deficit spending

Change is not a pleasant process, but we must not shy away from it. There is an alternative. It’s time to engage. It’s time to make the world anew.

Published by Anonymous (not verified) on Mon, 11/05/2020 - 1:47am in

World in handsImage by Mariana Anatoneag from Pixabay

All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence.

Martin Luther King, Jr.

 

While the scale of the real human tragedy of austerity and lack of strategic planning continues to be revealed in our hospitals, care homes and community settings, this week the Bank of England warned that the UK was facing an historic recession. UK demand has plummeted, and consumer confidence has declined sharply as the unemployment rate has risen and people’s concerns are reduced to the daily task of just living in lockdown.

At the same time, in response to the government’s fiscal injection to mitigate the dire consequences of the economic slide that is unrolling before us, the debt sirens are predictably rising from the icy waters in an attempt to lure, yet again, an unsuspecting public into believing that there will be a future financial price to pay, when the human cost is the real issue. Given ten years of cutting vital public infrastructure, the consequences of which we are currently living through, the prospect of a deep recession which will last well beyond the end of the pandemic and the challenges we face from climate change are what we should worry about rather than the government deficit.

If we are to believe politicians and think tanks, there will be no option but to cut public spending to reduce public debt once the pandemic is over. Indeed, that message is being reseeded in the public consciousness by past and present Tory Chancellors of the Exchequer. With George Osborne calling for more austerity only a few weeks ago, Rishi Sunak waded in this week with the suggestion that he was preparing to ‘wean’ businesses and workers off the government’s furlough scheme by cutting wage subsidies as part of an attempt to get people back to work as and when the lockdown is eased in the future. The flaw in his plan is that is difficult to see at this precise moment in time where these ‘alternative’ jobs will come from – at least in the short to medium term.

He also claimed that the nation might become ‘addicted’ to state generosity. Apart from the offensive nature of this statement (which suggests that working people are living the high life and lazing their lives away behind the curtains on public money when in reality they are trying to make ends meet on 80% of their pay, or still waiting as self-employed to get any money at all), the idea that anyone would choose to remain out of work tells us two things; firstly that the government is not beyond using scare tactics to bully people back to work when they are already fearful for their financial security and secondly that the government’s fiscal injection, which was initially hailed as a positive step forward, comes with conditions that are still being framed in household budget terms. The narrative is being cynically being shaped for a new normal. The government, instead of serving the nation, is once again and predictably intending to serve only a small section of it while punishing the rest.

It would seem that under the radar the groundwork is being laid for an economic reset to complete the already skewed distribution of resources into ever fewer hands. More austerity, more cuts to our public and social infrastructure which is already on its knees and then the final ‘coup de grace’ or end game the privatisation of the remaining parts of the public infrastructure including the NHS. As we are already seeing, the government is using the pandemic to transfer even more key public health duties into the private sector. Government contracts are already being awarded centrally to the private sector under the emergency measures with no public scrutiny. Deloitte, KPMG, Serco, Sodexo and Boots are just some of the companies which have secured public funding to manage drive-in testing centres, purchasing of PPE and other vital equipment. This is disaster capitalism at work and the alarm bells should be ringing loudly. Allyson Pollock, who is director of the Newcastle University Centre for Excellence in Regulatory Science, co-author of the NHS Reinstatement Bill and NHS campaigner said ‘We are beginning to see the construction of parallel structures, having eviscerated the old ones. These structures are completely divorced from local residents, local health services and local communities.’

Democracy, both local and central, has over decades been undermined. Now, under cover of COVID-19, we are seeing the State using it to ally with big business to suit the continuing ideological interests of the former and the profit motives of the latter. Trade deals currently being negotiated with the US by the UK government are part of this growing globalised structure aiming to reinforce the power of corporations with state support and dictate the terms by which citizens live their lives.

In 2010 people accepted Tory austerity because they believed the narrative that Labour had overspent, and they had to get the public finances under control. They understood their own personal finances and thought, understandably, that the state’s must be the same. Even now, despite the growing number of people that know that the State’s finances cannot be likened to their own household budget, the government is trying to re-forge the worn-out austerity record anew.

Will the public be taken in yet again by this false narrative? The economist Danny Blanchflower said recently that he thought that people would not accept more austerity. If that were true, then at this moment of national crisis it should be a public wake up call. We don’t have to be economists to understand what the consequences are. Every afternoon at 5pm with the government’s daily briefing, the evidence is increasingly being revealed of the very real human costs as financial hardship bites and the death toll increases.

We need to learn that economics is then not the dry, boring subject that we have patronisingly been told should be left to the experts. Quite simply, it determines what happens to each and every one of us as a result of the ideologically driven political decisions made by our elected politicians. Although distrust, quite rightly, has grown about our political institutions, the truth remains that whilst we still have an important role to play in holding them to account for their policy decisions we can only do so from a position of knowledge and the willingness to challenge the status quo.

Over decades, we have been primed by politicians, institutions and the media to accept the economic narrative. We have stood by as our health and welfare systems have been cut to the bone. We have accepted that cuts were necessary rather than questioning the economic orthodoxy which spawned them. We have accepted the flawed, politically pushed narratives that deficit reduction or balanced public accounts were more important objectives than serving the interests of citizens. Those who have borne the consequences in terms of hidden poverty and inequality, attributed by pernicious ideology to their own failings, are now slowly waking up to the economic realities of their lives. Insecure employment and low wages, hunger and food banks and homelessness have all arisen from the pursuit of a damaging ideology whereby government has relinquished its responsibility to serve the best interests of its citizens and placed the blame on those citizens themselves. All the while also sowing division to serve its smoke-and-mirrors agenda – the expropriation of public wealth into a few private hands.

We have been persuaded by a false narrative that government deficits are a burden rather than an essential and normal mechanism to serve the national interest. While the government focuses on getting the ‘economy’ back to normal, as if it were an unidentified object out there in space, it has ignored that, fundamentally, the economy is its people. After decades of living in a financialised world of rentiers, hedge funders and money men we have lost sight of the real wealth – which consists of people and the natural and other resources which sustain life on our planet.

The economy is nothing without the people, or indeed those resources. Health and social care workers, teachers, local council employees delivering vital services, police officers keeping the peace, farmers producing the food we eat, factories processing it or lorry drivers delivering it to supermarkets and stores, those who collect our rubbish, clean the streets and provide all sorts of other services to the public, the list is long of essential workers whose value during this extraordinary event we are only just beginning to appreciate having taken them for granted for too long. It is not the billionaires that create the wealth of the country, it is the people. We make our contributions to societal and economic wellbeing, not through the tax we pay (which whilst essential is not required to fund government spending as we are led to believe) but through the vital work we do to keep society functioning.

It defies belief that whilst politicians and others are already preparing the public for more austerity, the Bank of England is warning that the COVID-19 crisis will most likely push the UK economy into the deepest recession for 300 years. At a time when the worst effects of a global economic crisis are yet to unfold (despite the Bank of England’s laughable and misplaced confidence that there will be ‘only limited scarring of the economy’ and it will ‘bounce back […]much more rapidly than the pull back from the global financial crisis’) a government of any political shade should be proposing targeted fiscal spending aiming at four objectives:

  • To ensure in the immediate future sufficient spending to keep people safe, fed and sheltered until the immediate threats of COVID-19 are under control and that strategic services such as health and social care, energy and food production and transport and communications can operate as effectively as possible with the least risk to their future stability. This might involve more state intervention, price controls and rationing if necessary.
  • To take back public services into the public domain and reinvest in our public and social infrastructure to secure the vital foundations for a healthy economy for today’s and future generations. It won’t be enough for Boris and his ministers – or indeed the public – to clap for our public sector workers. We need a commitment to changing the ideological narratives which have done so much damage and to reward those who make the real contributions to economic stability and social well-being.
  • To offer a permanent Job Guarantee programme to provide the necessary counter-cyclical mechanism to support people whose livelihoods are likely to be disrupted for some time in the future as unemployment continues to rise as a direct result of both the domestic and global economic slowdown. Unemployment is a political choice, not an economic necessity.
  • To develop a workable and just pathway towards a greener and more sustainable economy without which the future of the planet is in jeopardy.

Whilst this is what should happen, whether it does is yet another question. It is regrettable that government, whilst having seemingly recognised its sovereign currency-issuing powers to avert economic disaster, now seems to be rowing backwards at a time when government intervention is vital if we are to secure a future at all. The entire economic system has been built on sand. The 2008 Financial Crash was practice for what might come and yet our elected politicians failed to grasp the nettle in any meaningful way, tweaking here and there but leaving the status quo in place.

Without putting too fine a point on it, globally we are at a planetary crossroads and COVID-19 is just one issue of many which will necessarily have to drive a reset in how we do things. We certainly need an economic recovery, but the question is what values will it be based on, what will it consist of and finally and very importantly who will benefit? The big questions of our time remain unanswered for the moment and given this government’s ideological agenda it is difficult to see exactly where we may be going. Although one might make some educated guesses. However, with increasing public recognition of the mess we are in and how we got here, combined with a better understanding of how government spends and what the real limitations to spending are, we could take a first step towards that better world we aspire to create for our children. Change is not a pleasant process, but we must not shy away from it. So much depends on what we do next. There is an alternative – so let’s make sure we are part of it. Ignoring it won’t make it go away.

 

 

A Job Guarantee is fundamental to any healthy economy. To find out more follow the link for an in-depth look at what it is and how it works.

https://gimms.org.uk/job-guarantee/

 

 

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The post Change is not a pleasant process, but we must not shy away from it. There is an alternative. It’s time to engage. It’s time to make the world anew. appeared first on The Gower Initiative for Modern Money Studies.

The question is not how we will pay for the pandemic, but how government can use its currency-issuing capacity to deal with the most pressing issues of our time.

Published by Anonymous (not verified) on Sat, 02/05/2020 - 9:38pm in

Rainbow window sign with the slogan "Miss you" during the COVID-19 pandemicImage by Sara Holland

‘Care homes have been top priority for the government’ so said the health secretary in a COVID-19 briefing earlier this week. Daily the evidence grows that this is yet more political rhetoric aiming to create a purposeful narrative of a government that has acted in the best interests of citizens. However, the growing dissonance between politicians’ words and day-to-day realities for NHS and social care workers and many others across the country continues to stand out in sharp relief.

Whether it’s health workers or social care workers, still lacking adequate PPE or working in unsafe conditions risking their own lives and the lives of their patients as a result of hitherto inadequate testing capacity, we are witnessing the dire consequences of 10 years of ideologically driven austerity, cuts to public sector services, the whittling down of Public Health and local government services, unforgivable planning failures and government inaction early on, despite the World Health Organisation’s advice.

COVID-19 has revealed the extent to which our social care system has been hollowed out as a result of ideological cuts to funding for public services dressed up as financial necessity. It has highlighted, in the most tragic way, what happens when governments fail to serve the public purpose. Whether we are talking about nursing and residential care or help in the home, social care is in a state of collapse.

At a local level, social care amounts to almost 40% of council budgets and as a result of local government funding cuts, authorities (having lost 60p out of every £1 in central government funding since 2010) are likely to face a £3.6bn funding gap in adult social care by 2025. The UKHomeCare Association estimated in its 2018 report that almost one third of councils in England had seen homecare providers closing or ceasing to trade during that year. In 2018 more than 100 private care home operators collapsed, bringing the total over five years to more than 400.

The government’s promised review of social care has been on the back burner for many months but the delays in addressing the issue go back years. Jeremy Hunt, the former Conservative Secretary of State for Health admitted in a speech in early 2018 ‘In the past 20 years there have been five Green or White papers, numerous policy papers and 4 Independent Reviews into Social Care’ And yet nothing happened.  

Although the government is promising additional funds to deal with the immediate impact of COVID-19, the damage already caused by cuts to public sector spending on social care will not be quickly remedied.  The fact is that just promising more money does not necessarily translate into the capacity to provide the necessary resources immediately whether that’s PPE, which is still in short supply, or indeed, trained care workers.

Figures show that currently in the care sector there are over 120,000 unfilled vacancies with a growing reliance on agency staff to fill in the gaps (with all the health risks that that entails) which is particularly the case now as staff fall sick to COVID-19 and cannot work. Unless the government deals with the systemic problems caused by austerity and its belief in market solutions for public service provision, where profits are the driver and the focus quantitative rather than qualitative, the long term the future looks bleak for anyone who needs support as a result of sickness, disability or growing older.

The Resolution Foundation’s report ‘What happens after the clapping finishes? The pay, terms and conditions we choose for our care workers’ highlights the plight of many frontline care workers whether in public or private care environments.  It noted that around half of care workers, some 1 million people, were being paid less than the real living wage. In private care settings where the majority of care workers are employed as many as two-in-three earn below the Living Wage threshold. According to the report, many experience significant job insecurity and are four times more likely than average to be employed on a zero-hours contract. The Foundation stated that ‘Insecurity has become a structural feature of working life in social care. Zero-hour contracts have not been used sparingly, but instead have become the new normal in many settings. Blunt in its analysis it said ‘’Clapping is welcome, but care workers will value better pay and conditions even more’ and that ‘better pay in care should have long been a priority given the vital role care workers play in protecting the vulnerable’

Those hitherto labelled by politicians as ‘low-skilled’ workers are suddenly being propelled into the limelight and being lauded, quite rightly, as vital. Not just to meeting the challenges that COVID-19 is presenting, but also to the good functioning of society. And yet for decades, their contribution to the economy and to the wellbeing of society has gone unrecognised. The nation is learning this lesson the hard way as it watches the tragedy being played out daily as their friends, neighbours and family succumb to COVID-19 – people, not statistics.

Boris Johnson standing outside No 10 clapping for care workers is a clever distraction being cynically appropriated by a government whose political decisions over a decade caused the decay of vital public infrastructure, the provision of which does not depend on the healthy economy they claimed was necessary. Quite the reverse. Over 26,000 deaths already from COVID-19 can be added to the likely death toll of those who will have died at home or found themselves unable to present for worrying symptoms during the lockdown and the 120,000 which occurred as a result of harsh austerity measures which cut health services and welfare for vulnerable people. So, when the government says that their strategy in dealing with COVID-19 has been to ‘put their arms around every single worker’ we should see it for what it is. An attempt to create a caring narrative and expunge their austerity record.

But what if the country’s appreciation for its vital workers were to be rewarded in better pay and conditions? How could this be achieved?

Firstly, the care sector should be restored to publicly funded and delivered provision, rather than the profit-driven model which has dominated for decades as part of the neoliberal notion that the market delivers better outcomes.

The CHPI’s (Centre for Health and Public Interest) 2016 report noted that around £14bn is spent on adult social care annually in England, both for residential and home care delivered through local authorities. Authorities whose budgets have been cut over the past decade, leading to a decline in the numbers of older people receiving state-funded care services and who have no alternative but to fund their own care from their own financial resources.

It also noted that a significant number of care home providers are large chains which are backed by private equity – leaving them reliant on risky financial structures and exposed to collapse (as discussed earlier). It observes that over the past two decades, as a direct result of privatisation both the quality of care and the terms and conditions of the workforce have declined. Yet private providers have still managed to achieve significant rates of return on their capital investment.

The FT reported in February this year that there are growing concerns about public accountability of some of the larger private equity-owned care homes, particularly as failures increase. It quoted Nick Hood from Opus Restructuring who said ‘what has happened is that care homes have become financialised. Their owners are playing with debt and expecting returns of 12-14% and that is simply unsuitable for businesses with huge social responsibilities.

In those final few words stands the crux of the problem and at the same time the solution. Bring back health and social care as a publicly owned, publicly funded, publicly delivered and managed service.

Of course, the next pressing question is how will it be paid for? As a former Chancellor and initiator of the first round of austerity in 2010 George Osborne, clapped on by others, has warned that further severe cutbacks may be needed in the future to ‘pay for’ pandemic relief. Not content with having overseen the dismantlement of public and social infrastructure on the basis of its supposed unaffordability, he is recommending yet more pain which no doubt will be ‘paid for’ by yet more cuts or tax rises (except for the rich). Bringing yet more suffering to the most vulnerable, as the last foundational posts of a functioning society are kicked away in the belief that the rich are the wealth creators and we have to give them free rein to create it.

Despite the huge sums of public money being created to address the pandemic, the narrative that there will be a price to pay in the future continues to be pushed by those with an agenda. This extraordinary event is an opportunity to challenge the predominant descriptions of how money works in the real world. If the public genuinely comes to value those services which lie at the heart of a functioning economy, which after all is us, then it has a responsibility to get informed. An economics degree is not necessary to understand in simple terms how money works, what really constrains government spending and how we can build a better society to serve all.

In the Resolution Foundation’s report referred to above, it said ‘…we have to recognise that we can’t just wish that social care workers were paid more and leave it at that. This is a large sector heavily reliant on public funding, that has been through an era of sustained austerity and operates on extremely tight margins. […] If pay is to go up, taxpayers or those receiving care will need to meet the cost’.

In short, we need to challenge the perception that there are financial limits to government spending and that if pay is increased for essential workers then there will be a price to pay in higher taxes. We need to get with the facts. The finances of a currency-issuing nation such as the UK are nothing like a household or business and there can never be any excuse for essential public services such as health and social care not to be properly funded. Quite simply, the UK is the monopoly issuer of its own fiat currency and neither needs to tax or borrow in order to spend. Social care does indeed operate on ‘tight margins’ but it does so as a centrally decided political choice. Local authorities as users of the currency have no alternative when their central funding is reduced – they either have to cut services or increase local taxes thus imposing even more economic difficulties for working people.

The real questions are about resources. In an article entitled ‘Can coronavirus bring Economics back down to reality’ in The Week, Jeff Spross wrote: ‘The coronavirus is going to teach – or, to be more precise, reteach – some hard economic lessons. One of them is probably going to be for policymakers to focus on money a bit less and real resources more. […] the coronavirus has forced us to grapple with the most concrete, flesh-and-blood questions: Do we have the equipment we need to protect the public and care for the sick? Do we have enough food to feed everyone? And if we do, how do we actually get the equipment and the food to the people who need it?

If a lesson is to be learned this is it, not how are we going to pay for it.

 

In February, we were delighted to have Professor Bill Mitchell and Professor Steve Hall speak at our events in London and Manchester. We recorded the events and decided that the quality of the Manchester recording was the better of the two.

Slides for Professor Michell’s talk are available here

 

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Fundraisers v Public Money for NHS

Published by Anonymous (not verified) on Mon, 20/04/2020 - 12:24am in

GIMMS is pleased to have permission to reblog this article from @pamos19. Originally published on her Idle Obs blog site here

 

“Charity is a cold grey loveless thing. If a rich man wants to help the poor, he should pay his taxes gladly, not dole out money at a whim”…Clement Attlee

 

We love our NHS

The NHS is the ‘jewel in our crown’, our ‘national treasure’…. we love our NHS. In fact, we love it so much we’re pained to see its staff struggling to cope with the COVID-19 outbreak.

Our hearts go out to the families who have lost their loved ones from this terrible illness, and to the NHS staff battling to save them, who sometimes have to make the most difficult decisions about treatment pathways laid down by NICE guidelines.

Understandably, talking about the NHS brings out our strongest emotions. Knowing that NHS staff and Social Care workers are not being provided with adequate Personal Protective Equipment (PPE) in too many settings – hospitals, GP surgeries, Residential homes, ambulance crews, community nursing/caring, it brings out a natural response: we want to help.

Hence, there has been an explosion of fundraising activity on social media platforms. The biggest has been organised by NHS Charities Together.

Text Clap NHS Charities Together advertisement

Run for Heroes Instagram account

NHS Charities Together Virgin Giving page

As someone who has been a proactive campaigner in support of #OurNHS for three years, I fully understand the desire to help.

However… Stop It! Our NHS Is Not A Charity

Be warned, you may find what you’re about to read controversial. I ask for your patience in reading all the way to the end. I might challenge your perceptions, but bear with me, I hope by the end you will have seen why I felt it was important to write this blog.

I’m going to set the historical context first. Then I’ll demonstrate how the context has impacted our NHS and why it’s in the position of needing help and support today. Next, I will put forward the macroeconomic context, and finally, I intend to show that Public Money should be the winner in a Fundraiser v Public Money for our NHS argument.

 

The NHS – brief historical context

NHS: the Early Years

In post-war Britain 1948, the Labour government launched our National Health Service

Government leaflet sent out in 1948 explaining the National Health Service

A publicly owned, publicly run, and publicly delivered comprehensive *National* health service free at the point of need for all.

Birth to death…from the cradle to the grave. Eyes, ears, nose, mouth, mind, limbs, internal organs, disease, infection… Midwifery, District Nursing, Consultations, Tests, Treatments, Hospital stays, and Prescriptions were free.

Aneurin Bevan, Health minister at the time said:

Nye Bevan image and quote "No society can legimiately call itself civilised id a sick person is denied medical aid because of lack of means"

Many governments have come and gone, making changes such as implementing prescription charges, centralizing and decentralizing the ambulance service, and in 1998 devolution had some impact…

“The UK’s four systems were created very similar at the high-water mark of British political unity. They were all ‘national health service’ (NHS) systems, with the government directly owning hospitals, contracting with primary care General Practitioners (GP) and employing most other staff in a system centrally financed out of general taxation and provided for free at the point of service.”

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5127421/

 

Corporatisation and Markets

The internal competitive market and Foundation Trusts (run as businesses) were introduced early to mid-2000s.
But… every Secretary of State for Health of whichever political party in government had the responsibility to provide comprehensive healthcare for its citizens… until the Health and Social Care Act 2012 passed into law.

NHS Death Knell – The Lansley Act

Professor Allyson Pollock (March 2013):

“The UK NHS was created by national consensus in order to ensure that every citizen was guaranteed health care. Underpinning these arrangements was the secretary of state’s core duty to provide or secure a comprehensive health service, a duty repealed by the first clause of the Health and Social Care Act.”

This was passed at a time when the country was still reeling from the 2008/9 global financial crash and the coalition government had imposed severe austerity measures on public services. But more on that a bit later.

  • The Act opened up all our NHS services to the external market except for acute emergency and obstetrics.
  • It opened the flood gates for private sector provision of health and social care services
  • The Act also gave birth to four quangos: NHS England, NHS Scotland, NHS Wales, and NHS Northern Ireland each responsible for the provision of health and social care. Although still called NHS it was no longer a National Health Service
NHSE – The US model of healthcare comes to England

The appointment as head of NHS England was given to Simon Stevens, worked for the USA giant United Health Insurance company, where he was president of their global health division and CEO of Medicare.

His job as NHSE head was to oversee implementation of the complete reorganization of our health and social care service in England, by splitting England up into 44 regional health economies – ‘footprints’.

The aim was to establish Accountable Care Organisations (an American model) which we now call Integrated Care Systems/Organisations.[1]

These ICS/ICOs are contracted out to a body (which can be a private business or a combination of local authority and private partnerships) who are responsible for the provision of health and social care across their ‘footprint’ within a fixed budget. They are run like a business, so must balance the books or make a profit… they cannot go into deficit.

Government Austerity and NHSE Combine for Maximum Impact
  • Under Austerity, we saw swathing cuts in budgets to our public services from 2010 onwards
  • NHS trusts told to make ‘efficiency’ savings, savings targets set and if not achieved, financial penalties imposed. A Trust could even be put into Special Measures for being in ‘debt’
  • Staffing levels were cut, wards and small hospitals closed, bed numbers dropped.
  • Businesses have taken over services such as diagnostics, Mental Health, phlebotomy, radiology, cleaning, catering, ophthalmology, and so on.

In the private sector, the leanest service they can give the more profit they make. Our health service and social care system began to feel the strain.

“Sustainability” became the mantra of Government and NHS England chiefs.

By 2016 Sustainability and Transformation Plans (STPs) were published. These were the plans which would transform our health service and social care into ICS/ICOs.

Some STP Boards held Public Consultations

As small gatherings of ‘the aware’ sat and listened to highly paid NHSE employees give glossy presentations, telling us that our NHS will not survive unless we make these changes, which would improve the service… make it sustainable so it’s there for the future.

They asked for our views, which in practice were never going to make the slightest difference to their grand plans.

And Here We Are…

2019 saw our fragmented, under-resourced, under-funded, and under-staffed system in a very poor state:

  • 43,000 nurses and 10,000 GPs short
  • Hospital targets abandoned because they consistently couldn’t be met
  • Worn-out staff working longer shifts than they were being paid for
  • Cancelled appointments and operations a common occurrence
  • Little to no mental health support
  • 3 week waits to see a GP
  • Apps being touted as the answer to everything

People were dying who shouldn’t have been…

“Like many junior doctors who have worked in overwhelmed and understaffed A&E departments, I’ve seen things happen as a result of the overstretched conditions that I believe should be classed as “never events”. Since 2016, nearly 5,500 patients have died in England alone as a direct result of having waited too long to be admitted to hospital. To put that in perspective, that’s nearly twice the number of people killed in terror attacks in the UK  since 1970. We should be outraged”

https://amp.theguardian.com/commentisfree/2019/dec/10/doctor-johnson-thousands-deaths-nhs-patient

Now in 2020, the pandemic has hit an already ‘in crisis’ health care service (exacerbated by a chronic problem in social care)

 

Our NHS… Macroeconomic Context

It is political!

To all the naysayers who shout “Keep politics out of our NHS”… you can’t.

“What does the Government do?

The Government is responsible for deciding how the country is run and for managing things, day to day. They set taxes, choose what to spend public money on and decide how best to deliver public services, such as:

    • the National Health Service
    • the police and armed forces
    • welfare benefits like the State Pension
    • the UK’s energy supply

What does Parliament do?

Parliament’s job is to look closely at the Government’s plans and to monitor the way they are running things.

Parliament works on our behalf to try to make sure that Government decisions are:

    • open and transparent – by questioning ministers and requesting information
    • workable and efficient – by examining new proposals closely and suggesting improvements, checking how public money is being spent and tracking how new laws are working out in practice
    • fair and non-discriminatory – by checking that they comply with equalities and human rights laws and by speaking up on behalf of affected individuals”

https://www.parliament.uk/about/how/role/parliament-government/

Government has control of the public purse its role is to spend public money for public purpose and social benefit.

“If the job is to be done, the state must accept financial responsibility“

Nye Bevan quote "Society becomes more wholesome, more serene, and spiritually healthier, if it knows that its citizens have at the back of their consciousness the knowledge that not only themselves, but all their fellows, have access, when ill, to the best that medical skill can provide. But private charity and endowment, although inescapably essential at one time, cannot meet the cost of all this. If the job is to be done, the state must accept financial responsibility."

 

So what is the public purse and public money?

  • The public purse is not a fund, and public money is not taxpayers money
  • The public purse is the Bank of England and public money is the creation of pounds sterling by keystrokes – entering numbers into banks’ reserve accounts so they in turn can credit the account of a person or company selling its goods or services to the Government – as instructed by the Treasury.

Having said this, I can hear you ask… but where does the money come from? It must come from somewhere?

The keyword is “creation”

The UK Government is the sole issuer of our sovereign fiat currency. Every time the Government (of whichever colour) spends, it creates pounds sterling out of thin air. If the government needs to purchase goods or services which are for sale in GBP, then it simply instructs the Bank of England to do so via the Treasury. The Chancellor of the Exchequer provides the Budget Statement ie ‘shopping list’ and this is administered by the Treasury’s Debt Management Office (DMO) and the Monetary Policy Committee (MPC) at the Bank of England.

There is no taxpayers money funding Government spending. The only constraints on spending are the availability of resources (goods, services, labour) and inflation caused by resource shortages.

Now ask yourself…. when the global financial markets collapsed in 2008 what shortage did this cause?

Government told us “There is no money! We have to tighten our belts… Austerity!”

Did anyone shout back “Hang on a cotton-picking minute… you create money!”

[To be fair, some did. But the response they got (and still do, but from fewer people) was “Venezuela” and “Zimbabwe”… which demonstrated how little they know about those countries’ economies.
See my blog https://idleobs.wordpress.com/2020/03/29/coronavirus-economic-stimulus-but-how-will-you-pay-for-it/ ]

The Truth: Our Government can NEVER run out of money

 

The Final Argument – Why we should not have to fundraise for the NHS

Current Shortages in our Health and Social Care Services
  • Nurses, Doctors, Radiologists, Social Workers, Care-workers ie labour
  • Equipment, especially PPE, COVID-19 Tests, and Ventilators ie goods
  • Diagnostics/Testing laboratories ie services
Labour – the workforce

500,000 volunteers have come forward to help our ‘NHS, there must be jobs that these volunteers are doing, and that is great. Practical help at a time of most need.

No shortage of people willing to work for no pay – although government could pay them via a Job Guarantee programme, and this could encourage more people into care-worker jobs.

However, the shortage of clinical staff and social workers needs addressing urgently through government investment in bursaries, decent wages, and free education, but will not help in the immediate crisis.

Goods

Through a combination of incompetence or deliberate policy, the government did not purchase goods listed above prior to the pandemic, despite being forewarned in the pandemic simulation report 2016. Government’s initial ’do nothing’ strategy exacerbated the situation as global demand for equipment and tests grew. By the time Matt Hancock and NHSE tried to get hold of, or refused to deal with certain suppliers of, what we needed, the goods aren’t there (although that’s debatable)

Volunteers across England are making PPE out of the goodness of their hearts and donated material. Practical help at a time of most need.

Services

Although slow to start, government are negotiating contracts with laboratories. Money is being created to purchase these services.

 

Conclusion

There can never be a shortage of public money to purchase anything if it’s available for sale in our own currency

There is not a shortage of money to attract, train and retain staff, only the shortage of will by the government to do it

There is not a shortage of money to purchase equipment, only the shortage of will by the government to do it, and at the right time

So why does the NHS need money from charity when government can provide it with public money?

It doesn’t and shouldn’t!

If the government keeps getting away with not accepting financial responsibility, they will keep starving our NHS of money to pay for the facilities, staff, equipment, and resources it needs to exist!!

Please stop giving money to charity for the ‘NHS’

Demand from government that it carries out its duty to use public money as it was meant: for public purpose and social benefit.

[1]Accountable in a financial sense, ie accounting Integrated in an admin sense ‘backroom stuff’

 

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The cost of government austerity has been a one of infrastructure decay and human suffering. Our nation has paid the price. Are we ready yet to re-imagine our world?

Published by Anonymous (not verified) on Sat, 18/04/2020 - 9:09pm in

Blackboard with the slogan "Upgrade thinking" written in white chalkImage by Gerd Altmann from Pixabay

‘No society should need permission from wealthy people to operate in a high functioning way’

Nick Hanauer

 

A day of reckoning is coming. The exponential rise in deficit spending to manage the COVID-19 emergency is coming to crush future generations and will need action to address the prospect of a future burden of higher taxes to pay for it. Or so a briefing paper published by the Social Market Foundation claimed this week. The SMF (funded by Vodaphone, Barclays and KPMG amongst others) states in its report that public sector net borrowing could rise above £200bn per year which raises the prospect of an ‘Austerity Round Two’ leading to tax rises and spending cuts once the worst of the crisis is over. It calls for the economic costs of responding to the coronavirus pandemic to be shared fairly across the generations and says that ‘as we emerge from the crisis, older generations must uphold their part of the contract by bearing a fair proportion of future tax rises and welfare reforms.’

In short, it is suggesting that there will be a financial price to pay for the government’s increase in spending and recommending that the ‘triple lock’ which ensures substantial rises in the Basic State Pension should be replaced with a ‘double lock’ tying increases to earnings or inflation. This it says could contribute £20bn to deficit reduction over the next five years and reduce the fiscal burden on the working-age population.

Economic orthodoxy lives on. After the initial positive buzz which resulted from the government’s announcement of a huge spending programme to manage the economic and human fall out of the COVID-19 crisis (before we realised its shortcomings) the debt sirens are back beating the debt drum. Not surprisingly. The neoliberals have caught up with the challenge to their economic and monetary supremacy and are fighting back by posing the customary question about how it will be paid for. We can expect more as the weeks roll on. On this line of thinking someone, somewhere has to pay the financial cost sooner or later and the question will be who.

Of course, the usual response to the question is the taxpayer and that narrative is not just the line pursued by the right-wing. The household budget narrative dominates both on the right and the left. On the right, low taxes are the aim and have justified the slimming down of public services and infrastructure. Those who rightly wish to address economic inequality, do so by falsely suggesting that tax avoidance or evasion is a drain on the public purse, and we must ensure that the rich pay their fair share. The ‘solution’ on the left is to bring back that ‘ol magic money tree’ located in the Cayman Islands. Indeed, earlier this week, an editorial in the Morning Star suggested that the government should open up tax havens and tax the super-wealthy to raise the extra funds needed for welfare benefits, job support, training schemes and public services including the NHS.

The truth is that we are not dependent on the rich (or indeed anyone) paying their tax to fund public services and we don’t need to grovel or expect them to do the right thing as if somehow it is a charitable exercise in goodwill. We need instead to recognise the currency-issuing powers of government to pursue a public purpose agenda which serves the interests of the nation. Make the rich pay their tax for the right reasons, which are to do with redistribution of wealth through progressive taxation and not because it funds government spending. It doesn’t.

We need to recognise that the real costs of austerity are not financial but human ones. In fact, we are now paying the costs of that burden imposed in 2010 by the Conservatives when they cut public spending on our public and social infrastructure including our public services and welfare. The burden was never the financial one it was dishonestly described as; it has been the subsequent burden of infrastructure decay and human suffering as a result of austerity. We are now seeing its effects on the lives of our friends and families as we struggle to cope with the effects of lockdown; counting the harrowing cost on our financial, physical and mental health. It is a sad thing indeed that it had to be coronavirus that brought it to our attention as life as we know it stopped like a broken clock.

Past austerity has cut our productive capacity. That has built in the potential for inflationary pressures which could prove to be an issue with a critical global shortage of PPE and other vital equipment and import restrictions from affected nations.  While the government isn’t like a household in financial terms, it is clear that it has failed our nation on the very yardstick it chooses to measure itself by.  It has run down the essential supplies of critical equipment and materials to keep the public safe and compromised our national security by running the NHS at full capacity without the slack required to cope in a crisis. This will be the deficit that we inherit; not the spreadsheet balances. As Fadhel Kaboub noted in a recent podcast ‘It’s not about having the money it’s about having the real, physical productive resources’

And yet the economic orthodoxy that precipitated this destruction still looms like a bad penny on our horizon. Once again, the neoliberals are proposing to hit those who can least afford to pay with the very real costs of any future austerity. The SMF’s economic illiteracy, which suggests that today’s government spending will have to be paid back at some point in time and would thus be a burden on future generations, is a blatant misrepresentation of the truth.

The government does not need to find savings now and scrapping the triple lock on pensions in order to restore what is referred to as ‘intergenerational fairness’ will quite simply create more pensioner poverty than already exists, which in turn will have a detrimental effect on the economy. Quite simply, whether it is retired or working people, involuntarily unemployed or underemployed people, less money in their pockets translates into less money being spent into the economy which is what keeps it turning. Tightening the money tap will quite simply send the economy into a death spiral if it is not already there. And that cost will be even harder to bear, not just for the most vulnerable in society but also for the future of the planet.

As Prem Sikka suggests in an article this week in Left Foot Forward, the SMF has failed ‘to assess the impact of pension reduction on the life of retirees. With reduced income, retirees will spend less on good and services and thereby reduce the multiplier effect. The SMF proposals would ensure that retirees surviving the coronavirus pandemic will face a future of severe poverty’.

That is the real burden a human one. The role of government is not to balance its budget, but to serve the common interests of its citizens and in that its function is to ensure that its economic policy decisions result in a more productive nation. Future generations, or indeed retirees will pay the heavy price of both ineffective government inaction today and economic decisions to impose yet more austerity or increase taxes in the future.

In short, today’s government debt will not in itself be a burden on future generations. The real burden will be government’s failure to spend adequately today to ensure a better future tomorrow. Cutting spending once the crisis is over would be tantamount to ensuring economic collapse if indeed we haven’t already reached it before then.  Using ‘intergenerational fairness’ as an excuse to cut spending is designed to create smoke and mirrors and conflict between generations and is a sleight of hand to place blame anywhere but at the government’s feet.

In conclusion, we end this MMT Lens with a quote from a blog by Bill Mitchell.

“…the inclusion of public debt and unfunded pension liabilities for government workers in the index are based on a misunderstanding of what actually will burden the future generation.

The fact is that the current government has as much ‘money’ now as it had yesterday and the same amount it will have tomorrow. That is, it has whatever it wants to spend. It always has that. It has no more or less capacity to spend today because there were surpluses in the past than it would have if there had have been deficits in the past.

[…..]

Every generation chooses its own tax rates. That is, the mix of public and private sector involvement in the economy is a political choice. If the future generations want more private and less public they will choose lower tax rates etc.

Currency-issuing governments do not draw down on the savings provided by the previous government’s surpluses. It is a nonsensical notion thinking that a sovereign government would ‘save’ in its own currency.”

 “The idea that borrowing ‘takes money from the pockets of future taxpayers’ is nonsensical. The funds to pay for the bonds originate in the government net spending in the first place.

 Clearly, deficits now are in part helping the current generation with income transfers and the like. But they also facilitate public education, public health and other infrastructure which provide massive benefits into the future for the current generation and their children. 

Once you understand that then the idea that there is a future burden will make you laugh.

 

 

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Norwood Hanson, Paul Krugman and MMT

Published by Anonymous (not verified) on Sun, 29/03/2020 - 10:00pm in

Phil Armstrong, University of Southampton Solent and York College

 2020

 

 1. Norwood Hanson: Is the sun going around the Earth or the Earth going around the sun?

 

Norwood Russell Hanson (1961) considers the conceptual foundations of science; he notes that the work of scientists involves observation. However, such observation is likely to be interpreted differently by different observers, as consistent with an acceptance of the view that all facts are theory-laden (but, importantly, not theory determined). Hanson focuses upon how we conceptualise what we see into general systems, ‘Let us examine not how observation, facts and data are built up into general systems of physical explanation, but how these systems are built into our observations, and our appreciation of facts and data’ (Hanson 1961: 3).

Hanson considers how different observers perceive things differently. He talks about Tycho Brahe[1] and Kepler looking up at the sky, and asks a question, ‘Kepler regarded the sun as fixed: it was the Earth that moved. But Tycho followed Ptolemy[2] and Aristotle in this much at least: the Earth was fixed and all other celestial bodies moved around it. Do Kepler and Tycho see the same thing in the east at dawn?’ (Hanson 1961: 5). Hanson argues that ‘people, not their eyes, see’ (Hanson 1961: 6) and develops his story by noting, ‘Tycho and Simplicius[3] see a mobile sun, Kepler and Galileo see a static sun’ (Hanson 1961: 17) and later notes, ‘Our sense observation shows only that in the morning the distance between the horizon and the sun is increasing, but it does not tell us whether the sun is ascending or the horizon is descending…For Galileo and Kepler the horizon drops; for Simplicius and Tycho and the sun rises’ (Hanson 1961:182). Hanson points out that ‘There is a sense, then, in which seeing is a ‘theory-laden’ undertaking (Hanson 1961: 19) and ‘The observer…aims only to get his observations to cohere against a background of established knowledge’ (Hanson 1961: 20).

 

2. Paul Krugman like Tycho and Simplicius

 

Moving on from the solar system to the financial system we move from asking whether the sun revolves around the Earth (or vice versa) to asking if taxes fund spending (or vice versa); specifically, when we consider the dynamic nature of the efflux and reflux of credit and debits in relation to government’s account we might conceptualise what we observe in two ways:  first we may ‘see’ the taxation (or borrowing) as funding the spending or (lending) [view A]  or second, as the spending (or lending) funding the taxation (or borrowing) [view B].[4]

In this context, we might reasonably compare Paul Krugman to Tycho and Simplicius. By way of example, I might consider a recent series of Twitter posts from Krugman (I have collected them into one passage below).

“I’ve been getting some questions from readers wondering about the cost of the not-a-stimulus (it’s actually disaster relief) package. “Where’s the $2 trillion coming from? Thin air?” Basically, yes. We went through this argument back in 2008-2009, when many people (including some who should have known better) worried that government borrowing was going to “crowd out” private investment. There are times when that happens, but this isn’t one of them. In the most immediate sense, the govt. is going to borrow the money — and its borrowing costs are near record lows, despite the surging deficit…But where does the borrowed money come from? Basically, right now we have trillions in private savings with no place to go, because private investment demand isn’t sufficient to use them; who’s going to invest in the face of a plague of unknown duration? So government borrowing just draws on this pool of excess savings. Furthermore, in so doing it helps prevent an even steeper economic contraction” (Paul Krugman, combined 5 tweets 27/03/20, emphasis added).

It is clear from the text that Krugman implicitly accepts view A. The italicised sections show this most clearly. By acknowledging the possibility of ‘crowding out’[5], arguing that ‘the govt. is going to borrow the money’ and that ‘government borrowing just draws on this pool of excess savings’, it is clear that Krugman conceptualises the government as a currency-user; a position that, as I will show below – in common with Ptolemaic astronomy -is not consistent with the evidence.

 

3. Modern Monetary Theorists like Copernicus, Galileo and Kepler

 

Returning to our discussion of the solar system we might note that the eventual triumph of heliocentrism did not come quickly or easily. Much hard work from astronomers was required but eventually, the battle was won and, ‘By the eighteenth century, after the successes of Galileo, Kepler and Newton, the universe was construed as an intricate geometric-arithmetic puzzle’ (Hanson 1961: 66). I might argue that shifts in worldview are prompted by the observation of some deeply significant anomaly (or anomalies) (Kuhn 1962). In this context,  Hanson (1961: 68-9)  notes, “We ask, ‘What is its cause?’ selectively: we ask only when we are confronted with some breach of routine, an event that stands out and leads us to ask after its nature and genesis.” Hanson refers to retroduction[6] and argues “A theory is not pieced together from observed phenomena; it is rather what makes it possible to observe phenomena as being of a certain sort, and as related to other phenomena. Theories put phenomena into systems. They are built up ‘in reverse’ – retroductively” (Hanson 1961:90).

In the same way that Tycho and Kepler ‘see’ the same things, those who conceptualise the government as a currency-user – such as all mainstream economists and many so-called ‘progressives’ such as Krugman – and those who conceptualise it as a currency-issuer – notably the advocates of MMT – ‘see’ the same things. The issue is how to decide which view is consistent with the development of a theory with the most explanatory power? Returning to the issue of anomalies – or unforeseen observations – we have a clue to the answer. The economics profession has long argued that heightened public deficits would lead to higher long term interest rates and, in turn, that these higher interest rates would lead to lower private investment or ‘crowding out’. This hypothesis follows from their view of the government as a currency-user which borrows from a ‘fixed pot’ of saving in competition with private borrowers.  This prediction was decisively falsified during, and immediately after, the global financial crisis when all the world’s major nations with their own currencies, operating under floating exchange rates, saw declines, not increases, in long term interest rates on government debt[7]. It is true that some, although by no means all – Eurozone nations did see a rise in long term interest rates. However, since MMT explicitly recognises the distinction between Eurozone nations (which have ceded currency-issuing power to another entity – the ECB) and currency-issuing nations, it recognises that Eurozone nations should be conceptualised as currency-users meaning that this outcome is exactly in line with the expectations of MMT[8].

An understanding of MMT removes the supposed element of ‘surprise’ from what is a highly significant anomaly from the perspective of mainstream economics, The advocates of MMT are able – retroductively – to posit the structures and mechanisms which explain this contrast between currency-issuing and currency-using states and I would, therefore, argue that MMT provides the basis for the provision of a satisfying explanation of observed phenomena – absent from mainstream thinking based upon ‘seeing’ the state as a currency-user.

In contrast to perspective which underpins the comments made by Krugman, above, Modern Monetary Theorists contend that when a nation has its own sovereign currency and operates under floating exchange rates, ‘borrowing’ by the state is not operationally required. The government should be thought of as a currency-issuer; it spends first and creates reserves, ex nihilo. It is never revenue-constrained as a currency-user might be. The so-called ‘borrowing’ operation which removes the reserves is voluntary (Mosler 2012). It could allow any untaxed spending to remain in the system. However, such a policy would result in the overnight rate falling to zero (if no other action was taken, such as the central bank agreeing to pay interest on excess reserves).

However, it must be conceded that the difficulties involved in replacing deeply-embedded theories (or paradigms in Kuhn’s [1962] terminology) should not be underestimated and I would argue that this is particularly the case in economics. The economics academy has been highly successful in reducing the ability of alternative perspectives to gain traction. Contrary to their professed acceptance of the principle of falsification, mainstream economists have introduced numerous ad hoc modifications to their apparently failed theories (Armstrong 2018) to avoid falsification. However, despite this disappointing situation, the position of mainstream economics is far from impregnable and the advocates of MMT must continue to challenge its hegemonic status. We can only hope that mainstream economics and its conceptualisation of the state as a currency-user is eventually destined to be consigned to the status of an episode in the history of economic thought, following in the footsteps geocentric thinking in astronomy.

 

References

 

Armstrong, P. (2018), ‘MMT and an Alternative Heterodox Paradigm’, Gower Initiative for Modern Money Studies, https://gimms.org.uk/2018/12/26/mmt-heterodox-alternative-paradigm/.

Bhaskar, R., (2017), The Order of Natural Necessity, Gary Hawke (ed.), Luxemburg: CreateSpace Independent Publishing Platform.

Galilei, G. (1632/1953), Dialogue Concerning the Two Chief World Systems (Dialogo sopra i due massimi sistemi del mondo), Berkley: University of California Press.

Hanson. N (1961), Patterns of Discovery, Cambridge: Cambridge University Press.

Kuhn, T. (1962), The Structure of Scientific Revolutions, Chicago: University of Chicago Press.

Mosler, W (2012), Soft Currency Economics II, US Virgin Islands: Valance.

 

 

[1] Tycho Brahe (1546 – 1601) was a Danish astronomer who developed a view of the solar system which recognised that the moon orbits the Earth and the planets orbit the sun, but retained the position that the sun orbits the Earth.

[2] Claudius Ptolemy (c. AD 100 – c. 170) was a Greek mathematicianastronomer and astrologer whose Ptolemaic approach suggests that the Earth is at the centre of the universe.

[3] Galileo compares the Copernican with the Ptolemaic systems in Dialogue Concerning the Two Chief World Systems (1632). In the text, Simplicio presents the case for the Ptolemaic system and argues against the Copernican alternative. The character’s name is generally supposed to be derived from that of a sixth-century follower of Aristotle, Simplicius of Cilicia.

[4] A third view might be summed up by the question, ‘Is the distinction important?’ I would argue that the distinction is important since the government can spend without prior tax revenue whereas prior spending (or lending) is logically and historically required for taxes to be paid. Thus only view B above is valid.

[5] The crowding-ou hypothesis suggests that heightened government deficits lead to higher long term interest rates and that,  in turn, these higher rates, reduce – or ‘crowd out’ – private investment. Little or no evidence to support this hypothesis exists (Armstrong 2018).

[6] In the retroductive moment, a scientist imagines a mechanism or structure which, if it were true, would explain the event or regularity in question. It is the use of the imagination to posit explanatory mechanisms and structures’ (Bhaskar 2017: 28).

[7] Armstrong (2018).

[8] Armstrong (2018)

 

 

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Rishi Sunak is wrong. ‘Righting the ship’ won’t require any taxpayers to ‘chip in’ to cover the cost of his spending plans – not now, in the future, or ever. 

Published by Anonymous (not verified) on Sun, 29/03/2020 - 4:37am in

Scientists wearing masks holding sign with the slogan "Together we do it"Image by Gerd Altmann from Pixabay

Marcus Tullius Cicero was a Roman statesman, lawyer and academic sceptic philosopher. He wrote ‘The Safety of the People shall be the Highest Law.’

This week, it was reported that the former health secretary Jeremy Hunt was in charge when medical advice to stockpile protective equipment in event of a flu pandemic was rejected on the grounds that stockpiling would be too expensive. By this decision, it would seem that this government chose deliberately to put cost over the health of its citizens, thus perpetuating the myths about the unaffordability of public services. The health and safety of the nation has been in the hands of a government which thought saving money was more important than keeping people protected. Jeremy Hunt claimed a while back, that public services depended on a healthy economy. That falsity will come to haunt him as we find out the hard way that it is, in fact, the other way around. A healthy economy depends on a healthy nation.

The neoliberal order which has dominated the global corridors of power for more than 40 years, combined with monetarist policies and more recently austerity following the global financial crash, has led to the destruction of public and social infrastructure not just here but in many developed nations around the world including the EU trading bloc. It lies at the heart of this crisis.

The horrors we are seeing in Spain, France, Italy, the US and other countries as the COVID-19 coronavirus compromises the ability of health and other public services to cope underline painfully the consequences of government decisions. Governments which rejected the power of the state to serve its citizens, promoting the god of the markets – the invisible hand – instead, have appeased it at every turn to favour the global corporations which have dictated the rules.

In the UK, despite the early advice from other experts in countries where coronavirus had already struck, government prevarication and failure to act expeditiously has allowed the disease to spread through the nation affecting many, not just those who are elderly with underlying health conditions. All human life is precious and yet this government has treated some as expendable and put the lives of those in the front line in the health service at risk.

As GIMMS noted in a previous MMT Lens, we will pay a heavy price for the ‘just in time’ approach to our health and public services and the lie that they were only affordable if the economy was doing well.  The media, having done little to hold the government to account for decades and especially in the last 10 years, has left us without sufficient nurses, doctors and health workers, beds, ventilators, ICUs and other equipment. Our health professionals are still crying out for Personal Protective Equipment (PPE) and are selflessly putting their own health at risk for others.  They are crying out for ventilators to keep people alive. They are crying out to be tested to keep themselves and their patients safe.

A healthy economy relies on public infrastructure, which is in short supply as a result of government choice. Ramping up the much-needed supplies is proving slow and difficult, not to mention demonstrating government incompetence. A good government delivering public purpose would have meant that we would have been better able to deal with this emergency and we might not be witnessing its current trajectory.

Our public infrastructure has been the victim of government cuts and we are now paying the price for the breakdown which is occurring as a result of limited or non-existent emergency planning, deregulation to suit market demands and privatisation – which have all been justified by the lie that the state had no money of its own and public services were a luxury determined by the health of the economy.

When the Chancellor got up to announce his spending plans and the measures to help those now unable to work, people cheered. If nothing else, this should have demonstrated quite clearly that the government was not constrained by tax or borrowing in order to spend, despite the charade that successive governments have played out about how its spending is paid for.

With big business queuing up for handouts (reminiscent of those banks that were too big to fail who were bailed out with public money) for others, it has been like squeezing blood from a stone. The very people who form the backbone of society, who keep it functioning and contribute to the economy through their work – the self-employed in particular – are being asked to jump through hoops to get any money at all, leaving them struggling and worrying about the future. People who for a decade have been living hand to mouth with scarce or no savings, working in zero-hours employment, the gig economy or in part-time work, will have to wait months for the government to pay up. Those in desperate need without employment are being asked to apply for Universal Credit for a measly £94.50 a week hanging on in telephone queues which can be as long as 90,000. It will not be long before those who congratulated the Chancellor for his largesse will have to think again, as bills go unpaid and people go hungry. People need support now, not later. The breakdown of society is in the offing if the government fails to act as it could now simply by authorising the central bank to make payments through HMRC who hold our data.

Alongside the tragedy which is playing out, the household budget narrative is never far behind, even in the words of Rishi Sunak who during his announcement of measures for the self-employed claimed that when this emergency was over we’d have ‘to chip in to right the ship’ promoting yet again that at some time in the future there will be a cost to taxpayers. Which in short there will not, since the government does not need to collect tax before it can spend!

Next, an ITV newsreader asked, ‘can the public finances take the strain?’ And this was followed by Robert Peston telling the TV audience that we’ll be ‘paying off the national debt for years’. To be clear – for the UK government, which is the currency issuer, there is no strain on the public finances and there will be no future burden on the taxpayer.

The Tax-Payers Alliance then announced that in future there would have to be ‘growth-enhancing’ measures and spending restraint’ both mutually exclusive positions which hark back to a false claim that cutting public spending could lift growth. The evidence is before us right now that this is not true.

Finally, the journalist Philip Inman suggested that Sunak’s budget spending spree could come at a high price, ‘fighting a war with borrowed money.’ Except that the government, as the currency issuer, does not need to borrow to cover its deficits; nor does it need to issue bonds in order to spend.

Our public and social infrastructure is under severe pressure and cracking under the strain, and people are suffering and dying. And yet they are still arguing about the financial cost of the Chancellor’s spending as if deficits and borrowing were the devil, balanced budgets the epitome of a government’s economic success or that there will be a price to pay if fiscal prudence is abandoned.

The ONLY cost in the future is the human cost we will face if the government fails to act in a manner that secures the lives of citizens, ensures they can pay their bills and eat during this emergency.  Fiscal prudence is the least of our worries!

We must today, tomorrow and in the future, keep holding to account government, politicians and all those who peddle the economic orthodoxy that there is no money. The Chancellor has shown that there is the possibility to spend without checking the public purse first. It is a political choice. So much is now at stake and we need as nations to keep pushing with more persistence until change happens. The battle lines are being drawn as we speak. The coronavirus, hard as it is, may be our societal wake-up call. Let’s hope so.

 

 

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A Short Comment on the UK Government’s Fiscal Policy in the Current Crisis

By Phil Armstrong, University of Southampton Solent and York College.

Man putting on protective mask and wearing latex glovesImage by Terri Sharp from Pixabay

The UK government’s significant fiscal expansion – in line with its ‘do whatever is required’[1] mantra – is, of course, welcome. However, I would argue that it is still far too small to deal with the massive demand shock associated with the coronavirus pandemic (Mitchell 2020a, 2020b) and also that it is incorrectly targeted. It pays insufficient attention to the poorest groups in society; the government has failed to take the necessary steps required to ensure the income of those most in need is adequately supported during the crisis. Clearly, the situation is evolving on a daily basis and, looking forward, it is highly likely that there will be continual calls for the government to increase its fiscal intervention from many sectors in society – not least business leaders who fear the effects of rapidly declining demand.

However, I would stress that the intervention is being enacted against an inapplicable theoretical and ideological backdrop, specifically the mistaken neoliberal framing of the so-called ‘government budget constraint’ (GBC). The logic of the GBC conceptualises the government as a currency-user, which might finance its spending by taxation, by borrowing (debt issuance) or ‘printing money’ (Mitchell 2011). According to mainstream thinking, each of these methods carries problems; increased taxation reduces non-government sector spending power and allegedly generates disincentive effects, ‘excessive’ borrowing leads to higher long term interest rates, in turn, causing ‘crowding out’[2] and ‘money printing’ inevitably results in inflation.   There is also an underlying ideology implicit in neoliberalism; that state expansion soaks up real resources which would be better (or ‘more efficiently’) used by the private sector.

In extremis, it appears that the Conservatives (who have shown a marked distaste for expansionist state intervention in the recent past) and even business leaders who would normally be opposed to increased government spending and enlarged deficits are now prepared to put their weight behind the fiscal expansion[3]. However, the underlying framing based upon the GBC is likely to come back to bite us all – hard – in the future. In line with the erroneous conceptualisation of the state as a currency-user, the government is presenting its current additional spending as being ‘financed’ by borrowing. The story is founded upon the idea that the government needs to spend significant extra sums now – owing to the severity of the crisis – and heavy borrowing is, therefore, essential (reinforced with the contention that it is cheaper for the state to borrow now than in the past as long term interest rates are very low) in the manner of household who accepts a very large credit card bill because there is no other way it can survive[4].

However, following this line of thinking will lead to a damaging and erroneous conclusion. It is highly likely that in the future – when the crisis has passed – mainstream economists will argue that there is a financial ‘mess’ to fix; ‘unacceptably’ large public sector deficits may well persist beyond the crisis alongside an ‘excessive’ national debt as a proportion of GDP. The narrative will then, no doubt, suggest that they need to be ‘dealt with’– possibly with another, even harsher, round of austerity than last time – and it will those least able to cope who are most likely to be the ones asked to bear the greatest share of the burden (as was the case the last time austerity was imposed).

This conceptualisation of the government as a currency-user suggests that money printing and bond issuance are alternative ways of financing a deficit, however, advocates of MMT conceptualise the state as a currency-issuer. From this viewpoint, in reality, they are not alternatives.  The government always spends by the creation of new money – both taxes and borrowing logically and historically follow spending (or lending). Only money that has already been issued by the state can be collected in taxes or used to buy state debt. When the government spends, it does so by crediting the bank accounts of its target recipients, simultaneously increasing the target’s bank’s reserve account by the same amount. When taxes are paid by a private sector agent, her deposit balance falls and her bank’s reserve account balance at the central bank (CB) is correspondingly marked down[5].  The purchase of government debt is best conceptualised as a reserve drain (Mosler 2012) which changes the composition of non-government sector holding of risk-free state debt but not its size.

I would argue that having this correct conceptualisation is the key to avoiding the return of austerity. In reality, the government sets its aims, determines its budget and spends by the ex nihilo creation of new money. When the operational reality of the financial system is correctly understood, then the expectation of a post-crisis ‘mess’ to fix disappears. Once the economy has recovered, that does not necessarily mean a need for austerity or even fiscal retrenchment – only the post-crisis economic outcomes such as growth, employment and price stability matter. If unemployment persists after the crisis has passed, then government net spending should still be regarded as being too low, irrespective of the size of the government deficit both in absolute terms and as a proportion of national income. Only in an economy suffering from inflation from excess demand would fiscal contraction be required.

These are challenging times for us all, but in the current crisis we have the opportunity to push forward the insights of MMT and to challenge established thought – particularly with respect to the inapplicable government budget constraint. If our understanding of the operational reality of the monetary system can be characterised by the insights of MMT, the full scope of existing fiscal space can be understood and importantly, the likely post-crisis push for fiscal retrenchment can be effectively countered.

 

[1] See Islam (2020).

[2] The crowding hypothesis is based on the contention that higher interest rates will lead to lower private sector investment, meaning that large government deficits effectively ‘crowd out’ private investment. Little, if any, empirical support for this hypothesis exists (Armstrong 2015).

[3] For example, Richard Branson expressed his support for fiscal retrenchment in 2010 (Stratton 2010) but changed his mind in 2020 when arguing in favour of a £7.5 billion government support package for the airline industry (Hockaday 2020).

[4]  ‘We are in an entirely new world. A wartime effort, with wartime deficits to cover it’, Rishi Sunak, quoted in Islam, F., BBC News online, 17 March 2020.

[5] It is important to stress that private sector debt or bank money cannot provide the final means of settling a tax bill which occurs when a taxpayer’s bank’s reserve account at the central bank is debited in favour of the Treasury account (Armstrong 2019).

 

References

 

Armstrong, P. (2015), ‘Heterodox Views of Money and Modern Monetary Theory (MMT)’

https://moslereconomics.com/wp-content/uploads/2007/12/Money-and-MMT.pdf

 

Armstrong, P. (2019), ‘A simple MMT advocate’s response to the Gavyn Davies article ‘What you need to know about modern monetary theory’, Gower Initiative for Modern Money Studies,

https://gimms.org.uk/2019/05/27/phil-armstrong-gavyn-davies-response

 

Hockaday, J. (2020), ‘Airline bosses to ask for £7,500,000,000 bailout to survive coronavirus.

The Metro online, https://metro.co.uk/2020/03/14/airline-bosses-ask-7500000000-bailout-survive-coronavirus-12399300/

 

Islam, F (2020), ‘Coronavirus: Chancellor unveils £350bn lifeline for economy’, BBC News online, 17 March, https://www.bbc.co.uk/news/business-51935467

 

Mitchell, W. (2011), ‘Budget Deficit Basics’ 4 April

http://bilbo.economicoutlook.net/blog/?p=14044

 

Mitchell, W. (2020a), ‘The coronavirus crisis – a particular type of shock – Part 1’, March 10,

http://bilbo.economicoutlook.net/blog/?p=44484

 

Mitchell, W. (2020b), ‘The coronavirus crisis – a particular type of shock – Part 2’, March 11,

http://bilbo.economicoutlook.net/blog/?p=44488

 

Mosler, W. (2012), Soft Currency Economics II, US Virgin Islands: Valance

 

Stratton, A (2010), ‘Richard Branson backs Tory plans to cut spending sooner rather than later’, The Guardian, 16 February,

https://www.theguardian.com/politics/2010/feb/16/branson-back-tory-deficit-cuts

 

 

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The post A Short Comment on the UK Government’s Fiscal Policy in the Current Crisis appeared first on The Gower Initiative for Modern Money Studies.

We need to break free from the notion that a country’s health is measured by a balanced budget. Value is not judged by money, but by human and planetary flourishing.

Published by Anonymous (not verified) on Sun, 02/02/2020 - 5:48am in

Mind the gap warning painted on a railway station platformPhoto by Pixabay

Five years ago, responding to a letter from one of his constituents about food banks, MP John Whittingdale wrote that he thought food banks ‘provided an incredibly valuable service beyond the support provided by government’ and he ‘paid tribute to the hardworking volunteers involved.’ He added in conclusion that ‘work was the best way to lift outcomes’ and that ‘Universal Credit would ensure that it always pays to work.’

Five years on, the Secretary of State for the DWP, Therese Coffey, made it clear this week that nothing had changed. When she was challenged by a Labour MP who said it was a ‘gross injustice that nurses are forced to use food banks while fat-cat bosses receive obscene pay-outs, her response was that food banks were ‘the perfect way’ to meet the challenges posed by poverty. She, too, praised the volunteers saying that ‘Marrying the two is a perfect way to try to address the challenges that people face at difficult times in their lives. She also referred to those using foodbanks as ‘customers’. Yes, you read that right.  People who are hungry as a result of deliberately forged government policies, cuts to public spending, low wages and insecure employment are now ‘customers’ as if they were simply off to the supermarket to do a weekly shop! 

In her first speech at the Conservative Party Conference, Coffey also said of the increasingly discredited Universal Credit that it: ‘provides a safeguard for the most vulnerable in our society. It supports strivers, who are not content living a life on welfare…We know that work is the best route out of poverty.’

These are government ministers who show complete indifference to the reality of people’s lives and deny that their austerity policies have created poverty and inequality. These are government ministers who spout platitudes about making work pay when the evidence is to the contrary. These are ministers who sincerely believe that charitable donations are to be commended and that volunteers are doing valuable and selfless work supporting the needy. Ultimately these are people blinded by a cruel ideology; perfectly happy to consign the poorest and most vulnerable in our society to miserable lives with their inhumane policies in the belief that this is the normal order of things and that people, not government, are responsible for their fate however much government policies are skewed against them

They also achieve this public acceptance by reducing the health and wellbeing of the nation to whether we can afford it monetarily, promoting the idea that public services depend on a strong economy which in turn increases tax revenue and allows the government to spend on public services.  It disseminates the lie that a strong economy depends on wealthy entrepreneurs who are benefiting from low taxes and are not hamstrung by regulations and in order that wealth will trickle down by default.  And, regrettably, with the constant repetition of such messages, many people have been seduced by such arguments.

The evidence of the last 10 years in terms of cuts to public spending and reforms to the social security system belies the reality as distressing reports in the media portray this week.  Aside from the huge rise in the numbers of food banks across the country and the increasing numbers of people using them, which GIMMS has covered in previous blogs, almost on a weekly basis we read the harrowing stories of people who have died as a result of government policies related to cuts to public sector spending.

Just this week Errol Graham who was 57 and suffered from severe social anxiety starved to death just months after the DWP stopped his out of work and housing benefits.  Barry Balderstone who was suffering from advanced Parkinson’s disease and was deemed not ill enough to qualify for free, full-time social care died the day after he received the news that his claim had been rejected. He weighed just 7 stone.  According to a media report, health bosses said that the decisions were made following ‘faithful application of nationally-set criteria’. Helen Boughen, who has a rare genetic disease which has left her barely able to speak, eat or breathe had her benefits cancelled after assessors deemed her fit to work. A spokesperson for the DWP said ‘We are committed to ensuring that people get the support they are entitled to.’ Such statements ring hollow in the light of the indignities heaped upon disabled and sick people.

How would any of us feel if our care, or the care of our loved ones, were reduced to obeying a set of rules to meet financial tests or financial affordability?  The deaths of Errol Graham and Barry Balderstone are just two cases in a long line of deaths which have occurred, to put it bluntly, at the hands of the State as a result of government policy decisions forged in line with discredited market-led economic orthodoxy and combined with the untrue claim that such public spending is down to financial affordability or the health of the economy.

Having to undergo gruelling work capability assessments to determine whether one is eligible for support causes indignity and fear. The indignity of being rejected and having to appeal and in the meantime lose one’s benefits.  The humiliation of having to rely on food banks to feed oneself or one’s family as a result of a cruel and dysfunctional Universal Credit, a system being rolled out across the country. And the nation shaming poverty, hunger and starvation in one of the richest countries in the world. Clearly, work does not make you free.

So, when government officials express their sympathies at such deaths referring to them as tragic or complex as they did in the case of Errol Graham, the reality is that it is sham sorrow; words chosen from their box of suitable ready-made responses in a cold-hearted, cynical attempt to gloss over the human realities.

And yet, whilst it continues its brutal assault on some of the weakest and most vulnerable in our society it has no problem finding tax cuts for the wealthy, serving the interest of big corporations, pouring vast sums of public money into vanity projects like HS2 or saving a failing company like Flybe.

We seem to be regressing into another era. An updated version of the Dickensian novel Oliver Twist in which a starving Oliver pulls the short straw to put his empty bowl out and ask the well-fed Beadle for more. The era of the workhouse where the Poor Law Boards, believing that they were doing their Christian duty, sat in judgement; dishing out charity to the deserving poor whilst leaving the rest to rot.  The system perpetuated misery, poverty, malnutrition, starvation and not to mention untimely death as in the case of Oliver Twist’s mother who died alone in the workhouse.  Those very same situations are being repeated daily in many thousands of homes across the country.

We have come a long way from the Beveridge Report published in 1942 which eventually shaped the Britain we know today and created a system of social insurance to protect people from ‘cradle to grave’.

Today that welfare system is being dismantled piece by piece. We have been told by politicians that we can no longer afford this comprehensive system of support and protection which shields us from the raw realities of naked capitalism and provides security and safety when we need it most.  We are now living in a time where we are being conditioned to believe that such systems are no longer affordable, that the private sector is the only option left and that the future lies in public charitable donations or volunteering to deliver those services that are not profitable to big business. These things are being normalised in society. From food and clothing banks to food collection points in supermarkets whose bosses shamelessly promote their good works and collude in the big lie. Our goodwill and empathy are appealed to and being abused to serve the market and cut costs.

The State is dissociating itself from its role as an institution serving the public purpose by providing the public and social infrastructure to create a healthy nation and by association a healthy economy.  It is instead creating an environment of fear as it chips away at our system of social security through instigating punishment, tightening criteria for eligibility and stigmatising people with accusations that they are lazy scrounging shirkers hiding behind the curtains. It is also pushing ahead ever faster with the fragmentation and privatisation of our public services in the belief that the markets can deliver public services better, even though the evidence is clear that they do not.

We don’t have a government in denial; we have a government pursuing policies designed to hurt people and create misery all wrapped up in the ideological cloak of ‘there is no alternative’.  Whilst Boris Johnson promised a post Brexit ‘golden age ‘and his Chancellor declared that the government had ‘turned the page on austerity’ those pledges in a post-election period are now beginning to unravel.

That promised golden age and abandonment of austerity apparently doesn’t apply to northern cities. Over the last 10 years, the poorest areas in the north have borne the brunt of Conservative austerity. And now, just this week, the Local Government Association has predicted that the new government formula will impose further cuts to already battered northern cities from 2021 onwards as government reallocates council funding to Conservative-controlled, mainly southern shire councils.

Also, this week in the biggest turnaround, the Chancellor announced that he had written to cabinet ministers asking them to draw up cuts of up to 5% of their spending plans saying that they had been elected with a clear fiscal mandate to control day to day spending. He went on to say that there will need to be savings made across government to free up money to invest in the government’s priorities. Austerity was framed as a necessity in the wake of the Global Financial Crisis, with government having emptied its coffers by bailing out banks, so the population had to take a knock, dig deep, “we’re all in it together”. Lies. A lie that has taken thousands of lives, vandalised our public services and communities

So yet again, as already mentioned by GIMMS a couple of weeks ago, we have government couching its spending plans in household budget terms, claiming they have to make difficult choices to release money to spend elsewhere as if there were a shortage of it when there isn’t. The commitment by government to implement a spending programme to revitalise the economy at a time of great upheaval are vanishing into thin air.

In effect, the Chancellor is leading the public down the garden path claiming, quite untruthfully, that he will have to rob Peter’s and Paul’s departments to fund the government’s promised capital spending or infrastructure projects.  As the UK is a sovereign currency-issuer, he has no need to do this in order to spend. He could, assuming the resources to deliver the government’s policies exist, quite simply spend; vote the necessary funds into existence.  One should ask oneself how the Chinese authorities could build a hospital in six days to deal with the coronavirus emergency playing out in China, whilst our Chancellor scrabbles around for departmental savings. The Chinese government certainly weren’t checking whether enough tax had been paid or worrying about where they could find the money, they just authorised their central bank to make the necessary transfer into the accounts of an appointed construction company via a few keystrokes on a computer.

Cutting day to day spending, on the other hand, will reinforce the last 10 years of austerity which has already caused so much damage to public services, welfare provision and staffing levels in public sector environments. Essentially, that means you can build a hospital, but you might not be able to pay for a nurse to work in it. At a time when the NHS, for example, needs more nurses this would be folly indeed. Our politicians, whilst telling us there is no money to spend on public sector service provision which is fundamental to the UK’s social and economic health, will continue to pour public money into private profit, funding large infrastructure projects like HS2 to serve the corporate purpose instead.  The state as a cash cow for big business and a reinforcement of the capture of government by globalised forces.

The only way for such misrepresentations to be challenged is for a grassroots movement to get informed about the art of the possible by challenging the notion that there isn’t enough money to create a better, safer, more equable and sustainable world for those we love, our children and future generations.

As Howard Zinn, the great author and socialist thinker wrote:

‘Truth has a power of its own. Art has a power of its own. That age-old lesson – that everything we do matters – is the meaning of the people’s struggle in the United States and everywhere. [….] When we stand up and speak out together, we can create a power no government can supress. We live in a beautiful country. But people who have no respect for human life, freedom, or justice have taken it over. It is now up to all of us to take it back.’

 

 

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The post We need to break free from the notion that a country’s health is measured by a balanced budget. Value is not judged by money, but by human and planetary flourishing. appeared first on The Gower Initiative for Modern Money Studies.