“Do you truly believe that life is fair, Senor de la Vega?
-No, maestro, but I plan to do everything in my power to make it so.”
― Isabel Allende, Zorro
There seems to be some disagreement in Tory circles. As some Tory backbenchers push for further public spending increases to boost the economy in the aftermath of the pandemic, the newly appointed Business Secretary Kwasi Kwarteng signalled this week that a squeeze on public spending and possible tax rises are in the offing to deal with the deficit and debt which have risen as a result of Covid-19. The rises in the deficit and debt have, according to a report in the Telegraph, been fuelled by ‘handouts’, appearing to suggest they were charitably inspired rather than a vital function of the government during difficult or indeed more normal economic times.
As an appropriate aside at this point, our Lens readers will already know that the debt is not a problem in itself. That it is not money owed in conventional terms and can, as the government is the currency issuer, always be ‘paid back’, and that the real judgement of a government’s record is not its financial prudence but its economic record.
To return to the story, Kwarteng then went on to suggest that Britain could not ‘spend its way to prosperity’, insisting in the interview that the private sector was the way to ‘boost the economy’. He then went on to claim that without a prosperous private sector the country would not be able to afford public services, saying that they ‘rely on a thriving, dynamic open economy’. Suggesting yet again that the rich, by their industry, are the wealth makers and that as such they are needed to keep tax revenues flowing into the government coffers.
Same old arguments. Same old bilge.
It is encouraging to see some disagreement in political circles, even if it is still couched in deficit dove terms of ‘spend now to support the economy and pay back later as the economic outlook improves and tax revenues rise.’ But it seems that we are doomed, not just to continue along the ‘free market’ ideological road which has promised much but delivered only increasing poverty and inequality, but also to frame that agenda in household budget terms of affordability.
We have been here before, and as has been pointed out in many MMT Lens blogs, the consequences have been laid bare in the Covid-19 pandemic. And yet despite the evidence, the government is still caught in the glare of ‘free-market’ ideology; still embracing the now-discredited notion that our wealth is created by private investment which then trickles down. And, whilst it has rediscovered the power of the public purse to serve the immediate and vital purpose of stopping the economy from collapsing along with the lives of those affected, it seems that it might be a short-lived affair as the neoliberal project motors on.
The libertarian project of ‘free markets’ is often portrayed as being one of small government and minimal intervention both in the public and private sector. However, the reality has been about increasing the dominance of big business, with a growing alliance between government and corporations with no democratic accountability, which allows public money to flow one way into the pockets of those corporations as a profit generator.
Alleged unaffordability has been used to promote a hitherto, but less so today, covert agenda to push the toxic ideology which serves as the common thread of economic policy and spending. The dominance of misnamed ‘free markets’ and of corporate control. That project has gone into overdrive during the course of addressing Covid-19.
The pandemic has indeed demonstrated the power of the state, but not in the interests of serving public purpose. The public is being encouraged to accept, once again, the idea that government is limited in its ability to manage the economy and that there are financial caveats. And yet as Andres Bernal made it clear recently, commenting on social media:
‘The free market is an incoherent concept in any empirical sense or accurate description of markets throughout history. But the metaphor is part of an ideological project to analogically shape the boundaries and meaning of social worth and participation. It’s meant to make conventional assumptions about firms, markets, money, and economies at large appear as natural as opposed to politically designed by law and policy’.
While politicians favouring an end to lockdown bang on about protecting the economy, they forget that the economy is the people, the public and social infrastructure and institutions, and the governments which provide the vital legal and legislative frameworks for business to exist and for people to prosper (or not as the case may be).
The economy does not exist in a bubble as a natural entity directing the orchestra. Quite simply it is us. And without the people, there is nothing. The economy forms part of an integral whole, as an editorial in the Guardian this week pointed out with reference to lockdown, but applying in real terms to a much wider context:
Underlying every tactical blunder is a vast strategic error – the belief that economic recovery and social restriction are in conflict; that public health measures deplete national wealth.
The neoliberal project, which goes back more than forty years, has determined the road we have travelled on – one of planetary destruction and human exploitation to feed the market beast. That, combined with 10 years of Tory public sector austerity which has led to the decimation of our health and social care sector and public health infrastructure, has brought us not just to national crossroads, but a planetary one too. On the basis of the lie of monetary scarcity.
In recent months and weeks, articles in the media have focused on the consequences of our failing public and social infrastructure and commented on the huge rises in poverty and inequality bringing hunger and homelessness in one of the richest countries in the world. The beast, as yet though, largely remains unnamed and the media uncritical of it.
This was emphasised this week in a blog by Bill Mitchell. In it, he refers to an article authored by Richard Horton and published last year in the medical journal The Lancet in which Horton notes:
‘The economic crisis that is advancing towards us will not be solved by a drug or a vaccine. Nothing less than national revival is needed. Approaching COVID-19 as a syndemic will invite a larger vision, one encompassing education, employment, housing, food, and environment. Viewing COVID-19 only as a pandemic excludes such a broader but necessary prospectus. […] Unless governments devise policies and programmes to reverse profound disparities, our societies will never be truly COVID-19 secure.’
However, right as Horton is about the need for a national revival, Professor Mitchell takes issue on one point and highlights that:
‘the problem is that the economic crisis is not ahead of us […] but has been building for decades. […] Even before the pandemic the signs of the crisis were there for all to see … It took some decades of relentless retrenchment of welfare support, privatisations, outsourcing, elevated levels of unemployment, the rise of unemployment, the suppression of wages growth, the cuts to essential services, user pays and all the rest of the agenda to create societies that not only distribute national income disproportionately to the top-end-of town but have become increasingly fragile to economic disasters’.
Neoliberalism is its name. And its consequences have been destructive. Over the last year, GIMMS has increasingly noted in its MMT Lens the deliberate promotion and growth of the charitable or voluntary sector to step in and fill the gap left by a negligent government. A government which, in reality, has failed in its primary purpose; to serve its citizens through a targeted programme of spending and legislation. David Cameron’s big society has become a reality, even as we begin to appreciate the irony of charities beginning to struggle as their public donations dry up and government grants are reduced.
You can’t run public provision on political rhetoric and hot air, or dependency on charitable donations.
This was demonstrated only too clearly this week with two events. Firstly, the presenters on a local radio station encouraged their listeners to donate to an appeal aiming to provide equipment for home schooling and secondly, an email was sent by the National Education Union to its members and supporters urging them to donate to its ‘Help a Child to Learn’ appeal. Whilst these are vital at this difficult time and recognise a fundamental need, it is symptomatic of a government which has not only not delivered but also been in pursuit of quite a different vision for the future.
No child should be locked out of education for lack of access to computers or other vital equipment to aid home learning during this pandemic. But although there is a clear need to redress the balance because the government is currently not doing so either deliberately or otherwise, unions and other institutions should be clear whilst they promote such direct appeals for help that these must be stopgap measures only. But they are potentially turning into permanent solutions that do not address the root causes of these failures, which are about the dominance of a toxic economic ideology and the failure of the government to spend adequately to ensure the nation’s needs are met within the context of available resources.
The government failed to deliver such support adequately in the last lockdown and still many families without computer access are struggling to meet home schooling needs almost a year on. A two-tier educational system existed prior to the pandemic but has been worsened by it as a direct and continuing result of lack of political will to address it.
The government had the monetary capacity to meet this need and did not, even though more recently it has been committing to redress that failure by promises of increased spending on education. But the root cause of these failures had nothing to do with lack of public money in the austerity years, even though it is presented as such. This root was a direct result of lack of political will to address the origins of poverty and inequality which has crushed people’s lives, created hardship and an inability for those people to build a better life for themselves.
Whilst politicians, from their ivory towers, prattle on about self-reliance, they haven’t the intellect to understand that such self-reliance is dependent on having the public and social infrastructure in place along with government policies and legislation to give people the opportunities they need, whether we are talking about good, well paid, useful employment through the implementation of a job guarantee to restore the balance of power towards working people, or the public infrastructure which underpins society.
These opportunities don’t happen by themselves in the ‘deregulated’ free for all, profit-oriented environment which has dominated for decades and which was supposed to have brought so many benefits but has brought privation and impoverishment instead.
Looking to future generations (today’s children), rather than concentrating on the false images of huge debt burdens in the form of higher taxes if we don’t practise sound financial management of the public finances today, politicians should be focusing on their role as facilitators of a better future. Recognising the role of government through its currency-issuing powers to spend sufficiently to ensure our children have a good education would benefit society as a whole, the economy of which they are a part and in turn enrich their own personal lives in the longer term. And let’s not forget the role of government in promoting full employment as a policy goal, developing fairer employment policies which include decent wages, secure employment and good terms and conditions. All these things are interconnected and lead to healthier and more balanced lives.
This is true both on national and international levels given the challenges we face, but to reiterate yet again reflecting the words of the journalist Larry Elliot who wrote in an article this week, ‘it all comes down to political will’. He noted too that ‘all ships have to move together’, meaning our response to the challenges we face must be global. The challenges are not just due to Covid-19, but also include addressing climate change and rising inequity in real wealth and access to resources; all of which will need global cooperation.
However, it was also depressing to note that in the same breath, as with many media commentators and institutions in recent months and weeks particularly left-wing ones, he suggests ‘closing tax havens and making sure billionaires pay their fair share of tax’ as if by doing so governments will suddenly have extra funding to manage the domestic and global challenges we face.
By continuing to suggest that we depend on the wealthy for our health and well-being, we are denying the capacity of governments. Governments which not only have the power to legislate to create a fairer playing field but also issue their own currency to address those key challenges by dint of that power vested in them by the people democratically.
Ceding that power to the wealthy is a rather scary prospect, even if it is couched in the language of fairness and equity. Particularly when we know that that tax is not needed by the government to create that fairer society about which Elliott writes.
A newly launched project called ‘The Giving Pledge’ under the guise of a declared ‘commitment to philanthropy’ by which some of the wealthiest individuals aim to dedicate the majority of their wealth to giving back is a case in point. A claim by one of its supporters that ‘structured philanthropy is needed to address some of humanity’s most critical challenges beyond the responsibilities of governments and public funds’ should be a cause for concern.
Human and planetary well-being should not be at the whim of the excessively rich who already have too much power, wealth and influence as well as an unfair share of real resources. All of which have been accrued as a result of governments around the world who have presided over that inequity through taxation and other policies and courted such influential people through the corridors of power.
It makes a mockery of democracy and it makes a mockery of the real capacity of governments, both monetarily and legislatively, to create a fairer world and address the very real tsunami of climate change whose shadow is bearing down over humanity.
We don’t have to rely on the distributed largesse of the wealthy to enact change; we just have to have governments that are willing to act in the best interests of humanity instead of a small section of it.
Past Event
Phil Armstrong in Conversation with Pavlina Tcherneva
January 24th 2021 @ 4:00 pm – 5:30 pm GMT
GIMMS is delighted to present another in its series ‘In Conversation’.
Phil Armstrong spoke to Pavlina Tcherneva, program director and associate professor of economics at Bard College and a research associate at the Levy Economics Institute.
Audio via the MMT Podcast here
A video of the event will be available soon via our YouTube channel
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