“Our posturings, our imagined self-importance, the delusion that we have some privileged position in the Universe, are challenged by this point of pale light. Our planet is a lonely speck in the great enveloping cosmic dark. In our obscurity, in all this vastness, there is no hint that help will come from elsewhere to save us from ourselves.
The Earth is the only world known so far to harbor life. There is nowhere else, at least in the near future, to which our species could migrate. Visit, yes. Settle, not yet. Like it or not, for the moment the Earth is where we make our stand.
It has been said that astronomy is a humbling and character-building experience. There is perhaps no better demonstration of the folly of human conceits than this distant image of our tiny world. To me, it underscores our responsibility to deal more kindly with one another, and to preserve and cherish the pale blue dot, the only home we’ve ever known.”
Carl Sagan, Pale Blue Dot: A Vision of the Human Future in Space
Whilst faith in the ideologically driven orthodoxy, expressed as supreme trust in the market to provide economic stability, might appear to be on the rocks as capitalism’s global structures start to wobble in the growing uncertainty, it still has the power to dictate its orthodoxy as economists grapple, not only with this vastly different world in which we find ourselves, but also challenges to the destructive economic narratives which have been hitherto their bread and butter.
The high levels of public spending, whilst vital to the economy, have created a world full of cognitive dissonance for those still stuck in the old neoliberal narratives of ‘free markets’ and ‘balanced budgets’, even if the discourse has shifted ever so slightly. Whilst vast sums of public money find their way into private profit with no public accountability, our public and social infrastructure have fallen into decay and the scourge of poverty grows; driven by decades of neoliberally inspired policy, focused on financial affordability, the consequences of which continue to exact a heavy toll.
Even as the media pundits, politicians and other experts spin the headlines on the future prospects for economic growth, they increasingly cannot ignore that we are living in very uncertain times. That the consequences of decades of market-oriented policies and the spending decisions that reflect them, and which have been highlighted over the past year, are coming to a head.
Whilst there is recognition that the huge level of public spending was essential to see the economy through the pandemic, this is still being repetitively framed with concerns about rising public debt. And over recent weeks the spectre of inflation, or even hyperinflation, has been hanging in the air like a bad smell; always erroneously linked to governments spending too much.
The world is such an uncertain place, and the behaviour of consumers so unpredictable, that even on the subject of inflation, members of the Bank of England’s Monetary Policy Committee cannot agree about what will happen next. This week, the Governor Andrew Bailey rejected the outgoing Chief Economist Andy Haldane’s warning that they might have to take action to prevent the ‘inflation genie’ from wreaking havoc on the economy. Haldane had suggested that the economy could overheat as a result of businesses struggling to hire enough staff, that consumers with large amounts of cash to spare could inflict price pressures on goods and services as a result. Therefore, he said, the Central Bank should rein in its plans to inject cash into the economy at the end of the year. The Governor, on the other hand, suggested that such price increases were more likely to be of a temporary nature and manageable.
Yes, inflationary pressure as a result of price rises caused by such supply issues is a possibility, but this will be determined by how consumers react in the coming months as we break out of lockdown. It will also be influenced by the economic conditions which preceded the pandemic, which have continued to affect the economy as a result of decades of neoliberal economic policies. The very policies which have kept the economy suppressed in recent years compared to pre-GFC levels (which were built on private debt) and caused unemployment, underemployment, and allowed insecure working practices to become normal.
The world of prediction is not a hard and fast science, as the Global Financial Crash attests to. Combining this with the unpredictable nature of human behaviour, the future seems less certain than ever, as government financial support dries up, potentially driving further increases in unemployment and leading to more economic instability. Indeed, as Professor Bill Mitchell was clear in a blog in April, ‘There will be no core inflationary pressures until wages growth starts to outstrip productivity growth and that doesn’t look like happening anytime soon.’
The economy is a bit like the weather recently, predictable in its unpredictability. Human beings are not the ‘homo economicus’ of mainstream economic literature.
Even if some individuals are sitting on piles of cash, that does not necessarily translate into higher levels of private spending; and whether people will spend or not will depend on many variables, including the confidence to do so. That confidence can only be led by, and is dependent on, government, which can invest in the public purpose by creating the public and social infrastructure for a healthy economy, assuming it has the political will to do so.
At the other end of the wealth scale, many have been left behind over decades, plunging them into deprivation and poverty which has been accentuated over the last year. Economic growth driven by private spending has its limitations – even large pots of money run out in the end. And to rely on private spending as a mechanism to stimulate the economy would be misplaced, indeed disastrous, at a moment of existential crisis; a moment of questioning the rationality of continuing as we are.
A sustainable economic cycle relies on a government which is responsive to changing economic conditions and spending sufficiently to keep the economy functioning in both good and bad economic times. A government that recognises the real resource limitations, which both force it to define its spending priorities to keep expenditure within the productive capacity of the nation to avoid inflationary pressures, and to ensure that its spending delivers its agenda, which of course will differ according to its political objectives. From the perspective of a currency-issuing country like the UK, the question of whether it can afford to deliver its agenda is a red herring. If nothing else the last year has proved the point.
Furthermore, and as the economist John T Harvey suggested in an article in Forbes this week, let us not get inflation out of perspective. In an article entitled ‘Four Reasons to stop panicking over inflation’, he was clear that it isn’t always the bad phenomenon we are led to believe, and concerns about it are based on the poor understanding engendered by decades of mainstream economic orthodoxy, which has claimed essentially that it is driven by excessive levels of government spending (Zimbabwe and the Weimar Republic being the poster examples normally used to frighten the pants off people).
And yet, even in the midst of the biggest challenge the planet has faced in 250 million years, the old paradigms seem comforting to some, as we saw this week when the newly appointed Shadow Chancellor Rachel Reeves began a speech saying that the party needed to rebuild its reputation for economic competence, and that the key test for her would be whether taxpayers trusted her to look after their money. What has changed in 9 years?
One cannot help being reminded of Liam Byrne’s damaging note left in the Treasury in 2010, claiming that there was no money left, and upon which the Conservatives have dined out ever since. One might have to conclude that dealing with the truly crucial issues, i.e., the climate emergency which threatens the planet’s life support systems, the entrenched wealth inequalities, and unequal access to real resources, will always take a back seat to balancing the public accounts. Unless something gives.
In 2012, in a speech to the IPPR Reeves said, ‘Sound public finances will always be the indispensable platform for delivering better jobs, better services and a strong, growing economy’ suggesting that ‘the nation’s finances, and building a stronger, fairer Britain, are imperatives that are not only compatible; they are also inseparable.’
Reeves was as right to suggest this week that a future government should introduce measures to tackle low pay, the gig economy, and remove the ability of companies to fire workers and then rehire, as she was to point out that the current government had left the public sector underfunded and unprepared for the pandemic. But to suggest that one was dependent on the other demonstrated either a depressing ignorance of monetary reality or an unwillingness to challenge the damaging orthodoxy which prevails.
By hitching herself once again to the notion that government actions are limited by fiscal concerns, and that the public finances can be compared to a household budget, Reeves shows that such entrenched thinking will limit the capacity of not only this government, but governments in the future around the world, to address the climate and resource crisis, the shadow of which menaces existence.
As the build-up to COP26 begins to play out in the public arena, without a complete reversal of economic ideas the political will to act will always be hampered by budgetary concerns, when, for the sake of us all, politicians must really face up to the very real threat that the climate and real resource use pose.
One has to ask how long it will be before Reeves is parroting her words from 2012, when she suggested that fiscal prudence, balanced budgets, and a lower national debt were vital components of the nation’s economic health. If she were to choose that route, Labour would be committing to repeat the same mistakes of the last but one Shadow Chancellor, who being guided by his orthodox economic advisers, determined to put fiscal competence over real economic health and the lives of citizens.
On such a basis, a progressive agenda, if there were one, would be reduced to taxing the rich to pay for it, as if somehow public well-being were dependent on some sort of philanthropic gestures by those with vast amounts of wealth. Taxing the rich? Why not? But let us not kid ourselves that it is paying for anything, least of all our public and social infrastructure or indeed addressing the climate emergency. Taxing the rich should be about equity and redistribution of real resources and not least to remove the vast influence and power they wield in the corridors of power.
Whilst the media continues to witter on about high public debt and the threat of inflation, the very real consequences of government policies and spending cuts continue to play out.
This week, the Trussell Trust published its report, ‘State of Hunger: Building the Evidence of Poverty, Destitution and Food Insecurity in the UK.’ The Executive Summary makes for a depressing read. Its recommendations are that government should commit to ending the need for food banks, and measures should include ‘ensuring our UK Social Security System provides everyone with enough to afford the essentials’.
Whilst we do indeed need a commitment to end the need for food banks through increased social security payments for those who need it, the solution starts with the government, which has regrettably bowed down to the neoliberal tenets of faith, as have governments for decades. Tenets which focus on deregulation and employment policies that allow businesses to compete on the backs of employees, through driving down wages. This has miserably failed working people and given huge power to big business to dictate the terms of employment. In turn, this has created employment insecurity, left people struggling on low incomes or consigned them to the scrap heap of unemployment, with all the waste of human potential that that incurs.
This could be addressed easily by the introduction of a government-backed Job Guarantee, which would set the price for labour and ensure that businesses could no longer use low wages and poor terms and conditions as means to compete in global or domestic markets. Increasing social security payments, essential as it is, without addressing the core problems of low pay and insecure employment, would only prove to be yet another sticking plaster for a rotten, toxic economic system. A system based on exploitation to keep profits flowing, and the endless cycle of growth going.
Whatever one’s politics, surely employment security and good wages, along with a functioning public infrastructure, are vital foundations for a healthy, sustainable economy in which citizens can flourish?
And once one knows the facts about how governments spend, it brings home starkly that poverty, inequality, hunger, and homelessness are political choices, for which there can be no excuse.
The content of the Trussell Trust Report was illustrated on Thursday by a truly shocking Channel 4 News Report on poverty, hunger, and homelessness in Cornwall. The distress experienced by those who had the misfortune to find themselves unemployed or homeless was unmistakable. People who had never imagined that they could find themselves without work or somewhere to live, struggling just to provide the basics, or completely overwhelmed by the hardship they were experiencing, with no hope for a better future.
An idyllic postcard environment it might be, but it masks the huge suffering which has resulted from a decade of government policies, including spending cuts and the loss of EU economic grants, which have as yet to be replaced even though, as the currency issuer, the government could have ensured sufficient funding to all those regions that needed it. It alone can act to undo the ideologically driven poverty and deprivation which has hitherto been justified on the back of the false premise of getting the public accounts in balance.
Cornwall, like other regions in the UK, has suffered high levels of poverty and homelessness, with many people working in already poorly paid hospitality or other service-led jobs linked to tourism, a sector that has been hugely affected over the past year. Houses are in short supply as second homeowners, in normal times, rent out their properties in the summer, thus reducing housing stock. And this has now been compounded by wealthier professionals moving out of cities into Cornwall to escape Covid-19.
The solution to rising poverty and homelessness is not private business investment as the first port of call, as was suggested at the end of the Trussell Trust’s report, but instead a government-directed strategic plan to make the words ‘levelling up’ a reality, rather than just handy rhetoric to keep the public on side but which goes nowhere and ends up filling the pockets of big business. Not only do we need adequate public spending, investing in public infrastructure, housing, and public sector employment, which in turn drives confidence for businesses to invest in their local communities and people to spend, we also need a vast stimulus to drive a just transition towards a sustainable, steady-state economy.
Since the launch of GIMMS in 2018, climate change has regularly featured in GIMMS’ blogs. The climate ‘fire’ is still burning, and the warnings should by now be resonating and driving a public conversation, as the UK prepares to open up after a difficult year, with still no certainties on any front.
We can no longer ignore the warnings. We have to grapple with them in the knowledge that no matter what we are told by self-serving politicians or those economists advising them, it is never money that constrains action, whether it is tackling climate change or the vast inequalities that exist in the rotten economic system in which we live, a system that has created the climate ‘inferno’. The only constraints are political will and those created by the finite resources which the planet gifts us, and which we have sorely misused and abused.
This week, Alok Sharma, the president of the COP26 climate summit, gave an urgent plea: that coal should be ‘consigned to history’ as the world faces its ‘last hope’ of preventing further climate breakdown.
In April, scientists reported that the climate crisis had shifted the Earth’s axis as melting glaciers redistribute weight across the globe. And a new study published this week demonstrated that the huge amount of greenhouse gases that are emitted as a result of human activity are shrinking the stratosphere, which has already decreased by 400 metres since the 1980s, and could contract by a further kilometre by 2080; potentially affecting satellite operations, GPS systems and radio communications.
Another report also published this week in the One Earth journal, indicates that climate change risks pushing one-third of global food production outside the safe climatic space. According to the study, the most vulnerable areas are South and Southeast Asia and Africa’s Sudano-Sahelian Zone, which have low resilience to cope with the changes. The results underpin the rising importance of delivering the low-emissions targets to avoid facing food shortages, starvation, and vast human migrations. There is only one world.
At the same time, while the US President Joe Biden is promising huge investment in addressing climate change, his plans to reduce emissions through agricultural carbon markets will benefit large scale agribusiness, potentially locking in harmful monoculture crop systems and the industrial-scale animal operations that damage the environment, and will make it harder for the smaller farms which employ regenerative practices in food production to compete. Once again, climate action seems to be about favouring big business and its destructive environmental practices over the smaller businesses that are aiming to farm in tune with nature.
Whilst the political greenwashing continues to promise much, but so far has delivered little in terms of real climate action, and technological solutions propose that we can continue to grow our economies whilst we offset our carbon emissions by, for example, growing more trees to absorb them, the reality is that we are blindly fooling ourselves into believing that we are indestructible gods. In terms of understanding the complexity of the planet which sustains us, we are still in the beginner’s class.
Bonnie Waring, who is a Senior Lecturer in Climate Change and Environment at the Grantham Institute, Imperial College London, wrote an article entitled ‘There aren’t enough trees in the world to offset carbon emissions and there never will be’, in which she said:
‘supporting natural ecosystems is an important tool in the arsenal of strategies we will need to combat climate change. But land ecosystems will never be able to absorb the quantity of carbon released by fossil fuel burning. Rather than be lulled into false complacency by tree planting schemes we need to cut off emissions at their source and search for additional strategies to remove the carbon that has already accumulated in the atmosphere.
Does this mean that current campaigns to protect and expand forest are a poor idea? Emphatically not. The protection and expansion of natural habitat, particularly forests, is absolutely vital to ensure the health of our planet.
Forests are so much more than just carbon stores. They are the unknowably complex green webs that bind together the fates of millions of known species, with millions more still waiting to be discovered. To survive and thrive in a future of dramatic global change, we will have to respect that tangled web and our place in it.
This is our challenge: to learn to live and flourish within the boundaries set by the planet’s finite resources. We can make a start by understanding how we can deliver that through the lens of MMT.
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