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).

The need is to fix the system, not just to provide ‘sticking plasters’

Food Bank Cupboard stocked with tinned and packet foodImage by Staffs Live (CC BY-NC 2.0)

“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”

Franklin D. Roosevelt

 

It feels lately that we, like Lewis Carrol’s Alice, have fallen down a rabbit hole into an immensely troubling surreal situation with seemingly no idea how we are going to extricate ourselves.

Whether it is the distressing daily reports of Covid-19 deaths, the disturbing video accounts of the huge pressures on our NHS or care services, the political upheavals taking place across the Atlantic and elsewhere or the most serious challenge of all, climate change, it seems ever clearer that we are in Antonio Gramsci’s ‘time of monsters’ in which ‘the old world is dying and the new world struggles to be born’.

What that world will look like remains to be seen, but recent political events would seem to suggest that we still have some way to go before the ‘old world’ breathes its last. The pandemic, combined with the consequences of forty and more years of Neoliberalism Central which has infected every aspect of our lives and dominates political decision making, has created not only public disillusionment, but also petrification as our institutions sit in their blinkered bunkers holding on for dear life to all they knew.

Whether it’s the existing and growing union between government and global corporations, policy decisions which have increased inequality and poverty and encouraged charity, volunteering and philanthropy to take up the reins of public provision, or the promotion of sound finance as a vital component of good governance, the old structures are embedded in our consciousness.

It wasn’t always like this.

During the second world war, William Beveridge was appointed to investigate social security in Britain and his report, published in 1942, identified five major problems which prevented people from improving their lives. These were:

Want (caused by poverty)

Ignorance (caused by a lack of education)

Squalor (caused by poor housing

Idleness (caused by the lack of jobs or the ability to gain employment)

Disease (caused by inadequate health care provision)

It was recognised that government had a role to play in addressing those five ‘evils’ and as a result of the Beveridge report, the post-war government set up the social security system and pursued policies which aimed to address them including full employment. It may not have been perfect, but it changed people’s lives for the better.

Over recent decades, that connection between the state and publicly paid-for provision, management and delivery of services has been broken. Responsibility for such provision is increasingly being shifted into the charitable/voluntary sector, whilst at the same time, the dominant orthodoxy of individual responsibility has led to shaming and blaming people for their situation as the government takes a back-seat role.

Food banks have become a normalised feature of Britain, as Therese Coffey, the Tory minister for the Department for Work and Pensions, indicated last year when she referred to people using food banks as ‘customers’ and suggested they were a ‘perfect way to help the poor’. It implies that government has no role at all in ensuring the economic well-being of its citizens, and worse, that the 14 million Britons who do not have enough to live on are there through their own lack of moral fibre!

When charities buy into this picture and act as mitigators for a rotten economic system (which drives the poverty and inequality, that drive, in turn, the consequences including hunger, homelessness, and illness), they are not aiming to fix the system, but to provide sticking plasters. As such, it demonstrates how they, too, have been captured by an ideology and accept it without question.

This was made shockingly clear in a paid-for content article in this week’s Guardian. The CEO of the Bethany Christian Trust, when talking about tackling the problem of food insecurity said: ‘if by giving someone a meal we’re sitting them down with people they can talk to about debt counselling, mental health issues, addiction, domestic abuse, or whatever help they might need, then that plate of food can work so much harder’.

Rather than starting with the political roots of these problems, charities increasingly view them as issues to be solved through improving the capacity of the individuals themselves to manage the challenges they face.

Quite simply, this facilitates the shifting of blame onto people, rather than highlighting the failure of the government to make provision for its citizens and is classic neoliberal text. As Neil Valley suggests in his article in the New Internationalist ‘The Self-Help Myth’.

‘The pervasive rhetoric of personal responsibility has transformed the role of government and society in the neoliberal era. Where once the role of government was to safeguard the general happiness of the majority of citizens, albeit to varying degrees, its primary role now is to facilitate the conditions where each citizen can take on more and more individual responsibility, absolving the state from its responsibility towards its citizens.’

Then step in charities to fill the gap in service provision and provide the mitigating support for the rotten toxic system which has created the need in the first place and designates those in receipt of such support as customers rather than victims.

The increasingly pervasive narrative, which is being driven further by the pandemic crisis, is that charities and the voluntary sector should be at the heart of our local communities to ensure that vulnerable people don’t fall between the cracks, rather than publicly paid for, managed and delivered state provision.

It was, therefore, all the more disconcerting this week to read the proposal in the left-wing publication The Tribune that a National Food Service should be set up. Whilst its aims to serve the public good rather than private profit are indeed laudable, one has to question the logic.

Of course, one could not object to the removal of private companies delivering public services, given that the tentacles of private profit are growing exponentially as government distributes contracts to its friends and large corporations with few strings attached, whilst at the same time the coffers remain largely bare to serve the needs of those who have for decades been at the sharp end of government policies. The resulting poverty and inequality have been highlighted during this crisis.

The proposal, however, seems to suggest that we mitigate for the crisis of capitalism being played out in the growth of hunger through mutual on the ground action, rather than dealing with its root causes – government policy driven by ideology. We don’t need a plan to ‘respond’ to this fundamental crisis of capitalism, we need a plan to change it; to put public purpose and the interests of citizens, not to mention the planet, at the heart of all government policy.

Over the last few decades, working people have borne the consequences of a toxic economic ideology underpinned by the notion of monetary scarcity, which has led to the reduction in their share of their productivity, which has translated into lower wages, insecure employment and underemployment and a decline in living standards. Poverty is the direct result. The constant repetition of these ideas via politicians, think tanks, economists and the media has led us to believe that this is the inescapable default.

Government, far from serving its citizens, has overseen through its employment and other policies, huge disparities in wealth and access to resources, allowing, for example, chief executives of big corporations to earn many more times that of their employees, not to mention garner political influence as a result.

To add to this picture is the decimation of our post-war public and social security infrastructure, which existed to provide health and social care through various publicly paid for institutions, to ensure that those in need had access to shelter, food and warmth, in times of personal tragedy, sickness, unemployment or economic collapse. When this infrastructure was built, the profiteers had no place in this model and nor should they today.

Whilst the human suffering continues to play out across the nation, the government cynically continues with its U-turns on policy in the vain attempt to keep its MPs and the public on side. Last week, as noted in the MMT Lens, Boris Johnson told MPs that ‘most people would rather see a focus on jobs and growth in wages than…welfare.’ This week, with his signature tune U-Turn, he has indicated a potential rethink of ending the £20 a week Universal Credit uplift, saying he wanted to ensure that ‘people don’t suffer as a result of the economic consequences of the pandemic’. You couldn’t make it up.

Yes, indeed, to more jobs through the implementation of a Job Guarantee, to drive better wages overall and restore the government’s role as the price setter and rebuilding public service provision. But in the meantime, let’s ensure while the consequences of the pandemic continue to cause economic and social pain, that all people have enough to pay their bills and keep food on the table without worry, stress or having to get into debt to keep their heads above water. We have witnessed the power of the public purse, let us not allow that knowledge to be polluted by the restoration of household budget politics.

It is regrettable that politicians, journalists, institutions and think tanks, in their weekly forecasts of doom and gloom, continue to build up the narrative of money scarcity and a future price to pay for this massive round of government monetary intervention. A narrative that will be used to justify eventual hard decisions or another round of austerity in some form or another.

Whilst the livelihoods of many people lie in the balance, not just for now but in a rapidly changing world, we still have to endure the false notions of tax rises to pay for government spending and the penchant for sound finance. Such narratives suggest, not only that people must suffer, but also that the cost of saving our planet from climactic destruction will be too high.

The fact that the government continues to find huge sums of money to support businesses and yet quibbles over a few pounds to working people, suggesting that it is unaffordable should surely be a public conversation starter!

As the chancellor opines that there are some hard choices ahead, one of his treasury ministers clearly of the deficit dove variety, softens the blow by suggesting that the need for tax rises to tackle the record levels of government borrowing could be delayed at least until the economy ‘bounces back’. As if somehow increased tax revenues equate to the capacity to spend or pay down the national debt.

The experts at the Institute of Fiscal Studies and other think tanks then put the fear of God into the public that £40bn in tax rises might be necessary to put the public finances back onto a sustainable footing. Thus, making that public even more cautious about the government’s future spending plans. Self-fulfilling prophecies come to mind.

And then, just this week, when people thought that the vast round of government spending signified a change of approach to managing the economy, Rishi Sunak told Conservative MPs that he will be using his March budget to begin the process of restoring ‘order’ to the public finances through implementing higher taxes.

To those Tories who would like to see the Universal Credit uplift continue beyond April, he gave a reminder of its high cost which represents, according to his calculations, an equivalent of 1p on income tax plus 5p per litre on fuel duty. Thus, further reinforcing the idea that the provision of higher welfare benefits means collecting tax from elsewhere to cover it.

The ‘someone, somewhere will have to pay for it’ model of the state finances will no doubt be used cynically to drive further wedges between the haves and the have nots and justify the further decimation of the already inadequate social security safety net.

According to this narrative, the magic porridge pot is running on empty and needs replenishing in order to pay down debt and avoid a giant burden for future generations.

This tale of supposed coming woe serves to keep people in their place while reinforcing the old myths about how governments spend. It displays both economic illiteracy and a disregard for the lives of those who will lose out as a result, not to mention addressing the biggest challenge of all – climate change.

And then at the ‘left’ end of the household budget scale, we have economists, opposition politicians, unions and other so-called experts, urging the Chancellor to take advantage of low borrowing rates of interest to avoid tax rises until the economy gets back on its feet and restores tax revenues, or reinforcing the false narratives about taxing the rich to pay for the pandemic. The household budget model is endemic and those on the political left keep shooting themselves in the foot repeatedly.

A paper published by the LSE’s International Inequalities Institute last December, using data from 18 OECD countries over the last five decades, concluded unsurprisingly enough that tax cuts for the rich didn’t trickle down; that they contributed to inequality and did little to stimulate business investment.

The authors then went on to suggest that it was time to tax the rich more to repair the public finances. This was backed up in the same month when the Wealth Tax Commission, founded in April of last year, concluded that a one-off wealth tax would raise significant revenue and be fairer and more efficient than other alternatives. To be exact, it suggested that a ‘one-off wealth tax on millionaire couples would raise £260 billion’ The implication being yet again that such a tax could be used to repair the public finances.

Whilst we can’t avoid these false tropes, which lead the public astray and reinforce the messages that government spends like a household, we can challenge them. When Matt Hancock, the Secretary of State for Health and Social Care, bleats on as he did this week about the NHS Pay review body taking ‘account of the extremely challenging fiscal and economic context’ in its decision about future pay rises, we can show the public that such decisions have no connection, either with the current state of the public finances or the future monetary affordability of those pay rises.

We can reinforce the message that curtailing public sector pay won’t increase the ability of the government to ‘set the public finances straight’, any more than the decade of austerity did. It could actually have a negative, indeed disastrous, effect on the economy at a time when it will, without doubt, need continuing government support.

Aside from the fact that public sector and, indeed, other key workers have seen their pay dwindle in real terms as a result of a decade of pay freezes or inadequate employment legislation, and that the pandemic has revealed the vital nature of their contribution to society, all increasing taxation will do is leave less money for working people to spend into both the national and local economies. Also, should that increased taxation fall on corporations, (as is being suggested) who will likely pass that additional cost on through higher prices to working people anyway, it will create a double whammy effect.

Whilst a pay rise will increase tax revenues, it will not increase the government’s capacity to spend. But we see the false narrative again in a study published this week by the London Economic Consultancy. The report claimed that the government would recover 81% of the cost of any pay rise in additional taxes, which would, in turn, have significant ‘knock-on’ benefits for the Treasury. Clearly suggesting that tax funds its spending.

Whether from the left or right of the political spectrum, the public is treated daily to a mishmash of false information dictated by the dominant economic paradigm which masquerades as truth. It’s no wonder that people are confused and feel disempowered or turned off by politics and economics, which they feel do not relate to their lives at all, even though, in reality, these things have everything to do with them.

While politicians, journalists and economists argue about monetary affordability and who should pay for government spending, people are dying and will continue to die for the want of a government that puts their interests first.

What happens next will depend on a successful challenge through raising public awareness that there is indeed an alternative to the vast disparities in wealth, the rise of poverty and inequality, the whittling down of democracy and increased corporate dominance in our lives. And it starts with understanding how government really spends.

 

Upcoming Event

Phil Armstrong in Conversation with Pavlina Tcherneva – Online

January 24th 2021 @ 4:00 pm – 5:30 pm GMT

GIMMS is delighted to present another in its series ‘In Conversation’.

Phil Armstrong, author of ‘Can Heterodox Economics Make a Difference’ published in November 2020, will be talking to Pavlina Tcherneva.

Pavlina is program director and associate professor of economics at Bard College and a research associate at the Levy Economics Institute. She conducts research in the fields of modern monetary theory and public policy and has collaborated with policymakers from around the world on developing and evaluating various job-creation programmes. Her work on the Job Guarantee spans over 20 years.

Author of the recently published book ‘The Case for a Job Guarantee’, she challenges us to imagine a world where the phantom of unemployment is banished and anyone who seeks decent living-wage work can find it – guaranteed. It will be of particular relevance as we begin to grapple with the economic fall-out of the Covid-19 pandemic but for anyone passionate about social justice and building a fairer economy it should be essential reading.

We invite you to join us for this informal event which we are sure will be both stimulating and insightful.

Tickets via Eventbrite

 

Past Event

Phil Armstrong in Conversation with Fadhel Kaboub – Online

Author and MMT Scholar Phil Armstrong talks to professor of economics and president of the Global Institute for Sustainable Prosperity Fadhel Kaboub about how MMT insights apply to the global south, colonial reparations, the MMT Job Guarantee contrasted with Universal Basic Income, and much more.

 

 

Audio via the MMT Podcast here

 

Join our mailing list

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

Support us

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

 

Share

Tweet

Whatsapp

Messenger

Share

Email

reddit

Pinterest

tumblr

Viber icon
Viber

The post The need is to fix the system, not just to provide ‘sticking plasters’ appeared first on The Gower Initiative for Modern Money Studies.

The Covid-19 pandemic shows the need for change. For a real ‘Reset’.

Button with label "Push to reset the world"Photo by Jose Antonio Gallego Vázquez on Unsplash

‘We live in capitalism. Its power seems inescapable. So did the divine right of kings.’

Ursula K Le Guin

The year 2020 will be not be remembered with any great affection. So much suffering, loss of human life and economic uncertainty has left the nation in turmoil. Whilst in normal times we would be welcoming the new year with resolutions and hope for better days to come, the prospects for the future remain very uncertain.

Whilst the government’s handling of this pandemic crisis has been chaotic and indecisive with disastrous consequences, it has also revealed the dire state of our public and social infrastructure for which decades of ideologically driven government policies have been responsible. That, combined with the vast wealth and other inequalities that exist in both rich and poor countries across the planet and the climate tsunami following up frighteningly behind, should leave a bad taste in our collective mouth. It should start to make us question the very foundations of the economic model now turning to sand before our very eyes.

Covid-19 has exposed in the most distressing way the damaging consequences of the pursuit of balanced budget narratives which have allowed governments to justify public sector rationalisation or austerity on the grounds of unaffordability, and overseen a huge increase in poverty and inequality. Successive governments have abdicated their responsibility for the lives of citizens; their responsibility to create a fairer distribution of wealth and real resources and ensure that the public infrastructure meets their needs. Instead, they have plumped in favour of that elusive but all-seeing ‘god of the market’ which, in real terms, has meant ceding control to global corporations who direct the policy orchestra and pouring public money into the pockets of those same corporations with little transparency or accountability.

Whilst the government has found the power of the public purse to manage this crisis, there have been winners and losers throughout which reflect its ideological persuasion. It has only been with public pressure that it has been forced into political U-turns to help some of the poorest people in our communities, whilst leaving still others in distress and without adequate support. The road to Damascus moment still eludes a government which has chosen a path that so far has only led to economic hardship and inequity for many and yet great wealth for a few others.

It has also done so with the usual threats of a financial price to pay in the future to keep the household budget narratives of state spending alive and well. It would not do for the public to be disabused of the notion that taxes fund spending, that government has to borrow to cover its deficit and that public debt is real and will require difficult decisions at some unspecified time in the future. Such narratives are vital to government and will, without challenge, allow them to be able to finish off the job of destroying publicly paid for and managed public and social infrastructure and thus ensure the continuing dominance of global corporate power. We do indeed face a continuing hollowing out of democracy in favour of a growing alliance between the state and big business and the big political revolving door.

Whilst GIMMS and other educational organisations across the world have made huge strides in raising awareness of how money really works, the task ahead remains a daunting one. The weekly news is testament to the ongoing consequences of government policies and the spun narratives of how government spends but also encouragingly shows the power the public has to effect change, and not just through the ballot box. The on-going saga of free school meals continues to rumble on and elicit government U-turns. The latest, and most shameful, were the pictures on social media of the meagre ‘rations’ from a private company contracted and paid huge sums to provide substandard food packs which it turned out largely reflected government guidelines and did not meet the standards for the nutritious, balanced diet all children need to grow and thrive. It is to be regretted that the government, in the same week, went on to tell headteachers in England not to supply vouchers and food parcels to disadvantaged children during the February half-term, signalling it was already doing enough which is clearly not the case. There are no excuses for hungry children, or hungry adults for that matter.

The fiasco was yet another example of public money being poured into private profit and at the same time failing to address the reasons for children going hungry in the first place. Poverty and hunger are not new phenomena. Covid-19 has, without doubt, put a spotlight on the prevailing economic system and the economic decisions of successive governments which have not only been responsible for increasing poverty and inequality through employment, welfare and taxation policies but also shifted blame and created widening societal divisions which allow the real authors of economic distress to go scot-free.

It is therefore shameful that the Chancellor Rishi Sunak whilst facing opposition from campaigners is still considering cutting the meagre £20 per week universal credit uplift which has helped people struggling to get by during the pandemic. The consequences of the crisis will be with us for many months to come, possibly years, and therefore the government with its power of the public purse has no excuses when it comes to ensuring that its citizens can pay their bills and put food on the table while the disruption continues. Instead, its policy responses have proved not strategic but piecemeal and ill-thought-out with plenty of U-turns along the way.

Whilst we need the power of the public purse to mitigate the economic consequences of the current crisis, we also need a government with a long-term strategy for addressing the poverty and inequality that has arisen over decades and which has allowed top managers to reap excessive monetary rewards whilst depriving working people and their families, whose standards of living have declined substantially through low incomes and insecure employment.

Boris Johnson suggested earlier this week that he was still in favour of reducing Universal Credit saying:

‘what we want to see is jobs, we want people in employment, and we want to see the economy bouncing back. And I think most people in this country want to see a focus on jobs and growth in wages than on welfare’.

A change of heart? Given that the Tory government has presided over exactly the opposite over the last 10 years through austerity and economic policies which have increased economic instability whilst at the same time serving the corporate estate, instead, it is likely to be yet another in a long line of so far undelivered promises to level up. However, the sentiment is correct and is what should be driving government policy. We need a recognition of the power of the public purse to pursue full employment through a Job Guarantee and the vested power of government to legislate fair employment terms and conditions with the aim of shifting the balance of power back to working people instead of where it currently lies in corporate hands with government approval. We need a government prepared to address the key issues of our time using its currency-issuing powers, not just for the coming months but for always. Whilst Rishi Sunak calls upon the nation to spend the savings resulting from lockdown to get the economy going again (aside from the fact that he is turning a blind eye to the many millions of people as reported by the Resolution Think Thank this week who have lost out or got into further debt as a result of the pandemic adding to their already insecure lives) the looming crisis of climate change has been put on the back burner and time is running out. The god of growth must be worshipped anew to get the economy back into shape.

Aside from the fact that people are unlikely to spend their savings like drunken sailors in the near future, given the on-going uncertainty about the economy and jobs, exhorting the gods of growth and indiscriminate private consumption as a solution to economic slow-down would not only be folly but denies the clear power of government to spend to effect real and sustainable change.

We need a sea change in how we live our lives to address the already happening climate catastrophe and indeed, it will only be through large scale government action in spending policies and legislation that will enable this to happen. There is a pressing need for a national investment strategy that includes a massive and long-term investment in education and training in order to secure our future productive capacity. We much focus on high-skilled, low-carbon and well-paid jobs both for the private sector and in a much-expanded public sector to ensure high-quality basic services are provided to everyone, including our disabled and elderly citizens. Our nation must become more productive if we are to reduce our working week and support our retirees and support to those nations without the necessary real resources to support their communities.

The overarching need is to protect our environment for future generations which should also include acting to redress the vast wealth inequalities that exist. We need to restore our sense of the value of publicly paid for and provided public sector work to national well-being, implement a Job Guarantee to provide stability through an effective countercyclical response to the inevitable economic ups and downs all economies face, and a living income for anyone who is unable to work for health reasons or caring or other essential duties including higher education. Of course, these will not be magic bullets to bring about a perfect world, but provide a basis for a conversation that we need to have.

These are important decisions, not just concerning the big macroeconomic questions about creating an efficient functioning economy, but also relating to the sort of society we want to see. For left-wing progressives, this would suggest creating a fairer and more equitable society where people have sufficient wages to live comfortably with adequate nutrition and good living conditions as well as good public services such as health and education. Assuming that the future will bring forth a political party that has the express intention of addressing these issues, change is in our collective hands as an electorate and we should not forget the power we hold.

It is regrettable that currently there is no such party dedicated to the change we need and that all roads are still leading to an ever-distorted capitalism wherever you place the X on the ballot paper.

Whilst the very real human consequences of government decisions and its policies continue to play out in our communities and our families the government, opposition politicians, economists and journalists continue to pound out the messages of monetary scarcity; either talking about the need for ‘hard choices’ to deal with the deterioration of the public finances or delaying the ‘repayment pain’ until economic conditions will allow.

Whether it’s Rishi Sunak the Chancellor or his shadow opposition sidekick Labour’s Annaliese Dodds, they both adhere to a household budget narrative of the public accounts, in other words, the diktat of sound finance as if a government suffered from the same constraints as business. The operative question in either case being, at what point do you enact such fiscal tightening, not whether you actually need to. How the state really spends cannot have escaped their notice, and yet they stick to the orthodoxy like glue.

Whilst that is undeniably to be expected with the Conservatives, whose agenda is more about creating an alliance with big business under cover of stories about monetary scarcity and ‘hard choices’, Annaliese Dodds in this week’s Mais lecture indicated clearly her party’s on-going adherence to the false notion that government constraints are monetary. Whilst, to be fair, she gave a cutting analysis of the effects of government policies on people’s lives both before and after the arrival of Covid-19, she stuck to the orthodox economic mantras. Namely keeping the City sweet by maintaining the joke of supposed Central Bank independence and having a ‘responsible approach to government debt.

She summarised her approach to fiscal policy as requiring ‘a set of rules around both annual and the stock of debt, that simultaneously demonstrates a prudent approach to the public finances and leaves space for investment in the future and the ability to adapt to crises’. A sound approach to the public finances she said must ‘also include consideration of the quality and effectiveness of public spending.’ Whilst such evaluation should always be a part of government spending strategies (and clearly, we have seen in recent months and years the exact opposite) the concept of sound finance continues to be the guiding doctrine of politicians on both sides of the political spectrum. They might have different spending objectives, but both are couched within the clear limitations of household budget thinking.

As society implodes as a result of rising poverty, inequality and ill health which has arisen as a result of government policies and placed increasing pressures on public services such as our NHS which this last year has bravely served the nation in a deliberately created environment of insufficient staff, facilities and other resources, there is only one direction in which we can place the blame. Governments whose decisions have favoured market solutions through privatisation and legislative policies which favour them – with shocking consequences.

In similarity to nature’s web of life, which is defined by its interdependence, our economy does not exist as disparate parts. The economy represents the lives of working people and the businesses that employ them, and its health is reliant on the public and social infrastructure provided by the government to support it. Remove one vital link and you risk that eventually the whole will collapse.

This is the frightening consequence we already face, not just in the real but finite resources upon which our societies are built and owe their existence, but also our dependency on the goodwill and care we express for others. As reliance on charitable institutions to feed hungry people or deal with rising homelessness increases, or rich philanthropists replace public institutions with the equivalent of poor law boards dictating the pace and deciding who will be a beneficiary, our society will continue to break down on the basis of a ‘convenient lie’ that the state has no money of its own and there is no alternative course of action.

Instead of examining the public accounts and deducting from the financial position the health of a country, a future government should be turning that idea on its head to see the reality of the challenges we face. The reality of the real constraints which are not money but real resources and how they can be managed fairly in the interests of all citizens. The fast-approaching reality of climate change and its consequences threaten to engulf us if world governments fail to work together to create better, fairer and more sustainable solutions.

We need a ‘Reset’. Not the ‘Great Reset’ being promoted by the World Economic Forum which, whilst sounding just the thing to address rising inequality and climate disaster, will maintain the same power structures with the same corporations dictating the rules in the interests of accumulating more profit and wealth whilst still clinging to the sham economic model which seeks to keep power in the hands of the few.

We need quite a different ‘Reset’ as suggested by Associate Professor Fadhel Kaboub in a GIMMS ‘in conversation’ event last week. One where public purpose, not profit or greed, directs government spending and legislative actions for a sustainable and fairer future and without which the light at the end of the tunnel will recede, not get closer.

There is an alternative and history is still to be written on the choices we make. We once believed that the Earth was flat, that it was at the centre of the universe and the sun and planets revolved around it. Those notions were disproved by the observations of scientists like Copernicus and Galileo. We need now to disprove the notions that money is scarce – not because knowing it makes a difference in itself, but because knowing it will enable us to decide what history will eventually record about the decisions that were taken as a result.

We can be on the right side of history if we choose to be.

 

Upcoming Event

Phil Armstrong in Conversation with Pavlina Tcherneva – Online

January 24th 2021 @ 4:00 pm – 5:30 pm GMT

GIMMS is delighted to present another in its series ‘In Conversation’.

Phil Armstrong, author of ‘Can Heterodox Economics Make a Difference’ published in November 2020, will be talking to Pavlina Tcherneva.

Pavlina is program director and associate professor of economics at Bard College and a research associate at the Levy Economics Institute. She conducts research in the fields of modern monetary theory and public policy and has collaborated with policymakers from around the world on developing and evaluating various job-creation programmes. Her work on the Job Guarantee spans over 20 years.

Author of the recently published book ‘The Case for a Job Guarantee’, she challenges us to imagine a world where the phantom of unemployment is banished and anyone who seeks decent living-wage work can find it – guaranteed. It will be of particular relevance as we begin to grapple with the economic fall-out of the Covid-19 pandemic but for anyone passionate about social justice and building a fairer economy it should be essential reading.

We invite you to join us for this informal event which we are sure will be both stimulating and insightful.

Tickets via Eventbrite

 

Past Event

Phil Armstrong in Conversation with Fadhel Kaboub – Online

Author and MMT Scholar Phil Armstrong talks to professor of economics and president of the Global Institute for Sustainable Prosperity Fadhel Kaboub about how MMT insights apply to the global south, colonial reparations, the MMT Job Guarantee contrasted with Universal Basic Income, and much more.

Audio via the MMT Podcast here

Video will be available soon.

 

Join our mailing list

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

Support us

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

 

Share

Tweet

Whatsapp

Messenger

Share

Email

reddit

Pinterest

tumblr

Viber icon
Viber

The post The Covid-19 pandemic shows the need for change. For a real ‘Reset’. appeared first on The Gower Initiative for Modern Money Studies.

Wealth Tax: Expropriation of the Rich or Capitalist Smokescreen?

Published by Anonymous (not verified) on Sun, 17/01/2021 - 2:16am in

Tags 

Italy, Economics, tax

image/jpeg iconwealth_tax.jpg

As the bourgeoisie wracks its brains for solutions to this epochal crisis, the tax lever has become one of the main tools that left reformists believe will end capitalist aggression and bring substantial benefits to the depleted pockets of the proletariat.

read more

Will rising interest rates in the future bankrupt the UK government?

Published by Anonymous (not verified) on Sun, 13/12/2020 - 8:10am in

Pound coinsImage by Michael Brasuela from Pixabay

For this week’s MMT Lens, GIMMS is pleased to publish a guest article by Berlin-based economist Dirk Ehnts, author of “Modern Monetary Theory and European Macroeconomics

 

The Office for Budget Responsibility (OBR) issued stern warnings at the end of November stating that fiscal adjustment would very likely be required to arrest the continued rise in public debt. This led British finance minister Rishi Sunak to make the claim that public finances are on “unsustainable” path. According to the BBC reports, Sunak stated that “there are record peacetime highs in borrowing and debt, and the forecasts that were set out yesterday show us on a path where that continues to be at a very elevated level, so that’s not a sustainable position”. The elephant in the room is this: How is a sustainable position in public debt defined?

Some, like the OBR, apparently seem to think that the public debt needs to be “stabilised’. What that exactly means is not made explicit. The OBR warned:

The increase in borrowing does, however, render the public finances more vulnerable to changes in financing conditions and other future shocks. This heightened vulnerability is compounded by the shortening of the effective maturity of that debt as a result of both a greater focus on short-term debt issuance by the Treasury and further Bank of England purchases of longer-dated gilts financed through the creation of floating rate reserves. Taken together, these leave debt interest spending twice as sensitive to changes in short-term interest rates than prior to the pandemic. Arresting the continued rise in public debt is likely to require some fiscal adjustment once the virus has run its course. Only in our upside scenario, in which the pandemic is swiftly ended and there is little lasting damage to activity, does borrowing fall below the level required to stabilise the debt-to-GDP ratio by the forecast horizon. In our central forecast and downside scenario, tax rises or spending cuts of between £21 billion and £46 billion (between 0.8 and 1.8 per cent of GDP) would be required merely to stop debt rising relative to GDP.

 

Monopoly Money

Dr Phil Armstrong has written an article on fiscal policy for The Gower Initiative for Modern Money Studies that is worth reading in relation to this. In it, he mentions the “government budget constraint” which conceptualises government as a currency user – that is that the government would have to have income before spending. This is upside down because the government is the monopoly issuer of the currency, not a user. The Bank of England is today wholly-owned by the UK government, and no other body is allowed to create UK pounds. It can create digital pounds in the payments system that it runs, thus marking up and down the accounts of banks, the government and other public institutions. It also acts as the bank of the government, facilitating its payments. The Bank of England also determines the bank rate, which is the interest rate it pays to commercial banks that hold money (reserves) at the Bank of England.

The interest rate that the government pays on its government bonds (gilts) follows that bank rate closely. Looking at the figure below, it is clear that the interest rate on gilts with a 10-year maturity is mostly determined by the bank rate. The reason is that there is an arbitrage relationship. Banks can choose to hold their money in the form of reserves (deposits at the Bank of England) or they can purchase gilts with these reserves. When reserves pay a lower rate of interest than gilts, banks have an incentive to adjust their asset portfolio. Swapping reserves for gilts delivers more profit for commercial banks.

Line graph showing long term government bond yields in the UK against the Bank of England policy rateGraph via https://fred.stlouisfed.org/

 

Gilts and bonds

The interest rate that the UK government pays is a policy variable determined by the Bank of England. Furthermore, it is not the Bank of England’s remit to bankrupt the government that owns it. The institutional setup ensures that the Bank of England supports the liquidity and solvency of the government to the extent that it becomes an issuer of currency itself. Selling government bonds, it can create whatever amount of pounds it deems necessary to fulfil its functions. Given that the Bank of England stands ready to purchase huge amounts of gilts on the secondary market (for “used” gilts), it is clear to investors that gilts are just as good as reserves. There is no risk of default.

Moreover, consider that the Bank of England can always allow the government to spend using overdrafts of its ways and means facility. This prompted the Financial Times to publish this article: “Bank of England to directly finance UK government’s extra spending“. The Bank of England can, in effect, just execute all the payments that the Treasury sends its way. Issuance of gilts is optional. While this might seem strange at first sight, it is only a logical consequence of the fact that the Bank of England is the issuer of currency. Before gilts can be purchased, the government first has to spend some money into the economy. Alternatively, banks can borrow from the Bank of England before they purchase gilts. Issuing gilts provides a risk-free asset with some interest, but it is not needed to “finance” the government.

 

Deficit versus surplus

 

Line graph showing public sector debt outstanding in the UK against the Bank of Englan policy rateGraph via https://fred.stlouisfed.org/

 

The figure above shows the UK public debt to GDP ratio and the Bank of England’s policy rate through the centuries. Note that UK public debt peaked in 1945 at above 250 per cent of GDP. Unsustainable? Obviously not. In 1951, the interest rate started to increase from 2 per cent to 16 per cent in the mid-1970s. Unsustainable? Obviously not. What the figure shows is that the government of the UK cannot “run out of money”. When it spends more into the economy than it collects through taxes, a “public deficit” is produced. This means that the private sector saves a part of its monetary income which it has not spent on paying taxes (yet). When the government spends less than it collects in taxes, a “public surplus” results. This reduces public debt. That public debt to GDP ratio can be heavily influenced by GDP growth, which explains the fall in the public debt to GDP ratio in the second half of the 20th century.

I would like to raise one last issue, even though it should be clear by now that as a currency issuer the government will not run out of money. Lately, the Bank of England has purchased quite a lot of gilts through its Asset Purchase Facility. On September 30, 2020, it held 674.9 billion pounds worth of gilts. At the end of October 2020, the public debt to GDP ratio hit 100%. This was £2,076.8 billion in currency. Roughly one-third of outstanding gilts are held by the Asset Purchase Facility. Where does the interest go that the Treasury pays on these gilts and accumulates at the Asset Purchase Facility? The answer is this: “As a result of the Indemnity Agreement, all profits and losses are passed onto HM Treasury.” So, HM Treasury pays interest, then gets one-third of it back immediately. There is no technical reason why the Asset Purchase Facility couldn’t buy up all of the outstanding gilts. Then, all interest payments made by HM Treasury would come back immediately. The banks would have reserves at the Bank of England worth the public debt. These earn interest equal to the bank rate. Since this interest rate is set by the Bank of England, it can be set at zero if the Bank believes this makes sense. At positive interest rates, the Bank of England will pay the banks holding reserves by marking up their accounts. They do this with the computer and as the monopoly supplier of currency, there is no limit.

So, do rising interest rates in the future create a problem for the UK government? No. The Bank of England is the currency issuer. There is nothing that stops it from paying what HM Treasury instructs it to pay. Gilts can be issued in this process as an option. The government’s ability to pay is not put into doubt since the Bank of England acts as a lender of last resort, offering to buy up gilts on the market so that the price of gilts can never crash. Higher interest rates cannot bankrupt the UK government.

 

Upcoming Event

Phil Armstrong in Conversation with Fadhel Kaboub – Online

January 9th 2021 @ 13:00 pm – 14:30 pm

GIMMS is delighted to present another in its series ‘In Conversation’.

Phil Armstrong author of ‘Can Heterodox Economics Make a Difference’ published in November 2020 will be talking to Fadhel Kaboub.

Fadhel Kaboub is an Associate Professor of Economics at Denison University, and the president of the Global Institute for Sustainable Prosperity. He has held research affiliations with the Levy Economics Institute, and the John F. Kennedy School of Government at Harvard University. He is an expert on Modern Monetary Theory, the Green New Deal, and the Job Guarantee. His work focuses on public policies to enhance monetary and economic sovereignty in the Global South, build resilience, and promote equitable and sustainable prosperity. You can follow him on Twitter @FadhelKaboub and @GISP_Tweets

We invite you to join us for this informal event which we are sure will be both stimulating and insightful.

Register via Eventbrite

 

Join our mailing list

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

Support us

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

Share

Tweet

Whatsapp

Messenger

Share

Email

reddit

Pinterest

tumblr

Viber icon
Viber

The post Will rising interest rates in the future bankrupt the UK government? appeared first on The Gower Initiative for Modern Money Studies.

Breaking free from false economic narratives

Published by Anonymous (not verified) on Mon, 30/11/2020 - 8:11am in

Silhouette of a woman breaking a chain to free her hands as the sun risesImage by Elias Sch. from Pixabay

Dear Dominic

One all night sesh we had playing Monopoly in college and the banker ran out of money. We just wrote out more notes and it worked fine. Should I tell Rish?

Financibus ad infinitium

Boris

 

Posted on Facebook by the author Michael Rosen

 

Anyone watching the media coverage before and after the Chancellor’s Spending Review could be forgiven for thinking that the UK was going to sink like the Titanic under the burden of unsustainable borrowing and debt unless the government took the necessary step to control its spending. The party of fiscal sustainability which has been reworked over these last few months to keep the economy afloat is now rowing back and an army of fiscal hawks and deficit doves are now back to playing the household budget game of the public finances.

After 10 years of punishing austerity and cuts to public sector spending, which have already done huge damage, Rishi Sunak told the BBC he would have to make tough choices on public pay.

Torsten Bell from the Resolution Foundation claimed that the COVID-19 crisis is causing immense damage to the public finances and tax rises will be needed to cover the extra spending.

Laura Kuenssberg, the political editor of the BBC, talked about the ‘eye-wateringly enormous levels of public borrowing’ as a result of the ‘massive gap between what the government takes in tax and what it has been spending’. Recalling David Cameron’s false claim in 2010 that the economy was nearly bankrupt, she suggested that the government’s credit card was ‘absolutely maxed out’ and ‘there was no money left’.

Daniela Gabor, an economist from the University of West England, whilst on the one hand accepting that the household budget narrative of the public finances was flawed, she like many others reinforced it by saying that ‘interest rates on public debt were at historical lows’ and that government, rather than making cuts ‘should be using the opportunity to borrow more in order to finance the country’s recovery’.

Tom Kibasi, a former director of the Institute for Public Policy Research (IPPR) thought that whilst we need structurally higher government spending that would, in turn, mean permanently higher taxes.

A former Treasury Minister described it as a ‘multigenerational debt which will have implications for the rest of our lives in terms of what the British state can afford’.

And the Shadow Chancellor Annaliese Dodds topped the titanic effort to mislead the public by saying ‘Britain must rebuild its economy after the Covid-19 pandemic with one eye on rising deficit and debt levels.’

STOP!

From politicians on both sides of the political spectrum, institutions and think tanks such as the IFS and the Resolution Foundation, and economists stuck in orthodoxy from fiscal hawks to deficit doves, all are choosing to be ignorant of how governments spend and all promote the same economic illiteracy. It seems that the Establishment is on a mission – to ensure that the public doesn’t get the wrong idea about the spending capacity of the UK government to address the fallout from the Covid-19 pandemic and to ensure that the lie of austerity is not uncovered and that cuts to public spending imposed from 2010 were driven, not by fiscal necessity, but by economic ideology.

The political and media tale of the vast amounts being ‘borrowed’ is a cynical reinforcement of a false narrative that is setting up people for the expectation that there is always a price to pay in cuts, pay freezes or ultimately higher taxation.  Like many Chancellors before him, Rishi Sunak is hiding behind the smoke and mirrors of public accounting which does not reflect the monetary reality of how a government which issues its own currency actually spends.

The most telling aspect of this narrative, which should instruct our views, is that the government has had no trouble finding the money to pour into the private sector and will continue to do so, as announced in Sunak’s infrastructure plan outlined in his Comprehensive Spending Review. This projects more than £100bn worth of capital spending next year on building projects for schools, hospitals, housing, transport and green projects. Whilst public money flowing into private profit in itself is not an issue unless we are talking about public services which should always be publicly funded and delivered, it will quite simply mean more contracts flowing to the private sector without parliamentary oversight and public accountability.

At the same time, Rishi Sunak plans to cap public sector pay, reduce the planned increases to the national living wage (from 49p to 19p per hour), cut the amount of money available for low-wage tenants through housing benefit and he has left Universal Credit claimants in a state of uncertainty as to a continuation of the current UC uplift in April.

After 10 years already of public sector pay freezes, imposing more will further reduce standards of living for public sector workers who have already suffered enough. As life becomes tougher and incomes even more stretched, less money will flow into our local and national economies – not exactly helpful at a time when the government should be ensuring sufficient spending to keep the economic wheels rolling.

As so many are already on low wages or in precarious employment, this will quite simply drive people into even more poverty. And worse, is it right to further deprive people of an income which allows them to support themselves and their families without a daily struggle to make ends meet?

Would it not be better, through adequate welfare and employment policies, to ensure that people did not fall into poverty in the first place, and not just in times of economic crisis? This is the moment for serious consideration of a Job Guarantee to get us through these dark days and beyond. Useful public work paid for centrally and organised locally at a living wage to keep money flowing through the economy.

After the last few months, we have seen the very real value of public sector work, and indeed those key workers, often on low wages, who have kept the economy functioning. They are the linchpins of a healthy economy and society. Government ministers clapped for them and now they want to throw them under a bus. The government, which is the price setter for labour and thus determines both the wages of those in the public and private sector through wage and employment policies, is playing a cynical but not unsurprising game of divide and rule to keep working people subordinate to the needs of corporations. Businesses which profit from policies designed to keep wages down and profits up, as the share of productivity continues to be shifted into ever fewer hands, causing more misery along the way. The expected huge rise in unemployment will indeed play right into their hands although, of course, that will eventually come full circle as people on low wages spend less into the economy.

These last few years, months and weeks, we have seen things that no civilised country should see, and not just in the UK. The huge growth in the use of food banks (covered in previous blogs) which predates the pandemic reflects government policies – people from all sections of society are now being driven to queue for food. Their stories should shame our politicians.

Dame Louise Casey, a former homelessness Czar and advisor to 5 previous Prime Ministers, was clear ‘This is the UK in 2020 we should be able to do a better job of looking after the destitute and the hungry … and no it is not ok to leave that to charity… Unless something is done, a food emergency will follow the economic emergency’.

Earlier this year, the Work and Pensions Secretary Therese Coffey described food banks as the ‘perfect way’ to help the poor, as if somehow the government had had no hand in their poverty. Which of course is the neoliberal way – blaming poor people for their situation. However, it cannot be emphasised enough that it is the government which has had a hand in their poverty. Not just this government, but successive governments who have idolised the god of the market and bow to its dictates.

The decline of our public and social infrastructure, from the NHS, social care and mental health provision, not to mention other vital public services and the social security safety net, is not an unforeseeable tragedy borne of events outside government control which necessitates hard financial choices. It has been a deliberate act of neglect, which looks to continue.

The former Liberal Democrat MP and care minister, Norman Lamb, whose voting record showed he generally voted for reductions in welfare benefits, bewailed this week the neglect of social care and mental health services. In the same breath, he suggested that the state of the public finances should be a cause of concern, implying that there was a lack of money to address the worsening state of our essential services. There is no lack of money. What we lack is a political will to act. The political will to serve the nation’s interests and those of some of the poorest and most vulnerable in our society.

In this respect, and over decades, we have been witnessing the decline of State responsibility as philanthropy (with its shades of Victorian ‘do-gooding’ and social control), charity and volunteering have slowly been taking its place as a mechanism to deliver public goods. It is serving to substitute public spending, which is increasingly being withdrawn by the state on the premise of unaffordability whilst at the same time maintaining those public services that the private sector can run for profit and receive public money to do so.

As evidence of this drift, this week Andy Haldane, the Chief Economist and founder of Pro-Bono Economics, said that civil society had been one of the unsung heroes of the pandemic crisis and that the social sector had been ‘operating as our institutional immune system’ supporting those most in need. It was heartening, he said, that civil society and charities have plainly risen to these challenges, helped by a surge in volunteering activity’. He then went on to note that the charity sector was in a fragile state financially with a funding gap for this year of around £10bn and this hit to income was expected to persist for the majority of charities.

‘An institutional immune system’? This gets to the nub of the issue. The idea that charities and volunteering can or should be a substitute for proper government-funded intervention and not just in times of crisis. The Big Society is now playing out big time. And whilst we should not criticise the goodwill of those people who give their time and energy to good causes, one might argue that the need for charity and volunteering is, in fact, a failure of the state. And as it is becoming very clear, such a model has one big flaw.

Charities, like all organisations, depend on volunteers being available and donations and other forms of raising money to run their activities. In times of crisis like today, they too suffer as businesses suffer, as economic conditions decline, and people have less money in their pockets to spend. These days, they have become little more than businesses, making money and having the same hierarchical business structures of top management with top salaries and volunteer or low paid workers at the bottom. This is not a good or sustainable model for the delivery of public purpose, serving economic and social well-being.

Only the government can step in as the power behind the public purse, and such an acknowledgement offers huge opportunities to create an economy that works for everyone and not just the few. If a job needs doing, then it should be the state that provides the wherewithal, either through a job guarantee to smooth out the cyclical ups and downs of the economy, or through an expanded public sector. The only constraint any government will face is one of real resources and that is the real political challenge. How those resources are shared to create a society that works for all.

The bottom line is that in reality there is no shortage of money; just a shortage of political will which is borne of a toxic ideology that reviles the state delivery of public services, combined with the newly coined word ‘chumocracy’ which serves the interests of the friends of the government and the corporations who can ensure their place through the revolving door.

On Tuesday’, Bill Mitchell hosted a guest blog by Professor Scott Baum, and it deserves to be quoted in this week’s MMT Lens. Whilst referring to Australia, it provides a valuable insight into where we are right now in the UK and what the challenges we face are in turning the ship around, or rather stopping it from sinking like the Titanic with all passengers aboard.

 

“The fairy-tale of government working for everyone is continuing to result in significant social and economic pain for many individuals, their families and their communities.

 

Why is it that the government says one thing, but then in practice does another?

 

What has led us down this path of accumulated social wreckage?

 

We know that it is not because sovereign currency-issuing governments are fiscally limited in their ability to work for the good of everyone.

 

The government, if they wished, could intervene in a heartbeat to improve the precarious lives currently being lived by so many Australians.

 

We have seen this during the COVID emergency where governments have been quick to step in and provide a wide range of support to a wider range of the population than has been the case in the past.

 

Politicians have been allowed to leave their ideologies (think neo-liberalism) at the door.

 

But what their ideology doesn’t allow them to do is to stray for long. Before too long they have to go back and pick up where they left off.

 

The apparatus of justification that is so entrenched within the neo-liberal ideology means that even when ‘business as usual’ approaches have to be abandoned due to a crisis, it is not long before we turn back to the usual ideas that have led us to where we are today.

 

Throughout the COVID slowdown statements by politicians have been steeped in this kind of ‘return to normal’ thinking.

 

Early on Australian Prime Minister Scott Morrison said

 

The measures are all temporary, targeted and proportionate to the challenge we face. Our actions will ensure we respond to the immediate challenges we face and help Australia bounce back stronger on the other side, without undermining the structural integrity of the Budget.

 

Reading between the lines, yes, we had to do something we were not comfortable doing because the ‘system’ wasn’t working.

 

But we can’t wait to get back to our comfort zone.

 

In short, as a society, we are where we are because of the failures of the neoliberal system, the inability of politicians to see beyond their ideological views and the ability of those who benefit most to continue to legitimate the system.”

 

Failure to leave our household budget comfort zone can only lead to more poverty, inequality, and environmental decay. As the pandemic has inadvertently set us on a different course, those of us who want to see a fairer redistribution of wealth and resources and a planet which can support future generations sustainably, need to ensure that the road taken is not a Great Reset towards a reinforcement of global corporate power and influence greenwashing its way towards greater control and higher profits.

That’s some challenge, but it’s not insurmountable.

 

 

Event Recording

The video of GIMMS’ event “Phil Armstrong in Conversation with Neil Wilson” is now available:

 

Also available as a podcast via the MMT Podcast. #75 Neil Wilson & Phil Armstrong: In Conversation

 

Join our mailing list

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

Support us

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

Share

Tweet

Whatsapp

Messenger

Share

Email

reddit

Pinterest

tumblr

Viber icon
Viber

The post Breaking free from false economic narratives appeared first on The Gower Initiative for Modern Money Studies.

Just getting by is not enough

Woman shopping in a supermarketPhoto by Kevin Laminto on Unsplash

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

Charles Moore

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And then went on to criticise Sunak by saying that:

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

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

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

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

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

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

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

 

Event Recording

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

 

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

 

Join our mailing list

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

Support us

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

Share

Tweet

Whatsapp

Messenger

Share

Email

reddit

Pinterest

tumblr

Viber icon
Viber

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

The deceitful image of money scarcity has no place in our society.

Hands of two women. A younger woman holding the hands of an elderly woman.Image by Sabine Van Erp from Pixabay

Society is indeed a contract. It is a partnership … not only between those who are living, but those who are dead and those who are to be born.

Edmund Burke
Reflections on the French Revolution – 1870

 

In the news this week the government did yet another turnabout following Marcus Rashford’s campaign and public pressure by announcing a £170m winter grant scheme to support low-income families. During the same week, the Trussell Trust reported that there had been a 47% rise in the number of parcels distributed via its networks in the 6 months to September 2020 compared to the previous year; that more than 1.2 million parcels were distributed, of which 470,000 were to children. And this was, it suggested, just the tip of the iceberg as these figures did not include the number of people helped by the numerous local organisations, independent food banks and local authorities who have stepped in to support their communities.

Whilst the Trust attributed some of these increases to the pandemic, which has had a devastating, effect the Trust was clear as to the underlying reasons why people need support. The key issues were related it said to a fundamental lack of income which has left people struggling to afford the essentials. As Emmie Revie, the Chief Executive of the Trust commented to the Guardian:

 

‘We have to find better ways of supporting one another as a society than leaving people to rely on food charity. It’s not just about ending food banks, it’s about finding an alternative to the need for mass distribution of charity food in the fifth wealthiest country in the world.’

 

The threads of poverty lie in adherence to a failed market-focused economic ideology and the government policies and spending decisions that result from it. Child hunger is just one of many interlinked consequences and research published this week by the Living Wage Foundation showed that during 2019/20 nearly three-quarters of independent care workers in England were paid less than the real living wage. They are, it said, among the 5.2 million workers in low paid, insecure jobs – 1.3 million of whom are key workers. The analysis noted that care workers earn an average of £8.50 per hour and 24% are on zero-hours contracts. It, like the Trussell Trust, highlighted the existing inequalities in our society which has hit the lowest earners the hardest and that was before the pandemic struck. Whilst the nation clapped with Boris Johnson Tabitha, a care worker, said:

 

‘I feel like a Roman Gladiator going into the ring on a night shift. Everyone is clapping for you, but you’re pitting yourself against a deadly disease without the proper pay and protection.’

 

As the government has increasingly ceded its responsibilities for its citizens through cuts to spending on public infrastructure both local and national, which in turn has led to an ideological and financial response at local level as private profit-seeking companies were invited to tender for contracts to deliver social care services, the consequences have been devastating. For those being cared for as much as those doing the vital work of caring for others.

As the government lauded its financial acumen in managing its accounts, its decisions have led to a vicious cycle of deprivation and poverty and public infrastructure decay. The connections are irrefutable. Surely it must dawn on the nation soon, as government and other institutions begin to wind up and reinforce the household budget narrative in support of action to get the public finances ‘back in order’ after all this spending, that its health and economic well-being is being reduced to one of balanced budgets and unaffordability.

At the same time as Rishi Sunak suggested that he may increase capital gains tax to pay for billions borrowed and the COVID-19 debt which is supposedly racking up, the Resolution Foundation published its report entitled Unhealthy Finances: How to support the economy today and repair the public finances tomorrow. In its report, it focused specifically on the dual challenge it believes the government is facing ‘to ensure that there is sufficient fiscal support through the crisis and recovery, and setting fiscal policy on a sustainable path.’

Even though it said that the government should commit not to start such consolidation until the economy had recovered, it still claimed that the government must do what is required to ensure that the public finances are sustainable and adopt a balanced current budget rule.

In the report, it suggested continuing to use low interest rates as a tool for supporting the economy and noted the fiscal damage being caused by lower tax receipts and higher spending. It proposed, amongst other things, reforming the tax system to raise revenue and imposing a health and social care levy to provide any additional revenue required.

Here we have all the usual implied but false language narratives about government spending – taxing to spend, borrowing and unsustainable public debt, repairing the public finances, financial sustainability, balanced budgets.

We’ve been here many times before and clearly the establishment is determined not to lose control of that narrative. The fightback is in full swing. The deficit and debt worrywarts are working overtime to keep the public in line. Heaven forbid that people should learn the truth about how the government really spends!

However, as that knowledge is going more mainstream, questions are being asked as it is becoming ever clearer that human and planetary well-being lies with government choice, i.e. who gets the money. It is therefore intolerable to think, in the light of this growing understanding of the spending capacity of government, that government and think tanks are suggesting that taxes be increased to pay for this imaginary round of borrowing and the subsequent imaginary national debt which has arisen from it.

Whilst one could certainly make a case for reforming the whole tax system to ensure a fairer distribution of wealth, the justification by the Resolution Foundation or the Chancellor for increasing taxes does not stack up for the following two reasons:

  • That such action would quite simply take money out of the economy at a time when it would still be recovering from the economic effects of the current crisis compounded by previous cuts to public spending which have had a cumulative effect on the economy. Private debt levels prior to the pandemic were already high but have soared by 66% since May to £10.3bn. The number of people in serious debt has doubled since March rising to 1.2m with a further 3 million at risk of falling into arrears. Raising taxes with this scenario in mind would seem self-defeating and destructive.
  • That taxes don’t fund government spending and cannot be used to reduce public debt

Quite simply the ‘taxes fund spending’ story is just a lot of accounting smoke and mirrors to suit an agenda which aims to keep people downtrodden and accepting their fate. The trope of financial unaffordability is deep within our own household budget psyches and shifting such narratives can be hard work. Much depends on loosening our attachment to them through knowledge and more importantly the desire for something better.

Taxes will not pay off the national debt any more than they will boost financially a failing social care system. Our public services including social care and the NHS are in crisis as a result of government choices, not a lack of tax money the government can collect. Privatisation and the profit motive, along with public spending cuts have both played a role in destroying what could and should have been funded publicly.

The deceitful image of money scarcity, with government reliant on taxes and borrowing to spend, has no place in our society as children go unnecessarily hungry and our young people face a gloomy future.

In this week’s Guardian, Patrick Collinson wrote that the COVID-19 crisis could have a lasting impact on young people’s pensions: indeed, the lives of young people have been turned upside down with future employment prospects damaged and life opportunities curtailed. However, future private pensions are the least of the worries of young people as they start out in life. It is the government’s role now to ensure, through its policies, that young people can thrive and build themselves a future and decent state pension provision should be a significant part of that.

We need to expose the con of private pensions which are reliant on fickle markets and a stable economy. Margaret Thatcher’s economic vision which was inspired by Friedrich Hayek and Milton Friedman reflected her belief in the superiority of the market. The idea implicit in this dogma was that the welfare state deprived people of the opportunity to make their own provision for old age. Thus, we witnessed the opening up of the market for private pensions in an attempt to weaken the state’s own pension provision. The current crisis is exposing their weakness which even before the pandemic was becoming clear and invites us to question the state’s ideological reliance on the private pension sector.

The solutions are to provide decent state pensions to give retired people financial security and ensure a decent standard of living and to reduce the pension age. The current round of retirement age increases is based on the lie that state pensions will become increasingly unaffordable as the birth rate falls and tax take reduces which will, it is claimed, cause an unacceptable burden on future taxpayers. We need to break the false connection between the payment of tax and receiving a pension.

The question of how it can be paid for doesn’t arise if we understand how the government spends. It would be paid for in the same way the government always pays for things; by creating the money out of nowhere. A simple transfer with a few computer keystrokes authorised by the Treasury and carried out by the Central Bank. We need to knock on the head the idea that a portion of our tax is being collected somewhere in a savings pot to be divvied out at retirement or indeed that taxes serve to pay for public services.

Assuming that government has invested through sufficient spending on public and social infrastructure including education, training, new technologies and by embracing full employment policies, then an earlier retirement and a good state pension is possible. Such investment will not put a financial burden on the lives of future generations, it will enhance them and those of retirees. We just have to decide as a nation how we want the real, but finite, resources we have at our disposal to create a better life to be shared out.

Earlier this week, there was an interesting exchange of views on a Facebook labour group when someone posted the following:

 

‘You do realise the Bank of England are printing new notes by the million. All we will get from Johnson is a bankrupt country.’

 

It is disappointing to observe in that post and the thread that followed that some individuals on the left seem to get pleasure from continually shooting themselves in the foot. By excoriating what they see as a reckless Tory government because in their view it is spending too much and driving us towards bankruptcy or hyperinflation, adds a certain touch of irony to the criticism since it was the Conservatives who used similar arguments against Labour’s spending plans in the last election. It all boils down to where is the money going to come from and who is going to pay?!

This type of scaremongering is damaging to a left-wing agenda and is borne of lack of knowledge. It is regrettable that, even when presented with the facts about how the government spends, many still choose to persist in reinforcing the myths and ignore the fact that it is impossible for the UK government to go bankrupt or run out of money and that government does not need our taxes to pay for public services not even the taxes of the rich. Ultimately, that is to deny monetary reality and what that knowledge could mean for any future progressive government’s spending plans if such a government were to exist although that is currently quite another story!

If we are going to debate, let’s do it from a position of knowledge rather than making exaggerated and untrue statements about how we are all going to hell in a hand cart because the Tories have spent too much. Let’s remember that in 2010 the same arguments were being levelled at Labour following the Global Financial Crash; another era of suffering and hardship for many. And that it was the Tories who said in 2010 that there was no alternative to cuts to public spending to get the public finances back in order and yet have suddenly without a problem found the monetary wherewithal to save the economy from the worst effects of the crisis. For the left to use this argument against the Conservatives is counter-productive to future progressive agendas.

The household budget ping pong played by successive governments at election time, which examines critically the fiscal record of a government or asks how its spending plans will be paid for, has done great damage to society and the economy. Such arguments overlook the real measures of economic health relating to how government serves its citizens in real social improvements from the provision of health and social care, education, policing, a social safety net and public transport networks to local service provision of libraries, municipal parks and refuse collection. All these things which previously were determined as the public good have been attacked by a governing elite serving its own interests and those of its financial donors.

As Peter Fleming, professor of business and society at City, University of London wrote:  Austerity [redefined] these things as fiscal liabilities or deficits rather than shared investments in common decency’.

Let’s argue for a better, fairer and kinder society based on real knowledge of monetary reality and not baseless statements which only serve to promote continuing political inertia on the left in terms of understanding how money works and how that knowledge fundamentally changes how we can respond to today’s and tomorrow’s challenges.

 

Newly published

This week, we published a fact sheet on Negative Interest Rates

Negative Interest Rates

and a new paper by Phil Armstrong and Warren Mosler

Weimar Republic Hyperinflation through a Modern Monetary Theory Lens

 

Join our mailing list

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

Support us

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

Share

Tweet

Whatsapp

Messenger

Share

Email

reddit

Pinterest

tumblr

Viber icon
Viber

The post The deceitful image of money scarcity has no place in our society. appeared first on The Gower Initiative for Modern Money Studies.

‘I’ Report of Successful Test of Virgin Hyperloop Maglev Train

Published by Anonymous (not verified) on Sat, 14/11/2020 - 1:55am in

Here’s an interesting piece of science/technology news. Tuesday’s I, for 10th November 2020, carried a piece by Rhiannon Williams, ‘New tube: Hyperloop carries first passengers in 100 mph test run’, which reported that Virgin Hyperloop had successfully tested their proposed maglev transport system. This is a type of magnetically levitated train running in a sealed tunnel from which the air has been removed so that there is no atmospheric resistance. The article ran

Two passengers have become the first to use Hyperloop, a technology which claims to be the future of ultra-fast ground transport.

The demonstration took place on a 500-metre test track in the Nevada desert outside Las Vegas on Sunday.

Josh Giegel, Virgin Hyperloop’s chief technology officer and co-founder, and Sara Luchlan, the company’s head of passenger experience, climbed into a Virgin Hyperloop pod before it entered an airlock inside an enclosed vacuum tube.

Footage showed the pod taking about 15 seconds to complete the journey as the air inside the tube was removed, accelerating the pod to 100 mph before it slowed to a halt.

The futuristic system is intended eventually to allow journeys of up to 670 mph using electric propulsion, and magnetic levitation in a tube, which is in near-vacuum conditions.

The Shanghai Maglev, the fastest commercial bullet train, which also uses magnetic levitation, is capable of top speeds of 3000 mph, meaning it could end up being considered slow by the Hyperloop’s theoretical future standards. The fastest speed achieved by a maglev train was 375 mph on a test run in Japan.

Virgin Hyperloop was founded in 2014 and builds on a proposal by Tesla and SpaceX founder Elon Musk.

The technology could allow passengers to travel between Heathrow and Gatwick airports, which are 45 miles apart, in just four minutes, the company’s previous chief executive, Rob Lloyd, told the BBC in 2018.

Ms Luchlan described the experience as “exhilarating”. It had, she added, been smooth, and “not at all like a rollercoaster”.

The business hopes to seat up to 23 passengers in a pod and make its technology “a reality in years, not decades”. Jay Walder, the current chief executive, said: “I can’t tell you how often I get asked, ‘is hyperloop safe?’ With today’s passenger testing, we have successfully answered this question, demonstrating that not only can Virgin Hyperloop safely put a person in a pod in a vacuum environment but that the company has a thoughtful approach to safety.”

The article was accompanied by this handy explanatory diagram.

The text’s blurry, but should read:

How it works

Hyperloop is a new mode of long-distance transportation that uses electromagnetic levitation and propulsion to glide a vehicle at airline speeds through a low-pressure tube.

Electromagnetic coils along the tube are supplied with an alternating current, causing them to rapidly switch polarity. Permanent magnets beneath the pod are attracted then repelled, creating forward motion and magnetic levitation.

It then shows a diagram of various other high speed vehicles with the proposed Hyperloop system for comparison. These are

Virgin Hyperloop …. 670 mph.

Boeing 787 Dreamliner …. 593 mph.

Maglev (Japan) …. 375 mph.

Javelin (UK) … 140 mph.

Well, colour me sceptical about all this. The ‘Virgin’ part of the company’s name makes me wonder if it’s part of Beardie Branson’s empire of tat. In which case, we’re justified in wondering if it this will ever, ever actually be put into operation. After all, Branson has been telling the good peeps, who’ve bought tickets for his Virgin Galactic journeys into space that everything’s nearly complete, and they’ll be going into space next year, for the past 25 years or so. I don’t believe that his proposed Spaceship 1 or whatever it’s called will ever fly, and that the whole business is being run as a loss so he can avoid paying tax legally. I don’t know how much it would cost to set up a full scale Hyperloop line running between two real towns between several stops within a single city like a subway, but I’d imagine it’d cost tens, if not hundreds of millions. I think it’s too expensive for any government, whether national or local authority, to afford, at least in the present economic situation.

And on a more humorous level, it also reminds me of the rapid transit system in the 2000 AD ‘Nemesis the Warlock’ strip. This was set in a far future in which humanity cowered underground, ruled over by the Terminators. They were a kind of futuristic medieval crusading order, dedicated to the extermination of all intelligent alien life, led by their ruthless leader, Torquemada. Earth was now called Termight, and humanity lived in vast underground cities linked by rapid transit tunnels. A system similar to the Hyperloop, the Overground, ran across Termight’s devastated surface. Termight’s surface had been devastated, not by aliens, but by strange creatures from Earth’s future, which had appeared during the construction of a system of artificial Black and White Holes linking Earth to the rest of the galaxy. These creatures included the Gooney Bird, a giant predatory bird that looked like it had evolved from the Concorde plane, which swept down from its nest in an abandoned city to attack the Overground trains and feed them to its young.

From: Nemesis the Warlock: Volume One, by Pat Mills, Kevin O’Neill and Jesus Redondo (Hachette Partworks Ltd: 2017)

The Hyperloop’s too close to the fictional Overground system for comfort. Will the company’s insurance cover attacks by giant rampaging carnivorous mechanical birds? The comparison’s particularly close as Termight’s surface is a desert waste, and the system was tested out in the Nevada desert.

I realise that ‘Nemesis the Warlock’ is Science Fiction, and that even with its successful test run on Tuesday, it’ll be years before the hyperloop system ever becomes a reality, but I think it might be wise to avoid it if it ever does. After all, you wouldn’t want to be on it when the metal claws and beak start tearing through the tunnel.

We can afford to choose public purpose spending

Published by Anonymous (not verified) on Sun, 08/11/2020 - 8:06am in
Public duty and the public purpose? Or, self-serving interest? Politicians have a choice. We have a choice.

A row of white doors along a wallImage by Arek Socha from Pixabay

The problems we face did not come down from the heavens. They are made. They are made by bad human decisions, and good human decisions can change them.

Bernie Sanders

 

In this week’s news, the economic train crash continues as it was announced that more than 7200 workers are set to lose their jobs as the pandemic continues to take lives and cause huge economic suffering to the lives of the still living with worse yet to come.

Boris Johnson said this week at one of the government briefings that we should be ‘humbled in the face of nature’, that the NHS could collapse if the government failed to heed the warnings of the experts and that he was not prepared to take a risk with the lives of British people. Those statements should have been the moment for a sharp intake of national breath in disbelief at the spinning of a story which belies a cynical sleight of hand to shift the blame from the real culprits and display feigned empathy that it has the interests of the nation at heart. Through 10 years of austerity politics, the government has willingly taken risks with the lives of British people with its policies and spending decisions which have stripped down our public infrastructure and led to over a hundred thousand preventable deaths through cuts to health and social care spending and social security reforms.

On the one hand, we should indeed be humbled in the face of nature as the consequences of human activity linked to the exploitation of resources and excessive consumption as the price for seeking the god of growth and profit begins to be made very clear. But that was not Johnson’s intention. It was yet another example of how the government manipulates the narrative through its use of words to shift the arguments away from its own disastrous policy and spending decisions that have exposed the gaping holes in our public and social infrastructure.

When the Prime Minister says we need a second ‘lockdown’ to stop our hospitals being overwhelmed, that cannot be the fault of nature. When we are short of 100,000 NHS workers of which 44,000 are nurses, that cannot be blamed on nature. When the Cygnus report published in 2016 exposed the serious gaps in Britain’s pandemic response plans, nature had no role to play.

Alluding to nature aims to take the heat off the government to make as if it were not responsible for this epic train crash of policies and spending decisions. We have limped from one mess to another; each crisis building incrementally consequences that could have been avoided. From successive financial crises to the arrival of Covid-19 and the subsequent government management of it. These were manmade not nature made, as were the disastrous solutions.

Austerity has brought us here and austerity kills and has killed. It is as David Stuckler explained in his book The Body Economic: Why Austerity Kills’

‘an economic ideology [which] ‘stems from the belief that small government and free markets are always better than state intervention. It is a socially constructed myth – a convenient belief among politicians taken advantage of by those who have a vested interest in shrinking the role of the state, in privatizing social welfare systems for personal gain.”

Our country didn’t just fall into this situation by accident; it happened as a result of a toxic economic orthodoxy which dominates policymaking at the heart of Westminster and indeed beyond nationally and globally from national governments to global institutions such as the IMF, the World Bank and the World Economic Forum. The destruction of our public and social infrastructure, in favour of market solutions, left us totally unprepared and yet still the market solutions command power. As public money continues to be dished out to non-accountable, profit-hungry companies, corporate welfare reigns at the expense of a publicly delivered, managed and accountable public service model. The corporatisation of everything is at a terrible human cost. The massaging of the public purse for corporate benefit, not public purpose. And anything goes!

This was further emphasised this week when Simon Stevens, a former advisor to Tony Blair who worked for the US private healthcare company United Health and now heads NHS England said ‘there is no health service in the world that by itself can cope with coronavirus on the rampage’. Whilst one cannot deny the enormity of this global health and economic challenge, this is yet another attempt to bypass or ignore the realities of a lethal economic ideology which has as one of its tenets the belief that cutting public spending is a necessary policy to balance a nation’s budget.

Ten years of public spending cuts in real terms, the ongoing damaging reforms to the NHS which have fragmented it and commercialised it; pared-down facilities and reduced number of beds (from 300000 in 1987 to 141,000 today), 100,000 fewer NHS workers than needed; and the failure to acknowledge the Cygnus report, has left the UK insufficiently prepared for the emergency we now have before us.

This was cruelly demonstrated by the realities of the Nightingale Hospitals which were set up to manage the predicted overspill of Covid patients once established hospital beds had reached capacity. As a Keep our NHS Public publication revealed this week ‘the need for the existence of these urgently-created hospitals is a powerful illustration of how little wriggle-room exists in our hospital system and how resilience has been stripped away by chronic underfunding’. It also pointed to the fact that the Government had also failed to mention exactly who would staff the temporary hospitals when the nursing shortage was already so acute. ‘Robbing Peter to pay Paul’ was always going to be revealed as a huge PR exercise which led people up the wrong path but could not deliver.

Stevens also forgot to mention the pursuit of the same damaging neoliberal ideology arising out of the World Economic Forum’s concern for the financial sustainability of public health care which Stewart Player covered in this article from 2017. It showed the WEF’s influence in developing a world vision for health care and whose ideas we have seen reproduced here in the UK with the help of private consultancies such as McKinsey and Co.

It particularly looked at the ‘fiscal pressures to curb expenditure’ and the ‘wider economic context of high levels of public debt and stagnant state revenue.’ It examined in particular ‘various forms of rationing and shifting the cost burden onto individuals and employers through … mandatory insurance’ or ‘increasing tax revenue’ or potentially increasing healthcare productivity ‘through delivering more services with fewer resources’ which would ‘go a long way to ensuring their financial sustainability.’

This is the same Simon Stevens who has been a significant player in the damaging reforms to a now fragmented NHS to cut costs and make it a nice profitable opportunity for private healthcare companies.

Whether we talk about the NHS, education or other vital public services which provide the foundations for a healthy economy, the public is continually being programmed to accept the narrative of the problem with public debt and the need for financial sustainability as much as it is being programmed to accept that the private sector does it better or indeed that volunteering can take the place of government intervention.

After the very necessary big spend of trillions of pounds (even if as left-wingers we can argue about the details of that expenditure) ‘there will be a price to pay’ is the mantra still being touted.

Whilst the government pours vast sums into private profit, we see an on-going denial of government responsibility for public well-being through its spending decisions. As the government’s corporate friends gain access to the public purse with no seeming limits, our public support systems are denied sufficient funding.

From its decision not to extend free school meals, lauding of public generosity in donating to food banks or other charities to its appeals to people’s human empathy with invitations to volunteer, we are being sucked into accepting these things as normal. As they reinforce the narratives of fiscal responsibility, the public is being sucked into accepting that government has no role to play in public purpose. By the time the nation notices this trickery, it will be too late. We will have fulfilled willingly David Cameron’s Big Society dream without realising where it is leading us.

Whether its Lord Stuart Rose, Chairman of Ocado, who said on Channel 4 News this week ‘We have to be able to protect our economy and generate the sort of income that tax provides so that we can pay for the hospitals, pay for the services and keep the NHS going.[…]We’ve now borrowed £400bn this year that’s £40,000 roughly for every taxpayer in the UK … it is going to be a deep hole that we are going to have to dig ourselves out of later. Let’s talk about the 20-30-year-olds who are going to have to live with that for the next 20 or thirty years.’

Or the former Shadow Chancellor of the Exchequer Ed Balls suggesting that whilst governments don’t need to think about returning to austerity, spending cuts or tax rising ‘it’s gonna take fifty years or more to recover from the fiscal consequences of this pandemic and then going on to claim that ‘it was the children born in the 50s, 60s and 70s who ended up paying for the aftermath of the second world war and it will be future generations who will bear some of the burden of dealing with the pandemic …’

It shows very clearly how stuck politicians and business leaders are in the economic orthodoxy which has done so much harm already and their willingness to carry on with that harm. The suggestion that the children born in post-war years were burdened with paying for it through higher taxes fails to acknowledge that that spending created the public and social infrastructure from which they all benefited in successive years as did the pursuit by successive governments of full employment at least until the 70s when neoliberal orthodoxy began to take hold. With public ‘debt’ at 248% of GDP in the post-war period, nobody suffered, and everyone gained.

That investment which created the NHS, an education system and good local government providing essential services, all helped to enhance people’s lives and by dint of that construct a fairer economy. Later adherence to the concept of fiscal responsibility and its damaging bedfellow austerity created the exact opposite. Indeed, as David Stuckler observed in his book referred to earlier:

‘Had the austerity experiments been governed by the same rigorous standards as clinical trials, they would have been discontinued long ago by a board of medical ethics. The side effects of the austerity treatment have been severe and often deadly. The benefits of the treatment have failed to materialize. Instead of austerity, we should enact evidence-based policies to protect health during hard times. Social protection saves lives.’

Both of these public figures are promoting an idea that has had its day. If only they knew about modern money realities – or perhaps they do?

That the government:

  • is the monopoly issuer of the £ sterling
  • has to spend before anyone can pay their tax
  • doesn’t have to borrow to spend. That the term ‘borrowing’ is purely a convenient sleight of hand that suits politicians to promote to justify their spending decisions and serve corporate interests.

And that:

  • the size of deficits in themselves are not a suitable measure of any government’s economic record
  • the only burden that future generations will face is one caused by a government that has failed to invest today in the real resources whether its people or the things used in the production of the goods and services which enhance our lives and make a better tomorrow.

As Thomas Fazi, co-author of Reclaiming the State published in 2017, wrote a year later:

“One of the key insights [of MMT] is that the ‘deficit’ numbers by themselves – whether in percentages of GNP or in absolute quantitative terms – are meaningless. The government can ‘sustain’ any amount of deficit […] to pay its obligations. Of course, this is not a license for irresponsible spending. Creation of money, and its utilization in ways which do not enhance productive capacity of the domestic economy are sure to cause harm to the economy. Rather, MMT provides us with a license for responsible spending. If there are worthwhile projects which will utilize resources currently lying idle, then there is no need to be scared of the deficit numbers in spending on these projects. Viewed in this light, the project of building a million houses is not constrained by the budget of the government. Rather it is constrained by the availability of resources which are required for this purpose. If there is idle productive capacity in terms of labor, land, and materials, spending in this area will utilize them to the maximum. If the capacity does not exist, then a carefully balanced spending strategy, which builds capacity in a way coordinated with the increasing demand for utilization of this capacity, can be funded by deficit financing, without causing harm to the economy. Of course, it goes without saying that this requires skilful management and planning”.

We need to re-create a model of good government in which politicians dedicate themselves to the concept of public duty to serve the public purpose and not their corporate friends, or themselves via the revolving door.

Newly published

 

This week, we published guides to quantitative easing, or QE.

Basic information is available in our FAQs here

and a fuller explanation is in our QE Fact Sheet

 

Upcoming Event

Phil Armstrong in Conversation with Neil Wilson – Online

November 15 @ 14:00 pm – 15:30 pm

The GIMMS team is delighted to host its next ‘in conversation’ event at which Phil Armstrong will be talking to Neil Wilson

Neil is an expert in finance and information systems and one of the UK’s leading thinkers about MMT. After more than 30 years in the systems business, Neil learned the hard way that operations rarely follow the manual. Moving from network crashes to financial crashes, Neil was intrigued as to whether the economy could be fixed with a reboot – which lead him to Modern Monetary Theory (MMT). His work challenges the high-priesthood of Important Grey Men who refer to people as ‘resources’ and who believe debt is bad for government and good for you.

He dreams of a world where everyone who wants a living wage job can find one, close to their home, their friends and family.

You are invited to join us for this informal event which we are sure will be both stimulating and insightful.

Register via Eventbrite

 

Join our mailing list

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

Support us

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

Share

Tweet

Whatsapp

Messenger

Share

Email

reddit

Pinterest

tumblr

Viber icon
Viber

The post We can afford to choose public purpose spending appeared first on The Gower Initiative for Modern Money Studies.

‘I’ Article on the Laws Deterring Blacks from Voting in the Southern USA

As America gets ready to decide whether they want the Orange Generalissimo or Joe Biden in the White House for the next four years, it seems that many Black citizens in the American south are being put off voting by restrictive legislation. These laws, including one dating from the era of Jim Crow in Mississippi serve to disenfranchise the poor and minorities, and have prevented people of colour from being elected to government office in the state. The I published a report about this by Tim Sulllivan, ‘Laws continue to deter black voters in southern states’ in last Friday’s edition for 23rd October 2020. This ran

The weight of history and current laws are deterring the black vote in some southern states.

The opposition to black votes in Mississippi has changed since the 1960s, but it has not ended. There are no poll taxes any more, no tests on the state constitution. But on the eve for the most divisive presidential election in decades, voters face obstacles such as state-mandated ID laws that mostly affect poor and minority communities and the disenfranchisement of tens of thousands of former prisoners.

And despite Mississippi having the largest percentage of black people of any state, a Jim Crow-era election law has ensured a black person has not been elected to statewide office in 130 years. Even today, the state has broad restrictions on absentee voting or online registration, absentee ballots that must be witnessed by notaries and voter ID laws that overwhelmingly affect the poor and minorities. Nearly a third of black people here live below the poverty line, and taking a day off work to vote can be too expensive. Then there are felony voting restrictions, which in Mississippi have disenfranchised almost 16 per cent of the black population, researchers say.

Distrust of the government runs deep. As a result, black politicians have long been fighting an apathy born of generations of frustration.

Anthony Boggan sometimes votes, but is sitting it out this year, disgusted at the choices. A 49-year-old black Jackson resident with a small moving company, Mr Boggan likes how the economy boomed during the Trump years, but cannot vote for a man known for his insults. As for Joe Biden, he and Donald Trump both “got dementia”, he says, and he hates how the former Vice President tries to curry favour in the black community. “They’re all going to tell you the same thing,” he said. “Anything to get elected.”

Some of these laws were put in place quite recently by the Republicans with the ostensible intention of reducing voter fraud. They chiefly affect the poor, Blacks and students, the section of the population most likely to vote Democrat. The Young Turks produced a report about them a few years ago, noting that one Republican politico let the cat out of the bag and actually admitted that they were intended to stop people voting for the Democrats.

Unfortunately, Mississippi isn’t the only southern state nor the Republicans the only party to rig regulations to stop Blacks voting. A few years ago the Democrats in Florida did something similar, manipulating the electoral rolls so that Blacks and Hispanics couldn’t vote.

And what the Republicans do, the Tory party copies. The Tories have also passed legislation supposedly designed to prevent voter fraud, but which also acts to prevent the poor, Blacks and other ethnic minorities from voting over here. Mike has published several articles on this, noting that the actual incidence of electoral fraud in this country is minuscule and covering reports that describe how they have operated to prevent people from voting. And it isn’t a coincidence that the sections of the population they prevent are those which also traditionally favour the Labour party.

It’s long past time these laws were repealed in both America and Britain. But this will require the election of genuinely reforming left-wing governments in each country. And I don’t see that happening any time soon with the corporatist right in control of the Democrats in America and Labour over here.

Pages