full employment

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At Roosevelt: Reimagining Full Employment

Published by Anonymous (not verified) on Fri, 23/07/2021 - 12:41am in

Mike Konczal, Lauren Melodia and I have a new report out from the Roosevelt Institute, on what true full employment might look like in the United States.

This is part of a larger project of imagining what an economic boom would look like. As Mike and I argued in our recent New York Times op-ed, there’s a real possibility that the coming years could see a historic boom, thanks to the exceptionally strong stimulus measures of the past year and, hopefully, the further expansions of public spending on the way. (Interestingly, the term “boom” is now making it into Biden’s speeches on the economy.) If the administration, Congress and the Fed don’t lose their nerve and stay on the path they’re currently on, we could soon be seeing economic growth and rising wages in a way that we haven’t since at least the late 1990s.

This is going to call for a new way of thinking about economic policy. Over the past decade or more, the macroeconomic policy debate has been dominated by a consensus that is more concerned with the supposed dangers of public debt than stagnation, and sees any uptick in growth or wages as worryingly inflationary. Meanwhile, the left knows how to criticize austerity and bailouts for business, and to make the case for specific forms of public spending, but has a harder time articulating the benefits of sustained growth and tight labor markets.

What we’re trying to do is move away from the old, defensive fights about public debt and austerity and make the positive case for a bigger more active public sector. There’s no reason the Right should have a monopoly on promises faster growth and improvements in peoples material living standards. Post-covid, we’re looking at a new “morning in America” moment, and progressives should be prepared to take credit.

One of the great appeals of the Green New Deal framing on climate change is that it turns decarbonization from a question of austerity and sacrifice into a promise to improve people’s material well being, not decades from now but right now, and in ways that go well beyond climate itself. I think this promise is not just politically useful but factually well-founded, and could just as well be made for other expansions of the public sector.

This is an argument that I and others have been making for years. Of course, any promise of faster growth and higher living standards has to confront the argument, enshrined in macroeconomics textbooks, that the economy is already operating close to potential, at least most of the time — that the Federal Reserve has taken care of the demand problem. In that case, the Keynesian promise that more spending can call forth more production would no longer apply.

We’ve tended to respond to this argument negatively — that there is no evidence that the US now was facing any kind of absolute supply constraint or labor shortage before the pandemic, let alone now. This is fine as far as it goes, and I think our side of the debate has won some major victories — Jay Powell and Janet Yellen both now seem to agree that as of 2019 the US was still well short of full employement. Still, I think it’s legitimate for people to ask, “If this isn’t full employment, then what would be?” We need a positive answer of our own, and not just a negative criticism of the textbook view.

This new paper is an attempt to do just that — to construct an estimate of full employment that doesn’t build in the assumption that recent labor market performance was close to it. One way to do this is to compare the US to other advanced countries, many of which have higher employment-population ratios than the US, even after adjusting for age differences. We chose to take a different approach, one that instead looks at differences in employment rates within the US population.

From the executive summary:

This issue brief argues that potential employment in the US is much higher than we have seen in recent years. In addition to those officially counted in the labor force, there is a large latent labor force, consisting of people who are not currently seeking work but who could reasonably be expected to do so given sustained strong labor demand. This implies much more labor market slack than conventional measures of unemployment suggest.

An important but less familiar sign of labor market slack is the difference in employment rates between groups with more- and less-privileged positions in the labor market. Because less-favored groups—Black workers, women, those with less formal education, those just entering the labor market—are generally last hired and first fired, the gaps between more- and less-favored groups vary systematically over the business cycle. When labor markets are weak and employers can pick and choose among potential employees, the gap between employment rates for more- and less-favored groups widens. When labor markets are tight, and workers have more bargaining power, the gap shrinks.

We use this systematic relationship between overall labor market conditions and employment rates across race, gender, education, and age to construct a new measure of potential employment. In effect, since more-favored workers will be hired before less-favored ones, the difference in outcomes between these groups is a measure of how close hiring has gotten to the true back of the line.

We construct our measure in stages. We start with the fact that changes in employment rates within a given age group cannot reflect the effect of population aging. Simply basing potential employment by age groups on employment rates that have been observed historically implies potential employment 1.7 points higher than the CBO estimates.

Next, we close the employment gaps by race and gender, on the assumption that women and Black Americans are no less able or willing to work than white men of a similar age. (When adjusting for gender, we make an allowance for lower employment rates among parents of young children). This raises potential employment by another 6.2 points.

Finally, reducing the employment gap between more- and less-educated workers in line with the lower gaps that have been observed historically adds another 1.8 points to the potential employment rate.

In total, these adjustments yield a potential employment-population ratio 10 points higher than the CBO estimates, equivalent to the addition of about 28 million more jobs over the next decade.

Adding these 28 million additional jobs over the next decade would require an average annual growth in employment of 2.1 percent. The employment growth that would fully mobilize the latent labor force, as estimated here, is in line with the rate of GDP growth required to repair the damage from the Great Recession of 2007–2009 and return GDP to its pre–2007 trend.

You can read the rest here.

Even more in Provisioning & Prosperity

Published by Anonymous (not verified) on Fri, 16/07/2021 - 9:51am in

Seemed more accurate to title this page Macroeconomics: Provisioning & Properity

How to Implement True, Full Employment
— L. Randall Wray New Economic Perspectives Aug 12, 2009

Biden Can Go Bigger and Not ‘Pay for It’ the Old Way • By focusing on how much revenue they hope to raise from tax increases on the well-off, Democrats risk limiting the scope of their ambitions.
— Stephanie Kelton (@StephanieKelton) New York Times (@NYTimes) April 7, 2021

More than tinkering around the edges is needed to bring about a better world

“I suppose there hasn’t been a single month since the war, in any trade you care to name, in which there weren’t more men than jobs. It’s brought a peculiar, ghastly feeling into life. It’s like on a sinking ship when there are nineteen survivors and fourteen lifebelts. But is there anything particularly modern in that, you say? Has it anything to do with the war? Well, it feels as if it had. The feeling that you’ve got to be everlastingly fighting and hustling, that you’ll never get anything unless you grab it from somebody else, that there’s always somebody after your job, that next month or the month after they’ll be reducing staff and it’s you that’ll get the bird.”

― George Orwell, Coming Up for Air

 

Worker installing solar panelsPhoto by Kristian Buus on Flickr

Even as life returns to some sort of normality over the coming weeks and months, if all goes to plan and restrictions are lifted, the consequences of the pandemic on the economic life of the nation will not likely be short-lived, regardless of the ‘bounce back’ predicted by the Bank of England this week. Whilst the economic pundits predict the strongest growth since 1941 (when the country was incidentally building up its infrastructure to fight a war), with an expectation of around 7.25%, it follows a contraction of 9.9% in 2020. That is not exactly a sign of a substantial economic rebound in a time when there are still many uncertainties.  It was reported at the end of last week that Europe is in a double-dip recession and other major economies are still wrestling with the consequences of Covid-19 on their economies, demonstrating clearly that the UK does not exist in a vacuum.

However, aside from our dependency on global trade conditions, there will still be much uncertainty domestically as the economy opens up and the furlough scheme is wound down. Economists and treasury officials keep referring to the vast private savings that have built up over the year, which can get the economy going if people choose to spend it, but the reality is that the structural poverty and inequality that exists will mean that many will not be spending; they will still be struggling. A two-tier economy in effect, which has been caused by the pursuit of a decades-old noxious economic dogma that continues to destroy lives and create huge gaps in access to real wealth and resources. On top of that, we face the even greater threat of climate chaos which until recently has scarcely been at the top of any government’s agenda and still lacks a clearly defined global strategy to address it.

As has been noted in the media, this so-called bounce back is hardly likely to herald a return to the ‘roaring 20s’ which occurred after the devastation of the first world war, and the initial growth response is likely to taper off over time and will not be sustained.  Andrew Bailey, the governor of the Bank of England, has already warned that it will be ‘a long way short of the typical growth rates the UK experienced only a decade or two ago’. Growth rates which, it has to be said, were built on the back of huge and unsustainable private debt, which predictably and spectacularly crashed in 2007, followed in 2010 by wholly unnecessary and harmful cuts to public spending. Cuts which, whilst touted as being vital to the stability of the public finances, in reality, led to economic decline and rising poverty and inequality.

Of course, whilst the media, economic pundits and politicians promote the good news of the return to growth (however uncertain that still is) to pump up people’s confidence to get them to spend, the question over GDP growth as a measure of human flourishing should still be exercising our minds in terms of the future that we want to see and who should benefit. The toxic nature of the economic system relies on the exploitation of humans and the real resources that lie at the heart of every economy.

Employment is a key measure of economic health and even before the pandemic arrived on the scene, unemployment, underemployment and insecure working practices reflected a long-standing economic ideology that sacrificed human labour on the altar of competition and profit. It was enabled by governments which defined full employment based on a random figure pulled out of a hat, which over decades have left vast numbers without jobs, or in insecure employment, existing on scarcely liveable benefits or low wages. Unemployment has suited governments and the corporations who have benefited from it. Worse, it has been allowed to create societal divisions related to ‘scroungers’ on benefits and ‘hard-working people’.

People have been viewed as expendable commodities, the consequences of which are clear to see in our society. Not just in the loss of economic output, but the very real consequences of unemployment on the economic, social, and personal lives of those affected. Consequences including social exclusion and loss of freedom, loss of valuable skills, ill health, reduced life expectancy and destabilisation of family life.

In the aftermath of the pandemic, unemployment remains a scourge which has been highlighted by the high numbers of workers who have found themselves, with the number of those who had already been without work prior to the pandemic, having to rely on miserly state support, which despite the pandemic uplift is still insufficient to keep people from the door of the food bank or wondering how to pay their bills.

The unemployment rate may have fallen slightly in the last quarter, but the numbers hide great disparities and the human stories associated with the loss of a job. Recently published figures revealed that the burden has fallen disproportionately onto young people, women, and ethnic groups. Data on long-term youth unemployment shows that it is the youngest workers who have borne a heavy burden, with those under the age of 35 making up almost 80% of jobs that have been lost in the past year, including graduates.

Also, according to the TUC, many more women have been made redundant than during the Global Financial Crash, with around 94,000 losing their jobs between December 2020 and February this year. It is predicted that the female jobs market, which is dominated by retail and hospitality, will remain very unstable in the coming months, particularly as government furlough support reduces and then comes to an end in September.

People from Black, Asian, and Ethnic communities who often work in precarious, poorly paid employment have also been hard hit by the consequences of the pandemic, with a much higher unemployment rate than the overall average for white working people.

Whilst the growth pundits work on increasing public confidence to spend (even though many are still suffering from the cumulative effects of previous government policies on their purses and their quality of life) one might have to consider the possibility that the economy could remain permanently smaller in a changing world forced to address the serious consequences of the on-going climate emergency. Assuming we do.

Reading the newspapers during these last few weeks, the instinct seems to be to restore the world to its pre-pandemic structures, based on private consumption to create growth. But it doesn’t have to be like this. There is an alternative. There is a potentially different world that doesn’t involve returning to the stone age, but asks us to re-evaluate our priorities and consider our ecological future to bring about real human flourishing.

For example, this week the Green Alliance Think Tank proposed investment in green jobs. The Alliance has suggested that such jobs should be at the heart of government recovery plans and says that around 16,000 jobs could be created by taking action to reverse the decline in the natural world, which could include tree planting and coastal restoration. Investing in local communities would in turn provide huge economic benefits; providing employment and visible improvements to the local environment in which people live.

Also this week, Mary-Ann Stephenson, Director of the Women’s Budget Group suggested that instead of job creation focusing largely on construction projects, which form a large part of the government’s investment programme, that public spending on care could create almost three times as many jobs as the same investments in construction. Over the last year, we have woken up to the value of our key workers both in the public and private sector, and we should not forget their contribution as vital to economic health.

Let’s imagine a way forward.

With the need to move away from carbon-based industries and excessive consumption, to implement more ecologically sound and socially just practices, we could with political will reinvest in the public infrastructure which has been decimated because of cuts to spending driven by political ideology.

Such investment could reap benefits two ways – re-envisaging our values towards human ones instead of those of capital and profit whilst at the same time rejigging our economy away from excessive private consumption and the ecological damage that ensues from it.

We need a plan for direct public sector job creation to fill the growing gaps in healthcare, social care, education, local government, and public administration which have been so damaging to the economy. Whilst such investment is currently anathema to neoliberal governments which have spent the last few decades de-investing in publicly provided and paid for goods, justifying their actions as being financially necessary to get the public accounts in order whilst at the same time pouring huge sums of public money into private corporations to run those same public services, if the political will exists then everything is possible.

In tandem with government investment in a properly formulated green agenda and a larger public sector, a Job Guarantee should necessarily form part of any future government policies. Not only to subdue inflation, but to ensure that nobody is left behind when recession hits or health emergencies occur and create higher unemployment. It is damaging to the economy when people have less money in their pockets and damaging to the people who must suffer the consequences of unemployment. Cyclical in nature, the Job Guarantee would provide temporary useful public sector employment, paid at a living wage with the sick pay and other protections that workers need, when the private sector is unable to take on more workers, thus avoiding the damaging social and economic costs of joblessness.

We urgently need to address the coming economic fallout, not only of the pandemic but also of the need to move towards a sustainable economy. We need to develop a strategy for a just transition that does not leave human beings stranded or without useful, productive, and socially-oriented work.

However, as always, and here we get to the standard stumbling block, such plans are always connected to the false narrative of monetary affordability. How will we pay for it? And this week, as in so many weeks before, we read prime examples of how this household budget narrative plays out in government and media circles, to the real detriment of a public conversation about the future. Such narratives impede action because they make false claims about how governments spend and allow them to pursue their own political agendas.

This week Gavin Williamson, the Secretary of State for Education, said that the Arts were not ‘strategic priorities’. Aside from the cultural contribution and pleasure they bring to people, they also provide employment and add £112bn to the economy; so how that is not a strategic priority is anyone’s guess. That’s money in wages circulating in the economy, as in one person’s spending is another’s income, whether it is teaching them in our schools, colleges, and universities, or going to museums, art galleries or attending musical or dance performances. A deeply short-sighted judgement which was encapsulated precisely by the author Michael Rosen on his Facebook Page.

“We condemn and will do all in our powers to oppose the 50% cut in provision of arts subjects in universities. It represents a combination of authoritarianism, philistinism and neo-liberalism. It would remove the professionalisation of arts training and the development of critical thought in relation to the arts. The arts are an essential part of how we interpret, understand and position ourselves in the world whether as individuals or in groups. Universities have had a centuries-old tradition of providing a space in which serious discussion, debate and training in relation to the arts have taken place and as a consequence the arts in universities have enriched society.

From another perspective, it has also provided the training necessary for jobs in the highly profitable culture industries and the basis for people to go on to manage and set up cultural projects, businesses and trade. These cuts are not a solution to anything. They are an ideological attack on a sector incorrectly deemed as not part of the economy. The government has shown that it has the means and methods of raising revenues through its mechanisms with the Bank of England, so these cuts are being proposed purely for ideological, not economic, reasons.

There are ramifications beyond universities: these cuts will have a knock-on effect on primary and secondary education as a route to higher education through the arts being cut off. This will also disproportionately affect students from low-income backgrounds as they will be unable to support themselves through a time of acquiring arts training. The effect of this will be to ensure that the arts become a profession of the affluent.”

And there you have it. While politicians stick to the household budget nonsense, even Michael Rosen knows how the monetary system works.

Under this plan, the cuts to spending on the arts will be redirected to other areas such as nursing and computing, in the mistaken belief that the government must save in one place to spend in another, as if it had a limited budget and had to make hard choices about how to divvy up the tax revenue so as to keep the public finances on track.

To be clear, a government which issues its own currency does not have a limited budget based on tax revenues or the ability to borrow to cover its deficit. Assuming the real resources exist or can be acquired through implementing taxation policies, the government can fund education for the cultural enrichment of the nation and the benefit of the economy. We do not need automatons for capitalism; we need people educated for life.

And that brings us to another vital area of the economy. The NHS, Public Health and Social Care. After a traumatic year for those caring for sick patients, in an environment which has had to cope with cuts to real spending affecting every aspect of the public service and leading to a shortage of nurses and other health professionals, beds, equipment, and facilities, a study by the London School of Economics and the Lancet Medical Journal is clear that the Covid-19 pandemic has reinforced the ‘economic case to invest in health … to enhance societal well-being.’ It proposes that total expenditure needs to increase by around £102 billion in real terms in 2030-31 to restore the NHS back to a properly functioning public service.

However, it then goes on to make the usual assumption that since investment in the NHS, social care and public health is crucial for ‘fiscal sustainability’, taxes would have to increase to cover the investment.

Professor Elias Mossialos from the LSE said:

‘For the NHS to be truly the envy of the world again politicians will need to be honest with the public that this will require taxation to meet funding levels comparable to other countries.’

Indeed, politicians do need to be honest with the public, but not in terms of raising tax to fund the NHS. The political decisions they have made based on a false accounting of how the state monetary system works have left our public and social infrastructure in a state of decay, and increasingly in the hands of private corporations. These were policy choices justified on the back of the claim that the last Labour government had spent all the money, and that therefore the Chancellor of the time had no option but to rein in spending to get the public finances in order. It proved the perfect opportunity to continue pursuing the neoliberal agenda of privatisation begun by Thatcher and continued by successive governments.

The constant repetition of the household budget narrative of government spending has ensured that it is ingrained in the public consciousness. An article in the Guardian published two months ago suggested voters were demonstrating a ‘new willingness to sacrifice more of their earnings to repair the damage done by the pandemic.’ People were concerned about the eventual need to pay back the enormous sums of money spent by the government to keep the economy afloat, recognising in addition that it could not keep borrowing forever. As a result, people thought that the country would need to tackle its debt which necessarily and in the words of Rishi Sunak would require ‘hard choices.’

The only changes in people’s preferences in how to deal with the debt, compared with 2009 after the financial crash, were that tax rises would be preferred to spending cuts; suggesting that the evidence of the consequences of spending cuts has made an impression on public perception.

The author suggested in the article that it offered an opportunity to reframe increased taxation as ‘part of people’s contribution to the national effort…or as an act of paying back to our NHS …. a desire to tackle the debt but through fair tax rises rather than reduced spending.’

As long as this false narrative determines the public conversation, we can forget about addressing climate change, the continuing rape and pillage of the Earth’s resources to drive consumption, or the vast inequalities in wealth and access to resources. Because while people believe the household budget narrative, these things will always be unaffordable, despite the fact that governments have shown quite clearly their currency-issuing capacity, both in bailing out the banks and supporting the economy during the pandemic.

On that basis, the limits are always driven by concerns about money and debt, when the real limits to spending are the real resources themselves and the ability of the planet to continue to provide us with the means for existence. How we find the solutions to our pressing challenges will depend on a change of public perception and rethinking the future.

The warnings are there on a weekly basis and are covered endlessly by the GIMMS team. From the cuts to foreign aid which have reportedly wiped out funding for 42 vital projects around the world, projects which should be part of the global drive towards creating a just and sustainable transition (and incidentally saving less than the cost of the now white elephant Downing Street press room) to the almost daily reports of how human activities are affecting the planet and its ability to maintain a steady sustainable balance. The headlines daily underline the growing seriousness of the challenges we face.

Research published this week in the journal ‘Nature’ exposes the threats posed to coastal cities as a result of the melting of the Antarctic ice sheet which could raise oceans by 17cm to 21cm by the end of the century.

Andrea Dutton, an expert in sea-level rise at the University of Wisconsin, said of the research that Antarctic melting will ‘bring about coastal retreat and migration of a scale we have never before witnessed’, observing that ‘we will not be able to just adapt because it is impossible to engineer our way out of this.’ ‘The conclusion’ she said, ‘is a stark reminder of the urgency in making deep and sustained cuts in our greenhouse emissions.’

In other research, scientists have shown that pesticides are causing widespread damage to the natural ecosystems contained in the soils which underpin life and make up a part of the vast food web that cycles energy and nutrients, promoting plant growth and soil productivity. In a report published last December by the UN, scientists were clear that without action to halt soil degradation the future looked bleak, given that it takes thousands of years for soils to form. Those same soils which feed us.

With the very foundations of life at stake, it is time governments took the challenges seriously rather than tinkering around the edges. As Damian Carrington in the Guardian wrote this week, ‘until every government and corporate decision has to pass the bullshit test – does it really cut carbon now – then we are kidding ourselves if we think we are treating the climate crisis like the emergency it is.’

However, not only should we be addressing carbon reduction but also the exploitation of real resources and their damaging consequences as a result of an out-of-control capitalism dedicated to maintaining profits at the expense of human beings and the health of the planet.

 

 

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The post More than tinkering around the edges is needed to bring about a better world appeared first on The Gower Initiative for Modern Money Studies.

Have we had enough of market-led dogma yet?

“OK…SO WHERE DOES THE FUNDING COME FROM?”

It depends on what we are talking about. If we are talking about universal health care, a Job Guarantee, infrastructure work, etc., the funding comes from the national government.

If, on the other hand, we are talking about national government spending itself, – as in, “how does the government ‘fund’ its spending?”, the answer is the national government does not “fund” its spending because it is an impossible condition.

The national government alone is the source of funding in terms of its own currency for the private sector and the foreign sector combined. That is what being the monopoly currency issuer is all about: Providing the funds.

The currency-issuing national government is not an intermediary that collects “money” from private entities in the form of taxation or borrowing to fill its empty coffers, and then redistributes those “funds”.

Treasury has no coffers to fill. Rather, treasury fills the coffers of everyone else.

Ellis Winningham

Placard with the slogan "When is enough enough, when does hte greed stop?", Wisconsin State Capitol protest 2014Photo by Joe Brusky/Flickr Creative Commons License 2.0

Have we had enough yet? This week Boris Johnson, in a Zoom meeting of the 1922 Committee, warmly saluted the vaccine rollout with these words: ‘The reason we have the vaccine success is because of capitalism, because of greed my friends’. Whilst he has tried to backpedal from these ill-advised remarks, the words reflect a widely held view by politicians, institutions and the excessively rich that the market is the only mechanism for delivering well-being, and that the State should take a step back and let the market do its job, greed and all. We have paid a heavy price for that sort of thinking, in terms of environmental destruction, poverty, inequality, human degradation and exploitation.

The cumulative effect of five decades and more of market-led dogma and a toxic ideology that has been embraced by successive governments, of either political stripe, has given monetary succour to the corporations at the expense of public purpose, which has over the past year been revealed for exactly what it is. Greed for power, greed for profit. Not a very wholesome or edifying advert for capitalism, and one which is increasingly in the public eye, as media attention focuses on who has benefited from government policies and spending decisions, and those who have lost out.

The appalling management of the Covid-19 crisis, which has led to the deaths of well in excess of 126,000 people so far, combined with those who have suffered or died as a result of cuts to government spending on vital public infrastructure and the pernicious reforms of the social security system, have revealed in all their hideous outcomes what happens when government spending is reduced to household budgeting narratives. The phoney notion that delivering public purpose is either monetarily unaffordable and/or dependent on the economic climate.

The remark reveals something rather distasteful about a Prime Minister who not long back was standing on the steps of Number 10 encouraging us to clap for key workers. Those who have been responsible for caring for the sick, elderly, and vulnerable as well as keeping the economy functioning during the crisis whether in the public or private sector.

A letter written by the authors of The Spirit Level (Kate Pickett and Richard Wilkinson) which was published in the Guardian this week took the Prime Minister to task for his comments saying:

“You report (23 March) that Boris Johnson told backbench Conservative MPs that the UK’s successful vaccine rollout was thanks to capitalism and greed. Really? Greedy academics and research scientists? Greedy World Health Organization staff and civil servants? Greedy nurses who give us our jabs? Is that also why contracts given to Tory cronies for test and trace were so startlingly successful? This is not a trivial misunderstanding: it is a fundamental failure to comprehend how modern societies work. Prof Mariana Mazzucato has shown how discovery and innovation flow from the public sector, and there are now studies showing that more equal societies are more innovative, with more patents per head than those where capitalism is rampant.”

Whilst the financial markets have produced nothing of value, focused as they are on speculation and amassing huge monetary wealth, the real wealth makers, not the monetary sort, are those on whom society depends. The past year has highlighted their contributions on every level of society. It has also highlighted the role that government can play, if it chooses, in delivering public purpose aims. Whether that is spending to keep the economy from tanking or vital public service and welfare provision, research and development and education and training; all of which make the difference between a good society and a bad one.

However, we live in a world where ‘money’ wealth trumps the real wealth we enjoy, and which is sustained and underpinned by nature which provides the many services on which we depend. Deregulation (or rather accommodation) by neoliberal governments has created a rampant market-dominated model which is threatening democracy and the future of humanity and planetary health.

This toxic market ideology is at the same time underpinned by incorrect ideas of how governments spend. Ideas which suggest that taxing and borrowing are at the heart of their spending capacity, and which, if not reversed, will continue to constrain government actions on the key issues of our day.

The art of the possible is not financially oriented. The art of the possible is about political choices, but those political choices hitherto have left our society in a state of crisis and will continue to do so unless we challenge the status quo.

Currently, the rules for government spending are laid out clearly. Stuff the pockets of the private sector corporations and those of your friends, whilst telling the public sector that there is no money and keeping private-sector workers on low wages and in insecure employment. The evidence is piling up daily.

This week Test and Trace is hiring a ‘Lessons Learnt Analyst’ with a salary of £45,000. You couldn’t make it up! Management consultants being paid to advise what went wrong with a programme designed by management consultants. As GIMMS’ board advisor Deborah Harrington so rightly asked ‘do you ever get the impression we have all somehow been trapped inside a never-ending episode of ‘You’ve been framed’?

Also, this week ministers have opened the public purse yet again to the private sector; shelling out almost £1 million to a private recruitment firm to find temporary staff for the new, but controversial, National Institute for Health Protection, which is to replace Public Health England, in what has been termed a ‘shifting deckchairs’ exercise. In reality an attempt to transfer the blame elsewhere than at the government’s feet.

Whilst refusing to pay nurses a decent pay rise, giving workers a scarcely generous increase in the minimum wage and at the same time suggesting that more cuts to public services may be in the offing, the claim that the government needs to restore its finances smells of purposeful deceit of the public. As GIMMS pointed out last week, the contradictions are increasingly evident, and it is for the public to challenge those false flags which serve ideology and not necessity.

In March 2019, the IMF warned that the world had ‘run out of firepower to fight the next recession’. It erroneously suggested that the ‘money printing’ programmes known as Quantitative Easing, which had supposedly pumped trillions into economies after the Global Financial Crash in 2008, had left the economies so weak in the decade since that the balance sheets of the central banks had ‘swollen to a level that leaves little room left for manoeuvre’. Its conclusion was that the large piles of debt would reduce the ‘fiscal firepower’, available to counteract recessions’.

The public has been led astray by terms such as money printing, public debt and borrowing, and if your suspicions have been aroused that something is not quite right then it’s time to get with monetary realities. Governments around the world have as necessity dictated created the funds necessary to deal with the fallout of Covid-19 at the stroke of a computer key. It may have been dressed up in the smoke and mirrors of QE and borrowing, but it has shown without doubt that, just as in 2008, the money is there at central level to deal not just with the consequences of the pandemic, but also to address the issues which have arisen from insufficient government spending by political decree. From hunger and homelessness to infrastructure decay and environmental degradation.

But government action so far seems to be one of half-hearted plans dressed up in overblown rhetoric, from promises to level up our communities, invest in infrastructure, education and training and deliver an effective green transition. Lots of hot air but little in the way of concrete proposals, or worse, failure to deliver on already proposed programmes.

If the UK government’s flagship home insulation scheme is anything to go by, then one should ask whether that public funding has been properly administered or is even delivering its green objectives. Indeed, in hot news over the weekend the government has decided to scrap the green homes grant which was administered by a US company. Promising a kickstart for a green recovery along with green jobs, it descended unsurprisingly into a dogs’ dinner that was, according to the Environmental Audit Committee of MPs, ‘rushed in conception and poorly administrated’, indeed ‘nothing short of disastrous. As a reader’s letter published this week in the Guardian suggested:

‘This government’s approach to the climate crisis […] is the same as it is to all other iniquities its ideology exacerbates such as poverty, inequality and homelessness. They announce a relatively small injection of cash and a couple of initiatives, careful not to disturb the underlying practices causing the problems. If [the government were] serious and really followed the science, they would end all subsidies to, and investment in, fossil fuel industries. They would also implement curbs to reduce energy and resource consumption, direct and indirect, by the UK population. That would be global leadership and would set a course for a just transition.

 

The government’s proposals are nothing more than a smokescreen to suggest we tried, while baking in failure for our generation and horror for those that follow.”

The problems of lack of commitment by the government are also compounded by financial institutions and businesses who, whilst greenwashing their way to profits, don’t walk the talk. This week, it was reported that the world’s biggest banks have provided $3.8tn of financing for fossil fuel companies since the Paris climate deal in 2015, despite the fact that it has been known for some time that a large proportion of oil and gas reserves must remain in the ground in order to meet the Paris targets. This is exactly the opposite of what is required to tackle the climate crisis effectively and requires urgent government action and spending on a vast scale.

Also this week, Andrea Leadsom announced a new package for parents, ‘Start for Life’, which will provide a hub network to give families access to vital support. This is the same MP who praised Labour’s Sure Start initiative and had to be reminded that government cuts had closed more than 1000 Sure Start Centres.

It seems ironic that we have a Minister who in 2012 envisaged ‘there being absolutely no regulation whatsoever… no minimum wage, no maternity or paternity rights, no unfair dismissal rights, no pension rights…’ for employees working in small businesses and who also voted to reduce the household benefit cap, to freeze the rate of many working-age benefits and for many other changes to the benefits system which have seriously impacted on the lives of those same families, now purporting to want to address the failure caused by a political decision to cut spending on benefits and other services. You couldn’t make it up.

According to reports, Leadsom still has to get the Treasury on board with her plans. Despite the fact that such funding is available at a keystroke on a computer should the government choose; it is constrained only by the availability of real resources. The question of paying for it is an irrelevant one.

Instead of worrying about costs, the government, if it really wants to level up, should have the humility to examine the consequences of its previous spending and policy decisions, and the impact they have had on families across the nation. Would it not be better to start at the roots of poverty by addressing its fundamental causes, through wage and employment policies to help families manage their lives with less financial stress and worry, and in turn create more stable home environments?

The positive knock-on effects of more government spending on public purpose which then fan out into the wider economy are indisputable and make for a healthier and more productive society. Furthermore, people with more money in their pockets are better placed to provide for themselves and will spend any extra into the economy. Simple macroeconomics. And yet the government still sees public provision as a monetary cost rather than a societal gain.

A report on ITV this week covered the appalling conditions in which many families are forced to live in council housing (although this is not confined to social housing, the private sector’s reputation is just as blemished). It was truly shocking. The Chief Executive of Shelter, the biggest housing charity, described it as ‘the worst housing conditions they have ever seen’.

If the government is determined to address poverty and inequality, then it has to put its money where its mouth is. Yes, let us invest in public service provision to support families with better and more joined-up services, but it will not help unless the government focuses as well on eliminating one of the causes of family stress. Poverty. People do not choose poverty, and unemployment, governments impose it through the ideological dogma they espouse and the policies they enact.

At the other end of the scale, Kwasi Kwarteng, the Secretary of State for Business, defending his department’s slow progress on funding for the organisation UK Research and Innovation, which has so far failed to provide any sort of certainty for the science community, blamed it on the pressure on budgets. This is not just short-sighted, as the Covid-19 pandemic has shown, society will increasingly depend on science to address key issues like climate change, but is actually nothing short of a lie in monetary terms. Furthermore, this is the role of the State. Planning for the future, not abandoning citizens to the vagaries of a market-led disaster which is sure to follow without government action.

The government is not short of a penny. It is the currency issuer. Therefore, the only constraints it faces to deliver its agenda are real resource ones. Whilst the government continues to embrace false funding models which claim monetary constraints, any plans for a just green transition that will also address poverty and inequality at the same time will fall by the wayside.

The unvarnished truth is that the phrases ‘bolstering the treasury’s coffers,’ ‘closing the tax gap’ and ‘protecting the finances’ – terms which appear regularly in the press – are illusory descriptions of how the state money system works. Vocabulary designed to make us think that the government spends in the same way households, local government and businesses do.

The illusion acts to keep us in our place, so as we do not demand too much in the way of public services or any other useful expenditure which provides social value and serves the economy.

The real questions for citizens regarding the future are about what real resources we have and how we want them to be distributed. Do we want a return to the old normal of unnecessary and wasteful private consumption, environmental destruction and the reinforcement of the vast inequalities that accompany it? Or do we want our governments to act in the public interest by commanding the resources that are available to deliver public purpose? The second option will require a shift in how we think about creating a fairer society.

Why aren’t we looking at a Job Guarantee as a mechanism to help in addressing both inequity and climate change? Why wouldn’t governments choose a macroeconomically sound proposal, which focuses on creating economic stability in times of crisis and smoothing out the inevitable cyclical economic downturns which destroy lives?  Why not give working people useful, socially oriented employment instead of leaving them to rot on the unemployment scrap heap?

For too long, governments have acted in the interests of big business and global corporations, which in turn through the implementation of short-sighted employment and wage policies serving business, not citizens, have then impacted on their economies adversely.

Haven’t we had enough? Time for change!

 

 

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The post Have we had enough of market-led dogma yet? appeared first on The Gower Initiative for Modern Money Studies.