neoliberal
The global fight for genuinely universal healthcare is a fight we can’t afford to lose
GIMMS would like to welcome Jessica Ormerod and Deborah Harrington as its guest bloggers this week for the MMT Lens. Jessica and Deborah, who were recently appointed to the GIMMS advisory board, are directors of the NGO Public Matters which is a research and education partnership focusing on public services and, specifically, the UK’s public health service, the NHS.
Photo by rawpixel on Unsplash
“We should highly value public services because this is created by people for all people. Public services ensure that no-one is left behind to suffer and that everyone has equal access to the services they need”
Jennifer Yu
The Importance of Public Services to keep our society strong and healthy
You can’t have a debate about the NHS without someone saying ‘how are you going to pay for it’. Talk about increasing funding for the NHS and someone will always ask the question ‘how much more tax are YOU willing to pay?’ On the other hand, talk about going to war and there is silence on the topic. Either tax does or doesn’t pay for things and there seems to be a clear contradiction in the public grasp of the mechanism by which governments actually spend. Understanding the basics of modern money clearly defines the real relationship between the different sectors of the economy, the availability of resources and how many of those resources a government chooses to divert to its own purpose. It clarifies that such political decision-making is never about taxing to spend or cutting spending to ‘balance the books.’
From the perspective of the benefits which public services like the NHS provide and how resources fit into that paradigm, it can best be explained in the following way. If the government wishes to build a new hospital but the country is short of the professional and skilled tradespeople to design and build it, or the materials to provision it, or the clinical and associated staff to run it on completion then, no matter how much it is needed, spending money will not create that hospital.
If, on the other hand, there is an existing, staffed hospital serving real existing needs in its community then the government can fund it as long as those resources continue to be available and are needed. To close such a hospital on the grounds of ‘lack of money’ is as false an assertion as to say ‘we’ll have to stop February at the 10th because we’ve run out of dates in the calendar.’
Although Public Matters focuses on the UK’s healthcare system, it is highly conscious of this process being a part of a global move towards privatisation, driven by an economic and political orthodoxy. However, this is not just a UK phenomenon. Across Europe the same orthodoxy is driving the same damaging reform and its citizens are suffering the loss not only of the services which form the foundations of a healthy economy but also the ethos that underpins those services.
The world needs an antidote to the neoliberal orthodoxy which has a firm grip on the way our politicians make their economic decisions. In the same way that Keynesian economics was the antidote to the chaos of the post gold standard years, modern monetary realities in the form of MMT (Modern Monetary Theory) is the same antidote to the challenges we are currently facing. Not just in relation to the decimation of public services and the erasure of the public service ethic but also solving the pressing and urgent issue of climate change and planetary survival.
To put this into a fundamental principle, all money creation, whether by government decree or bank license, is ultimately backed by government, not by the private sector. Regardless of who is in government this radically transforms any understanding of the relationship between the government and the non-government sector compared to the existing neo-liberal polity which places government as a supplicant at the feet of the City. That matters and it is political.
Criticism of MMT frequently comes from those who are defending the economic status quo (defending balanced budgets as an objective in its own right etc) whilst maintaining that they support strong social policies. The reason that we had strong social policies post WW11 was because there was a consensus around Keynes. Privatisation became the order of the day because Keynes was discredited and Friedman took his place in the economic ascendency, the ground having been assiduously prepared in advance by the Mont Pelerin Society.
If we are to reject austerity then this orthodoxy must be swept away. Some believe that rehabilitating Keynes will do the trick, but Keynesian economics is tied to the social, institutional and political conditions that existed pre-1971. That world has long disappeared, and we face new challenges. We need an economic narrative fit for public purpose and for the realities of modern sovereign economies.
GIMMS are pleased to announce that Bill Mitchell will be in London on 1st March to launch “Macroeconomics”, the textbook book he has written with L Randall Wray and Martin Watts. There is limited space at the venue so registration is essential for anyone who wishes to attend. Tickets are free and available here.
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The post The global fight for genuinely universal healthcare is a fight we can’t afford to lose appeared first on The Gower Initiative for Modern Money Studies.
“Austerity is theft, the greatest transfer of wealth from poor to the rich since the enclosures.”
Fuad Alakbarov (Azerbaijani-Scottish human rights activist, political commentator and humanitarian.)
Photo – Peter Damian
In the week before Christmas, the Secretary of State for housing claimed that the sky rocketing levels of homelessness were down to social issues and had nothing to do with the government’s housing policy. Then just a few days later George Osborne added his pennorth dismissing outright the link between his punitive austerity programme and Britain’s homelessness crisis saying, ‘It’s not a lack of money – that’s not a consequence of austerity – that’s just a consequence of bad policy”. When interviewed on BBC Radio 4’s Today programme he went on to argue that poverty would have been worse without austerity. He suggested that when the Tories had come to power in 2010 the country was close to bankruptcy and that the public spending cuts were necessary to get the country back on its feet.
Within these words lie two dishonest and harmful narratives which have pervaded the public consciousness for decades and form the basis for people’s understanding of the world they inhabit. They have set us on the road to a divided and unequal society.
Firstly, the ideological narrative that competition defines the human race, and thus the individual is responsible for his or her own fortune. It applies the biological evolutionary language of Darwin to the functioning of the economy and society. It posits that the State has no role to play in delivering public purpose and well- being and that it should not interfere in what is conceived to be a natural process of the survival of the fittest whereby the most motivated, strongest and powerful win. It rejects outright the concept of mutual aid and cooperation as being fundamental to human and planetary thriving.
The political elites and the Fourth Estate have consistently demonised poor people, the sick and those with disabilities by the use of inflammatory language to create division both across and within the social classes. The constant reference by politicians and journalists to strivers and hard-working families is an example. Or the provocative words of George Osborne who said “Where is the fairness, we ask, for the shift-worker, leaving home in the dark hours of the early morning, who looks up at the closed blinds of their next-door neighbour sleeping off a life on benefits.” Such images perpetuate hate, encourage violence, justify selfishness and a sense of entitlement as well drive the notion that personal fulfilment trumps the interests of the collective.
Secondly, the narrative that austerity was necessary to get the government’s accounts back into balance and that its role was to be fiscally responsible so as to not burden future generations with debt.
In 2010 and following George Osborne’s spending review Will Hutton noted that ‘Never before has a country with such a large economy, carrying so much private debt, taken the experience of near financial collapse to squeeze its budget with such severity and speed”. The tried and tested Keynsian economics of fiscal spending were abandoned in a frenzy of cuts to public services, local government and welfare. The notion that the state money system was one great big household budget was invoked by deficit hawk economists and politicians alike and reference made to Liam Byrne’s note left in the Treasury that there was no money left. Repeated allusions were made to paying down the state credit cards, taking the nation back from bankruptcy and the wisdom of living within one’s means.
George Osborne’s cuts drove deep cutting £81bn from government spending on the NHS, welfare, higher education, social housing, policing and local government to lead to the loss of over 500,000 jobs. He vowed to restore ‘sanity to our public finances and stability to our economy’. Using these false analogies, the Conservatives were able to justify their cuts to public services, the selling off of public assets and privatisation of public services, the paring down of the welfare state to bare bones to kick away the foundation stones of civil society. Not for any financial imperative but because they made a political choice to do so.
Contrary to George Osborne’s claim that austerity was vital for the health of the economy the consequences have proved calamitous. Every day the evidence piles up from overstretched hospitals, failing social care, crumbling infrastructure, the tragic personal stories of those affected by changes to benefits which have led to suffering and death, increased homelessness and death on the streets of Britain, hunger and the growth of food banks, closures of high street shops and a deteriorating economy. And yet, every day, government ministers shamelessly deny responsibility for the harm they are causing claiming that their policies are successful and defending their economic record.
In 1845 Friedrich Engels coined the phrase ‘social murder ‘whereby the class which holds social and political control places citizens in such a position that they inevitably meet an early or unnatural death. Murder committed not by one individual against another but by the political elite against the poorest in society. One hundred and seventy three years on Dr Chris Grover from Lancaster University in a recently published report accuses the political elites of the same as a direct consequence of austerity and cuts to benefits which he says can be viewed as a form of “structural violence that is built into society and is expressed in unequal power and unequal life chances as it deepens inequalities and injustices and creates even more poverty.” He suggests that “as a result of austerity working class people face harm to their physical and mental well-being and in some instances are ‘socially murdered.”
People are not suffering and dying because of their own personal failings they are dying as victims of an ideology which has promoted austerity as a financial necessity when, in fact, it is the worst prescription of all. Umair Haque describes it as a force that is ripping the world apart, slashing through democracy, the future and society reducing the planet to a smoking wreck.
George Osborne boasted that austerity was necessary to save the economy by driving down deficits and the ‘national debt’ (never mind the fact it is our savings or that the government as the currency issuer can always settle its pound denominated liabilities). This deliberate deception disguised its real purpose which was always about demolishing public services to shift the public narrative to acceptance of privatisation. In this respect, it was shameful that Manchester University appointed the architect of Tory austerity as an Honorary Professor of Economics. In so doing it thoroughly insults all those who have suffered as a result of his unnecessary and harmful economic policies as well as discredits even further those subscribing to economic orthodoxy within the teaching profession. Its decision to legitimise a man who has caused so much pain and suffering should have been called into question. Such servile behaviour in a seat of supposed learning was distasteful and has proved to be an odious appointment as his austerity chickens come home to roost.
It’s now time for the people to contest the lies and the cruel deception practised by ideologically driven politicians. Firstly, by recognising that nothing is set in stone and that there is an alternative to austerity. Secondly, by opening our eyes to the painful realities of cuts to public services and social security whereby people are suffering and dying as a result. And thirdly, by getting to grips with how money works and the currency issuing nature of sovereign governments. Governments which need neither to tax nor to borrow to spend and whose limitations are not money but the real resources available to it to deliver its policies.
The truth is that government spending into the economy injects money into the purses and bank accounts of public sector workers who then take their earnings and spend them directly into the real economy, pay down their debts or save. In fact, a healthy economy depends on people spending, it depends on sales of goods and services. To give an example every £1 spent by government on the NHS will generate around £4.30 of spending as wages circulate around the economy. By cutting public spending, austerity has had the reverse effect which has led to soaring of unsustainable private debt and a downward economic spiral for all but the rich.
Once we grasp the essential truths of monetary realities we will be able to see the wood for the trees and recognise that the role of government is not to balance the budget but to balance the economy. Only in this way can we create a fairer, equitable and more sustainable world.
References
How Austerity Ripped the World Apart – Umair Haque
Austerity results in ‘social murder’ according to new research – Lancaster University
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The post “Austerity is theft, the greatest transfer of wealth from poor to the rich since the enclosures.” appeared first on The Gower Initiative for Modern Money Studies.
A weekend of quiet reflection
T
oday’s blog comes just before the weekend commemorating 100 years since the end of the First World War, the ‘war to end war’. When it started people thought it would be over in a matter of months but it turned into a fight to the bitter end. It is regarded as the first “total war” in which military and industrial resources and people were mobilised on a scale never before thought possible. Trench warfare created an endless demand for men, munitions and supplies with often no apparent gains or victories. But by the beginning of 1918 those resources had been drained too much. Demoralised German workers, suffering from food and fuel shortages, threatened revolution at home. The German leaders eventually asked the forces allied against them for peace.
The armistice went into effect at 11am on 11 November, 1918.
The war did not end all wars. The brutality and pitiless nature of the war and the sacrifice of the combatants did help to change the world, though. The reaction to the two world wars, the ravaging of communities by the 1919 flu epidemic and the Great Depression combined to bring about the great social benefits of the NHS and the Welfare State. 100 years on those benefits are under serious threat and among those who will suffer the consequences of a fraying safety net will be those who have given military service in both war and peacetime.
This weekend we will respect their memory in a modern way. We will not post or comment on social media from sunset on Friday to sunrise on Monday.
The idea of a weekend of quiet reflection appeals to us even more in the context of recent arguments on social media over MMT. A great deal of noise is being generated over what is, at heart, a matter of too many people, on both sides of the argument, who are not prepared to understand, or take the time to read, what MMT actually is. We read various criticisms along the lines of ‘MMT hasn’t taken account of taxation and integrated it into a more comprehensive theory or explanation of how a modern economy works’ or ‘MMT still needs to be developed’. And we also see supporters saying they like the basic ideas but ‘we still need to tax the rich and MMT should say that’.
There is clearly some confusion in the ‘taxes don’t pay for spending’ message, in that it is being interpreted as ‘we don’t need taxes’. Perhaps someone would like to bend their creative talents to thinking of a neat way to encapsulate that idea that carries the real message better?
With this in mind, this blog is going to run through a few of the basics that should be understood by supporters and critics alike.
MMT is a ‘theory’ in the way that relativity or evolution is a ‘theory’, in other words it is an intellectual school of thought based on empirical evidence of how things work. It is a blend of established macroeconomic theories including Chartalism and the work of successive and influential 20th century economists such as John Maynard Keynes, Abba Lerner, Hyman Minsky and Wyn Godley. That is why it is called ‘Modern’, in the same way as we would say ‘Modern Art’. These people have influenced the work of more recent economists and finance experts. Professors Bill Mitchell, Stephanie Kelton, L Randall Wray and Warren Mosler have been working together to develop it into a comprehensive and coherent body of work for 25 years.
It is an antidote to the neoliberal economic traditions which have a firm grip on the way our politics is currently ordered in the way that Keynesian economics was the antidote to the chaos of the post-gold standard years.
When governments spend they create new money. When they tax they destroy it. When commercial banks make loans they create new money. When the loan is repaid the money is destroyed. All money creation, whether by government decree or bank license is ultimately backed by the government, not by the private sector. Regardless of who is in government this radically transforms any understanding of the relationship between the government and the non-government sector compared to the existing neo-liberal polity which places government as supplicant at the feet of the City. That matters. This is ‘political’ even though it may not be party-specific political.
Criticism frequently comes from those who are defending the economic status quo (defending balanced budgets as an objective in its own right, etc) whilst maintaining that they support strong social policies. The reason we had strong social policies post WWII was because there was a consensus around Keynes. Privatisation became the order of the day because Keynes was discredited and Friedman took his place in the ascendancy, the ground having been assiduously prepared in advance by the Mont Pelerin Society. This orthodoxy must be swept away if there is to be any change from austerity. There are those who believe that rehabilitating Keynes will do the trick, but Keynesian economics is tied to the social, institutional and political conditions pre 1971. We are no longer in that world. We need a new dominant economic narrative.
Wishing you all a peaceful weekend.
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The post A weekend of quiet reflection appeared first on The Gower Initiative for Modern Money Studies.