“Whatever great meaningful and impactful work we are doing now is only the beginning, let’s keep moving forward for a better tomorrow.” – George Stamatis

According to the Office for Budget Responsibility, whose fiscal sustainability report was published last month, the news is bad. In its Executive Summary, it noted that the UK was on track to record the largest decline in annual GDP for 300 years. It has forecast that this winter, unemployment will soar to levels last seen in the 1980s under Margaret Thatcher. It recognised the government’s focus on managing the pandemic and reviving the economy through its fiscal spending programme, but went on to point out that the structural fiscal damage would likely lead to the need to increase tax revenues and/or reduce spending to put the public finances on a sustainable path.

Instead of examining the real human consequences of government policies over the last decade, or the huge fiscal response to the pandemic, the health of the economy more has often than not been reduced to the fiscal framework of household budgets. Over the last few weeks, GIMMS has been pointing out in the MMT Lens that the Debt Sirens are now working overtime to revive in the public consciousness the idea that there will be a heavy price to pay for the huge sums spent by this government.

In this week’s news, Rishi Sunak suggested that Britain cannot sustain the current level of ‘borrowing’ and Andrew Bailey, the Governor of the Bank of England, backed up the Chancellor when he said that there was no question of a wholesale extension of the Job Retention Scheme. The clear implication is that it’s not affordable! One wonders on this premise whether Rishi Sunak, like Labour’s Liam Byrne, might be obliged to leave a note in the Treasury when he finally leaves saying ‘There is no money left’. The Tories spent it all!

You might be forgiven too for thinking when TV journalists like Krishnan Guru Murthy then reinforce the false household budget narrative with statements like ‘The Government is running out of Money’ or when The Times publishes a provocative headline, as they did this week, designed to send pensioners into a spin ‘State pension fund ‘raided’ to pay for pandemic unemployment payments’ that they are pointing out the obvious. It is not possible to continue ‘spending like a drunken sailor’ without consequences. Surely the public might say? Notwithstanding that government spending is the only thing keeping the economy from tanking further.

Even the National Institute of Economic and Social Research, whilst opposing at the end of last month the Chancellor’s planned closure of the furlough scheme saying it was too early to do so without the probability of a surge in unemployment, then goes on to focus on the problem of higher public sector borrowing in its words ‘financed by higher private sector saving’. The money has to come from somewhere. Doesn’t’ it? Whether that’s borrowing or higher taxes.

And so, the public continues none the wiser and starts to prepare itself for hard times ahead. Such uncertainty will, in turn, lead to yet more economic distress as people fear the worst and retrench yet more. Those who can, will continue to save and indeed the figures show that during the pandemic savings have risen. At the other end of the scale, the choices for many are cutting their budgets or getting into debt. Either way, it is the worst economic recipe of all. Savings don’t always mean people are going to spend in an uncertain climate and for those lower down the wage scale, the choices don’t even exist. It becomes a vicious cycle of decline.

It’s time to break this cycle of lies.

To put it clearly, a sovereign currency-issuing government doesn’t have to borrow from the private sector in order to spend, nor raid the State Pension Fund to pay for the pandemic unemployment payments. And it most certainly can’t run out of money! After the big spend, a narrative is being constructed to justify more cuts to publicly provided services, just as happened in 2010 when the Tories came to office. While we clapped for our public services and key workers recognising their vital contribution to keeping the economy functioning during the pandemic, the Establishment has been planning its next coup which will focus on how to pour yet more public money, that apparently ‘we don’t have’ to invest in the public purpose, into private profit instead. As mentioned last week – the creation of UK plc.

While Rishi Sunak promotes, with great fanfare, his ‘Eat out to help out’ scheme (when many people are simply struggling to eat and for whom such a discount might represent a whole week’s food) and Boris Johnson unveils his £10m half-hearted plan to cut obesity (with those contradictions ringing loud and clear) the numerous elephants in the room remain seemingly invisible to policymakers:

• The last 10 years of austerity which has left the economy in bad shape and the public and social infrastructure in a state of decay and unable to respond effectively. A social safety net which has been decimated and left many people hungry and homeless.
• The precarious nature of employment with long hours, insecure working practices, and poor pay.
• And now the prospect of mass unemployment adding to the already structural faults in the employment landscape.

The growth in self-employment with around 5 million people or 15% of the workforce, a growing number of which are women, has replaced well-paid and secure work. Presented as offering choice and flexibility it has, in fact, left many people in dire economic straits trying to make a decent living even before the pandemic and the rules on receipt of benefits over the last few months have further disadvantaged these people and left them without.

Currently, many people are now chasing too few jobs with employers receiving hundreds of applications for just one position. It seems that the message to people of working age is that you are on your own. You can either sink or swim! Then, in the event that your job is no longer viable in the longer term, the message from Rishi Sunak this week is to get on your bike and get retrained and, without a doubt, then if you still fail to find a job then you can be sure that the blame will be shifted onto you.  As Bill Mitchell said in a blog in 2009 during the Great Financial Crash ‘Training does not equal jobs’ this will be yet again a government shifting responsibility elsewhere and abdicating its own for the economy and the welfare of its citizens.

The government’s continuing fixation on ‘debt’ and the unsustainability of ‘borrowing’, which is the driver for its October deadline for bring the furlough scheme to a close, combined with private sector redundancies or cutting workers’ pay (both of which are already happening) is a recipe for economic disaster and lies in flawed thinking. Indeed, if pursued, will do an immense amount of harm to an already ailing economy. In simple economic terms, the government’s deficit is the private sector’s surplus. In personal terms that we can identify with, that’s the money circulating in the economy. Who in their right minds would want to remove it at this critical time by abandoning the furlough scheme or even consider higher taxes? But still, the household budget drums beat! And still the shifting of public assets into ever fewer hands carries on.

We are, it seems, being presented with a choice. A stark choice. Follow the household budget narratives which ultimately will demand tough decisions on spending (notwithstanding that there will always plenty for the next war, or to fill the boots of big corporations) and accept there will be no alternative to more public infrastructure decay and worse more deaths of innocent people. Or we break free from the nonsense which asks, ‘but where will the money come from?’ The bottom line is that our public fixation with high levels of debt and the rising deficit is harming people, indeed killing people, and pulling the rug from under the feet of those same people threatened with the loss of their job, cuts to their wages or government-imposed public sector wage restraint. Indeed, thousands of NHS nurses and healthcare staff marched in towns and cities this weekend to protest about being excluded from the public sector pay rise announced by the government in recent weeks. Just how Rishi Sunak thinks he can stimulate an ailing economy by cutting the lifelines of working people is a mystery.

We need now to restore the diminished power of working people and resist the potential for driving down conditions and pay which most likely will be the result of mass unemployment as the power shifts remorselessly towards ever fewer people. We haven’t got one, but we need a government not only prepared to legislate to protect working people from the economic ravages of the pandemic, but also one that is committed to the principle of full employment through the implementation of a Job Guarantee. Instead of worrying about the size of the deficit, we should be looking at its size in relation to what it represents in real terms to the well-being of citizens and whether or not it corresponds to full employment.

So, why a job guarantee, why is it important and what would it entail? In simple terms, the job guarantee acts as a superior macroeconomic stabiliser providing a sustainable solution to the perennial problems of inflation and unemployment. Its aim is to create full employment and price stability through the government hiring unemployed workers as an employer of last resort.

Professor Bill Mitchell usefully clarified in his blog this week what it would entail:

1. A guaranteed job for anyone who wants to work and cannot currently find a job.
2. They would receive a socially inclusive minimum wage.
3. They would receive holiday and sick pay entitlements, superannuation contributions from the employer, and other special leave entitlements that are common in the permanent workforce.
4. They would be entitled to undergo training (on-the-job or in outside environments, including going back to school, college or university).
5. They would receive social wage benefits – what some might call guaranteed levels of services – such as health care insurance, free child-care, transport allowances, access to legal aid supplements, etc.
6. Family Income Supplements: The Job Guarantee is not based on family units. The Job Guarantee wage (available to anyone over working age) would be supplemented with benefits reflecting family structure. In contrast to workfare, there would no pressure on single parents to seek employment.
7. They could choose whatever hours they desired to work – effectively eliminating time-based underemployment.
8. IMPORTANTLY, a worker would be given a grace period on accessing the Job Guarantee. Their wage would start immediately but they could have 3-4 weeks before having to start work where they could sort out their affairs, ‘take a breather’, engage in job search if they wanted, etc. During this period, they would be paid the standard wage rate.
9. The job would be permanent if they chose.
10. The job design can be flexible to help workers with special difficulties enjoy a productive working life (for example, the provision of clinical support within the workplace to help people burdened with episodic illnesses).

To this, we would add a superior benefit system which would protect those who cannot work for any reason including illness and disability or carrying out caring roles along with Universal Basic Services.

The question must be answered. And we must answer as a collective. What sort of society do we want to live in? A dystopian Mad Max one where economic slavery and gross inequality dictates the terms by which we live our lives. Or something better?

Event

The Post-Covid Economy

We were privileged to be able to host GIMMS Associate Philip Armstrong speaking about how the economy works and what a Post-Covid Economy could look like.

Christian Reilly kindly recorded the event for us and shared it on The MMT Podcast here.

Slides available at https://gimms.org.uk/wp-content/uploads/2020/08/Phil-Armstrong-MMT-and-Post-Covid-Economics.pdf

Join our mailing list

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

Support us

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