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Just getting by is not enough

Woman shopping in a supermarketPhoto by Kevin Laminto on Unsplash

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

Charles Moore

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And then went on to criticise Sunak by saying that:

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

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

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

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

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

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

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

 

Event Recording

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

 

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

 

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

What sort of future do you want for yourself and your children? If it’s not more of the same, then it’s time for some radical thinking. 

Two children walking away on a path with their arms around each otherPhoto from Pxfuel

Three common neoliberal threads run through this week’s news: How will the enormous sums of money borrowed by the government to hold up the Covid-19 ailing economy be paid for? How can we fix the crisis in social care which has been starkly revealed over the last few months? And the continual covert shifting of responsibility from government to the public in the endless blame game which has created the narrative that poverty and inequality is a personal failure that bears no relationship to government policy.

Over several weeks now, and already noted by the GIMMS MMT Lens in previous blogs, the narrative of getting the public accounts back into balance has been a constant theme in the media; preparing us for the worst, preparing us for the inevitable. Revenue raising, public sector pay restraint and finding savings, returning to normal levels of ‘borrowing’, not to mention talk of plans to balance the books.

After 10 years of austerity and the very visible consequences which are wracking society, combined with the economic effects of Covid-19, the public should be shaking in its boots at such talk. Yet there is often a veiled acceptance that there will be no alternative. Only this week, Douglas Fraser in an article which appeared on the BBC website entitled ‘Is it time to rethink the tax system?’ repeated the common tropes that more tax revenue would be needed to fund government borrowing and the enhanced public services the nation is demanding. Quoting the Public Accounts Committee on the subject of tax breaks, it was suggested that they cost the public purse hundreds and billions of pounds in lost income as if somehow the government was a public limited company, a local government authority or indeed you or I.

Forgive us if we keep labouring the point, but wherever you look you just can’t get away from the false Household Budget version of the public money system – it pervades the public consciousness like a bad penny. Both on the left and right it informs every comment by journalists, politicians, government institutions and think tanks. From the wealth taxes to pay for public services suggested by the Shadow Chancellor Anneliese Dodds, to the price the nation will have to pay for all that additional spending. Never mind that its aim was to keep people from going hungry and being unable to pay their bills when the economy was going into a nosedive because of lockdown.

One might, of course, take issue with the way this fiscal programme was carried out, benefiting as it did businesses and corporations rather than working people directly, with the fact that many were let down by a welfare system which had already been proved not fit for purpose with many falling through the cracks, not to mention the vast sums of money poured into public contracts with the private sector. But such a fiscal injection was vital and will continue to be vital for many months to come, even as the furlough scheme is closed and we face the prospect of a huge rise in unemployment on levels not seen for many decades. These were political choices unrelated to monetary realities and we would do well to recognise and emphasise that fact when talking about how money works.

Even whilst the conversation is about how it will be paid back and in an age where national sovereignty has been deliberately ceded to global corporations, it demonstrates with stark clarity the real powers of a government which has sovereign currency-issuing powers to act quickly and with public purpose (should it choose to do so) without reference to the state of the public accounts (as was already patently clear from the bank bailouts in 2008 but which somehow we seem to have forgotten!)

In the review of a recently published book ‘Post Democracy – after the Crises’ authored by the academic Colin Crouch it notes that:

Globalisation having curtailed the ability of national governments to shape economic policy, the neoliberal ideology that drove it “has turned this weakening of the nation-state into a virtue”. For Crouch, neoliberals view governments as “almost by definition incompetent” and sought to strengthen the power of multinationals as more dynamic, efficient stewards of economic well-being. But neoliberalism was never about simply weakening the state –instead, it requires continual state intervention to create and shepherd market mechanisms, as well as obligatory bailouts and subsidies (as we see in the current crisis). The anti-statist rhetoric of neoliberal populism bears little resemblance to the actual practice of neoliberals in government.

Whilst denying modern monetary reality (even though that is what it has been doing in effect) the UK government has not had any financial problem dealing with the current crisis – funding its agenda or lining the pockets of the corporate beneficiaries who no doubt will continue to profit from the public purse. Contrast that with the false narrative being pursued about affordability and how it will be paid for ultimately and surely the contradictions are staring the public in the painfully in the face, particularly now.

Instead of examining this from the point of view of how public purpose can be served through government action, the myths and legends of how governments spend are being shamefully repeated to reinforce the desired message that it will have to be paid for. This strengthens the intrinsic public belief that our public and social infrastructure will have to bear the brunt in the end.

Many will approve of the government’s stated intention to create thousands of UK public sector jobs – from nurses to teachers and police officers – after years of unnecessary cuts which have damaged our public and social infrastructure. But seen alongside the narratives of rising ‘government debt’ and questions about how it can be paid for, they will understandably mistrust the government’s expressed intention, whether that’s rebuilding an already decimated public sector or levelling up society. Especially those who understand that cutting departmental budgets to find so-called savings which can then supposedly be spent elsewhere is a fantasy and a deception.

For many decades, the question of funding social care has been a reoccurring theme in political circles and this week it was brought yet again into public focus as it was revealed that the government was considering plans for over 40s to pay more tax or national insurance or self-insure to contribute towards the cost of care in later life either at home or to cover the cost of a stay in a care home. It would, in the words of the Conservative MP Damien Green, resolve the funding question, whilst the Liberal Democrat former MP Paul Burstow suggested that it would put ‘social care on a firm footing for the future … to ensure sufficient funds are raised’. The chief executive of NHS England, Simon Stevens, said in an interview in early July that he hoped that ‘by the time we are sitting down this time next year, on the 73rd birthday of the NHS we have actually as a country been able to decisively answer the question [of] how we are going to fund and provide high-quality care for my parents’ generation’.

That sticky, sticky question of how we will pay for it yet again raises its ugly head and yet again fails to acknowledge monetary realities. Aside from the facts that the flat-rate tax being suggested would be regressive and inequitable punishing those on already low incomes and that it would take income that would have been spent into the economy out of the economy at a time when it is already struggling (and will be likely to do so for some time yet, maybe even years), it does not represent the reality that such a tax does not equate to a pot of money put aside by government to pay for anything – let alone social care.

As Alan Greenspan said in response to a question by US Congressman Paul Ryan about personal retirement accounts helping to achieve solvency for the system.

Well, I wouldn’t say that the pay-as-you-go benefits are insecure, in the sense that there’s nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The question is, how do you set up a system which assures that the real assets are created which those benefits are employed to purchase.”

The UK is no different. Importantly as Greenspan points out and which equally applies, although in a different context here, it could create the money to fund social care tomorrow, if it chose. The real constraints would be assuring that government had made provision to ensure that the real assets are available – in this case sufficient care workers with good pay and conditions and an adequate care home infrastructure to deliver high-quality care.

That requires both planning and political will and, for the best outcome, restoration of social care to the public sphere rather than being run by corporations who are intent on cutting costs for profit. The endless round of austerity has cut funding to local authorities charged with social care provision, combined with its provision through the private sector has been damaging. This and the colossal failure of care revealed due to Covid-19 show that it is time for a radical rethink about social care provision.

We need to stop thinking about how it can be paid for because with modern monetary realities in mind that is a given. Instead, we must start thinking about how we can create a decent social care system which offers dignity to those who need its services and fair pay and conditions for those providing them.

Finally, in this week’s news, there has been another frequent constant theme – blaming the populace for government failings. Whether it’s Matt Hancock blaming the public for the rise in coronavirus infections (notwithstanding the complete dog’s dinner that has been the constant theme of this government’s handling of the pandemic with its tardy and inconsistent communication and messaging), telling us we can save the NHS by cycling and losing weight (implying that you’ll be to blame if the NHS sinks beneath the waves) or the shocking comments by Jacob Rees Mogg’s sister Annunziata who tweeted that people on low incomes should buy fresh produce instead of junk food to save money and learn to budget and cook to improve their health. Rees-Mogg, speaking from her ivory tower of wealth and privilege, clearly has no idea about the lives and struggles of ordinary working people. Instead let’s blame, blame, blame.

The neoliberal notion of personal responsibility has become paramount in government messaging down the decades. One which has disputed the role of the state in creating a positive vision of society which puts collective action at the heart of government policies.

We all have a role to play as part of any collective action to improve the nation’s well-being, but such messaging is less to do with collective action and more to do with shifting the blame downwards so that government is no longer in the firing line and can thus abdicate its responsibility and deny democratic accountability.

It is time to acknowledge the government’s responsibility for the socio-economic conditions people find themselves in. Not just the consequences of austerity – the cuts to public sector spending on our NHS, social care, education, policing and local government – but also those policies which have decried full employment as a policy objective and left people in low paying, precarious employment with less protection against the ravages of capitalism. It is time to recognise the socio-determinants of the nation’s health and how governments have used the blame game to shift attention away from their real objectives. Serving not citizens, but global corporations and shovelling public money into private profit. Westminster Plc!

If the government can create money on a whim to fund its friends, then equally it can create money for the public purpose and to pursue full employment. Don’t let anyone tell you that it can’t. Learn the real story about money and what the very real constraints to spending are and how the government’s role is to balance the economy, not the budget. Our lives will depend upon it.

 

Upcoming Event

The Post-Covid Economy – Sat, 8 August 2020 18:00 – 19:30 BST

What could a Post-Covid Economy look like? Join GIMMS and our speaker Philip Armstrong to find out. Register via Eventbrite

 

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The post What sort of future do you want for yourself and your children? If it’s not more of the same, then it’s time for some radical thinking.  appeared first on The Gower Initiative for Modern Money Studies.

We need a government that dares to think big and be more ambitious in its strategy to set our economy on a more sustainable and equitable pathway.

Man begging with sign that says "homeless and broke, please help if you can"Photo by Vincent Albanese

“The difficulty lies not so much in developing new ideas as in escaping the old ones.”
― 
John Maynard Keynes

When the world is facing one of the worst public health and economic crises since the Great Depression in the 1920s, Rishi Sunak excelled himself this week with his summer statement. Not in a good way one has to say. To put it bluntly, we have gone from Boris Johnson’s ‘New Deal’ pretensions to Rishi Sunak’s ‘meal deal’ as so neatly coined this week by the Labour party. At a time when unemployment has soared globally with projections that it will rise still higher, Sunak’s intervention could be said to be less than even a damp squib which fails to deal with the very real threats that the UK faces right now as domestic and worldwide demand plummets and people hunker down in uncertainty both for their jobs and their financial security.

That the Chancellor thought a ‘eat out to help’ scheme would help those 3.7 million key workers struggling to survive on less than £10 an hour shows where his head is firmly planted – in the sand. As Garry Lemon from the Trussell Trust noted ‘encouraging people to eat out is one thing but ensuring people can afford to eat at all must come first’. Ten years of austerity has left essential public services on the edge of collapse and people in insecure work on low incomes both in the private and public sector. Whilst giving a dining out discount to the already well-off it is quite simply a slap in the face for working people who have already borne the brunt of years of government cuts to public spending and yet who have proven their value to society in these last few months as key workers keeping the important services going as the nation locked down. The clear downside of his meal deal voucher is that you’ve still got to have the means to pay the other half of the bill when many are simply struggling to put food on the table!

And the bad news did not stop there, as government showed yet again who is to benefit from increased government spending. The proposed Job Retention scheme, which will replace the Furlough scheme ending in October, is just another mechanism for supporting businesses instead of working people and as the TUC commented it will do little to reduce unemployment. It will quite simply represent just more of the same corporate ‘welfare’ which has underpinned government policies for decades, whether bailouts for banks and businesses or employment legislation honed to serve private sector needs.

And then, to cap it all, a £1bn giveaway to second home-owners and landlords in the form of a reduction in stamp duty which once again favours the wealthier amongst us and does nothing for renters or indeed anyone purchasing a house in areas where prices are lower out of London.

Just how Sunak viewed these proposals as a mechanism to kickstart the economy is anyone’s guess, when there are already vast numbers of people struggling as a result of the combined consequences of government austerity and the economic consequences of Covid-19 with more hardship to come as the OECD projections make clear. The words of Marie Antoinette who was reputed to have said when there was no bread ‘Let them eat cake’ sums up the government’s response very simply as a complete denial of the extent of the poverty and inequality that exists which has been caused by a pernicious economic theory which has been used to justify greed and selfishness and put private over collective good.

Bread or cake, either way it’s just crumbs, when the strategy should be far bigger in terms of spending to alleviate the human cost to society and the economy and indeed dealing with the next big challenge bearing down over humanity – climate change. His plans do nothing to address the structural poverty which exists in the UK where food banks, homelessness and families living in temporary accommodation have become the norm and an accepted part of the way things are, as has blaming and shaming.

His plans do nothing either to reverse the cuts to public spending which have done so much damage to our essential public and social infrastructure, the consequences of which have been so much in evidence these last few months. After weeks of people clapping key workers on the doorsteps of their homes and politicians jumping on the goodwill bandwagon to give the false impression that we are all in it together, little has been said about the who is to blame for the worsening condition of our public services and what comes next. Johnson passing the buck for the care home crisis onto staff, along with his criticism of NHS England, Public Health England and SAGE’s responses to the pandemic should be a clue to where the government intend to shift the blame. Just more smoke and mirrors to distract from the consequences of government policies.

The fine words and expressions of solidarity with the working people of this country by Rishi Sunak are no replacement for real action to deal with the threats that face us. In the event that a second wave of Covid-19 can be avoided, unemployment is likely to rise to 11.7% by the end of the year but should we experience a second wave that could, according to the OECD, rocket up to almost 15% of the working population. The scourge of unemployment threatens young people in particular who stand to lose out as the labour market contracts.

So far, we have seen the government relying on the private sector to dig us out of this mess, whether it’s a Job Retention Bonus or the proposed apprenticeship scheme. It fails to acknowledge that continuing economic uncertainty will not bring about confidence, either for businesses to invest or consumers to spend. Furthermore, a £10 meal voucher or a reduction in VAT will do nothing to restore confidence when people are fearful for their jobs and their future income. It’s all sticking plasters and simply perpetuates the lie that it is only the private sector that can create the wealth in the end.

As Josh Ryan Collins wrote in a UCL IIPP blog on Medium ‘The pandemic has raised the level of uncertainty in the economy to an all-time high. As John Maynard Keynes emphasised, at such times it is natural for firms and households to retrench. Under such conditions – and with foreign demand also crippled – the domestic government is the only actor able to stimulate the economy and prevent unemployment and recession’.  

The action needed to avert an economic crisis and address climate change is on a scale far greater than the one on offer by the Conservatives, who are picking and choosing the recipients of their spending based on a flawed economic model which puts the private sector as the wealth creator and denies the power of the state and its money issuing powers to address the serious challenges to come.

Government needs to restore its role as employer of last resort and focus its efforts on full employment through job creation – not as a temporary measure but as a permanent feature of public policy. At the end of the day, whether you are on the right or the left of the political spectrum, a mechanism for providing paid work at a living wage which supports the health and well-being of local communities in difficult economic conditions and at the same time keeps money in people’s pockets which then, in turn, flows through the economy and keeps prices stable surely should be the goal of any government?

But how could this be achieved? In two ways:

Firstly, with the introduction of a public sector Job Guarantee to provide employment for those who have been made involuntarily unemployed either as a consequence of Covid-19 or as part of a Just Transition towards a green economy as old carbon-based jobs become redundant and new green ones take their place. With a living wage and training, it would offer a stepping-stone into private sector work as economic conditions improved, would set a wage floor below which private employers could not offer employment and would serve local communities by providing worthwhile and useful public service work.

And secondly, with an expansion of the public sector, which hitherto has been shrunk to a shadow of its former self and is also short of hundreds and thousands of staff particularly in social care and health. As GIMMS has said many times before, the public sector provides the foundations for a healthy economy and any government of any political shade would do well to recognise that public service which serves the economy should not be in the hands of profit-hungry companies which are more interested in cutting costs than improving lives.

Not only do we need to rebuild the public infrastructure that has been shattered by the austerity policies and neoliberal narratives of small government, but we also need to recognise the real and tangible value of public sector work to the economic and social infrastructure.

Of course, without doubt, the next question will be ‘how will it be paid for’? Over recent weeks the debt scaremongers have been much in evidence from various media outlets to public institutions and public finance experts who show scepticism that even the current round of additional spending can be funded without taxing or borrowing more. They put the fear of God into the public consciousness that at some unspecified time in the future someone will have to pay and that someone will be the taxpayer.

Even the Daily Mirror this week helped to spin the lie to its readers that the government has to borrow to fund its deficit, that it will take decades to pay off the debt that has been accumulated as a result of the additional spending, and that the Chancellor will have to impose higher taxes eventually to pay it back. None of this is true and it is shameful that such lies continue to create such fear and uncertainty in the minds of the public.

By all means carry on with this nonsense but such beliefs will, by their nature, constrain any government’s capacity to serve the best interests of its citizens and the economy as a whole if people lose confidence and fear the consequences of such spending on their own future income. Instead of listening to the likes of the Daily Mirror, Rishi Sunak, successive shadow chancellors and other economic pundits not to mention the IFS which regularly trots out analyses of the public accounts as if it were a household budget, we should be challenging these false notions wherever they come from.

And then, when the National Audit Office adds its concerns about the increasing cost of rolling out universal credit and the rising impact of Covid-19 on job losses and Rishi Sunak announces that the number of work coaches in jobcentres would double next year to cope with rising numbers of unemployed people signing on, if you have even the most limited knowledge of how governments spend then you have to scratch your head in puzzlement.

The first thing to note is that the monetary cost of any programme is an irrelevancy for a government like the UK’s that issues its own currency. Secondly, it is not the monetary cost of unemployment or underemployment that is important, it is the social and economic cost to individuals and the economy as a whole that matters. And thirdly it won’t matter how many job coaches you put in Jobcentres – as Warren Mosler so aptly pointed out using the analogy of dogs and bones – if you’ve only got 95 bones and 100 dogs it won’t solve the problem of unemployment. Suggesting that the onus lies with the individual to shape up and be responsible for his or her own fate is a neoliberal narrative to blame and shame.

We need the state to recognise its responsibility as the employer of last resort during the economic cycle and we need a Job Guarantee, not a system of individual censure and humiliation.

The government needs to think big and be more ambitious in its strategy to help reset our economy on a more sustainable and equitable pathway. Whether it will, is an entirely different matter.

 

 

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The post We need a government that dares to think big and be more ambitious in its strategy to set our economy on a more sustainable and equitable pathway. appeared first on The Gower Initiative for Modern Money Studies.

To rephrase Mahatma Gandhi ‘The future will depend on what we do today.’

Statue of seven children using a lever to move the world“Together for Peace and Justice” by Xavier de Fraissinette, Parc de la Tête-d’Or, Lyon. Image by Ben Kerckx from Pixabay

Just a brief look at the news headlines in the last few weeks should be enough to set the alarm bells ringing. We are watching as the nation suffers a train crash of epic proportions.

The Institute for Employment Studies reported in May that the number of people claiming benefits principally because of being unemployed had risen by 860,000 in the month to 9th April to just over 2 million, and that not since February 1947, the year of the big snow, had unemployment figures risen so steeply. It went on to say that that that figure was now likely to be in the region of 3 million, the highest since the 1980s, and that it will take years, not months, to repair the damage.

According to figures released by the Office for National Statistics (ONS), 600,000 jobs have already disappeared and many face redundancy over the next few months as economic uncertainty continues and employers begin to make plans to reduce their workforce as the furlough scheme is phased out later this summer. The ONS also noted that that there had been a record fall in job vacancies between March and May and hinted at worse to come. Jonathan Athow, from the ONS, commented that ‘the slowdown in the economy is now visibly hitting the labour market’

The consequences of Covid-19 on the economy, and let’s not forget the impact of 10 years of cuts to public spending and welfare entitlements, are affecting every aspect of our lives.  Thousands of children have been plunged into poverty and UK food banks are facing record demand with more than 100,000 carers forced to use a food bank in the UK lockdown. Two-thirds of families on universal credit have been pushed into debt, having had to borrow money including using payday loans or credit cards to keep their heads above the water. Put bluntly, that means people struggling to put food on the table, money in the electric meter or pay their rent, not to mention the impact on the mental health of parents trying to provide the basics or educate their children at home for three months without adequate access to the internet or computers.

The Joseph Rowntree Foundation, in partnership with Save The Children, are shining a light on the experiences of families and children in poverty; calling on the government to ensure that families are supported, not just during this lockdown period but also beyond it, to prevent increasing numbers of children being pulled into poverty. It points out that too many children are going without, due to income losses and the pressure that the lockdown has put on already overstretched budgets.

Whilst one must commend those who have performed extraordinary acts of public service during this pandemic, those who have raised money for the NHS and charities and this week like Mark Rashford who through a steadfast public campaign shamed the government into continuing its vouchers for free school meals during the summer holidays, we now urgently need a frank national conversation about where we go from here.  Not just about the sort of society we want to live in now or in the future, but whether we even want to protect our children’s children from the devastating effects of climate change; the threat of which is hanging like a tsunami over our heads while we queue outside Primark or Nike Town!

We are a nation that has been divided by a toxic ideology which has, until recently, ripped to shreds any sense of collective responsibility. We cannot stick our heads in the sand and return to the normal many are hankering for. Too much is at stake.

The pandemic has revealed the shocking state of the Social Care system which is in a state of collapse, an NHS battered by 10 years of cuts to its spending with reductions in staffing, beds and facilities, a social security system which has removed the support pillars and left people in dire poverty and children hungry, living sometimes in temporary accommodation with no sense of security.

The greatest achievements of the post-war world are being dismantled or outsourced to profit and are being replaced by the so-called big society which ironically is also collapsing due to cuts government cuts. As previously reported by GIMMS, Covid-19 has left one in ten charities facing bankruptcy this year and many struggling to provide services in an economic environment which has its roots in austerity.

Instead of state involvement in the provision of the fundamental structures that form the basis of a healthy economy and society which benefits everyone (even if those structures are not perfect), we are being prepared through constant propaganda and messaging to accept a reset. One in which the state continues to pour public money into private profit but at the same time claims there is no money for publicly paid for and managed services and an adequately funded social security system.

Our society is being impoverished, not just financially but in terms of its public and social infrastructure, culturally and the safety net which protects people when through no fault of their own the economy tanks. All on the basis of claimed unaffordability. The monetary largesse of these last few months is already in question and we face a return to more cuts to public spending.

Just this week it was reported that Leeds Council is considering closing its museums and libraries as it can no longer afford to pay for them. This is not just a localised problem; across the country libraries and museums have already closed or rely on volunteers to staff them. The pandemic is revealing the brutal cost of previous cuts to government spending that have left local and regional councils, particularly in the north and south-west, impoverished and with insufficient infrastructure to even deal with the consequences of Covid-19.

Aside from the valuable input to GDP (which ministers seem to conveniently forget), our cultural life is under threat as our museums and libraries face more closures as local councils try to balance their books. Our national and local theatres, art galleries, orchestras and all those things we value in terms of human enrichment and education face if not oblivion, then severe retrenchment.

While public money finds its way easily into private profit at the blink of an eye to provide public services in the name of the lie of market efficiency, our society is being prepared to accept a reset in which charities, public donation and volunteering, not to mention the philanthropy of the Victorian poor law boards, decide who gets what.

Is that the sort of society we really want to live in?

To recognise the alternatives, we have to understand how an alternative vision can be paid for, as that is the perennial question always asked by the public and politicians alike. If we fail to do so the future looks pretty bleak for us all now and for future generations who will be paying not the financial cost but the very real human cost.

We need to start with a basic understanding of how the UK government as the currency issuer spends. It is regrettable that across the piece left and right-wing economists, along with politicians and institutions are still stuck in the household budget narrative of how governments spend. For the right, the constraints lie in a scarcity of money (which they use to justify their political agenda) and on the left the answer is getting the rich to pay through their taxes or borrowing at low rates of interest to fund our public services, pay for public infrastructure or fund a green new deal.

Only this week the ONS focused its report on the public finances on the through-the-roof borrowing figures and, shock horror, it is apparently £173.2bn higher than it was a year ago at £1.95 trillion and the UK’s debt-to-GDP ratio has pushed above 100%. Such focus is designed to put fear into the hearts of people who don’t understand the working of the economy and the public finances and it is likely to enable the government to justify further austerity at some point in the future.

Indeed, the Chancellor Rishi Sunak it has been reported is preparing to scrap the triple-lock on the state pension on the basis that the already high cost of the Covid-19 pandemic could make it unaffordable. Officials have claimed that a temporary suspension would be unavoidable if the government is not to be faced with paying a massive bill next year.  The Pensions Policy Institute has already warned, quite rightly, that such a move would have serious implications for already existing and future pensioner poverty and the amount spent on other means-tested benefits such as housing benefit, caring credits and disability premiums. It would also impact on low earners who would have to put in an extra £540 a year to avoid poverty in retirement. How would punishing people even further help the economy or indeed serve its already beleaguered citizens?

Torsten Bell from the IFS in an article in the Guardian claimed that a survey of economists had proved that they were not keen on cuts or more austerity to reduce the deficit, but favoured tax rises instead. He further claimed that economists were turning into a bunch of radical lefties these days. However, whilst their support for austerity has dwindled perhaps, they still see the public accounts as a household budget whereby taxing and borrowing (at low rates of interest) form the basis for government spending. That cannot be considered radical in any shape or form and unless they can get to grips with how a modern monetary system actually works and reject the notion that spending now will create financial burdens on future generations, then sadly we will see more of the same orthodoxy rearing its ugly head.

To put it bluntly, in an economy that is facing wipe-out and serious future economic consequences, the idea that paying more taxes to pay for government spending which will do yet more harm to the economy as it takes money out of the economy is nonsensical, especially when you know that government doesn’t need those taxes before it can spend.

We need to ditch this narrative if we are to make a better, fairer world which also puts the environment as a top priority. Indeed, at the beginning of this week, the leaders of some of Britain’s top charities wrote to the Prime Minister to demand as a priority a green recovery and urged him to use economic rescue packages to build low-carbon infrastructure and stimulate the creation of long-term green jobs.

However, if we allow that sticky question of monetary affordability to dominate the debate, any future actions will always at some point in time constrain a government’s spending decisions.

We don’t have to be economists either to understand monetary realities or challenge the current false narratives which pervade the discourse.

There are just a few things we need to know or consider:

  • The UK government is the currency issuer.
  • It neither needs to tax in order to spend, or to borrow to cover its deficit
  • Such a government whilst not being financially constrained does face real resource constraints when deciding its spending policies. These include the human beings that do the jobs and the physical resources needed to provide goods and services.
  • If the nation decides ultimately that it wants the government to take a greater role in public provision of services to serve the best interests of citizens, it will have to accept that the government will have to procure those resources and thus may have to deprive the private sector of some of those resources in order to do so.
  • A Job Guarantee is fundamental to this understanding of monetary realities. It not only provides an essential automatic stabiliser in the economy ensuring that people are not left abandoned on the unemployment scrap heap during its cyclical ups and downs and values their contribution to making a more stable society but also plays a vital role in controlling inflationary pressures.

In the coming years, with the growing threat to climate change, it will also provide an essential mechanism to implement a just transition as jobs are lost in polluting industries and we move towards a sustainable economy.

In such an environment we will have to entirely rethink and redefine what work is and what our societal values should be. We need to ensure that we can offer our young people a future with good, non-exploitative employment which pays good wages and offers decent terms and conditions within the context of creating that sustainable economy.

Let’s not leave the future in the hands of the neoliberal orthodoxy which has done so much damage, created so much poverty, inequality and societal division. We do have choices. We don’t have to accept more of the same.

 

 

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The post To rephrase Mahatma Gandhi ‘The future will depend on what we do today.’ appeared first on The Gower Initiative for Modern Money Studies.