change we actually need to save ourselves.  We have a choice, as Professor Mann explains, we can keep on walking out into the minefield or we can reverse course and get off as quick as we can.

When politicians and think tanks ask where the money will come from to invest in addressing climate change, it is the wrong question. We should instead be asking what the consequences will be of inaction, as increased consumption and growing world populations put ever increasing pressures on nature’s resources which are being depleted far faster than the planet’s ecosystems can renew them. This is the only overspending that we should be concerned about.

Arguments about the size of deficits and debt should be put aside for the more important arguments about how we address these challenges. We must identify what resources we have and how we can use them effectively, not only to preserve planetary life but also deal with the increasing poverty and inequality that has arisen as a result of both a flawed economic system and a warming planet, which are already increasing the pressures on land and water use.

An understanding of how money works combined with an appreciation of what a Job Guarantee is and a discussion about the Green New Deal are an important start to the public conversation about where we go from here. Certainty is an impossibility. Life doesn’t deal in chocolate boxes, but we have to start somewhere and as Professor Michael Mann said we have a choice we can keep on navigating the mine field or we can reverse course.

In a recent article, Larry Elliott and Richard Partington posed the question “Boris says he’ll spend but who will pay? Will they break with austerity even if that means higher public borrowing they ask? The article notes that the Institute of Fiscal Studies has indicated that Johnson’s tax promises are expensive commitments which could cost £9bn a year. The authors quote the OBR which said that it would push government borrowing and debt up from the levels in their forecasts adding that there was no war chest or pot of money set aside that would make them a free lunch. They refer to Gordon Brown’s ‘golden rule’ only to borrow for investment (now where have we heard that before?) and George Osborne’s pledge to eliminate the deficit within five years and quote the UK’s ‘total debt pile’ and the fact that the deficit is still a ‘problem’. They even refer to John McDonnell, who has suggested that Labour would ‘raise spending with greater responsibility, as the party would increase taxes on high earners and businesses.

This is the false language of household budgets and quite simply does not apply to a sovereign currency issuing country. A government that is monetarily sovereign neither needs to tax or to borrow in order to spend. And yet our politicians, many journalists and institutions hang on to outdated concepts, regardless of the realities of modern money. The discussion hangs on deficits and debt, balanced budgets and surpluses when these are no more than red herrings which take no account of the economic context, the economic record of the government or the consequences of government policies on the lives of citizens.

If the government is us then it is beholden on us to use our power to change how things work. Let’s not pay the price for not doing so. There is an alternative world out there if we choose to stand against the tide. The first small step is understanding that a government is defined by the spending choices it makes and that there is no scarcity of money, only lack of political will.

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