fiat currency

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Johnson resigns, but the toxic market-driven ideology will remain, whoever his successor

“Have we fallen into a mesmerized state that makes us accept as inevitable that which is inferior or detrimental, as though having lost the will or the vision to demand that which is good?”

Rachel Carson, Silent Spring

 

Boris Johnson making resignation speech at lectern, No 10 Downing steet07/07/2022. Prime Minister Boris Johnson makes his resignation statement outside Number 10 Downing Street. Picture by Kyle Heller / No 10 Downing Street. Creative Commons 2.0 license.

On Thursday, after weeks of uncertainty, as the wheels of the Conservative party machine forced his hand, Boris Johnson was finally left with no alternative but to resign. When he will leave the building permanently is still unclear, but not before he holds a lavish wedding party in the summer, which was to be held at Chequers but has now been moved due to the understandable public outcry!

It is a final insult to the nation which has borne the brunt of Tory policies, not just during the last two years and more, but since they came to power in 2010, claiming to be the party of fiscal discipline ready to save the country from bankruptcy. The shadow of unnecessary austerity which followed, on the basis of a false presentation of how the government spends, has dogged the economy ever since and caused human misery.

Whilst people may clap and cheer his departure, it is, however, yet another distraction from reality. The Prime Minister, whilst clearly not known for his integrity and honesty, and who with astonishing regularity has demonstrated his ability to dodge the fire, has been a longstanding part of successive Conservative governments which have wreaked destruction on the lives of working people and the country’s public and social infrastructure. The current one is no exception, and the evidence cannot be ignored. It is damning.

With Johnson’s ‘planned’ departure the neoliberal, market-dedicated Tory vultures are already circling for the top spot. But the idea that a new prime minister and government will mean a change of direction will quite simply be wishful thinking. To view his departure as a win for the country would be a mistake. Will the sense of overarching privilege and entitlement that dominates in Conservative thinking be replaced with a sense of duty to the country’s citizens? Probably not, when the architects of suffering are benefiting from the system remaining as it is.

As the blogger Jonathan Cook tweeted:

‘Rejoice, Rejoice! The ship of state, holed by corruption and heading straight for the rocks of climate breakdown, is to get a new captain who’s as committed to the course we’re on as the last captain.’

Just a brief look at the voting records of MPs and Ministers who may stand to replace Johnson is indicative of what to expect from any future Prime Minister. And it’s not just climate breakdown, bad as that is, that is at stake. From voting for reductions in spending on welfare benefits and for NHS reforms, (better known as privatisation), and against publicly owned bus and rail services, climate change measures or spending public money on creating guaranteed jobs for long-term unemployed youth, these issues are just the tip of the iceberg.

Steve Baker, MP for High Wycombe who once re-tweeted a report that suggested that the ‘climate crisis is not happening’, is, according to reports, considering running for PM, and has said that if he won, he would dismantle many of the Prime Minister’s Green policies (which is strange because it’s not clear that he ever was committed to any except in his rhetoric). Baker claimed bizarrely that measures to help farmers protect the environment were ‘anti-human life on Earth’, and that he would increase gas production in the UK because there was ‘no short-term threat from the climate crisis.’ The calibre of potential leadership leaves much to be desired.

This is a party, just like its opposition, wedded to a toxic market-driven ideology which is underpinned by a false narrative of how the government spends. Whilst for a time it seemed that a window of opportunity was opening to challenge those notions, given the vast public spending to prop up the economy which begged many questions about where the money came from, the household budget explanation continues to dominate, allowing present and future governments of either political stripe to persist with their smoke and mirror tricks to justify their political decisions. On the left, it’s ‘tax the rich to fund public services’, on the right, it’s ‘cut spending on public services to balance budgets.’

Rishi Sunak, a committed Thatcherite and the first to resign from Johnson’s government, has been replaced as Chancellor by yet another, Nadhim Zahawi. The Guardian reports that he is one of the richest MPs, who has used a tax haven for family investments and holds a wide portfolio of other interests including several houses. It might suggest that tax reform is not likely to be on his top list of ‘must do’s unless it favours the interests of the already excessively wealthy and the big corporations.

At the same time, he was quoted as saying that he wants to, ‘make sure that we are as competitive as we can be, whilst maintaining fiscal discipline’.

And there you have it. Fiscal Discipline. Same old. He has claimed that whilst his priority is to ‘rebuild and grow the economy’, spending plans which include potential tax cuts should not:

deflect from the need to limit increases in borrowing and to bring down inflation. “The important thing is to get inflation under control, be fiscally responsible. The first thing to do is to make sure that we are really careful about, whether it’s public sector pay, is that inflation doesn’t continue to be fuelled.

If the intention is to keep spending and erroneously named ‘borrowing‘ under control, how he aims to achieve this miracle has yet to be explained, although, of course, we could take an educated guess as to his modus operandi. But growing the economy and cutting government spending are mutually exclusive propositions. The former requires the intervention of the latter.

Last week, as Minister for Education, Zahawi was advocating a nine per cent pay rise for new teachers (but only 3% for others). This week, as Chancellor, he is rowing back, saying he will now wait for the pay review bodies before deciding. Fiscal discipline is the watchword, or in other words the possibility of more austerity for public sector workers who under this government have already suffered grievously as a result of cuts and pay freezes, leaving them even less able to stand the pressures caused by rising prices. The same working people who are now potentially expected to continue to do so to keep the public finances afloat (or so the story goes), or to control inflationary pressures by avoiding a wage-inflation spiral.

What absolute nonsense. Firstly, the UK’s public finances are not like the accounts of a private business. As such, there is no possibility of the government going bankrupt. The government is the currency issuer and as such has choices in terms of its spending priorities, which do not involve taxation or bond sales (called borrowing) to cover them. The only constraints it faces are finite real resources and the decisions about how they are distributed evenly, or not, throughout society.

Instead, we should view government spending and its policy decisions in terms of tangible benefits which have thus far served the elites and the corporations, and not working people and their families. They have led to the decline of our public sector infrastructure in areas such as health, education, and local government.

When they asked us to clap for the NHS, for those who bore the brunt of the pandemic, that shouldn’t have meant that they expected people to continue to work for peanuts after years of pulling in their belts, having been told falsely that there was no money. Or to work under worsening conditions with insufficient staff and real resources to provide good health care services. Furthermore, under the cover of the NHS logo and the noses of an unwitting public, our NHS has been packaged up to suit private healthcare interests. A heavy price has been paid and will continue to be paid.

As a report from the University of Oxford, which was published in The Lancet in early July showed, the fallout from the privatisation of health contracts has been a drop in care quality and higher rates of treatable mortality, deaths that could have been avoided. The NHS is not a business making widgets for sale. It is a vital public service protecting the health of the nation and should be publicly owned, paid for, and managed.

Spending cuts have also been responsible for a social security system which is not fit for purpose and has become a mechanism for dividing and punishing people instead of helping them in need. It has also led to many deaths as a recent report published by the Deaths by Welfare project notes. Deaths that could have been avoided with the political will.

Government policies and spending decisions have led to a low-wage economy, rising poverty, hunger and food banks, and a sicker nation.

Government has, in fact, treated its citizens as expendable in a never-ending race to the bottom. The neoliberal quest pursued by successive governments has been to reduce the size of the state on the basis of both a toxic neoliberal ideology that sets the market as the arbiter of all, and that a smaller state will need less tax to pay for it, which forms the cornerstone of Tory policy.

It is based on a notion of a bloated state that needs to be culled in the face of a scarce pool of money which deprives the business sector of funds for investment. In this respect, Rees Mogg, who seems to have travelled in the Tardis forwards in time from the 18th century and who is horrified by the idea that people can work from home just as effectively as in the office, has indicated his intention to reduce the civil service by 91,000, to reduce government spending costs. He asks no questions about the economic impact of such a strategy on an already failing economy. Or the suffering it will cause.

The undisguised hatred of state interference by the right wing fails to recognise that it is the spending decisions of the currency issuer which determine the economic health of a nation and creates the infrastructure and legal framework for business to even exist.

The State sits at the top of the pyramid and through its spending and taxation policies, everything good or otherwise flows down from there. It can’t be emphasised enough that government makes the decisions about its spending priorities and those determine how well the economy functions and who benefits.

Whilst government pretends that there is no money for public infrastructure, it has had no problem finding public money to fund wars or pour into private profit for public service provision. Public services funded with public money have become a cash cow for the private sector. If the alarm bells are not ringing, they should be!

The public sector is the last bastion against an out-of-control neoliberal-inspired capitalism which seeks to profit from human suffering to keep the global capitalist truck rolling. And this government is party to that objective, both in its policies and its household budget narratives of government spending. We shall come back to this shortly.

At the same time, that word inflation is still making the headlines on a daily basis. It is the central bank’s justification for raising interest rates and the government’s for its proposals to constrain public sector wage rises and calling generally for pay restraint, except of course if you are a CEO of a large corporation. It is worth repeating again in this week’s Lens the words of John T Harvey in an article in Forbes.

‘… it’s abundantly clear that the lion’s share of what we are facing today is being driven by supply-chain issues […] Gas prices are not going up because people had so much money they wanted to do some more joy riding and oil companies couldn’t keep up.  Rather, as with the OPEC oil embargo in 1973, a geopolitical event has created uncertainty and a decrease in supply.  These are the factors responsible for our inflationary woes. […] Nothing in our current scenario suggests that lowering the level of economic activity […] would be helpful. ‘

So, to keep harping on about wage-inflation spirals shows a level of economic ignorance on the part of politicians in terms of the context of these inflationary pressures and a seeming willingness of the central bank to bow to media and political pressure to increase interest rates which will not be in the best interests of the economy. It’s not like Andrew Bailey, the Governor of the Bank of England, doesn’t know this fact as he made plain early on. It will quite simply add to the woes of working people as the increased cost of money works its way through the economy in additional costs and then prices. In an environment where price rises are the result of global supply issues over which we have little control and not wage demands, they will just further damage an already failing economy.

In the face of the storm, you don’t pray for a hurricane.

This was brought home by an unlikely source this week when Paul Drechsler, a former Chair of the CBI and current Chair of the International Chambers of Commerce, was asked in an interview on the Radio 4 Today Programme whether cutting taxes should be the new Chancellor’s first priority. He responded:

‘I think the most important thing to do is to feed people who are hungry. I mean that is the burning platform at the moment.  The poorest in our society are going to be starving to death the second half of this year.  This needs to be addressed. Sprinkling a bit of cash over everybody […] isn’t going to make a jot of bloody difference.’

In the article published in Ekklesia, reference was also made to the survey commissioned by the Royal College of Physicians in May this year, which showed the impact of the cost-of-living crisis on people’s health. Responding to those results, Professor Michael Marmot who is an expert on health inequalities noted:

‘In my recommendations for how to reduce health inequalities, sufficient incomes for a healthy life was one among six. But it is crucial as it relates so strongly to many of the others, in particular early child development, housing and health behaviours. As these figures show, the cost-of-living crisis is a potent cause of stress. If we require anything of government, at a minimum, it is to enable people to have the means to pursue a healthy life.’

The cost-of-living crisis has arisen out of the ongoing pandemic and the supply issues related to the conflict in Ukraine, but the low-wage economy has been an ongoing situation caused by successive governments who have been willing to allow people to be thrown under a bus as an inflation control mechanism and, let’s be honest, to allow business to exploit the angst of the unemployed who are desperately seeking work and who then have no alternative but to compete with their fellow workers on wage rates.

The failure by the government also to address the socio-economic determinants of health through its spending policies and legislation is a shameful reminder that this has been a political choice borne of a rotten ideology and has caused great social and economic harm.

It is all the more concerning then to read in the BBC this week that according to the OBR, in its Fiscal Risks and Sustainability Report, the pressures of an ageing population on spending and the loss of existing motoring taxes in a decarbonizing economy (although no sign of that as yet) means that the UK is on an ‘unsustainable path’, unless spending is tightened, and taxes are raised.

That bogeyman of debt once again raises its ugly head and once again the public is being tricked into believing that there will be no alternative to more austerity pain if the government is to get the public finances back into the black.

In the words of Mike Hall, an MMT activist posting on Facebook, who responded thus to this patent nonsense.

‘This is a completely, factually fraudulent narrative, uncritically parroted by the propagandists masquerading as ‘journalists’ […]

 

UK Gov issues £s, free gratis. It has zero need, functionally to offer *savings* Bonds at all, with the pretence they’re needed to ‘fund’ anything. Monetary system facts, that the establishment mass media and politicians they elevate, continue to lie about.’

He suggests that:

‘The only way we can begin to correct this rule by false propaganda is by creating a true commons, common ownership mass media sector, free of both private money interests & centralised control by corrupt political leaders. […]

 

The present system of rule elites’ propaganda control means humanity (none of us) will not survive the climate and ecological collapse it is hurtling us toward.

 

Change must begin with the information/media system (and its consequent politics planetary wide death), or it will not happen at all.’

And here in the penultimate paragraph, we get to the heart of the matter. We have a ruling class assisted by academia, institutions and the media, parroting a lie at every opportunity about how governments spend, which allows them to suggest that we do not have the monetary wherewithal, not just to save humanity from ecological collapse, but also to address the crushing wealth and other inequalities that exist around the world, in particular in the global south, due to centuries of colonial exploitation.

The ludicrous nature of that narrative must be exposed for what it is. A lie. In a world where time is running out to address the climate crisis, those who talk about fiscal ammunition having been used up or public debt as unsustainable, or who suggest that such spending relies on a healthy economy and the taxes derived from it, or indeed that too much government spending/borrowing will create a future tax burden, are condemning future generations. The UK government, whilst trumpeting its green credentials, has done little more than just that, and now is moving full steam ahead in the opposite direction to secure its energy needs by giving energy companies drilling rights for new oil and gas exploration, and who knows, maybe fracking next.

The supply crisis has reinforced, as nothing else could, that we do not live in a vacuum and that we have become dependent on just-in-time global supply chains that can easily be affected by war, disease, and climate change. This should be the signal that we must not return to our old ways to shore up an economic system which has been proved to be catastrophic in every sense – for the planet and its biodiversity, and the people who depend upon it both here and elsewhere for their existence and livelihoods.

It is an opportunity to develop our own food and energy strategies, invest in public infrastructure and useful and productive activity to secure a better, happier, and more sustainable future for all. It is also an opportunity to work cooperatively with nations around the world for the same objectives, instead of assuming we can carry on exploiting the human and other resources of those countries, as was suggested this week by Abebe Selassie, a director of the IMF’s African department, in an article entitled ‘Neglect Africa Now and we will face labour shortages globally.’ Yes, let’s not neglect Africa, but not by stealing labour for the benefit of northern economies.

Whilst corporations continue to sell us a greenwashed world designed to keep the profits rolling, and governments tell us their spending options are limited by a finite pool of money, we are running out of time to make the difference that is needed. This is a global emergency and it’s time to get serious. That starts as always with a challenge to the narratives about how governments spend, and for that, we need a media that holds government and its institutions to account.

 

 

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The post Johnson resigns, but the toxic market-driven ideology will remain, whoever his successor appeared first on The Gower Initiative for Modern Money Studies.

The Government, like the Pied Piper, marches the nation back to Dickensian Britain

“Please spread the word. We need to end the ‘state is like household’ analogy. The main constraint on govt. spending is the productive capacity and resources in the economy and the risk of inflation – not the size of the budget deficit.”

Josh Ryan-Collins on Twitter

The Pied Piper of Hamelin playing his pipe and leading the children away from the town
The Pied Piper of Hamelin, print, Henry Marsh, after John La Farge (MET, 21.65.4). John La viola, CC0, via Wikimedia Commons

This week, the Chancellor of the Exchequer, after dragging his feet and protesting in his speech to the CBI that, given the external global circumstances driving the cost-of-living increases, ‘there is no measure that any government could take’, has now done an about-turn. After telling the public not so long back that his top priority as the dangers of the pandemic receded was to restore the public finances, the ongoing and worsening supply crisis has finally forced his reluctant hand, albeit as a temporary and inadequate measure as many charities and other anti-poverty groups have already noted in their analyses. He fails, yet again, to get to grips with the underlying structural problems caused by the policy decisions of successive governments. Decisions which have led to a low wage economy, and over decades driven poverty and inequality which has benefited businesses at the expense of working people. Existing problems which have severely exacerbated the current unstable economic situation.

It is, however, once again too little and too late. An afterthought for a man who appeared last week for the first time in the Sunday Times Rich List, who seems to have no concept of the difficulties in ordinary people’s lives. Andrew Harrop, of the Fabian Society, described the Chancellor’s measures as a ‘sticking plaster’. We have had a lot of those over the last decade as government austerity has resulted in the inevitable breakdown of public and social infrastructure, and of society and its values. Half-baked policies have glossed over the growing hardship this government has caused by doing nothing except revel in its rhetoric and smoothing over of the truth with its propaganda.

Societal breakdown is not an unavoidable destination, it is the result of the deliberate failure by the government to enact the policies that would keep its citizens safe and secure in a functioning, fair economy and ensure that in hard times it acts to cushion the blows caused by events out of its control. Furthermore, whilst many, with their hearts probably in the right place, talk about creating a fairer welfare system and higher benefits as a way out of this situation, in the long term that is not the answer, and buys into more dependence on the state, which, frankly, has already done its utmost through reforming the welfare system to punish those citizens who find themselves in involuntary unemployment or precarious employment, or unable to work through illness.

The solution lies in creating a fairer society that is predicated on better wages and terms and conditions of employment, not so-called welfare ‘handouts’ to those who are disparagingly referred to as the ‘deserving poor.’ As Hannah Fearn wrote in the Independent this week: ‘Benefits do not support the poorest to live a self-determining and fulfilled life, but trap them in desperate cycles of poverty.’

It also lies in creating a high-quality public service sector, instead of the diminished one we have today, the implementation of a Job Guarantee to support people, as now in this current economic climate, and for those that cannot work, a properly funded social security system which gives people dignity and sufficient income to live on.

It was shameful to note that in his speech, the Chancellor, announcing his spending measures, said that the government would ‘not sit idly by’. That would be laughable if things were not so serious. For over more than ten years, the Conservative government has ‘sat idly by’, as it cut spending on public and social infrastructure to the bone, on the specious lie of unaffordability, couched in narratives of sound finance. This is therefore not a new phenomenon. The price we have paid for that lie as the pandemic raged has been made very clear. The public infrastructure upon which society relies, both in good and bad times, fell short, from the NHS to social care, education, local government and other vital institutions. Everything that binds society together with a cooperative purpose has been whittled away.

The emphasis on balanced budgets to serve an ideologically driven agenda that benefits global corporations rather than delivering public purpose, has led to rising poverty and inequality, which have translated into hunger and the growth of food banks as families have struggled to put food on the table and heat their homes. GIMMS has covered these disturbing subjects endlessly in its MMT Lens, week by week, month by month, year by year, since its launch in 2018. The fractures began in earnest a decade ago, with unnecessary austerity, and a false discourse that governments are limited in their spending policy choices by the tax they collect or what they can borrow, which, in turn, according to the orthodoxy, has consequences for future generations in terms of higher tax burdens. An obscene deception in the light of what has followed, and which arose out of a political choice driven by a pernicious economic ideology, and not financial necessity. It is time to hammer home that the line so often used by Sunak and others is false. The future burdens won’t be tax ones, but human and environmental ones created by governments which have failed consistently to invest today to create a truly productive and sustainable future tomorrow.

The global pandemic which affected and is still affecting production, followed by the outbreak of war in Ukraine, have only served to highlight our strategic planning deficiencies and interdependence. Ukraine and Russia play a major role in global food markets (not to mention oil and gas) which, when increasingly combined with the growing consequences of climate change on food production, with India imposing a ban on wheat exports as severe heatwaves have damaged crops, and East Africa in the grip of a relentless drought, only serves to emphasise the real costs for governments which have prioritised keeping the global corporatised economic order functioning, and the capitalist gravy train, predicated on exploitation, rolling. The tsunami of climate change is bearing down upon us, and yet, the government still sees the future as being defined by increasing growth in consumption, regardless of its impact on the planet. We apparently have to make up for the losses of the last two years, even if that means abandoning our climate promises which now seem to have been lost somewhere in the ether.

Instead of focusing on sound, consistent, long-term strategies to secure food and renewable energy domestically, governments have allowed the global corporate juggernaut to dictate the pace, thus securing its power, influence, and wealth. But as we are belatedly discovering, the ‘Just in Time’ world in which we live has distinct disadvantages. Nature, disease, and geopolitics combined, have exposed the weaknesses of a decaying unipolar economic system, which, until recently, has based its ideas on the finite nature of money and persuaded an unaware public that there is no alternative. A system predicated not on cooperation but on dividing people and allowing, by design, an unfair distribution of real wealth and real resources.

The Global Financial Crash in 2008, the Pandemic and current economic uncertainties have changed all that, and governments have been driven, as a result, to ‘re-discover’ the power of the public purse to manage their economies in the face of the prospect of economic decline, although always with a view to constraining that spending at some future point in time, once an emergency is over. There is always a price to pay on this model of how government spends. But just when Sunak thought he could get back to ‘business as usual’, his plans were scuppered once again by the conflict in Ukraine.

Balancing the books is a perennial concern for all governments, sooner or later. The government should be a good manager of the economy by ensuring that the public and social infrastructure meets the needs of the people it serves, from individuals to communities and businesses, and by aiming to balance its spending with the very real resource constraints, which requires strategic planning. Instead, governments, the media and those working in think tanks, endlessly replay their messages of monetary scarcity which have played a cruel and destructive trick on the population. Such deceitful narratives ultimately constrain the actions that are needed to address poverty, inequality, environmental sustainability and planetary health. Should that, of course, be a government objective. However, these narratives are useful for governments who wish to avoid such actions. It doesn’t bode well for the now seemingly defunct concept of levelling up or addressing the climate emergency.

We are led to believe that government spending is constrained by taxation or borrowing, and the media without fail, reinforces those messages, as Larry Elliott did in an article in the Guardian at the end of April. On the one hand, journalists report the state of public services and other vital infrastructure, relate stories about how people are struggling to keep their heads above water and being obliged to use food banks or switch off their heating, and yet, in the next breath, in an astonishing display of cognitive dissonance, give their readers a blow-by-blow account of the state of the public finances, as if somehow it is of vital importance to know how well the Chancellor is delivering his fiscal objectives. Put the fear of God into a nation by focusing its attention, like a magician, on the wrong subject. It seems that they choose not to make a connection between government spending (or the lack of it) and the state of the nation. Those two things are not disparate subjects, they go together.

As the current government, like the Pied Piper, marches the nation back to Dickensian Britain, journalists should at least be challenging the accepted economic dogma which prevails, rather than reinforcing the message that sound finance trumps public purpose. That should be the role of the media. But then, of course, as Upton Sinclair so rightly observed, ‘It is difficult to get a man to understand something when his salary depends upon his not understanding it.

So, given his predilection for household budget accounting, it was not surprising that Rishi Sunak, the arbiter and promoter of sound finance, had to eat his words and do yet another about-turn, by stating that he will be imposing a ‘windfall tax’ on oil and gas companies (well sort of) so he can, as he claims, partly cover his spending pledges. Whilst some Conservatives are critical of the tax, suggesting it will reduce investment and goes against their low tax stance, (at least where the rich corporations are concerned), Labour’s calls over the last few months for a tax on extraordinary profits to help people manage their way through the energy crisis, thus have now been satisfied. Job done. That is, of course, if we believe the notion that has been drilled into the public consciousness that taxes fund government spending.

The government as the currency issuer has the capacity to spend what it needs to, to balance the economy in good times and keep it functioning during economic crises. It doesn’t have to go begging to rich people or large corporations to provide that funding, or impose windfall taxes, and nor does it have to borrow to do the same. That is all part of the smoke and mirrors that have created false narratives. The sequence is spend first, then tax, not the other way around.

The last two decades and more should have proved categorically that household budget economics, in terms of government spending, is a myth. The public is beginning to take note that there is always money to bail out ‘too big to fail’ banks and other large companies, fund wars or address the fallout from pandemics, when it suits the government to do so. As the contradictions become ever clearer, the public are slowly coming to understand the political nature of spending decisions, and that, by the same token, the UK government could, in the same way, create the money to fund public services and vital infrastructure, that poverty and inequality could be addressed to ensure that citizens have dignified and meaningful lives, and that the climate crisis could be tackled through legislation, and targeted spending and taxation policies, to drive change and force businesses to do or die.

As Josh Ryan-Collins, who is an associate professor in economics and finance at the UCL Institute for Innovation and Public Purpose wrote in an article in the New Statesmen this week, ‘Government spending power is limited not by tax revenues or borrowing but by the productive capacity of the UK economy and political will.’

Ryan Collins, promoting a new co-authored working paper, ‘The self-financing state: An institutional analysis‘, published by the UCL Institute for Innovation and Public Purpose (IIPP), which provides an in-depth analysis of the mechanics of the key institutions involved in UK government spending, demonstrates clearly in his article that the ‘British state always creates new money when it spends’. That is fundamental to what comes next.  It is the starting point for change.

The self-financing state: An institutional analysis

This paper is an institutional analysis of government expenditure, revenue collection and debt issuance operations in the United Kingdom.

 

So, while Chancellors, politicians, think tanks and journalists indulge in relaying myths that describe how governments spend, and keep the prevailing economic system functioning in the favour of capital, the reality is somewhat different.

A challenge to that understanding and the economic orthodoxy which drives it, is, however, underway.

The World Economic Forum’s meeting in Davos this week has revealed the growing cracks. The realisation by the wealthy elites that the global economic system, which has created vast wealth for the few, whilst at the same time crippling poverty and inequalities in the distribution of real wealth for many others, is under threat. As working people in the global north wake up to their exploitation and the associated injustices, and those in the Global South begin to reject the economic solutions imposed by the north, under the tutelage of the US, its allies and the institutions which it controls – the IMF, the World Bank and the World Trade Organisation, those that have benefited over decades may, at last, be facing a rude awakening which could force a rethink. Not that one is holding one’s breath! But it should not be surprising that the Establishment which has dictated the rules for decades, feels threatened in this time of flux and uncertainty. Things ‘ain’t what they used to be’ and the certainties are slipping away.

Reuters reported this week that world leaders, financiers and chief executives were leaving Davos with ‘an urgent sense of the need to reboot and redefine globalisation’. Their version of globalisation has, hitherto, not been about real cooperation in the service of humanity, rather it has been the exploitation of human labour and finite resources in the service of greed and profits.  Globalisation has not been about planetary flourishing, it has proved to be the exact opposite, favouring the few, a billionaire class who, as Oxfam pointed out this week, were increasing their fortunes by $1billion every two days. Not because they worked hard but because the system is rigged in their favour. A system which allows them to amass vast resources and pollute the planet with their excesses, while the rest labour in low wage economies as slaves.

Its dominant position has been ably assisted by the notion of monetary scarcity, which has been hugely damaging as countries in the global south have been weighed down by foreign debt and forced to accept punishing bailout regimes, which have, in turn, forced cuts to public spending and decimated public infrastructure. This is the common link between the global north and the global south. The toxic economic system which prevails and leads Sunak to focus on fiscal discipline rather than public purpose.

 

The MMT Podcast with Patricia Pino & Christian Reilly: #131 Fadhel Kaboub: Free Trade Isn’t Free: Food Sovereignty And Why It MattersPatricia and Christian talk to economist and President of the Global Institute For Sustainable Prosperity Professor Fadhel Kaboub about how global food and energy systems have been fostered to benefit the global north at the expense of the global south, and how understanding modern money is vital to…

 

The damage that has been done over decades is incalculable. The events of the past few years have revealed the inherent weaknesses of globalisation and its bedfellow, neoliberalism.

As the effects of climate change, caused by the burning of fossil fuels, combine with the associated loss of biodiversity due to land mismanagement and exploitation, the degradation of soil, resulting from unhealthy farming practices and overuse of herbicides and fertilisers, along with changing global weather patterns, the world faces an uncertain future without adequate urgent action.

Ultimately, the UK does not exist in a bubble and must now see its future actions and policy decisions in a global context, but not the one we know. Not a continuation of the status quo which protects a rotten free trade system and sustains the wealth of the few, but an all-encompassing strategy for human and planetary fulfilment. It is not about pulling up the drawbridge. It is about ensuring that nations can help themselves to ride the economic and climate storms ahead, and work cooperatively to trade fairly and sustainably with their global neighbours.

Some might call this an unachievable pipe dream, given the current instability forged out of a toxic economic system and endless wars for global hegemony, and let’s be honest, theft of real resources. But it doesn’t have to be.

Our future depends on real and substantial change, not tinkering around the edges so that the global elites can maintain their power and influence. It begins with a public understanding of how the government spends, to challenge the status quo and set the scene for creating a fairer world, which has both a sustainable and liveable future. The way ahead may be bumpy but that’s no reason not to try.

 

Announcement

The GIMMS book ‘Modern Monetary Theory: Key Insights, Leading Thinkers‘ – Edited by Professor L. Randall Wray and the Gower Initiative for Modern Money Studies, is scheduled to be published by Edward Elgar Publishing in January 2023

For more details, please see the EE website via the link below:

 Key Insights, Leading Thinkers" draft front coverModern Monetary Theory’This is a fascinating, eclectic group of professional papers in which the reader may explore both the first principles of Modern Monetary Theory and many institutional and historical details that lend weight to the conceptual framework. This book is a landmark in the development of MMT, a boon for…

 

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The post The Government, like the Pied Piper, marches the nation back to Dickensian Britain appeared first on The Gower Initiative for Modern Money Studies.