MMT is a description of the monetary system. It is not something you can “switch to”, “implement”, or “use”. It merely describes what already is.
The description, once understood, implies what is possible and not possible. MMT then gives us an essential structure to work with to derive economic policy.
So, it is clear that mainstream economists are not critiquing MMT. Rather, they are attacking the progressive possibilities uncovered by what MMT implies. They are virulently angry about the public discovering that the mainstream lied to them; what economists told the people was impossible is factually quite possible, and economists are lashing out with everything they have – mainly straw man arguments – in a fit of terror and panic. In other words, the public found out that the TINA mantra (There Is No Alternative) was and is total bullshit, and that mainstream economists don’t know what the hell they are talking about.
Ellis Winningham (Economist)
As we approach the anniversary of the first lockdown, the author Michael Rosen, who spent 48 days in intensive care, has joined his voice with others calling for a public inquiry into the government’s handling of the Covid-19 Pandemic. The consequences for families across the nation and the economy have been painful and far-reaching. However, much of what has happened this year cannot be attributed to the unexpected nature of the crisis or to happenstance.
The responsibility lies, firstly, with an economic system which dominates policy and spending decisions and has left our public and social infrastructure a shadow of itself. Secondly, it lies with the government which has neglected its role in planning and spending for public benefit, preferring instead to serve its corporate friends.
For many years to come, the human and economic cost of the pandemic will be a reminder of a government which put corporations before people, with a decade’s worth of policies that deprived our local communities of sufficient funding, cut spending on vital public services and turned the benefits system into a corrective system which resembles the inhumane Elizabethan poor laws which brought into being the workhouse which punished instead of alleviating the pain and suffering caused by unemployment.
Whilst politicians and mainstream economists still talk about ‘fixing the roof’, in this case meaning the public finances, the real roof that needs to be fixed is the one that has created a public and social infrastructure which no longer serves the public purpose.
According to NHS officials, public sympathy for the NHS may be put in doubt as waiting lists for appointments and treatment grow as a result of a year of delays due to Covid-19 and the already damaging funding gaps which will further affect the NHS’s capacity to deliver services in the future. Cuts to public sector spending over the last 10 years left the NHS ill-prepared for a pandemic. It left a stretched service short of nurses, facilities, equipment and beds. A situation which was also aggravated by poor government crisis planning.
These were the outward, most visible, and shocking indications that previous government choices, arising out of an adherence to fiscal and ideologically driven dogma, had left the public sector ill-prepared for what was to come.
However, in the same vein, we cannot ignore the causal relationship between government spending and policy decisions which have driven a rise in poverty, inequality and deprivation which have all played a major role in this crisis and its on-going, systemic disaster.
The statistics show clearly that the pandemic has affected some sections of society more than others, in geographical and class terms, and have contributed to life-changing experiences and tragic death outcomes. As Dr Charlotte Summers, a lecturer in intensive care medicine at the University of Cambridge, commented in a Guardian article this week:
‘The problem won’t be answered with a single-minded focus on economic growth but rather an understanding that health and wealth are intertwined and that tackling poor and overcrowded housing, air pollution, unemployment and inadequate education are essential for promoting economic prosperity and public health.’
That drills down into the very heart of the question about economic prosperity, and not just in this country. Who creates prosperity and what conditions are needed to ensure that citizens can make their contributions to the good functioning of the economy and society as a whole through the work they do, whether paid or not?
After the Global Financial Crash, austerity was prescribed as the cure for bloated public finances. We are now living with the consequences of the austerity lie, which has not just affected our public infrastructure but also led to increases in poverty that should shame one of the richest countries in the world.
Over the past year, it has been proved without doubt who the real architects of a healthy economy are; that is the people of this country who have kept it functioning despite the difficulties that Covid-19 posed. From nurses, doctors and other health workers to social care workers, delivery drivers, those working in the energy and water sectors and local government services, those keeping our parks tidy and our streets clean; they are the real wealth creators since they represent the backbone of our economy and our real social wealth.
And yet, despite the clear evidence that our public infrastructure and the people who work both in it and the wider economy are vital to the good functioning of society, politicians still continue to preach ‘austerity’ through the household budget narratives they use to describe the public accounts.
Only this week, the Health Secretary Matt Hancock suggested that decisions on public sector pay had to be taken because of the ‘enormous pressure on the public finances’. That pressure is apparently so great that the Treasury and NHS England are in a standoff over the demand for additional funding, which if not conceded will result in yet more service cuts and will lead to the NHS not being able to tackle the backlog of surgery and treatments that have built up during the past year.
After 10 years of swingeing cuts already, combined with getting the NHS ready for the big sell-off to make it an attractive prospect for the private health care companies, once again there is the veiled suggestion in the standoff that after the huge and necessary relief package which has sustained the economy over the past year, in the end, hard decisions will have to be made about the affordability of public services and wage increases.
The same tired narratives have also applied over the cuts to foreign aid which the Chancellor announced last year. This week (as reported in the Guardian) the charity Voluntary Service Overseas is planning to shut down its operations in 14 countries as a result of government cuts to the foreign aid budget. The rationale for the cuts, according to the Chancellor, was a response to the economic costs of the coronavirus crisis. A government spokesperson suggested that it had been ‘forced … to take tough but necessary decisions’.
Suggesting that there is no money for aid because the government has spent too much on dealing with the pandemic is yet more deceit by a reckless government, which at the same time has absolutely no problem finding money as it did this week to lift its cap on the number of Trident nuclear warheads.
The inconsistency of the narrative is bewildering. One minute there is no money and the next like the magician pulling a rabbit out of a hat it is suddenly whipped up in no time.
Plenty of money for death and destruction, but none for dealing with the vast inequities that the dominating economic system creates. At the same time as announcing the lifting of the cap, Boris Johnson made a personal commitment (not that anyone takes his promises or personal commitment seriously) that they would be restoring foreign aid as soon as the ‘fiscal situation allows,’ again speaking as if there were a shortage of funds in the state piggy bank to provide support for overseas development.
If you are not confused, you should be, by these clear contradictions. There is no shortage of government funds. Only real resource constraints define government spending decisions and how they will be managed, along with the political will which determines what government priorities are.
We cannot see this issue purely from a UK perspective – it is so much more in these tumultuous times of global crisis and change. It is vital to take this discussion to the next level; the biggest threat we face is climate change combined with growing global poverty and inequality.
Instead of focusing on addressing those threats cooperatively with a global vision for change (not a capitalist inspired Great Reset), our leaders think the best way forward is to make the UK a world player in death and destruction. And it is not confined to the UK. This week the republican senator Mitch McConnell challenged President Biden to boost defence spending to counter what they see as a threat from China.
While our leaders play at warmongering, what we really need is action. Action to address the human and resource exploitation that is creating huge poverty, inequality, and environmental destruction. Exploitation which afflicts both rich and poor countries but discriminates more unfairly against those who are being affected by the West’s excessive consumption, unfair distribution of real wealth and the impact of damaging resource extraction.
We need a fairer trading system as well as a transfer of technologies and other practical support to assist in this global levelling up.
With global cooperation, there could be a role for such organisations as the VSO to work with poorer nations. Not charitably funded, but rather a global governmental initiative using sovereign currency-issuing capacities to give everyone a fair chance within a sustainable economic system.
Whilst these things may seem impossible, acting on fighting poverty globally shouldn’t be down to charities, who are in fact mitigating for a rotten global economic system which is unjust and exploitative, and also creates power imbalances serving the political interests of corrupted governments.
What we desperately need is targeted action by national governments to reduce global inequity. In light of the challenges, we will all gain by cooperation. The inequality and poverty our leaders have connived in, through embracing neoliberal and monetarist ideology, is a stain on the international community.
However, commitment to tackling climate change even locally is being watered down by our current government. According to a report by Greener UK which is a coalition of campaigning groups, legally binding commitments on key areas such as pollution, nature, restoration, waste and resources have been put off until 2037; and only this week Boris Johnson announced that he wanted to cut air passenger duty on domestic flights to boost travel connections across the UK. Some commitment to addressing climate change!! The Australian Prime Minister, Scott Morrison, is suggesting a similar policy with half-price flights to boost the domestic economy. We are going in the wrong direction.
In the light of the planned COP26 conference being hosted by the UK in November, it puts doubt not just on the government’s commitment to real change here, but also playing a cooperative role globally. An opportunity perhaps for more hot air and rhetoric from ministers promising the Earth but the reality of less action.
It is even more disturbing to learn that the environmental principle intended to stop branches of government from acting in ways that might harm the environment will not apply to key departments such as defence and the Treasury. Does that imply that tackling climate change is to be relegated to affordability? No doubt after this huge round of relief spending, we might possibly see that suggestion being made.
The household budget earworm is well and truly established in our public conversations, but it is important to challenge those notions. The BBC reported this week that UK government “borrowing” had hit a February record, and suggested that the public finances had been hit hard as a result.
On Thursday the Centre for Public Policy held a Zoom webinar entitled ‘Is there any money left? The Future of Public Finances Post-Covid.’ Echoes perhaps of Liam Byrne’s note left in the Treasury stating that there was ‘no money left’.
Politicians, economists, and journalists can’t get beyond thinking in accounting frameworks about the public finances, and thus constrain debate about the very serious issues we face, because now or later we will, according to them, have to pay for it. Affordability trumps saving the planet, addressing poverty, and restoring our public infrastructure to health every time!
At the other end of the scale, this week an article in the Financial Times, alluding to a supposed failure of the fiat monetary system, suggested that it had reached the end of its usefulness as it had led to higher debt and spending profligacy, and that some alternative monetary anchor should replace it. The Gold Standard and its replacement forged at Bretton Woods failed to cope with the uncertainty caused by global events such as the Great Depression. So why would one want to restore such an anchored system? It didn’t work then, and it won’t work now.
In fact, whilst not mentioned, probably deliberately, it would be much fairer to say that the fiat monetary system hadn’t failed, but rather the ideological ideas that underpin the spending and policy decisions of neoliberal governments had. Poverty, inequality, and privatisation of public services have all contributed to the impoverishment of our global societies. That should be the real cause for concern.
Private debt is the real problem, not public debt as we are led to believe. The nonsense spouted about public debt and borrowing levels is designed to keep the population in check, and thinking that the things they value such as good local and nationally paid for and provided public services, health and social care and education are unaffordable.
The in-depth paper ‘An Accounting Model of the UK Exchequer’, which was co-authored by Neil Wilson, Richard Tye and Andrew Berkley and was presented to the UCL Institute for Innovation and Public Purpose this week, reveals the monetary realities of government spending and exposes the smoke and mirrors that confuse people’s understanding and lead them to accept the dominant paradigm.
“Even if you previously believed it was firmly attached, the global pandemic of 2020 has caused the mask of ‘fiscal responsibility’ to slip away completely. Politicians that were previously preaching hair shirts of austerity have been able to find billions of pounds, dollars and euros from somewhere to prop up their economies while the inflation that we were told would run rampant if we were ever to undertake such an action has been noticeable by its absence.”
In an article this week, even the BBC seems to be getting on board with this new way of understanding the public finances. As explained by Andrew Verity:
“…Unlike households governments controlling their own currency can borrow without limit money that they have freshly created. They therefore can’t go bankrupt. Because almost all of the money borrowed by the government in this financial year (by issuing gilts) will be owed to another public sector body, the Bank of England. It’s nothing like a household borrowing from a bank.”
It is important to note two things; firstly, that without the government’s relief package the economy would have been worse off – government had no alternative; and secondly, that the additional spending will not create a debt burden for future generations – the bogey man that is regularly flaunted in front of citizens worried about rising taxes for them and for their children.
If the government had failed to act, the burden would have been one of economic collapse and human misery combined with continuing economic uncertainty and all that would mean for future generations. The choice is simple. Worry about the myth of public debt or forge a new understanding that enables economic and planetary stability.
We are by no means out of the woods, led as we are by a government that has a singular agenda to support its corporate friends and pour public money into private profit. But with increasing public knowledge about how the government spends, and that fantasy but perfectly possible future government dedicated to public service using the monetary tools at its disposal, we can address the challenges and create a society which adds real value to human existence, whilst at the same time ensuring economic and planetary sustainability.
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