“We all need to work together, because there are no jobs on a dead planet; there is no equity without rights to decent work and social protection, no social justice without a shift in governance and ambition, and, ultimately, no peace for the peoples of the world without the guarantees of sustainability.”
Sharan Burrow
Now is the winter of our discontent…. Oops, let’s rewind somewhat and rewrite Shakespeare. Now is the summer of our discontent might be more appropriate, given the troubling state of the country and the media coverage which has been shining more light on the realities of life for many people in the UK; the growing inequalities and the declining state of our public infrastructure. The austerity chickens are coming home to roost big-time for the current government. The promise that getting the public finances sorted would bring economic triumph is everything to them, but in the real world, cuts to public spending have brought pain, suffering and in too many cases early death. Worse still, the neoliberal ideological agenda is still being played out relentlessly by Tory politicians with a specific aim in mind – the dismantlement of the public and social infrastructure, including the welfare state, which has benefited citizens since its inception in 1948.
First up is the publication of a new report by the erroneously named Centre for Social Justice, one of whose founders was Iain Duncan Smith, former Secretary of State for Work and Pensions, promoter of the mantra ‘work pays’ and the prime mover behind the now increasingly discredited Universal Credit system. In its report ‘Ageing Confidently: Supporting an ageing workforce’ (funded by Deutsche Bank and the Joseph Rowntree Foundation) one of the recommendations is to raise the retirement age to seventy-five. Duncan Smith, in a tweet after its publication, claimed that ‘removing barriers for older people had the potential to improve health and well-being, increase retirement savings and ensure full functioning of public services for all’. The public outcry has been quite understandably ferocious and the campaigner and columnist Frances Ryan’s response was acerbic ‘It’s a dystopian vision of life, in which capitalism tells workers who have already grafted for 40 years that working a five-day week through their 70s is, in fact, the path to a healthy body and society’.
As was noted in last week’s MMT Lens, life expectancy varies depending on your geographical location and financial means. Figures show that improvements in life expectancy for older people has stalled since 2014 and is actually worsening as the gap between social classes and regions widens. Austerity and the political ideology of self–reliance over state intervention have taken their toll. The social determinants of health from income and employment, education and access to good health services and adequate food and housing have all been affected by the political choice to cut spending. As such, this proposal is offering a ‘work until you drop’ scenario where those most affected by government policies may die before they even reach retirement age unless of course, they are lucky enough to have the financial means to retire in good health.
When you combine this proposal with the revelations this week in the report Pension Reforms and Old Age Inequalities in Europe which revealed that the proportion of elderly people living in poverty in the UK is five times what it was in 1986, the alarm bells should be ringing loudly. We are all going to be old one day. There is no escape!
The author of the report, Bernard Ebbinghaus from Oxford University, said that ‘The United Kingdom is a good example of Beveridge-lite systems that have historically failed to combat old age poverty’. The research also revealed that the increasing focus on private pension provision was increasing the pre-existing level of social inequality. So even if you get to get to 75, you still face the prospect of an impoverished retirement.
The arguments about pensions and retirement centre around an ageing population; the belief that because the number of elderly people is increasing faster than the number of those who are working, the impact on government revenues will leave it cash–strapped; that as a larger amount of its budget will have to service the costs of social security for the old, it will be left with less money for investment elsewhere. Indeed, the report makes such references:
“Fiscal impacts: pensions and out of work benefits. The demographic shift to an older population raises concerns over the fiscal stability of the UK in the future.”
“This demographic change has resulted in a decreased proportion of working age people, which presents significant fiscal challenges.”
However, these are not new arguments and the public message has been that our welfare system and pensions are no longer affordable, and we have to accept later retirement and make our own preparations for old age. Mind you, how that works in a low wage and insecure employment economy where people struggle to feed themselves let alone save for their retirement is unclear.
In 2015, Liam Fox described the benefits system as a ‘Ponzi scheme’ which would burden future generations, claiming that ‘we can’t afford it now, [and] we can’t afford it in the future and that we need to make ‘the adjustments… for us to be able to get back into balance’.
These are the typical household budget descriptions of the public accounts which define the public understanding of money and how it works. First and foremost, it is important to note that any changes to benefits or pensions will be a government choice, based on a political agenda of limited welfare and self-reliance, and has nothing to do with the state of the public finances. Secondly, that a government which issues its own currency does not have to rely on tax or borrowing to fund its spending and that its real constraints are not monetary, but the real resources which our public infrastructure relies on to function for the health of the nation. What we really can’t afford, is a government that fails to invest sufficiently in the public and social infrastructure, to ensure that the nation will be productive as it can be to provide enough goods and services for people to purchase in the future. Nobody is borrowing anything from the future, or its taxpayers.
It’s worth repeating again that whilst it cuts spending on public services and welfare on account of financial concerns, this government has had no problem finding the money for its own pet projects such as HS2, funding wars or buying off the DUP, not to mention pouring funds into private businesses to run public services. The question is not how a government can pay for its policies, but what it chooses to pay for based on its policy priorities. The health of the economy and well-being of society seems to come right at the bottom of the list and corporate welfare at the top.
When we look at the chaos that is now ensuing as a result of damaging government policies, it should shock the public that the government has been happy to treat its citizens with such contempt whilst at the same time sending out its propaganda cavalry to smooth citizens’ concerns, sweet talking them about its achievements and how the public’s sacrifice has been worth it.
The public’s sacrifice has been a real one and nowhere is it more evident in this week’s other news.
This week the Children’s Commissioner warned in a report Bleak Houses published this week that 210,000 homeless children are being housed in unsuitable accommodation. Families with children living in shipping containers, B&Bs, hostels, old office blocks and warehouses or even sofa surfing. Families living on top of one another, in cramped conditions, accommodation prone to damp, mould, cold and overheating, and spending sometimes years in temporary housing until permanent accommodation can be found.
Polly Neate, the Chief Executive of Shelter, responded to the report saying that it was a damning indictment of the failure to address the housing emergency and blamed it on a combination of punitive welfare policies and a housing crisis along with excessive private rents, all of which were robbing hundreds of thousands of children of a decent and normal childhood.
Combine this shocking state of affairs with the obscenity of up to four million children (more than two million under aged 5) going hungry through the summer holidays because they have lost their free school meals and one should be outraged that this is occurring in what is the fifth richest country in the world. The chief executive of the Childhood Trust, Laurence Guinness, reported this week that he had met young people who had been forced to sell drugs in exchange for food or children as young as 12 who regularly scavenged in bins for food. One, he said, had been reduced to eating toilet paper to stave off hunger pains.
As a result of this devastating poverty and deprivation, which has its roots in a sham economic system that has prevailed for more than four decades and on the back of a lie about the unaffordability of public infrastructure and essential services, our children go hungry, are housed in appalling conditions and face long-term chronic ill-health as a result, the consequences of which will follow many of them for the rest of their lives.
A report published by the Commons Housing, Communities and Local Government Committee has warned that our social care service for children is on the verge of collapse, following almost a decade of cuts to central government funding which has put a huge burden on local authorities. Local communities across the country have borne the brunt of draconian cuts in services which have put vulnerable families, disabled people and the elderly at risk. Such services traditionally respond to local needs and form the bedrock of a healthy economy and society.
Austerity has also had a devastating impact on public health. As reported in the Journal of the Royal Society of Medicine a former director of public health warns that the very same organisations which have had to cope with cuts to central government funding (local authorities) and whose budgets have been slashed as a result have left environmental departments unable to meet potential threats to human health which have already caused failures in the public health system.
It can’t be emphasised enough that this has always been an ideological choice unrelated to the public finances, which makes the government culpable for the chaos through its policy and spending choices. The blame lies at the government’s door and the solution is not, as has been suggested by some union officials, to allow councils to borrow more and raise income locally. In an economy that, as figures are showing is slowing, increasing local taxes will simply place an increased burden on the functioning of local economies as local councils do indeed have to raise tax in order to spend, unlike central government. Taking money out of people’s pockets is not the answer. The solution is for increased fiscal spending through central government which can then be targeted appropriately at a local level to meet local needs. That could be through managing a locally focused Job Guarantee programme to provide useful public work for those affected by involuntary unemployment. Or investment in public works to revitalise local economies and introduce local programmes aimed at creating environmentally sustainable communities.
If we have to talk about unaffordability, let’s not see it in terms of money as a scarce resource which has to be shared out amongst competing demands. Let’s instead look at it from the point of view of resources, as they are the only real constraints which governments have to manage. Whether it’s having enough social care workers, nurses and doctors or public health officials as well as the public infrastructure to meet people’s needs – those are the real obligations that government must manage in the interests of citizens and the national economy. A government which fails to do so, fails for both current and future generations.
Finally, in a week in which we have seen film of the devastation being caused in Brazil as a result of what are likely to be deliberate burning of swathes of the Brazilian rainforest to satisfy our thirst for beef, the publication of more and more scientific reports about the speed at which our climate is changing and the visible consequences on our environment, we need some of our economists to stop denying the realities of modern money.
As Professor Stephanie Kelton tweeted last year:
‘If you’re clinging to 100– year–old theories about how money works you are a climate change obstructionist.’
In the face of the colossal challenges we have to save ourselves (the planet itself will get on very nicely without us) those that want to pick arguments revolving around the dangers of ‘printing more money’ should just take a short trip into history and wonder just exactly how we paid for the second world war. The government of the day didn’t have to wait until it had collected enough tax, it just spent the money on the military hardware it needed to fight the war. Nobody raised their eyebrows at the rising deficit and debt or pointed a finger at government profligacy. The money was created, and it was spent. And just to note, after the war when we had a debt to GDP ratio of 248%, we built the NHS and the welfare state. We didn’t go bankrupt then, any more than we can do so now.
Let’s not squander the currency–issuing powers of governments around the world which can act together and make the difference between survival and extinction.
And just to end on a very positive note, Peru approved a law this week that aims to put an end to the deforestation that arises from destructive palm oil plantations and production. It is a huge win for wildlife and sustainable agriculture. Let’s hope that this will be just the start of a process that will encourage other nations to take the bull by the horns and act to oppose more Amazonian deforestation; the forest is the lungs of this beautiful planet Earth, on which we all depend.
PENSIONS AND MODERN MONETARY THEORY
This article sets out some of the horrors caused by misguided austerity measures that become obvious through an understanding of MMT macroeconomics. However, the problem created by an aging population and adequate pensions cannot be solved that easily by government spending. Pensioners no longer contribute to the production of goods and services. Increasing payments made to pensioners – which will not increase the amount of goods and services available in the economy – necessarily will reduce the amount everybody else can spend if inflationary pressures are to be avoided. Therefore, increase pension payments will force the government to take out money from the economy via taxation so that rest of us will have less money available to spend. It is society as a whole that has to decide how much living standards it is prepare to sacrifice to ensure that our senior citizens can enjoy a decent retirement. An understanding of MMT helps to make that choice – and social responsibility involved – clear.