public purpose

Error message

  • Deprecated function: The each() function is deprecated. This message will be suppressed on further calls in _menu_load_objects() (line 579 of /var/www/drupal-7.x/includes/menu.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Deprecated function: implode(): Passing glue string after array is deprecated. Swap the parameters in drupal_get_feeds() (line 394 of /var/www/drupal-7.x/includes/common.inc).

The Government, like the Pied Piper, marches the nation back to Dickensian Britain

“Please spread the word. We need to end the ‘state is like household’ analogy. The main constraint on govt. spending is the productive capacity and resources in the economy and the risk of inflation – not the size of the budget deficit.”

Josh Ryan-Collins on Twitter

The Pied Piper of Hamelin playing his pipe and leading the children away from the town
The Pied Piper of Hamelin, print, Henry Marsh, after John La Farge (MET, 21.65.4). John La viola, CC0, via Wikimedia Commons

This week, the Chancellor of the Exchequer, after dragging his feet and protesting in his speech to the CBI that, given the external global circumstances driving the cost-of-living increases, ‘there is no measure that any government could take’, has now done an about-turn. After telling the public not so long back that his top priority as the dangers of the pandemic receded was to restore the public finances, the ongoing and worsening supply crisis has finally forced his reluctant hand, albeit as a temporary and inadequate measure as many charities and other anti-poverty groups have already noted in their analyses. He fails, yet again, to get to grips with the underlying structural problems caused by the policy decisions of successive governments. Decisions which have led to a low wage economy, and over decades driven poverty and inequality which has benefited businesses at the expense of working people. Existing problems which have severely exacerbated the current unstable economic situation.

It is, however, once again too little and too late. An afterthought for a man who appeared last week for the first time in the Sunday Times Rich List, who seems to have no concept of the difficulties in ordinary people’s lives. Andrew Harrop, of the Fabian Society, described the Chancellor’s measures as a ‘sticking plaster’. We have had a lot of those over the last decade as government austerity has resulted in the inevitable breakdown of public and social infrastructure, and of society and its values. Half-baked policies have glossed over the growing hardship this government has caused by doing nothing except revel in its rhetoric and smoothing over of the truth with its propaganda.

Societal breakdown is not an unavoidable destination, it is the result of the deliberate failure by the government to enact the policies that would keep its citizens safe and secure in a functioning, fair economy and ensure that in hard times it acts to cushion the blows caused by events out of its control. Furthermore, whilst many, with their hearts probably in the right place, talk about creating a fairer welfare system and higher benefits as a way out of this situation, in the long term that is not the answer, and buys into more dependence on the state, which, frankly, has already done its utmost through reforming the welfare system to punish those citizens who find themselves in involuntary unemployment or precarious employment, or unable to work through illness.

The solution lies in creating a fairer society that is predicated on better wages and terms and conditions of employment, not so-called welfare ‘handouts’ to those who are disparagingly referred to as the ‘deserving poor.’ As Hannah Fearn wrote in the Independent this week: ‘Benefits do not support the poorest to live a self-determining and fulfilled life, but trap them in desperate cycles of poverty.’

It also lies in creating a high-quality public service sector, instead of the diminished one we have today, the implementation of a Job Guarantee to support people, as now in this current economic climate, and for those that cannot work, a properly funded social security system which gives people dignity and sufficient income to live on.

It was shameful to note that in his speech, the Chancellor, announcing his spending measures, said that the government would ‘not sit idly by’. That would be laughable if things were not so serious. For over more than ten years, the Conservative government has ‘sat idly by’, as it cut spending on public and social infrastructure to the bone, on the specious lie of unaffordability, couched in narratives of sound finance. This is therefore not a new phenomenon. The price we have paid for that lie as the pandemic raged has been made very clear. The public infrastructure upon which society relies, both in good and bad times, fell short, from the NHS to social care, education, local government and other vital institutions. Everything that binds society together with a cooperative purpose has been whittled away.

The emphasis on balanced budgets to serve an ideologically driven agenda that benefits global corporations rather than delivering public purpose, has led to rising poverty and inequality, which have translated into hunger and the growth of food banks as families have struggled to put food on the table and heat their homes. GIMMS has covered these disturbing subjects endlessly in its MMT Lens, week by week, month by month, year by year, since its launch in 2018. The fractures began in earnest a decade ago, with unnecessary austerity, and a false discourse that governments are limited in their spending policy choices by the tax they collect or what they can borrow, which, in turn, according to the orthodoxy, has consequences for future generations in terms of higher tax burdens. An obscene deception in the light of what has followed, and which arose out of a political choice driven by a pernicious economic ideology, and not financial necessity. It is time to hammer home that the line so often used by Sunak and others is false. The future burdens won’t be tax ones, but human and environmental ones created by governments which have failed consistently to invest today to create a truly productive and sustainable future tomorrow.

The global pandemic which affected and is still affecting production, followed by the outbreak of war in Ukraine, have only served to highlight our strategic planning deficiencies and interdependence. Ukraine and Russia play a major role in global food markets (not to mention oil and gas) which, when increasingly combined with the growing consequences of climate change on food production, with India imposing a ban on wheat exports as severe heatwaves have damaged crops, and East Africa in the grip of a relentless drought, only serves to emphasise the real costs for governments which have prioritised keeping the global corporatised economic order functioning, and the capitalist gravy train, predicated on exploitation, rolling. The tsunami of climate change is bearing down upon us, and yet, the government still sees the future as being defined by increasing growth in consumption, regardless of its impact on the planet. We apparently have to make up for the losses of the last two years, even if that means abandoning our climate promises which now seem to have been lost somewhere in the ether.

Instead of focusing on sound, consistent, long-term strategies to secure food and renewable energy domestically, governments have allowed the global corporate juggernaut to dictate the pace, thus securing its power, influence, and wealth. But as we are belatedly discovering, the ‘Just in Time’ world in which we live has distinct disadvantages. Nature, disease, and geopolitics combined, have exposed the weaknesses of a decaying unipolar economic system, which, until recently, has based its ideas on the finite nature of money and persuaded an unaware public that there is no alternative. A system predicated not on cooperation but on dividing people and allowing, by design, an unfair distribution of real wealth and real resources.

The Global Financial Crash in 2008, the Pandemic and current economic uncertainties have changed all that, and governments have been driven, as a result, to ‘re-discover’ the power of the public purse to manage their economies in the face of the prospect of economic decline, although always with a view to constraining that spending at some future point in time, once an emergency is over. There is always a price to pay on this model of how government spends. But just when Sunak thought he could get back to ‘business as usual’, his plans were scuppered once again by the conflict in Ukraine.

Balancing the books is a perennial concern for all governments, sooner or later. The government should be a good manager of the economy by ensuring that the public and social infrastructure meets the needs of the people it serves, from individuals to communities and businesses, and by aiming to balance its spending with the very real resource constraints, which requires strategic planning. Instead, governments, the media and those working in think tanks, endlessly replay their messages of monetary scarcity which have played a cruel and destructive trick on the population. Such deceitful narratives ultimately constrain the actions that are needed to address poverty, inequality, environmental sustainability and planetary health. Should that, of course, be a government objective. However, these narratives are useful for governments who wish to avoid such actions. It doesn’t bode well for the now seemingly defunct concept of levelling up or addressing the climate emergency.

We are led to believe that government spending is constrained by taxation or borrowing, and the media without fail, reinforces those messages, as Larry Elliott did in an article in the Guardian at the end of April. On the one hand, journalists report the state of public services and other vital infrastructure, relate stories about how people are struggling to keep their heads above water and being obliged to use food banks or switch off their heating, and yet, in the next breath, in an astonishing display of cognitive dissonance, give their readers a blow-by-blow account of the state of the public finances, as if somehow it is of vital importance to know how well the Chancellor is delivering his fiscal objectives. Put the fear of God into a nation by focusing its attention, like a magician, on the wrong subject. It seems that they choose not to make a connection between government spending (or the lack of it) and the state of the nation. Those two things are not disparate subjects, they go together.

As the current government, like the Pied Piper, marches the nation back to Dickensian Britain, journalists should at least be challenging the accepted economic dogma which prevails, rather than reinforcing the message that sound finance trumps public purpose. That should be the role of the media. But then, of course, as Upton Sinclair so rightly observed, ‘It is difficult to get a man to understand something when his salary depends upon his not understanding it.

So, given his predilection for household budget accounting, it was not surprising that Rishi Sunak, the arbiter and promoter of sound finance, had to eat his words and do yet another about-turn, by stating that he will be imposing a ‘windfall tax’ on oil and gas companies (well sort of) so he can, as he claims, partly cover his spending pledges. Whilst some Conservatives are critical of the tax, suggesting it will reduce investment and goes against their low tax stance, (at least where the rich corporations are concerned), Labour’s calls over the last few months for a tax on extraordinary profits to help people manage their way through the energy crisis, thus have now been satisfied. Job done. That is, of course, if we believe the notion that has been drilled into the public consciousness that taxes fund government spending.

The government as the currency issuer has the capacity to spend what it needs to, to balance the economy in good times and keep it functioning during economic crises. It doesn’t have to go begging to rich people or large corporations to provide that funding, or impose windfall taxes, and nor does it have to borrow to do the same. That is all part of the smoke and mirrors that have created false narratives. The sequence is spend first, then tax, not the other way around.

The last two decades and more should have proved categorically that household budget economics, in terms of government spending, is a myth. The public is beginning to take note that there is always money to bail out ‘too big to fail’ banks and other large companies, fund wars or address the fallout from pandemics, when it suits the government to do so. As the contradictions become ever clearer, the public are slowly coming to understand the political nature of spending decisions, and that, by the same token, the UK government could, in the same way, create the money to fund public services and vital infrastructure, that poverty and inequality could be addressed to ensure that citizens have dignified and meaningful lives, and that the climate crisis could be tackled through legislation, and targeted spending and taxation policies, to drive change and force businesses to do or die.

As Josh Ryan-Collins, who is an associate professor in economics and finance at the UCL Institute for Innovation and Public Purpose wrote in an article in the New Statesmen this week, ‘Government spending power is limited not by tax revenues or borrowing but by the productive capacity of the UK economy and political will.’

Ryan Collins, promoting a new co-authored working paper, ‘The self-financing state: An institutional analysis‘, published by the UCL Institute for Innovation and Public Purpose (IIPP), which provides an in-depth analysis of the mechanics of the key institutions involved in UK government spending, demonstrates clearly in his article that the ‘British state always creates new money when it spends’. That is fundamental to what comes next.  It is the starting point for change.

The self-financing state: An institutional analysis

This paper is an institutional analysis of government expenditure, revenue collection and debt issuance operations in the United Kingdom.

 

So, while Chancellors, politicians, think tanks and journalists indulge in relaying myths that describe how governments spend, and keep the prevailing economic system functioning in the favour of capital, the reality is somewhat different.

A challenge to that understanding and the economic orthodoxy which drives it, is, however, underway.

The World Economic Forum’s meeting in Davos this week has revealed the growing cracks. The realisation by the wealthy elites that the global economic system, which has created vast wealth for the few, whilst at the same time crippling poverty and inequalities in the distribution of real wealth for many others, is under threat. As working people in the global north wake up to their exploitation and the associated injustices, and those in the Global South begin to reject the economic solutions imposed by the north, under the tutelage of the US, its allies and the institutions which it controls – the IMF, the World Bank and the World Trade Organisation, those that have benefited over decades may, at last, be facing a rude awakening which could force a rethink. Not that one is holding one’s breath! But it should not be surprising that the Establishment which has dictated the rules for decades, feels threatened in this time of flux and uncertainty. Things ‘ain’t what they used to be’ and the certainties are slipping away.

Reuters reported this week that world leaders, financiers and chief executives were leaving Davos with ‘an urgent sense of the need to reboot and redefine globalisation’. Their version of globalisation has, hitherto, not been about real cooperation in the service of humanity, rather it has been the exploitation of human labour and finite resources in the service of greed and profits.  Globalisation has not been about planetary flourishing, it has proved to be the exact opposite, favouring the few, a billionaire class who, as Oxfam pointed out this week, were increasing their fortunes by $1billion every two days. Not because they worked hard but because the system is rigged in their favour. A system which allows them to amass vast resources and pollute the planet with their excesses, while the rest labour in low wage economies as slaves.

Its dominant position has been ably assisted by the notion of monetary scarcity, which has been hugely damaging as countries in the global south have been weighed down by foreign debt and forced to accept punishing bailout regimes, which have, in turn, forced cuts to public spending and decimated public infrastructure. This is the common link between the global north and the global south. The toxic economic system which prevails and leads Sunak to focus on fiscal discipline rather than public purpose.

 

The MMT Podcast with Patricia Pino & Christian Reilly: #131 Fadhel Kaboub: Free Trade Isn’t Free: Food Sovereignty And Why It MattersPatricia and Christian talk to economist and President of the Global Institute For Sustainable Prosperity Professor Fadhel Kaboub about how global food and energy systems have been fostered to benefit the global north at the expense of the global south, and how understanding modern money is vital to…

 

The damage that has been done over decades is incalculable. The events of the past few years have revealed the inherent weaknesses of globalisation and its bedfellow, neoliberalism.

As the effects of climate change, caused by the burning of fossil fuels, combine with the associated loss of biodiversity due to land mismanagement and exploitation, the degradation of soil, resulting from unhealthy farming practices and overuse of herbicides and fertilisers, along with changing global weather patterns, the world faces an uncertain future without adequate urgent action.

Ultimately, the UK does not exist in a bubble and must now see its future actions and policy decisions in a global context, but not the one we know. Not a continuation of the status quo which protects a rotten free trade system and sustains the wealth of the few, but an all-encompassing strategy for human and planetary fulfilment. It is not about pulling up the drawbridge. It is about ensuring that nations can help themselves to ride the economic and climate storms ahead, and work cooperatively to trade fairly and sustainably with their global neighbours.

Some might call this an unachievable pipe dream, given the current instability forged out of a toxic economic system and endless wars for global hegemony, and let’s be honest, theft of real resources. But it doesn’t have to be.

Our future depends on real and substantial change, not tinkering around the edges so that the global elites can maintain their power and influence. It begins with a public understanding of how the government spends, to challenge the status quo and set the scene for creating a fairer world, which has both a sustainable and liveable future. The way ahead may be bumpy but that’s no reason not to try.

 

Announcement

The GIMMS book ‘Modern Monetary Theory: Key Insights, Leading Thinkers‘ – Edited by Professor L. Randall Wray and the Gower Initiative for Modern Money Studies, is scheduled to be published by Edward Elgar Publishing in January 2023

For more details, please see the EE website via the link below:

 Key Insights, Leading Thinkers" draft front coverModern Monetary Theory’This is a fascinating, eclectic group of professional papers in which the reader may explore both the first principles of Modern Monetary Theory and many institutional and historical details that lend weight to the conceptual framework. This book is a landmark in the development of MMT, a boon for…

 

Join our mailing list

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

Support us

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

 

 

Share

Tweet

Whatsapp

Messenger

Share

Email

reddit

Pinterest

tumblr

Viber icon
Viber

The post The Government, like the Pied Piper, marches the nation back to Dickensian Britain appeared first on The Gower Initiative for Modern Money Studies.

Cabinet brainstorms quick fixes for the cost-of-living crisis to avoid the real solution

Published by Anonymous (not verified) on Sun, 01/05/2022 - 3:51am in

“When people live in a fair, caring society, where everyone has equal access to social goods, they don’t have to spend their time worrying about how to cover their basic needs day to day – they can enjoy the art of living. And instead of feeling they are in constant competition with their neighbours, they can build bonds of social solidarity.”

Jason Hickel – Less is More.

Boris Johnson holds a meeting of UK Cabinet minstersPPicture by Simon Dawson – No 10 Downing Street on Flickr. Creative Commons 2.0 license

According to the Telegraph this week, the Treasury has ‘raked in more tax than ever before’, thus putting the UK, it says, on course to have the ‘highest tax burden since the aftermath of the second world war’. The Chancellor, still counting his beans, was not in the slightest bit apologetic, making clear his assertion that he had no other option but to get the public finances back on track after the vast amount of public money that had been spent during the pandemic. Keeping the £12,570 personal allowance for income tax at its current level would, the author of the Telegraph article indicated, generate an extra £20bn for the Treasury over the next five years, thus reinforcing, yet again, the plainly wrong idea that government relies on tax to spend, or balance the public accounts. A government spokesperson called on for comment, said, wiping a tear away, that it had been forced to make ‘tough decisions’, but not to worry, in 2024 we can expect a tax cut bonanza just before the next election.

The Guardian took another tack, not taxes, but borrowing. In an article by Larry Elliott entitled, ‘UK government borrowing halves but is still close to record high’, he quotes figures from the ONS which reported that the gap between the state’s revenues and its spending was down on the previous year, but that despite the improvement over the year, the total deficit for 2021/22 was more than £20bn higher than forecast by the OBR. All as if borrowing figures were a sound measure of the government’s management of the economy. The Chancellor, trying yet again to sell his agenda of fiscal discipline, was quoted by Elliott, reiterating yet again, that ‘Public debt is at the highest levels since the 1960s and rising inflation is pushing up our debt interest costs, which means we must manage public finances sustainably to avoid saddling future generations with further debt’.

They are all at it! Whether it’s former or current Chancellors of the Exchequer, journalists or orthodox economists, they all have one thing in common: their addiction to the false narrative of household budgets. The idea that governments are limited in their spending policies by how much tax they collect or what they can borrow. The false corollary of all that, is that without careful management of the public accounts, either we face the prospect of the UK going bankrupt, as former Chancellor George Osborne suggested to the public, or future generations will pay the price in higher taxes. All nonsense, of course, but it keeps the public in their place, meaning acceptance without question, that the government has limited fiscal capacity, and the message that government has no option but to impose belt-tightening policies, completely ignoring the fact that a government deficit represents a private sector surplus, in layman’s terms, the money in our pockets. Taxing away more doesn’t give the government more to spend, or to pay down public debt as is implied, and it certainly doesn’t help an economy to navigate difficult times.

We are now witnessing in the most distressing way, the terrible consequences of those narratives which are having a direct effect on the economy, or more precisely, the people who do the work to keep it functioning. Not just the effects of the last 2 years on people’s lives but the ongoing consequences of decades of successive government spending policies. Policies which have ranked fiscal discipline over economic health and public well-being, seen wealth distribution skewed to favour ever fewer people and overseen the selling off or privatisation of key public assets with vast amounts of public money syphoned off for private profit, along with the underfunding of vital publicly run and paid for public infrastructure which has left it in a state of ongoing decay. We have paid a heavy price as a nation for the economic ideology which prevails and dictates policy and spending.

From every corner, the warning signals have been ringing loudly. Last month, Martin Lewis, the Money Saving Expert, said that he was running out of tools to help people manage the cost-of-living crisis. He said that ‘it’s not something money management can fix, it’s not something that for those on the lowest incomes telling them to cut their belts will work, we need political intervention.’

Phil Andrew, the CEO of the StepChange Debt Charity, echoing Lewis, said that their advisers had been taking increasing numbers of calls from people who fear they won’t be able to keep up their debt repayments. With eleven million households facing Covid-related debt, and four million using credit to pay for essentials, he was clear:

‘For these households, rises in energy bills and the increasing cost of essentials are not things that make the difference between being able to afford luxuries or not. They are the things that genuinely make the difference between heating and eating.’

The Trussell Trust, which runs more than half of UK food banks, says it is witnessing an accelerating crisis across the UK as more and more people are unable to afford the absolute essentials necessary to eat, stay warm and dry, and clean. Figures released this week show that the Trust’s network provided more than 2.1 million parcels to people facing financial hardship from 1st April 2021 to 31st March 2022, which represents a 14% increase over 2019/20 – before the pandemic. And more than 830,000 parcels were provided for children, which represents a 15% increase from 2019/20, when 720,000 were provided. The Trust, again echoing Martin Lewis, said that there is still time for politicians to turn this situation around, saying that, governments at all levels must use their powers and take urgent action now to strengthen our social security system so it keeps up with the true cost of living and helps prevent hundreds of thousands more families being forced through the doors of food banks.’

These figures are a shocking indictment of a government that does have the fiscal tools to put in place solutions to mitigate the economic shock of Covid (although imperfect, already demonstrated), the effects of the war in Ukraine and last but not least to address a climate crisis which threatens humanity, but which seems to have been put on the back burner even as the planet’s life support systems continue to degrade and the social injustices intensify globally.

Our government has the legislative and fiscal tools, should it choose to use them, not only to mitigate this economic crisis in the short term, but also to challenge the market-driven ideology of decades. An ideology which has led to an increasing divide between the rich and the poor, with an ever-increasing share of wealth going into fewer hands, as wages have stagnated. A pernicious ideology that has created increasing reliance on an unfair social security system which punishes people rather than supporting them, whilst it has made the concept of real full employment a dirty word and allowed the corporate sector to get away with murder by paying low wages and setting working people against each other in the dash for a job and a modicum of security.

We may, as the Trussell Trust says, need a fairer social security system for those who cannot work, or who are caught in economic straits not of their making, but we also need a government with the political will to implement a Job Guarantee, not just to provide the vital cyclical economic automatic stabiliser at such times as these, but also to reverse the unfair advantage capital has had for decades over labour, which has been responsible for wages being driven down in a fight for competitive supremacy with all that entails in human deprivation.

However, apparently, the government is right out of tools, out of ideas, out of everything except perhaps its propaganda machine, which is working just fine. This week’s Cabinet ‘blue sky thinking’ exercise left many scratching their heads as Boris Johnson was reported as asking for proposals for tackling the cost-of-living crisis without actually spending public money. Ministers have been ordered to find new ‘non-fiscal’ solutions. Grant Shapps suggested making the MOT test biennial instead of annual. Is that a joke? If so, it’s in the worst possible taste, ignoring as it does the very real effects of higher energy and food costs on families across the country. Their problems won’t be solved by such crass intervention. And Johnson is said to have revived the Liz Truss proposal to cut childcare costs by lowering England’s legal limit on adult supervision for nursery children, even though such a move could well endanger the safety of these children. As we said – right out of ideas, well at least sensible ones like using fiscal policy to address the current crisis and indeed future ones. Meaning, spending newly created money as only a currency-issuing government can do.

Even Torsten Bell from the Resolution Foundation think tank, which has its roots in orthodox economic thinking, commented that he thought the government had ‘lost the plot’, if it believed that such ideas would improve people’s lives substantially.

It is quite shocking and disingenuous of a Chancellor who can afford a £600 pair of trainers, has an extensive property portfolio and will think nothing of spending £13,000 a year on heating a swimming pool, to tell listeners on Mumsnet this week, that it would be ‘silly’ at this moment in time to give poor families any further help with rising bills, when people are already feeling the pinch from record rises in energy price and steep increases in the cost of food and essentials. Sunak’s Spring Statement and previous budgets have been a kick in the teeth for ordinary people who have paid the price in living standards and rising private debt, caused by inadequate spending, not just by Sunak but also by previous Chancellors wedded to economic orthodoxy, and the lie that government spending is just like our own household budgets. People who have already been subjected to government policies which have driven growing poverty and inequality and decimated the public and social infrastructure over the decades which preceded the current emergency. They need help now, not later, when things are likely to be infinitely worse.

The Chancellor has at his disposal the fiscal tools he needs to address the current cost-of-living crisis and create a fairer and more sustainable society. But while he adheres to his fiscal discipline message that puts the household budget narrative of tax and spend, paying down debt, reducing public deficits or the objective of achieving balanced budgets or surpluses at the top of his agenda, regardless of the economic conditions that prevail, the lives of ordinary people can only get worse, and recession will be just over the hill. We are not all in this together under this regime.

There is an alternative. It’s just that we don’t have a government or other political parties willing to challenge the economic orthodoxy which drives spending and legislative decisions. The system has been corrupted to serve global corporations, whilst politicians have been bought, as a result, by benefiting through the revolving door. At the same time, the media plays out the narrative like a broken record, to keep the illusions going that governments are powerless to intervene when economic instability threatens, hamstrung as they are by scarce monetary resources, when the reverse is actually true.

What hinders government is not scarcity of money, but the recognition that it must align its spending to the available resources and the productive capacity of the nation, and make the political decisions about who gets the pie based on that. That is the real balancing act and the real starting point for a true understanding of what governments can do, with the political will, to create the sort of society which benefits everyone, by serving public purpose instead of corporate greed.

 

 

Join our mailing list

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

Support us

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

 

 

Share

Tweet

Whatsapp

Messenger

Share

Email

reddit

Pinterest

tumblr

Viber icon
Viber

The post Cabinet brainstorms quick fixes for the cost-of-living crisis to avoid the real solution appeared first on The Gower Initiative for Modern Money Studies.