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Will rising interest rates in the future bankrupt the UK government?

Published by Anonymous (not verified) on Sun, 13/12/2020 - 8:10am in

Pound coinsImage by Michael Brasuela from Pixabay

For this week’s MMT Lens, GIMMS is pleased to publish a guest article by Berlin-based economist Dirk Ehnts, author of “Modern Monetary Theory and European Macroeconomics

 

The Office for Budget Responsibility (OBR) issued stern warnings at the end of November stating that fiscal adjustment would very likely be required to arrest the continued rise in public debt. This led British finance minister Rishi Sunak to make the claim that public finances are on “unsustainable” path. According to the BBC reports, Sunak stated that “there are record peacetime highs in borrowing and debt, and the forecasts that were set out yesterday show us on a path where that continues to be at a very elevated level, so that’s not a sustainable position”. The elephant in the room is this: How is a sustainable position in public debt defined?

Some, like the OBR, apparently seem to think that the public debt needs to be “stabilised’. What that exactly means is not made explicit. The OBR warned:

The increase in borrowing does, however, render the public finances more vulnerable to changes in financing conditions and other future shocks. This heightened vulnerability is compounded by the shortening of the effective maturity of that debt as a result of both a greater focus on short-term debt issuance by the Treasury and further Bank of England purchases of longer-dated gilts financed through the creation of floating rate reserves. Taken together, these leave debt interest spending twice as sensitive to changes in short-term interest rates than prior to the pandemic. Arresting the continued rise in public debt is likely to require some fiscal adjustment once the virus has run its course. Only in our upside scenario, in which the pandemic is swiftly ended and there is little lasting damage to activity, does borrowing fall below the level required to stabilise the debt-to-GDP ratio by the forecast horizon. In our central forecast and downside scenario, tax rises or spending cuts of between £21 billion and £46 billion (between 0.8 and 1.8 per cent of GDP) would be required merely to stop debt rising relative to GDP.

 

Monopoly Money

Dr Phil Armstrong has written an article on fiscal policy for The Gower Initiative for Modern Money Studies that is worth reading in relation to this. In it, he mentions the “government budget constraint” which conceptualises government as a currency user – that is that the government would have to have income before spending. This is upside down because the government is the monopoly issuer of the currency, not a user. The Bank of England is today wholly-owned by the UK government, and no other body is allowed to create UK pounds. It can create digital pounds in the payments system that it runs, thus marking up and down the accounts of banks, the government and other public institutions. It also acts as the bank of the government, facilitating its payments. The Bank of England also determines the bank rate, which is the interest rate it pays to commercial banks that hold money (reserves) at the Bank of England.

The interest rate that the government pays on its government bonds (gilts) follows that bank rate closely. Looking at the figure below, it is clear that the interest rate on gilts with a 10-year maturity is mostly determined by the bank rate. The reason is that there is an arbitrage relationship. Banks can choose to hold their money in the form of reserves (deposits at the Bank of England) or they can purchase gilts with these reserves. When reserves pay a lower rate of interest than gilts, banks have an incentive to adjust their asset portfolio. Swapping reserves for gilts delivers more profit for commercial banks.

Line graph showing long term government bond yields in the UK against the Bank of England policy rateGraph via https://fred.stlouisfed.org/

 

Gilts and bonds

The interest rate that the UK government pays is a policy variable determined by the Bank of England. Furthermore, it is not the Bank of England’s remit to bankrupt the government that owns it. The institutional setup ensures that the Bank of England supports the liquidity and solvency of the government to the extent that it becomes an issuer of currency itself. Selling government bonds, it can create whatever amount of pounds it deems necessary to fulfil its functions. Given that the Bank of England stands ready to purchase huge amounts of gilts on the secondary market (for “used” gilts), it is clear to investors that gilts are just as good as reserves. There is no risk of default.

Moreover, consider that the Bank of England can always allow the government to spend using overdrafts of its ways and means facility. This prompted the Financial Times to publish this article: “Bank of England to directly finance UK government’s extra spending“. The Bank of England can, in effect, just execute all the payments that the Treasury sends its way. Issuance of gilts is optional. While this might seem strange at first sight, it is only a logical consequence of the fact that the Bank of England is the issuer of currency. Before gilts can be purchased, the government first has to spend some money into the economy. Alternatively, banks can borrow from the Bank of England before they purchase gilts. Issuing gilts provides a risk-free asset with some interest, but it is not needed to “finance” the government.

 

Deficit versus surplus

 

Line graph showing public sector debt outstanding in the UK against the Bank of Englan policy rateGraph via https://fred.stlouisfed.org/

 

The figure above shows the UK public debt to GDP ratio and the Bank of England’s policy rate through the centuries. Note that UK public debt peaked in 1945 at above 250 per cent of GDP. Unsustainable? Obviously not. In 1951, the interest rate started to increase from 2 per cent to 16 per cent in the mid-1970s. Unsustainable? Obviously not. What the figure shows is that the government of the UK cannot “run out of money”. When it spends more into the economy than it collects through taxes, a “public deficit” is produced. This means that the private sector saves a part of its monetary income which it has not spent on paying taxes (yet). When the government spends less than it collects in taxes, a “public surplus” results. This reduces public debt. That public debt to GDP ratio can be heavily influenced by GDP growth, which explains the fall in the public debt to GDP ratio in the second half of the 20th century.

I would like to raise one last issue, even though it should be clear by now that as a currency issuer the government will not run out of money. Lately, the Bank of England has purchased quite a lot of gilts through its Asset Purchase Facility. On September 30, 2020, it held 674.9 billion pounds worth of gilts. At the end of October 2020, the public debt to GDP ratio hit 100%. This was £2,076.8 billion in currency. Roughly one-third of outstanding gilts are held by the Asset Purchase Facility. Where does the interest go that the Treasury pays on these gilts and accumulates at the Asset Purchase Facility? The answer is this: “As a result of the Indemnity Agreement, all profits and losses are passed onto HM Treasury.” So, HM Treasury pays interest, then gets one-third of it back immediately. There is no technical reason why the Asset Purchase Facility couldn’t buy up all of the outstanding gilts. Then, all interest payments made by HM Treasury would come back immediately. The banks would have reserves at the Bank of England worth the public debt. These earn interest equal to the bank rate. Since this interest rate is set by the Bank of England, it can be set at zero if the Bank believes this makes sense. At positive interest rates, the Bank of England will pay the banks holding reserves by marking up their accounts. They do this with the computer and as the monopoly supplier of currency, there is no limit.

So, do rising interest rates in the future create a problem for the UK government? No. The Bank of England is the currency issuer. There is nothing that stops it from paying what HM Treasury instructs it to pay. Gilts can be issued in this process as an option. The government’s ability to pay is not put into doubt since the Bank of England acts as a lender of last resort, offering to buy up gilts on the market so that the price of gilts can never crash. Higher interest rates cannot bankrupt the UK government.

 

Upcoming Event

Phil Armstrong in Conversation with Fadhel Kaboub – Online

January 9th 2021 @ 13:00 pm – 14:30 pm

GIMMS is delighted to present another in its series ‘In Conversation’.

Phil Armstrong author of ‘Can Heterodox Economics Make a Difference’ published in November 2020 will be talking to Fadhel Kaboub.

Fadhel Kaboub is an Associate Professor of Economics at Denison University, and the president of the Global Institute for Sustainable Prosperity. He has held research affiliations with the Levy Economics Institute, and the John F. Kennedy School of Government at Harvard University. He is an expert on Modern Monetary Theory, the Green New Deal, and the Job Guarantee. His work focuses on public policies to enhance monetary and economic sovereignty in the Global South, build resilience, and promote equitable and sustainable prosperity. You can follow him on Twitter @FadhelKaboub and @GISP_Tweets

We invite you to join us for this informal event which we are sure will be both stimulating and insightful.

Register via Eventbrite

 

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The post Will rising interest rates in the future bankrupt the UK government? appeared first on The Gower Initiative for Modern Money Studies.

Time to abandon fictions of how our economy functions

Published by Anonymous (not verified) on Sun, 06/12/2020 - 9:35am in

UK pounds sterling notes and coinsPhoto by John Cameron on Unsplash

“The point is, not every deficit serves the broader public good. Deficits can be used for good or evil. They can enrich a small segment of the population, lifting the yachts of the rich and powerful to new heights, while leaving millions behind. They can fund unjust wars that destabilize the world and cost millions their lives. Or they can be used to sustain life and build a more just economy that works for the many and not just the few. What they can’t do is eat up our collective savings.”
― 
Stephanie Kelton, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy

 

 

In last week’s MMT Lens, GIMMS lamented the appalling propagandised narrative being touted endlessly by the media and ill-informed journalists following the Chancellor’s spending review that the state finances could be compared to a credit card. The implied suggestion was that the ‘UK was going to sink like the Titanic under the burden of unsustainable borrowing and debt’ unless the government took steps to reduce its spending.

This week a group of mainstream economists wrote to Tim Davie, the Director General of the BBC, to object that some of its reporting misrepresented ‘the financial constraints facing the UK government and reproduces a number of misconceptions surrounding macroeconomics and the public finances and pointing out that the ‘credit card’ analogy … is never an appropriate metaphor for public finances’.

The signatories of the letter pointed to the responsibility of the BBC as an influencer and educator to ensure that they represented economic reality by avoiding household budget analogies. They suggested that the government should not focus on reducing the deficit but instead ‘embark upon a major investment package boosting jobs and growth’ which would be ‘in line with standard macroeconomic literature which stresses the beneficial effects of countercyclical government spending during crises’.

So far … so good, and just what the economic doctor might have ordered if he or she understood how sovereign governments which issue their own currency spend. For too long, the public has been bombarded with such analogies promoted by mainstream economists, politicians, and institutions alike. Analogies which have formed an incorrect version of how the UK government really spends. Given the seriousness of the current economic emergency we are facing and the challenge of climate change, it was, and is, time to challenge the economic orthodoxy.

But whoa … just as we start to get hopeful about a sea change in economic thinking, the signatories of the letter went on to spoil their clarification by reverting to norm. The household budget norm. The one that ultimately would constrain government spending – that of having to deal with an out of control debt burden at some unspecified time in the future.

They claimed that increased deficit spending could be justified on account of interest rates on government bonds being at record lows which would mean that government would therefore spend less on debt interest over the next five years, despite the rise in national debt over the course of the next five years. They then went on to suggest that it was likely that interest rates would remain low for the foreseeable future and that these were not signs of an institution approaching its credit limits, rather they were a signal to government’s creditors to continue to fund its borrowing.

Whilst criticising the BBC for the sin of allowing its journalists to refer to household budget accounting, it then goes on to reinforce that very same narrative. The one that involves government collecting money from us in the form of taxes and borrowing any additional money it needs to carry out its spending agenda. The narrative so beloved of Mrs Thatcher encapsulated in her much-quoted dictum ‘There is no such thing as public money … There is only taxpayer money. If the state wishes to spend more it can only do so by borrowing your savings or by taxing you more’ has informed the public and political debate about government spending for decades. The money has to come from somewhere and the question raised when politicians, particularly progressive ones, talk about spending is how will it be paid for? The spectre of debt hangs around our necks like a bad-smelling penny.

As Stephanie Kelton, author of The Deficit Myth says, we have learned to accept the conventional description that ‘Taxing and borrowing precede spending’. But even though it is flawed reasoning, it dominates the way we think as we compare the state finances to our own household budgets. It sounds reasonable and rational. But as Kelton points out ‘We’ve got the whole thing backward’.

Going against all of our carefully groomed preconceptions, the monetary reality is that the UK government neither needs to fund its spending by collecting tax, or match its deficit through issuing bonds (in other words so-called borrowing) or indeed buy them back via QE which is often confused erroneously with ‘printing money’. We have been living a lie propagated by a neoliberal establishment, both on the right and left, which has an interest either in keeping that narrative alive and well for its own ideological purposes or to appease the City.

Getting the formula right is vital. TAB(S) = tax and borrow to spend, is replaced by (S)TAB = Spend to tax and borrow. In basic terms, this means that the sovereign currency issuer has to spend into the economy before it can impose a tax or indeed indulge in the pretence that it has to borrow – a left over function of gold standard days. The borrowing model exists as a sleight of hand, a smoke and mirrors which bears no relationship to monetary reality and suits politicians to scare the pants off people!

So, some might say what difference does knowing any of this boring stuff make to my life? Well, in fact, a whole lot of difference. You don’t have to be an economist or understand economic formulae to see the effects of government spending policies on the nation, whether it is the 10 years of cuts to public sector services and welfare or indeed this round of fiscal injection which has sustained the economy during these last few months as Covid-19 has wreaked havoc on people’s lives. We are living the consequences of the decision to impose austerity, cuts public services and change the way the benefit system works. We are living the consequences of a market dominated economy which puts the needs of corporations above the needs of working people.

This week the BBC published a distressing video report of conditions in Burnley which have worsened over the last few months. It was also a stark reminder that poverty and inequality is not a new phenomenon, it didn’t just happen as a result of Covid-19. It existed well before the pandemic arrived. The level of human degradation was shocking to see.

The BBC analysis showed that the death rate from all causes between April and June this year in the most deprived areas was nearly double that of deaths in the least deprived parts of England. Whilst Boris Johnson talks of ‘levelling up’ he is, in fact, acknowledging the damaging consequences of his government’s policies over the last decade which have led to increased poverty, inequality and ill health across the country whilst at the same time shifted wealth into fewer hands.

Over years right-wing politicians and the media, in an orgy of blame and finger-pointing, have created a narrative that people’s personal shortcomings lie at the heart of their poverty, not government inaction.

Whilst the government has relinquished its responsibility for the overall economic and social health of its citizens through its spending and other policies, it makes it all the more depressing when the government then goes on to laud in cynical soundbites its additional funding (under pressure) for local authorities, for families to stay warm and fed and extra money for food aid charities. Forced to mend its own failures, caused not just by Covid-19 but by its ideological agenda, greed and to feather its own nest through the revolving corporate door.

This is a systemic problem which has its roots in insufficient government spending on public and social infrastructure and employment legislation which has served the corporate body and poured vast amounts of public money into private profit and not just in these last few months.

When queues lengthen for food banks, when children are ripping bags open for food because they are so hungry, when parents are feeding their kids before themselves and when someone says ‘a couple of days food means everything to us’, this is a systemic failure of a corporatised government serving other interests as if trickle-down of wealth was a real thing!  Covid-19 is not to blame. Government and its policies are.

It was reported this week by the Trussell Trust that it 47% of households surveyed at food banks during the summer owed money to the Department of Work and Pensions due to loans and overpayment of benefits. Three out of four households on Universal Credit using food banks were repaying an advance payment to the government, a loan primarily taken out to cover the five-week wait for the first payment.

Emmie Reeve, the Trust’s chief executive urged the government to stop taking money from people’s pockets during the winter months saying:

“Our welfare system should increase people’s security, not suffering. But right now the government is taking money from the benefit payments of many people using food banks,

 

“Taking money off payments to repay these debts makes it much harder for people to afford the essentials and can impact on people’s mental health – this isn’t OK.

 

“With the pandemic continuing to hit people’s incomes, the government must pause taking money from benefit payments over the winter months until a more responsible and just system that offers security and support is in place. This would help people on the lowest incomes to keep every penny of their benefits to help afford the absolute essentials, instead of needing to turn to a food bank for help.”

 

GIMMS would argue that it is not only cruel and inhumane to cause suffering, but that it is totally avoidable where the government is the issuer of the currency. The government is using the household budget model to claim, falsely, that it must be responsible and recoup taxpayer money where benefits have been overpaid. But with a S(TAB) model of the public finances (spending has to happen before a government can tax or borrow) this can be shown to be nothing but an accounting procedure to make the government look as if it is a good guardian of the public accounts. It bears no relationship to monetary reality and is both harmful to the economy and ultimately harmful to human and planetary health.

When Emmie Reeve asks the government to stop taking money away from the poorest and most vulnerable amongst us ‘until a more responsible and just system that offers security and support is in place …  to ‘help people on the lowest incomes to keep every penny of their benefits to help afford the absolute essentials, instead of needing to turn to a food bank for help, that is indeed vital. However, it is not just the welfare system which needs to change. It is the whole vision of how our economy functions. How an understanding of monetary reality could, and should, determine the policies pursued by governments in the interests of national economic and social well-being.

As discussed in last week’s blog, over recent decades the share of productivity has ceded into ever fewer hands leaving people poorer and living less equal lives than the richest who have benefited from ‘trickle-down’ policies at the expense of the poorest.

We have a situation where our public and social infrastructure is in a state of decay and the language used to describe what is happening is about relegating blame to weakest and poorest in our society and our public institutions like the NHS. Only this week Dame Sally Davies suggested in an article in the Guardian that the COVID-19 response was compounded by groupthink and a ‘lack of resilience’ in the NHS’. It was as if the problem lay with the NHS and not successive governments from Thatcher to Blair and Cameron who are really to blame for pressures being faced by the NHS as a result of Covid-19. There was not one mention of government involvement through austerity, cuts to public spending and damaging reforms designed to fragment the service and make it ripe pickings for the private sector.

Neoliberal groupthink and ideological arrogance would be a better description. The state has become nothing more than a cash cow for the private sector at the expense of government-directed public purpose, which includes full employment.

The direction we are going in, which has been covered in many previous MMT Lens blogs, seems ever clearer as the State steps back from its primary purpose which involves a democratically elected government as agents of the people, inspired by the concept of public service to deliver the public good.

In an article published in the Guardian in May this year, Andy Haldane, the Chief Economist at the Bank of England, suggested that civil society had been neglected politically and financially and quoting from Raghuram Rajan’s book ‘The Third Pillar’ wrote ‘We have let the local community pillar break down and wither’.

Referring to the ONS (Office for National Statistics) which said that we should measure social value and its contribution to society he argued that we don’t see volunteering as work because it’s unpaid. “What could be more ‘doing things for others’ than volunteering?” he suggested.

Referring to the fourth industrial revolution and the prospect of jobs being taken by robots, he asked how in such a scenario do we reward people. Although expressing some ambivalence about a UBI and with questions about its feasibility and financing his view was that a renewed civic sector could exist alongside a ‘more socially purposed corporate sector’ and a state and public sector that provides insurance and infrastructure support.

Yes, indeed we have allowed the local community pillar to break down and wither, but not for the reasons he suggests. Ultimately, the charitable and voluntary sector (as was pointed out in last week’s MMT Lens) is a deliberate failure of government. A failure to spend sufficiently on delivering public purpose aims.

Indeed, Haldane’s project to encourage volunteering in the NHS has been about mitigating for a badly funded and resourced public institution using an appeal to public goodwill to do so. His suggestion that volunteers could provide the NHS with skills which would otherwise cost ‘hundreds of pounds per hour’ is symptomatic of an ideology whose toxic roots are now bearing poison fruit in these difficult times. The idea being encouraged that charity and volunteering can play some part in state-funded delivery of services which puts cost above people under the guise of encouraging community cooperation. The false belief that there is a limited pot of money to be shared out is being used to justify this mega shift in how society operates and who controls it.

The suggestion that volunteering can replace good publicly paid for and provided services which provide employment and wages which in turn keep an economy functioning, or indeed that a UBI (Universal Basic Income) could mitigate for the prospect of industrial and technological change as part of a fourth industrial revolution sounds appealing. However, it is nothing but a neoliberal trojan horse which keeps working people in their place and the corporate sector dictating the economic rules for its own benefit.

Furthermore, the idea that socially purposed corporate sector is the way forward ignores the fact that the corporate rationale is to make profits for their shareholders, usually through exploiting working people and other resources. If it indulges in social or greenwashing, it does so to persuade its customers that its motives are wholesome, yet another corporate sleight of hand.

Haldane seems to suggest that government’s role should be reduced to one of being an insurer and servicer of corporate needs rather than those of citizens and that utilising a volunteer workforce to keep costs and spending down should play a part in that. It ignores the fact that it is the very power of the state, along with its spending and legislative powers, that allows these market structures to exist in the first place.

Unemployment, underemployment, precarious employment, hunger, homelessness, decaying public and social infrastructure all are crimes being committed by this government against its people. Whilst corporations benefit from the sovereign currency powers of government, working people and their families pay a high price in growing poverty and inequality, which in the coming months as companies fail and unemployment rises can only get worse.

In conclusion, it is worth repeating the final few words of last week’s blog:

“Only the government can step in as the power behind the public purse, and such an acknowledgement offers huge opportunities to create an economy that works for everyone and not just the few. If a job needs doing, then it should be the state that provides the wherewithal, either through a job guarantee to smooth out the cyclical ups and downs of the economy, or through an expanded public sector. The only constraint any government will face is one of real resources and that is the real political challenge. How those resources are shared to create a society that works for all.”

 

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Just getting by is not enough

Woman shopping in a supermarketPhoto by Kevin Laminto on Unsplash

“The rich run a global system that allows them to accumulate capital and pay the lowest possible price for labour. The freedom that results applies only to them. The many simply have to work harder, in conditions that grow ever more insecure, to enrich the few. Democratic politics, which purports to enrich the many, is actually in the pocket of those bankers, media barons and other moguls who run and own everything.”

Charles Moore

In the light of the possible wage freeze for 5 million public workers, the economist Grace Blakely explained on Double Down News this week why billionaires should pay, ‘not working people who sacrificed their lives to keep our economy going.’ Whilst the sentiment is right that working people should not pay for the crisis, her suggestion that the billionaires should step into the breach and pay what they owe instead is just more neoliberally inspired claptrap. The implication that the very rich are stealing from the public purse and that we should bring back John McDonnell’s magic money tree from the Cayman Islands is a shameful and false narrative being peddled by a supposed left-wing economist who clearly is still caught in the headlights of false household budget accounting. By such shifting of blame elsewhere, Blakeley fails to acknowledge the real power of the public purse to spend, should the government choose to, on public purpose and also the power of the state to legislate to ensure that the rich pay what they owe. In this fairy tale narrative of taxes fund spending, she ignores the fact that, amongst other things such as redistributing wealth through progressive taxes, taxation is the mechanism to reduce the influence of the wealthy in the corridors of political power. That should surely be the left-wing argument for ensuring the billionaires pay their dues.

Blakely’s appeal came in response to the proposal by the Centre for Policy Studies for a three-year public sector pay freeze, which it claimed could save the government cumulatively £23m. It also suggested in its newly published report that the pain had not been shared equally and that private sector workers had suffered more than those in the public sector. The CPS put forward that NHS workers could be exempt from the freeze to account for their hard work and sacrifices during the pandemic giving an albeit reduced saving.

Robert Colville, the Director of the CPS, suggested that the public finances had been decimated and that it would be difficult to justify generous pay rises in the public sector when private sector wages were falling, given that there was a need to control public spending and reduce the structural deficit which the pandemic was likely to have opened up.

Once again not only do we see the powers that be aiming to drive further wedges of envy between the public and private sector, but also a reinforcement of household budget accounting in terms of how the government spends.

Over the last six months and more, the public sector has stepped up to the plate in response to Covid-19. The Prime Minister and his Chancellor have stood in Downing Street to clap for the NHS and social care workers and the nation responded. The public sector – the NHS, education, social care, and services provided by local government – has, along with other key workers in the private sector, ensured that services were kept going. That care for the elderly continued to be provided in difficult circumstances, that the food and other vital supply delivery networks continued to function, that supermarkets and other shops were stocked and able to provision the nation.

The pandemic has demonstrated, as no other event perhaps could, how interdependent society is and that key workers in the public and private sectors, many of whom are low paid, underpin the foundations of society so that it can function effectively. The world of Mrs Thatcher’s ‘there is no society’ has been well and truly discredited.

And yet after all the clapping and talk of levelling up, the government might be on the brink not only of creating more societal division in a cynical sleight of hand to distract attention away from government actions, but also of freezing the pay of public sector workers who have already suffered the consequences of a decade of Tory austerity. It is time to question who the government is serving. The markets and exploitative corporations or its citizens?

We have been brainwashed into believing that the government is at the mercy of the market and must serve it. The public has accepted the lie that government spending is constrained and dependent on private businesses generating the wealth which in turn generates the taxes that we are told fund government spending.

And yet the reverse is true. It is the government which sets the economic bar. It is the government which spends to tax, which sets the price for labour and legislates for protective employment law. It has been a political choice to cede responsibility for ensuring that people both in the public and private sector are paid wages commensurate with a good standard of living, that would put paid to continuing poverty and inequality.

At the other end of the scale, the power of the public purse has been shown to work perfectly when it is a question of pouring vast sums into private profit, in many cases with little accountability. The term ‘chumocracy’ has also been applied to how many of these contracts have been awarded.

Only this week, we have seen yet another demonstration of how the use of the public purse is a matter of political choice as the government agreed a four-year £16.5bn increase in defence spending. Boris Johnson called it ‘a once-in-a-generation modernisation of the armed forces … [required] to extend British influence and protect the public’ and restore Britain as “the foremost naval power in Europe”. We seem to be going back in time!

Labour unsurprisingly has supported these plans, but did ask how they would be paid for. Patrick Butler from the Guardian questioned how such a vast amount of money was justified when the ‘public finances have been stretched by the pandemic’.

The vision of stretched finances appeals to household budget explanations of how governments spend and is designed to reinforce the narrative of scarcity of money. Over the last few months, it surely must start to dawn on the public that there is no scarcity of money. The public finances have not been stretched, indeed they have been positively overflowing. The government simply made a political decision to spend money on defence, just as it did to support furlough or after public pressure to feed hungry children in schools.

In terms of how the government spends, it does not have to choose one expenditure over another. It does not have to match its spending to tax revenue or worry whether it can borrow money. It is just a decision based on political priorities. Feeding hungry children wasn’t a priority until it became politically expedient for it to be.

It is disheartening that time and time again mainstream journalists persist in toeing the establishment line that money is scarce and there will be a future price to pay. In an article in the Financial Times this week, it was suggested that that the Exchequer was running on empty and that the Tories in the wealthy south will soon be asked to support tax increases to help left-behind regions.

Let’s reiterate yet again that the state of the public finances is not dire, the Exchequer is not running on empty and, since tax does not fund government spending, increases will not help left-behind regions. In fact, taxing more in a period of economic decline or as a country was coming out of one would be positively harmful.

When it is suggested that drivers could be charged for using roads to help Rishi Sunak cover a tax shortfall of £40bn caused by the rising popularity of electric cars, one is tempted to point out that there is no hole in the finances to plug. Whilst we might want to use taxation to encourage people to use public transport, the only holes to plug are the potholes caused by cuts to spending on our road network.

It cannot now be any clearer that the UK government, which has the power of the public purse to authorise spending through its central bank, is not hindered by scarce monetary resources. That it just spends. The clear political priority is to spend on defence to ‘extend British influence’ rather than invest in a public and social infrastructure that serves the interests of the nation or addresses the rising poverty and inequality which has arisen as a result of government policies over the past 10 years.

The question of affordability has been used by successive governments to justify their spending policies. And yet, whilst successive governments have always found money for defence or prosecuting wars, whether it can be found to pay public sector workers decent wages is quite another matter.

In the same vein this week, the Treasury was reported to have been reluctant to commit more money to delivering the Prime Minister’s 10-point plan for moving to a low-carbon economy. Aside from the usual puff and rhetoric from politicians on a practical level, there are still questions as to whether words will be translated into real, firm actions. In an open letter to the government, it was reported this week that the UK would not be able to deliver on its zero-carbon commitments unless it intervened in the energy from waste sector and that recycling rates have reached a standstill. Ministers have also been accused of using the pandemic to justify further delay on promised action on food waste reporting until 2021. While the planet’s biodiversity continues to decline as the planet warms and valuable resources go up in smoke with few constraints, the government continues to prevaricate.

In saying that hard choices exist in relation to public sector pay or suggesting that we haven’t enough money to address climate issues, the Treasury ignores the elephant in the room. That the real human and planetary cost of not spending on these vital things will be immeasurable.

Over eight years ago George Osborne criticised green policies as a ‘burden’ and a ‘ridiculous cost’ to British businesses. Since then the environmental landscape has changed irrevocably as the climate tsunami bears down upon us with ever greater urgency. Governments have become masters at making promises or giving speeches with hat tips to change, but which result in very little. To suggest that there is a monetary constraint reveals much about the ideology which governs the government’s policies and the constituency it serves, but in the end, the burden of not acting will not be monetary, it will affect every aspect of our lives – economic and societal.

This is an opportunity not to be wasted. We have allowed an economic system to exploit working people. Businesses have justified low wages and poor employment conditions as prerequisites to competitiveness. Government having abandoned full employment policies in the 1970s has rolled over instead of assuming its considerable powers.

A recent report published by the Social Equality Commission quoted a female supermarket worker who said ‘when you dig really deep, I think it is about happiness and stability, and feeling valued … because money is secondary to all that. As long as you can get by, you shouldn’t worry about it.’

Happiness and stability are, without doubt, important but how such happiness and stability can occur when people are struggling to make ends meet is debatable. Just getting by is not enough and nor is it fair. Good wages and secure employment allow people to have a good standard of living, to be able to plan for the unexpected or indeed to save for the future. People are being brainwashed into accepting their lot on the lie of there being no alternative when there is such imaginable wealth in the hands of few people whose power and influence dictate its distribution.

From a macroeconomic perspective, the bottom line is that people with good wages and employment security spend their money in their local communities and the wider economy which in turn support local and national businesses. It seems the Chancellor, by suggesting he has to plug the hole in the finances either by higher taxes or public sector pay freezes, is displaying a deliberate ignorance, dictated by ideology, of the macroeconomic importance of people having money in their pockets. Let’s remember that one person’s spending is another’s income. It is fundamental!

To conclude this week’s lens, it is only right that we bring our readers’ attention to an editorial in the Guardian which highlighted that:

Coronavirus has thrown into sharp relief the inequalities in Britain. The bottom fifth of the working population have seen incomes cut sharply and their savings reduced to nothing. For the poor, there’s little or no cash to furnish even the barest of Christmases, while those at the top have seen cash pile up in bank accounts.

And then went on to criticise Sunak by saying that:

‘he continues to peddle the myth that the extra government borrowing during the pandemic means that he has to make “hard choices” to “balance the books”. The chancellor is softening the ground for austerity policies. Mr Sunak is making an ideological choice by using the wrong model of the economy. If he does not relent then he will be responsible for unnecessary unemployment and poverty.

It then urged Sunak to rethink his future policies by recognising that:

‘the government can take responsibility for maintaining the total level of spending in the economy at level that keeps the country as close to full employment as possible where a working week is at a reasonable length and paid at a reasonable wage.’

This is a moment of great change. A moment of great opportunity to create a fairer society for all. The economist Herman Minsky wrote: “a necessary ingredient of any war against poverty is a program of job creation; and it has never been shown that a thorough program of job creation, taking people as they are, will not, by itself, eliminate a large part of the poverty that exists”.

Unemployment and its associated economic and social ills could be mitigated by the introduction of a government-backed Job Guarantee, not only to deal with the economic fall out from the pandemic which will continue for some time to come but also act as a just transition mechanism as we address climate change. As a macroeconomic tool, it offers a cyclical approach to unemployment that would create a more stable economic environment to deal with the ups and downs of the economy with the added advantage that working people are not left to perish when times get tough.

Instead of talking about monetary scarcity and unaffordability, an argument which dominated the narrative for decades, the debate must now move to how we can create a more sustainable and equitable future in the context of the distribution of finite real resources and who gets them.

Society, through its elected government, has to decide its priorities. Real and sustainable human and planetary well-being delivered by powerful states with the power of the public purse governing in the interests of their citizens? Or a rehash of the current economic model which has at its heart a greenwashed control by global corporations.

 

Event Recording

GIMMS’ event “Phil Armstrong in Conversation with Neil Wilson” is now available as a podcast via the MMT Podcast. Our thanks to Christian Reilly for publishing it.

 

The MMT Podcast #75 Neil Wilson & Phil Armstrong: In Conversation

 

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The post Just getting by is not enough appeared first on The Gower Initiative for Modern Money Studies.

The deceitful image of money scarcity has no place in our society.

Hands of two women. A younger woman holding the hands of an elderly woman.Image by Sabine Van Erp from Pixabay

Society is indeed a contract. It is a partnership … not only between those who are living, but those who are dead and those who are to be born.

Edmund Burke
Reflections on the French Revolution – 1870

 

In the news this week the government did yet another turnabout following Marcus Rashford’s campaign and public pressure by announcing a £170m winter grant scheme to support low-income families. During the same week, the Trussell Trust reported that there had been a 47% rise in the number of parcels distributed via its networks in the 6 months to September 2020 compared to the previous year; that more than 1.2 million parcels were distributed, of which 470,000 were to children. And this was, it suggested, just the tip of the iceberg as these figures did not include the number of people helped by the numerous local organisations, independent food banks and local authorities who have stepped in to support their communities.

Whilst the Trust attributed some of these increases to the pandemic, which has had a devastating, effect the Trust was clear as to the underlying reasons why people need support. The key issues were related it said to a fundamental lack of income which has left people struggling to afford the essentials. As Emmie Revie, the Chief Executive of the Trust commented to the Guardian:

 

‘We have to find better ways of supporting one another as a society than leaving people to rely on food charity. It’s not just about ending food banks, it’s about finding an alternative to the need for mass distribution of charity food in the fifth wealthiest country in the world.’

 

The threads of poverty lie in adherence to a failed market-focused economic ideology and the government policies and spending decisions that result from it. Child hunger is just one of many interlinked consequences and research published this week by the Living Wage Foundation showed that during 2019/20 nearly three-quarters of independent care workers in England were paid less than the real living wage. They are, it said, among the 5.2 million workers in low paid, insecure jobs – 1.3 million of whom are key workers. The analysis noted that care workers earn an average of £8.50 per hour and 24% are on zero-hours contracts. It, like the Trussell Trust, highlighted the existing inequalities in our society which has hit the lowest earners the hardest and that was before the pandemic struck. Whilst the nation clapped with Boris Johnson Tabitha, a care worker, said:

 

‘I feel like a Roman Gladiator going into the ring on a night shift. Everyone is clapping for you, but you’re pitting yourself against a deadly disease without the proper pay and protection.’

 

As the government has increasingly ceded its responsibilities for its citizens through cuts to spending on public infrastructure both local and national, which in turn has led to an ideological and financial response at local level as private profit-seeking companies were invited to tender for contracts to deliver social care services, the consequences have been devastating. For those being cared for as much as those doing the vital work of caring for others.

As the government lauded its financial acumen in managing its accounts, its decisions have led to a vicious cycle of deprivation and poverty and public infrastructure decay. The connections are irrefutable. Surely it must dawn on the nation soon, as government and other institutions begin to wind up and reinforce the household budget narrative in support of action to get the public finances ‘back in order’ after all this spending, that its health and economic well-being is being reduced to one of balanced budgets and unaffordability.

At the same time as Rishi Sunak suggested that he may increase capital gains tax to pay for billions borrowed and the COVID-19 debt which is supposedly racking up, the Resolution Foundation published its report entitled Unhealthy Finances: How to support the economy today and repair the public finances tomorrow. In its report, it focused specifically on the dual challenge it believes the government is facing ‘to ensure that there is sufficient fiscal support through the crisis and recovery, and setting fiscal policy on a sustainable path.’

Even though it said that the government should commit not to start such consolidation until the economy had recovered, it still claimed that the government must do what is required to ensure that the public finances are sustainable and adopt a balanced current budget rule.

In the report, it suggested continuing to use low interest rates as a tool for supporting the economy and noted the fiscal damage being caused by lower tax receipts and higher spending. It proposed, amongst other things, reforming the tax system to raise revenue and imposing a health and social care levy to provide any additional revenue required.

Here we have all the usual implied but false language narratives about government spending – taxing to spend, borrowing and unsustainable public debt, repairing the public finances, financial sustainability, balanced budgets.

We’ve been here many times before and clearly the establishment is determined not to lose control of that narrative. The fightback is in full swing. The deficit and debt worrywarts are working overtime to keep the public in line. Heaven forbid that people should learn the truth about how the government really spends!

However, as that knowledge is going more mainstream, questions are being asked as it is becoming ever clearer that human and planetary well-being lies with government choice, i.e. who gets the money. It is therefore intolerable to think, in the light of this growing understanding of the spending capacity of government, that government and think tanks are suggesting that taxes be increased to pay for this imaginary round of borrowing and the subsequent imaginary national debt which has arisen from it.

Whilst one could certainly make a case for reforming the whole tax system to ensure a fairer distribution of wealth, the justification by the Resolution Foundation or the Chancellor for increasing taxes does not stack up for the following two reasons:

  • That such action would quite simply take money out of the economy at a time when it would still be recovering from the economic effects of the current crisis compounded by previous cuts to public spending which have had a cumulative effect on the economy. Private debt levels prior to the pandemic were already high but have soared by 66% since May to £10.3bn. The number of people in serious debt has doubled since March rising to 1.2m with a further 3 million at risk of falling into arrears. Raising taxes with this scenario in mind would seem self-defeating and destructive.
  • That taxes don’t fund government spending and cannot be used to reduce public debt

Quite simply the ‘taxes fund spending’ story is just a lot of accounting smoke and mirrors to suit an agenda which aims to keep people downtrodden and accepting their fate. The trope of financial unaffordability is deep within our own household budget psyches and shifting such narratives can be hard work. Much depends on loosening our attachment to them through knowledge and more importantly the desire for something better.

Taxes will not pay off the national debt any more than they will boost financially a failing social care system. Our public services including social care and the NHS are in crisis as a result of government choices, not a lack of tax money the government can collect. Privatisation and the profit motive, along with public spending cuts have both played a role in destroying what could and should have been funded publicly.

The deceitful image of money scarcity, with government reliant on taxes and borrowing to spend, has no place in our society as children go unnecessarily hungry and our young people face a gloomy future.

In this week’s Guardian, Patrick Collinson wrote that the COVID-19 crisis could have a lasting impact on young people’s pensions: indeed, the lives of young people have been turned upside down with future employment prospects damaged and life opportunities curtailed. However, future private pensions are the least of the worries of young people as they start out in life. It is the government’s role now to ensure, through its policies, that young people can thrive and build themselves a future and decent state pension provision should be a significant part of that.

We need to expose the con of private pensions which are reliant on fickle markets and a stable economy. Margaret Thatcher’s economic vision which was inspired by Friedrich Hayek and Milton Friedman reflected her belief in the superiority of the market. The idea implicit in this dogma was that the welfare state deprived people of the opportunity to make their own provision for old age. Thus, we witnessed the opening up of the market for private pensions in an attempt to weaken the state’s own pension provision. The current crisis is exposing their weakness which even before the pandemic was becoming clear and invites us to question the state’s ideological reliance on the private pension sector.

The solutions are to provide decent state pensions to give retired people financial security and ensure a decent standard of living and to reduce the pension age. The current round of retirement age increases is based on the lie that state pensions will become increasingly unaffordable as the birth rate falls and tax take reduces which will, it is claimed, cause an unacceptable burden on future taxpayers. We need to break the false connection between the payment of tax and receiving a pension.

The question of how it can be paid for doesn’t arise if we understand how the government spends. It would be paid for in the same way the government always pays for things; by creating the money out of nowhere. A simple transfer with a few computer keystrokes authorised by the Treasury and carried out by the Central Bank. We need to knock on the head the idea that a portion of our tax is being collected somewhere in a savings pot to be divvied out at retirement or indeed that taxes serve to pay for public services.

Assuming that government has invested through sufficient spending on public and social infrastructure including education, training, new technologies and by embracing full employment policies, then an earlier retirement and a good state pension is possible. Such investment will not put a financial burden on the lives of future generations, it will enhance them and those of retirees. We just have to decide as a nation how we want the real, but finite, resources we have at our disposal to create a better life to be shared out.

Earlier this week, there was an interesting exchange of views on a Facebook labour group when someone posted the following:

 

‘You do realise the Bank of England are printing new notes by the million. All we will get from Johnson is a bankrupt country.’

 

It is disappointing to observe in that post and the thread that followed that some individuals on the left seem to get pleasure from continually shooting themselves in the foot. By excoriating what they see as a reckless Tory government because in their view it is spending too much and driving us towards bankruptcy or hyperinflation, adds a certain touch of irony to the criticism since it was the Conservatives who used similar arguments against Labour’s spending plans in the last election. It all boils down to where is the money going to come from and who is going to pay?!

This type of scaremongering is damaging to a left-wing agenda and is borne of lack of knowledge. It is regrettable that, even when presented with the facts about how the government spends, many still choose to persist in reinforcing the myths and ignore the fact that it is impossible for the UK government to go bankrupt or run out of money and that government does not need our taxes to pay for public services not even the taxes of the rich. Ultimately, that is to deny monetary reality and what that knowledge could mean for any future progressive government’s spending plans if such a government were to exist although that is currently quite another story!

If we are going to debate, let’s do it from a position of knowledge rather than making exaggerated and untrue statements about how we are all going to hell in a hand cart because the Tories have spent too much. Let’s remember that in 2010 the same arguments were being levelled at Labour following the Global Financial Crash; another era of suffering and hardship for many. And that it was the Tories who said in 2010 that there was no alternative to cuts to public spending to get the public finances back in order and yet have suddenly without a problem found the monetary wherewithal to save the economy from the worst effects of the crisis. For the left to use this argument against the Conservatives is counter-productive to future progressive agendas.

The household budget ping pong played by successive governments at election time, which examines critically the fiscal record of a government or asks how its spending plans will be paid for, has done great damage to society and the economy. Such arguments overlook the real measures of economic health relating to how government serves its citizens in real social improvements from the provision of health and social care, education, policing, a social safety net and public transport networks to local service provision of libraries, municipal parks and refuse collection. All these things which previously were determined as the public good have been attacked by a governing elite serving its own interests and those of its financial donors.

As Peter Fleming, professor of business and society at City, University of London wrote:  Austerity [redefined] these things as fiscal liabilities or deficits rather than shared investments in common decency’.

Let’s argue for a better, fairer and kinder society based on real knowledge of monetary reality and not baseless statements which only serve to promote continuing political inertia on the left in terms of understanding how money works and how that knowledge fundamentally changes how we can respond to today’s and tomorrow’s challenges.

 

Newly published

This week, we published a fact sheet on Negative Interest Rates

Negative Interest Rates

and a new paper by Phil Armstrong and Warren Mosler

Weimar Republic Hyperinflation through a Modern Monetary Theory Lens

 

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The post The deceitful image of money scarcity has no place in our society. appeared first on The Gower Initiative for Modern Money Studies.

We can afford to choose public purpose spending

Published by Anonymous (not verified) on Sun, 08/11/2020 - 8:06am in
Public duty and the public purpose? Or, self-serving interest? Politicians have a choice. We have a choice.

A row of white doors along a wallImage by Arek Socha from Pixabay

The problems we face did not come down from the heavens. They are made. They are made by bad human decisions, and good human decisions can change them.

Bernie Sanders

 

In this week’s news, the economic train crash continues as it was announced that more than 7200 workers are set to lose their jobs as the pandemic continues to take lives and cause huge economic suffering to the lives of the still living with worse yet to come.

Boris Johnson said this week at one of the government briefings that we should be ‘humbled in the face of nature’, that the NHS could collapse if the government failed to heed the warnings of the experts and that he was not prepared to take a risk with the lives of British people. Those statements should have been the moment for a sharp intake of national breath in disbelief at the spinning of a story which belies a cynical sleight of hand to shift the blame from the real culprits and display feigned empathy that it has the interests of the nation at heart. Through 10 years of austerity politics, the government has willingly taken risks with the lives of British people with its policies and spending decisions which have stripped down our public infrastructure and led to over a hundred thousand preventable deaths through cuts to health and social care spending and social security reforms.

On the one hand, we should indeed be humbled in the face of nature as the consequences of human activity linked to the exploitation of resources and excessive consumption as the price for seeking the god of growth and profit begins to be made very clear. But that was not Johnson’s intention. It was yet another example of how the government manipulates the narrative through its use of words to shift the arguments away from its own disastrous policy and spending decisions that have exposed the gaping holes in our public and social infrastructure.

When the Prime Minister says we need a second ‘lockdown’ to stop our hospitals being overwhelmed, that cannot be the fault of nature. When we are short of 100,000 NHS workers of which 44,000 are nurses, that cannot be blamed on nature. When the Cygnus report published in 2016 exposed the serious gaps in Britain’s pandemic response plans, nature had no role to play.

Alluding to nature aims to take the heat off the government to make as if it were not responsible for this epic train crash of policies and spending decisions. We have limped from one mess to another; each crisis building incrementally consequences that could have been avoided. From successive financial crises to the arrival of Covid-19 and the subsequent government management of it. These were manmade not nature made, as were the disastrous solutions.

Austerity has brought us here and austerity kills and has killed. It is as David Stuckler explained in his book The Body Economic: Why Austerity Kills’

‘an economic ideology [which] ‘stems from the belief that small government and free markets are always better than state intervention. It is a socially constructed myth – a convenient belief among politicians taken advantage of by those who have a vested interest in shrinking the role of the state, in privatizing social welfare systems for personal gain.”

Our country didn’t just fall into this situation by accident; it happened as a result of a toxic economic orthodoxy which dominates policymaking at the heart of Westminster and indeed beyond nationally and globally from national governments to global institutions such as the IMF, the World Bank and the World Economic Forum. The destruction of our public and social infrastructure, in favour of market solutions, left us totally unprepared and yet still the market solutions command power. As public money continues to be dished out to non-accountable, profit-hungry companies, corporate welfare reigns at the expense of a publicly delivered, managed and accountable public service model. The corporatisation of everything is at a terrible human cost. The massaging of the public purse for corporate benefit, not public purpose. And anything goes!

This was further emphasised this week when Simon Stevens, a former advisor to Tony Blair who worked for the US private healthcare company United Health and now heads NHS England said ‘there is no health service in the world that by itself can cope with coronavirus on the rampage’. Whilst one cannot deny the enormity of this global health and economic challenge, this is yet another attempt to bypass or ignore the realities of a lethal economic ideology which has as one of its tenets the belief that cutting public spending is a necessary policy to balance a nation’s budget.

Ten years of public spending cuts in real terms, the ongoing damaging reforms to the NHS which have fragmented it and commercialised it; pared-down facilities and reduced number of beds (from 300000 in 1987 to 141,000 today), 100,000 fewer NHS workers than needed; and the failure to acknowledge the Cygnus report, has left the UK insufficiently prepared for the emergency we now have before us.

This was cruelly demonstrated by the realities of the Nightingale Hospitals which were set up to manage the predicted overspill of Covid patients once established hospital beds had reached capacity. As a Keep our NHS Public publication revealed this week ‘the need for the existence of these urgently-created hospitals is a powerful illustration of how little wriggle-room exists in our hospital system and how resilience has been stripped away by chronic underfunding’. It also pointed to the fact that the Government had also failed to mention exactly who would staff the temporary hospitals when the nursing shortage was already so acute. ‘Robbing Peter to pay Paul’ was always going to be revealed as a huge PR exercise which led people up the wrong path but could not deliver.

Stevens also forgot to mention the pursuit of the same damaging neoliberal ideology arising out of the World Economic Forum’s concern for the financial sustainability of public health care which Stewart Player covered in this article from 2017. It showed the WEF’s influence in developing a world vision for health care and whose ideas we have seen reproduced here in the UK with the help of private consultancies such as McKinsey and Co.

It particularly looked at the ‘fiscal pressures to curb expenditure’ and the ‘wider economic context of high levels of public debt and stagnant state revenue.’ It examined in particular ‘various forms of rationing and shifting the cost burden onto individuals and employers through … mandatory insurance’ or ‘increasing tax revenue’ or potentially increasing healthcare productivity ‘through delivering more services with fewer resources’ which would ‘go a long way to ensuring their financial sustainability.’

This is the same Simon Stevens who has been a significant player in the damaging reforms to a now fragmented NHS to cut costs and make it a nice profitable opportunity for private healthcare companies.

Whether we talk about the NHS, education or other vital public services which provide the foundations for a healthy economy, the public is continually being programmed to accept the narrative of the problem with public debt and the need for financial sustainability as much as it is being programmed to accept that the private sector does it better or indeed that volunteering can take the place of government intervention.

After the very necessary big spend of trillions of pounds (even if as left-wingers we can argue about the details of that expenditure) ‘there will be a price to pay’ is the mantra still being touted.

Whilst the government pours vast sums into private profit, we see an on-going denial of government responsibility for public well-being through its spending decisions. As the government’s corporate friends gain access to the public purse with no seeming limits, our public support systems are denied sufficient funding.

From its decision not to extend free school meals, lauding of public generosity in donating to food banks or other charities to its appeals to people’s human empathy with invitations to volunteer, we are being sucked into accepting these things as normal. As they reinforce the narratives of fiscal responsibility, the public is being sucked into accepting that government has no role to play in public purpose. By the time the nation notices this trickery, it will be too late. We will have fulfilled willingly David Cameron’s Big Society dream without realising where it is leading us.

Whether its Lord Stuart Rose, Chairman of Ocado, who said on Channel 4 News this week ‘We have to be able to protect our economy and generate the sort of income that tax provides so that we can pay for the hospitals, pay for the services and keep the NHS going.[…]We’ve now borrowed £400bn this year that’s £40,000 roughly for every taxpayer in the UK … it is going to be a deep hole that we are going to have to dig ourselves out of later. Let’s talk about the 20-30-year-olds who are going to have to live with that for the next 20 or thirty years.’

Or the former Shadow Chancellor of the Exchequer Ed Balls suggesting that whilst governments don’t need to think about returning to austerity, spending cuts or tax rising ‘it’s gonna take fifty years or more to recover from the fiscal consequences of this pandemic and then going on to claim that ‘it was the children born in the 50s, 60s and 70s who ended up paying for the aftermath of the second world war and it will be future generations who will bear some of the burden of dealing with the pandemic …’

It shows very clearly how stuck politicians and business leaders are in the economic orthodoxy which has done so much harm already and their willingness to carry on with that harm. The suggestion that the children born in post-war years were burdened with paying for it through higher taxes fails to acknowledge that that spending created the public and social infrastructure from which they all benefited in successive years as did the pursuit by successive governments of full employment at least until the 70s when neoliberal orthodoxy began to take hold. With public ‘debt’ at 248% of GDP in the post-war period, nobody suffered, and everyone gained.

That investment which created the NHS, an education system and good local government providing essential services, all helped to enhance people’s lives and by dint of that construct a fairer economy. Later adherence to the concept of fiscal responsibility and its damaging bedfellow austerity created the exact opposite. Indeed, as David Stuckler observed in his book referred to earlier:

‘Had the austerity experiments been governed by the same rigorous standards as clinical trials, they would have been discontinued long ago by a board of medical ethics. The side effects of the austerity treatment have been severe and often deadly. The benefits of the treatment have failed to materialize. Instead of austerity, we should enact evidence-based policies to protect health during hard times. Social protection saves lives.’

Both of these public figures are promoting an idea that has had its day. If only they knew about modern money realities – or perhaps they do?

That the government:

  • is the monopoly issuer of the £ sterling
  • has to spend before anyone can pay their tax
  • doesn’t have to borrow to spend. That the term ‘borrowing’ is purely a convenient sleight of hand that suits politicians to promote to justify their spending decisions and serve corporate interests.

And that:

  • the size of deficits in themselves are not a suitable measure of any government’s economic record
  • the only burden that future generations will face is one caused by a government that has failed to invest today in the real resources whether its people or the things used in the production of the goods and services which enhance our lives and make a better tomorrow.

As Thomas Fazi, co-author of Reclaiming the State published in 2017, wrote a year later:

“One of the key insights [of MMT] is that the ‘deficit’ numbers by themselves – whether in percentages of GNP or in absolute quantitative terms – are meaningless. The government can ‘sustain’ any amount of deficit […] to pay its obligations. Of course, this is not a license for irresponsible spending. Creation of money, and its utilization in ways which do not enhance productive capacity of the domestic economy are sure to cause harm to the economy. Rather, MMT provides us with a license for responsible spending. If there are worthwhile projects which will utilize resources currently lying idle, then there is no need to be scared of the deficit numbers in spending on these projects. Viewed in this light, the project of building a million houses is not constrained by the budget of the government. Rather it is constrained by the availability of resources which are required for this purpose. If there is idle productive capacity in terms of labor, land, and materials, spending in this area will utilize them to the maximum. If the capacity does not exist, then a carefully balanced spending strategy, which builds capacity in a way coordinated with the increasing demand for utilization of this capacity, can be funded by deficit financing, without causing harm to the economy. Of course, it goes without saying that this requires skilful management and planning”.

We need to re-create a model of good government in which politicians dedicate themselves to the concept of public duty to serve the public purpose and not their corporate friends, or themselves via the revolving door.

Newly published

 

This week, we published guides to quantitative easing, or QE.

Basic information is available in our FAQs here

and a fuller explanation is in our QE Fact Sheet

 

Upcoming Event

Phil Armstrong in Conversation with Neil Wilson – Online

November 15 @ 14:00 pm – 15:30 pm

The GIMMS team is delighted to host its next ‘in conversation’ event at which Phil Armstrong will be talking to Neil Wilson

Neil is an expert in finance and information systems and one of the UK’s leading thinkers about MMT. After more than 30 years in the systems business, Neil learned the hard way that operations rarely follow the manual. Moving from network crashes to financial crashes, Neil was intrigued as to whether the economy could be fixed with a reboot – which lead him to Modern Monetary Theory (MMT). His work challenges the high-priesthood of Important Grey Men who refer to people as ‘resources’ and who believe debt is bad for government and good for you.

He dreams of a world where everyone who wants a living wage job can find one, close to their home, their friends and family.

You are invited to join us for this informal event which we are sure will be both stimulating and insightful.

Register via Eventbrite

 

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Ending needless suffering

Published by Anonymous (not verified) on Sun, 01/11/2020 - 8:17am in

Hungry child with her hand in her mouthImage by Chitsu San from Pixabay

“When the MMT coin drops and you realise the suffering is gratuitous”

Stephanie Kelton

In this week’s blog, hunger is on the menu yet again. Gratuitous hunger and hardship. Gratuitous suffering. Whilst the government gives with one hand (not enough), lauds its generosity at every media opportunity and yet is selective in its distribution of public money, it is making it very clear that the magic money tree they swore blind didn’t exist prior to the pandemic does have limits and we can expect a tightening of the public purse in the future. Indeed, in a recent tweet Rishi Sunak made his position very clear in when responding to the question whose money are we spending:

‘… the simple answer is your money. The government is not some entity that has its own money. The government only has money because people pay taxes and we borrow money. That’s how we fund what we do.

 

That’s why I’m careful with how we spend that money. It’s why often I will say look we can’t do absolutely everything that people want. There’s obviously limits. I’ve got to try and balance what’s the right level of taxation, how much we can safely borrow, conscious that that will need to be paid back and the burden will fall on future generations.

 

We’ve spent an enormous amount and we’ve borrowed an enormous amount on everyone’s behalf.

We always have to be mindful of the money we’re spending. It’s yours, it’s everyone else’s and we need to keep an eye of needing at some point to know that we have to pay things back.’

Let’s not be under any illusions; Sunak may have found the money taps to mitigate for the worst effects of the pandemic and for their corporate friends benefit, but Maggie Thatcher’s dictum stands ‘There is no such thing as public money. There is only taxpayers’ money,’ when it comes to spending on the public and social infrastructure upon which our economy stands. Instead of focusing on the real limitations to government spending, which are our real resources, its fall-back line is that there will be a future monetary price to pay or future generations will suffer.

We are not so subtly being prepared for yet another round of some sort of austerity, more cuts to public spending and wage caps in the public sector (already on the cards potentially to be announced at the next spending review in November).

The government line of thinking seems to be yes, let’s clap for the NHS, give out awards for the ‘courage and dedication’ shown by frontline workers, as long as it doesn’t involve an increase in government spending on those very key workers who have gone beyond the call of duty during this pandemic.

Awards won’t pay the bills, but they will be the perfect distraction at a time when the country needs something more than a cynical diversion to take the public’s eye away from the realities of government policies. The household budget myth of how the government spends adds another layer of distraction and quite simply reinforce a useful lie to justify what comes next. And it’s not just more tightening of public sector spending.

This week Matt Hancock suggested with all seriousness that businesses, charities, and local government should be praised for ‘stepping up to the plate’ in support of Marcus Rashford’s Free School Meal Campaign. He said that he was ‘strongly on the side of those who have come out to help’.  ‘It’s brilliant’ he said and added ‘I saw that Marcus Rashford said what we need is collaboration, people working together … making sure that everybody gets the support that they need’.  It would be laughable if we didn’t know better what this distraction signals and it is much more cynical than at first sight.

Whilst Hancock praises the generosity of the nation, he hides a more insidious objective, which combined with the alarmist headlines about the huge levels of borrowing and trillions of public debt and on-going references to getting the public finances back in order by the Treasury should definitely set the alarm bells ringing.

Jack Monroe, the food writer, journalist and activist known for campaigning on poverty and hunger issues wrote in an article this week in the Guardian ‘long term, we need a reckoning as to how so many people have ended up at the doors of food banks, how so many people are falling into desperate situations’  A volunteer food bank manager at the Hillingdon Crisis Support Service in North West London pointing to the receipts for food that her team of volunteers purchased with their own money was absolutely clear when she asked the question ‘Where’s the government’?

Where is the government indeed?  On the one hand, Rishi Sunak talks about the government’s enormous fiscal response; a message which is then tempered by his warnings that there will be a future price to pay. Heaven forbid that the public might get to know how the government spends.

Then from the Tory propaganda units in the basements of Westminster, their PR men and women spend their days writing their media press releases and ministers get dizzy at their generosity, the dissonance between the government version of events and reality is becoming ever starker as the crisis deepens.

It is worth remembering that whilst the current government through its employment and other policies has consistently rejected its direct responsibilities towards the health of the nation, since 1948 all Finnish children have been served a free lunch every school day. Children learn cooking through school subjects, the effects of food on health, the environment, economy and culture and as such education plays a central part in the health of future generations and the Finnish economy.

A healthy nation equates to a healthy economy, a fact our government ignores whether we are talking about public health, education or those public structures which enable them. You know, those very things that are ‘unaffordable’.

Whilst the smoke and mirrors of blame have pointed only too often at irresponsible parents, lazy people and scroungers, the enormity of the economic crisis affecting all working people who have already lost jobs or will do so in the months to come, will increasingly begin to unravel the lies about who is responsible.

The culprits lie at the heart of government; not just this government but successive governments who have bought into the lie of the superiority of markets, the scarcity of money and the unaffordability of spending on publicly paid for and delivered services. Our society is not just poorer for it, it is crumbling as a result.

The Joseph Rowntree Foundation warned in late September that if the government failed to keep its much-vaunted promises on protecting living standards and levelling up, then many more people would be pulled into poverty. It said that cutting the increased Universal Credit rate would hit those on the lowest incomes and families with children, and that the cut would impact on those who are having to turn to the social security system for the first time as a result of job losses caused by the pandemic as well as those who were already in poverty. This action, it said, would plunge 500,000 more people into deep poverty – 50% below the poverty line.

While Rishi Sunak reiterates the lie about ‘taxpayer’s money’ like a worn-out Thatcherite record, if people are not to face huge financial hardship this winter and if the economy is not to nosedive completely, particularly in the light of the prospect of a further lockdown, then the government as the currency issuer should do what only it can do; pay the people what they need to pay their bills and keep food on the table.

The rhetoric of generosity spouted by modern-day versions of Scrooge seated in Westminster should be ridiculed and shown up for what it is. Mean, monetarily unnecessary and very damaging to the health of the nation today and for future generations.

As the TUC and the IPPR made clear in their jointly authored research paper published this week, struggling families need an urgent cash boost and that strengthening the social security system (which is one of the least generous in the developed world), doubling child benefit payments or raising Universal Credit payments would make a ‘life-changing difference’ to many of the poorest families.

The IPPR’s executive director Carys Roberts made it clear that without a significant cash injection, more families would be forced to rely on food banks [at a time when donations in some areas are drying up as economic conditions worsen] and that putting more money into families’ pockets would ‘spare hundreds of thousands of children from the scarring effects of poverty over the next 18 months’ and would ‘also mean an economic stimulus to keep the economy going’

To this mix should be added, as a long term objective, a larger public sector to undo the damage caused by the last 10 years of cuts and the previous decades of shrinkage, a fit for purpose social security system, a permanent Job Guarantee programme to stabilise the economy when it falters and the implementation of a wage floor below which no-one can fall.

A government that fails to serve the interests of the nation is a failed government. A government that ignores poverty, hunger and hardship whilst pouring vast sums into corporate bank accounts is a rogue government.

As politicians cynically praise the public and local bodies for their collective action, it cannot be emphasised too strongly, as indeed GIMMS has done previously, that it is a signal of their real intentions to continue along a path reminiscent of the world of Victorian philanthropy in which the public’s goodwill is exploited and charitable donations and volunteering become the norm. A place where properly organised and publicly paid for public and social infrastructure (which lies at the heart of a functioning economy and the distribution of wealth and resources) becomes a mere shadow of itself, if it exists at all.

As the government faces more pressure to provide funding for free school meals, we need to examine this as just part of the vicious nature of government policies whereby power is being centralised, public money is poured into corporate delivery of public services and our local communities are dying a slow but quickening death, unable to withstand the pressures caused by a decade of austerity and now the pandemic.

When Johnson says ‘we don’t want to see children going hungry this winter’ but fails to provide adequate funding at national or local level, you can be sure that the opposite will happen. Whilst government ministers praise their response, they ignore the comments of local government leaders to the already spent allocation of funding; ‘the government’s rhetoric on the sums provided to councils was absolutely disingenuous’‘the north London local authority share of the £63m (government allocation) was not enough to even cover free school meals over half term and Christmas’ and ‘the council is paying for this out its existing budget’.

As we stand at a significant crossroads in the history of humanity, it is an opportunity to examine our consciences, our values and the prevalent prejudices that we hold as a result of the demonisation of vulnerable, unemployed, sick and disabled people. Instead of accepting the prejudices as truth, we should be looking more closely at the motives for such an agenda.

Whichever way we look, there is no-one to vote for who hasn’t or can’t be bought by a corporate establishment which has been allowed, through its excessive wealth, to buy power and influence whilst the revolving door keeps the political machinery oiled and functioning in its favour. This has been at the expense of working people and the infrastructure which form the foundation of a good society.

If we turn a blind eye now, we are turning a blind eye to the future of our young people who deserve something better – stable lives, stable jobs and a sustainable economy.

The mantle of fiscal responsibility worn by successive governments to justify their policies and spending decisions, which have been the measure by which a government’s economic record has been judged, should be at the heart of future discussion. If we are to challenge the false narratives which have allowed such wealth disparities, poverty and inequality to exist, we can only do so from a position of public knowledge.

If the media as part of that orthodoxy will not tell the truth, then it is up to others to be the bringers of that knowledge.

GIMMS and many other activist organisations which are growing across the world are committed to making a difference. As Stephanie Kelton so rightly said“When the MMT coin drops and you realise the suffering is gratuitous” that should be our lightbulb moment.

If you are interested in exploring further, you can find information here:

gimms.org.uk/mmtbasics/

gimms.org.uk/tools-and-resources/

pileusmmt.libsyn.com/

All that we ask is that you pass the knowledge on.

 

 

Upcoming Event

Phil Armstrong in Conversation with Neil Wilson – Online

November 15 @ 14:00 pm – 15:30 pm

The GIMMS team is delighted to host its next ‘in conversation’ event at which Phil Armstrong will be talking to Neil Wilson

Neil is an expert in finance and information systems and one of the UK’s leading thinkers about MMT. After more than 30 years in the systems business, Neil learned the hard way that operations rarely follow the manual. Moving from network crashes to financial crashes, Neil was intrigued as to whether the economy could be fixed with a reboot – which lead him to Modern Monetary Theory (MMT). His work challenges the high-priesthood of Important Grey Men who refer to people as ‘resources’ and who believe debt is bad for government and good for you.

He dreams of a world where everyone who wants a living wage job can find one, close to their home, their friends and family.

You are invited to join us for this informal event which we are sure will be both stimulating and insightful.

Register via Eventbrite

 

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If you would like GIMMS to let you know about news and events, please click to sign up here

Support us

The Gower Initiative for Money Studies is run by volunteers and relies on donations to continue its work. If you would like to donate, please see our donations page here

 

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The post Ending needless suffering appeared first on The Gower Initiative for Modern Money Studies.

Child hunger is an avoidable tragedy

Published by Anonymous (not verified) on Mon, 26/10/2020 - 4:59am in
If we cherish a desire for a fairer and more equitable society, then now is the time to ‘Persist until something happens!’

Food - Vegetables and macaroni cheese ready to be served in steel traysImage by Obi Onyeador on Unsplash

“We must make sure that the government do not see the kindness of the British public as an opportunity to continue their shameless and wanton negligence of their responsibility to the nation’s children.”

Nadine Batchelor Hunt, Freelance Journalist (writing in the Huffington Post).

To witness the outpouring of public generosity this week following the rejection by the government of Labour’s motion to continue free school meals during school holidays was heartening. Marcus Rashford’s campaign has rightly stirred the hearts of the people and demonstrated that as a nation we have the capacity to be generous and the ability to empathise with the plight of others.

At the other end of the scale, we have seen an outpouring of vitriol and animosity towards those who are in dire need of support as the consequences of Covid-19 continue to play out in the lives of working people and the myriad small businesses whose livelihoods are at stake.

It has revealed a toxicity at the heart of government which is shameful and an equally poisonous response from some people who have been blinded by an orthodox economic narrative peddled for decades that the poor deserve their poverty and that if only they worked harder they could be rich and successful too.

One can only describe these outpourings of hate as not only vicious and deserving of contempt but also a denial of the daily realities for so many people. Daily realities not of their making. People whose lives have been sacrificed on the altar of economic rationality, the consequences of which have been devastating in terms of income and standards of living.

During this week Tory MPs have excelled themselves. Nick Clarke, who proposed that child hunger could be alleviated by learning to cook, budgeting or selling assets. Ben Bradley, who suggested provocatively in a response to a tweet that school meals had been effectively a direct payment to brothels and drug dealers. And Selaine Saxby, who intimated that hospitality firms should be punished for their charitable gesture in offering food for children by denying them future government help.

The cockroaches continue to crawl out of the woodwork. It beggars belief that the Conservatives, in presenting their arguments for not feeding children, have suggested that they can’t ‘nationalise’ children, create ‘dependencies’ or ‘wreck’ the economy. This was yet another example of a twisted economic ideology being used to justify its action or lack thereof. An ideology which rejects state provision and a cooperative vision, revels in the sham holy grail of balanced budgets and idolises the god of the market and self-reliance.

Only this week, Rishi Sunak warned that ‘saving lives’ must be balanced against protecting the economy. He said that there would be hard choices ahead. However, when the economy and the people are inextricably linked, indeed two sides of the same coin, the illogic of that position is irrefutable. There are no hard choices to make between lives and the economy. The UK is a sovereign currency issuer with the power to spend to do both, indeed not to do so would potentially destroy both. It is a political choice to allow children to go hungry. It is a political choice to deprive people of sufficient monetary means to get through this crisis. It is a political choice to adhere to a lethal ideology which promotes balanced budgets over human health.

As Tory MPs led the charge to defend their decision to vote against the proposed extension of FSM vouchers, some, taking their lead from Tory comments, piled in on social media. Helen Thomas was lambasted on Twitter after suggesting that parents who don’t cook their meals from scratch were ‘lazy’ and should ‘forage for apples’ if they can’t afford food. ‘Food is inexpensive, homegrown is cheap’ she declared.

Not only has the oft-repeated narrative of ‘lazy scroungers’ done a huge amount of damage to our sense of collective responsibility and empathy for others, it has cleverly disguised the true causes of poverty and inequality. The blame game has led to a divided society which has served governments well, until now at least, as the collective conscience is aroused and critical voices are raised.

The United Nations Convention on the Rights of the Child makes it clear that the state has a responsibility to ensure that children have sufficient to eat.

Article 24

Children have the right to the best health care possible, clean water to drink, healthy food and a clean and safe environment to live in.

Article 27

Children have the right to food, clothing and a safe place to live so they can develop in the best possible way. The government should help families and children who cannot afford this.

It is a stain on government when 72% of children living in poverty are in working households, the social security safety net fails to deliver adequate support and families are denied the real living wage that would enable them to take responsibility, feed their children with wholesome food and bring them up in a safe and secure environment. The greatest tragedy is that the government, through its policies, allows unemployment or underemployment to persist as a trade-off against inflation which at the same time allows exploitation of working people to flourish in the form of low wages and insecure employment.

The consequences have been devastating.

As Ben Bradley boasted in an arrogant tweet about the government’s record and its dual responsibility to support the vulnerable by helping people to help themselves whilst at the same time being fiscally responsible by ‘balancing the books’, Marcus Rashford tweeted back that:

‘The economy already pays a high price for child hunger. If children were fed properly you would increase educational attainment and boost life chances’.

Child hunger is an avoidable tragedy. The special rapporteur Philip Alston commented last year in his UN commissioned report that the UK’s social safety net had been ‘deliberately removed and replaced with a harsh and uncaring ethos’ and added that ‘ideological’ cuts to public services during the 10 years of austerity beginning in 2010 had had ‘tragic consequences’.

The Covid-19 pandemic has highlighted the degradation that has occurred as the government has, over a decade, relinquished its responsibilities and deliberately presided over the huge increases in poverty and inequality whilst at the same time it vaunts its success painting pictures which don’t bear out any reality.

It is gratifying to see the very public response to the government’s decision not to support free school meals in the future and promises of real action. However, it is equally depressing to see a left-wing labour social media page describing it as ‘socialism in action’. Whilst it is vital that we hold the government to account for its negligence, charitable action does not make it socialism, however vital it is to show solidarity through cooperative generosity.

One of the roles of the government is to serve its citizens by providing the vital infrastructure which creates a stable and fair society. The fact that it hasn’t should be demonstration enough that we should be under no illusions about the intention of government, which is to wash its hands of the public and social infrastructure which we the people through an elected government created in the post-war years.

Charities and the voluntary sector are increasingly being invited to deliver a variety of public services, and food banks and homelessness charities are being normalised as if the lie of the scarcity of money demanded those things. A climate of acceptance has slipped in almost unnoticed as we donate money or put a tin of beans in the food bank box in the supermarket, which in its turn promotes its generosity in providing unsold food to those same charities. It is a vicious circle of acceptance.

It should be increasingly clear that the intention is to return us to re-embracing a version of those former Victorian values where a deserving poor received help as long as they complied with the rules and regulations laid down by the do-gooders of society.

Another role of the government is to protect its citizens in normal times and in times of crisis. Its task as an elected body is to manage the economy in the interests of all, not just the small section of it who have for too long and increasingly been the recipients of public money. If the government can find the money for an ‘Eat out to help out’ discount and if it can find the money for a pay increase for MPs or to subsidise their food and drink in the House of Commons, then it can find through the same political will the means to deliver a fairer society. One which both takes care of its citizens through sufficient spending to ensure full employment and ensures at the same time that the real but finite resources we have at our disposal are shared more equitably across society.

We seem to have forgotten that the government is us and as a result democracy has never been in more peril than it is today. Whilst it is right to applaud the generosity and empathy of people who have shown they care, we should do so by highlighting, too, the failure of the government to step in as only it can as the currency issuer to serve not only the interests of the most vulnerable citizens but also to ensure that the economic consequences of Covid-19 are alleviated by targeted government action.

If we cherish a desire for a fairer and more equitable society and care about the future of our children, then this is the moment for us all to hold the government to account by standing together in solidarity. It is not the job of socialists or indeed anyone who cares about the sort of society we live in to be part of the mitigation for a cruel and toxic agenda.

 

 

Upcoming Event

Phil Armstrong in Conversation with Neil Wilson – Online

November 15 @ 14:00 pm – 15:30 pm

The GIMMS team is delighted to host its next ‘in conversation’ event at which Phil Armstrong will be talking to Neil Wilson

Neil is an expert in finance and information systems and one of the UK’s leading thinkers about MMT. After more than 30 years in the systems business, Neil learned the hard way that operations rarely follow the manual. Moving from network crashes to financial crashes, Neil was intrigued as to whether the economy could be fixed with a reboot – which lead him to Modern Monetary Theory (MMT). His work challenges the high-priesthood of Important Grey Men who refer to people as ‘resources’ and who believe debt is bad for government and good for you.

He dreams of a world where everyone who wants a living wage job can find one, close to their home, their friends and family.

You are invited to join us for this informal event which we are sure will be both stimulating and insightful.

Register via Eventbrite

 

Event recording

Phil Armstrong in Conversation with Warren Mosler

Phil Armstrong spoke to Warren Mosler for GIMMS on 17th October 2020.

 

This interview is also available via the MMT Podcast here

 

Join our mailing list

If you would like GIMMS to let you know about news and events, please click to sign up here

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The Gower Initiative for Money Studies is run by volunteers and relies on donations to continue its work. If you would like to donate, please see our donations page here

 

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The post Child hunger is an avoidable tragedy appeared first on The Gower Initiative for Modern Money Studies.

Our choices today will define our humanity and our priorities.

Published by Anonymous (not verified) on Wed, 21/10/2020 - 6:50am in

People packing plastic bags of food at a food bankImage by Joel Munz on Unsplash

Overcoming poverty is not a task of charity, it is an act of justice. Like slavery and apartheid, poverty is not natural. It is manmade and can be overcome and eradicated by the actions of human beings.

Nelson Mandela

The health and well-being of human beings and the planet is still being pitted against an out of control capitalism defined by excessive consumption and unbridled growth compounded by the lie of balanced budgets and future tax burdens.

In this week’s news, the plight of many poor families struggling to feed their children has yet again come into the spotlight, in what has hitherto been one of the richest countries in the world. The increase in poverty and hunger demonstrated over a decade with the growing number of food banks and other charities has been noted on many occasions in previous MMT Lens blogs.

Covid-19 has exacerbated what was already a rising concern and has left many families stressed and under pressure. Back in July whilst Boris Johnson invited people to spend and spend some more, and Rishi Sunak offered his ‘eat out to help out scheme’ financed from the public purse, those already on limited incomes made worse by the current crisis had no such opportunity.

In the same month, the footballer Marcus Rashford raised public awareness of the plight of families struggling to feed their children and ran a successful campaign to force the government to provide funding for school meals during the summer holidays.

Following the government’s rejection of Rashford’s proposal this week to extend free school meals to holiday breaks including Christmas and Easter, he has pledged to continue his campaign.

He tweeted on 15th October:

It’s … not for food banks to feed millions of British children but here we are. 250% increase in food poverty and rising. […] For too long this conversation has been delayed. Child food poverty in the UK is not a result of Covid-19. We must act with urgency to stabilise the households of our vulnerable children.

His stark comments clearly point to government policies which have directly impacted on the lives of some of the poorest people in our communities, prior to and post-Covid and which, in the future, will affect a broader section of the working population as jobs are lost and the economy destabilises.

It has been estimated by the Food Foundation think tank that as many as 900,000 more children have applied for free school meals, adding to 1.4 million who have already claimed. This will most certainly be the tip of the iceberg over the coming months.

The picture that is increasingly emerging as the economy slows and with the prospect of more business closures and redundancies, should be a serious cause for concern in relation to the consequences for families and their children.

Earlier this week Channel 4 News covered a disturbing report about the rise in child poverty in the Midlands and the North of England where it is, according to figures just published, rising the fastest. Magic Breakfast, a national charity which shockingly provides 48,000 breakfasts nationally, says that demand has increased as a result of the pandemic.

With a particular focus on a breakfast club in a Birmingham school which is handing out breakfast parcels to children to take home, the headteacher said some struggling families had been unable to claim free school meals because they were not eligible for social security benefits and that others who had suffered cuts to household income could still not meet the threshold for free school meals. Commenting that school meals cost £45 a month per child which for many was a great deal of money she said that she had had cases where parents had come to the school with their household bills and bank statements to show that they can’t pay.

As the Channel 4 news reporter commented ‘Child poverty shamed Britain even before the pandemic.’

To highlight growing concerns in political circles a former advisor to the government on homelessness warned that the UK faces a ‘period of destitution’ in which ‘families can’t put shoes on children’. Dame Louise Casey indicated that the proposed reduced level of support would compound the problems faced by growing numbers of families. She criticised the government’s claim that its priority was to protect jobs and incomes saying that many people still risked ‘falling into poverty’.

Along with the threat that the uplift to Universal Credit and Working Tax Credit would not be extended beyond April 2020, the prospects for many families is potentially dire as many more people not able to cover essential bills fall into debt, thus putting further strain on their finances.

The question we should be posing is how has this situation arisen and what can be done to alleviate it? The trail leads always back to government.

While the government propaganda machine promotes Rishi Sunak’s generosity from an ivory tower of ministerial plenty and lauds its additional spending, it is in reality, a fraction of what it needs to do to protect citizens. Not just in the coming months but in the coming years, as the fallout from Covid-19 continues to play out on the economy and the lives of those affected not just by the pandemic but by the compounded consequences of years of austerity and employment policies which have allowed incomes and living standards to fall.

Whilst the government is certainly right to suggest that it should not be for schools to provide pupils with food during the school holidays, it has nothing to do, as the government keeps claiming, with its monetary generosity during these last few months (which one can most certainly take issue with).

The policymakers in Westminster have chosen not to acknowledge the impact of the political decisions which have led to this situation in the first place and well before the pandemic hit and indeed have tried to dress them up as successful outcomes.

Yes, we certainly need a long-term plan to combat hunger, but one that does not involve charitable organisations to fill the gap left by a deliberately negligent government or making people feel as if somehow it is their fault for the situation they find themselves in.

We must firmly reject the implied judgement on people who have fallen on bad times, not of their own making. For too long the blame game has allowed the government to divide the nation when the truth of the matter is that it is government itself which has failed citizens through its policy actions and spending decisions.

The cuts to public spending, the devastating consequences of reforms to social security, government’s ideological adherence to employment policies which allow business to exploit working people through controlling wages and insecure working practices have all played a role.

The rise in charitable food banks, community meal provision, homelessness and increasing private indebtedness is symptomatic of a government which has allowed this unnecessary and damaging state of affairs to exist.

The government’s justification for this truly repugnant state of affairs which has led the government to rule out giving more support to workers and businesses hit by this week’s new lockdowns in the north is because it claims it would cost too much. So once again we are in a situation where government ministers cynically use false narratives to explain their decisions.

The Communities secretary Robert Jenrick said earlier this week that the nation is in a ‘deep recession’, that the ‘the national debt is rising’ and therefore the government is limited in what it can do to protect jobs.

Once again this is a clear demonstration of the abdication of government responsibility for employment, social cohesion and economic well-being. People have become a secondary consideration to the corporate interests, politicians serve and benefit from through the revolving door.

It is regrettable, but understandable, that over a decade and more the nation has accepted the presence of food banks and other charitable organisations as an unavoidable and normal feature of British life, as if somehow the government had no other choice but to cut its spending. The public has up until now accepted the narrative that difficult decisions must be made to get the public finances in order.

After the huge rounds of public spending which challenge the ingrained public preconceptions of how the government spends, the shine of these fairy tale narratives is hopefully beginning to wear off – even as Rishi Sunak promises at the Conservatives virtual conference that the government can always be relied upon the ‘balance the books.’

It cannot be emphasised too strongly that the tragedy of hunger and poverty is one that is avoidable. The government could avert it with a simple instruction to the central bank to spend sufficient money into existence to alleviate that hunger and struggle at such a critical time. That it has been a choice not to, should be the point at which we stand up and argue for real change.

And yet, instead, the monetary reality of the government as the monopoly currency issuer is hidden behind a screen of smoke and mirrors which continued this week when the IFS (Institute of Fiscal Studies) suggested that taxes may have to rise at some point in the future given the huge spike in government ‘borrowing’ this year to deal with the economic fallout of the pandemic. Saying clearly and quite rightly that tax increases would be the wrong action at the moment, it then went on to reinforce the message that once the economy had been restored to health  the government would have to get the public finances back on track with a round of ‘fiscal tightening’.

And so, the active and deliberate reinforcement of a lie sets the scene at some time in the future for more unnecessary and damaging punishment which will not, in reality, be linked to whether it is monetarily affordable but the government’s political agenda in creating a flow of public money into private profit and the further destabilisation of public services.

After 10 years of fiscal tightening following the Global Financial Crash which has left our public infrastructure in tatters, have we learned nothing?

While the likes of the IFS and the IMF accept that we need to limit the economic damage caused by the virus and address poverty, unemployment and inequality through higher public spending, they always do so with false ‘borrowing cheaply’ narratives, pumping the belief that we are at the mercy of money lenders and the implication that with the exponential growth of public debt there will be a price to pay … but not quite yet.

Whilst there may be a sea change in economic thought occurring as governments spend to keep economies afloat, it is important that the work to raise public awareness of the real choices governments face continues. These are not linked to balance sheets they are ones related to real resources. In the words of the economist Ellis Winningham ‘, we will always have the ‘money’ to do whatever our real resources will allow us to do.’  That is the only constraint. And the challenge is both to match spending to available resources and determine how those resources will be distributed within the nation and for whose benefit.

Deborah Harrington, a member of GIMMS’ advisory board, also made it absolutely clear this week to those on the left who continue to tout the lie about taxpayers’ money on various social media sites that:

“Covid has demonstrated that the government does not need one penny of taxes to ‘pay for’ what it needs. It has neither raised taxes nor sold bonds to ‘finance’ its spending. The money has been created pure and simple. It wasn’t borrowed and it wasn’t collected in extra taxes – in fact, tax receipts have fallen, obviously, as incomes have dropped.

 

The whole story of tax and borrowing disguises this power at the heart of government. It makes people believe there’s a limited pot to dip into. That to pay Peter you have to rob Paul. It’s the driving argument behind austerity and if you continue to support it as an argument ‘we need tax rises/future generations will pay for it’ then you – yes, YOU, reading this – are giving your support to an agenda that destroys public services and leaves people in poverty and homelessness.

What we build society with and what we create goods and services with is our work. Government simply chooses how much money it will use in any given year to divert those resources, through its taxation and spending policies, to public purposes.”

 Whilst we seem a long way from it at the moment, creating a more equable, fair and environmentally sustainable world should be at the top of the political agenda. The only way of achieving those aims is a long-overdue public conversation about our political, economic and societal priorities, examined within the context of the constraints that exist to deliver them and how the share of finite resources should or could be redistributed to serve the public purpose.

The question always returns to what sort of society do we want to live in? One where excessive wealth in few hands dominates, where charity becomes the norm for delivery of services to a ‘deserving’ population and growth and consumption is the drug which drives the economy?

Or alternatively, a different but better world where people have the wherewithal to live comfortably and sustainably with hope for the future?

 

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The post Our choices today will define our humanity and our priorities. appeared first on The Gower Initiative for Modern Money Studies.

What is the real burden that the government’s “hard choices” will pass on to future generations?

Instead of more political rhetoric and more of the same orthodox solutions dressed up as change, we need radical progressive action to pave the way for a kinder, more equable and sustainable future.

 

Planet Earth in handsImage by Anja from Pixabay

After this crisis, if anybody dares mention a ‘need’ for austerity or tax cuts for ‘wealth creators’ aka useless parasites, or calls for pointless fiscal retrenchment, then ridicule their rank stupidity, economic illiteracy, immorality and their inability to learn simple lessons.’

Phil Armstrong, GIMMS Associate.

 

The debt warriors are continuing their rear-guard action. In the hope that all is not lost in the battle for minds as people get wiser; the battle to keep people believing that the vital extra spending, which has in effect kept the economy afloat, is going to have to be paid for. Sustaining the illusion is vital for their purpose and the people need reminders and nudges to keep them in the dark and demonstrate that the government is fiscally responsible. Where have we heard this before? And look how that ended up. Ten years of punishing austerity and the killing off of our public services in the name of balanced books.

This week, the Conservative MP Harriet Baldwin said on BBC Politics Live.

‘It’s the right time to talk about [balancing the books] because we have to maintain the confidence of the bond market.’ We have a plan to bring the public finances under control’

This little gem suggesting that government is beholden to the bond markets (when it is not) followed Rishi Sunak who said in his conference speech earlier in the week that he had ‘a sacred duty’ to ‘leave the public finances strong’ hinting that there might be tax rises ahead. He continued by saying that ‘If… we argue there is no limit on what we can spend, that we can simply borrow our way out of any hole, what is the point in us?’

Hard choices would have to be made as he pledged to ‘balance the books’. He posited that the public would accept that taxes would have to rise given the size of public spending during the crisis and suggested that the government might have to break some of its manifesto pledges. Wait for it…it’s coming.

The implication is that those billions of pounds borrowed to keep the economy afloat and functioning will have to be paid for and that the burden, if not addressed, will pass to future generations in the form of higher taxes. Keeping the illusion going was further emphasised at the weekend when the government rejected extra support for workers in lockdown areas because ‘the national debt is rising’ and it would cost too much.

So deeply is the ‘tax pays for spending’ narrative embedded in the public consciousness that research published this week by Ipsos Mori suggested that of those responding almost half favoured raising taxes to fund public services in the context of Covid-19 with the most favoured option being a wealth tax for people earning over £500,000.

Still resolutely stuck in the ‘taxes fund spending’ mode, people implicitly understand that somewhere along the line they have lost out, not just personally but in terms of a public infrastructure which Covid has demonstrated is no longer fit for purpose due to cuts. And, quite rightly they want redress, as long as perhaps it’s not them that have to pay. Whilst there is a big difference in approving a concept and actually accepting it as the reality for one’s own pocket, the government is relying on that false narrative for it to get away yet again with murder.

In the light of monetary realities, knowledge of which is increasingly coming into the spotlight and challenging the status quo orthodoxy, in searching for answers the better questions to ask the public might have been:

Do you want the government to spend more on improving our public services in the interests of the nation?  

Do you want to restore those public services to publicly paid, managed and delivered provision?

For the truth is, that these decisions are political ones, not linked to taxes or borrowing or the state of the public finances.

At the other end of the political spectrum, this week on Double Down News Grace Blakely exposed, quite rightly, the increasing horrendous gap in wealth distribution and its damaging effects on society. However, she then went on to suggest that the billionaires should pay the costs.

At a time when the Swiss Bank UBS reported this week that billionaires increased their wealth by more than a quarter at the peak of the crisis when at the same time millions of people were losing their jobs or struggling to get by on furlough schemes and Universal Credit it might seem a just call to ask the extremely wealthy not only to pay what they owe but pay more. After all, over decades, working people have seen their living standards fall, as their share of productivity has ended up in the hands of ever fewer people so it is infuriating to see that the gap between the haves and have nots which was already huge, growing even more rapidly as billionaire’s wealth hits new highs. An increase in the pay of politicians announced late this week (the Tories having already rejected a pay increase for nurses) shows little solidarity with people’s struggles and it must surely start crossing people’s minds that something is seriously awry not just in terms of wealth distribution but also in the way they understand how power works and who pulls the strings.

But it is equally disheartening to note that we have left-wing economists and commentators reinforcing the mantra of ‘tax pays for government spending’ in the daily smoke of mirrors that suggests that state spending is like a household budget and that the solution is to get the filthy rich to pay more.

While our public infrastructure continues to crumble before our eyes and people suffer it’s time for the left to stop talking about getting the rich to pay for it, however much that appeals to a sense of fairness. Only by recognising how government really spends and using that knowledge to propose an alternative vision for the future can we win that battle. If it does not, then any plans that future progressive governments propose will always be constrained by this false narrative.

In the words of Deborah Harrington, who sits on GIMMS advisory board:

‘Billionaires can’t ‘pay for’ the coronavirus crisis. Only governments can. The left should stop promoting the neoliberal theory that we are all dependent on and beholden to the rich for our public services. They are cheering their support for Thatcher, May and all the others who claim the government has ‘no money, only taxpayers’ money’. Tax the rich because they are too rich. Tax the rich because inequality is damaging to a healthy society. Tax the rich because they use their disproportionately accumulated wealth to buy government policy that makes them even richer. Have the courage to say that the extremely wealthy are a drain, not a gain, for society. Stop trying to push the idea that if you could only persuade them to pay their taxes willingly everything would be just fine. Even better, have pre-distribution mechanisms that stop them accumulating so much in the first place.’

The question some might ask is have politicians on any side learned anything? Forty years of economic orthodoxy have left many economies around the world in poor shape and unable to address the crisis. And yet whilst Rishi Sunak considers disingenuously and publicly how he is going to ‘pay for‘ his fiscal injection (to keep the right narrative alive in the public mind) it most certainly will not stop money pouring into the bank balances of private corporations.

And given the Chancellor’s Conference speech it will on the other hand most likely mean that the public sector will once again be squeezed. It is a guise for delivering what they have always intended – to destroy the public sector as publicly funded, managed and delivered infrastructure that serves the public good with no profit motive, through the toxic ideology that business is more efficient. The lie of a so-called small state is smashed by the realities that it increasingly exists to serve global corporate interests.

Whilst government ministers laud their actions and monetary largesse, anyone following media reporting or previous GIMMS blogs will know that the real beneficiaries of public money have been large corporations who have failed to deliver the promised efficiency and worse without public accountability. The prospect of Westminster Plc draws ever nearer.

And the promised levelling up? It will likely be just one more casualty of a wretched economic system, and just more of the typical political rhetoric which politicians are so good at – on both sides.

In the wake of the Chancellor’s speech, the Guardian in its unexpected and timely editorial this week noted ‘it makes no sense to compare personal experience with the economics of a nation’. Quoting the late Labour MP Roy Jenkins who observed correctly that a family budget was not the same as a national budget and said that Margaret Thatcher had traded in ‘lousy economics’, it noted how much of the political economy had been conceded to the right and that the present Labour shadow chancellor still in orthodox mode could not match his ‘unapologetic Keynesianism’.

Sunak’s speech seems indicative of what to expect in the future. Yet more penny-pinching when it comes to our public infrastructure. It suits a carefully crafted narrative to suggest that such spending would bankrupt the economy or burden future taxpayers. A narrative the public continues to buy for now, at least as a reflection of how it believes that government spends.

While our imaginations are still stuck in Mikawber mode, the real threats to the future are being cynically put on the back burner when those threats are the ones that we need to be addressing urgently. It seems that, in political terms, ultimately the quest to balance the books is being made to appear a far more important objective than addressing climate change and politically created and unnecessary inequality. Our planet is to be sacrificed on the pyre of balanced budgets and big business gets to create a greenwashed world in its image – that of profit and greed.

As we watch the fires in South America continue to burn as a result of deforestation to make way for cattle pasture and soy plantations, and the tropical wetlands continue to burn in the Pantanal, a combination of a man-made arson and drought caused by the climate crisis, we need urgently to shift the narrative to one of sustainability and human and planetary health.

This year of environmental disasters – fires, drought, floods and Covid-19 – is a reflection of our failure to act and should be the wakeup call we need. Our leaders, for all their fine words, are complicit in this destruction. Some wilfully and openly ignore the threats, others indulge in ‘environmentally friendly’, rhetoric whilst doing very little, and at the same time global corporations some of the biggest polluters sell us their greenwashing propaganda.

Along with climate change, poverty and inequality continue to rise. It was reported this week by the charity Save the Children that living standards for the UK’s poorest had plunged during the pandemic. It noted that over a third of families on Universal Credit and Child Tax Credits have had to rely on help from charities for food or children’s clothes over the past two months and two-thirds had incurred debt to get by. Half of those surveyed said that they were in rent arrears or behind on household bills. Earlier research carried out by Save the Children and the Joseph Rowntree Foundation in June revealed that 70% of people had cut back on food and other essentials when the pandemic began and the charity warned that the winter will be more difficult for many families as heating and other household costs rise and the prospect of further job losses increase the pressure on overstretched household budgets. With the threat of a cut in Universal Credit next April, the future is looking even more uncertain for some of the poorest people in our communities.

And we cannot ignore the global situation. Save the Children also noted last month in a jointly authored report with UNICEF that the number of children living in multidimensional poverty (access education, healthcare, housing, nutrition, sanitation and water) across the world had soared to around 1.2 billion due to Covid. To put it starkly, an additional 150 million since the pandemic began in early 2020. It also noted that around 45% of children were severely deprived of one of the critical needs mentioned above before the pandemic and that the picture is likely to worsen in the months to come.

While the arguments rage about the size of government, its colossal spending and future tax burdens, the cost of such arguments on human lives and the planet seem of secondary concern as the government continues to pursue its market-driven dogma which is neither free nor fair.

The promised V-shape recovery has not materialised and left prospects bleak for the Covid generation whose employment prospects are quickly vanishing into the mist and threatening their future health, security and livelihoods.

Instead of real jobs with good pay and conditions, Rishi Sunak is offering people ‘job coaches’ to beef up their CVs or training to improve their future job prospects. Never mind that without government intervention in the form of adequate spending and other targeted measures to improve the economic outlook, those jobs will never materialise. Relying on business to find solutions will lead us to a dead end.

Or as earlier this week the Conservative MP Robert Jenrick called for ‘grassroots volunteering and ‘togetherness’. Where was the government when it was telling us austerity was necessary to get the public finances straight as it dismantled our infrastructure and other vital public services? A government that also promoted individualism, greed and selfishness, has overseen huge wealth inequalities and divided our communities. The word ‘togetherness’ doesn’t seem to fit the bill.

Instead of real solutions, the government is offering the usual toxic rhetoric painted as positive proposals for a so-called new normal which aims to consolidate the toxicity, not address it.

At a time when jobs are being lost, GIMMS repeats its question. Why not rebuild our public sector offering good wages and secure employment? Why not introduce a Job Guarantee that provides a living wage, training and good employment conditions to bridge the gap when times get tough and provide a transitional staging post into private sector employment when the economy improves?

Rethinking the sort of society, we would like to live in will be of paramount importance in the coming months. The old model is not fit for purpose and we and the planet deserve something better.

 

 

Upcoming Event

Phil Armstrong in Conversation with Warren Mosler – Online

October 17 @ 17:00 pm – 18:30 pm

GIMMS is delighted to present its second ‘in conversation’ event.

GIMMS’ Associate Member Phil Armstrong whose new book will be published in November (details below) will be talking to Warren Mosler. Warren, who is one of the founding proponents of MMT, has dedicated the last 25 years to bringing that knowledge to a wider audience across the world and authored ‘The Seven Deadly Innocent Frauds of Economic Policy, published in 2010. He also sits on GIMMS advisory board.

Register via Eventbrite

Event recording

Phil Armstrong in Conversation with Bill Mitchell

Bill Mitchell spoke to Bill Mitchell for GIMMS on 27th September 2020.

 

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The post What is the real burden that the government’s “hard choices” will pass on to future generations? appeared first on The Gower Initiative for Modern Money Studies.

Standing at a crossroads in time

Published by Anonymous (not verified) on Mon, 05/10/2020 - 3:38am in
‘Democracy is not just a counting up of votes, it is a counting up of actions.’

Howard Zinn
Crossroads signpost with signs saying "possible" and "impossible"Image by Gerd Altmann from Pixabay

Do you remember when Andy Haldane, the Chief Economist at the Bank of England, insisted that Britain was enjoying a ‘V-shaped’ recovery way back in July? Since then much has happened but not a V-shaped recovery and the future is looking pretty bleak. Despite that, Haldane’s concern this week that ‘our pessimism is holding us back’ and that companies hiring and corporate investment were the ‘missing ingredient in the recovery’ leads one to wonder if the Chief Economist is living on a different planet.

The prospect of a rise in unemployment by the end of 2020, less generous government support than hitherto, people saving more than spending and a collapse in business investment would suggest that people are retrenching as a result of lack of confidence. Businesses will not invest while they are unsure whether that investment will repay itself in increased profits and people won’t spend whilst their lives are turned upside down and they have no idea whether they will have a job next week. It seems that Andy Haldane is stuck in some other world that does not exist for the majority of people.

A combination of government policy, cuts to public sector spending over the last 10 years which has left public infrastructure in tatters, combined with the uncertainty caused by Brexit and the final straw of Covid-19 has left the nation in a state of collective inertia wondering what will happen next. Tin hats are the order of the day, not party bunting and champagne. Glasses of confidence are in short supply!

We stand at a crossroads in time and Covid-19 has revealed in stark terms the putrid underbelly of an economic system which has predominated for decades. Rising poverty and inequality, huge social injustice, wealth distribution skewed in favour of those who already have more than sufficient and the ever-present elephant in the room, climate chaos, all the result of a toxic ideology and excessive consumption.

This week the Royal Botanic Gardens of Kew published its fourth report in the ‘State of the World’ series. Professor Antonelli, the Director of Science wrote in its introduction:

Never before has the biosphere, the thin layer of life we call home, been under such intensive and urgent threat. Deforestation rates have soared as we have cleared land to feed ever-more people, global emissions are disrupting the climate system, new pathogens threaten our crops and our health, illegal trade has eradicated entire plant populations, and non-native species are out-competing local floras. Biodiversity is being lost – locally, regionally and globally [……]

We share this planet with millions of other species, many of which existed long before us. Despite the fact that an exploitative view of nature has deep roots in our society, most people today would agree that we have no moral right to obliterate a species – even if it has no immediate benefit to us. Ultimately, the protection of biodiversity needs to embrace our ethical duty of care for this planet as well as our own needs.

Whilst 40% of all the world’s plant species are at risk of extinction according to a report published last month by the UN the world has failed to achieve in full any of the biodiversity targets agreed in Japan in 2010 and indeed this is the second consecutive decade that governments have not done so. The Global Biodiversity Outlook Report offered a convincing and authoritative overview of the state of nature indicating that the natural world is suffering badly.

According to Elizabeth Maruma Mrema, Executive Secretary of the Convention on Biological Diversity, it underlined that ‘humanity stands at a crossroads with regard to the legacy we wish to leave future generations’ and that ‘earth’s living systems as a whole are being compromised. And the more humanity exploits nature in unsustainable ways and undermines its contributions to people, the more we undermine our own well-being security and prosperity’. It outlined the need to shift away from ‘business as usual’ across a range of human activities.

The bottom line is that our own well-being and survival are dependent on rethinking our relationship with nature and each other.

Amidst the disturbing backdrop of the threat to the planet caused by failure to address these serious biodiversity losses and the growing evidence of the consequences of climate change across the world from devastating droughts, fires, storms and flooding, the consequences of government political decisions and spending policies continue to play out daily in people’s lives.

Evidence of both ignorance and wilful conduct by our elected politicians is shocking. Whilst a household budget description of the public finances continues to dominate in political and establishment circles, the potential for addressing the consequences of spending cuts or indeed the serious challenges we face will always curtail any action.

The reverse of the toxic climate coin is the huge wealth inequality and poverty which has done so much damage to economies around the world.

In the UK, as many more people turn to the social security system for support as a result of the ending of the job retention scheme, many will find out first-hand how far from generous those benefits are and have been for those living on lower incomes. The ‘lazy scrounger’ narrative which has done so much harm will increasingly come into the spotlight as the middle-class professionals find themselves relying on state support. The real-life daily realities of many low-income families in precarious employment or subsisting on less than adequate social security payments will begin to emerge to a section of society which has hitherto thought itself immune.

The effects on the economy as incomes have plunged over the last few months, particularly for those in receipt of Universal Credit, will be further highlighted as the redundancies pile up and living standards begin to fall. It will bring into sharp focus the policies which over more than a decade have sought to divide people and create a two-tier society of ‘haves’ and ‘have nots’ on the basis of the lies trotted out regularly that such public and social infrastructure is dependent on a tax/contribution paying nation and that it is the private sector which creates the wealth to allow that to happen.

The argument that contributions paid in relate to a pot of money put aside by the state on our behalf must be knocked on the head and replaced with the real description of how the UK government actually spends. That what is paid out is a political choice determined by an agenda and is unrelated to how much revenue the government has collected. Household budget descriptions of how money works serve only to deliver that pernicious agenda and do not represent monetary reality.

It was depressing, therefore, to hear Labour’s Lucy Powell reinforcing the narrative of affordability when she was asked about Labour’s commitment to the pension triple lock earlier this week. She suggested that it would be dependent on knowing ‘what income you have got coming in and what outgoings you need to make’ and that ‘the single biggest determination of that is the level of employment, and level of growth in our economy’.

Once again, the suggestion is clear; that the government can’t afford to protect the incomes of retired people for whom the state pension is their only source. She, like so many others, makes a false connection between the health of the economy and tax revenue by suggesting that pensions, other benefits or indeed essential public and social infrastructure are dependent on a healthy economy and people paying their tax. It is disheartening that such economic ignorance lives on and the health of the economy is reduced to monetary affordability.

This was again brought sharply into focus this week by a report published by the Labour Women’s Budget Group which called for a universal care service. As has already been previously noted, Covid19 has highlighted the existing inequalities in society and the failure to invest in health and social care which has led to many preventable deaths both before and during the pandemic. In the midst of a climate emergency as the Women’s Budget Group points out, the pandemic has revealed huge cracks in our public and social infrastructure along with wealth disparities and social and racial injustice. The group underlined that business profit and greed has in recent times come before a caring more equal society. It called for reforms to create a caring economy ‘a blueprint for a world where work and care can be shared harmoniously, where the economy is measured in well-being and sustainability’.

These are laudable objectives, but yet again we hear the household budget tropes put forward to justify such action. That it would be a good time to consider a universal care service because interest rates are at historic lows and research has shown that taxpayers would be happy to pay extra. Once again, a constraint is immediately revealed by the suggestion that the limits to spending are monetary. Putting aside for a minute the fact that the constraints are not monetary but related to real resources, there is a better reason to consider such action:

Because a civilised society takes care of its young and elderly.

And far from being unaffordable in monetary terms, the government as the currency issuer can, assuming the real resources are available, make a political choice to invest in the lives of its citizens to improve their lives and ensure a vibrant, healthy sustainable economy.

And whilst tax plays an important role in achieving government policies, not only is tax not required to make such an investment, but also in these difficult days raising them would at this point depress the economy even further and may indeed turn taxpayers against such an expenditure.

Such a care service should not only be paid for from public funds, it should be managed and delivered as a public service and not be in private hands.

If we want a caring and environmentally sustainable economy instead of yet more exploitation no matter how eco-friendly it is presented as, fundamental to that change is a government which puts people’s interests over and above the interests of capital. We need politicians that recognise both the value of a well-educated and trained workforce to address those challenges and the role a Job Guarantee might play to ensure a just transition for those most likely to lose out.

This week, the government announced a package of measures that will allow people to study at college paid for by a national skills fund and a more flexible higher education loan scheme. Reminiscent of New Labour’s ‘Life-Long Learning’ programme, Boris Johnson announced a ‘lifetime skills guarantee’ promising that the government would help people to get the skills they need to navigate this quickly changing world. On the face of it, this is a good plan. However, training and skills in themselves good and positive as they are, are no substitute for actual jobs if, as Warren Mosler has pointed out, you’ve still only got ‘nine bones for 10 dogs’ people will still remain unemployed.

While the government continues to see job creation as a private sector exercise and absolves itself from the responsibility of governing in the interests of the nation as a whole, those jobs won’t be created by a private sector without confidence that their investment will pay a return. That confidence only derives from the actions of government through its policies and spending decisions.

For ideological reasons, the government never mentions job creation in the public sector which is where we sorely need investment. As has been pointed out many times in previous MMT Lens blogs, it could address unemployment through an expansion of the public sector (which has over 10 years been starved of funding and adequate staffing levels) to create a public and social infrastructure that meets the needs of the economy and is fit for purpose. That could be supplemented by a permanent Job Guarantee to manage the cyclical ups and downs of the economy by providing work, training and skills for those who will be most affected by this very different world that is heading our way. It is ironic that this government has cut funding to education and training over the last 10 years making it more difficult for people to gain the skills they and society needs.

Worse, over decades, starting with New Labour, it has also made education a cost to the individual instead of being funded by public money. As if somehow it is only the individual that benefits, when in fact society and the economy gain positively from a well-trained, educated workforce whether in public or private sector employment.

So where do we go from here? Are we asking ourselves the right questions? And are we prepared to make some difficult decisions?

We are at a pivotal moment in history and the future will depend not just on government action but the public willingness to engage in a serious adult conversation. Engaging requires the facts about what is possible and what is not and about the change that is needed to ensure a viable future for humankind. It requires understanding how we have been led down an alley without an exit by those politicians serving the interests of a tiny section of society. Those same politicians and institutions which daily use false narratives to suggest that there is no alternative to more pain in the future if we are to dig ourselves out of the financial hole all this spending is causing.

The only hole we have to dig ourselves out of is the hole that has been created by this false narrative that saving the planet is unaffordable, that the economic crisis caused by Covid-19 has made it even more unaffordable and making people’s quality of life better is far too expensive. Challenging such notions should be top priority. Whilst it remains to be seen whether such a government is on the horizon there is no excuse for inaction. For ourselves and for future generations.

 

 

Upcoming Event

Phil Armstrong in Conversation with Warren Mosler – Online

October 17 @ 17:00 pm – 18:30 pm

GIMMS is delighted to present its second ‘in conversation’ event.

GIMMS’ Associate Member Phil Armstrong whose new book will be published in November (details below) will be talking to Warren Mosler. Warren, who is one of the founding proponents of MMT, has dedicated the last 25 years to bringing that knowledge to a wider audience across the world and authored ‘The Seven Deadly Innocent Frauds of Economic Policy, published in 2010. He also sits on GIMMS advisory board.

Register via Eventbrite

Join our mailing list

If you would like GIMMS to let you know about news and events, please click to sign up here

Support us

The Gower Initiative for Money Studies is run by volunteers and relies on donations to continue its work. If you would like to donate, please see our donations page here

 

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The post Standing at a crossroads in time appeared first on The Gower Initiative for Modern Money Studies.

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