economic recovery

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“Either you guarantee employment, or you guarantee there will be unemployment.” – Pavlina Tcherneva

Unemployed men wearing hats waiting in employment benefit linePhoto by The New York Public Library on Unsplash. 1938 – Unemployment benefits aid begins. Line of men inside a division office of the State Employment Service office at San Francisco, California, waiting to register for benefits on one of the first days the office was open. Photographer – Dorothea Lange

This week the Learning and Work Institute published its July briefing on employment. Stephen Evans, its chief executive, made it clear that there were signs of an employment crisis ahead with payroll employment down 650,000 and the claimant count over double the level seen in March with the biggest rises in areas where unemployment is already high.

According to its analysis, the number of hours worked have plummeted 17% since the start of the crisis – the lowest level since 1997. It also noted the OBR projections that 15% of furloughed workers (1.4 million people) will not be able to return to their previous jobs.

Pointing to the current 2.6 million claimant unemployment, which is almost at the levels of the 1980s, it said that that could rise further with the withdrawal of the Coronavirus Job Retention Scheme at the end of October, risking a second wave of unemployment and adding to the redundancies already announced in recent weeks.  Modelling by the Learning and Work Institute has also warned that without adequate government intervention unemployment could be on track to exceed four million, which would be an unemployment rate higher than at any point since 1938, following the Great Depression.

According to the Learning and Work Institute and very worryingly the youth claimant count has already exceeded the peak of the last recession reaching 508,000 in June. The Resolution Foundation suggested in its ‘Class of 2020’ report, published in May, that the pandemic could push youth unemployment over one million.  It also found that education leavers were most exposed to the increase in unemployment and that they are likely to face reduced pay and employment prospects even after the economy has recovered.

Prior to the pandemic, the consequences of 10 years of cuts to public spending and government policies had already left people in precarious employment and on low wages – in poverty. The future is now even more uncertain for many of those people who will be joined by many others fearing equally for their prospects. ‘Can I get a job?’Will I still have a job to go to?’ And for young people ‘What sort of future will I have?’  Those fears are translating into falling consumer confidence and spending.  Andy Haldane’s ‘V-shaped recovery’ is looking less and less likely as people worry about the prospect of redundancy and decide instead to save what they can (and if they can) just in case the worst happens.

Jonathan Haskell, who sits on the Central Bank’s interest rate-setting committee, was clear in his analysis ‘The path of recovery crucially depends on the fear of infection, which in turn depends on the mix of public (track and trace) and private (screens in shops) health measures… It also depends on the fear, or realisation, of unemployment, as weak activity and capacity constraints on the operation of surviving businesses, and insolvencies, translate into a fall in the demand for labour’.

With the slowdown in economic activity across the world and the prospect of a deep global recession, the steep fall in household consumption and businesses which have closed, the already massive response from the government in the initial stages of the pandemic has now translated into the job creation programme announced a few weeks ago by Rishi Sunak to mitigate the worst consequences of the economic slowdown as we emerge from lockdown.

Sunak announced increased capital funding and plans for better infrastructure from roads to schools and hospitals as well as the creation of green jobs along with a youth employment programme.  Whilst they are welcome, such plans will not be ‘shovel ready’ or provide an immediate solution to the expected rise in numbers of unemployment. Furthermore, the Kickstart scheme for young people may not be workfare but leaves many questions unanswered: Will these jobs be mandatory with the threat of Universal Credit being stopped if they opt-out? Will they lead to permanent jobs? And could they undermine existing employees if employers choose to replace them with government-funded labour?

As Ellen Clifford (a disabled activist and author of The War on Disabled People: Capitalism, Welfare and the Making of a Human Catastrophe’) notes in her article in Novara Media ‘Throughout the pandemic, the Conservatives’ primary economic concern has been how to support business with little to no regard for public well-being.’

This phenomenon is not new. It has been the modus operandi of successive governments and reflects ‘free market’ ideology which places businesses as wealth makers, forgetting the role of workers in that wealth creation.  At the same time, it has been allowing vast sums of public money to be poured into private profit. As has already been noted by GIMMS in previous MMT Lens blogs, under cover of Covid-19 this process has speeded up.

As reported recently by the RMT, the privatised rail companies have been handed hundreds of millions in extra subsidies to run trains during the lockdown and they are now demanding even more. Add to this the state contracts worth over £1bn that over the last few months have already landed in the laps of private companies without a tender process or accountability. Companies such as Deloitte, PriceWaterhouseCoopers and Ernst & Young have all been beneficiaries of public money under fast-track rules. In other words, just more of the same corporate welfare which has been a key feature of successive governments over decades.

At the same time as our public services have been starved of funds on the grounds of unaffordability, the private sector has done very well indeed from the public money tap.  Whilst public money has been poured into private healthcare organisations the UK, according to recent research by the Nuffield Trust the NHS is near the bottom of the league for health resources – short of staff, beds, equipment and buildings. The commercialisation of our public service sector means that private profit trumps public well-being whether it’s the NHS or social care. Even our education system has been reduced to serving the god of the market.

And as Rishi Sunak bigs up his generosity by praising the role of public sector workers and rewarding some, he is at the same time playing a nasty, divisive game by increasing the pay of teachers, police and prison officers, the judiciary, civil servants, doctors and dentists and the armed forces whilst ignoring other frontline workers including nurses, midwives, hospital porters and other NHS staff who will not be included in this pay round. The very people who were instrumental in saving thousands of lives whilst putting their own at risk. The same people who despite a three-year wage settlement still have not made up for the lost incomes which occurred during the previous public sector pay freeze.

The settlement did not include either the many thousands of brave and committed employees working for private care companies on low pay and with poor working conditions during the pandemic. This is a direct result of the brutal cuts to local government budgets which has left them between a rock and a hard place and having to drive hard bargains to buy care which in turn has a knock-on effect on workers’ pay. As an aside, isn’t it time for social care to be brought back into the public sphere rather than being open to abuse by big private companies obsessed with profit?

It is risible then that at the same time as recognising the ‘vital contribution’ made by our key workers, Rishi Sunak is now talking about the need to get the public finances back in shape and the possibility of further cuts to spending. This week he warned that public sector workers should expect further pay squeezes and has ordered government departments to find cost savings.  Suggesting that the money for the proposed public sector pay increases will have to come from existing budgets is likely smoke and mirrors code for the prospect of more cuts to public spending at some point in the future.

After a huge fiscal stimulus to keep the economy from tanking, which yet again has benefited businesses, the government is now rowing back and preparing us for the bad but false news that it will have to be paid for. And the media and economically illiterate journalists reinforce the household budget narrative to keep the public in line and compliant – ‘Covid-19 provoked a surge in borrowing’,…‘the UK public finances are on an ‘unsustainable path’‘tax rises are inevitable’ are dished out daily to subvert the truth about monetary reality. The desired response will be that the public accepts more austerity as the price to pay for government spending during the pandemic.

It’s time for the public to get ahead of the curve and stop bowing to the deficit hawks who spread misinformation which will deprive them of a better life.

Quite simply, such a strategy would further depress the economy at a time when it needs more spending, not less. Robbing Peter’s department to pay Paul’s is, in short, more austerity and more cuts to public spending based on the lie that there is a finite pot of public money. We should be clear here that it has nothing to do with the state of the public finances or modern monetary realities and is more to do with political choice and fulfilment of ideological narratives about the superiority of the market rather than the government recognising its role in serving the interests of the nation as a whole. The message of trickle-down has proved a lie, but they still try to promote it as a wealth equaliser.

If the Conservatives were really interested in really levelling up Britain and tackling poverty and inequality, then they would have to embark on a radical strategy which would include;

  • a central government paid for Job Guarantee serving the needs of local communities by providing useful, paid public sector work both to maintain economic activity in the real economy and mitigate the worse effects of the coming recession.
  • a permanent expansion of the public sector for education, healthcare and social care for the well-being of both the economy and its citizens.
  • Targeted government investment in training, education and re-skilling for the future and to transition towards a just green economy.

A Job Guarantee may not be a magic bullet in itself to solve all the problems we face but it is an essential framework upon which we can build a better society for all.  In the words of Pavlina Tcherneva, academic and author of The Case for a Job Guarantee:

“The guarantee part of the proposal is the promise, the assurance, that a basic job offer will always be available to those who seek it. The job part deals with another paradox, namely that while paid work in the modern world is life-defining and indispensable, it has, for many, become elusive, onerous, and punitive. The job component in the Job Guarantee aims to change all that by establishing a decent, living-wage job as a standard for all jobs in the economy, while paving the way for the transformation of public policy, the nature of the work experience, and the meaning of work itself.”

Hands up who doesn’t want a better life for themselves and their families?

 

 

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The post “Either you guarantee employment, or you guarantee there will be unemployment.” – Pavlina Tcherneva appeared first on The Gower Initiative for Modern Money Studies.

Nothing is written in stone. There is an alternative. Let’s make this the era of people power; we can do this!

Children wearing school uniform holding a chalkboard with the slogan "We are the future"Image by Gerd Altmann from Pixabay

‘Our economic and social prospects in the coming decade depend on today’s policies. The recovery will not gain steam without more confidence which will not recover without global cooperation.  Governments must seize this opportunity to engender a fairer and more sustainable economy. Prospects come from dialogue and cooperation at national and global levels.’

Laurence Boone – OECD Chief Economist

In the week that it was reported that in April the UK economy suffered a record slump with GDP plunging by 20.4%, the OECD suggested that it would likely suffer the worst damage from the Covid-19 crisis of any country in the developed world. It also noted in its most recent report that the global economy was now experiencing the deepest recession since the Great Depression in the 1930s, with GDP declines of more than 20% and a surge in unemployment in many countries.

It is clear that whilst many countries are now coming out of lockdown, the fear of a second wave and ongoing public and business uncertainty will continue to impact on future economic activity. Just this week there has been a slew of redundancy announcements.  BP is planning to cut its workforce by around 10,000 worldwide and in the UK British Gas by 5000 and the Chemicals firm Johnson Matthey by 2500. Heathrow is also launching a redundancy programme as the number of flights and passenger traffic has plummeted, with no sign of any recovery as travel restrictions continue.

This, unfortunately, represents just the tip of an iceberg threatening to sink economies around the world without continuing and adequate state intervention through increased spending. The ManpowerGroup, in its employment survey published this week, found that companies in all the major sectors of the economy are more likely to cut jobs than to hire over the next 3 months and revealed that it was the weakest forecast since records began in 1992. It has been estimated that the unemployment rate in the UK could reach 10% during the second quarter of 2020.

A report by Pro-Bono Economics also published this week reveals that despite the government bailout in April, one in 10 UK charities are facing bankruptcy by the end of the year as a result of financial shortfalls triggered by mounting demand for their services and lost fundraising income due to shop closures. The study said that two-thirds of smaller, local charities had made significant cuts to their services and one in eight were expecting to have to terminate their operations. According to the report it had also forced some big-name charities to use public donations to support those services provided under contract to local authorities and central government (we will return to this later on).

Alongside the economic consequences of the pandemic, Sara Caul, Head of Mortality at the ONS (Office for National Statistics) noted in the statistical report of deaths occurring between1st March and 30th May, that people living in more deprived areas had experienced Covid-19 mortality rates more than double those living in less deprived areas.

Not only are we faced with the very real tragedy of Covid-19 and its effects on the lives of those who have lost loved ones and those that have witnessed the ravages of the disease in our hospitals and care homes, the IFS (Institute for Fiscal Studies) in its Deaton Review observed this week how existing deep-rooted inequalities lay at the heart of the current disparities identified between UK regions.

The IFS then suggests that inequality can only worsen if ministers fail to act, and risks entrenching already deep divides. But confusingly and at the same time as recognising this, then goes on to suggest that the crisis is likely to leave challenging legacies for inequality given that the government’s capacity will be constrained by record peacetime levels of debt.

LET’S STOP RIGHT THERE.

Whilst the IFS deplores the existence of inequality and identifies some of its causes, it fails to grapple with the primary reason why inequality has risen and indulges in a false story which suggests that addressing it will be hindered by the already high levels of government debt.

What the report fails to mention, is that those disparities exposed via the pandemic are linked to the systemic frailty of a decaying economic paradigm. The decades of low wage growth which have left households unprepared financially to face involuntarily imposed unemployment as a result of Covid-19, the stark inequalities that have arisen as a result of an economic system which has penalised working people and impacted on access to good healthcare, education, housing and essential public services. It reveals how government, via its policy decisions and through a decade of austerity and cuts to public spending, has left a landscape ravaged by rising poverty and inequality. It has impacted communities across the country, particularly in the South West and the North, where cuts to local government spending, combined with increasing job insecurity and low wages have affected both poor white and ethnic populations to also create fear and societal division.

David Cameron’s big society, namely the charitable/voluntary sector, has also been affected by fallout from austerity, combined with the economic effects of Covid-19 on its finances.  Years of cuts to local government grants have, in their turn, affected many local charities who were already financially stretched. Closure of fund-raising avenues has left many faced with difficult decisions. This highlights what happens when government shifts responsibility for the provision of essential services to the charitable, voluntary sector whilst at the same time cutting public expenditure.

We are facing a disaster of monumental proportions. The economic fallout from Covid-19 is bad enough, but when combined with the threat posed to human existence by climate change, it is ethically and morally indefensible to hide behind false narratives which are designed to limit the actions a government can take to address these issues.  The crisis is systemic and it is incomprehensible that our leaders, along with think tanks such as the IFS and media hacks, are still working hard to keep the hierarchies of power in place with false narratives about how money really works whilst a credulous and uninformed public accepts the dominant paradigms as being unquestionable and unassailable.

For the moment the public purse has been opened to avert economic disaster but as GIMMS has discussed before how long will it be before the old narratives about unaffordability and paying the debt back creep back into the political and public discourse?

As Professor Prem Sikka wrote in a recent article ‘the right will try and push for a new round of cuts after this crisis. It would be economically illiterate to do so…It’s time to bust some neoliberal myths about debt’

If we continue to allow such myths to dominate, the consequences will be dire for the current and future generations.

As Covid-19 has dominated the news for weeks, it has already been made clear that health and wealth inequalities have played a tragic role in deaths, which combined with the future challenges posed by climate change will be a make or break moment for real and sustainable change.

In an open letter this week the UK Health Alliance on Climate Change, formed in 2016, urged the government to follow its six principles for a healthy recovery from Covid-19. It made clear its position that the health of the planet and the health of people are intimately connected and as such future government action must prioritise the health of both.

Whilst those principles are vitally important and essential to any future governmental policies it will be, as Prem Sikka has already observed, only be a matter of time before the issue of affordability and increasing government debt to pay for it will be raised.

However, without a sea change in the political market-led ideology which currently guides government policy, along with the acceptance of the very real resource constraints which all governments face when making their spending decisions, then those six principles will see little chance of being enacted to deliver those public purpose goals to secure the future.

Furthermore, whilst we remain mired in the household budget version of how government spending happens, we will equally accept its spending limitations and thus our own demise as a species.

This is our wake-up call to protect future generations, not from tax burdens as the orthodoxy prescribes, but from the burden of environmental decay and increasing climate uncertainty.

An economic recovery will depend on a new economic paradigm which puts people and the planet first – not more of the same with an environmental extra tagged on.  A Green New Deal combined with a Job Guarantee to allow a smooth and just transition is the way forward. That can only be underpinned by an understanding that government is not limited by money, but by the resources it has at its disposal to deliver its objectives. We can’t allow past narratives to dictate the future.

As a nation, it will be up to us to decide whether we go forward or stay stuck in the exploitative and destructive paradigm which is currently dictating the economic recovery in terms of more unsustainable growth, more futile consumption to feather the bank accounts of global corporations and more eco destruction.

Our future depends on understanding what is possible and what is not. And getting informed is the first step towards a better understanding of the choices we have.

As such, GIMMS can’t end this blog without a mention of two important books which were published this week, and which complement many others before them.  Firstly, The Deficit Mythby Stephanie Kelton shatters the myths that prevent us from taking action because we can’t get beyond the question of how we can pay for it. Whilst written for an American audience, it is equally applicable for the UK.

And secondly, ‘The Case for a Job Guarantee’ written by Pavlina R Tcherneva, which challenges the idea that unemployment is unavoidable and necessary for an efficient economy and invites us to imagine quite a different world where unemployment is eliminated and which has implications for the wider context of a Green New Deal.

And if you missed this first time around, readers interested in historical background and learning more about how money really works in the post-gold-standard era couldn’t do better than ordering Bill Mitchell and Thomas Fazi’s jointly co-authored book Reclaiming the State’.

And finally, don’t forget GIMMS website, which is a fount of information for anyone – from beginners through to those wanting more detailed information. Starting with our information sheet An introduction to Modern Monetary Theory’.

 

 

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The post Nothing is written in stone. There is an alternative. Let’s make this the era of people power; we can do this! appeared first on The Gower Initiative for Modern Money Studies.

Why has Europe's economy done worse than the US? | Mark Weisbrot

Published by Anonymous (not verified) on Fri, 17/01/2014 - 12:15am in

The eurozone experience shows what can happen when people lose control over their government's economic policies

If we compare the economic recovery of the United States since the Great Recession with that of Europe – or more specifically the eurozone countries – the differences are striking, and instructive. The US recession technically lasted about a year and a half – from December 2007 to June 2009. (Of course, for America's 20.3 million unemployed and underemployed, and millions of others, the recession never ended – but more on that below.) The eurozone had a recession of similar length from around January 2008 to April 2009. But it then fell into a longer recession in the third quarter of 2011 that lasted for another two years, and may only be exiting that recession currently.

This makes a big difference in people's lives. In the eurozone, unemployment is at near record levels of 12.1%; while in the US, it is currently 6.7%. Despite the incompleteness of these measures, these numbers are comparable. And, of course, in Spain and Greece unemployment is 26.7 and 27.8%, respectively, with youth unemployment at an intolerable 57.4 and 59.2%.

Historical experience indicates that successful fiscal consolidations were often launched in the midst of economic downturns or the early stages of recovery.

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