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Conference speeches reveal the misery to come

Boris Johnson and Rishi Sunak make their way up the staircase of No10 Downing StreetPicture by Andrew Parsons / No 10 Downing Street on Flickr. Creative Commons 2.0 license

The ultimate, hidden truth of the world, is that it is something that we make, and could just as easily make differently.”

David Graeber

 

After two weeks of party conferences, it is clear that we are on the train to the end of the line, and the buffers are in sight, as the Chancellor committed to yet more fiscal discipline in one way or another. The Conservatives’ levelling up, addressing rising poverty and inequality, and the coming tsunami of climate change, all seem to have been put on the back burner to accommodate the false narrative of fiscal responsibility which marked Sunak’s conference speech.

He said:

So, we need to fix our public finances. Strong public finances don’t happen by accident. They are a deliberate choice. They are a legacy for future generations, and they safeguard against future threats.

 

I’m grateful, we should all be grateful, to my predecessors and their 10 years of sound conservative management of our economy. I believe in fiscal responsibility, and everyone in this hall does too.

 

And whilst I know tax rises are unpopular, some will even see them unconservative, I’ll tell you what is unconservative, unfunded pledges, reckless borrowing and soaring debt, and anyone who tells you that you can borrow more today, and tomorrow will simply sort itself out, just doesn’t care about the future.

 

So yes, I want tax cuts, but in order to do that our public finances must be put back on a sustainable footing.

In those few words, you have the stark reality of what is to come. Despite the Prime Minister’s usual blustering rhetoric at the close of the Conference, which was not enthusiastically received by many outside the conference hall, he seemed to dismiss the current situation as a temporary blip on the way to better times, Rishi Sunak, on the other hand, promised tax cuts, but we’d have to wait until the public finances were on a ‘sustainable footing’.

Johnson’s better times, in that case, will mean instead that we can expect more austerity and cuts to public sector spending. Indeed, senior ministers have said that the levelling up project will likely take 10 years to complete, and they have admitted that there will be pain for voters on the way. We will see, as a result, a further rise in poverty and inequality, more suffering for those who are already having to choose between heating and eating, or worrying whether they will have a roof over their head. Levelling up and fiscal retrenchment are, in fact, mutually exclusive propositions. The incumbents of No. 10 and No. 11 are clearly not on the same page.

And worse, there was scarcely, if at all, any reference to climate change, apart from the green homes grant for which he had already cut funding. Indeed, it has been reported that the Treasury has been blocking green policies on infrastructure and home insulation.

Does this suggest, as it might well do, that the Chancellor has reservations about its affordability? In that case, so much for the Prime Minister’s rhetoric, a week or so ago, which claimed that the climate summit of world leaders in November will be the ‘turning point for humanity.’ Though, obviously, not until we’ve got the public finances under control, and the water is lapping around our feet.

The Chancellor, in his speech, referring in glowing terms to his predecessors’ fiscal credibility, has chosen to ignore the real consequences of their policies and spending decisions on the economy, and the public and social infrastructure. He has chosen to ignore the ongoing disintegration of society as poverty, food banks and homelessness have become an accepted public norm, and the responsibility of numerous, underfunded charities relying on public donations to fund their activities.

Yet again, and predictably, he is falling back on the false narratives of how the government spends and appealing to the household budget-conscious nation to accept that there is no alternative to yet more pain. Hurrah, folks, let’s celebrate! We balanced the budget but killed a lot of people along the way, and failed to secure a green, sustainable future for our children and theirs.

Sunak stated that strong finances don’t happen by accident. From his fiscal discipline bunker, he has twisted reality to suit his rhetoric. The reality is that it is not strong finances but strong economies that don’t happen by accident. They are a deliberate choice by the government and relate both to policy and spending decisions of governments of whichever political persuasion. Over the last decade, this government has consistently glossed over those consequences with political spin and deceit, by always falling back on its fiscal discipline and austerity narrative, claiming that we cannot leave it to future generations to clear up the mess.

Ironically, that same government then spent 18 months propping up an economy that had never really recovered, as a result of his predecessors’ public sector austerity, imposed in the wake of the global financial crisis, leaving a decaying public infrastructure denied adequate funding, and struggling to cope with the pandemic and its associated aftermath.

In the same way, Sunak’s claim that strong finances are a legacy for the future is yet again indulging in a false narrative of how the government spends. Today’s deficits will not lead to a burden of higher taxes on future generations. Suggesting that cutting spending now will enable future spending, in a world of supposed monetary scarcity, is yet more illusion created to keep people fearful and in their place.

The awful reality is that such austerity, as we have already experienced, will continue to lead to an impoverished future for our children and their children, or maybe not a decent future at all if the government fails to act to address the climate crisis.

As Professor Bill Mitchell noted in a blog post in 2014:

“The idea that borrowing ‘takes money from the pockets of future taxpayers’ is nonsensical. The funds to pay for the bonds originate in the government net spending in the first place.

 

 Clearly, deficits now are in part helping the current generation with income transfers and the like. But they also facilitate public education, public health and other infrastructure which provide massive benefits into the future for the current generation and their children.

 

Once you understand that, then the idea that there is a future burden will make you laugh.”

While the chancellor continues to bang on about fiscal responsibility, and the media hammers out the narrative, these illusions and their repetition keep its audience captured and compliant with Thatcher’s mantra of ‘There is no alternative.’ Frankly, it is no exaggeration to suggest that that mantra is killing us.

Indeed, wherever you look the right-wing media remains a key advocate of government’s unswerving devotion to market solutions and fiscal prudence, harmful as it will be in the current economic uncertainty. Repeat after us, they opine ad nauseam…there is no alternative to sound finance and balanced budgets; hammering it into the public consciousness to reinforce the narrative and drive compliance.

This week, the Telegraph began an article quoting Wilkins Micawber in Charles Dickens novel, David Copperfield, “Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

Comparing Micawber’s income and expenditure with that of the State is yet another example of dishonest reporting supporting the political ideology which prevails. The government’s finances bear no resemblance to Micawber’s, or indeed our own. This is because the government is the currency issuer, and the private sector, including individuals, businesses, and public institutions like local government, are currency users. The former has the power of the public purse to spend, constrained only by the productive capacity of the nation, and the latter, the currency user, is compelled to live within its income. They are not the same by any stretch of the imagination.

Let’s not beat about the bush, at this stage in the game when the stakes are high and involve survival. The currency-issuing capacity of government, not just over the last year, but during the Global Financial Crash in 2008 which bailed out the banks, is clear to see, and it is shameful but predictable that the media still continues to toe the political line with such macroeconomic nonsense. That nonsense will, in the end, prove very harmful to an economy which is far from recovering, and which, as a result, will create further economic uncertainty across the board, and most particularly, for those least able to manage.

The article (requires registration to read) is littered, as most are, with macroeconomic untruths about borrowing and debt, or building up a war chest for the future. Sunak has apparently to “cut his coat to an increasingly threadbare cloth’, must put ‘the public finances on a sustainable footing’, and work within the ‘fiscal straitjacket the OBR sets for him.

It gets worse. Against that misrepresentation of how the government spends, the article compared levels of national debt which stood at around 30% of GDP in 2006, [stands today at 98%,] and predictions estimate that in two years’ time it will peak at around 110%. Never mind that it stood at 248% in the post-war period, when the government invested in the nation’s public and social infrastructure, with not a whiff of bankruptcy in sight. Such information serves yet again to shock the public and create those perfect conditions for compliance.

The article then goes on to suggest that it would be ‘perilously close to a level, markets might reasonably think ‘unsustainable’, leaving virtually nothing in the tank to deal with future shocks, or the upward pressures on debt servicing costs that would result from rising interest rates.’

Never mind that the reality is that bond markets don’t control anything, and that it is the government that makes the rules and calls the tune. Never mind that borrowing is just an illusion, a matter of smoke and mirrors, which keeps yet again the public in tune with the messages of soaring debt, paying it down and living within one’s financial means.

As a result of this thinking, Sunak has already broken three of the Party’s manifesto commitments; the state pension triple lock pledge, a promise not to increase the rate of national insurance and breaking its commitment to spend 0.7% of gross national product on overseas aid. And with the ending of the furlough scheme last week and the £20 a week cut to Universal Credit, it is a clear indication of where we are headed.

The choice it seems is a high welfare state or a low tax economy, but we can’t have both. Under this false ‘tax pays for spending’ paradigm, fiscal discipline and balanced budgets are a moral obligation, never mind who it hurts or who dies as a result.

But let’s be clear, these fiscal measurements of an economy’s health are the wrong ones, as GIMMS has noted many times. The size of the deficit in itself tells us nothing about how well, or not, an economy is doing.

What tells us the real story is looking at the economic conditions of the time, both global and domestic, and how the government of the day responded. It points to the economic ideology that prevails when the government cuts or increases spending. It shows who benefited and who lost out.

Over decades, under successive governments, it has been working people who have lost out to this toxic ideology of market supremacy, which has created vast disparities in wealth, and placed downward pressure on standards of living, as ever-greater shares of productivity were distributed to fewer people.

The truth is that the ‘misery’ referred to in Micawber’s quote is not related, in this instance, to a government that has been fiscally imprudent, but the misery that will be caused by a government that has failed to provide the infrastructure a modern economy needs to function, and a fairer distribution of real wealth and resources, not to mention the prospect of a sustainable future. An economy which is, after all, the people that contribute to it, who have borne the cruel brunt of government policy and spending decisions.

That is what we should be focusing on. Not whether the government or the chancellor of the day is fiscally credible, or whether he has achieved his objectives of keeping public finances balanced. On this basis, we can understand that this current government holds its citizens in contempt. And it also holds our children, and their future, in contempt.

Professor Bill Mitchell nailed it simply in a blog this week when he wrote:

“But let’s clear a few things up first.

 

 1.

The government’s fiscal balance is not a motor car. The latter sometimes required repair when a component ages and falters.

 

There is no sense to be made of applying the metaphor to a fiscal balance.

 

One doesn’t ‘fix’ that balance.

 

One doesn’t ‘repair’ it.

 

It is what it is and should never be a target in itself for action.

 

In a modern monetary economy, the currency-issuing government should be targeting things that matter – like protecting “peoples’ livelihoods” and letting the fiscal balance be whatever is required to achieve that aim, conditional on what the non-government sector is doing with respect to spending and saving decisions.

 

Currently, that means the fiscal deficit has to be continuously large in Britain.

 

Not forever, but any notion of a fiscal surplus or balance is nonsensical, and the pragmatist would soon see the unemployed bodies piling up and be forced to do something about it.

 

2.

The future generations choose whatever public debt levels and tax structures that they will live with. The baby boomers didn’t impose any particular tax structure on our children.

 

Once they get to voting age, they can express their preferences accordingly.

 

What we have left them with is massive deteriorating natural environment, the ‘gig’ economy where their future prospects are damaged, a housing market that will preclude all but the ‘rich’ kids from fully participating, run-down educational institutions, health services that are underfunded, public transport systems that continually fail, and all the rest of it.

 

That is the burden that this “we need to fix our public finances” mentality has wrought for our children, and for us, and for the planet.”

 In conclusion to this week’s blog, it is becoming very clear where this ‘Brave New World’ promised by Johnson, at some as yet unspecified time in the future, is going to lead us. Most certainly not to a land of post-Brexit milk and honey. When a Prime Minister tells his audience that we should look at ‘the most important metric […] wage growth’, and ‘never mind life expectancy’ or cancer outcomes’, horrific as that statement is, the higher wage growth story is embellished, and doesn’t tell the whole story about the uneven nature of that wage growth and who is benefiting and why. It is time to question and challenge what those words may signal for the future.

Apart from being a crass and cruel statement that belittles people’s lives as inconsequential and disrespects those affected by such issues, it can be directly correlated to 10 years of cuts to public spending, leaving people vulnerable and our infrastructure decaying. By saying this, he is wilfully ignoring the impact of previous government choices on the nation. But admitting it, even if he thought it, would spoil the narrative he is desperate to convey of good times ahead.

At the same time, he is suggesting in his best free marketeer mode that the markets will sort it all out, if the government just steps back and allows them to do their work. At the same time, and ironically, he has also blamed businesses for not having done so.

The hands-off approach is not working, as has been demonstrated many times. This week, the army was brought in to get fuel to service stations as driver shortages continue to put pressure on supply lines. Let’s not forget either, a government that outsourced its responsibilities for the provision of PPE last year, and failed to plan for the pandemic, both with disastrous results. Or what happens to the quality of services and people’s wages and job security when public services are delivered by a greedy, profit-driven private sector. All are a clear indication of the government priority not to govern, but to shift its obligations downwards and wash its hands of any responsibility.

If Sunak gets his way and continues down the track of fiscal discipline, as Johnson exalts, as he did in an interview this week the power of the market to deliver economic miracles, then the future that is being mapped is one of total negation of the government’s role in the economy. Just as they have always wanted it. Welcome to a return to pre-second world war conditions that most of us won’t recognise or remember.

This was further emphasised by Sajid Javid suggesting in his speech to Conference that health and social care, ‘begins at home’, and ‘people should rely on their families in the first instance rather than on the state.’

When Javid talked then about his role volunteering in a care home, we can begin to envision the sort of society he is talking about. The Big Society, where charities and individuals take the place of government, which then provides the minimum in public service provision.

Frances Ryan in the Guardian was clear:

“Javid’s comments are not simply offensive – they are a worrying sign about the future of social care. It is worth reflecting on what Javid’s speech means: the health secretary believes that government should not take overall responsibility for health and social care. That is not a minor thing. It is a radical rewrite of the social contract, and an abandonment of basic ministerial duty.

 

Last month, Boris Johnson’s social care plan gave minimal extra funding to the sector, and no word on how to meet unmet care needs. Javid appears to see himself as building a repackaged “big society”, where the market and individuals rule supreme, the state collects rising taxes but delivers little more for it, and disabled and older people will be cared for as long as they do not expect the state to do it.

 

It isn’t “fixing” social care for the government to tell families to do the care themselves. It is passing the buck. Why bother solving staffing shortages or unmet care needs when you can just shift the burden on to the public?”

 

To then go on to suggest, as he did, that we currently live in a ‘compassionate, developed country that can afford to help with that’ [caring] is to deny the last 10 years of government policies and spending decisions which have pulled the carpet from under the feet of many families, leaving them to struggle to cope on their own or rely on what charity is left to help.

Those same charities are now struggling to keep afloat as a result of cuts to public spending, which have filtered down to our local communities where much of this vital work was being done. Work, which, in many cases, is mitigating for government ‘failure’ and abdication of responsibility.

So, the narrative is being constructed that we can all be volunteers or carers and work for free, to reduce the financial burden on the State.

The culture of individual responsibility, not a bad thing in itself, has been cultivated by successive governments espousing neoliberal ideology, and is being used to justify further disintegration of our public services. A do-it-yourself programme. It fails to recognise the social determinants of health, which, in turn, rely on a government whose policies and spending creates the infrastructure that allows a positive culture of independence and responsibility to thrive.

Whether it was pandemic or healthcare planning or ensuring that we had sufficient HGV drivers or social care workers, as GIMMS has pointed out before, it was the government’s responsibility to think strategically and plan for the future. Instead, it absolved itself from any responsibility, expecting a disparate, profit-led, short-term thinking market to deliver. It hasn’t, and won’t, and yet the government is still pursuing this direction.

While the public continues to accept the notion of the public finances being like their own household budgets, and accepts its fate as necessary, there can be no progress. As even more cuts bite into lives already grappling with the consequences of the last 10 years, more austerity will quite simply mean that we will all be the losers in the end.

However, on a final positive note, armed with the tools that an understanding of monetary reality provides, it doesn’t have to be that way. We can change the world with the political will to do so. It is up to us to keep pushing for that alternative vision.

 

 

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The post Conference speeches reveal the misery to come appeared first on The Gower Initiative for Modern Money Studies.

Another week of handbag economics

Black handbagPhoto by Middlesex University Fashion Collection on Flickr Creative Commons 2.0 licence

“The objective should be to organize the economy around human needs and well-being. If toward this end we decommodify key goods and services, or legislate longer product lifespans, use-value will clearly increase even if GDP declines. We must focus on what matters”.

Jason Hickel, Economic Anthropologist

 

Whether we admit it or not, we are living in perilous times. From the climate crisis to the ongoing obscene disparities in real wealth and income, which affect billions of people around the world, they are the outcomes of a distorted economic system. A system which is underpinned by exploitation of labour and the natural resources which sustain its greedy search for profit, no matter the actual costs to the planet or human lives. This distortion is upheld by a false narrative about monetary scarcity, and from 2010 onwards led to the Conservative government claiming that without action we faced bankruptcy, and prescribing austerity with the destructive consequences we are living with today.

The arrival of the pandemic over eighteen months ago challenged that notion, as governments around the developed world loosened the purse strings to accommodate the consequences of the pandemic on global economies. But now, even though we are not yet out of the woods, and the climate crisis continues to bear down upon us, politicians are doing their best to reclaim that redundant narrative of fiscal discipline.

This week has been yet another example of macroeconomic ignorance, idiocy and callousness coming from both sides of the political spectrum.

First up, this week at the Labour party’s conference in Brighton we learned what the future might hold in the unlikely event that Labour wins a future election. The shadow chancellor, Rachel Reeves, boldly pledging £28bn of capital investment to be spent on tackling the climate crisis, then went on to stress the party’s commitment to the straitjacket of fiscal responsibility, by imposing fiscal rules that would both ensure that tax revenues matched day to day public expenditure and that the ‘burden’ of public debt would be on a downward trajectory. Although, to be fair, whilst she said she saw them more as principles rather than binding constraints, and that a permanent mechanism would be introduced to suspend those rules in the event of ‘exceptional shock’, the context of her speech was very much in line with the economic orthodoxy of borrowing, raising revenue through taxation to fund spending, and being fiscally responsible, even if at the same time, unlike the Tories, promising that it would not be ‘on the backs of working people.

Putting aside for the moment the facts about how government really spends, that taxes play no role in that spending, and that the ‘burden’ of public debt is illusory, as an Editorial in the Guardian made clear this week, capital investment whilst vital, must be considered within the context of whether it is achievable in real resource terms. In simple language, the question is never ‘is there enough money’, but do we have enough people and other real resources to deliver and service that capital investment? As the Editorial put it, ‘a better approach to policy would be to focus on how much is needed to accomplish a stated public purpose and work out whether the economy can absorb that amount of spending without price pressures.’

It is the real resources that are finite, and which need to be managed by the government to deliver public purpose and a fairer and more sustainable planet. As such, the choices to be made are not financial, but resource led. The power is in the hands of the government, through its taxation policies, to appropriate the resources it needs to deliver its policies from the private sector. The collection of taxes has, therefore, no funding purpose, and serves quite a separate set of objectives linked to equity, as a tool for controlling inflationary pressures, and driving behavioural change.

And yet, taxing to spend still forms the basis of all Labour’s future proposals, as Reeves also promised that instead of increasing National Insurance to fund the NHS and social care, she would be looking across the board for sources of revenue, which included increasing taxes for the wealthy and tax reforms. But she also told the Financial Times that she wanted people to know ‘that there are fiscal anchors, and that there will be restraints and [for] everything that Labour commits to we will explain where the money will come from’. When, in reference to Labour’s economic policy under Jeremy Corbyn, she was asked about the ‘magic money tree, she responded that she didn’t believe there was one. Liam Byrne’s note in the treasury has left a lot to answer for in terms of Labour’s mediocre response, tied to sound finance rather than delivering real public purpose. It makes for painful listening when you know something about monetary reality.

Reeves then went on in the same vein to challenge the Conservatives to set out a costed plan to meet its green pledges. While the planet continues to burn and people’s lives are wrecked by government policies, it seems to be a game of household budget one-upmanship between the main parties about who can be the most fiscally responsible, with the eternal question ‘where will the money come from?’

However, the question in itself is borne from Margaret Thatcher’s handbag economics, which has dominated public policy and spending decisions since that time. This is not progress. It’s going backwards. The chink of light shining at the end of the tunnel, as financial caution was set aside to save economies from collapse, and which revealed the real possibilities for a fairer and sustainable future, is now less bright. As the incumbent at No.11 and his shadow opposition dig in their heels, anxious to reinforce their fiscal credibility, what is at stake in a continuing uncertain economic environment is our future, that of our young people and those yet to be born.

As the activist Malcolm Reavell pointed out in a social media post this week, in response to Rachel Reeves speaking at the Labour conference:

‘[…] we are doomed as a species if the monetary society in which we live is continually fed the “taxpayers’ money” trope. Nothing will change. The inequality we experience is caused by a deeply embedded false economics, supported by education, media, and politicians. There are few politicians who are willing to stand up to the establishment and call out the lies about currency creation, least of all those who seek personal gain from the perpetuation of the lies.’

Whilst Labour, whatever they are promising in terms of policies, continue up the one-way street to nowhere except the maintenance of the status quo, the Conservatives are way in front having led the way.

Research published this week by the Health Foundation think tank indicated that the NHS and social care services will need more than a million extra staff over the next decade to keep up with growing demand. It was estimated that government would need to invest around £86bn into services to deal with the consequences of an ageing population, a rise in chronic illness, and the backlog of healthcare caused by the pandemic.

To put some context to this report, we are already 100,000 short of health workers which includes nurses, doctors, and other healthcare professionals. We have a chronic shortage of social care workers with over 300,000 people on waiting lists, and social care provision on the brink of collapse due to financial and staffing issues.

This is not accidental. It is related to a decade of public sector spending cuts that have stripped out public services to the bone and shown a complete disregard for the role of government in long term strategic planning to ensure the nation’s needs are met. Every aspect of our public and social infrastructure has been whittled away, government employment and other policies have been responsible for a decline in living standards, poverty wages and precarious working practices, which, in turn, have affected people’s health and well-being. And now, with the ending of furlough and the £20 a week Universal Credit uplift, along with price hikes in energy and food, and the ending of the suspension of evictions, the government is condemning people to further hardship and uncertainty, with its continuing emphasis on sound finance.

Rishi Sunak’s hasty announcement in which he promised ‘to throw the kitchen sink’ at resolving his crass decision to remove the uplift, turns out to be a measly £500m grant to provide support on a discretionary basis to families facing emergency situations, and was described as ‘crumbs off the table.’ The Joseph Rowntree Foundation called it ‘an eleventh-hour attempt to save face’, saying that ‘it does not come close to meeting the scale of the challenge facing millions of families on low incomes as the cost of living crisis looms. By admitting that families will need to apply for emergency grants to meet the costs of basics like food and heating through winter, it’s clear the chancellor knows the damage the cut to Universal Credit will cause.’

At the heart of these problems lies a government fixated on a market-led economic ideology, which combines with its associated balanced budget narratives to form the basis for the policy and spending decisions that have led us here.

In short, and to put it proverbially, ‘a stitch in time could have saved nine’, albeit on a far larger scale. For the narrative of monetary scarcity and the primacy of the market, we are now paying a hefty price in terms of human, economic and planetary health. This will continue unless this government or future ones rethink their priorities.

Putting it right is possible. At its heart, it will require huge investment in infrastructure and the people who will be needed to restore our public services to a functioning system. It will also demand consideration about how we organise society’s priorities for today and the future, in light of the climate emergency.

We seem, however, a very long way from that, and as if on cue, the government this week announced plans to cut the graduate salary threshold for paying back student loans, as the taxpayer bill is deemed too high.

David Willetts, a former universities minister who oversaw the switch to the £9000 student loan in 2012, backed up the plans saying that it was ‘in the interests of students that universities are well funded. But that should not come at the expense of taxpayers.’ He also said that it would save the government nearly £3bn a year. Yet more economic bilge from one of the supporting acolytes of Conservative austerity.

Apart from the fact that taxpayers are not footing the bill for unpaid loans, because as we should know by now, the government doesn’t need taxes to spend, it also won’t save a penny of future government spending or release funds for other priorities. It represents a continuing part of the ongoing smoke and mirrors that keep people in ignorance, divided and under the control of the ‘how we pay for things’ narrative.

Worse, it will further affect the incomes of those who are just starting to build a future for themselves, and who will suddenly find themselves burdened, unless they come under the repayment threshold being set, or their parents can foot the bill in advance. Under such a proposal, we will be continuing to enslave our young people to a rotten, stressful, debt-ridden system of social control, at a time when we need to harness their youthful energy and nurture their creativity and imagination to see a better way forward. We should be investing in our young as only a currency-issuing government can do, not burdening them with debt.

GIMMS would like to give the final words in this week’s lens to Ellis Winningham, who responded on social media to Keir Starmer’s question posed in his essay ‘The Road Ahead.’ It applies equally to the Tories as it does to Labour and should be the starting point for challenging the wrong-headed notions about how the government spends. It shows that contrary to public belief, it is never about monetary scarcity and always about political choice, and such choices, in their turn, are dependent on real resources and how they are employed and shared for the wider good, or not. The future of the planet and our children’s children hinges upon this fundamental knowledge. So far politicians have failed to embrace it, so the challenge remains for the modern money movement to keep passing that baton of knowledge to as many people as possible, until those holding the reins of power can no longer ignore it.

“Why when government departments are funded by taxpayer money are we so lax about ensuring that money is spent appropriately?” – Keir Starmer, “The Road Ahead”

 

Starmer is obviously out of his depth here. We know this because were he not, he wouldn’t be asking the question. Little do people realise that inside this simple question lies the root problem of nearly all of the economic and social problems we see today. The answer to Keir’s question is simple, and here it is:

 

Government departments are not funded by “taxpayer money.”

 

The funding occurs when Parliament decides that a department must be funded and then settles on the appropriate figure. The BoE then credits the spending account with the figure Parliament desires, and the funding is complete. In other words, the UK government does not spend “taxpayer money;” it simply creates the money and then spends what it created. All government spending is “money creation” from the moment that Parliament decides to spend.

 

Now then, when the Tories decide to spend departmental funds inappropriately, giving their friends handouts, the bank accounts of their friends are credited, and the BoE credits the reserve accounts of those banks to ensure that the payments will clear.

 

Many people in Britain want to know why the government could find the money to bail out banks and so forth but cannot seem to find the money for the things which ensure the public’s well-being. The explanation above is the answer to their question. It’s not a financial thing; it is a political thing. The government can always afford anything priced in GBP, so it can always “find the money” to fully-fund things like the NHS, care services, education, full employment, Social Security, and pensions. Parliament simply chooses not to fully-fund the NHS, care services, education, full employment, Social Security, and pensions.

 

But what happens to “taxpayer money” if the government doesn’t spend it?

 

It is deleted from the banking system upon receipt and replaced by new money when the government spends again. What is vitally important to realise here is that the government always spends prior to collecting taxes. Spending places GBP into circulation, and taxation removes GBP from circulation.

 

To correct Starmer, it is never a question about spending “taxpayer money” inappropriately. It is always a question of spending newly created public funds inappropriately. And concerning the issue of spending public funds inappropriately, Starmer is right to question it. The Tories create the money they wish to spend, and then spend it for whatever they choose because they know there is always more money to be had. If departmental funds are running low after giving their friends and pet projects most of the money, the Tories will create more money to spend. I definitely question that.

 

So, yes, there is a “magic money tree” as many of you might have heard, but it is not exactly the Bank of England as some would think. The “magic money tree” is Parliament itself. Currently, the Tories are in command of the “magic money tree,” and they are only interested in that which benefits corporations, the financial sector, and the rest of their wealthy benefactors.

 

That is why the Tories seem so lax about ensuring that the money they authorised to be created is spent appropriately.

 

Ellis Winningham

 

 

 

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The post Another week of handbag economics appeared first on The Gower Initiative for Modern Money Studies.

New "Taxcast" Examines Finance vs. the Environment

Published by Anonymous (not verified) on Sun, 26/09/2021 - 4:43am in

 The newest edition of the "Taxcast" podcast takes on two big environmental topics this month. First, John Christensen of the Tax Justice Network discusses with host Naomi Fowler how high levels of financialization of an economy degrades the environment.

Second, an even more challenging question is whether growth itself is now threatening the environment and, if so, what to do about it. Anthropologist Jason Hickel tackles this issue in his segment of the Taxcast.

Both segments are well worth your time. If you, like me, prefer to spend less time and read the transcript, see the link below.

Taxcast podcast

Transcript

The National Insurance increase shows that levelling up has been consigned to the Conservative bonfire of easy promises

Boris Johnson playing Connect 4 with an elderly lady and a nurse whilst visit Westport Care Home in East London 7/9/21Picture by Andrew Parsons / No 10 Downing Street. Creative Commons 2.0 license

A country ruled by criminals needs two revolutions, one small and one big: The small revolution is to overthrow the criminal government, the big revolution is to radically undo the damage these criminals have inflicted on the country!

Mehmet Murat Ildan, Contemporary Turkish playwright, novelist, and thinker

 

This week, Boris Johnson announced that his government would not ‘duck the tough decisions needed to get NHS patients the treatment they need’, or ‘to fix our broken social care system’. After all the fanfare and promises, from an already morally bankrupt government, the reality is somewhat different. The proposed solution to increase National Insurance will not only do nothing to resolve the growing crisis in social care, or create a fairer system for social care provision, it will also create further burdens on an economy already creaking at the seams.

When Johnson refers to a ‘broken’ health and social care system, he is ignoring the elephant in the room. Who broke it? The actions of successive Conservative governments are to blame, through a decade of cuts that have deliberately starved the public sector of adequate funding, along with decades of allowing a private profit-seeking sector to benefit from public money, at the expense of those needing health or social care services. It did so as a result of its fixation with fiscal discipline and market-driven economic dogma.

The Covid-19 pandemic has exposed the folly of austerity, the toxic and harmful obsession with private sector involvement in the delivery of public services, and the consequences of the lack of strategic planning for such events, which have resulted in the NHS and social care struggling to function effectively during this crisis and led to unnecessary suffering and deaths.

Adding to the already existing shortage of nurses (over 40,000) and other health workers, insufficient ICU facilities, ventilators, beds and PPE, were the warning indicators that something was seriously wrong, as hospitals burst at the seams with very sick patients needing treatment. As a result, we are now facing a growing backlog of patients awaiting diagnosis or treatment (or who have even died waiting), with experts warning of the future consequences on staff already suffering from burnout, stress, and exhaustion. It is humanly unsustainable.

Social care services have not been immune from the same economic illiteracy. The warning signs preceded the pandemic. Social care is in meltdown now, and the proposal to increase National Insurance will not only fail to enable the fairer payment system for social care promised by the government, but it will also do little to alleviate the immediate problems caused by government policies.

Government officials have been clear that most of the money raised by the new tax will be spent on the NHS in the first three years, on the assumption that demand for state-funded care will increase from 2026, as people reach the spending cap. These proposals make no attempt to deal with an already failing underfunded system, and social care providers and charities have already indicated that the extra resources would not be sufficient to improve standards.

The problems faced by social care have been longstanding, exacerbated over decades by a mishmash of reforms by governments unwilling to grasp the nettle, as a likely result of the uncomfortable, but false, question of affordability and how it would be paid for. As a result, under an unfair means-tested social care system, which has for decades been served by private profit-seeking companies and charities relying on state funding to function, social care services have increasingly been impacted by years of funding cuts affecting local council budgets, putting increasing pressures on care standards, wages and employment terms and conditions, as private providers struggle to make their businesses profitable.

This is just pushing the problem yet again down the line, when social care can already no longer meet the needs of those requiring support. Recently published figures showed that nearly 300,000 people are on local authority waiting lists for adult social care, a situation which has arisen as a result of funding pressures and delayed assessments. Figures also reveal a chronic shortage of care workers which has meant that those requiring a home care package have had no option but to accept a ‘temporary’ placement in residential facilities.

The government’s decision to increase National Insurance, a regressive tax that will affect the poorest, not the richest, will lead to many of those already poorly paid workers losing substantial income, as figures now show. Coupled with the looming cuts to the universal credit uplift of £20 a week and rising energy and food prices, it will add more unnecessary pain and suffering to people’s lives. A study published this week by the Health Foundation has shown that the UC cut will hit areas with the worst health hardest and is likely to widen inequality in health and wellbeing, running counter to the government’s promised levelling-up commitment.

Analysis by Policy in Practice noted that by April 2022, the combination of the new Health and Social Care Levy and the removal of the uplift to Universal Credit would mean that carers would be £1035 per year worse off, despite the planned (but scarcely generous) increase to the National Living Wage. Its Director Deven Ghelani said: ‘The unfairness of paying for social care through a rise in national insurance, whilst cutting support for the lowest earners at the same time, means those that kept us going through the pandemic are the ones hardest hit.’

It isn’t any wonder that the media reported this week that many were already choosing to leave social care and find work elsewhere. When Amazon becomes a better alternative to working in social care and playing a vital role in society, then we should question our societal values. When we are told that affordability is key to public service provision, the cruel consequence must be that, down the line, people must suffer higher taxes to balance the budget. How can that even be a consideration for a government which is a currency issuer and has the power of the public purse?

Astonishingly, even the free-market Adam Smith Institute called these plans ‘morally bankrupt’, saying that the government was asking ‘poorer workers to bail out millionaire property owners.’ They also criticised the plan as a ‘kick in the teeth for all the young working people of this country who have already been hard done by the pandemic.’

Whilst the solution is simple, ditching the for-profit motive and replacing it with an adequately funded, publicly paid for, managed, and delivered social care system, getting politicians to agree is quite another matter. Obsessing over how it will be paid for, we have two extremes of economic nonsense being touted in the news and on social media. Both sides of the political spectrum are dedicated to raising taxes to pay for health and social care. The Tories, as these plans show, through punishing already poor people, and Labour by taxing the rich to raise revenue.

Quite rightly, one should tax the rich for reasons of equity and to strip away the power and influence their wealth brings them, but this week some left-wing progressive MPs have flogged the ‘taxing the rich’ to pay for social care narrative to death on social media. James Meadway, a former advisor to John McDonnell, also got in on the act saying that Labour should, ‘seize the opportunity to make the alternative funding case’. A wealth tax and other changes to tax arrangements would fit the bill, he suggested. At the same time, as his party came under pressure to set out a ‘costed plan’, the leader of the Labour Party, Keir Starmer, suggested that Labour would consider taxing wealth even more heavily to raise funds.

How depressingly predictable that the question of how you are going to pay for it is the standard response to funding public services, but the same question is never asked for bailing out banks or going to war.

Yes, of course, we want to see a more equitable society, but playing to Mrs Thatcher’s ‘There is no such thing as public money. There is only taxpayers’ money,’ assertion is a highly damaging tactic. When those supposedly on the progressive left associate themselves with an acolyte of the arch neoliberals Hayek and Friedman, it is scarcely an advert for confidence in them. Although the fact that such views are still underpinning policies and spending is not surprising, given the entrenchment of such narratives in political discourse. Playing to the understanding of one’s audience works every time.

What we need now, desperately, is an opposition which is prepared to put citizens before the profits of private companies and for politicians to reject the gibberish that the belief that taxes fund spending represents. It is hardly progressive to reinforce in the public mind the false household budget narratives of government spending; that tax rises will be necessary to fix what actually has been a deliberately broken health and social care system, or that they could be needed to keep the public accounts straight, as per Sunak’s coming ‘hard choices’ in the October Spending Review.

The insistence that there is no alternative to tax rises to pay for social care is both macroeconomically unsound and cruel to those who are already struggling to keep their heads above water. The consequences of higher taxes in these still uncertain times will be very hard on some of the poorest and most vulnerable in our society, and will do nothing to support the economy, businesses or the working population and their families, as the UC uplift is terminated, and energy and other costs rise. There still remains the looming potential crisis of rising unemployment as furlough ends, and even if there are sectors crying out for workers, there will likely be a mismatch in terms of skills requirements to fill new posts, and that will take time to correct.

In this respect, the government has put all its eggs into the free-market basket, expecting it to come up trumps, and it has failed, unsurprisingly. This government and decades of previous ones have trusted in the market to deliver. The invisible hand of the market, whatever that mythical beast is, has done no such thing. The private sector is a profit-seeking juggernaut which puts its own interests over public purpose. And therein lies the heart of the problem. Government has put fiscal discipline above people’s lives and allowed the private sector to run amok, in an unforgivable free-for-all bonanza of deregulation and profit-seeking.

The question is never, ‘is there enough money’ or ‘how will we pay for it?’ The question is do we have the real resources to deliver a better health and social care service, and if not, what are the solutions? That is the role of the government to plan and deliver through its spending and taxation policies. The government should be us, but now democracy is made a mockery, as government and corporations become one and the same thing, serving not the interests of the people or indeed the planet, but their own rapacious greed.

The price of a hands-off approach has been and will continue to be a heavy one. Government, as an elected body, should have a responsibility to serve its citizens to ensure fair and equitable wealth distribution, to create the vital public and social infrastructure upon which the economy depends, to plan for the future whether in a post Brexit era, for future pandemics, or indeed for a just green transition to deal with the climate emergency. Words and actions, however, like oil and water, don’t mix in Conservative terms. It has done none of those things, and now we have seen how easy it was for Conservative MPs in the Red Wall, who were originally objecting to the NI tax rise, to dutifully line up behind their macroeconomically challenged leaders to vote for more pain and suffering. Levelling up has been consigned to the Conservative bonfire of easy promises, and the people yet again duped into acceptance that there will be no alternative to tax rises, either to fund social care or balance the public accounts.

The failure of government hinges on a lie used to justify austerity. The lie of monetary scarcity. Over decades, despite the rhetoric and promises, the issue of social care has been swept under the carpet, and now the system is barely functioning. It will not be fixed by increasing taxes of any sort. It can only be fixed by a government with the political will to do so. Shamefully, successive governments have made a political choice not to fund it adequately. They invited the private sector in, as if social care or the NHS should be beholden to the god of business efficiency and profit, not public service for human well-being. The real cost has been lives, disaffected, poorly paid staff who are on the edge financially and physically.

We should be shouting it out loud. We have a government that chose this path. A government that chose to let social care collapse for the lie of fiscal discipline. What a terrible price we and our loved ones are paying. It didn’t and doesn’t have to be like this.

There are two potential outcomes: Either that we carry on with ‘business as usual’, as the work and pensions minister Baroness Stedman-Scott put it earlier this week to the House of Lords, referring to the removal of the UC uplift, or something else.

We could imagine a world where monetary reality informs government policies and spending decisions. Where government puts its citizens first. A world in which we could have a functioning public and social infrastructure, funded, managed and delivered publicly. An economy, underpinned by full employment and a Job Guarantee, that works for everyone, not just for an excessively wealthy elite that uses its power and influence to dominate public policy. A society where real resources and wealth are distributed more fairly, and a just transition to a green agenda to address the climate crisis looming close behind. Just imagine! The way may be rocky and uncertain, but if we don’t try, we will never know.

 

 

 

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The post The National Insurance increase shows that levelling up has been consigned to the Conservative bonfire of easy promises appeared first on The Gower Initiative for Modern Money Studies.

Liberal party’s housing platform

Published by Anonymous (not verified) on Wed, 01/09/2021 - 10:25pm in

With a federal election taking place in Canada in fewer than three weeks, I’ve written a 950-word overview of the Liberal Party’s housing platform.

It’s available here: https://nickfalvo.ca/ten-things-to-know-about-the-liberal-partys-housing-platform/

Liberal party’s housing platform

Published by Anonymous (not verified) on Wed, 01/09/2021 - 10:25pm in

With a federal election taking place in Canada in fewer than three weeks, I’ve written a 950-word overview of the Liberal Party’s housing platform.

It’s available here: https://nickfalvo.ca/ten-things-to-know-about-the-liberal-partys-housing-platform/

Fairy tales and the vocabulary of scarcity. Protecting the wealthy and hurting the rest

Fairy tale princess and books in fantasy landImage by Mystic Art Design from Pixabay

“Last time, most of us fell for it. This time, it is critical that we do not. Because, in reality, the crisis we just experienced was waking from a dream, a confrontation with the actual reality of human life, which is that we are a collection of fragile beings taking care of one another, and that those who do the lion’s share of this care work that keeps us alive are overtaxed, underpaid, and daily humiliated, and that a very large proportion of the population don’t do anything at all but spin fantasies, extract rents, and generally get in the way of those who are making, fixing, moving, and transporting things, or tending to the needs of other living beings. It is imperative that we not slip back into a reality where all this makes some sort of inexplicable sense, the way senseless things so often do in dreams.”

David Graeber –  After the Pandemic, We Can’t Go Back to Sleep

 

 

Rishi Sunak is looking to raise funds! So says an article in the mainstream media this week. Raise funds for what? A gym, a swimming pool or perhaps tennis courts for his £1.5 million manor? No, nothing so trivial! The article, like so many over the past few months, was speculating on how the Chancellor might get the public finances back on track after the huge spending response by the government to keep the country economically afloat and functioning during the pandemic.

What’s it to be? Capital gains tax, targeting public sector pensions, abandoning the pensions triple lock, cutting public sector spending, raising taxes, or perhaps increasing National Insurance (to fund the proposed social care reforms if they ever get off the drawing board). After all, you’ve got to find the money from somewhere, haven’t you? At this point one cannot help but note with a hint sarcasm, that an excessively wealthy Chancellor is now considering cutting benefits for some of the poorest people in our society, putting balanced accounts over people’s lives.

Last week, the BBC covered yet another fake story about government borrowing. It reported that whilst overall borrowing was down on the same time last year, the government had spent a record £8.7bn in interest on repaying its debts in June, three times as much as in June 2020, as a result of inflation which had raised the value of index-linked government bonds. It also noted that debt to GDP was at its highest since the 1960s.

In the same article, the Chancellor, whilst patting himself on the back for the ‘unprecedented package’ of pandemic support, the only option that he actually had to keep the economy from taking a nosedive, commented that he needed to ensure debt remained under control in the medium term and indicated that his ‘tough choices’ in the last budget were ‘to put the public finances on a sustainable path’.

The IFS, relishing its doom-mongering task, as always, said in July that they expected that the ‘tough choices’ would continue, even if the economy appeared to be recovering more quickly than had been expected at the last budget. It noted that ‘permanent economic damage’ had been done by the pandemic, and that rising debt interest costs meant that, under their forecast, the Chancellor would have little, if any, additional headroom against his stated medium-term target of current budget balance (borrowing only to invest, not to fund day-to-day spending) in this year’s Autumn Spending Review. Analysts did, however, stress that despite record interest, debt servicing costs as a share of GDP remained low by historic standards.

Ruth Gregory, a senior UK economist at Capital Economics, said that ‘the public finances should reap the benefits of a fuller recovery in GDP than the OBR expects, meaning that the deficit will fall still further.’ Assuming of course that the proclaimed recovery remains on track, which is looking less and less certain.

You can trace in the above text a common theme. Tax, borrowing, deficit, debt, and fiscal headroom is the vocabulary of choice by politicians, journalists and institutions when describing how the government spends. It is, therefore, unsurprising that the public accepts the deficit and debt fairy tales.

Whilst it may be the case in terms of how the public accounts are presented, the reality is that it is merely an accounting framework which fails to reflect the capacity of the UK government, as the currency issuer, to spend money into existence, and is designed to keep a lid on monetary reality.

Instead, the media in its analysis, acts to reinforce the incorrect narrative of how the government spends, and focuses either on the capabilities of the chancellor of the day to manage the economy in a fiscally sound manner, or aims to shock the same public when the deficit and debt increase, leading to false accusations by the political opposition of economic mismanagement and spending beyond the nation’s means.

We can certainly expect more of this household budget nonsense in the months to come. After a vast round of government spending to prop up the economy, someone’s got to keep the public’s expectations in check, to keep the status quo in place by suggesting that government must balance its books, sooner or later.

In this, the journalists fall over themselves, as Will Hutton did this week in an article discussing the current economic situation, to frame the issues as per usual in terms of borrowing, deficit and debt, as if they represented monetary reality. To give him his due, he was clear, in a deficit dove sort of way, that the spending responses the government had made to address the prevailing economic conditions had been necessary to stop the economy from crashing, and went on to suggest that such spending would need to continue to support the economy. However, even if he didn’t say it, caught as he is like many others in the false paradigm of how the government spends, he will be equally quick to suggest at some time in the future that whilst we might continue to borrow while interest rates remain low, eventually there will be a reckoning and government will have no alternative but to curb its spending and restore fiscal discipline.

Now is the time to challenge this notion of monetary scarcity, and also the economic orthodoxy which has done huge harm to the UK, and also globally.

As the MMT Lens has noted many times before, it’s not the state of the public accounts that are important in themselves, but the economic conditions that lie behind them. What choices did the government make, faced with those economic conditions? What did the government do, or not do, who benefited and who did not?

The media, acting like a magician using his powers of sleight of hand, guides the public to be afraid of public debt and its consequences, when all the while the future of the planet hangs in the balance, not just in terms of planetary degradation, but also the poverty and inequality which will continue to grow without urgent action.

We need a State of the Nation Address to make clear what the consequences of the ideologically driven policies of successive governments and their spending choices have been, and most particularly over the last decade. While the rich have benefited from an ever-larger proportion of wealth, the living standards of successive generations have fallen, increasing poverty and inequality.

The ‘cheap as chips’ economy flourishes increasingly for only one section of it. The corporate sector. Earlier in the year, it was reported that the wealth of the world’s billionaires had grown by $4tn during the pandemic, despite the global economy suffering its deepest recession since the Second World War. Jeff Bezos, Mark Zuckerberg, and Bill Gates are just a few of those who have come out of the crisis unscathed, and in some cases even richer.

At the other end of the wealth scale, the gig economy continues to flourish for owners of exploitative companies like Deliveroo, whose workers can earn as little as £2 an hour, unscrupulous employers employing the dirty tricks of fire and rehire on the back of the pandemic, and a continuing low wage economy (even if some sectors are under pressure due to shortages). When the question is asked why such employment standards have been allowed by law and why have they persisted under successive governments, there is only one answer; that those successive governments have served their corporate friends and their own interests through the revolving door, rather than those of the electorate.

This week, the charity Citizens Advice warned, as many have been doing over previous months, that the government’s planned £20 a week cut to Universal Credit could drive 2.3million people into debt. That includes people who were already struggling to make ends meet before the pandemic as a result of government policies.

A survey had shown that more than a third would be in debt after paying just their essential bills, if their benefits were to drop by £20 a week. This increased to half of claimants in the so-called ‘Red Wall’ areas. The organisation is warning of a ‘triple whammy of benefit cuts, rising energy bills and further redundancies as the furlough scheme ends, which will push families into hardship.’

Dame Clare Moriarty, the chief executive of Citizens Advice, described the cut as “a hammer blow to millions of people”, saying that it undermined the chance of a more equal recovery, by tipping families into the red and taking money from the communities most in need.

Whatever happened to Boris Johnson’s levelling up plan? In his usual defence of cutting the Universal Credit uplift, he suggested that claimants should rely on their own ‘efforts’ rather than accept ‘welfare.’ More ‘it’s your own fault if you can’t find a job’ neoliberal twaddle!

Whilst some in the media suggest that cutting the uplift would create electoral risks for Conservative constituencies in the Red Wall, they often fail to bring attention to something much more significant. That the poverty which preceded the pandemic, although alleviated by the increase in Universal Credit, is not a blip of nature, it has been politically induced. Johnson’s mantra of ‘getting people into work’ is no option at all, if wages are not high enough to keep people out of want. It helps no one apart from profit-seeking business, and the irony is that in the end, the whole economy suffers. People are poor, not because of their shortcomings or because they are lazy shirkers and not trying hard enough, they are poor because the government has decreed they should be.

The media should name the economic ideology that drives poverty and inequality and creates the vast disparities in wealth that we are seeing today. Neoliberalism. A phenomenon which has captured political parties, institutions, and the media which parrots its tenets of faith. The fact that many on Universal Credit are in work, surviving from hand to mouth on low wages, is a red warning indicator that something is wrong. It is an indictment of the government that poverty and employment insecurity has been built into the system to serve its corporate supporters who lobby to serve their own profit interests. But neoliberalism teaches, falsely, that government has no power to change the economic paradigm, and that its policies are constrained by scarce monetary resources. It is the spread of neoliberalism’s teachings that has prevented people from seeing the possibilities for positive change.

It was depressing this week to read about Labour’s plans for overhauling the Universal Credit System through allowing low-income workers to earn more, without seeing a cut in their welfare payments. The phrase ‘making work pay,’ featured in the presentation of their plans, which was horribly reminiscent of Iain Duncan Smith’s dictionary of human torture which informed his welfare shakeup and the Universal Credit Plan in 2010, and which incidentally and shamefully Labour supported. What changes? Labour sharing a bed with its corporate friends alongside the Tories, when it had the opportunity to break free of the economic ideology which has done so much damage already.

With increased knowledge about the capacity of government to act, it doesn’t have to be this way. With a government that puts the needs of its citizens at the top of its agenda, it could, through adopting full employment as a policy objective, and the implementation of a Job Guarantee, ensure that people are paid a living wage instead of what happens now, which is, in effect, a wage subsidy to help out their corporate friends.

Since the government is the price setter for labour through its legislative capacity, a Job Guarantee would help both those in work on low wages and those who are involuntarily unemployed and seeking work. A centrally paid for employment scheme, paid at a living wage set by the government, would provide training, give people dignity and purpose as well as offer a transition into better paying, private sector employment, as and when economic conditions improve. That is the best option of all.

The macroeconomic bottom line is that people with more money in their pockets spend it back into the economy, thus benefiting their local communities and the wider economy. They can pay for the real essentials like rent, food, clothing, and travel, with enough left over for life’s pleasures. Nobody should have to rely on food banks to feed themselves or their children.

What’s not to like? It’s a no-brainer. The economy would benefit, (which in an alternative world to the one we currently inhabit should be the aim of all governments whichever side of the political spectrum they stand) and working people would benefit through increased financial security and improved health and well-being.

Furthermore, with the challenge that is being presented by the urgent necessity to address the climate emergency and work towards a just transition to a truly sustainable world, it offers us an important opportunity to rethink the way we do things, re-examine what work is, and move towards a world that is less oriented towards the consumption of things, to a world concerned with sustainable living and dedicated to fulfilling public purpose. We need to do this within the context, not of monetary constraints, but the very real constraints related to resources.

This week the Financial Times ran an article with the headline ‘Climate action will stall until the finance problem is solved’, in which it said:

‘The options are to raise debt, raise taxes (including wealth taxes) or adopt a wartime mentality. None are politically attractive which at a profound level is the reason why the finance question remains unanswered, and the climate crisis remains unresolved’.

On that basis, as humanity sinks beneath the waves, the politicians will still be puzzling their little brains about how to pay for it, when all the time they should have been looking at the real and finite resources we will need to deliver a green transition, and how they can be shared fairly to create a more equitable world. As a social media friend commented, referring to what would have happened if the government had said in 1939 at the beginning of the second world war, ‘We will not defend Britain until the finance is sorted’, it would have been lunacy. The government did what only it could do to prepare for the battles to come, it spent the money into existence, whilst at the same time, offering war bonds to remove private purchasing power to ensure that it was not competing for the resources it would need to prosecute the war. Those same tools can be used for a just, green transition.

When the fate of the planet and its citizens are at stake, it is a paltry and self-serving argument to ask how it will be paid for, or to claim that balanced budgets must come before action on climate, poverty, and inequality.

Whilst we may indeed have to develop a ‘wartime mentality’, we should interpret that, not as deprivation but as an opportunity for cooperation. A transformation from a society of endless consumption of things we don’t need, to one which really delivers public purpose, a society formulated around human and planetary well-being. A cup half full and not half empty.

Such a world seems light-years away, when the Business Secretary Kwasi Kwarteng, continues to advocate a ‘free market’ approach to the economy, that same approach which has created the structural weaknesses revealed over the past year and that will do nothing to save the planet. Whilst, at the same time, right-wing journalists mourn massive state intervention and a culture of unlimited spending (even though it’s poured vast sums of public money into private profit) and promote instead a return to the good old days of unrestrained growth and market dominance.

But in the light of the challenges we face, it is time to acknowledge the damage this approach has already caused and will continue to cause if we fail now to rethink how we live.

Finally, with the news that global trade uncertainty continues to affect the economy, retail sales suffered an unexpected fall in July, and figures show that consumption has levelled off. It rather takes the shine off the expectation that people would be anxious to spend their savings as soon as they were able to, thus saving the government from the ignominy of having to admit that its growth expectations were miscalculated or wishful thinking. The exhortation to spend has fallen flat on its face, for the time being at least.

The elephant in the room crashes about as the government continues to ignore its role in the economic trends, which were already weak before the pandemic as a result of cuts to public spending. And, that it needs to spend sufficiently to deal with the ongoing economic uncertainty and create confidence that government actions are operating in the favour of working people and their families, not the politicians’ corporate friends. In such circumstances, it is clear that those lucky enough to have savings are reluctant to splurge out, just in case things go pear-shaped, and it ignores the many who have no such savings and who have been living on the edge for years as a result of government spending and policy decisions.

While the government continues to threaten more cuts and more public sector austerity to pay down the imaginary debt, the removal of the Universal Credit uplift and potentially the pension triple lock, with the still to come uncertainty surrounding the planned withdrawal of furlough arrangements, people will continue to hunker down after a short flirtation with spending, if they had anything to spend.

Such a strategy, based as it is on a false narrative of government spending, and the evils of deficit and debt, and spending beyond the nation’s means, will constrain the government’s promises, weak as they are, to act on the climate crisis and address the consequences of their own ideologically-driven policies.

If we are to avoid further planetary degradation, destruction of land, resources, and biodiversity, and all that will mean for the future survival of human beings on this planet, we cannot afford to ignore the warnings. We have no monetary constraints, only real resource ones, and it is now for governments across the world to cooperate to ensure that we can deliver a sustainable global economy and a fairer distribution of real resources in both the poorest and richest countries alike. Everything is possible with political will, if we choose it.

 

 

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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

 

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The post Fairy tales and the vocabulary of scarcity. Protecting the wealthy and hurting the rest appeared first on The Gower Initiative for Modern Money Studies.

the federal Conservatives’ housing platform

Published by Anonymous (not verified) on Tue, 24/08/2021 - 7:03am in

With a federal election taking place in Canada on September 20, I’ve written an 800-word overview of the Conservatives’ housing platform.

It’s available here: 
https://nickfalvo.ca/ten-things-to-know-about-the-federal-conservatives-housing-platform

the federal Conservatives’ housing platform

Published by Anonymous (not verified) on Tue, 24/08/2021 - 7:03am in

With a federal election taking place in Canada on September 20, I’ve written an 800-word overview of the Conservatives’ housing platform.

It’s available here: 
https://nickfalvo.ca/ten-things-to-know-about-the-federal-conservatives-housing-platform

Concentrate on real resources to solve real problems, instead of the financial cost.

Published by Anonymous (not verified) on Mon, 23/08/2021 - 1:36am in

Photo by David B Young on Flickr Creative Commons 2.0 licence

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

Jason Hickel, Less is More: How Degrowth Will Save the World

 

Over the last 11 years, this government has presided over a train crash of unnecessary austerity and cuts to public sector spending, justified on the spurious claim that they were not affordable due to the previous government spending beyond its means. The public were told that recovery could only be achieved if people pulled in their belts and made a sacrifice to get the public accounts back into order. Bankruptcy was just around the corner if we failed to do so. The public, none the wiser, accepted the household budget wisdom without question, it has been ingrained in the public consciousness since Margaret Thatcher. Since that time, every part of our public and social infrastructure has experienced the consequences of those public sector spending cuts, from the NHS to adult and children’s social care, along with local government and other public institutions whose budgets have been slashed to accommodate the scam narrative of financial affordability.

We have, over the last year, witnessed as never before the grinding reality of austerity and its consequences on the public domain.

A couple of weeks ago, a research economist at the IFS reported that more than four million people had been on an NHS waiting list before the pandemic and that Covid-19 had increased the pressures on the NHS. He warned that unless the NHS could find effective ways to ‘boost its capacity’, then longer waiting lists would be inevitable. No mention here of the fact that the government has starved the NHS of adequate funding, allowed vast sums of public money to pour into private profit, and is currently overseeing the end of the NHS, as we know it, through its US-style integrated care plans. The suggestion that the NHS is to blame and not the government is just a part of the trickery used by such institutions to shift public focus away from government spending decisions and policies. The reality is that you can’t run a public service on empty for too long before the cracks appear, and Covid-19 has split them wide. But still, the public are led by the nose to accept the notion of public sector culpability, rather than manoeuvring by the government to deliver political agendas.

Recently, the President of the Association of Director’s of Children’s Services, Charlotte Ramsden, asked ‘Where is the national plan for children?’ Yes, indeed where is it? The problem goes beyond the chaos of austerity within local authorities whose budgets have been slashed, forcing tough decisions about how limited funding can be allocated fairly across the competing needs of our communities. It also reflects the increasing pressures caused by rising poverty and families trying to survive on low incomes and being obliged to seek help at the growing number of food banks across the country. Tackling poverty should surely be part of the holistic vision for children’s social service provision, given that they are often dealing with the crises brought about by government austerity in the first place. It is shameful that this government has committed to removing the Universal Credit Uplift which has seen so many people through these challenging times.

While Rishi Sunak counts the beans, children count the real cost of successive Chancellors, more concerned with balanced budgets and their political reputation for fiscal discipline. As the Guardian put it succinctly in an editorial this week:

‘Reform is required as well as money. The children’s home sector requires rebuilding with children’s needs – and not financial incentives – centre-stage. Above all, poverty must be reduced. Its corrosive effects on family life, including poor mental health, addiction, homelessness, and hunger, are well known. To deny or ignore the impact of these on children is not only self-defeating, since the costs of treating the symptoms are so often higher than tackling the cause. It is also cruel.’

Also this week, a study published by the Sutton Trust and the Sylvia Charitable Trust noted that inequality in early years education wasn’t offering a fair start to children. Commenting on the government’s policy of funding only 15 hours of weekly childcare or nursery for three- and four-year-olds from low-income families, compared to 30 hours for children whose parents were in work, was deepening inequalities. Apart from the injustice of unequal access to child-care which favours the wealthier, it is short-sighted. Children who benefit from early years education and opportunities to socialise with their peers take those advantages with them throughout their lives. All children deserve a fair start. They benefit, and society benefits.

We should be looking at the roots of the additional pressures on public sector services, not just the services themselves. We should be examining them in the context of the social determinants of child health and security. Determinants such as poverty, the creation of low wages, precarious employment and involuntary unemployment, as well as inadequate, unfit for purpose housing, along with high rents and a crumbling public infrastructure. All these things create stresses in family life and give rise to the problems struggling people face. In turn, they affect the good functioning of society as a whole.

Over the past few decades, we have also seen increasing privatisation of both adult and children’s social care services. It has been based on two lies: that government has a finite pot of money; and that the private sector can deliver public services more efficiently and therefore more cheaply. For decades we have accepted the narrative of a competitive, for-profit model of social care provision, but its promises have fallen far short of the expectations in terms of delivery of efficient, high-quality services, and have impacted on those employed to deliver them in terms of low wages and poor terms and conditions of employment.

During the austerity years, as cuts to public spending increasingly fed through to local government and service providers, the crisis continued to intensify. The consequences of market-led provision, driven by competition, have progressively undermined the quality of care, and the last year has revealed the widening cracks; the result of a decade of government policy and spending decisions. Ironically, the assumed beneficiaries of this profit-led system of social care have suffered as cuts kicked in, leaving profit margins slimmer and companies considering exiting the care market. That is the prerogative of private companies whose rationale is making profit.

The virtues of the free market have been peddled for decades by governments serving the corporate estate and neglecting their responsibilities as elected bodies to serve the nation’s interests. Over the past year, it has been exposed for the con trick it is. This is exactly why we need to bring social care services back under the public sector umbrella of a publicly, paid for, managed, and delivered, accountable service.

As for paying for it (which is usually the next question) it is only the government that has the monetary and legislative capacity to address poverty and inequality and invest in public and social infrastructure to create a stable foundation for a successful and fairer economy. Whilst the government prevaricates, and discussion takes place about how social care can be funded, those needing support continue to be abandoned to fate. Last month, Boris Johnson, in the tradition of sweeping important decisions into the long grass (at least until the autumn) put on hold plans for a tax rise to fix the disintegrating care system, while further discussion continues.

With some MPs unhappy at the prospect of funding it through increases to National Insurance, a regressive tax which hits the poorest hardest, and others being concerned about what they see as intergenerational unfairness, they either lack the fundamental knowledge about monetary reality, or choose to ignore it. The facts would allow them to focus, not on how to pay for it, but on understanding the real issues that revolve around the real resources that will be needed to deliver a social care system that can function effectively, using the tools government has at its disposal, to ensure a fairer distribution of wealth and resources. An increase in National Insurance does not take into consideration the consequences of taxing people more during a period of economic uncertainty. Again, the principle of one person’s spending equals another’s income kicks in here.

No matter how much money you throw at it, if you have no strategy for ensuring that there is a functioning infrastructure for social care, with sufficient well-paid staff on good terms and conditions to deliver those services, you will fail. The question of how to fund it is a redundant one because the government is the currency issuer. But as it is also the political decision-maker, it can target its taxation policy to ensure it releases the labour and other real resources it needs to deliver a functioning social care system.

All talk about levelling up, or investing in public services cannot happen while we have a Chancellor dedicated to market solutions and fiscal discipline, and while politicians talk in terms of taxing to spend.

Last week, GIMMS reported on the IPCC’s report which put humanity on code red. As the droughts, wildfires and floods continue to be chronicled in the media, the UK government, as a host of this November’s COP26, persists with its rhetoric claiming that the UK is a climate world leader and that it has reduced its CO₂ emissions by 44% since 1990. This week the climate activist Greta Thunberg called out their lies and also suggested that global leaders were still treating the climate emergency as a ‘faraway, distant problem.’ She made those comments at a briefing, launching a UNICEF report, Children’s Climate Risk Index, which found that ‘approximately 1 billion children – nearly half of the world’s 2.2 billion children – live in one of the 33 countries classified as ‘extremely high risk’. These children face a deadly combination of exposure to multiple climate and environmental shocks with a high vulnerability due to inadequate essential services such as water and sanitation, healthcare, and education. The findings reflect the number of children impacted today, – figures likely to get worse as the impacts of climate change accelerate.’

While politicians, and the governments they represent, continue with their gilded climate rhetoric, in the same week, it was announced that the oil giant Exxon is expecting to produce 800,000 barrels of oil a day by 2025 in Guyana, which would exceed the estimates for its entire oil and natural gas production in the south-western US Permian basin by 100,000 barrels, that same year. It would represent ‘Exxon’s largest single source of fossil production anywhere in the world.’ Not only do experts believe that the company’s safety plans are ‘inadequate and dangerous’, but a top engineer has also said that worker’s lives, public health and Guyana’s oceans and fisheries, which indigenous locals rely on for a living, are all at stake particularly in the event of a spill. Vincent Adams, an environment chief said, ‘when they make all their billions, and they are ready to pack up and they’re gone, we’ve got to deal with the mess.’

While the company claims its climate goals are ‘some of the most aggressive’ in the industry, its oil operations in Guyana will flood the atmosphere with more than 2bn metric tons of CO₂. As environmental campaigners have suggested, ‘Exxon cannot reconcile the project with its public commitments to address climate change and reduce carbon emissions.’

Greenwashing on steroids!

Last week’s news that humanity may be on code red, will slowly but surely become tomorrow’s chip paper unless we take the warnings with the seriousness they deserve. The real commitment to radical change still remains on the drawing board with no clear direction or strategic plan, either domestically or globally, hinging as it does on the power of the global corporates to control the messages through lobbying and their financial firepower.

It is ironic that Alok Sharma points the finger of blame at the Chinese and suggests that we can only fight climate change if China does its part. Just another example of shifting the focus of blame; failing to acknowledge in the usual smoke and mirrors the connection between China’s exports and their destination.

Larry Elliott noted in the Guardian this week that China was responsible for 28% of global greenhouse gas emissions, with Britain, France, and Italy accounting for about 1%. However, he forgot to note at the same time that the consumables we all rely on in our homes, from electrical goods to computers, phones, and clothing, have been imported from China. As Sue Dalley in a letter to the paper said, ‘This suggests to me a rather different allocation of responsibility; it is time to engage in the urgent political review of just how we in the west must change our addiction to cheap mass consumption …’

It can be summed up by George Monbiot in an opinion piece in this week’s Guardian:

“The global emergency requires a new politics, but it is nowhere in sight. Governments still fear lobby groups more than they fear the collapse of our living systems. For tiny and temporary political gains, they commit us to vast and irreversible consequences. MPs with no discernible record of concern for poor people, and a long record of voting against them, suddenly claim that climate action must be stymied to protect them.

 

The Treasury refuses to commit to the spending needed to support even the government’s feeble programme. Johnson, charged with transforming the global response to climate breakdown at the November summit in Glasgow, blusters and dithers, seeming constitutionally incapable of making difficult decisions.

 

No government, even the most progressive, is yet prepared to contemplate the transformation we need: a global programme that places the survival of humanity and the rest of life on Earth above all other issues. We need not just new policy, but a new ethics. We need to close the gap between knowing and doing. But this conversation has scarcely begun.”

Whilst we as individuals can make our own personal choices, fundamentally it is only the government through its spending choices and policies that can take the radical action that needs to happen to ensure our children and their children have a future.

The government has many tools at its disposal to achieve its objectives, if it has any beyond ensuring the increasing disparities in wealth and allowing its corporate friends to continue to greenwash their way to continuing profits.

A mainstream newspaper this week ran an article about Green NS& I Bonds. Referring to the NS&I website which explained that all money invested in NS&I is passed onto HM Treasury and contributes towards government spending, it went on to indicate how that money would be used to fund green initiatives, from making transport cleaner, developing renewable energy, decarbonisation of public buildings such as schools, and investment in protecting the environment and the countryside.

Green Bonds could indeed play a significant role in a government’s climate agenda, but not in terms of funding such projects. That is just another example of the illusions which governments promote about how governments need to tax to spend, or to borrow by issuing bonds. The government has the capacity to fund green projects as the currency issuer. It doesn’t need to borrow from anyone or offer bonds to do so. The only benefit an investor might get apart from the interest at maturity is a nice warm glow thinking they’ve helped the government to achieve its green agenda, should it ever publish one.

However, as L Randall Wray noted in a recent MMT Podcast hosted by GIMMS Associate Members Christian Reilly and Patricia Pino, Green Bonds could play a valuable role as did the issuance of War Bonds during the second world war. Contrary to belief, they were not issued to pay for the war, they were issued to remove the purchasing power of citizens, to free up those real finite resources required to fight the war, and thus avoid the inflationary pressures which could have ensued. The same warm glow applied as people felt they were doing their bit to support the war effort, even if the reality was that the government did not need their savings to prosecute it.

That same principle could have the same applications in addressing a war of a quite different kind. The one concerned with human survival on a planet of finite resources. Only this time, we should understand the mechanics of Green Bonds, not as mechanisms to fund a green agenda but mechanisms to deliver a green agenda through re-allocation of resources.

 

 

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The post Concentrate on real resources to solve real problems, instead of the financial cost. appeared first on The Gower Initiative for Modern Money Studies.

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