“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
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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