tax

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).

‘In these difficult days [we] must and shall choose the path of social justice … the path of faith, the path of hope, and the path of love toward our fellow man.’ Franklin D Roosevelt.

Published by Anonymous (not verified) on Sun, 05/07/2020 - 10:06pm in

Construction worker or engineer in newly-built railway tunnelPhoto by Ricardo Gomez Angel on Unsplash

From Boris Johnson’s earlier reincarnation as Churchill in the pre-Brexit era, he has now been reborn as FDR, or at least likes to think so. According to the Conservative website, taking on FDR’s mantle Johnson has set out his plans to put jobs, skills and infrastructure investment at the heart of the UK’s economic recovery post-coronavirus. He claimed in his speech that his plans were ‘positively Rooseveltian’ and suggested that ‘It sounds like a new deal. All I can say is that if so then that is how it is meant to sound and to be because that is what the times demand. A government that is powerful and determined and that puts its arms around people at a time of crisis.’

As a speech, much of it sounded just like many speeches politicians make, just more rhetoric designed to carry the populace along but with little backbone to the words. Certainly, once dissected, it shows little evidence of truthfulness or desire for real change. And ‘putting its arms around the people’ seems just a tad overdone given the last 10 years, even if the spending taps have now been turned on.

Whilst the Times hailed it as a ‘spending spree’ that was as ‘bold as Franklin Roosevelt’s New Deal,’ in the post-analysis phase it has become clear that the speech’s promises were anything but and indeed were not only less than truthful but also a signal that it’s back to the usual Tory business. As pointed out by a political commentator ‘not much of the announcement was new and it wasn’t much of a deal’.

The promised paltry £600bn turned out to be worth £5bn, as much of the spending had already been announced by the Chancellor. That equates to less than £100 per capita across the UK or 0.2% of GDP. In fact, Roosevelt’s New Deal investment amounted to 40% of US GDP at that time, which was 200 times larger than Johnson’s.

It will prove nowhere near enough to dig the UK out of the economic hole it has in fact been excavating since 2010 through unnecessary cuts to public sector spending which have left our public and social infrastructure in tatters and least prepared to deal with the coming economic fallout as a result of Covid-19. Neither will it be enough to deal with the coming climate disaster that faces us without an even bigger spending programme designed to stabilise the climate and deliver a more sustainable world. The closest Johnson got in his speech was planting more trees! It’s going to need a lot more than that!

We need to examine who the real beneficiaries of this spending will be although the clues are already staring us right in the face.

As an article in Open Democracy described it this week, it is nothing but a ‘new deal for rentiers’. It noted that Roosevelt, in his first inaugural address in 1933, had declared the cause of unemployment and economic distress was not scarcity but rather that ‘the rulers of the exchange of mankind’s goods have failed through their own stubbornness and their own incompetency’ (although the word incompetency might be disputed in today’s world).

Roosevelt made it clear that his political enemies were ‘business and financial monopoly, speculation and reckless banking’ (much as they are ours still today). The article also makes the point that the New Deal was not just about investing to create jobs, it was about rebalancing power away from rentier capital and towards working people

With just a quick read through Johnson’s speech, it becomes clear that his modus operandi for bouncing back is just more of the same. He emphasised that ‘levelling up’ did not mean ‘launching some punitive raid on the wealth creators’ and added that ‘yes, of course, we clap for our NHS, but under this government, we also applaud those who make our NHS possible: our innovators, our wealth creators, our capitalists and financiers; because in the end, it is their willingness to take risks with their own money that will be crucial to our future success.’

Those few words indicate very clearly which path the government is intending to follow as it continues to peddle the myths about how we owe a successful economy to the wealth creators, when the truth is that it is exactly the opposite. It has been generally accepted that the wealth creators, through their efforts, generate tax payments which then fund public services without which difficult decisions would have to be made about their continuing affordability. Indeed, that ruse has been used by politicians on numerous occasions to justify punitive cuts to spending.

Thus, in economic downturns, as tax revenues become smaller it proves the perfect opportunity to sell the narrative that we need to downsize public services or outsource or sell them off to private profit on the basis that they will be more efficient and provide better value for taxpayers. Or so the story goes. Except that it is not true.

As GIMMS has pointed out many times before, our NHS or other public services are not dependent on a healthy economy. They are instead dependent on a well-functioning public and social infrastructure upon which the businesses and corporations depend, in turn, for their success. This includes such things as education and health, public transport networks and good national and local governance.

It is also vital to challenge the notion that the government needs that tax before it can spend. It categorically doesn’t. In making affordability a key demand, it is in truth less about whether the government has the money (which it always does) and more about delivering political ideology related to who should run public services.

As we have seen, vast sums of public money have already been shovelled into private profit to deliver public services with no sign of abating. Indeed, under cover of Covid-19, the process seems to have speeded up and we have seen a huge rise in the number of contracts being dished out by government even to companies that have no assets or employees as revealed only this week.

The power of the nation-state to direct the economy in the nation’s interests has been much undervalued in recent years as global interests have dominated public policy. But with the power of the public purse, the government can determine who will be the beneficiaries of its policies and spending. As we have seen over the last decade, instead of focusing on promoting the well-being of the nation which should be its primary goal, the government has focused on lining the pockets of corporations with public money and thus ensuring their own wealth and security through the revolving door. At a huge cost to working people’s lives and the public services on which they depend.

Johnson’s claim this week that government had overseen a reduction in child poverty and that 400,000 fewer families were living in poverty now than there were in 2010 was called out this week by the Office of the Children’s Commissioner for England. His claim is symptomatic of the massaging of data by the government which, like snakes, try to slither their way through the lies and dissimulation to present a positive view of their economic record.

A quick look at this week’s news is instructive and demonstrates that all is not as it seems or as it has been promised. It was revealed that half of school leaders still have not received the promised laptops for disadvantaged children. Whilst government clattered on about the importance of getting disadvantaged children back to school, it has failed to do the very thing that would have helped those children while in lockdown. It has failed over a decade to improve the life chances of poorer children by addressing the fundamentals – decent housing, well-paying jobs and access to decent services – all of which are in a state of decay.

And, as Johnson invites people to spend, spend, spend and talks about a grand ‘new deal’ many people can barely afford to eat. Over this decade and more the nation has accepted the presence of food banks as a necessary feature of British life, as if somehow the government could not have avoided that growth through its own policy and spending decisions.

According to food bank providers during the Covid-19 crisis, there has been a surge in demand in some areas of around 300%. As Marcus Rashford so clearly highlighted in his campaign to force the government to continue providing funding for free school meals over the summer holidays, over the coming months the need will grow. Do we really want to see children going hungry when the government could avoid that scenario with a simple instruction to the central bank to spend the money into existence to alleviate the temporary disruption?

And yet that is only half the story.

The combination of the damaging consequences of existing low incomes, precarious employment, a benefit system which is not fit for purpose and years of austerity with the damaging economic fallout from Covid-19 which is likely to get much worse in the coming months should provoke outrage. That the government, instead of addressing the fallout of their previous policies, think that shovelling more money into the pockets of the ‘wealth creators’ and reinforcing a rotten political and economic system is the way forward. They dress their speeches with soothing words about compassion and levelling up and then act to enable the maintenance of the status quo.

Much is revealed by the government’s approach to hunger. Instead of dealing with the fundamental reasons why children are hungry, it chooses to fund food banks and other organisations to deal with the consequences rather than through its policies. The charitable sector and volunteering are replacing government provision.

Government has the tools to ensure that no child goes hungry, by setting the rules and supporting employment policies designed to ensure full employment as prerequisite, through the implementation of a job guarantee offering public service work at a living wage, which in turn drives good wages and security in the private sector.

That is what will make the difference between an economy on its knees and one which prospers. Instead, it has given in to global pressures to compete and denied its power to address these issues. It has shifted the responsibility downwards praising the role of the charitable sector and voluntary organisations in the delivery of public services.

The main thrust of Johnson’s spending plans is a capital infrastructure programme. However, this was as Chris Packham, the naturalist and campaigner, rightly noted not about building a green economy but building more roads and more concrete to continue with a carbon-based future. The one small concession he observed was planting more trees and a miserly £40m towards kickstarting a greener economy. Not exactly radical and not nearly enough.

No mention was made either of the need to invest in better public services or to ensure that there is a pool of well-trained labour to service that infrastructure programme. More hospitals and schools are all very well but without the nurses and doctors to work in them, such construction could become an enormous white elephant. Capital and day to day spending are intimately connected, not stand-alones.  It seems that it’s all money for their business friends but no substantial investment in the things that count and make people’s lives better.  An opportunity squandered.

Instead of telling people to ‘spend, spend, spend (which in the current economic uncertainty is unlikely to stimulate the required response and anyway do we really want to continue along the path of mindless consumption?) the better mantra would be ‘jobs, jobs, jobs but not any old jobs. A job guarantee would not only provide public service jobs creating real value to society, a liveable income and security for the coming days as employment rises but could also assist in enabling a just transition towards a more sustainable world, as old jobs become redundant and new ones develop to take their place.

Whilst it is true that currently there doesn’t seem to be any desire by the established powers to embrace a new economic paradigm, it is vitally important that we keep the fires burning for change and raise public awareness of what an understanding of modern monetary reality could do in terms of delivering a fairer distribution of wealth and to address the key challenges we face.  We have as a nation to decide what we want. To continue as we are and all that implies for the future, or take a different route to a fairer and more sustainable planet? What shall it be?

You can find out more here:

https://gimms.org.uk/mmtbasics/

https://gimms.org.uk/job-guarantee/

 

 

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

Viber icon
Viber

The post ‘In these difficult days [we] must and shall choose the path of social justice … the path of faith, the path of hope, and the path of love toward our fellow man.’ Franklin D Roosevelt. appeared first on The Gower Initiative for Modern Money Studies.

White Paper: Modern Monetary Theory (MMT)

Published by Anonymous (not verified) on Sun, 05/07/2020 - 3:39am in

Warren Mosler email hidden; JavaScript is required
/* */

Published online 4th July 2020

 

Full Document

 

Introduction

 

The purpose of this white paper is to publicly present the fundamentals of MMT.

What is MMT?

MMT began largely a description of Federal Reserve Bank monetary operations, which are best thought of as debits and credits to accounts as kept by banks, businesses, and individuals.

Warren Mosler independently originated what has been popularized as MMT in 1992.  And while subsequent research has revealed writings of authors who had similar thoughts on some of MMT’s monetary understandings and insights, including Abba Lerner, George Knapp, Mitchell Innes, Adam Smith, and former NY Fed chief Beardsley Ruml, MMT is unique in its analysis of monetary economies, and therefore best considered as its own school of thought.

 

 

Share

Tweet

Whatsapp

Messenger

Share

Email

reddit

Viber icon
Viber

The post White Paper: Modern Monetary Theory (MMT) appeared first on The Gower Initiative for Modern Money Studies.

We need to talk about Tommy…the NHS: charity, taxes and MMT

Published by Anonymous (not verified) on Mon, 29/06/2020 - 2:05am in

Thank You NHS flag with rainbowPhoto by Red Dot on Unsplash

In this post, originally published on Medium, Michael Berks discusses NHS funding.

I’m sure you’ve all seen the story of 100-year old Captain Tom Moore, who, by walking 100 laps of his garden has raised over £23 million for NHS charities. It is, on the face of it, a happy, feel-good story — something we all need in these difficult times. And I’m certainly not going to knock Captain Tom— bloomin’ legend that he is, or complain at anyone donating to his cause. However, if your social media feeds are anything like mine, you’ve probably seen lots of counter posts, pointing out the inescapably true fact that we have a government with a remit to properly fund the NHS — the importance of which has never been clearer — and portraying the NHS as charity, reliant on the goodwill of donations to perform its everyday duties, far from a good thing, is actually a very damaging viewpoint to take.

The majority of these counter posts also point out something else seemingly obvious –the way the government funds the NHS is by collecting taxes from all of us and using these to pay for services. And if some of the rich celebrities cheering on all this giving would instead pay a fair share of taxes we really could fund the NHS properly without relying on charity! Amirigghht?!!

At this point, of course, my MMT alarm bells start ringing. In fact, I’d argue that framing the funding of the NHS in this way is only marginally better than seeing it as a charity case. In this post, I’ll try and explain why. It’ll be quite (ok very) long, but I’ve kept it as economic jargon-free as possible, so I really hope you take the time to read through and hopefully come away with a clearer idea of how government provision of services actually work.

The big problem with the taxes pay for NHS (or other government services) frame is it promotes the idea that money grows on rich people — and as a result, that rich people are thus some special species we must protect. We must nurture them, the wealth-generators, to harvest them for their taxes, without which, we can’t have the things we need to make society work. In other words, while we might want to collect more taxes from the rich, if we upset them too much, they’ll all leave the country — so now we’re even worse off than before. Or at the very least, they’ll just use creative accounting to squirrel away more of their earnings into tax havens so we won’t see any extra income anyway. More generally, just reducing their earnings in any way actively harms us — they earn less, we get less in taxes, our services suffer. We’re fed this narrative time and again, and ultimately it leads to absurd stories like this… a pay-cut to Premiership footballers will harm the NHS!

Let’s be clear what this is claiming. There will be a frontline member of NHS staff somewhere — say Charlie the nurse — who as a result of footballers having to take a pay-cut while not playing football, will have to lose his job.

Take a step back. Forget what you think you understand about economics or how money works for a second, and just try and think this through.

In fact, stop and say these words out loud:

“Because some very rich men don’t get to go out and play ball with each other, we’ll have to stop Charlie doing his job as a nurse.”

Sounds ridiculous right? That’s because it IS ridiculous.

Why should anyone not doing their job, prevent Charlie from doing his? Obviously if said person’s job produced food for Charlie, or his transport, or something else he needs to live and breathe and get to work on time each day, that might be a problem. In other words, all they key-workers we’ve suddenly realised exist — we need them to keep working. But footballers..? Not so much.

As long as Charlie is willing and able to be a nurse, our government has an infinite supply of pounds it can pay him. It doesn’t need your taxes or charity to pay him. Indeed creating money out of nothing is how all government spending works.

Oh God! I mentioned government spending and infinite in the same sentence. You’ve just put your economics hat back on, haven’t you? Inflation. Hyperinflation. ZIMBABWE!! Don’t I know what happens when governments ‘print’ money without limits?!

OK, calm down. Let’s work this through properly…

First up, I’ll concede there is some conceptual difference between the notion of Charlie receiving pounds created out of nothing from the government, and paying him with pounds directly linked to a tax or your charity donations. The former are new financial assets entering the economy, whereas the latter are the same pounds recycled from somewhere else in the economy. So on the face of it, paying Charlie with ‘new’ government money is increasing the money supply.

And with your economics hat on again, you’ve heard that increasing the money supply equals inflation. As the supply of money goes up, its value must come down — the pound in your pocket is worth less, and thus all the goods you need to buy will cost you more. Simple supply and demand. QED.

Again, slow down. Take a step back. In fact ‘money supply increase equals inflation’ is one of those ‘common sense’ bits of orthodox economics that has no basis in reality, and is completely disproved by all the actual data we see in economies across the world (if you really want a description of what happened in eg Zimbabwe, ask me in the comments).

To see why, stop thinking in abstract economic terms, and think instead about some real supply and demand you actually experience in everyday life. Take petrol prices. The average pump price of a litre of petrol in the UK at the end of January was just over 127p. Today it’s 109p [ed. this was mid-April]. That’s a 15% drop in 2 months. The money supply in the UK hasn’t shifted by anything like that in this time — and more specifically, government spending is rising significantly to meet the demands of the current crisis, so surely prices should be going up?

Of course you know why petrol prices have dropped. No-one is driving their cars, so no-one is buying petrol, both here and abroad. More generally, the demand for oil across the world has plummeted, and in turn, so has its price (indeed there’s been a way larger percentage drop in the price of crude oil — the reason pump prices have ‘only’ dropped by 15% is because of all the other fixed costs in the retail price of petrol). When demand for oil increases, prices will go back up. The point is, it isn’t the total supply of money out there driving changes in the price of oil, but money that is actually being used to try and buy oil. The same principle, give or take, is what defines prices for most goods and services. In particular, money being saved — by you me, or anyone else in the economy — is not being used to buy anything. It just sits there in our accounts, as numbers on a spreadsheet somewhere. It is not inflationary.

So now let’s go back to Charlie and our Facebook posts. “If only the government would make rich people pay their share, and collect some of all that loot in tax havens, we could actually afford a fully funded NHS”. Polls show this sentiment is pretty popular across the political spectrum. Obviously if you read the Daily Mail you hate Lewis Hamilton, whereas if you read the Guardian you hate Richard Branson — but one way or another, everyone, apart from the super-rich, hates a tax dodger.

And you might disagree on how feasible it is to actually collect those taxes (and therefore not believe it when party X includes that income in their spending plans), but assuming the government does find a way, everyone thinks it’d be great if we could use that tax as income to better fund public services.

But hold on. Those pounds we’ve just clawed back from the Cayman Islands were previously sitting in the accounts of Richy McRich doing nothing. If we now use them to pay Charlie to keep being a nurse they are every bit as ‘new’ pounds to the real economy as the government creating pounds out of thin air.

Take the following three scenarios:

(1) Richy McRich in an uncharacteristic display of generosity pledges a portion of his off-shore account to pay Charlie’s wages forever as a charitable donation to the public.

(2) The UK government in an uncharacteristic display of a government doing what it promised to do, closes a tax loophole and is able to collect from Richy McRich’s off-shore account enough to pay Charlie forever.

(3) The UK government uses its power as the sovereign monopoly supplier of pounds to pay Charlie forever.

The functional impact on the real economy — that is, what money is used to buy goods and services across the country, is identical in each scenario. But (3) had your head screaming about hyperinflation a minute ago, whereas (1) or (2) seem like the perfect win for society.

So if that’s true, does that mean we don’t need taxes at all?

Well no, of course not.

Firstly, what makes Charlie, or anyone else, want to work for the government at all?

This is where taxes come in. By making all of us pay a tax, that can only be settled using pounds (of which the government is monopoly supplier) — and moreover, having the authority to put us in jail if we don’t pay — we all have the incentive to either earn pounds by directly working for the government, or by providing good and services for people that do. The government pays Charlie to be a nurse, receiving pounds some of which he uses to pay his tax. You sold Charlie his car, or walk his dog, or clean his windows — receiving pounds from Charlie, some of which you use to pay your taxes. You use your pounds to go to the supermarket… And so on. That’s how a modern monetary economy works.

You might not realise this fundamental role of taxes –after all, it’s obvious why you need pounds when everyone ELSE values them too. But have you ever thought, why does everyone else value them too?

Put another way, the government doesn’t need our money, it needs us to need their money. That is why in MMT we say taxes drive the value of money. It is the ability of the UK government to tax us in pounds, that gives what is otherwise just a piece of paper with the Queen’s face on it (or some numbers on a spreadsheet) value.

So #1 — taxes drive the value of money.

Next, remember the first rule of MMT is: THOU SHALL NOT TALK ABOUT MMT.

Wait, that’s not true either, we bang on about it all the time!

The first rule of MMT is: “Societies are always constrained by the real resource limits of their economy”.

What does that actually mean? In this case, Charlie is our real resource.

To keep Charlie employed as a nurse, we need him to be not employed doing something else. In that sense, the government is in competition with all of us in the private sector for all the goods and services we can produce between us. If everyone has a job, and there are no more people with sufficient skills to be trained as a nurse (or a doctor or a teacher etc) the government can’t magic one out of thin air, just because it has an unlimited supply of pounds. It could double the wages of all nurses, and then offer new posts — which might cause some people to think, ‘hey, I’m going to quit my job and retrain as a nurse’. But this scenario absolutely is inflationary. The government is using its infinite supply of money to bid up the cost of wages across the economy.

So as well as driving the value of money, another important role taxes play, is to take away some of our spending power. That leaves less money in our pockets to bid away the services of Charlie or anyone else. In other words, taxes stop us (the private sector) from using real resources we might otherwise want, making them available for the government to buy and use instead.

If that seems to contradict what we said above about tax havens, the point is Richy McRich didn’t want to use his pounds to buy any more goods and services — he just wants to hoard them. That’s why he stashed them in an off-shore account in the Cayman Islands. So trying to tax them doesn’t actually free up any real goods or services this government might need.

It’s at this point people with left-wing/progressive views (and largely the people making and liking the fund-the-NHS-with-taxes Facebook posts) get a bit uncomfortable with MMT. After all, taxing the rich is a pretty core tenet of our beliefs. And now we’re saying you don’t need to? Well, fear not my lefty friends. Think about the three scenarios above. The first two actually give power to Richy McRich — it’s the money grows on rich people framing I talked about at the start. Which means if we make our public services dependent on the ability of us to get his money, we also have to accept when he lobbies the government to get his way (to reduce corporation taxes or ease environmental restrictions on his airline or make his offshore fund legal in the first place etc, etc). This is exactly how politics work now. That’s why framing the NHS as dependent on tax income is almost as harmful as framing it as being dependent on charity donations.

Whereas in scenario (3) we just ignore Richy. We don’t need him to keep Charlie as a nurse or all our other public services running. This means if you want to shut down his Cayman Islands account or whack him with a proper inheritance tax bill, or whatever, you can do so without being told ‘no, you can’t upset the wealth-generators or we’ll hurt the NHS’. Ironically, by understanding MMT and the role of taxes, you have far more freedom to insist on a more redistributive tax system (if you wish of course — others on the right may disagree, remember ultimately MMT is agnostic left vs right, by all means, fight it out, just get your economics right first).

So how about the NHS now? What are its real resource limits? The COVID crisis is showing us we’re hitting a lot of them. We can’t suddenly magic more nurse, doctors, ventilators, ICU beds or PPE in to existence. And even if people, in general, are available, they still need to be trained and moved to the required location. An unemployed ex-factory worker in Hartlepool can’t suddenly be redeployed as a nurse in London.

Some of those shortages (eg a lack of PPE orders) appear to be down to current government incompetence, but a lack of nurses and doctors (and ambulance drivers, lab technicians etc) is a long-standing problem due to the continuous underfunding of the last decade. As a proportion of the population, we had more frontline staff in nearly all our public services 10 years ago. The reason we don’t now, isn’t because we ran out of people, but because we were convinced we’d run out of money. But as you hopefully now understand, the idea we didn’t have any money is, and always was, nonsense! In other words, the real resources were always there, and thus the government always had the ability to keep buying them.

Where are all those people who could have been employed in the NHS working now? Well, Charlie’s mate Emily was training to be an ambulance driver but is now a self-employed courier delivering next-day Amazon prime parcels. Steve wanted to be a teaching assistant but works for Uber instead, and Vanessa was going to be physiotherapist for stroke victims but freelances as a PT in her local gym. Where do you think the record employment in the private sector and the gig economy has come from?

If you detect a note of sneering there, I promise you there’s none. I’m not knocking any of those jobs or the people that work in them. They clearly have value to the economy — both to Amazon, who benefit from a nice low wage driver for their sellers, but also to us, who get our gadgets delivered seemingly before we’ve even ordered them. And who doesn’t love an Uber eats?

The question for us all, then, is what we want from our economy. Or more importantly, what do we want from ourselves. Our taxes haven’t gone down to make those resources available to us as private individuals, and they won’t need to go up, if we wanted to instead shift them back to working in the public sector for society as a whole. Ultimately, it’s a political decision, far more than it is an economic one. And it’s not for me to persuade you what your what political views should be. But now you hopefully understand the economics a little better, then next time you’re clapping for all our NHS staff, have a think about what you value most.

 

Share

Tweet

Whatsapp

Messenger

Share

Email

reddit

Viber icon
Viber

The post We need to talk about Tommy…the NHS: charity, taxes and MMT 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.

 

 

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

Viber icon
Viber

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.

To talk about the future is only useful if it leads to action now

Environmental protester at a demonstration holding a sign with a clean Earth and a dirty Earth and the slogan "You Decide"Image by Dominic Wunderlich from Pixabay

‘To talk about the future is only useful if it leads to action now.’

E F Schumacher: Small is beautiful: Economics as if people mattered.

The Bank of England in its Monetary Policy Report for May 2020 noted in its summary that the ‘unprecedented situation means that the outlook for the UK and global economies is unusually uncertain.  It will depend critically on the evolution of the pandemic, and how governments, households and businesses respond to it’.

Already, the consequences are being felt around the world and there remains great uncertainty about the future.

In April the price of oil plummeted into negative regions as world economies slowed due to COVID-19.

At the end of April, it was reported that two million Bangladeshi jobs could be at risk as western high street clothing shops closed their doors for lockdowns. Bangladesh is a major garment exporter and reliant on European and American orders with some 83% of its export revenue linked to the garment industry.

Factories across the textile sector in countries like Bangladesh and India are still struggling to stay afloat. There have been closures or reduced working hours which have had a devastating effect on jobs and income for those employed in a sector which already relied on poor wages and bad working conditions to compete.  The dependence of globalised trade on outsourcing and just in time logistics to be competitive is exposing structural weaknesses and emphasising its exploitative nature on both domestic and foreign populations. Pull one piece from the jigsaw and the whole edifice comes crashing down.

Since lockdown, many high street businesses have been forced to close their doors as well as those with a global reach.  Airlines have scaled down their domestic and global operations, grounding planes and staff with the prospect of thousands of job losses. Rolls Royce has also confirmed that it would be making significant redundancies in its civil aerospace business both here and abroad.

In response and across the piece fiscal interventions have become the ‘mot du jour’ not the least in the UK.

Whilst one can argue the detail about how it was done and point out the flaws of the schemes which has left many working people without support, Sunak’s fiscal intervention was the right thing to do. However, whilst the Chancellor acted quickly to protect working people, he did so in line with Conservative neoliberal ideology by channelling money into big business and not just through signing contracts with already discredited companies like Serco to provide government services with no accountability built in.

Last month the Treasury and the Bank of England, following a campaign by Positive Money announced that the names of those companies which have been bailed out through the Covid Corporate Financing Facility would be made public. The scheme allows ‘investment-grade’ companies to sell short term debt to the Bank of England thus allowing access for Britain’s biggest corporations to billions of pounds of cheap funding. Fran Boait from Positive Money said ‘“The Covid Corporate Financing Facility was serving as a secret bailout vehicle, allowing Britain’s biggest corporations to access public money without the public having to know.”

It has been revealed that among the companies which have benefited are Stagecoach, G4S, Rolls Royce, Easy Jet and Intercontinental Hotels. So far 152 companies have taken over £16bn with an expected total bailout of £67.7bn.

However, as the SourcenewsScot reported this week, one in five of firms receiving bailout money are airlines, oil and gas or car manufacturers and ‘the only strings which are tied to this cheap money is a request by the BoE to be restrained in paying dividends. It doesn’t matter if they are climate polluters or tax haven users or have exposed their workers to harm during the pandemic, the BoE will bail them out if they are making a ‘material contribution’ to the UK economy just so long as they are also corporate giants.’ So much for the government’s expressed commitment to a green economic recovery at a time when such commitment is vital.

Positive Money has also warned that it may not be long before they are back for more given that this crisis is unlikely to be over anytime soon.

It is yet again more evidence that the UK government with the power of the public purse can bail out whomsoever it chooses, just as it did the banks in 2008, with not a taxpayer in sight.

For many small high street businesses and medium-sized enterprises which are struggling and desperate to get back to some sort of normality, the future remains an unknown. The economic and employment uncertainty is likely to continue. This, along with the cumulative effects of reduced incomes on salaried workers and reliance on minimal state support for many self-employed (for those who are eligible for it at all) may cause people to be cautious about future spending.

Figures show that during lockdown consumers have been spending around £17.9bn less per month into the economy as spending habits shifted to accommodate the new normal. According to figures published by the Bank of England, in April households also repaid record amounts of debt accumulated on credit cards and personal loans amounting to £7.4bn. Whilst at the other end of the scale, figures from the Bank exposed a sharp increase in business debts as a result of the drop in sales.

At the same time, the New Policy Institute calculated that the richest 20% of UK households will have likely saved £23bn by mid-June, which is more than six times as much as the savings made possible by the poorest 20% of households. Even if the pandemic were to stop dead in its tracks or restrictions were to be eased or lifted, with so much uncertainty confidence may not return for some time yet.

Many businesses, with increased debt and little hope of regaining the sales ground they have lost, may yet go under, thus increasing unemployment. In the light of failing confidence, people may have no alternative but to continue to retrench and/or continue to save.  And those who have suffered cuts to their income, been laid off or furloughed or face the prospect of redundancy and who have never been in a position to save, will further be impoverished thus deepening the wide gulf that exists between the rich and poor and those of ethnic origin in what is an already divided country.

Shockingly it was revealed by the Health Service Journal (HSJ) this week that the government had removed a key section from Public Health England’s review of the relative risk of COVID-19 to specific groups which suggested that discrimination and poorer life chances were playing a part in the increased risk of contracting the disease amongst those with BAME backgrounds.

The HSJ noted Matt Hancock’s response articulated at a daily coronavirus briefing this week when he said that ‘he understood why many were ‘understandably angry about injustices’ and that he felt a ‘deep responsibility because this pandemic has exposed huge disparities in the health of our nation’ [saying also] that ‘much more work’ was needed to be done to understand ‘what’s driving these disparities’ before adding: ‘We are absolutely determined to get to the bottom of this and find ways of closing the gap.’

In the light of his response one has to ask oneself the question where has the government been? The last 10 years of government-imposed austerity, cuts to spending on public sector services, its ideological attachment to low wages and precarious employment to serve the business agenda had already taken their toll before COVID-19 even arrived into our midst. It is incomprehensible that politicians and their appointees don’t know where the inequality and poverty have come from! Wilful ignorance comes to mind.

So where might we be going now?

Rishi Sunak, the Chancellor, announced last week that the Coronavirus Job Retention Scheme (aka the furlough scheme) which has helped protect 8.4 million jobs is to be extended until October and those who were eligible for Self-Employment Support will be able to claim a second and final grant in August. However, his plan to taper pay-outs from August onwards from the current 80% will mean that employers will have to cover the difference.

The ending of the furlough scheme at such a crucial moment will, without doubt, have exactly the opposite effect to the one desired.  It is likely to lead to a steep increase in unemployment as businesses are forced to downsize their operations or go bust; making people redundant just at the time when the world is entering a recession, or worse. The UK does not exist in a bubble – it is also affected by world economic conditions, which are equally distressed.

The impact is likely to be devastating. An analysis published by The Institute for Public Policy Research (IPPR) this week suggests that by the end of 2020, 1.1million more people face poverty as a result of the coronavirus pandemic and that 200,000 more children will be among those expected to be below the pre-virus poverty line as job losses hit family incomes. It says that without urgent action to protect families from financial hardship it would bring the total number of children living in poverty in the UK to 4.5 million – an increase of almost 5%.

Its figures are drawn from Bank of England estimates that unemployment is likely to reach just under 10%, or around 3.3 million people, by the final quarter of the year. Claire McNeil, Associate Director of the IPPR, said ‘The government must apply the same level of ambition it had for supporting businesses and workers … to prevent a new generation of children and their families falling into poverty through no fault of their own.’

What we need now is the combined and continued power of the state and the public purse, to both stave off further damage and begin the vital move towards globally sustainable economies and the pursuit of a more equitable and sustainable sharing of global resources.

The economic policies of the preceding decades have been framed around three false narratives: That global corporations and financial institutions are the wealth makers and must be privileged, that the State is powerless to act in the public interest and that the public accounts are like our own household budgets with spending limited to income (in this case taxation) which requires a firm hand and iron fiscal discipline to keep them in balance.

We are now by dint of this tragedy discovering that the magic money tree, like the magic porridge pot, is showing no signs of running out of funds as Rishi Sunak is also apparently contemplating yet another package of measures to help the economy. The release of information about the details of this package have now been put back until the autumn as Sunak seemingly waits to see what happens. Perhaps he’s expecting an economic miracle!  It has to be said that this is a moment for bold thinking, not delay or prevarication.

In fact, what we now need is a revolution in thinking, not the stale economic orthodoxy which has already done so much damage down the decades.  It is disappointing when three former Chancellors of the Exchequer still frame their arguments in household budget terms when talking about the challenges ahead. It is also disappointing to read the OBR’s analysis of the furlough scheme which speaks in terms of costs to the public finances and debt, when the focus should be on the real benefits of government spending to the nation and its economic health at a crucial time and in terms of investment in the future.

In the case of Osborne, the architect of austerity, it was frustrating to note his continuing adherence to ‘handbag’ economics when he commented in an article in the Telegraph that ‘sadly we are poorer than we thought we were, and either we’re going to have to raise more in revenue or spend less than we were planning’.

It is clear that whilst the cash is being splashed for the moment, the magic money tree is likely to have a limited life or perhaps more accurately will only bear fruit to serve the interests of the global corporations and other wealthy elites. If this remains unchallenged it will not bode well for the future of the UK, not to mention the planet.

If some of us thought that COVID-19 might act as a wake-up call for the future, that scenario is still unclear. Not only in terms of the government’s priorities about who is to benefit from government spending but also looking at the general situation. Pollution levels are once again rising in China and it is expected that Europe will follow suit. The pictures of long queues outside Ikea paint a depressing picture as do the piles of rubbish left in beauty spots by people who travelled hundreds of miles in their cars to get there. It seems that while people were obliged to stay at home, they would bake, connect with one another through Zoom or contemplate a different way of doing things, they are still just as eager to pick up where they left off once the restrictions are lifted.

And yet while we are all dying to get back to normal there is still an existential threat to civilisation which we must address swiftly if we care at all for the fate of future generations whilst we still have some time left.

COVID-19 offers an opportunity to rethink everything and most importantly to challenge the received wisdom that ultimately there will be a financial price to pay for government spending too much! The price we will really pay for continuing with the narrative of financial unaffordability will be the health of our ecosystem and all those who depend upon its resources to enable and enrich their lives in every sense.

We can all play a part in bringing about positive change. However, it is only government with the power of the public purse and an understanding of the resource constraints that all governments face, that can demonstrate the real resolve through its legislative powers at national and local level to deliver public purpose goals. A green recovery is only possible with a government committed to real change in its spending priorities and through pursuing full employment policies. This could be through a combination of an expansion of the public sector combined with a Job Guarantee to allow the transition towards the green economy we need by providing the necessary economic stability.

Let’s not let this opportunity slip through our fingers.  It is only the people that can demand the change we need. It is only people with the correct knowledge that can pour scorn on politicians who continue to adhere to false narratives about how governments spend. The future is at stake now more than ever before.

If you want to know more the GIMMS website is a good place to start the journey to that challenge

https://gimms.org.uk/mmtbasics/

 

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

Viber icon
Viber

The post To talk about the future is only useful if it leads to action now appeared first on The Gower Initiative for Modern Money Studies.

If you clapped for the NHS and key workers, now it’s time to ACT.

Published by Anonymous (not verified) on Sun, 31/05/2020 - 3:43am in

Chalk board with Together written on it and stick figutes holding handsImage by Gerd Altmann from Pixabay

“Governments stand because people sit; if people stand, governments will sit!”
Mehmet Murat İldan (Turkish writer).

Did you clap for the NHS and key workers? Did you cheer on Captain Tom? Have you been angered by what has happened to some of the most vulnerable in our society both in care homes and in our communities?  If so, then it’s time to take it a step further. Not putting too fine a point on it, clapping and anger are empty gestures without real action and sadly also have acted as a distraction to what is happening under cover of COVID-19.

Before it is too late to reverse the on-going creation of an all-powerful corporatocracy serving the few through government diktat, it’s time to recognise some difficult truths about what has been happening. Not just to our NHS but also to vital national and local public services which have been starved of cash, forced to reduce services and staffing levels and compelled to outsource or privatise those very services upon which we depend for national economic well-being. We are living the destructive consequences of an ideology that claims that private is more efficient, that our public services are dependent the state of the economy for funding and by association the false public assumption that a healthy economy increases tax revenues and enables public services to be paid for.

We are seeing first-hand what happens when the public purpose is subverted to deliver public money into private profit.  As George Monbiot put it in an article this week in his blog: ‘There is a consistent reason for multiple systemic failures the pandemic exposed: the intrusion of corporate power into public policy. Privatisation, commercialisation, outsourcing and offshoring have severely compromised the UK’s ability to respond to a crisis’.

The campaigning organisation WeOwnIT in partnership with the University of Greenwich published a report just over a week ago Privatised and Unprepared: The NHS Supply Chain which suggested our government is ‘asleep at the wheel’ although one might challenge that description for a more accurate one being ‘wide awake’. These are not failures of misdirected policies, they are deliberately constructed market-oriented strategies to favour corporations and serve a revolving door.

In a clear indictment of government actions, it describes a system which has been privatised to supposedly deliver efficiency savings but which in reality has left the country totally unprepared to address the COVID-19 emergency as well as seriously undermining the operation to protect the NHS, care staff and patients. Just in time systems, a fragmented supply structure in the hands of private profit-oriented organisations left the NHS and indeed care homes unable to access sufficient supplies of PPE. Privatisation and outsourcing have proven in the most tragic way that they are not the magic cure-all that was promised.

Worryingly but predictably the government, instead of stopping, is still pressing on with its plans as more and more public contracts are handed out to private companies without any accountability; fragmenting the emergency response even further at a time when it is essential for the government to act in the public interest, not to the advantage of private profit.

However, a privatised supply chain is just one piece of this complicated jigsaw. For decades and almost imperceptibly at least to the public the NHS has been undergoing a radical transformation. Behind its well-recognised public logo now sits a structure which has been infiltrated by private healthcare companies which have been directing the orchestra all with the approval of successive governments towards the creation of a US-style two-tier healthcare service. As our sister organisation, Public Matters, wrote in an article in 2017 ‘the Americanisation of the NHS [is] happening right here, right now.’  It is not a dystopian vision of the future.  Furthermore, this vision goes well beyond the national borders of the UK as Professor Steward Player (co-author of ‘The Plot against the NHS) wrote in an article published in the Socialist Health Association in 2017 in which he indicates that the ‘basic strategy now adopted for the NHS in England has its origins in the business-dominated international circuit of which the WEF (World Economic Forum) is the apex…[and] what is planned for the NHS in England is not a home-grown response…but what the global policy-making elite at Davos sees as a way of avoiding further growth of spending on publicly-provided health care.’

He noted that in early 2012 the WEF had considered that ‘national healthcare systems were increasingly caught between a rock and a hard place as fiscal crises were creating pressures to curb expenditure’. Professor Player also noted that as a result, it had set about the task of helping ‘existing models become sustainable’. The first report, co-authored with McKinsey and Co, looked amongst other things at the financial sustainability of health systems in the context of the level of public debt and declining tax revenues and the second at offering solutions which included ‘rationing, shifting the cost burden onto individuals and raising healthcare ‘productivity’ through delivering more services with fewer resources.’

It is instructive that once again we see the use of a false narrative about public debt and unsustainable spending which has underpinned government policies aimed at delivering a corporate, profit-led world serviced by public spending taps which can be switched on and off at will depending on the political objectives. And again, with the caveat that we’ll need more austerity in the public sector to pay down the debt incurred which in turn will lead to services being sacrificed, yet again, on the altar of efficiency and profit.

And now following Brexit, as if that were not enough, the health service which is already minus the ‘N’ for national’ is also being threatened by a trade treaty with the US. Even if the government has promised that the NHS will not be on the table, given the government’s obfuscation and lies trust in that promise has to be questioned.

COVID-19 is providing the perfect #disastercapitalism opportunity to drive these policies as we remain locked down and fearful for the future and also the daily reminders of the dishonest claim by politicians and their pals in the media who labour the point that someone will have to pay up in the end. Even when that is not true!

The same situation also applies to the Care Sector where, as covered in previous blogs, for the last few decades services have increasingly relied on market provision with tragic consequences, historically and as a result of the current pandemic. David Rowland who is a Director of the Centre for Health and Public Interest noted in a recent article in LSE Blogs that ‘using the market to deliver social care on a low-cost basis had manifestly failed even before the current pandemic’ pointing out that ‘one in five care homes are rated as inadequate or needing improvement, personal care is provided to people in their own homes in 15-minute slots, with the sector as a whole suffering from a 30% turnover rate – a fact which might explain why there are currently over 120,000 vacancies.’  

Like healthcare, the social care system is dominated by private residential and home care all competing for a share of the market, thus creating pressures on wages and quality of care. The workforce has become casualised with increasing reliance on zero-hour contracts.  As David Rowland points out ‘because the state has driven the cost of delivering care down to a bare minimum and because off-shore investors have sought to extract the maximum short-term profit out of the residential care sector, many care providers were teetering on the brink of collapse even before COVID-19 hit. He notes that this has ‘left the financial structure of the industry in such a fragile state that it is not able to withstand even a minor downturn in income or increase in costs’.

Austerity driven from the top has percolated into every aspect of our lives, leaving our local governmental structures unable to provide the necessary expert and logistical support. Privatisation equally has proved to be a killer. In short, whether it’s the NHS or the care sector as TJ Coles notes in his book ‘The Privatised Planet’ ‘the less care you give the more money you make’. And that is the crux of the threat that faces not just us but our fellow planetary citizens

Never has there been a more important time to challenge this ideology that the needs of the ‘market’ should trump public purpose and the creation of a healthy, educated, purposeful nation.

One million people have signed a petition calling for the resignation of Dominic Cummings and tens of thousands have written to their MP. His actions have stirred a wave of disgust at a time of national emergency and solidarity in a way that the loss of our public services has not.  Campaigns and demonstrations organised by committed individuals over the last 10 years have done little to raise real awareness amongst the general public about what has been happening with little or no public accountability.  When you are struggling to pay your bills, rent or mortgage, working for poor wages and in insecure employment, living in bad housing or unable to access good healthcare and education there is little time left to be concerned about the future when the here and now is all-consuming. A rotting economic system has deprived many of the will and energy to stand up.

With a media that has also reinforced the perception that our public services are either unaffordable or reliant on a healthy economy and taxes being paid, the public has not stood a chance to make its voice known. Until now perhaps?

The public has had a full-on very personal encounter with the vital nature of our public and social infrastructure and if change is to happen then it now needs to stand up and demand that our vital public services are not only funded properly but also restored to public provision. As part of that demand and with the knowledge that a sovereign currency-issuing government is not short of cash but more accurately short on political will, it must also challenge politicians and media pundits who are already talking about how it will be paid for.

The message is simple.  The government has the power of the public purse and the power to serve the public purpose if it chooses to do so. As the currency issuer, it neither needs tax or to borrow before it can spend, and that spending will not be a financial burden on future generations. Britain’s national debt which is predicted to hit £2 trillion for the first time will not be ‘the grim milestone’ it is claimed to be by a media pundit yesterday.

The real burden will be a government that has failed to spend sufficiently on delivering public purpose aims for today in the light of the damaging effects of COVID-19 on the economy which will continue for some time to come, and for future generations who will benefit or not as the case may be from government spending policies.

The political institutions, corporations and wealthy elites have gamed the system for their own purpose through domestic legislative means, trade deals and by subverting public funds into private profit. They are still gaming the system.  As Arundhati Roy put it in the Progressive International Our Task is to Disable the Engine’.  

 

 

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

Viber icon
Viber

The post If you clapped for the NHS and key workers, now it’s time to ACT. appeared first on The Gower Initiative for Modern Money Studies.

David Sirota’s Word of the Week: Looting

Published by Anonymous (not verified) on Fri, 29/05/2020 - 5:10am in

We don’t call this “looting” because it is being done quietly in nice marbled office buildings in Washington and New York. We don’t call this “looting” because the looters wear designer suits and are very polite as they eagerly steal everything not nailed down to the floor. Continue reading

The post David Sirota’s Word of the Week: Looting appeared first on BillMoyers.com.

‘Two roads diverged in a yellow wood’. The question is which one will we take?

Man standing in a wood at a fork where paths divergePhoto by Vladislav Babienko on Unsplash

Two roads diverged in a yellow wood’ are the opening words of a poem by the celebrated poet Robert Frost. Whilst he was writing about his own personal life’s journey, they are words that could not be more appropriate to the situation that not just the UK, but the planet, finds itself in. The COVID-19 pandemic which has brought world economies to a standstill and threatens a deep recession is uppermost in our minds, particularly those people who have been directly affected by the disease or by loss of their employment. But those immediate threats, devastating enough as they are proving to be with no immediate solutions and a government anxious to get the economy going again regardless of the potential human consequences, are overshadowed by another peril. Climate change remains the biggest challenge of all, risking as it does the very survival of the planet’s ecosystems and by implication human existence.

Our daily routines have until now imposed a false sense of permanence. The illusion that despite the cyclical economic instability which capitalist societies are prone to, everything always, eventually, returns to ‘normal’. Even when normal has patently shifted. We have accepted this as part and parcel of how things are, even when it hurts people. But the severity of the pandemic is challenging that view. We are finding that in addition to the risky nature of life which COVID-19 has revealed, danger also comes from the fact that our economic system has been built on shaky ground indeed – one might say quicksand. The rolling death toll and the degradation of our public services is a daily reminder.

As the country moves towards a lifting of lockdown and a return to semi-normality, we are seeing more cars on the road, beaches crowded with day-trippers, people travelling hundreds of miles to visit beauty spots, the prospect of schools re-opening amidst huge controversy and airlines proposing to recommence flights, the question hangs in the air about what sort of future lies ahead. Whether we can indeed continue along the perilous path of growth we have been travelling along without some sort of future reckoning. And if not, what should our world look like?

COVID-19 and its associated threats have revealed in the starkest way possible that the economic system which prevailed for the last forty years and more has left the world unable to meet the challenges so cruelly posed by the pandemic. All as a result of a toxic neoliberal ideology which has left our public and social infrastructure in ruins, impoverished people as a direct consequence of a globalised world which has kept wages and living standards down and focused on the primacy of the individual over collective action. Politicians have listened to the so-called economic gurus and put their faith in a mystical market as if somehow it alone can direct the orchestra from the celestial podium. Letting it rip to find that non-existent perfect equilibrium by serving global corporations through legislative means, promoting the lie of trickle-down, and claiming that the public infrastructure depends on so-called ‘wealth creators’.

We have paid a heavy price and we are indeed at a fork in the road. Where we go from here is not clear. And yet the choices we make next will make all the difference.

Earlier this week, the President of the World Bank said that ‘the pandemic and shutdown of advanced economies could push as many as 60 million people into extreme poverty’. The Chancellor of the Exchequer in the same week warned that Britain was facing a ‘severe recession the likes of which we haven’t seen’ which would cause severe damage to the UK’s economy. He also went back on earlier predictions of an ‘immediate bounce back’ as the lockdown was lifted and said that there would be more hardship to come.

This came as the Treasury confirmed that around eight million UK workers have now been furloughed and two million are expected to receive support from the government. The government’s spending has risen massively to support those affected and keep businesses ticking over until such time as a recovery is underway.

Although there has been some talk of more austerity to pay for this spending, even the most hawkish of commentators from neoliberal institutions like the Adam Smith Institute recognise that the last thing we need now is to worsen the prospect of a full-scale depression, even if those observations are still couched in household budget terms. Borrowing whilst interest rates are low or growing the economy to improve tax revenues are the oft-repeated caveats to that spending. Clearly, this is not closing the door to such false household budget narratives.

It is politically expedient to accept the need for spending to stop the economy from collapsing and causing infinite damage to the business infrastructure and profits much as the Labour government did in 2008 when it bailed out the banks. But in time, those narratives will likely be given a fresh breath of life at least in terms of continuing to deliver a political agenda.

It will likely bring the next instalment of austerity for public services and their employees’ wages and carrying on along the well-trodden path which favours corporations by delivering a legislative framework not just at national level but international level through the pursuit of free trade deals.

The state with its power of the public purse being used, not for the public purpose, but for quite a different estate – the corporations and a few wealthy elites. Indeed, this week the media, economists, politicians and political commentators have been priming the public for the acceptance of more austerity by reinforcing the message that governments have to borrow or that government has to collect money from tax revenue or other charges before it can spend.

Both the Huffington Post and the BBC ran articles this week discussing how governments pay for the government’s increase in spending through bond issuance. Peter Hitchens tweeted that Rishi Sunak’s furlough billions were just giant payday loan that the country will have to pay back with interest (at some future date). And Boris Johnson when challenged about the decision to continue charging health and care workers to use the NHS (before the decision to rescind the charge) suggested that the money was needed to run the NHS. Indeed, Captain Tom has been knighted for his work in raising money for the NHS as if the institution was a charity and not a publicly funded organisation which does not require tax or other contributions to fund it.

The narrative being reinforced in in the public’s mind is that at some time down the track it will all have to be paid for through more austerity or increased tax. It is worth repeating here that a sovereign currency-issuing government does not need to borrow in order to spend. Indeed, logically speaking how could it borrow money unless it had been spent by the government first? What looks like borrowing isn’t and bond issuance has quite another role. It is instead a smoke and mirrors exercise designed to give the appearance of borrowing and continue the narrative that governments are beholden to money lenders in private markets or that the markets call the tunes.

Dispelling the myths about how governments spend is a priority if we are to give ourselves half a chance to make a different and better world. As was indicated at the beginning of this blog COVID-19 and recession are just part of this picture. The talk about ‘getting back to normal’ overshadows the biggest threat that we still face – climate change and what our response should be. The false narrative of the burden of debt and paying it back will, if allowed to persist, persuade people that action to deal with any of those threats whether unemployment caused by a COVID-19 induced recession or climate change is unaffordable in the long term. That there is always a financial price to pay.

The reality is that the price will not be monetary, it will be in the lives of people who are unemployed, and a trashed planet not fit to live on. We will be rulers of a dead planet, poisoned by our own hand.

There is an alternative. It starts with knowing about how money works and being able to challenge the current narrative that success is to be judged by how well our politicians managed the public accounts.

Contrary to Mrs Thatcher’s oft-repeated slogan ‘there is no alternative’; there is one.

This is the moment to think about a permanent Job Guarantee to manage both the catastrophic effects of COVID-19 on people’s lives and the economy in terms of stabilising it through ending involuntary unemployment and facilitating the transition towards a green and sustainable world. So much potential but will our government act?

Maybe that time is coming; only time will tell. The political discourse has so far been dedicated to a return to normality, growth and rising GDP.

Fiona Harvey, the environment correspondent in the Guardian began an article this week with a stark warning:

‘Global leaders must heed the lessons of the financial crisis of 2008 when they look to repair the damage from the coronavirus pandemic, leading experts have warned, to avoid entrenching disastrous social, health and environmental inequalities and hastening climate breakdown.

The stakes are high.

Earlier this month the Oxford Smith School of Enterprise and the Environment published its paper ‘Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?

In its introduction, it noted that the crisis had demonstrated that governments can intervene decisively once the scale of an emergency is clear and public support is present. It went on to say that:

‘The climate emergency is like the COVID-19 emergency, just in slow motion and much graver. Both involve market failures, externalities, international cooperation, complex science, questions of system resilience, political leadership, and action that hinges on public support. Decisive state interventions are also required to stabilise the climate, by tipping energy and industrial systems towards newer, cleaner, and ultimately cheaper modes of production that become impossible to outcompete’

Its recommendations for contributing to achieving economic and climate goals were:

  • clean physical infrastructure investment
  • building efficiency retrofits
  • investment in education and training to address immediate unemployment from COVID-19 and structural unemployment from decarbonisation, — natural capital investment for ecosystem resilience and regeneration
  • clean R&D investment.

A state-run Job Guarantee implemented to serve both national and local community objectives offers the perfect vehicle to deliver a green-led recovery and reduce the inequality of past decades. Retrofitting existing buildings, creating cities which are cyclist and pedestrian-friendly, digging trenches for broadband connections, planting trees or putting in networks for charging electric-powered vehicles are just a few examples of the work that Job Guarantee participants could accomplish. Our imagination can determine the rest. Serving the public purpose must be the quest.

A Job Guarantee provides an immediate solution to the problem of rising unemployment to stabilise the economy, an opportunity for training the workforce and, out of the catastrophe of pandemic, also provides the perfect opportunity to start along the path towards a more equitable, greener and sustainable world.

We as a nation may also want to consider what sort of future we want in terms of public infrastructure to serve the public purpose. Do we want more state provision – a publicly provided and paid for infrastructure and employment to ensure that we can meet whatever the future holds? If the current situation is anything to go by, there are lessons to be learnt. Or do we prefer to continue as we are and move into a Mad Max dystopian type world where corporate profit is the guiding light and government is its servant?

Brian O’Callaghan, a co-author of the paper said that it was ‘this is the single biggest opportunity for the government to shape the future decade…’ which indeed it is.

Robert Frost ended his poem:

‘Two roads diverged in a wood, and I —

I took the one less traveled by,

And that has made all the difference.’

Therein lies the challenge. Not directly a personal one in this case but one which involves us all. Do we continue as we are or choose another path for the sake of the future and those that will inherit it?

 

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

Viber icon
Viber

The post ‘Two roads diverged in a yellow wood’. The question is which one will we take? appeared first on The Gower Initiative for Modern Money Studies.

J.A. Hobson on Capitalism and Imperialism

One of the crimes for which Jeremy Corbyn was pilloried as an anti-Semite was that he had written a foreword for an edition of J.A. Hobson’s book, Imperialism. First published in 1903, Hobson’s book has become one of the classic critiques of imperialism. Hobson considered that the motive force behind imperialist expansion and overseas conquest was capitalism and the continual need to find new markets. The book influenced Lenin’s own analysis of imperialism, Imperialism: The Highest Form of Capitalism. Fifty years after the book was published it was praised by the great British historian A.J.P. Taylor, who said that ‘No survey of the international history of the twentieth century can be complete without the name of J.A. Hobson’ because he was the first to identify imperialism’s economic motives. Hobson has been accused of anti-Semitism.

Imperialism and the Anti-Semitism Smears against Corbyn

I think it’s because he believed that Jewish financiers were behind the Anglo-South Africa or ‘Boer’ Wars. I think the real force was the British desire to expand into the African interior,  retain the Afrikaners as imperial subjects and acquire the riches of the southern African diamond fields as well as Cecil Rhodes own megalomaniac personal ambitions. However, when the various witch-hunters were howling about how anti-Semitic Corbyn was for endorsing the book, others pointed out that it was a very well-respected text admired and used by entirely reputable historians. Yes, it was a bit anti-Semitic. A very small bit – there was only one anti-Semitic sentence in it. It was another case of the witch-hunters grasping at whatever they could, no matter how small, to smear a genuinely anti-racist politician.

Financial Capitalism, Imperialism and the Decline of Ancient Rome

There’s an extract from Hobson’s Imperialism in The Penguin Book of Twentieth-Century Protest, edited by Brian MacArthur (London: Penguin 1988). This is a collection various writings protesting against a wide variety of issues ranging from indictments of the poverty of Edwardian England, to various wars, including Vietnam, Civil Rights and anti-Racism, as well as feminism, gay rights, the power of television and the threat of nuclear war. Yes, there’s an extract from Hitler’s Mein Kampf, but there’s also a piece by the American Zionist rabbi, Stephen S. Wise, against the persecution of the Jews in Nazi Germany as well as other condemnations of Nazis and their horrific rule. The book very definitely does not endorse Fascism or the Communism of Stalin, Pol Pot and the other monsters.

The extract included in the book does identify financial capitalism and militarism as the force behind Roman imperialism, which led to the enslavement of Rome’s enemies abroad and the emergence of an immensely wealthy aristocracy, while impoverishing ordinary Romans at the other end of the social hierarchy, and compares it to the comparable development of the British imperialism of his own time. The extract runs

The spirit of imperialism poisons the springs of democracy in the mind and character of the people. As our free self-governing colonies have furnished hope, encouragement and leadership to the popular aspirations in Great Britain, not merely by practical successes in the arts of popular government, but by the wafting of a spirit of freedom and equality, so our despotically ruled dependencies have ever served to damage the character of our people by feeding the habits of snobbish subservience, the admiration of wealth and rank, the corrupt survivals of the inequalities of feudalism. This process began with the advent of the East Indian nabob and the West Indian planter into English society and politics, bring back with his plunders of the slave trade and the gains of corrupt and extortionate officialism the acts of vulgar ostentation, domineering demeanour and corrupting largesse to dazzle and degrade the life of our people. Cobden, writing in 1860 of our Indian Empire, put this pithy question: ‘Is it not just possible that we may become corrupted at home by the reaction of arbitrary political maxims in the East upon our domestic politics, just as Greece and Rome were demoralized by their contact with Asia?’

The rise of a money-loaning aristocracy in Rome, composed of keen, unscrupulous men from many nations, who filled the high offices of state with their creatures, political ‘bosses’ or military adventurers, who had come to the front as usurers, publicans or chiefs of police in the provinces, was the most distinctive feature of later imperial Rome. This class was continually recruited from returned officials and colonial millionaires. The large incomes drawn in private official plunder, public tribute, usury and official incomes from the provinces had the following reactions upon Italy. Italians were no longer wanted for working the land or for manufactures, or even for military service. ‘The later campaigns on the Rhine and the Danube,’ it is pointed out, ‘were really slave-hunts on a gigantic scale.’

The Italian farmers, at first drawn from rural into military life, soon found themselves permanently ousted from agriculture by the serf labour of the latifundia, and they and their families were sucked into the dregs of town life, to be subsisted as a pauper population upon public charity. A mercenary colonial army came more and more displace the home forces. The parasitic city life, with its lowered vitality and the growing infrequency of marriage, to which Gibbon draws attention, rapidly impaired the physique of the native population of Italy, and Rome subsisted more and more upon immigration of raw vigour from Gaul and Germany. The necessity of maintaining powerful mercenary armies to hold the provinces heightened continually the peril, already manifest in the last years of the Republic, arising from the political ambitions of great pro-consuls conspiring with a moneyed interest at Rome against the Commonwealth. As time went on, this moneyed oligarchy became an hereditary aristocracy, and withdrew from military and civil service, relying more and more upon hired foreigners: themselves sapped by luxury and idleness and tainting by mixed servitude and licence the Roman populace, they so enfeebled the state as to destroy the physical and moral vitality required to hold in check and under government the vast repository of forces in the exploited Empire. The direct cause of Rome’s decay and fall is expressed politically by the term ‘over-centralization’, which conveys in brief the real essence of imperialism as distinguished from national growth on the one hand and colonialism upon the other. Parasitism practised through taxation and usury, involved a constantly increasing centralization of the instruments of government, and a growing strain upon this government as the prey became more impoverished by the drain and showed signs of restiveness. ‘The evolution of this centralized society was as logical as every other work of nature. When force reached the stage where it expressed itself exclusively through money the governing class ceased to be chosen because they were valiant or eloquent, artistic, learned or devout, and were selected solely because they had the faculty of acquiring and keeping wealth. As long as the weak retained enough vitality to produce something which could be absorbed, this oligarchy was invariable; and, for very many years after the native peasantry of Gaul and Italy had perished from the land, new blood, injected from more tenacious races, kept the dying civilization alive. The weakness of the moneyed class lay in this very power, for they not only killed the producer, but in the strength of their acquisitiveness they failed to propagate themselves.’

This is the largest, planest instance history presents of the social parasite process by which a moneyed interest within the state, usurping the reins of government, makes for imperial expansion in order to fasten economic suckers into foreign bodies so as to drain them of their wealth in order to support domestic luxury. The new imperialism differs in no vital point from this old example. The element of political tribute is now absent, or quite subsidiary, and the crudest forms of slavery have disappeared: some elements of more genuine and disinterested government serve to qualify and and mask the distinctively parasitic nature of the later sort. But nature is not mocked: the laws which, operative throughout nature, doom the parasite to atrophy, decay, and final extinction, are not evaded by nations any more than by individual organisms. The greater complexity of the modern process, the endeavour to escape the parasitic reaction by rendering some real but quite unequal and inadequate services to ‘the host’, may retard but cannot finally avert the natural consequences of living upon others. The claim that an imperial state forcibly subjugating other peoples and their lands does so for the purpose of rendering services to the conquered equal to those which she exacts is notoriously false: she neither intends equivalent services nor is capable of rendering them, and the pretence that such benefits to the governed form a leading motive or result of imperialism implies a degree of moral or intellectual obliquity so grave as itself to form a new peril for any nation fostering so false a notion of the nature of its conduct. ‘Let the motive be in the deed, not in the event,’ says a Persian proverb…

Imperialism is a depraved choice of national life, imposed by self-seeking interests which appeal to the lusts of quantitative acquisitiveness and of forceful domination surviving in a nation from early centuries of animal struggle for existence. Its adoption as a policy implies a deliberate renunciation of that cultivation of the higher inner qualities which for a nation as for its individual constitutes the ascendancy of reason over brute impulse. It is the besetting sin of all successful state, and its penalty is unalterable in the order of nature.

(Pp. 15-18).

Financial Capitalism Operating to Exploit Former Colonies and Undermine Domestic Economy

While the British Empire has gone the way of Rome’s, the same forces are still operating today. The Iraq invasion was really to enable western multinationals to seize Iraq’s state industries, and for the American and Saudi oil industry to seize its oil reserves. They weren’t about bringing it democracy or freeing its citizens. Although our former African colonies are now free, they are still plundered through highly unfair trade agreements. At home manufacturing industry has declined because Thatcherite economics favours the financial sector. And the immensely rich now hoard their wealth in offshore tax havens or invest it abroad, rather than in domestic industry. Thus denying British industry investment and making millions of domestic workers unemployed. There’s a further parallel in that in the later Roman Empire, the senatorial aristocracy retreated to their estates rather than pay tax, and so the tax burden increasingly fell on the ordinary Roman citizen. This is the same as the way the Tories have given vast tax cuts to the rich, which have ensured that the tax burden must also be increasingly borne by the poor.

Conservatives have also drawn parallels between the fall of the Roman Empire and today’s west. This has mostly been about non-White immigration, which they have compared to the barbarian invasions. But as Hobson’s Imperialism showed, capitalism and imperialism were connected and together responsible for Rome’s decline and fall. 

But strangely they don’t talk about that!

 

 

Shaw’s Classic Defence of Socialism for Women Part Two

George Bernard Shaw, The Intelligent Woman’s Guide to Socialism, Capitalism, Sovietism and Fascism, foreword by Polly Toynbee (London: Alma Classics 2012).

Trade Unions

He discusses the unions, which he describes as ‘proletarian capitalists’. They are there to protect the workers, who have to sell their labour just as the businessman has to sell the product they create. Unions are there to ensure the workers are able to charge the highest price they can for their labour. He also discusses strikes and lockouts, including the violence of some industrial disputes. Scabs need police protection against being beaten, and angry workers will tamper with the equipment so that anyone using it will be injured. They will also place fulminate of mercury in chimneys to cause an explosion if someone starts up the furnaces.

Party Politics and Socialism

Shaw describes the class conflict between the Tories, representing the aristocracy, and the Liberals, who represented the industrial middle classes. These competed for working class votes by extending the franchise and passing legislation like the Factory Acts to improve working conditions. However, each was as bad the other. The aristocracy kept their workers in poverty in the countryside, while the middle classes exploited them in the factories. The laws they passed for the working poor were partly designed to attack their opponents of the opposite class.

He goes on to give a brief history of British socialism, beginning with Marx, William Morris’ Socialist League, and Hyndeman’s Social Democratic Federation. These were small, middle class groups, disconnected from the British working class through their opposition to trade unions and the cooperatives. It was only when British socialism combined with them under Keir Hardie and the Independent Labour Party that socialism became a real force in working class politics. The Fabian Society has been an important part of this, and has made socialism respectable so that the genteel middle classes may join it as Conservatives join their Constitutional Club.

Shaw believed that socialism would advance, simply because of the numerical supremacy of the working classes, and that soon parliament would be full of Labour MPs. However, he also recognised that many members of the proletariat were anti-Socialist. This is because they depended for their livelihood on the businesses serving the idle rich. He called this section of the working class the ‘parasitic proletariat’. The working class is also distracted away from socialism through lotteries and so on.

Democratic, Parliamentary Socialism and Nationalisation

Shaw argues strongly that socialism could only be established through democratic, parliamentary action. General strikes wouldn’t work, as the employers would simply starve the workers out. The strikes intended to stop the outbreak of the First World War had failed the moment the first bomb dropped killing babies. Violent revolutions were purely destructive. Apart from the human lives lost, they destroyed the country’s vital industrial and economic structure. Socialism needed to build on this, not destroy it. Similarly, confiscating the capitalists’ wealth, either directly through nationalisation without compensation, or by taxing capital, was also counterproductive. The capitalists would simply sell their shares or unwillingly surrender them. The result would be bankruptcy and mass unemployment. This would result in further working class unrest, which would end in a counterrevolution.

The only way socialism could proceed would be by long preparation. You should only nationalise an industry once there was a suitable government department to run it. Compensation should be given to the former proprietors. This did not mean robbing the workers to pay their former exploiters, as the money would come from taxing the upper classes so that the class as a whole would be slightly worse off than before, even though the former owners were slightly better off.  You can see here and in Shaw’s warning of the ineffectiveness of general strikes the bitterness that still lingered amongst the working class after the failure of the General Strike of the 1920s.

Nationalisation could also only be done through parliament. There were, however, problems with parliamentary party politics. If the socialist party grew too big, it would split into competing factions divided on other issues, whose squabbles would defeat the overall purpose. Party politics were also a hindrance, in that it meant that one party would always oppose the policies of the other, even though they secretly supported them, because that was how the system worked. We’ve seen it in our day when the Tories before the 2010 election made a great show of opposing Blair’s hospital closures, but when in power did exactly the same and worse. Shaw recommends instead that the political process should follow that of the municipalities, where party divisions were still high, but where the process of legislation was done through committees and so on parties were better able to cooperate.

Limited Role for Capitalism

Shaw also argued against total nationalisation. He begins the book by stating that socialists don’t want to nationalise personal wealth. They weren’t going to seize women’s jewels, nor prevent a woman making extra cash for herself by singing in public or raising prize chrysanthemums, although it might in time be considered bad form to do so. Only big, routine businesses would be nationalised. Small businesses would be encouraged, as would innovatory private companies, though once they became routine they too would eventually be taken over by the state.

It’s a great argument for a pluralistic mixed economy, of the type that produced solid economic growth and working class prosperity after World War II, right up to 1979 and Thatcher’s victory.

 

 

 

 

 

 

 

 

 

 

 

 

 

Pages