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History Debunked Refutes Critical Race Theory’s Rejection of Objective Fact

In this video from History Debunked, YouTuber and author Simon Webb attacks Critical Race Theory’s epistemology. Critical Race Theory is the theory of racial politics, devised by American Marxists, that Blacks are the victims of institutional racism. As the video states, Critical Race Theory has largely been confined to the US for the past 40 years, but is now being adopted in Britain. It was the McPherson report following the murder of Stephen Lawrence, which introduced the idea of institutional racism in Britain with its conclusion that the Met was institutional racist. Since then a number of other organisations have also been accused of institutional racism, including the NHS.

Epistemology is the branch of philosophy dealing with knowledge. There is a difference between subjective and objective knowledge. The statement that light moves at 186,000 miles per second is objectively true. It can be tested. But the statement that X hates someone is subjective, as it is difficult to prove objectively. In the West, knowledge is generally regarded as objective fact. But Critical Race Theory rejects objective fact in favour of ‘Standpoint Epistemology’. This is the view that the opinions and perceptions of minorities are what matter, and these should be accepted uncritically, as demanding objective proof or questioning them is a form of oppression. The video also states that the theory also promotes instead of facts the stories Black people tell amongst themselves. These stories, which may include myths, are to be regarded as incontrovertible truth, and should similarly not be subjected to criticism or testing.

The video illustrates this by citing the views of a young Black woman, Yomimi, in an article published by the Beeb, and the Oprah Winfrey interview with Meghan Markle. The Beeb article is about the higher percentage of graduate unemployment among Blacks. Yomimi is quoted as saying that she feels it is due to institutional racism, and that employers automatically reject applicants from Black and Asian candidates, whose names are difficult to pronounce. This was the subject of a previous video by History Debunked yesterday, in which he argued against this assertion. Official statistics show that Chinese and Indians are slightly better at obtaining jobs than Whites, but Chinese names are notoriously difficult for westerners to pronounce. However, the Chinese generally do better in education than Whites, while fewer Blacks than Whites obtain two or more ‘A’ levels. Black unemployment may therefore have more to do with poor Black academic performance than institutional racism amongst employers. But what is important about the article is that Yomimi is not asked to provide supporting facts for her arguments. It is just how she feels or sees the situation.

Similarly, Markle said little in her interview with Winfrey that could be objectively verified. Significantly, Winfrey thanked Markle for speaking her ‘truth’. This sounds strange to British ears, but it’s part of the same viewpoint that rejects objective truth in favour of feelings and perceptions.

I’ve no doubt that racism exists in this country, and the police force, especially the Met, has been notorious for the racism of some of its officers. Racism appears to be one explanation for the Met’s failure to prosecute Lawrence’s murderers, but they were also the sons of notorious London gangsters. An alternative explanation was that the cops were afraid of prosecuting them because of their fathers, or else were corrupt and on their payroll. Private Eye also stated a few years ago that an Asian and White lad were also separately the victims of racist murders, and the Met was similarly negligent about finding and prosecuting their killers but that there was no mention of this.

The rejection of objective fact, however, is a fundamental element of Postmodernism and its moral and cultural relativism. Instead, it sees every culture and viewpoint as equal. Way back in the 1990s I tried to do an MA on British Islam at my old College. As part of it, my supervisor sent me to several Cultural Studies seminars, which were thoroughly postmodern. These were on colonial or western views of extra-European cultures. The attitude really did seem to be that westerners really couldn’t understand or appreciate other cultures, who should thus be exempt from western criticism. Any attempt to do so was dangerously prejudiced and ‘othering’.

Unfortunately, parts of the women’s movement have also been contaminated by this irratrionalism. In their book Intellectual Impostures, Sokal and Bricmont, one an American left-wing mathematician and physicist, the other a Belgian philosopher, attack postmodern philosophy and particularly its appropriation of scientific concepts. These are used nonsensically to give an appearance of depth and profundity to arguments that are actually absurd and incoherent nonsense. In one chapter they attack a number of postmodern feminist writers, who refuse to use conventional logical argument because logic and objective are patriarchal concepts that mentally imprison women. I am not joking, and this is most definitely not a wind-up.

A friend of mine came across this attitude, also back in the 1990s, in the women’s committee of the local branch of the National Union of Students. He was told by someone who worked with it, that it was one of three autonomous committees, whose conclusions were automatically passed as NUS policy. The other committees were for Black and LGBTQ students. The women’s committee similarly rejected logic and objective fact. Instead their debates supposedly consisted of them largely talking about their experiences of sexual abuse before concluding with their recommendation on a particularly issue. Which was passed with no debate. This situation should have been unacceptable. I have every sympathy for anyone who has been sexually abused, but official decisions need to be based on logical argument and proper debate, not entirely subjective feelings and personal history unless these are directly relevant to the matter.

Sokal and Bricmont were highly critical of this feminist rejection of logic, not least because it was based on a very traditional view, that has been used to exclude women from authority. For centuries women were largely excluded from a number of professions and political power on the basis that they, unlike men, were emotional rather than reasonable and logical. The Nazis used the same argument to justify their removal of women from the workplace and politics. They also believed in Cultural Relativism, and what was appropriate for one race was unsuitable for others. This is shown in their denunciation of democracy as ‘Jewish’. Now cultural relativism and the rejection of objective fact in favour of feelings and perceptions is being promoted as empowering for Blacks and women.

Proper discussion of racism is entirely appropriate, especially given the continuing poverty and marginalisation of the Black community. But this has to be done through rational discussion and argument, backed up with facts and statistics. And this means a rejection of Postmodernism and Critical Race Theory’s theory of knowledge.

Private Eye on Johnson’s Appointment of Neocon as Anti-Extremism Chief

A few weeks ago the Labour left staged an event on Zoom in which a series of Labour MPs and activists, including the head of the Stop the War Coalition, explained why socialists needed to be anti-war. They stated that after going quiet following the debacles of the Iraq invasion, Libya and elsewhere, the Neocons were being rehabilitated. There was therefore a real danger that the ideology behind those wars was returning, and Britain and America would embark on further imperialist, colonialist wars. And now, according to this fortnight’s Private Eye, for 16th – 29th April, 2021, Boris Johnson has appointed Robin Simcox, a Neocon, as head of the government’s Commission on Countering Extremism. Simcox is a member of the extreme right-wing Henry Jackson Society, firmly backing the wars in the Middle East. He also supported the rendition of terrorists to countries, where they would be tortured, as well as drone strikes and detention without trial. And when he was in another right-wing American think tank, the Heritage Foundation, he objected to White supremacist organisations also being included in the American government’s efforts to counter violent extremism.

The Eye’s article about his appointment, ‘Brave Neo World’, on page 14, runs

Robin Simcox, appointed as the new head of the government’s Commission on Countering Extremism (CCE), has neoconservative view that will themselves seem pretty extreme to many observers. He replaces Sara Khan, the first head of the CCE, which Theresa May set up in 2017 as “a statutory body to help fight hatred and extremism”.

Simcox was researcher at the neoconservative think tank the Henry Jackson Society (HJS), before leaving for the US to become “Margaret Thatcher fellow” at the conservative Heritage Foundation. He was also a regular contributor to Tory website ConservativeHome, writing there in 2011 that David Cameron was wrong to criticise neoconservatives “what has been happening in the Middle East is proving the neocons right” (ie that invasions could build democracies.

In a 2013 study for the HJS, Simcox argued: “Rendition, drones, detention without trial, preventative arrests and deportations are the realities of the ongoing struggle against today’s form of terrorism; they are not going to disappear, because they have proved extremely effective.” Rendition meant the US and UK handing terror suspects over to nations such as Libya or Egypt so they could be tortured for information. He complained that politicians “failed to adequately explain to the public” why these methods were needed and were “failing to explain that the complexities of dealing with modern-day terrorism meant that not all roads lead to a court of law”.

Simcox spent many years looking at Islamist terrorism, but at the Heritage Foundation he argued that making “white supremacy” the subject of a “countering violent extremism policy” was mostly driven by “political correctness” and could be “overreach”, regardless of the terrorist acts by white racists in the UK, US and elsewhere.

Simcox has been appointed interim lead commissioner of the CCE, possibly because bring him in as a temp means his recruitment wasn’t subject to the same competition and inspection as a permanent appointment.

Johnson has therefore appointed as head of the commission an extreme right-winger, who supports unprovoked attacks on countries like Iraq and Libya. The argument that these invasions were intended to liberate these nations from their dictators was a lie. It was purely for western geopolitical purposes, and particularly to remove obstacles to western political hegemony and dominance of the oil industry in the region. In the case of Iraq, what followed was the wholesale looting of the country. Its oil industry was acquired by American-Saudi oil interests, American and western multinationals stole its privatised state industries. The country’s economy was wrecked by the lowering of protectionist trade tariffs and unemployment shot up to 60 per cent. The country was riven with sectarian violence between Sunni and Shia, American mercenaries ran drugs and prostitution rings and shot ordinary Iraqis for kicks. The relatively secular, welfare states in Iraq and Libya, which gave their citizens free education and healthcare vanished. As did a relatively liberal social environment, in which women were to be regarded as equals and were free to pursue careers outside the home. And western intervention in the Middle East created an environment leading to the further, massive growth in Islamist extremism in al-Qaeda and then Daesh. And this has led to the return of slavery. This was Islamist sex-slavery under Daesh in the parts of Iraq under their jackboot, while Black Africans are being enslaved and sold by Islamists in slave markets that have reappeared in Libya.

Domestically, Simcox’s appointment is also ominous. He clearly doesn’t believe in human rights and the protection of the law. Just as he doesn’t believe in tackling White supremacist extremism, even though at one point there were more outrages committed by White racists than Islamists.

His appointment is part of continuing trend towards real Fascism, identified by Mike over at Vox Political, of which the Tories proposed curtailment of the freedom to demonstrate and protest in public is a major part. At the same time, it also appears to bear out the Labour left’s statement that the warmongers responsible for atrocities like Iraq and Libya are coming back. And I fear very much that they will start more wars.

The people warning against this and organising to defend real freedom of speech is the Labour left, whatever the Tories might say about ill-thought out legislation designed to outlaw ‘hate speech’. We need to support left politicos like Richard Burgon, Bell Ribeiro-Addy, Diana Abbott and Apsana Begum. The last three ladies, along with former head of Liberty, Shami Chakrabarti, held another Zoom event as part of the Arise festival of left Labour ideas, Our right to resist – the Tory attacks on our civil liberties & human rights, in March. We need to support the Stop the War Coalition, because I’m afraid the Tories and the Blairite right in the Labour party will start more wars.

Blair lied, people died. And Johnson lies as easily and as often as other people breathe. If not stopped, the Neocons will start more wars and more innocents will be massacred for the profit of big business.

How COVID-19 Affected First-Time Homebuyers

Published by Anonymous (not verified) on Mon, 12/04/2021 - 9:00pm in

Donghoon Lee and Joseph Tracy

How COVID-19 Affected First-Time Homebuyers

Efforts in the spring of 2020 to contain the spread of COVID-19 resulted in a sharp contraction in U.S. economic growth and an unprecedented, rapid rise in unemployment. While the first wave of the pandemic slowed the spring housing market, home sales rebounded sharply over the rest of the year, with strong gains in house prices. Given the rising house prices and continuing high unemployment, concerns arose that COVID-19 may have negatively affected first-time homebuyers. Using a new and more accurate measure of first-time homebuyers, we find that these buyers have not been adversely affected by the pandemic. At the same time, gains from lower mortgage rates have gone to existing homeowners and not to households purchasing their first home.

The strong performance of the housing market during 2020 is reflected both in terms of the volume of home purchases as well as the growth in house prices. The chart below shows total purchase mortgages by year, broken down into first-time homebuyers (FTBs) and repeat buyers. The data are based on new mortgage liens on household credit files, and so will not reflect any “all cash” home purchases.

How COVID-19 Affected First-Time Homebuyers

The annual pace of new purchase mortgages has been trending higher since 2011. This growth accelerated in 2020, with purchase mortgage volume increasing 10.5 percent, compared to 6.0 percent in 2019. Similarly, house prices rose 9.2 percent in 2020 compared to 3.6 percent in 2019, according to CoreLogic, reflecting strong demand and relatively low inventories.

Using a large representative sample of U.S. household credit files, we can identify a FTB as the first instance of a mortgage lien on a household’s credit file. The share of new purchase mortgages taken out by FTBs each year is shown in the chart below.

How COVID-19 Affected First-Time Homebuyers

We find that in 2019, prior to the COVID-19 outbreak, the share of FTBs among all purchase mortgages (excluding all-cash purchases) was 48.2 percent. In 2020, the FTB share increased to 48.8 percent, as opposed to the decline based on NAR survey data. This slight increase is also in sharp contrast to the 8.5 percentage point decline in the FTB share following the financial crisis. The FTB share has been trending up since 2013 and is now essentially back to its level in 2000.

Meanwhile, rising house prices pushed up mortgage balances for both FTBs and repeat buyers. The chart below shows the average mortgage balance over time for the two types of buyers.

LSE_2021_covid_first_time_buyers_lee_ch3_LSE_2021_covid_first_time_buyers_lee

The average mortgage origination balance for FTBs increased by 10.2 percent in 2020, more than triple the pace of 3.2 percent in 2019. Similarly, mortgage balances for repeat buyers increased by 12.1 percent in 2020 after remaining relatively flat in 2019 (an increase of only 0.8 percent).

Rising house prices and a weak labor market might be expected to create affordability problems for FTBs, leading to a lower FTB share in 2020. Why did this not occur? Were FTBs in 2020 relatively older and thus had higher incomes and more time to save for a down payment? The next chart provides data on the average age of FTBs and repeat buyers.

How COVID-19 Affected First-Time Homebuyers

Instead of rising, the average age of FTBs actually declined slightly, to 36.1 years in 2020 from 36.5 years in 2019.

The monthly payments on a house depend on both the mortgage balance and the mortgage rate. S&P Global reports that the average rate on a thirty-year fixed-rate mortgage fell from 4.75 percent in 2019 to 3.77 percent in 2020. For FTBs, this decline in mortgage rates completely offset the rise in house prices (and consequently mortgage balances). Based on our credit panel data, the average scheduled monthly payment for a FTB declined slightly from $1,625 in 2019 to $1,598 in 2020.

In addition to being able to afford the monthly principal and interest payments on a home, a FTB must also accumulate sufficient savings to make a down payment. Higher house prices can make saving enough for a down payment even more challenging for FTBs. However, if households invested their down-payment savings in broad equity market indices, their after-tax return in 2020 would have exceeded the rise in house prices. Generous pandemic stimulus checks and automatic forbearance on federal student loans could possibly have helped FTBs save for a down payment as well.

If FTBs were facing difficulties in making a down payment as house prices increased, they could either have tried to make a smaller-percentage down payment or have sought down-payment assistance. CoreLogic provided us with average down-payment percentages for FTBs (using the official definition for FTB of not owning a home in the last three years). In 2019, the down payment for FTBs was 8.9 percent, on average. In response to rising house prices, this percentage declined slightly in 2020, to 8.6 percent.1

Borrowers using Federal Housing Administration (FHA)-backed mortgages can use down-payment assistance (DPA) to reduce the burden of saving for a home. However, the FHA does not break out DPA use by FTBs and non-FTBs, although FTBs represent 70 percent of FHA purchase mortgages in 2020, based on our data. The use of FHA DPA increased slightly from 39.3 percent in 2019 to 39.8 percent in 2020.2 Both the lower down-payment percentages and higher use of DPA indicate that some FTBs faced challenges in purchasing a home in 2020 but that credit markets were able to accommodate them.

Summing Up

The COVID-19 health crisis sent the economy into a sharp recession, resulting in an unprecedented increase in unemployment. At the same time, low inventories and strong demand led to faster gains in house prices. Despite these challenges, the share of FTBs actually increased slightly in 2020. The decline in mortgage rates offset rising house prices to keep monthly payments roughly unchanged. This result illustrates that in a market with low inventory and strong demand, the benefit from lower mortgage rates goes to sellers and not first-time buyers.

(1) We thank Frank Nothaft of CoreLogic for providing these tabulations.

(2) Table B-10, page 98. https://www.hud.gov/sites/dfiles/Housing
/documents/2020FHAAnnualReportMMIFund.pdf

Donghoon LeeDonghoon Lee is an officer in the Federal Reserve Bank of New York’s Research and Statistics Group.

Joseph TracyJoseph Tracy is an executive vice president and senior advisor to the president of the Federal Reserve Bank of Dallas.

How to cite this post:

Donghoon Lee and Joseph Tracy, “How COVID-19 Affected First-Time Homebuyers,” Federal Reserve Bank of New York Liberty Street Economics, April 12, 2021, https://libertystreeteconomics.newyorkfed.org/2021/04/how-covid-19-affec....




Disclaimer

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

“Excess Savings” Are Not Excessive

Published by Anonymous (not verified) on Mon, 05/04/2021 - 9:00pm in

Florin Bilbiie, Gauti Eggertsson, Giorgio Primiceri, and Andrea Tambalotti

LSE_2021_excess-savings_tambalotti_460

How will the U.S. economy emerge from the ongoing COVID-19 pandemic? Will it struggle to return to prior levels of employment and activity, or will it come roaring back as soon as vaccinations are widespread and Americans feel comfortable travelling and eating out? Part of the answer to these questions hinges on what will happen to the large amount of “excess savings” that U.S. households have accumulated since last March. According to most estimates, these savings are around $1.6 trillion and counting. Some economists have expressed the concern that, if a considerable fraction of these accumulated funds is spent as soon as the economy re-opens, the ensuing rush of demand might be destabilizing. This post argues that these savings are not that excessive, when considered against the backdrop of the unprecedented government interventions adopted over the past year in support of households and that they are unlikely to generate a surge in demand post-pandemic.

Calculating excess savings is simple: they are the cumulative amount by which personal saving during the pandemic has exceeded a counterfactual path without COVID-19. As shown in blue in the chart below, personal saving has been elevated since last March. The red line represents one plausible counterfactual scenario, in which the saving rate out of disposable income is constant at its pre-pandemic level (7.3 percent), while disposable personal income grows at its average rate over the previous twenty years (3.5 percent). Excess savings are the area between the two lines. According to this calculation, they amounted to $1.6 trillion as of December 2020. Different plausible assumptions on the counterfactual evolution of personal saving in the absence of the pandemic lead to relatively small differences in this headline number.

“Excess Savings” Are Not Excessive

Where do these excess savings come from? Three contributing factors are clear. First, many Americans have thankfully kept their jobs and incomes over the past year. However, they have not spent nearly as much as they would have otherwise, because they are not dining out or going on vacation due to the pandemic. Increased purchases of furniture, electronics, and other goods have compensated only in part for this reduced spending on services. As a result, overall consumption has fallen for many households, even if their income is more or less intact. Second, starting with the emergency response approved in early March and the subsequent CARES Act, the government has stepped in to replace some of the lost income, especially for workers in the sectors hardest hit by the pandemic. Some of this income support was spent to keep food on the table and a roof over the heads of many families, but not all of it was. Third, it is possible that households decided to save more than usual as a precautionary measure, given the great uncertainty about their jobs and the overall health of the economy going forward.

Regardless of the precise reasons, there is no doubt that households saved more in the past year than they would have in a world without the pandemic. But is there anything “excessive” about the savings that they have thus accumulated? Are these moneys significantly different from the other $130 trillion in net worth that U.S. households already own, in a way that might lead them to be spent faster than other components of wealth? There are at least three reasons to think that the answer to this question is no.

Excess savings are the accounting counterpart of “extra” government debt. According to the principles of national income accounting, the flow of private saving (by households and businesses) must be channeled to one of three uses. It can finance investment, be lent abroad, or lent to the government. In 2020, the U.S. government spent roughly $2 trillion to fight the COVID-19 recession, most of it financed with debt. The $1.6 trillion in “excess savings” is the accounting counterpart of this increase in government borrowing.

As is often the case with accounting identities, this observation has limited economic implications. It does not reveal why households accumulated the “excess savings,” nor whether they will spend them once the economy fully re-opens. Nonetheless, it helps us to consider them under a different light—not as “extra” resources ready to be spent, but as the flip side of the extraordinary fiscal effort to fight the COVID-19 pandemic.

Excess savings are mostly held by…savers. One reason why many economists do not associate the exceptional increase in government debt over the past year with an imminent explosion in aggregate demand—even though they might worry about it for a host of other reasons—is the idea that government debt is money that citizens owe to themselves. As such, it would not represent “net wealth” that is ready to be spent. In economics jargon, this idea is known as Ricardian Equivalence. According to this proposition, public transfers financed with government debt do not affect consumption because households save them to pay for the increase in taxes that will eventually be necessary to repay that debt. If Ricardian Equivalence held, the marginal propensity to consume out of debt-financed transfers would be zero, and the resulting savings would never be spent.

Ricardian Equivalence is the kind of theoretical benchmark that economists love, but it clearly does not hold in practice. In fact, many U.S. families did spend a significant share of the checks and other income support that they received during the pandemic. According to available estimates, this share is around one-third on average. The rest was used to pay down debt (also about one-third) or otherwise saved. It is hard to know exactly who holds these savings, but it seems reasonable to assume that they are individuals and families with a bit of a buffer in their budgets—and whose consumption decisions are therefore less sensitive to their immediate economic circumstances. This is presumably what allowed them to save part of the support they received. According to economic theory, these savers are more likely to be Ricardian, and hence to continue holding on to these savings. Of course, their economic circumstances might change in the future and they might find themselves in need to spend those accumulated resources, but the end of the pandemic in itself is unlikely to turn them from savers to immediate spenders. If anything, fewer households should face financial hardship as aggregate conditions improve.

Excess savings are unlikely to unleash pent-up demand for services. One caveat to the previous reasoning is that some of the “excess savings” might be due to a dearth of spending opportunities in the sectors of the economy most affected by the virus, such as travel and entertainment. If this is true, some of that lost spending could materialize once those sectors fully re-open.

How large is this “pent-up” demand for services likely to be? On the one hand, there is little doubt that many consumers will enjoy a few extra restaurant meals and perhaps splurge on a nicer vacation after such a long period without them. On the other hand, there is a limit to how many extra restaurant meals and vacations people will be able to enjoy. To have a sense of how much of this pent-up demand might be activated by the “excess savings” accumulated during the pandemic, recall that available estimates of the propensity to consume out of the CARES Act transfers is about one-third. This means that the average household spent about 33 cents out of each dollar received in direct payments. As it turns out, this estimate is in line with those based on previous transfers of this kind, such as the Economic Stimulus Payments of 2008. Therefore, the pandemic does not seem to have substantially limited households’ ability to spend the support that they received.

The bottom line from these three sets of considerations is that, although large by historical standards, the savings accumulated by U.S. households during the pandemic do not appear to be “excessive” when set against the extraordinary need of many American families and the unprecedented government intervention to support them. It is certainly possible that some of these savings will pay for extra travel and entertainment once the COVID-19 nightmare is behind us, but our conclusion is that the resulting boost to expenditures will be limited. This conclusion does not rule out a strong economic recovery from the virus shock. It only implies that spending out of excess savings won’t be one of its major drivers.

Florin Bilbiie is a professor of economics at the University of Lausanne, Switzerland.

Gauti Eggertsson is a professor of economics at Brown University.

Giorgio Primiceri is a professor of economics at Northwestern University.

Andrea TambalottiAndrea Tambalotti is a vice president in the Federal Reserve Bank of New York’s Research and Statistics Group.

How to cite this post:

Florin Bilbiie, Gauti Eggertsson, Giorgio Primiceri, and Andrea Tambalotti, “’Excess Savings’ Are Not Excessive,” Federal Reserve Bank of New York Liberty Street Economics, April 5, 2021, https://libertystreeteconomics.newyorkfed.org/2021/04/excess-savings-are....




Disclaimer

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Hard times ahead. The almost year long pandemic moratorium on...

Published by Anonymous (not verified) on Mon, 29/03/2021 - 9:22am in

Hard times ahead. The almost
year long pandemic moratorium on residential rental evictions has ended.
Thousands will lose secure housing - with wage subsidies also ending - unable to afford their rental, regardless of how long they might have lived there. Recently unemployed immigrant workers in particular will be hard hit. Folks will
wind up on the street.

A long-laid protest street mosaic; it’s been there for at least a decade.
Marrickville.

Have we had enough of market-led dogma yet?

“OK…SO WHERE DOES THE FUNDING COME FROM?”

It depends on what we are talking about. If we are talking about universal health care, a Job Guarantee, infrastructure work, etc., the funding comes from the national government.

If, on the other hand, we are talking about national government spending itself, – as in, “how does the government ‘fund’ its spending?”, the answer is the national government does not “fund” its spending because it is an impossible condition.

The national government alone is the source of funding in terms of its own currency for the private sector and the foreign sector combined. That is what being the monopoly currency issuer is all about: Providing the funds.

The currency-issuing national government is not an intermediary that collects “money” from private entities in the form of taxation or borrowing to fill its empty coffers, and then redistributes those “funds”.

Treasury has no coffers to fill. Rather, treasury fills the coffers of everyone else.

Ellis Winningham

Placard with the slogan "When is enough enough, when does hte greed stop?", Wisconsin State Capitol protest 2014Photo by Joe Brusky/Flickr Creative Commons License 2.0

Have we had enough yet? This week Boris Johnson, in a Zoom meeting of the 1922 Committee, warmly saluted the vaccine rollout with these words: ‘The reason we have the vaccine success is because of capitalism, because of greed my friends’. Whilst he has tried to backpedal from these ill-advised remarks, the words reflect a widely held view by politicians, institutions and the excessively rich that the market is the only mechanism for delivering well-being, and that the State should take a step back and let the market do its job, greed and all. We have paid a heavy price for that sort of thinking, in terms of environmental destruction, poverty, inequality, human degradation and exploitation.

The cumulative effect of five decades and more of market-led dogma and a toxic ideology that has been embraced by successive governments, of either political stripe, has given monetary succour to the corporations at the expense of public purpose, which has over the past year been revealed for exactly what it is. Greed for power, greed for profit. Not a very wholesome or edifying advert for capitalism, and one which is increasingly in the public eye, as media attention focuses on who has benefited from government policies and spending decisions, and those who have lost out.

The appalling management of the Covid-19 crisis, which has led to the deaths of well in excess of 126,000 people so far, combined with those who have suffered or died as a result of cuts to government spending on vital public infrastructure and the pernicious reforms of the social security system, have revealed in all their hideous outcomes what happens when government spending is reduced to household budgeting narratives. The phoney notion that delivering public purpose is either monetarily unaffordable and/or dependent on the economic climate.

The remark reveals something rather distasteful about a Prime Minister who not long back was standing on the steps of Number 10 encouraging us to clap for key workers. Those who have been responsible for caring for the sick, elderly, and vulnerable as well as keeping the economy functioning during the crisis whether in the public or private sector.

A letter written by the authors of The Spirit Level (Kate Pickett and Richard Wilkinson) which was published in the Guardian this week took the Prime Minister to task for his comments saying:

“You report (23 March) that Boris Johnson told backbench Conservative MPs that the UK’s successful vaccine rollout was thanks to capitalism and greed. Really? Greedy academics and research scientists? Greedy World Health Organization staff and civil servants? Greedy nurses who give us our jabs? Is that also why contracts given to Tory cronies for test and trace were so startlingly successful? This is not a trivial misunderstanding: it is a fundamental failure to comprehend how modern societies work. Prof Mariana Mazzucato has shown how discovery and innovation flow from the public sector, and there are now studies showing that more equal societies are more innovative, with more patents per head than those where capitalism is rampant.”

Whilst the financial markets have produced nothing of value, focused as they are on speculation and amassing huge monetary wealth, the real wealth makers, not the monetary sort, are those on whom society depends. The past year has highlighted their contributions on every level of society. It has also highlighted the role that government can play, if it chooses, in delivering public purpose aims. Whether that is spending to keep the economy from tanking or vital public service and welfare provision, research and development and education and training; all of which make the difference between a good society and a bad one.

However, we live in a world where ‘money’ wealth trumps the real wealth we enjoy, and which is sustained and underpinned by nature which provides the many services on which we depend. Deregulation (or rather accommodation) by neoliberal governments has created a rampant market-dominated model which is threatening democracy and the future of humanity and planetary health.

This toxic market ideology is at the same time underpinned by incorrect ideas of how governments spend. Ideas which suggest that taxing and borrowing are at the heart of their spending capacity, and which, if not reversed, will continue to constrain government actions on the key issues of our day.

The art of the possible is not financially oriented. The art of the possible is about political choices, but those political choices hitherto have left our society in a state of crisis and will continue to do so unless we challenge the status quo.

Currently, the rules for government spending are laid out clearly. Stuff the pockets of the private sector corporations and those of your friends, whilst telling the public sector that there is no money and keeping private-sector workers on low wages and in insecure employment. The evidence is piling up daily.

This week Test and Trace is hiring a ‘Lessons Learnt Analyst’ with a salary of £45,000. You couldn’t make it up! Management consultants being paid to advise what went wrong with a programme designed by management consultants. As GIMMS’ board advisor Deborah Harrington so rightly asked ‘do you ever get the impression we have all somehow been trapped inside a never-ending episode of ‘You’ve been framed’?

Also, this week ministers have opened the public purse yet again to the private sector; shelling out almost £1 million to a private recruitment firm to find temporary staff for the new, but controversial, National Institute for Health Protection, which is to replace Public Health England, in what has been termed a ‘shifting deckchairs’ exercise. In reality an attempt to transfer the blame elsewhere than at the government’s feet.

Whilst refusing to pay nurses a decent pay rise, giving workers a scarcely generous increase in the minimum wage and at the same time suggesting that more cuts to public services may be in the offing, the claim that the government needs to restore its finances smells of purposeful deceit of the public. As GIMMS pointed out last week, the contradictions are increasingly evident, and it is for the public to challenge those false flags which serve ideology and not necessity.

In March 2019, the IMF warned that the world had ‘run out of firepower to fight the next recession’. It erroneously suggested that the ‘money printing’ programmes known as Quantitative Easing, which had supposedly pumped trillions into economies after the Global Financial Crash in 2008, had left the economies so weak in the decade since that the balance sheets of the central banks had ‘swollen to a level that leaves little room left for manoeuvre’. Its conclusion was that the large piles of debt would reduce the ‘fiscal firepower’, available to counteract recessions’.

The public has been led astray by terms such as money printing, public debt and borrowing, and if your suspicions have been aroused that something is not quite right then it’s time to get with monetary realities. Governments around the world have as necessity dictated created the funds necessary to deal with the fallout of Covid-19 at the stroke of a computer key. It may have been dressed up in the smoke and mirrors of QE and borrowing, but it has shown without doubt that, just as in 2008, the money is there at central level to deal not just with the consequences of the pandemic, but also to address the issues which have arisen from insufficient government spending by political decree. From hunger and homelessness to infrastructure decay and environmental degradation.

But government action so far seems to be one of half-hearted plans dressed up in overblown rhetoric, from promises to level up our communities, invest in infrastructure, education and training and deliver an effective green transition. Lots of hot air but little in the way of concrete proposals, or worse, failure to deliver on already proposed programmes.

If the UK government’s flagship home insulation scheme is anything to go by, then one should ask whether that public funding has been properly administered or is even delivering its green objectives. Indeed, in hot news over the weekend the government has decided to scrap the green homes grant which was administered by a US company. Promising a kickstart for a green recovery along with green jobs, it descended unsurprisingly into a dogs’ dinner that was, according to the Environmental Audit Committee of MPs, ‘rushed in conception and poorly administrated’, indeed ‘nothing short of disastrous. As a reader’s letter published this week in the Guardian suggested:

‘This government’s approach to the climate crisis […] is the same as it is to all other iniquities its ideology exacerbates such as poverty, inequality and homelessness. They announce a relatively small injection of cash and a couple of initiatives, careful not to disturb the underlying practices causing the problems. If [the government were] serious and really followed the science, they would end all subsidies to, and investment in, fossil fuel industries. They would also implement curbs to reduce energy and resource consumption, direct and indirect, by the UK population. That would be global leadership and would set a course for a just transition.

 

The government’s proposals are nothing more than a smokescreen to suggest we tried, while baking in failure for our generation and horror for those that follow.”

The problems of lack of commitment by the government are also compounded by financial institutions and businesses who, whilst greenwashing their way to profits, don’t walk the talk. This week, it was reported that the world’s biggest banks have provided $3.8tn of financing for fossil fuel companies since the Paris climate deal in 2015, despite the fact that it has been known for some time that a large proportion of oil and gas reserves must remain in the ground in order to meet the Paris targets. This is exactly the opposite of what is required to tackle the climate crisis effectively and requires urgent government action and spending on a vast scale.

Also this week, Andrea Leadsom announced a new package for parents, ‘Start for Life’, which will provide a hub network to give families access to vital support. This is the same MP who praised Labour’s Sure Start initiative and had to be reminded that government cuts had closed more than 1000 Sure Start Centres.

It seems ironic that we have a Minister who in 2012 envisaged ‘there being absolutely no regulation whatsoever… no minimum wage, no maternity or paternity rights, no unfair dismissal rights, no pension rights…’ for employees working in small businesses and who also voted to reduce the household benefit cap, to freeze the rate of many working-age benefits and for many other changes to the benefits system which have seriously impacted on the lives of those same families, now purporting to want to address the failure caused by a political decision to cut spending on benefits and other services. You couldn’t make it up.

According to reports, Leadsom still has to get the Treasury on board with her plans. Despite the fact that such funding is available at a keystroke on a computer should the government choose; it is constrained only by the availability of real resources. The question of paying for it is an irrelevant one.

Instead of worrying about costs, the government, if it really wants to level up, should have the humility to examine the consequences of its previous spending and policy decisions, and the impact they have had on families across the nation. Would it not be better to start at the roots of poverty by addressing its fundamental causes, through wage and employment policies to help families manage their lives with less financial stress and worry, and in turn create more stable home environments?

The positive knock-on effects of more government spending on public purpose which then fan out into the wider economy are indisputable and make for a healthier and more productive society. Furthermore, people with more money in their pockets are better placed to provide for themselves and will spend any extra into the economy. Simple macroeconomics. And yet the government still sees public provision as a monetary cost rather than a societal gain.

A report on ITV this week covered the appalling conditions in which many families are forced to live in council housing (although this is not confined to social housing, the private sector’s reputation is just as blemished). It was truly shocking. The Chief Executive of Shelter, the biggest housing charity, described it as ‘the worst housing conditions they have ever seen’.

If the government is determined to address poverty and inequality, then it has to put its money where its mouth is. Yes, let us invest in public service provision to support families with better and more joined-up services, but it will not help unless the government focuses as well on eliminating one of the causes of family stress. Poverty. People do not choose poverty, and unemployment, governments impose it through the ideological dogma they espouse and the policies they enact.

At the other end of the scale, Kwasi Kwarteng, the Secretary of State for Business, defending his department’s slow progress on funding for the organisation UK Research and Innovation, which has so far failed to provide any sort of certainty for the science community, blamed it on the pressure on budgets. This is not just short-sighted, as the Covid-19 pandemic has shown, society will increasingly depend on science to address key issues like climate change, but is actually nothing short of a lie in monetary terms. Furthermore, this is the role of the State. Planning for the future, not abandoning citizens to the vagaries of a market-led disaster which is sure to follow without government action.

The government is not short of a penny. It is the currency issuer. Therefore, the only constraints it faces to deliver its agenda are real resource ones. Whilst the government continues to embrace false funding models which claim monetary constraints, any plans for a just green transition that will also address poverty and inequality at the same time will fall by the wayside.

The unvarnished truth is that the phrases ‘bolstering the treasury’s coffers,’ ‘closing the tax gap’ and ‘protecting the finances’ – terms which appear regularly in the press – are illusory descriptions of how the state money system works. Vocabulary designed to make us think that the government spends in the same way households, local government and businesses do.

The illusion acts to keep us in our place, so as we do not demand too much in the way of public services or any other useful expenditure which provides social value and serves the economy.

The real questions for citizens regarding the future are about what real resources we have and how we want them to be distributed. Do we want a return to the old normal of unnecessary and wasteful private consumption, environmental destruction and the reinforcement of the vast inequalities that accompany it? Or do we want our governments to act in the public interest by commanding the resources that are available to deliver public purpose? The second option will require a shift in how we think about creating a fairer society.

Why aren’t we looking at a Job Guarantee as a mechanism to help in addressing both inequity and climate change? Why wouldn’t governments choose a macroeconomically sound proposal, which focuses on creating economic stability in times of crisis and smoothing out the inevitable cyclical economic downturns which destroy lives?  Why not give working people useful, socially oriented employment instead of leaving them to rot on the unemployment scrap heap?

For too long, governments have acted in the interests of big business and global corporations, which in turn through the implementation of short-sighted employment and wage policies serving business, not citizens, have then impacted on their economies adversely.

Haven’t we had enough? Time for change!

 

 

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Hard times ahead. The Federal Govt.’s $A90B pandemic wage...

Published by Anonymous (not verified) on Sun, 28/03/2021 - 9:25am in

Hard times ahead. The Federal Govt.’s $A90B pandemic wage subsidy program ends today. As a direct result, about 30,000 mainly low-paid workers in greater Sydney alone will lose their jobs as borderline businesses go broke. It’s already happening:

1. Row of shopfronts, recently vacated. Leichhardt. 2. Precious Paradise is no longer operational. Campsie. 3. Defunct pizza bar. Newtown. 4. Anarchist street poster. Erskineville.

Boris Says There’s No Money to Pay Nurses, But Has Millions to Spend on Atomic Weapons

Mike’s put up an excellent and disturbing article today, which shows very clearly where Boris Johnson’s priority’s really are. He’s planning to reverse the proposed reduction of Britain’s nuclear arsenal to 180 warheads and increase it instead to 260. As the peeps on Twitter have pointed out, this is a 45 per cent increase. It’s supposed to be in preparation for a possible terrorist attack using chemical or nuclear weapons by 2030. ‘Russ’, one of the critics of this insane proposal, has asked what Boris intends to do in the event of an attack like 9/11, when the terrorists came from four different countries. Would he launch those missiles at four different capitals? He states ‘Not a chance. Idiotic, dangerous, flashy bullshit.’

The question about 9/11 is a very good one. The vast majority of the plotters came from Saudi Arabia, and there is very, very strong evidence that responsibility for the attack goes all the way to the very top, to country’s present king or his head of intelligence. But George Dubya and Blair didn’t order reprisals against Saudi Arabia. Instead, we invaded Afghanistan. The country was indeed hosting Osama bin Laden and al-Qaeda, the organisation responsible for it. But I’ve also heard that the Afghans denied all knowledge of the plot and offered to surrender bin Laden to the Americans, but were ignored. The American military were planning the possibility of invading Afghanistan several years before in order to control a planned oil pipeline passing through it.

Saddam Hussein’s Iraq was also accused of complicity with 9/11, and Blair was scaremongering about Hussein having weapons of mass destruction that could be launched within three quarters of an hour. This was also a lie. The real reason for the invasion was, once again, oil. The American and Saudi oil companies wanted Iraq’s reserves and its oil industry, while American multinationals also wanted to get their grubby mitts on the country’s state industries. The actual cost to the Iraqi people has been horrendous. The country’s tariff barriers were lowered as part of a plan to create the low tax, free market state the Neo-Cons dreamed about, with a result that every nation dumped their excess goods there, undermining its domestic businesses. The result was soaring bankruptcy and unemployment. The country’s welfare state was destroyed, as was the ability of women to pursue a career in safety outside the home. The country was riven by sectarian violence, and the mercenaries used as part of the invasion force ran amok, running drugs and prostitution rings. They also shot ordinary Iraqis for sport. The Allied forces also used depleted uranium and other highly toxic materials in their armaments, with the result that the country also has a horrendously high rate of birth defects.

And now Boris wants more nukes. Does he intend to use them on further victims of western imperialism, countries deliberately and wrongfully blamed for terrorist attacks just to further western geopolitical and commercial goals? Mike also suggests that it seems to him that Boris is planning to start some kind of war with a country on or near the Indian and Pacific Oceans, and would like to set off a few nukes to show how tough he is.

This is all too possible. The American radical magazine, Counterpunch, published an article a few years ago arguing that the American military was set on a policy of ‘full spectrum dominance’. This meant that it was to remain the world’s only superpower with the ability to destroy or conquer any other country that could threaten it. And it looked very, very much that Hillary Clinton, who claimed to be terribly offended by the treatment of Meghan Markle, was preparing for a war with China. Lobster has also published a very detailed article arguing that, despite the rhetoric and posturing about the Chinese threatening western security interests in the South China Sea, the Chinese actually aren’t any danger at all. But they do threaten the global American commercial power both in practice and at an ideological level. The Americans believe in deregulation and free trade, while in China capitalism is regulated and state-directed. The global struggle between America and China is partly about which model of capitalism should be dominant.

And then there’s the issue of whether you could ever use a nuclear bomb in the event of a terrorist attack. From the 1970s to historic Good Friday peace agreement in the ’90s, Northern Ireland and Britain suffered terrorist violence and bombings. In Ulster this was by Irish Nationalist and Loyalist paramilitaries, while in Britain the bombings were carried out by the IRA. Following 9/11, one of the critics of the invasion of Afghanistan or Iraq asked whether Britain would have used the same tactics of mass bombing and air strikes on Northern Ireland in response to the IRA’s terrorism. Of course we wouldn’t, although we did send troops there to suppress it. There’s a real possibility that, thanks to Brexit, the Good Friday Agreement could break down and Ulster could once again fall into violence and bloodshed. Which also raises the spectre of further terrorist bombings in Britain. Would Boris nuke Derry or Belfast in response? I doubt it. At the same time, many of the Islamist terrorists responsible for atrocities in Britain seem to be homegrown, Muslim Brits who come from ordinary, peaceful families, but who have been radicalised by Islamist propaganda on the Net or from some firebrand preacher in a British mosque. Obviously, Boris isn’t going to use it in Britain itself.

There’s also the danger that if Boris every uses them against a foreign enemy, it’ll pitch the world into a nuclear war that will end very quickly with the destruction of the planet. I can remember the late, great Irish comedian Dave Allen commenting on this in one of his shows on the Beeb during Reagan and Thatcher’s New Cold War of the 1980s. ‘Do you know,’ he said in his tobacco and whisky cured voice, ‘that there are enough nuclear weapons to blow up the world three times. Three times! Once is enough for me!’ It was a profound relief for millions around the world when Reagan and Gorbachev signed their arms limitation agreement in Iceland. That, and the collapse of Communism, promised the beginning of a better world, where we wouldn’t have to fear nuclear annihilation. Well, it was until India and Pakistan looked set to nuke each other later in the ’90s.

But now those dreams of a better, more peaceful world are fading as Boris once again wishes to send us all back to the days of Thatcher and the Cold War. Thatcher was vehemently in favour of keeping Britain’s nuclear deterrent. So much so that she falsified the results of an experiment to estimate the results of a nuclear war on Britain. The experiment showed that it would end with the country’s major cities reduced to nuclear cinders. This was too much for the leaderene, who had the parameters of the projection altered to give the results she wanted. But this still would have resulted in millions dead, and so she had the parameters altered again to show that Britain would have survived with minimal damage. By which time the whole exercise had to be scrapped as it was completely unreliable.

Michael Foot, the leader of the Labour party at the time, favoured unilateral nuclear disarmament. He was right, but the Tories and their puppet press viciously attacked him as some kind of fool or traitor, who would give in to the evil Commies. The complaint of many Tories was that he would give our nuclear weapons away. Unlike Maggie, the bargain basement Boadicea, as I think Roy Hattersley once called her.

It looks very much like Boris is playing the same game. He’s wrecking the economy, destroying the health service and welfare state, but he’ll have the right-leaning part of the British public praising him for standing up to those evil foreigners and protecting the country with nukes.

And all the while he’s claiming that there’s no money to give the nurses and other hardworking, front-line professionals anything more than what is in reality a derisory cut in wages. Which is clearly a lie. But it does remind me of what Goering once said:

‘Guns will make us powerful. Butter will make us fat.’

He’s following the Nazis in deliberately starving people while splashing the cash on arms.

For further information, see: Nuclear bomb announcement sends clear message: warmonger Johnson has cash to KILL, not heal | Vox Political (voxpoliticalonline.com)

What do we want from an economic recovery?

Published by Anonymous (not verified) on Mon, 15/03/2021 - 1:59am in

“We could be collaborating with each other and with our ecosystem to create a beautiful, awesome, healthy world. Instead, we’re all competing with each other working meaningless jobs creating pieces of landfill which serve no purpose besides turning millionaires into billionaires.

The overwhelming majority of human effort goes into competing against other humans. We do have the ability to take all that lost energy and re-route it toward collaborating with each other toward health and thriving. There is no real reason we can’t do this. There are no hard obstacles preventing us from moving away from our failed competition-based model to a collaboration-based model. All that’s stopping us is plutocratic propaganda and our collective belief in it. We do have the ability to drop that belief and move toward sanity.”

Caitlin Johnstone

Woman holding a sign at a demonstration. Slogan "Cuts don't heal".Photo by Charles Edward Miller / Flickr Creative Commons Licence

The propaganda and distraction machine is in full swing. Boris Johnson’s ‘Beacons of Hope: The UK Vaccine Story’ (coming soon to your TV screens) and the Royal story which has dominated media reporting for days, have allowed our minds to be taken off the real ball. The avoidable tragedy of Covid-19, the consequences of 10 years of public sector austerity and the ongoing fallout from the Chancellor’s Budget.

From the insulting proposal for a 1% pay rise for NHS staff, to analysis which shows that the self-employed will likely be hit harder by the increase in Corporation Tax than the multinationals (who let’s face it know how to avoid paying it) to the on-going financial catastrophe that is continuing to play out as our local government infrastructure, battered by cuts for years, is facing meltdown. A reckoning may be at hand.

Alongside the very real consequences of the pandemic and 10 years of public sector austerity, which have affected every aspect of our lives from healthcare to education and social security, we have a Chancellor who pretends he’s running a company or a household budget. The proposed 1% pay rise for NHS staff is ‘based on affordability’ he said this week. The Prime Minister followed up with the claim that they had ‘already given as much as we can’.

Notwithstanding the financial pain already inflicted on the public sector over 10 years by previous chancellors, he claimed that the offer was ‘proportionate, fair and reasonable’. State penury is not restricted just to local issues, as Boris Johnson suggested that our ‘straitened circumstances’ meant we couldn’t provide aid to starving children in Yemen.

Whilst there is no shortage of public money to do up No. 10, help the Royals renovate Buckingham Palace, pour into vanity projects like HS2 and feather the nests of the government’s corporate chums with no accountability and no expense spared – the taps flow freely for that – when it’s about delivering public purpose to the people of this country, then those taps mysteriously get turned to a dribble. Surely the penny will soon drop in the public consciousness that there is some deceitful sleight of hand going on here.

With the economy in dire straits and unlikely to recover quickly, this would be a very good time for a fantasy government that put public purpose at the top of the agenda to spend more on our public sector. Not just to restore it to a functioning public entity which would have both public and social benefits for the nation, but also because it would have positive implications for the macroeconomy.

In other words, it boils down to the fact that when people have more money in their pockets, they have more to spend in their local shops and on other goods and services, which in turn benefits the economy as a whole. In simple terms, an increase in government spending will result in an increase in national income. And when there is a limit to private investment as in such times as these, the gap has to be filled by government expenditure. Not just to stop the economy tanking now, but to ensure that a recovery, when and if it comes, will be sustainable.

The only limit to increasing government spending is inflation. Thus, in a perfect world, the real role of government is to target our infinite monetary resources to the efficient use of our finite real resources, for human and planetary health.

Whilst the government has stepped into the economic breach caused by the covid-19 pandemic, as only it can do as the currency issuer, we are still reaping the consequences of the public sector pay squeeze imposed by previous Chancellors, damaging employment policies that have held down wages and increased employment insecurity which, in turn, have resulted in a sluggish, stop-start economy and led to increasing rises in poverty and inequality.

Only this week, the media covered the very shocking report of a London food bank facing queues 2km in length, with 800 people waiting in the cold for hours to collect food parcels. That number is expected to be over 1000 this weekend. This is not a new phenomenon; across the country, food banks have been filling the gaps left by a state that has abandoned its people to penury through its policies, yet shifts the blame onto the individual and talks about food banks as if they were a normal part of society.

In November, the Trussell Trust reported that its network had seen a 47% increase in need during the first six months of the pandemic, with a huge increase in emergency food parcels. Some 2,600 of which are going to children across the UK every day.

Poverty and unemployment are not accidents, they are the result of government policy and spending decisions; yet their existence is increasingly being normalised as if there were no alternative. Charitable food provision is a sign of a failing state and is simply acting as a plug to mitigate for an ideologically driven agenda.

Not only have the consequences of government spending decisions and policies over a decade and more become clear in the state of the economy, but they also show the policy direction of a government that has put serving the needs of the market over and above public well-being, in the claimed belief that markets, left to their own devices, create wealth which then trickles down.

Thus, with the power of the public purse which the State has had since the early 70s, even if it chooses to pretend it has monetary limitations, the current government is using its currency-issuing capacity to fund private corporations to deliver public and other services for profit. It is indicating a political preference for serving the private sector and private profit, rather than delivering public purpose. And yet it continues to couch its spending plans as if it were UK plc with a profit and loss sheet.

Indeed, emphasising this false narrative earlier this week, the government suggested that pharmacies would have to pay back the loans that the government had made them over the past year. Pharmacies have played a critical role during the pandemic and yet many of them could be threatened with closure as a result, with a damaging knock-on effect on many of our poorer communities. The impact of those potential closures could be harmful for those with few financial resources, forcing them to find alternatives further afield.

It demonstrates yet again the promotion of a dishonest narrative that claims the government’s finances can be compared to a company, bank, or our own household budgets. The monetary reality is that the government is not a bank and the repayment of loans, whilst ostensibly fixing the public accounts (to suit the notion of government being a sound financial manager of the state finances), is a political deception practised by politicians for decades. The government doesn’t need an income provided by tax or to borrow to fund investment or to cover a shortfall and nor does it need to loan money with the expectation of repayment.

The public is so used to thinking in terms of their own household budgets, with tax representing income to fund government spending, that it fails to ask the key question about where the money came from to pay their tax in the first place. It is the forgotten conundrum. As Warren Mosler calls it, ‘The MMT Sequence’ starts with government spending the money into existence and the imposition of a tax. This enables the government to provision itself by getting us to work to earn the money to pay our tax. As Warren says, ‘we’ve got it all backwards!’ It’s not funding anything!

Without challenge to the public perception that money is scarce, limited to tax revenue or borrowing, and the idea that government must live within its monetary means, the deception will continue to wreak damage to our economy, further increase poverty, skew wealth distribution towards the already wealthy and lead to a failure to address the most important issue of all – climate change. The conversation on this score should never be about monetary affordability; it should be about what we need to do to address these challenges using the finite resources we have at our disposal. The choices are never monetary-led, they are always resource-led.

Whilst the Chancellor continues to claim that hard choices are ahead for our public finances, even if not just yet, our public infrastructure continues to deteriorate.

A report from the National Audit Office has indicated that despite additional government funding over the past year to cope with the pandemic, the vast majority of English councils are likely to cut their spending so as to be able to meet their legal duty to balance their budgets. Many will be forced to rely on their reserves to do so. This could mean yet more cuts to local services already severely depleted by a decade of austerity and cuts to local government funding (over £15bn). The dilemma they face is whether to cut yet more services or increase council tax and indeed many councils are preparing to do so.

From a macroeconomic perspective, the government failure to fund local government adequately has been and remains short-sighted. Covid has now exposed the serious financial position of local councils and cutting services will further damage the local infrastructure upon which we all depend, from vital access to libraries and community centres to social care, bus services and parks, street cleaning and bin collections.

Unlike the government, local councils are currency users. As such, they have to budget to ensure that they use their funding efficiently and effectively through a combination of government grants and local taxation. With the economy on a downward trajectory and still great uncertainty to come, the accumulated consequences of previous pay squeezes and employment policy and the Chancellor’s budget last week, the prospect of higher council taxes doesn’t bode well for a sustained economic recovery. Additional local taxes will take more money out of our local communities and the small businesses they support, who have already suffered over the past year. It will also further impoverish our local communities financially and culturally. The prospect of further austerity for our vital locally provided public services is not a happy one, any more than it is for our national public infrastructure.

Once again, the big question we face is what sort of future we want for ourselves, our families and our communities. After a year of lockdown and tragic loss, the desire to return to normal is a strong one that is regularly articulated in both private and public conversations. However, normal was never normal. As the author, poet, humanitarian and social justice activist Sonya Renee Taylor noted:

‘Normal never was. Our actual pre-Corona existence was not normal other than normalised greed, inequity, exhaustion, depletion, extraction. We should not long to return my friends.’

Instead, she suggested that

‘we are being given an opportunity to stitch a new garment. One that fits all of humanity and nature.’

This is not about articulating a left or right position, it is about articulating a future for humanity and for the planet.

As a baseline for creating a better place for citizens, we have to ask ourselves if we want to continue with the ‘normalised’ existence that we have been living up until now, which has accepted poverty, inequality and planetary exploitation as par for the course to maintain our living standards? Or do we instead work towards one which puts people’s wellbeing as a priority, by ensuring first that there is a future through a collective global vision for environmental sustainability, and second, that citizens have access to good education, good housing, sufficient food and warmth, clean air and water, a living income and good public services? These are not impossible desires.

As a Guardian editorial asked this week, do we rely on a consumer-led recovery that will further deepen the gap between the rich and the poor and the ‘shabby underfunded public realm’ that we have inherited as a result of austerity and a toxic economic ideology? Or do we consider public investment to restore our public and social infrastructure to bring about a recovery that is fairer and more equitable?

If we choose the latter, then the question is never one of monetary affordability, regardless of how many times politicians quote these tired mantras. It is a question of political will in the first instance and then determining how such policies can be delivered within the context of real resources. In an uncertain world, there might be hiccups along the way, but there is no excuse for not trying. But first, we have to decide what our priorities should be and how they can be delivered.

 

 

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In pandemic times, the unemployment rate is not what it seems

Published by Anonymous (not verified) on Mon, 15/03/2021 - 12:47am in

Interpreting job market statistics demands a lot of care right now. The pandemic has muddied the statistical waters and created the illusion that unemployment rates are significantly higher in Canada than in other countries.

The leader of Canada’s official opposition claims the Canadian unemployment rate is higher than in other rich countries. Source: https://twitter.com/erinotoole/status/1367181227338264578?s=20

Erin O’Toole, with a sense of indignation and urgency, has boldly proclaimed that “We lead the G7 in unemployment.”

Statistics in the service of partisan politics are often, to put it gently, rather elastic in their meaning, so it is natural to wonder: do we really lead the pack in the dubious distinction of having the highest rate of unemployment?

Statistics Canada reported Friday that the unemployment rate stands at 8.2 per cent, a full two percentage points above that of the United States. As opposition leader Mr. O’Toole points out by citing the Organization for Economic Cooperation and Development, that’s higher than in many other rich countries.

But more care is needed to uncover the true meaning of these numbers, because the pandemic has twisted the workings of the statistical machinery that in normal times serves us well.

In fact, the OECD suggests that many comparisons be taken off the table. In a note on Employment and unemployment statistics during the COVID-19 crisis, it cautioned that, “the unprecedented impact of Covid-19 … affects the cross-country comparability of unemployment statistics.”

In many European countries, people who have been temporarily laid off — those who have lost their jobs but have an expectation of being recalled — are counted as employed.

The Canadian and American statistical agencies do just the opposite, counting them as unemployed. This difference in methods usually doesn’t amount to much, except of course during the pandemic, when the number of temporarily laid-off shot to the stratosphere.

In other words, the OECD is saying that its off-the-shelf statistics currently come with a warning label: use with caution, particularly across the Atlantic divide. So, claiming that Canada stands worst in the G7 is likely an apples-to-oranges comparison.

Canada – U.S. comparison

The other comparison that beckons is to the United States. The suggestion has been made that Canada scores poorly when compared to the unemployment rate south of the border.

The statistical agencies in the two countries use a number of rules of thumb to classify someone as “unemployed.” It is not just about being without a job. The unemployed are all those without paid work, and who at some point in the past month also looked for work.

But there is a consequential difference in how this official “unemployed” classification is determined.

The U.S. Bureau of Labor Statistics requires an American without paid work to do something to look for work, but it must be something that in principle would lead to a job offer. Directly contacting an employer or attending a job interview are among the activities that will do the trick.

Statistics Canada casts the net more widely to also capture those who just look at want-ads, check with a friend or relative, or engage in other activities that on their own wouldn’t lead to a concrete offer.

If Statistics Canada used the same measuring rod as its American counterpart, the Canadian unemployment rate would be almost one and half percentage points lower, cutting the two-percentage point gap between the two countries by more than half.

In February the gap between the Canadian and U.S. unemployment rates was no higher than it has been for the past decade and a half, and at least half of it reflects differences in statistical methods used to measure unemployment. (Click on image to enlarge.)

It is hard to see urgency in these numbers, as this gap, however measured, is not much different now than during 2015, or for that matter 2005.

Besides, Americans are actually questioning their official unemployment rate. Jerome Powell, the head of the Central Bank and arguably one of the world’s most powerful economic policy makers, has recently stressed that “published unemployment rates during COVID have dramatically understated the deterioration in the labor market.”

In part this is because the U.S. Bureau of Labor Statistics’ methods are not well suited to pandemic times, leading many jobless people to be misclassified as employed.

However, he also notes that millions of Americans feel the pandemic has prevented them from looking for work. So even if they very much want to work, they’re not officially unemployed under the U.S. rules because they’re not actively looking, some because no jobs are available, others because of worries about the virus, and others for child-care reasons.

Some economists have made calculations that suggest the “realistic unemployment rate” in the U.S. is 8.2 per cent. In Powell’s view the official unemployment rate, now standing at 6.2 per cent, should be upped even further to almost 10 per cent.

These adjustments put the American number well within the range of the Canadian, implying that there is not much difference between the rate in the two countries.

All this said, if the concern is about jobs, then the Canada-U.S. score card should be based on employment rates. This might be an easier apples-to-apples comparison.

In this case the cross-country patterns are not much different, and indeed there’s been a bit more improvement in Canada. Employment has certainly tanked, falling significantly and to the same degree in both countries, but the Canadian bounce-back from the lows of last April has been slightly quicker.

The number of employed Canadians has bounced back sharply since the start of the pandemic, and in February reached 97 per cent of the January 2020 employment level, a quicker recovery than in the United States. (Click on image to enlarge.)

The bottom line?

Canadians on average have been more hopeful that a job search will pay off, more likely and able to be looking for work, and hence more likely to be classified as unemployed than Americans. This, along with an understatement of the American unemployment rate, creates the illusion that Canada is doing worse.

Not at all the message the opposition leader has been sending, but somewhat closer to the true meaning of the statistics, elastic as that may be. The pandemic has muddied the statistical waters and demands more care in interpreting numbers that are usually easy to understand.

[ A version of this post was published as an Opinion article by the CBC on March 13th, 2021 with the heading “The pandemic has thrown a wrench into the statistical machinery that tracks job numbers.”  ]

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