national debt

Which way from here? That depends on where we want to go. Our choices now will determine our future.

Sign on a fence with and arrow logo and the word votePhoto via PxHere

We are in the last few days of the election campaign. An election which, without doubt, will be a defining one for the future of this country and possibly even the planet. It will determine whether we carry on with the economic and political status quo or whether we choose a different path towards a socially just and fairer economic system which also addresses as a matter of priority the challenges posed to the future survival of our species.  Growing political unrest caused by the last forty years of market-driven dogma has created huge wealth inequalities and is driving dangerous right-wing populism worldwide.

This might be just a national election, but the world is watching. Where we put our X in the voting booth this time around will be crucial. It matters as never before.

The ancient Greek philosopher Aristotle wrote:

“For the duty of the truly democratic politician is just to see that people are not destitute; for destitution is the cause of deterioration of democracy’

Of course, he lived in a time very different to our own, but he believed that the best form of democracy was one with a more equal income distribution and that greater economic equality would increase the stability of the state and thus that of citizens.

The State has a crucial role to play in serving the public purpose or in other words creating the fundamental frameworks for a healthy society and economy which benefits everyone.  However, for the last forty and more years, economic power has become increasingly concentrated in the hands of a few people. This has been facilitated by successive governments whose policies have been informed by an ideologically based dogma of privatisation, deregulation and an emphasis on ‘sound finance’ which, over the last nine years, has been at the heart of Conservative austerity.

It has also been enabled by politicians who have acted less in the service of the nation and more in the interests of corporations and excessively wealthy people who have influenced government policies in their favour through a network of lobbying and special advisors. Democracy has been undermined by those with the power and wealth to influence politicians and a media which continues to play a huge role in that subversion.

The ideological premise of trickle-down has been that the rich are the wealth creators, that tax cuts encourage investment in the economy and jobs which benefit working people and then, in their turn, brings in taxes to pay for our public services. We have been deceived with the lie trotted out over the years and even during this election campaign by Conservative ministers and even some on the progressive left that our public services are dependent on bringing in tax revenue. When in fact it is quite the reverse.

A healthy economy and all that means, from citizens having access to good education, quality healthcare and a protective welfare system, (not to mention other vital public services or businesses which rely on access to an educated and healthy workforce and the physical infrastructure for their businesses to flourish) depends on a government which has made a political decision to invest sufficiently in that public and social infrastructure to benefit both today’s and tomorrow’s citizens. It does not depend on a government checking on whether there is enough in the public purse to do so.

For well over a year now, GIMMS has charted the consequences of austerity in its MMT blogs. Yet, now we are now witnessing on a daily basis, like never before, its damaging effects on the very foundations of economic and social life.

Economic data published last month showed that the services sector slowed in the last quarter and the manufacturing and construction sectors contracted in November. The economy just avoided recession, with the weakest growth in a decade.  Whilst clearly the uncertainty over Brexit will have played a part, cuts in government spending over the last 9 years will have also played a significant role as businesses lose investment confidence and households tighten their belts due to rising household debt.

A study published by the Office for National Statistics on 5th December 2019 found that whilst Britain’s total wealth grew by 13% between 2016 and 2018, the wealth of the richest 10% increased four times faster than those of the poorest 10%. It also found that the poorest 10% of households had debts three times larger than their assets, compared with the richest 10% who have accumulated a stash of wealth which was 35 times larger than their total debts. The Wealth and Assets Survey carried out by the ONS also showed that in 2018 the top 10% finished up with 45% of national wealth while the poorest 10% held just 2%.

The shocking data underlines the growing wealth divide. A divide between those at the top who barely noticed the 2008 Global Financial Crash (or indeed profited from it) and those on low incomes whose real earnings have barely risen since the crash and who have seen their economic share of productivity decrease over decades. The very people who have paid the real price for austerity have, in fact, suffered a double whammy.  They not only are facing an enormous and increasing burden of household debt (putting huge stress on their finances exacerbated for those on low incomes and in precarious employment), but they are also reaping the consequences of brutal cuts to the public service sector.

Huge inequalities that have arisen as a result of the pursuit of this pernicious market-focused ideology along with a deceitful balanced public accounts narrative have not only driven a steam roller through our public services and vital welfare systems but have also impoverished millions leaving them floundering in insecure and low paid employment.

In the week that the Liberal Democrat leader Jo Swinson apologised for backing the Coalition’s austerity policies during the Coalition years and whose economic spokesman claimed in a speech very recently that they are the only party of ‘sound finance’ (which sounds very much like more of the same), the news has been ever more damning about its consequences for the lives of working people, families, children and the elderly and our public infrastructure.

Shelter’s ‘Generational Homeless’ report found that a child becomes homeless every eight minutes; that’s 183 children losing their homes every day. It found that at least 135,000 children will be living in temporary accommodation on Christmas day.

‘Life in a B&B is horrible. There’s no room to do anything. I’ve been told off … for running in the small corridor. You can’t do much, you can’t play much. I don’t get to play that much. Sometimes me and my little brother Harry fight for the one chair because we both want to sit at the table. I find it really hard to do my homework’ says Will whose family was made homeless and now lives in a single room in a bed and breakfast in Ilford.

A leading charity Action for Children warned this week that some of the youngest children are facing a childhood crisis as almost one million under 10s from low-income families face a bleak Christmas lacking basics such as a heated home, warm winter coat or fresh food.

Research from the charity shows that after a decade of austerity and ongoing problems with universal credit, parents below the breadline are able to spend just £2 a day per child on food and struggle to afford nutritious food which is vital for their health and development.

The Dispatches programme ‘Growing up Poor; Britain’s breadline kids’ which aired on Channel 4 earlier this week exemplified the shocking poverty that exists in one of the wealthiest countries in the world. Children sleeping in their coats in the middle of winter because they can’t afford heating; parents counting the pennies to see if there is enough money to feed the meter; a family living in Cambridge surviving on £5 a day in a wealthy city that houses eight of the 2000 food banks that have been set up across the UK in the last decade to alleviate hunger; and a teenager Danielle who is studying for her GCEs and self-harming housed with her family in a bedsit, with no savings and relying on a local soup kitchen and food bank to survive.

This is happening in 21st century Britain and yet it feels like we are being transported in Dr Who’s Tardis back to the streets of Dickensian times.  Our children are being denied a future by a government which has put balancing the public accounts above the health of the nation, its children who represent the future and the environment upon which they will depend for their survival.

At a hustings last week, the Conservative MP John Whittingdale was applauded by the audience when he claimed that Labour had left the economy in a perilous state and close to bankruptcy. Perpetuating the lie that austerity had been necessary to get the public finances in order, he said that careful economic management by the Conservatives meant that they could now spend on the NHS, policing and education. No acknowledgement was made about the damage that austerity had caused to our public services; those on low incomes and in insecure working; the huge rise in homelessness or the 73% increase in supplies being distributed in the 2000 food banks across the UK; the increasing numbers of hospital admissions for scurvy, vitamin D deficiency and other maladies associated with economy inequality and child food poverty; and no mention of the systemic problems with welfare reforms and the introduction of Universal Credit, along with a punitive assessment system which have led to many deaths.

We must continue to challenge the false assumptions about how modern monetary systems operate and demonstrate to the public that contrary to common belief government spending is not constrained by monetary resources.

Tackling existing and future inequality and saving the planet will not be constrained by the state of the public accounts or the national debt or whether government can raise sufficient tax or borrow on the markets but rather how it will manage the finite resources it has at its disposal to create the public frameworks and infrastructure to sustain a healthy economy and environment.

It is both a moral question about how a civilised nation should behave towards its neighbours near or far and how we organise our societies to create the optimum environment for all to live with dignity and without fear.

It is regrettable that creating fear and hate has been the modus operandi of governments, extreme political movements and the press. Without a fundamental shift in our attitudes we cannot hope to make the radical changes we need to create a fairer society and more importantly to survive.  A challenge to the political and economic status quo is vital if we care about our children’s future and that of many others around the world.

To reiterate the final paragraph in last week’s MMT Lens:

What are we so afraid of? A better future for our children? A more sustainable and fairer economy for all? Indeed, a planet for us to live and breathe on? What is not to like?

 

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The Rise of the Right

Published by Anonymous (not verified) on Thu, 21/11/2019 - 8:30am in

GIMMS is pleased to be able to present for our MMT Long Read two chapters of the book “The Rise of the Right – English nationalism and the transformation of working-class politics” by Professors of Criminology Simon Winlow, Steve Hall and James Treadwell.

“Throughout Europe right-wing populism has grown to the extent that we can now legitimately begin to think about the very real possibility of a fascist future. The new right-wing nationalism will not be a carbon copy of 20th-century European fascism, but fascism it will be, nonetheless. For years this seemed unthinkable…We must recognise that the adoption of hippy counter-culturalism was a colossal error, and then begin to repair some of the damage it has caused. The first step is to reconnect with the working class with a renewed order of grounded universal ethics and truthful symbolism comprehensible to all cultural groups…the left can be rehabilitated. Reconnecting with the working class and persuading them to believe in its project is a very difficult task, but it can be done.”

The Rise of the Right – English nationalism and the transformation of working-class politics

The Rise of the Right cover

Originally published by Policy Press in 2017.  Permission granted by the publisher to use this content.

https://policy.bristoluniversitypress.co.uk/the-rise-of-the-right

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It’s not balanced budgets that will save us. It’s the power of the public purse and our human values.

Person at a demonstration holding a placard with slogan "What lessens one of us lessens all of us"Photo by Micheile Henderson on Unsplash

Charles Dickens began his novel ‘Hard Times’ thus:

“NOW, what I want is, Facts. […]. Facts alone are wanted in life. Plant nothing else and root out everything else. You can only form the minds of reasoning animals upon Facts: nothing else will ever be of any service to them. [….] Stick to Facts, sir!”

Whilst one might dispute Dicken’s character Gradgrind with his miserable vision of human existence, facts can be very useful. They can trace the human misery caused by 9 years of austerity and the last forty years of a pernicious market-oriented ideology which has led to vast disparities in wealth distribution and caused huge damage to society by encouraging the pursuit of self-interest.  And yet it has to be said as the election campaign gears up, that in terms of monetary reality, of facts there seem to be very few to be had.

As political and economic commentators, not to mention politicians on all sides, emphasise daily their claims that the government finances are like a household budget, the public has largely remained stuck in the quagmire which is presented as monetary reality and distrustful of a political system which has failed them.

Looking at newspaper front pages this week you could be forgiven for thinking that we are headed for bankruptcy if Labour were to win the election or that their spending plans would cost UK households £43,000 each. A ‘reckless spendathon’ is in the offing according to a government spokesperson in a recent BBC television interview.

Aside from such narratives being a fallacy, they are designed to put the frighteners on people who are already suffering financial hardship caused by years of austerity and ideologically driven government policies. Those with a political agenda shore up those false beliefs that borrowing too much will lead to government insolvency. They cynically and callously terrify people that they will be asked to pay for those spending programmes when they will not. This is an establishment that is running scared that their reign of power is coming to an end. The means justify the ends!

It cannot be denied that if we are to escape the worst effects of a coming global downturn, an incoming government of whatever variety will need to implement adequate spending programmes and increasingly fiscal policy is becoming the ‘mot du jour’. However, the message is reinforced daily by all sides of the political spectrum that there are still financial limits to that spending.

Last week Ed Davey, deputy leader of the LibDems said of Labour and the Tories spending plans that they are ‘writing promises on cheques that will bounce’. The very same party that joined in with Tory austerity during the Coalition and voted for public spending cuts and welfare reforms.

In the same week, the Greens promised welcome public investment of £1trillion over 10 years to fight climate change, the money for which it said would come from ‘borrowing’ and ‘tax’ changes.

Then the Chancellor of the Exchequer in a ‘give with one hand take back with another’ message promised to increase borrowing to fund billions of pounds to pay for new infrastructure but then announced three new fiscal rules to ‘control borrowing, to control debt and to control debt interest’.

Stuck in household budget la-la land he said without a hint of jest:

‘like anyone who budgets whether it’s a household, or small business or large business, I know that we must keep track of what we are spending and what we bring in…. We can’t run an overdraft forever on day to day spending, so I can confirm that our first rule will be to have a balanced current budget. What we spend cannot exceed what we bring in.

Never mind that you can build as many hospitals as you like as part of an infrastructure spending programme but if you make up foolish rules about day to day spending those hospitals will remain empty of nurses and doctors and other health professionals to staff them.  And let’s not forget the bailing out of the banks or successive wars funded without a taxpayer in sight.

The same tired old tropes abound about taking advantage of ‘historically low borrowing rates’ and ‘living within our means’ remain the context for Conservative spending plans and figure in one way or another in the language narrative of other parties too.

In a similar vein this week, the shadow chancellor reinforced that same story when he tweeted:

‘The Tories can’t invest in the public services we need because unlike Labour they won’t raise taxes on the super-rich and take on the international tax dodgers’.

The implication being here that he will bring back the magic money tree from the Cayman Islands to pay for our public and social infrastructure.

Even the Leader of the Opposition has suggested that if they don’t tax the very rich, then Labour won’t be able to pay for public services.

As Professor Bill Mitchell commented in a blog in response:

‘The British government does not need to tax the rich to pay for first-class public services. It can do that at any time it can muster the real resources to accomplish that aspiration. It issues its own currency.

It might want to tax the rich because they have too much power but that is quite separate from justifying such an action because the government needs their ‘money’.

Although without doubt the proposals on the progressive left to tackle social inequality, rebuild public infrastructure and address climate change are laudable and indeed vital, it is to be regretted that the arguments for public spending programmes are being reduced to household budget frameworks of monetary affordability, where the money will come from and economic credibility. We have become fixated by the single idea that the country’s economic ‘health’ hangs on whether or not we run a deficit.

GIMMS will say it again. In reality, the only analysis that really counts when deciding which way to vote in any election is not a judgement based on a government’s financial record or whether it balanced the public accounts but what its economic record was.

We as citizens should be examining where the money was spent and who benefited. Did that spending ensure that its citizens were in secure employment and fairly paid, had decent housing and sufficient food in their bellies? Did it create a healthy and more equitable economy in which wealth was more fairly distributed? Did it ensure that the vital public and social infrastructure such as the NHS, social care, education and local government were adequately funded to serve the public purpose and not fill the coffers of private profit? Or was that public money sucked up by the private sector in a big free for all in which the state serves the interests of the corporations rather than the interests of its citizens?

And what about government policies on health, education, welfare spending and the environment? Did they create stable lives by improving the material, financial, physical and mental health of citizens? Did they ensure adequate investment to ensure that the nation can be as productive as possible through good education and training both for present and future generations? And finally, the environment – what actions did they take to address the climate crisis?

In other words, we should be examining what the real economic outcomes were.

After nine years of telling the public that there was no alternative to austerity and cuts to public spending because the coffers were bare, it’s amazing what the prospect of an election can do to turn the spending taps on. And yet the smoke and mirrors, lies and deception about how government spends just carries on relentlessly.

But now it’s all OK (for the moment) the Conservatives have found the magic money tree, cutting the deficit has apparently given them some savings and the fiscal ‘headroom’ to spend. For those that know, this narrative is a fairy tale of epic proportions. For those that don’t, it should be enough to arouse a cynical response by a public which has been at the sharp end of those tax and spend myths which have formed the basis for its policies.

Indeed, only this week the following headlines should serve as the wakeup call for the public about Conservative economic credibility.

‘UK suffers biggest fall in jobs in four years’

‘UK avoids recession but annual growth slowest in almost a decade.’

‘Wage growth slows’

We can blame it in part on the uncertainty caused by Brexit, but the reality is that behind the faceless employment figures published by the Office of National Statistics are the lives of real people who have been affected by the government’s policies and spending decisions over the last 9 years.

To put it in basic economic terms, when a government spends it creates income for the private sector which is then spent into the economy. When it imposes spending cuts it is removing money from people’s pockets leaving them with only three options: Use their savings if they have any, take out credit or go without.

All spending, whether from government or the private sector, equals income for someone. What happens when you take that away? That’s people who lost their jobs in the public sector as local government, the NHS and schools were forced to pare down their budgets as a consequence of public spending cuts. That’s people constrained by public sector pay caps and pay cuts. That’s people who ended up working two or three jobs on low pay to keep a roof over their head and food on the table. That’s people working in precarious employment in the zero-hours or gig economy with no guaranteed decent income or sick or holiday pay. That’s people affected by the reforms to welfare and the introduction of Universal Credit, from those who are unemployed left with insufficient financial resources to make ends meet and those in work but not earning enough to keep their heads above the water to those left struggling to cope because of chronic sickness or terminal illness.

In seeking the nirvana of balanced budgets by cutting spending the Conservative government has not created a healthy economy it has done the very opposite. The statistics are the proof.  Without adequate spending, the economy suffers, and people pay the price.

And yet as political parties present their spending plans and worry about how they will demonstrate their economic credibility the elephant in the room is crashing about trying to make itself noticed. On one note it is pathetic to see the Conservative party take issue with the opposition’s spending plans calling them reckless and unaffordable whilst promoting its own as being fiscally responsible. On another, in their rush to spend, neither party seems to have considered the real resource factor and how that will be managed.

The IFS for all its neoliberal sins ‘gets’ the elephant in the room and recognises that whoever wins on December 12th their spending plans will be dependent on whether they have the right resources at their disposal to deliver.

After 9 years of insufficient spending into the economy to prepare for the future, will there be sufficient people with the right skills to meet the government’s needs? Whether that’s engineers and construction workers to design and build the proposed infrastructure or homegrown nurses and doctors already trained up to service the planned spending on the NHS? Or in these days of climate crisis we might also be talking about the resources needed to deliver the Green New Deal and ensure a just transition not just for those in the rich west but those in the global south whose countries have already been plundered of raw materials and impoverished so that we can maintain our standard of living.

For progressive parties like Labour and the Green Party who wish to deliver a left-wing agenda what they have to do is decide their key priorities, consider the availability of resources and how they could be freed up to deliver a future government’s objectives efficiently and effectively. A case in point this week is Labour’s plan for free broadband which has much to recommend it in terms of bringing communities together in an inclusive and connected society. Journalists and others predictably have asked the question where will the money come from? They have missed the point entirely and should be asking instead how many workers would we need to deliver it?

Ultimately, all sovereign currency-issuing governments don’t need to match their plans to tax revenue or determine whether the markets can lend them the money. The role of government in this respect is not to balance the budget but to balance the economy.

The public needs to understand that it isn’t the government’s ability to tax the rich but its power to run a deficit which determines the health of an economy. As the sovereign currency issuer, the UK government has the power of the public purse to fund the public works necessary to tackle social and wealth inequalities, deal with the current global economic uncertainty, and fund the Green New Deal, should it choose to do so.

However, at home, our public and social infrastructure is in a shocking state of decay caused by 9 years of cuts to public spending and lack of planning. Reversing that decline is not something that just promising to spend can solve in the short term.  There are important issues to consider for the long term which may not fit the short-termism of the political five-year framework and many politicians who have become used to serving other interests.  That is the scale of the challenges we face.

When all is said and done even though the Labour party persists with the household budget myths John McDonnell has it right in terms of what is required not just to reverse the social injustices heaped upon global populations because of pernicious ‘free’ market ideology or the threat to the human species at our own hand. As he said not only must the scale of investment match the scale of the crises we face both in ecological and social terms, but also if we don’t make these investments our future generations will never forgive us.

Let’s leave the final words to Professor Bill Mitchell who wrote a while back:

“My ideological disposition tells me that the pursuit of human values is the only sustainable way of organising and running a world. The neoliberal era has severely undermined that pursuit.

That’s what we must change and urgently if we want half a chance to save ourselves and our children’s children from disaster.

 

Note: GIMMS has a very good resource section on our website which takes you through how money works. From FAQS to resources sheets and external websites, videos and academic papers for those who want to take it further. For an introduction to how money really works follow the link here.

 

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The austerity prescription was not an experiment; it did not fail for the rich. Time for a rethink. Time for an economic revolution.

Published by Anonymous (not verified) on Sun, 03/11/2019 - 8:51am in

Poling station sign on a fencePhoto by Martin Bamford

“Ultimately austerity has failed because it is unsupported by sound logic or data. It is an economic ideology. It 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. It does great harm – punishing the most vulnerable, rather than those who caused this recession.”

David Stuckler, The Body Economic: Why Austerity Kills

 

So here we are. After literally years of national uncertainty over Brexit, parliamentary wrangling and growing public discontent, a general election has been announced just before Christmas. Whilst at this early stage it is unclear what the outcome might be (we have a road to run yet) who we vote for should be determined not by listening to the promises that will be made in political manifestos but by examining closely the economic record of the current government over the last 9 years.

Who has gained and lost out through government’s and taxation and spending policies? Who has suffered at the sharp end of austerity politics and why? Every day the consequences are ever more visible. On our streets, in our hospitals and GP surgeries, in our schools and local communities, amongst our family and friends. Hunger and the normalisation of food banks, growing homelessness, cuts to child and adult social services, the collapse of social care, lonely deaths of vulnerable people behind closed doors, longer waits to see a doctor or hospital referrals, the humiliation and financial distress caused by welfare reforms. This is what austerity has achieved. GIMMS has covered these things week in and week out for the past year in some form and again we make no apology for doing so again. What happens next will be in our hands as will the future of our children and future generations.

Austerity has been built on a lie, and in fact, has allowed the incumbent government to pursue the neoliberal ideology of decades with impunity. It has shamelessly promoted the cult of the individual over collective action, demonised those who don’t fit the mould of hard-working people, left them at the mercy of the unemployment queue or working in the low paid, insecure gig economy, burdened them with high levels of private debt, increased poverty and inequality not to mention sold off public assets and privatised vital public services.

We were endlessly told that the previous Labour government had spent all the money and bankruptcy beckoned. We were told there was no alternative to cutting public spending to get our finances back in order. We were told that our public services were inefficient and no longer affordable. And we believed it all. Not because we were stupid but because it seemed a logical premise that the government’s finances were like our own. We were bound by Dickens’ character in David Copperfield, Micawber, whose dictum was that happiness arose from not spending beyond one’s means. However, those misunderstandings are now starting to shift and although many politicians and orthodox economists are trying to ignore the elephant in the room, modern monetary realities are moving into the mainstream arena to be discussed, criticised and picked over. We should feel more confident at this positive step forward.

In the meantime, though, we still have a big job in front of us to inform and challenge the status quo and economic orthodoxy of the last 40 and more years.

While we prepare for the coming election (and Christmas) the effects of government austerity roll on, affecting people’s lives remorselessly.

Published in July and updated just a few weeks ago, the Insolvency Service reported that levels of personal insolvency were approaching the highest in a decade. In the three months up to September, they rose from 25,169 in the same period last year to 30,879. The data also showed a dramatic increase in company insolvencies which had increased for the third consecutive quarter. Duncan Swift, president of insolvency and restructuring trade body R3 said ‘figures provide a worrying insight into the state of personal finances’ and are ‘further evidence that the economic and political turbulence of the last 12 months has taken its toll on businesses’. He also observed that ‘although real wages have hit a recent high, they are still lower than they were before the financial crisis. Unemployment may be low but it’s not necessarily secure for everyone’.

In a blog in 2017, Professor Bill Mitchell wrote:

‘One of the defining features of the neo-liberal era has been the build-up of private debt, particularly household debt. [……….]. Pursuing budget surpluses is necessarily equivalent to the pursuit of non-government sector deficits. They are the two sides of the same coin’.

In other words, when a government is in surplus i.e. it has taxed more than it has spent the non-government sector pays the price.

We should be wary however about blaming everything on Brexit, as many pundits do, and instead should be looking at other causes for the rise in private, household debt and growing financial instability.

Over the last nine years, the government has pursued an austerity policy of cuts to public spending on the false premise that it needed to cut its deficits and borrowing to get the public finances back into shape. It also provided a handy smokescreen for the Conservative government to reduce the level of state involvement in public service delivery by contracting out and privatising services, although it did not stop public money going into private profit.

Public services were cut, people lost their jobs and local government grants were slashed.  Poverty and inequality grew as employment became more precarious in a low wage economy along with the rise of zero and part-time hours, and the gig economy. The claim at the time was that if the public deficit was not reduced then the economy would suffer through a scarcity of money. The politicians advised by economic experts promised that lower deficits or fiscal surpluses would guarantee financial stability.

However, the reality was the reverse. Austerity policies, quite simply, removed money from the economy and reduced people’s spending power, leaving them with no other option but to increase their debt by taking out credit or spend their savings. As John Maynard Keynes so rightly noted ‘the boom, not the slump is the right time for austerity’.

When a government stops spending sufficiently to ensure full employment, someone else has to take up the slack i.e. the consumer has to spend instead to prop up the economy. However, unlike currency-issuing governments whose spending constraints are not financial, private households are limited in their capacity to spend by their income or their ability to borrow. Pursuing lower deficits or surpluses was, and still is perverse, not to mention damaging, given the economic context at the time. The nation is now paying a heavy price for austerity as the country faces the prospect of a future recession caused also by a global slowdown and the uncertainty of Brexit.

By way of example, we can show how the prevailing economic orthodoxy had serious consequences for the economy. In the early 2000s, Labour ran budget surpluses achieving the lowest deficits in UK history. Politicians of the time, in justification and using the classic household budget metaphor, said that there was nothing progressive about budget deficits and that every pound we spent on debt interest was one less we could spend on the NHS, on vital public services, on helping the poor and vulnerable. The UK was at the time on the crest of a wave of consumption built on household debt which subsequently and, as we know, ended in the Global Financial Crash caused by crooked financial institutions who’d got out of control, and governments who had not only encouraged a deregulated financial environment but also pushed debt into the private sector whilst claiming themselves to be financially prudent.  We don’t seem to have learned any valuable lessons from that experience.

In a co-authored paper with Luke Reedman, Professor Bill Mitchell wrote in 2002.

‘… a major shift in monetary and fiscal policy is required and must begin with an acceptance that public deficits are typically required to maintain stable growth rates in spending and sustainable levels of private sector debt. The government can clearly run surpluses for a time by exploiting the willingness of the private sector to increase its debt levels. But this strategy becomes highly deflationary once private agents seek to restore their balance sheets. The resulting output corrections force the public sector into deficit with accompanying private wealth losses and rising unemployment. In this context, the argument that budget surpluses are needed to ‘fire-proof’ the economy is nonsensical.’

To give these technical facts a human dimension we need to bring them down to real-life realities.

Aditya Chakrabortty commented in an article this week, that more than four million are children living in poverty in the UK and that the number of food banks has increased from 57 in 2010 to 428 last year, handing nearly 580,000 parcels to children. Such figures, in one of the richest societies in human history, should mortify us as a nation. Reviewing the recently published book ‘It’s a no money day’ Chakrabortty describes it as ‘a watershed moment when Britain’s food banks go from newspaper headlines to a subject that teachers cover in classrooms; the moment at which mass destitution is no longer a badge of political failure but is instead accepted as part of British life.’ The normalisation of food banks and the charitable collection of food in supermarkets should be THE moment when the alarm bells start to ring.

When the likes of Michael Gove sneer at people using food banks for not being able to ‘manage their finances,’ in so doing they not only perpetuate the lie that people are to blame for their own misfortune, but they also provoke hate and create societal division.  By propagating the lie of money scarcity and shifting of responsibility from government to individuals, politicians are failing in their duty as elected officials to serve citizens. The role of government needs to shift back from one which serves corporate interests to one which serves the public purpose.

We are a nation rich in real resources and have a currency-issuing government with the capacity to mobilise those resources for the public good. Nurturing our children should be always central to our nation’s investment, with their young minds nourished with hope and inspiration and not the needless misery of foodbanks and poverty. By extension, this applies to the population as a whole, many of whom have suffered needlessly from government austerity and ideologically driven policies.

Given the climate crisis and the challenges we face in righting the social injustices of the past few decades (caused by an ideology which has put the individual over the interests of the collective and profit over the health of the planet and its citizens increasing poverty and inequality and threatening the existence of our species), it is time to engage in a conversation about what we think should be our priorities in the future.  About what sort of country we want to be, what public and social infrastructure we need to create economic and social well-being and what sort of future we want for our children’s children. These are not left or right questions, they are, quite simply, questions about our human values.

In the words of the current Prime Minister, ‘Britain deserves better’. It certainly does. Better than the last 40 years of economic and ideological orthodoxy which successive neoliberal governments have pursued relentlessly. It’s time for a change.

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The post The austerity prescription was not an experiment; it did not fail for the rich. Time for a rethink. Time for an economic revolution. appeared first on The Gower Initiative for Modern Money Studies.

Surplus to requirements, ScoMo?

Published by Anonymous (not verified) on Sun, 20/10/2019 - 6:09pm in

Applause, stamping, hoots and catcalls resound up and down our wide brown land as another big week in Oz-politics lives down to expectations, as John Crace says of Boris Johnson, now the incredible sulk, after his inevitable Brexit flip-flop just flops with a not-so-super Saturday vote to delay, a thinly-disguised ploy to sink the whole…

The post Surplus to requirements, ScoMo? appeared first on The AIM Network.

We need to relearn the art of adequate spending for public purpose

Published by Anonymous (not verified) on Sat, 12/10/2019 - 9:30pm in

The GIMMS team have been away and had a very busy two weeks travelling between Brighton, London, Manchester, Leeds and Newport for a variety of events.  All in all, it has been very successful and well worth the effort. We’ve had the pleasure of meeting lots of enthusiastic and lovely people across the country and we hope that over time the interest can be carried forward into real action in local settings.

The recording of the Brighton Fringe Event at which Professor Bill Mitchell spoke is now available here and we are working on editing the training session in London and the recording of GIMMS event at the Green Party Conference.

So, from this week normal service is resumed for our MMT Lens with a round-up of the key events over the last two weeks.

 

Cardboard placard at a protest with the slogan "Fight today for a better tomorrow"Photo by Markus Spiske on Unsplash

Boris Johnson is spending. Well, not his own money, of course, but he has authorised a multibillion-pound government spending programme not to mention substantial tax cuts for the wealthiest. After nine years of unnecessary and harmful austerity politics a focus on fiscal rather than monetary policy, which is in a predictable dead end, is to be welcomed although strangely it seems to reflect many of Labour’s spending promises. They say that imitation is the sincerest form of flattery, don’t they?

As part of the spending review by Chancellor Sajid Javid some weeks back, Boris Johnson in his speech at Conference promised investment in the NHS and social care, education, transport and roads, local government, police and the environment. And again, strangely, all those things that it has been busily cutting over the last 9 years because it was claimed we couldn’t afford them are now back on the spending menu. It is tempting to ask the question but where will the money come from since it’s the one that the Conservatives have most often asked Labour when they have announced their policy and spending programmes.  It has also been tempting for some like Paul Johnson from the IFS to wonder whether Boris’s proposals for tax cuts were feasible given his public spending promises.  That is, of course, if like Paul Johnson you accept the too often trotted out household budget version of the state finances which says that government relies on tax and borrowing in order to spend which GIMMS readers surely must know by now they don’t in a country where the government is the sovereign currency issuer.

These spending promises and tax cuts drive a coach and horses through the notion that government spending is constrained by taxpayer revenue. It also tells us very clearly that some politicians know exactly how the money system works and let’s be honest it’s not been the first time that the Tories have opened the public purse to serve a specific political agenda! Those computer keys at the Bank of England will be red-hot if the promises are kept.

After having been told in no uncertain terms that there was no money and that we all had to pull in our horns to get the public accounts back into health suddenly there’s money but an equal question in people’s minds about how it will be paid for. And that cannot be surprising given that the household budget narrative reigns in the public consciousness.

As usual and in response to the government’s plans, some of which were announced prior to the Conservative conference, there have been alarm bells ringing in the usual quarters both political and institutional about the impact on the deficit and debt and borrowing levels.

The government’s spending plans sit contrary to the 2% of GDP limit which was set for the 2020-2021 fiscal year and suggests a rowing back from the traditional Tory mark of fiscal prudence. It remains to be seen how much of this is an electioneering ploy and whether it will translate into reality. However, interestingly, as government announced its spending plans there was trouble brewing in its own party as voices of dissent were being raised at a party fringe meeting where MPs, representatives from the Taxpayers’ Alliance and the Institute of Economic Affairs indicated that although they recognised that people had suffered through austerity they believed that the government had not gone far enough in cutting public spending. John O’Connell, Chief Executive of the TPA went as far as to reject the word austerity saying we should refer instead to ‘living within your means’.

It is shameful to note that there are people who, whilst acknowledging that austerity has caused suffering, want more of it. The household budget framework of taxing to spend and the resentment felt by some that ‘their tax’ is funding freebie public services for all lies at the heart of it and reflects the neoliberal ideology that the state should take a step back and abandon people as authors of their own fate. The idea that ‘living within one’s [financial] means’ is a better measure of economic success than pursuing public purpose to benefit people materially and in terms of well-being is an indication of how far we still have to go to challenge this narrative. Not only do we need to counter the notion of ‘taxing to spend’ with the correct description ‘spending to tax’ we need to correct the idea that living within one’s means relates to money. The only ‘living within our means’ we need to be doing relates to our resources whether that’s people or the materials used in the production of goods and services that we benefit from. The only balance we need to make is the one between spending and resources.

Predictably, news of the government’s spending and taxing plans brought out the debt sirens on the left who have been posting FB memes that the national debt has soared under the Tories to almost £1.8 trillion since 2010. It is disappointing to note in the face of the real consequences of austerity that the language narrative about how government spends is still dogged by household budget explanations, ‘rising deficits’, ‘increased borrowing’ and ‘mounting national debt’.

The Conservatives response has been that the government’s prudent management of the public accounts has given them the fiscal space to spend. In fact, the Prime Minister trotted out the usual nonsense that the Conservative Party had ‘tackled the debt and the deficit’ left by the last Labour government and suggested disingenuously that it has only been able to increase investment in schools and hospitals because it had ‘cleared up the wreckage they left’.

All these descriptions used by both the right and the left wing lie within a flawed mainstream paradigm. On the one hand, the Conservatives have used it to defend the need for austerity to deliver their own ideological agenda and claim fiscal superiority over their political rivals. On the other, Labour persists in the language of tax and spend and finding the magic money tree in the Cayman Islands to fund their laudable progressive programmes. Even John McDonnell could not resist saying that the proposed tax cuts would ‘rip out £10-£20bn a year from our already decimated public services’.  When clearly, they can’t and won’t!

It is regrettable that the public finds itself still caught in the headlights of a long deceased monetary narrative the consequences of which live with us now and will continue to do.

Instead of taking the debt sirens at face value in their criticism of the rising national debt under the Conservatives we should instead be evaluating their economic record. Who gained from their spending and taxing policies and who lost out?   Measuring success by the state of the public accounts from the size of the deficit/debt or whether the government has balanced the budget or achieved a surplus is quite simply incorrect and tells us nothing about the context of the state of the public accounts.

This can best be evaluated with a brief look at both the government’s spending plans, its policy agenda and the on-going consequences of cuts to public spending.

The government whilst it is planning to spend £25bn on improvements to the road network it has not been similarly generous to the bus network which amounts to only £220m. Combined with its already announced spending on the environment of around £432m which is a fraction of the amount needed to address the challenge of climate change demonstrates the Conservative’s complete disregard for the environmental challenges facing us. Apart from the fact that since 2010 government has cut spending on subsidies to bus companies which have forced the closure of 3000 bus routes (not to mention all the other consequences of cuts to public sector spending including the NHS, social care, education policing and local government) this would have been a good time for substantial investment in sustainable public transport instead of giving precedence to roads and cars.

Of course, as indicated earlier, it cannot be denied that a domestic spending programme is a good move at a time when the figures show that the world seems to be sinking towards recession. However, it should not be surprising, given who has authorised the spending, that it is still framed within a neoliberal framework of privatised public services and public money going into private profit whether that’s the NHS and social care or privatised transport networks. It does not suggest a reversal of neoliberally inspired agenda which the Conservatives have been pursuing under cover of austerity.

It also ignores the on-going consequences of public sector cuts, reforms to welfare and the introduction of Universal Credit on the well-being of citizens and indeed the economy.  The scandal of the huge rises in homelessness is bad enough (the Charity Crisis estimates some 24,000 people last year) but just last week figures published by the Office for National Statistics revealed that 726 homeless people died on our streets in 2018. The figures showed a 22% rise over 2017 which was the biggest increase since data was first collected in 2013

The Chief Executive of Crisis, Jon Sparkes, responding to the figures and at the same time putting a human face on the statistics said:

“It is heart-breaking that hundreds of people were forced to spend the last days of their lives without the dignity of a secure home. This is now the second year running where we have known the true scale of the human cost of homelessness, yet still the lessons from these tragic deaths go unlearnt.”

Add to this the record numbers of people, as reported by the Trussell Trust earlier this year, who are using foodbanks along with increasing food insecurity and the spectre of malnutrition, far from turning the page on austerity, the consequences of it remain with us and will do for some time to come unless we get a change in government.

Just a quick look at other news from the last couple of weeks emphasises that just the promise of spending is not going to fix the damage quickly. Behind just these few headlines lie the reality of the harm that has been caused by austerity and government policy choices.

“England sees ‘worst summer on record’ for A&E waits”,

“Alcohol tax cuts cause nearly 2000 extra deaths”,

“Severe obesity among children aged 10 to 11 at record high…. Figures highest among children from the most deprived communities”

 “Unprecedented’ rise in infant mortality linked to poverty”,

“Nursing vacancies hit record high leaving patient care at risk”

For the lie of balanced budgets our economy has slowed, people have got poorer and inequalities have risen, and our public and social infrastructure is cracking up. And all the while the rich have got richer and appropriated an immoral share of the country’s wealth – all with the helping hand of government.

But it doesn’t have to be like this. There is an alternative world and it is up to us to bring it about not just for our sakes but for our children who will bear the burden of our inaction if we turn away.

It starts by understanding these simple concepts:

“A sovereign government is never revenue constrained because it is the monopoly issuer of the currency. In other words, its public debt level is irrelevant in terms of its capacity to spend in the future, unless it deliberately constrains itself with voluntary fiscal rules.

Such a government is never financially constrained in its future choices by its past fiscal position. 

Fiscal Space is [not] about financial resources. It can only be about real resource availability in a modern monetary economy where the government issues its own currency.”

Bill Mitchell 2017

It is both encouraging and exciting that the orthodox narratives are being challenged now in the mainstream media as modern monetary realities get an airing even if sometimes critically. The debate is moving on. We just have to ensure it reaches a successful conclusion.

 

As we said in our introduction, the video of Professor Bill Mitchell’s talk on the Green New Deal has been published on our YouTube Channel.

 

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The post We need to relearn the art of adequate spending for public purpose appeared first on The Gower Initiative for Modern Money Studies.

Book Review: Why Not Default? The Political Economy of Sovereign Debt by Jerome Roos

Published by Anonymous (not verified) on Wed, 09/10/2019 - 10:03pm in

In Why Not Default? The Political Economy of Sovereign Debt, Jerome Roos explores why sovereign defaults have been an undesirable last option by systemically unpacking the structural characteristics of the contemporary debt market. This is a fresh and painstakingly researched approach that raises vital questions for economists, political scientists and policymakers to address in the era of relatively low cost, yet mounting, sovereign debt, writes Aleksandr V. Gevorkyan.

Why Not Default? The Political Economy of Sovereign Debt. Jerome Roos. Princeton University Press. 2019.

In Why Not Default? The Political Economy of Sovereign Debt—a book based on his doctoral dissertation—Jerome Roos systematically unpacks the structural characteristics of the contemporary debt market. Leveraging analysis of historical evidence, the author proposes a theory of creditor structural power and high spillover costs of default, thereby answering the question in the book’s title. The book connects the global financial system with countries’ prospects for access to the international capital markets and economic development.

Why don’t nations, or in the adopted jargon, sovereign borrowers, simply default on their debt if that could minimise financial burdens? It would appear to be logical to renege on prior commitments when faced with macroeconomic deficiencies or a currency crisis and interruption of foreign exchange flows. Yet, as Roos argues, sovereign defaults have become less common. In fact, even going back in time, despite their higher frequency of occurrence compared to today, sovereign defaults were the undesirable last option.

There is much to discover and learn in this dense volume. The opening chapters are dedicated to what the author describes as ‘The Theory of Sovereign Debt’. This is then followed by a critical review of the history of sovereign defaults, starting with early Italian city states, continuing through the nineteenth-century restructurings and 1930s defaults. Before its concluding chapter, the bulk of the book is found in the most granular exploration of three cases across three lengthy parts focusing on Mexico (1982-89), Argentina (1999-2005) and Greece (2010-15).

The historical perspective on the evolution of debtor compliance is undoubtedly one of the distinctive strengths of this study. The problem of sovereign debt is neither new nor confined to computer-modelled technical fundamentals. And little here has been by accident and much is derived from the debt dealings and dispute resolutions of the accumulated past. This historical narrative is interplayed with political economy. Applied consistently throughout, this merger adds to the book’s credibility as the dispersed historical episodes are stitched together in a framework of three enforcement mechanisms of debtor compliance.

Image Credit: ‘Let Greece Breathe’ event, London, 15 Feb 2015 (Sheila CC BY NC 2.0)

So, why not default? The author argues that an institutional framework in the international capital markets of enforcement mechanisms securing creditors’ structural power over the borrower and the high spillover costs of default faced by the latter hold the key to the answer.

The first enforcement mechanism is the market discipline defined as ‘a product of private creditors’ capacity to inflict highly damaging spillover costs on a debtor’s economy by withholding further credit and investment in the event of noncompliance’ (17). Creditors’ ability to act uniformly against an autonomous borrower is paramount in this mechanism. Roos documents the progression of the global capital markets from a decentralised to a more concentrated scheme. The bond markets of the 1920s-1930s were highly decentralised and filled with small retail investors with limited ability to coordinate their actions as creditors. The state (on the creditor side) in those and earlier debt restructurings played an important role, with at least diplomatic guarantees. With time, as global financial markets transformed, following banking systems’ consolidation, there was a shift towards a concentrated organisation of capital markets imposing now a coordinated discipline upon the borrower. This, Roos argues, is the critical element of the structural power that contemporary creditors have over borrowing governments.

The second enforcement mechanism relates to the conditionality of lending, familiar to development economists and common in the cases of official creditors or multilateral organisations crisis lending. Moving from the cases of Mexico and Argentina to the recent Greek debt crisis, the book illustrates the rapid evolution of this mechanism. Along the way, the role of multilateral institutions, such as the International Monetary Fund (IMF), as a lender of last resort is strengthened. The official creditor states (and individual private investors), in turn, relied on IMF’s programme as a prerequisite assurance to re-engage with the borrower. The mechanism appears to gain effectiveness as the debtor faces minimal domestic financial self-sufficiency and no viable alternatives to borrow externally.

Finally, the third mechanism pertains to the ‘bridging role’ of local business and political elites in each debtor country advocating fiscal discipline and debt repayment. Roos sees this as a complementing factor to the first two mechanisms and a by-product of the post-Bretton Woods ‘internationalization of debtor discipline’ (79). There is a structural, country-specific element to the financial power and fiscal decision-making that domestic elites claim on the debtor state. Much of this power is interdependent with the ability of domestic commercial groups to attract foreign credit motivating their preference for fiscal austerity in an attempt to avoid spillover costs to the private sector’s debtor profile.

Collectively, the argument goes, all three reinforce private creditors’ structural power. The spillover costs of sovereign default increase as a borrower risks being cut off from international capital, exacerbating domestic political fallout and economic malaise. As such, there are external and internal pressures upon the debtor, forcing debt repayment and compelling a new government to accept their predecessors’ obligations. Still, a default today is possible, the book concludes, but only ‘when all three enforcement mechanisms have broken down’ (70).

There is considerable relevance of the issues raised in Why Not Default? to today’s global capital markets and a demanding reader would have benefited from such clear assertion. The years since the 2008 global financial crisis have seen a rapid rise in foreign currency-denominated debt across emerging markets and developing countries, in particular. While some of this increase is dictated by individual country’s fundamentals, there is also evidence of emerging markets jumping on the opportunity to borrow in the global capital markets and of old-fashioned ‘reach for the yield’ by the global investor in the higher liquidity and low interest rates environment largely shaped by advanced economies’ monetary easing policies.

As emerging markets are racking up debt, including, now increasingly, in local currency with significant foreign investor ownership, the stakes are rising for macroeconomically weaker individual economies in the event of a significant disruption of capital flows. As in the past, the triggers might be a combination of external or internal factors. Of greater concern, however, are the transformative indirect tendencies in the capital markets affecting smaller economies. This is precisely the landscape where Roos’s combined theoretical framework of structural power and enforcement mechanisms, tested in real time, may inform policy actions aimed at preventing high spillover costs of multiple sudden defaults.

On a minor side, some might find Why Not Default? to be quite detailed and with limited empirical analysis. Yet, the latter may not be necessary here as the book advances its author’s conceptual vision. That may leave one a bit impatient to read Roos’s concrete proposals for reforming, if needed, the debt markets. But such analysis would likely require a dedicated volume with a magnifying glass focus on country-specific institutional, historical, political and socio-economic factors: apt for a follow-up work. On a personal note, it would also have been interesting to read more about sovereign debt challenges across the post-socialist transition economies of Eastern Europe and the Soviet Union as countries in this group may or may not be operating within the book’s proposed debtor compliance framework.

More broadly though, by asking ‘Why Not Default?’, Jerome Roos raises some unconventional, yet imperative, questions for economists, political scientists and policymakers to deal with in the new era of relatively low cost, yet mounting, sovereign debt. The book is fresh and novel in its approach to the problem of the creditors’ role and stuns the reader with painstakingly impressive treatment of historical evidence of debt restructuring, making the analysis relevant to discussions today.

Overall, Why Not Default? is a valuable resource in its intellectual synthesis of history and political economy, offering a motivation for an informed sustainable development strategy in the present and the future.

Aleksandr V. Gevorkyan, Ph.D. is Associate Professor and Henry George Chair in Economics at the Peter J. Tobin College of Business, St. John’s University. He is the author of Transition Economies: Transformation, Development, and Society in Eastern Europe and the Former Soviet Union (Routledge, 2018). This book was recently reviewed for LSE Review of Books by Dr. David Lane.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics. 


To transform the world, we need a revolution in our priorities and values

Published by Anonymous (not verified) on Sat, 24/08/2019 - 10:34pm in

Rough sleeper talking to a shopper outside a Prada shopPhoto by Max Böhme on Unsplash

“We all need to work together, because there are no jobs on a dead planet; there is no equity without rights to decent work and social protection, no social justice without a shift in governance and ambition, and, ultimately, no peace for the peoples of the world without the guarantees of sustainability.” 

Sharan Burrow 

Now is the winter of our discontent…. Oops, let’s rewind somewhat and rewrite Shakespeare. Now is the summer of our discontent might be more appropriate, given the troubling state of the country and the media coverage which has been shining more light on the realities of life for many people in the UK; the growing inequalities and the declining state of our public infrastructure.  The austerity chickens are coming home to roost big-time for the current government. The promise that getting the public finances sorted would bring economic triumph is everything to them, but in the real world, cuts to public spending have brought pain, suffering and in too many cases early death. Worse still, the neoliberal ideological agenda is still being played out relentlessly by Tory politicians with a specific aim in mind – the dismantlement of the public and social infrastructure, including the welfare state, which has benefited citizens since its inception in 1948.  

First up is the publication of a new report by the erroneously named Centre for Social Justice, one of whose founders was Iain Duncan Smith, former Secretary of State for Work and Pensions, promoter of the mantra ‘work pays’ and the prime mover behind the now increasingly discredited Universal Credit system.  In its report ‘Ageing Confidently: Supporting an ageing workforce’ (funded by Deutsche Bank and the Joseph Rowntree Foundation) one of the recommendations is to raise the retirement age to seventy-five. Duncan Smith, in a tweet after its publication, claimed that ‘removing barriers for older people had the potential to improve health and well-being, increase retirement savings and ensure full functioning of public services for all’.  The public outcry has been quite understandably ferocious and the campaigner and columnist Frances Ryan’s response was acerbic ‘It’s a dystopian vision of life, in which capitalism tells workers who have already grafted for 40 years that working a five-day week through their 70s is, in fact, the path to a healthy body and society’. 

As was noted in last week’s MMT Lens, life expectancy varies depending on your geographical location and financial means. Figures show that improvements in life expectancy for older people has stalled since 2014 and is actually worsening as the gap between social classes and regions widens. Austerity and the political ideology of self–reliance over state intervention have taken their toll. The social determinants of health from income and employment, education and access to good health services and adequate food and housing have all been affected by the political choice to cut spending. As such, this proposal is offering a ‘work until you drop’ scenario where those most affected by government policies may die before they even reach retirement age unless of course, they are lucky enough to have the financial means to retire in good health.  

When you combine this proposal with the revelations this week in the report Pension Reforms and Old Age Inequalities in Europe which revealed that the proportion of elderly people living in poverty in the UK is five times what it was in 1986, the alarm bells should be ringing loudly. We are all going to be old one day. There is no escape!  

The author of the report, Bernard Ebbinghaus from Oxford University, said that ‘The United Kingdom is a good example of Beveridge-lite systems that have historically failed to combat old age poverty’. The research also revealed that the increasing focus on private pension provision was increasing the pre-existing level of social inequality. So even if you get to get to 75, you still face the prospect of an impoverished retirement.  

The arguments about pensions and retirement centre around an ageing population; the belief that because the number of elderly people is increasing faster than the number of those who are working, the impact on government revenues will leave it cash–strapped; that as a larger amount of its budget will have to service the costs of social security for the old, it will be left with less money for investment elsewhere. Indeed, the report makes such references:  

“Fiscal impacts: pensions and out of work benefits. The demographic shift to an older population raises concerns over the fiscal stability of the UK in the future.” 

“This demographic change has resulted in a decreased proportion of working age people, which presents significant fiscal challenges.” 

However, these are not new arguments and the public message has been that our welfare system and pensions are no longer affordable, and we have to accept later retirement and make our own preparations for old age. Mind you, how that works in a low wage and insecure employment economy where people struggle to feed themselves let alone save for their retirement is unclear.   

In 2015, Liam Fox described the benefits system as a ‘Ponzi scheme’ which would burden future generations, claiming that ‘we can’t afford it now, [and] we can’t afford it in the future and that we need to make ‘the adjustments… for us to be able to get back into balance’. 

These are the typical household budget descriptions of the public accounts which define the public understanding of money and how it works. First and foremost, it is important to note that any changes to benefits or pensions will be a government choice, based on a political agenda of limited welfare and self-reliance, and has nothing to do with the state of the public finances. Secondly, that a government which issues its own currency does not have to rely on tax or borrowing to fund its spending and that its real constraints are not monetary, but the real resources which our public infrastructure relies on to function for the health of the nation.  What we really can’t afford, is a government that fails to invest sufficiently in the public and social infrastructure, to ensure that the nation will be productive as it can be to provide enough goods and services for people to purchase in the future. Nobody is borrowing anything from the future, or its taxpayers. 

It’s worth repeating again that whilst it cuts spending on public services and welfare on account of financial concerns, this government has had no problem finding the money for its own pet projects such as HS2, funding wars or buying off the DUP, not to mention pouring funds into private businesses to run public services. The question is not how a government can pay for its policies, but what it chooses to pay for based on its policy priorities.  The health of the economy and well-being of society seems to come right at the bottom of the list and corporate welfare at the top.  

When we look at the chaos that is now ensuing as a result of damaging government policies, it should shock the public that the government has been happy to treat its citizens with such contempt whilst at the same time sending out its propaganda cavalry to smooth citizens’ concerns,  sweet talking them about its achievements and how the public’s sacrifice has been worth it.  

The public’s sacrifice has been a real one and nowhere is it more evident in this week’s other news. 

This week the Children’s Commissioner warned in a report Bleak Houses published this week that 210,000 homeless children are being housed in unsuitable accommodation. Families with children living in shipping containers, B&Bs, hostels, old office blocks and warehouses or even sofa surfing. Families living on top of one another, in cramped conditions, accommodation prone to damp, mould, cold and overheating, and spending sometimes years in temporary housing until permanent accommodation can be found.  

Polly Neate, the Chief Executive of Shelter, responded to the report saying that it was a damning indictment of the failure to address the housing emergency and blamed it on a combination of punitive welfare policies and a housing crisis along with excessive private rents, all of which were robbing hundreds of thousands of children of a decent and normal childhood. 

Combine this shocking state of affairs with the obscenity of up to four million children (more than two million under aged 5) going hungry through the summer holidays because they have lost their free school meals and one should be outraged that this is occurring in what is the fifth richest country in the world. The chief executive of the Childhood Trust, Laurence Guinness, reported this week that he had met young people who had been forced to sell drugs in exchange for food or children as young as 12 who regularly scavenged in bins for food. One, he said, had been reduced to eating toilet paper to stave off hunger pains. 

As a result of this devastating poverty and deprivation, which has its roots in a sham economic system that has prevailed for more than four decades and on the back of a lie about the unaffordability of public infrastructure and essential services, our children go hungry, are housed in appalling conditions and face long-term chronic ill-health as a result, the consequences of which will follow many of them for the rest of their lives.   

A report published by the Commons Housing, Communities and Local Government Committee has warned that our social care service for children is on the verge of collapse, following almost a decade of cuts to central government funding which has put a huge burden on local authorities. Local communities across the country have borne the brunt of draconian cuts in services which have put vulnerable families, disabled people and the elderly at risk. Such services traditionally respond to local needs and form the bedrock of a healthy economy and society.  

Austerity has also had a devastating impact on public health. As reported in the Journal of the Royal Society of Medicine a former director of public health warns that the very same organisations which have had to cope with cuts to central government funding (local authorities) and whose budgets have been slashed as a result have left environmental departments unable to meet potential threats to human health which have already caused failures in the public health system. 

It can’t be emphasised enough that this has always been an ideological choice unrelated to the public finances, which makes the government culpable for the chaos through its policy and spending choices. The blame lies at the government’s door and the solution is not, as has been suggested by some union officials, to allow councils to borrow more and raise income locally. In an economy that, as figures are showing is slowing, increasing local taxes will simply place an increased burden on the functioning of local economies as local councils do indeed have to raise tax in order to spend, unlike central government. Taking money out of people’s pockets is not the answer. The solution is for increased fiscal spending through central government which can then be targeted appropriately at a local level to meet local needs. That could be through managing a locally focused Job Guarantee programme to provide useful public work for those affected by involuntary unemployment. Or investment in public works to revitalise local economies and introduce local programmes aimed at creating environmentally sustainable communities.  

If we have to talk about unaffordability, let’s not see it in terms of money as a scarce resource which has to be shared out amongst competing demands. Let’s instead look at it from the point of view of resources, as they are the only real constraints which governments have to manage. Whether it’s having enough social care workers, nurses and doctors or public health officials as well as the public infrastructure to meet people’s needs – those are the real obligations that government must manage in the interests of citizens and the national economy. A government which fails to do so, fails for both current and future generations.  

Finally, in a week in which we have seen film of the devastation being caused in Brazil as a result of what are likely to be deliberate burning of swathes of the Brazilian rainforest to satisfy our thirst for beef, the publication of more and more scientific reports about the speed at which our climate is changing and the visible consequences on our environment, we need some of our economists to stop denying the realities of modern money.  

As Professor Stephanie Kelton tweeted last year:   

‘If you’re clinging to 100– year–old theories about how money works you are a climate change obstructionist.’  

In the face of the colossal challenges we have to save ourselves (the planet itself will get on very nicely without us) those that want to pick arguments revolving around the dangers of ‘printing more money’ should just take a short trip into history and wonder just exactly how we paid for the second world war. The government of the day didn’t have to wait until it had collected enough tax, it just spent the money on the military hardware it needed to fight the war. Nobody raised their eyebrows at the rising deficit and debt or pointed a finger at government profligacy. The money was created, and it was spent. And just to note, after the war when we had a debt to GDP ratio of 248%, we built the NHS and the welfare state. We didn’t go bankrupt then, any more than we can do so now. 

Let’s not squander the currency–issuing powers of governments around the world which can act together and make the difference between survival and extinction.  

And just to end on a very positive note, Peru approved a law this week that aims to put an end to the deforestation that arises from destructive palm oil plantations and production. It is a huge win for wildlife and sustainable agriculture. Let’s hope that this will be just the start of a process that will encourage other nations to take the bull by the horns and act to oppose more Amazonian deforestation; the forest is the lungs of this beautiful planet Earth, on which we all depend. 

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The post To transform the world, we need a revolution in our priorities and values appeared first on The Gower Initiative for Modern Money Studies.

The Strange Case of the Missing Money

Published by Anonymous (not verified) on Sun, 11/08/2019 - 11:58pm in

Woman holding coins and "make a change" written on a scrap of paperPhoto by Kat Yukawa on Unsplash

“Economics lie at the very root of practical morality”

Josephine Butler, English feminist, social reformer and campaigner against injustice.

Boris Johnson has been distributing largesse. Well, not quite distributing it; it’s still in the pot of promises. There will, apparently, be extra money for the NHS, money for policing and education and even some to manage Brexit. If it were true then potentially it’s a good thing, but of course like everything the devil is in the detail.

After 9 years of being told endlessly there was no money and that cuts were necessary to deal with Labour’s economic mismanagement suddenly it just appears out of nowhere. Shouldn’t someone be asking how are they going to pay for it? Has someone checked out their fully costed budget? If it were Labour doing the spending then, of course, these are exactly the questions that would be being asked, even though they don’t represent monetary realities.

Of course, in the lexicon of monetary orthodoxy, aka household budgets, we can all thank the previous Chancellor who squirrelled away money in the ‘rainy-day fund’ for just such an event! Except, of course, that the question of how we pay for it doesn’t reflect how money works at all; the rainy-day fund is a figment of former chancellors’ imaginations because governments don’t spend like households and neither have nor don’t have money; they cannot put money aside or save for future expenditure. Those of us who know how it works might suppose it is simply missing knowledge on both sides of the political divide but maybe it is just a torturous game played out in the Houses of Parliament over the despatch box to deceive the public and deliver political agendas.

On the other hand, the new Chancellor Sajid Javid doesn’t seem to get it at all – or maybe he does. Whilst Boris Johnson is going on a spending spree of promises to keep the nation sweet in the run-up to a possible election, deal with the initial fall-out from Brexit and avoid the possibility of recession (currently being blamed on Brexit by media pundits whilst carefully ignoring the impact of 9 years of cuts to public spending on the economy), Javid said this week that he’s not expecting a recession at all (he’s checked with the orthodox economic oracles). He has claimed that increased growth will allow the government to meet its spending pledges (despite a contraction in the economy between April and June). Presumably, he’s counting on the additional tax that will be poured into the government’s coffers in the event of the engines of the economy perking up. Just how that miracle will occur is anyone’s guess given that the government actually has to spend before anyone can even pay their tax! If he knew this long kept secret (except he probably does but must keep to the business of government’s fiscal discipline) he could increase spending at a stroke of a computer key to avoid or lessen the worst effects of any potential recession which of course he is denying is a possibility.

Apparently, according to him, ‘the fundamentals of the British economy are strong – wages are growing [and] employment is at a record high”. Did anyone tell that to the funeral director offering budget funerals in this the final episode of the BBC programme Broke who is working a variety of jobs over 120 hours a week to keep his and his family’s heads above the water? Or those other people featured in the programme series who struggle every day working long hours on low wages, on zero hours or in the gig economy to keep their household budgets balanced and out of debt or indeed live on the beach for want of proper accommodation? There is a huge dissonance between the spoutings of government ministers and the realities on the ground for ordinary people.

Now let’s get back to that extra money Boris Johnson was talking about. Boris made his announcement in an article in the Sunday Times saying, ‘It is thanks to this country’s strong economic performance that we are now able to announce £1.8m more for the NHS to buy vital new kit and confirm new upgrades for 20 hospitals across the country’. So here we are again back to the idea that a healthy economy with higher tax revenues allows a government to spend (not withstanding that the economy is currently spiralling downwards along with other economies across the world). The suggestion is that the Conservative government has been fiscally prudent and that its economic policies which have resulted in higher tax revenues allow it to spend more. Again, a typical household budget response to government spending which is a cynical deception to cover its ideological intent.

However, not long after this announcement it became clear that this £1.8bn cash injection for the NHS capital budget which covers buildings and equipment isn’t extra money at all. It isn’t even new money, and nor will it be sufficient to make up the loss of NHS funding after 9 years of cuts to public spending. Krishnan Guru-Murthy from Channel 4 in an excruciating interview with the health minister Chris Skidmore suggested that it was money hospitals had saved by cutting services that they were now able to spend on capital projects. Trying to get Skidmore to admit the truth he said:

“I’m trying to work out where this money has come from. Hospitals up and down the country have been saving money for years but have not been allowed to spend it. And the understanding from experts like the Nuffield Trust is that this is an accounting exercise which now releases that money to be spent. Money that they saved by cutting on services that they’re now able to spend on capital projects.”

It turns out that Trusts couldn’t spend the cash they had saved until of course Boris Johnson claimed in a fanfare of trumpets that he was giving the NHS more money. This is nothing but yet another act of sleight of hand meant to put the government in a good light in the event that it will have to fight an election.

And let’s not forget either that small issue of Boris Johnson’s big red bus and his promise of £350m a week for the NHS if we voted to leave the EU?  People may have thought it sounded a great deal of money when multiplied up but it wouldn’t even cover the real costs of the cuts the government has already made over the last nine years and is a few specks in the ocean compared to the annual government expenditure on the NHS which in 2017/18 was around £122bn, of which £108bn was spent on day to day running costs.  The well-being of the nation and the economy, which depends on a well-funded publicly paid for and managed NHS, has been at stake for the past nine years, while the government has pretended there was no money for our health service and pushed through reforms designed to irrevocably change it and finish the work of successive governments. The NHS has lost its ‘N’; services and treatments are being cut left, right and centre, hospitals closed or downgraded and ‘care in the community’ has become the next big byword for change to cut costs as private healthcare companies no longer taking over through the backdoor are brazenly and openly charging now through the front door.

In another analysis this week, on Johnson’s funding pledges for education it would also appear that things are not quite as they seem. The Prime Minister committed to ‘invest in our schools and close the opportunity gap in our country’. However, new research published by the Education Policy Institute this week has not only found that the pledge would cost double what the government has promised, but also that it would disproportionately benefit the least disadvantaged schools thus reinforcing the educational inequalities that prevent many children from getting the best start in life.

Furthermore, the proposed extra money fails to take account of the real-life circumstances of children who won’t only lose out from an unfair distribution of education funding. Combined with the cuts to public spending on services, reforms to the welfare system, poor wages, insecure employment, homelessness and poor housing not to mention children in temporary and unsuitable accommodation or coming hungry to school, the effects can equally compromise a child’s future life chances and ultimately that of the nation itself. Government cannot continue to ignore the social determinants of a healthy society which cuts to public spending have undermined.

GIMMS might have missed it, but the one spending commitment that seems to have been left off the list is the environment. If anyone can tell us differently then we would be pleased to stand corrected.

The most pressing issue that we humans face is global climate change and in the last few weeks our planet has been displaying extremes of heat, storms and flooding and wildfires in the Arctic. Professor Michael Mann at Penn State University, one of the world’s leading climate scientists confirmed in an interview last year that the impacts of global warming on our planet ‘are now ‘no longer subtle…[and] we are seeing them play out in real time’.

Scientists who were meeting in Geneva earlier this week are soon to publish a stark warning about the damage also being done to the land surface of our planet as a result of the human activities which have led to soil degradation and erosion, expanding deserts and the destruction of forests and biodiversity.  Land which has been an asset in combatting climate change has now been turned into a major source of carbon as the battle for land increases to grow biofuels, plant material for plastics and fibre, timber for paper and furniture and food for growing populations.

As citizens of planet earth, we should all be concerned about the lack of real action by governments across the world. Whilst we all can make our personal contribution to changing our own behaviours, the reality is that it is only government with its sovereign spending and legislative powers that can drive the level of change we actually need to save ourselves.  We have a choice, as Professor Mann explains, we can keep on walking out into the minefield or we can reverse course and get off as quick as we can.

When politicians and think tanks ask where the money will come from to invest in addressing climate change, it is the wrong question. We should instead be asking what the consequences will be of inaction, as increased consumption and growing world populations put ever increasing pressures on nature’s resources which are being depleted far faster than the planet’s ecosystems can renew them. This is the only overspending that we should be concerned about.

Arguments about the size of deficits and debt should be put aside for the more important arguments about how we address these challenges. We must identify what resources we have and how we can use them effectively, not only to preserve planetary life but also deal with the increasing poverty and inequality that has arisen as a result of both a flawed economic system and a warming planet, which are already increasing the pressures on land and water use.

An understanding of how money works combined with an appreciation of what a Job Guarantee is and a discussion about the Green New Deal are an important start to the public conversation about where we go from here. Certainty is an impossibility. Life doesn’t deal in chocolate boxes, but we have to start somewhere and as Professor Michael Mann said we have a choice we can keep on navigating the mine field or we can reverse course.

In a recent article, Larry Elliott and Richard Partington posed the question “Boris says he’ll spend but who will pay? Will they break with austerity even if that means higher public borrowing they ask? The article notes that the Institute of Fiscal Studies has indicated that Johnson’s tax promises are expensive commitments which could cost £9bn a year. The authors quote the OBR which said that it would push government borrowing and debt up from the levels in their forecasts adding that there was no war chest or pot of money set aside that would make them a free lunch. They refer to Gordon Brown’s ‘golden rule’ only to borrow for investment (now where have we heard that before?) and George Osborne’s pledge to eliminate the deficit within five years and quote the UK’s ‘total debt pile’ and the fact that the deficit is still a ‘problem’. They even refer to John McDonnell, who has suggested that Labour would ‘raise spending with greater responsibility, as the party would increase taxes on high earners and businesses.

This is the false language of household budgets and quite simply does not apply to a sovereign currency issuing country. A government that is monetarily sovereign neither needs to tax or to borrow in order to spend. And yet our politicians, many journalists and institutions hang on to outdated concepts, regardless of the realities of modern money. The discussion hangs on deficits and debt, balanced budgets and surpluses when these are no more than red herrings which take no account of the economic context, the economic record of the government or the consequences of government policies on the lives of citizens.

If the government is us then it is beholden on us to use our power to change how things work. Let’s not pay the price for not doing so. There is an alternative world out there if we choose to stand against the tide. The first small step is understanding that a government is defined by the spending choices it makes and that there is no scarcity of money, only lack of political will.

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The post The Strange Case of the Missing Money appeared first on The Gower Initiative for Modern Money Studies.

The barbarians may be inside the gates, but we can still defeat them

Hand reaching towards the sunrise over a lakePhoto by Marc-Olivier Jodoin on Unsplash

The French have a saying “plus ça change, plus c’est la même chose.” With the events of the last few days, one might consider that nothing had changed; the Tories are still in the driving seat albeit with a new leader. However, with the election of Boris Johnson to the post of Prime Minister, followed by an ignominious line up of hard right, heavily male, privately-educated Cabinet appointments one can say, at least for those of us with a progressive disposition, that the country has reached a moment of even more uncertainty and fear for the future.

In his first speech as PM, Johnson promised a ‘new golden age’. Given previous history and his leadership campaign, one must ask the question “a golden age for whom?” Johnson and his friends are dyed-in-the-wool, free market fundamentalists who favour a deregulatory free-for-all. They individually, or collectively, support capital punishment, fracking, GM crops, a watering down of employment rights and privatisation of key public services such as the NHS (although the latter, of course, is vociferously denied) and worse still are climate change deniers.

Unless they have had a collective Damascene moment, which seems highly unlikely, the golden age will be about continuing to serve their corporate masters and the further weakening of democracy, not the public purpose. With little mention of our failing public services, a fiscal stimulus maybe but in whose interests? Twenty thousand new policeman sounds good but with so many police stations closed, the time it takes to train police officers along with the need for training facilities and trainers to train them, this will be a dead duck in the water. Furthermore, Johnson has failed to address the consequences of the Conservatives’ austerity policies on society as a whole which, without doubt, has increased the pressures on law and order. It’s all nothing but rainbow coloured whitewash or is that hogwash?

In all this, one might think that the appointment of Jo Swinson to the leadership of the Liberal Democrats is a side story which is unconnected. And yet it is. Whilst most would jump immediately to the Brexit connection, given the stands of both parties on this issue, the reality is that it is that something far more insidious links them – economic ideology and austerity.

Some have, of course, claimed that austerity created the conditions for the Brexit vote, but the working-class discontent related to reduced standards of living and increased poverty and inequality predates 2010, going back over 30 years. It is as much linked to the ideological agendas pursued by successive governments since Thatcher as it is to the last 9 years of austerity.

This has been a bubbling cauldron of long-term dissatisfaction which has driven people to want change. Brexit has been the expression of that desire – a rejection of the economic orthodoxy which has deprived them of good, well paid jobs and security and a rejection of the political and economic structures which have brought it about and led dangerously to the rise of the extreme right and nationalism in the UK (as well as in the US and Europe).

It is regrettable, however, that in the political maelstrom which is dividing the country the subject of austerity and the reasons for people’s discontent have taken a back seat as Remainers and Brexiters fight it out in an increasingly vicious war of words which often fail to promote cogent reasons for either.

Boris Johnson and Jo Swinson have one thing in common – they voted for austerity. Their voting records and actions whilst in coalition government attest to that fact and we must not forget it. The Liberal Democrats enthusiastically supported the false belief engendered by George Osborne in the Treasury and David Cameron that the financial crisis had been caused by too much government spending by Labour, rather than being one created by bankers and speculators. Public sector workers as a consequence bore the brunt of cuts to public spending.

The party gave the Conservatives every helping hand they could, including supporting the government’s Health and Social Care Act which was yet one more step in the creation of a two tier American style healthcare model, went back on their promise to oppose increasing student tuition fees and put disabled people in the firing line of austerity cuts as the campaigner Frances Ryan notes in her new book ‘Crippled’ mentioned in last week’s MMT Lens. And these are just a few examples of the way in which the Liberal Democrats shamefully enabled the Tory political agenda. The words ‘thirty pieces of silver’ come to mind.

When asked during her leadership campaign, Swinson said that she had no regrets about her party’s role in austerity, claiming that there had been no alternative in order to get the country back on its feet. Never mind the realities of an economy which has shrunk by £100bn since 2010 or the pain, suffering and financial hardship that has been caused by those in acting in Coalition on the false notion that the public finances had to be put back in order and that the cuts were necessary.

And yet puzzlingly, in a tweet in May, she praised Jacinda Ardern’s well-being ‘budget’ saying:

“Economic transformation is about putting people and planet at the heart of our economy. We should be building on our existing work on wellbeing & making it central here too.”

A change of heart? One must question that in a world where politics is less about serving the people and more about gaining the power to pursue one’s own interests and serving global corporations through revolving doors. It is instructive that she accepted cash from a fracking businessman after having campaigned to save the environment. Her campaign tagline ‘Build an economy that puts people and the planet first’ seems a little less shiny with that knowledge in mind. She also failed to support proposals in Westminster aimed at fighting climate change and voted in favour of cutting the subsidy for electricity generated via renewable or low carbon schemes.

It is as if Swinson cannot or chooses not to make the connection between government deficit spending and delivering public purpose by putting the planet and people at the centre of economic, environmental and social policy. As Frances Ryan notes “austerity has harmed millions of people in Britain and continues to wreck lives.” Not to mention the economy!

Not only did she show herself to be impervious to the suffering caused by her party’s support for Tory policies, she also demonstrated the usual political ignorance about how the government’s finances work.

As the economist, Ellis Winningham said in a recent podcast (here)

“The only fiscal rule that should exist is one that targets prosperity. What I mean by that is plain and simple. Deficits should be targeted at full employment and public purpose. The people’s well-being should be looked after 100% at all times.”

Swinson’s words and actions have been in complete denial of this rule.

In these uncertain times, serving public purpose has been replaced with serving self-interest and in doing so well-being has been replaced by suffering and hardship. There cannot be many whose lives have not been touched in some way whether personally or via friends or family by government- imposed austerity. The collapse in social care and mental health services are just two examples. The lie of “care in the community” from support for elderly sick people being discharged from hospital to those suffering from mental health difficulties is being exposed on a daily basis and it is shameful. All of us hope that the services will be there in case of need, but increasingly they are not.

The social and economic impact of cuts to spending, both at national and local level, are leaving the most vulnerable without the care they need and leaving already financially hard-pressed families to take up the strain of looking after their loved ones. Those working in social care, which is often provided by private, profit seeking companies, are equally stressed with increasing workloads and poor pay and many are choosing to quit their jobs. In turn, local government with cuts to its budgets struggle to meet the costs of privately provided care and those care companies are increasingly thinking about exiting the sector as the public funding stream dries up along with their profits.

In mental health both for adults and children, the situation is equally grim. Premature discharge, either from community care or hospital, often leaves the vulnerable and marginalised to cope without adequate support or even any support at all. Sick people seen as troublemakers or attention seekers are abandoned to their own devices if they ‘fail’ to comply, or those with complex issues are off-loaded into private profit-driven facilities miles away from family and friends. In many cases families are left to take the strain.

In a target driven world where figures and balance sheets are more important than people’s lives, all serve to hide the actual scale of the problems being faced by people behind closed doors or on the street as a result of political and economic ideology. The health of the public finances has been used cruelly to justify austerity.

As noted in last week’s MMT Lens, we still have politicians, journalists and institutions who are living in fantasy land about public debt and deficit and woe betide any government that spends beyond its financial means. Fiscal Credibility Rules rule!

One such article appeared this week in the Guardian written by the economics editor Phillip Inman entitled “Labour and Tories both plan to borrow and spend. Is that wise?” Inman compares the British to the Italians who are proposing a fiscal stimulus on borrowed money, where of course no comparison can be made since Italy is the user of the euro as a foreign currency and has to issue debt in that currency to fund its spending, unlike the UK which has to do neither in order to spend.

Inman then proceeds to claim that whoever is making spending promises or tax cuts, Conservatives or Labour, it will require a huge increase in government borrowing. He claims that higher borrowing will put the public finances at risk and that in the light of worsening public finances and the coming ‘economic chill’ it would be better to ‘hunker down’.

With the nation mired in excessive household debt and the consequences of 9 years of austerity which has decimated public and social infrastructure, surely Phillip Inman might by now have come to the conclusion that hunkering down has not revitalised the economy. Instead, it has demolished it and worse harmed the lives of those who have had to live through it; from those who have the misfortune to be involuntarily unemployed to those with disabilities, the chronically or terminally ill, those without a roof over their heads and parents who struggle to feed their children. (For an excellent critique of Philip Inman’s article follow the link here.)

The public doesn’t need to take a degree course in economics to grasp the simple realities of how a government spends, or that it neither needs to get tax or to borrow before it can do so. These are elemental ideas. What the public does need to know is that government has deliberately made political decisions to cut investment in public infrastructure and spending on the services on which we all depend as well as deny those in need adequate financial support to live without fear.

The public needs to ask serious questions about why there is no money for the public purpose but plenty for buying arms, pursuing wars and bailing out banks, not to mention the many billions which find their way into private profit for delivering public services like the NHS. These are surely the clues that the public has been hoodwinked by a lie about balanced budgets being more important than the state of the economy and people’s lives. The answer to the question ‘where will the money come from’ is simple. The government spends it into existence. No tax or borrowing required.

Just imagine the revolution there would be if the public knew the truth. Just imagine how that knowledge could make the difference between saving or destroying the planet and creating a healthier, more well-balanced world for its citizens, where resources are more equally shared and political and economic solutions to poverty and inequality can be sought.

Modern Monetary Theory is but a description of how money works and of course, in itself, is not a magic bullet. There are no certainties. The rise of right-wing extremism in the US, the UK and Europe is worrying indeed, but that is no reason not to hope for something different. We have to start somewhere. Certainly, we can only work with what knowledge we have already, but that shouldn’t stop us using the full force of our human imaginations to create a better world for us all.

Note: If you want to learn more, GIMMS has a simple to read introduction to Modern Monetary Theory, along with plenty of other resources to inform and challenge the prevalent narratives of how money works. (link here)

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