GIMMS would like to welcome Jessica Ormerod and Deborah Harrington as its guest bloggers this week for the MMT Lens. Jessica and Deborah, who were recently appointed to the GIMMS advisory board, are directors of the NGO Public Matters which is a research and education partnership focusing on public services and, specifically, the UK’s public health service, the NHS.
“We should highly value public services because this is created by people for all people. Public services ensure that no-one is left behind to suffer and that everyone has equal access to the services they need”
Jennifer Yu
The Importance of Public Services to keep our society strong and healthy
You can’t have a debate about the NHS without someone saying ‘how are you going to pay for it’. Talk about increasing funding for the NHS and someone will always ask the question ‘how much more tax are YOU willing to pay?’ On the other hand, talk about going to war and there is silence on the topic. Either tax does or doesn’t pay for things and there seems to be a clear contradiction in the public grasp of the mechanism by which governments actually spend. Understanding the basics of modern money clearly defines the real relationship between the different sectors of the economy, the availability of resources and how many of those resources a government chooses to divert to its own purpose. It clarifies that such political decision-making is never about taxing to spend or cutting spending to ‘balance the books.’
From the perspective of the benefits which public services like the NHS provide and how resources fit into that paradigm, it can best be explained in the following way. If the government wishes to build a new hospital but the country is short of the professional and skilled tradespeople to design and build it, or the materials to provision it, or the clinical and associated staff to run it on completion then, no matter how much it is needed, spending money will not create that hospital.
If, on the other hand, there is an existing, staffed hospital serving real existing needs in its community then the government can fund it as long as those resources continue to be available and are needed. To close such a hospital on the grounds of ‘lack of money’ is as false an assertion as to say ‘we’ll have to stop February at the 10th because we’ve run out of dates in the calendar.’
Although Public Matters focuses on the UK’s healthcare system, it is highly conscious of this process being a part of a global move towards privatisation, driven by an economic and political orthodoxy. However, this is not just a UK phenomenon. Across Europe the same orthodoxy is driving the same damaging reform and its citizens are suffering the loss not only of the services which form the foundations of a healthy economy but also the ethos that underpins those services.
The world needs an antidote to the neoliberal orthodoxy which has a firm grip on the way our politicians make their economic decisions. In the same way that Keynesian economics was the antidote to the chaos of the post gold standard years, modern monetary realities in the form of MMT (Modern Monetary Theory) is the same antidote to the challenges we are currently facing. Not just in relation to the decimation of public services and the erasure of the public service ethic but also solving the pressing and urgent issue of climate change and planetary survival.
To put this into a fundamental principle, all money creation, whether by government decree or bank license, is ultimately backed by government, not by the private sector. Regardless of who is in government this radically transforms any understanding of the relationship between the government and the non-government sector compared to the existing neo-liberal polity which places government as a supplicant at the feet of the City. That matters and it is political.
Criticism of MMT frequently comes from those who are defending the economic status quo (defending balanced budgets as an objective in its own right etc) whilst maintaining that they support strong social policies. The reason that we had strong social policies post WW11 was because there was a consensus around Keynes. Privatisation became the order of the day because Keynes was discredited and Friedman took his place in the economic ascendency, the ground having been assiduously prepared in advance by the Mont Pelerin Society.
If we are to reject austerity then this orthodoxy must be swept away. Some believe that rehabilitating Keynes will do the trick, but Keynesian economics is tied to the social, institutional and political conditions that existed pre-1971. That world has long disappeared, and we face new challenges. We need an economic narrative fit for public purpose and for the realities of modern sovereign economies.
GIMMS are pleased to announce that Bill Mitchell will be in London on 1st March to launch “Macroeconomics”, the textbook book he has written with L Randall Wray and Martin Watts. There is limited space at the venue so registration is essential for anyone who wishes to attend. Tickets are free and available here.
An excellent article! Public sector ethic goes out of the window with privatisation and is replaced by the profit motive. It should be clear that one is not equivalent to the other, and that health services must remain public.