“Neoliberalism has had a free rein in the West since 1980 and has been increasingly untrammelled. We have also seen 40 years of wars to establish its hegemony and resource control abroad.
It has led to the economic implosion about to hit us. It is the problem, not the solution.”
Craig Murray, Scottish author, human rights campaigner, journalist and former UK diplomat.
After a short holiday break for the MMT Lens, it is difficult to know where to start in this week’s update. Some of us can only look on in astonishment at the circus that is unwinding domestically as the Tory leadership challenge grinds on, to its conclusion, in September.
Two candidates fighting it out with policies firmly framed in household budget economics and ideologically driven policies that take little account of economic or monetary reality, and can only create further struggles for the vast majority of UK citizens, whilst shoring up the profits of the global corporates.
Whilst the candidates battle on, a warmongering PM in his usual ‘hide in the fridge to avoid difficult questions mode’, travelled to Kiev to reinforce his support for a war that could have been avoided through diplomacy and negotiation. And at the same time, during a hustings in Birmingham, his potential, equally warmongering successor Liz Truss, said, totally without emotion, that she would be happy to unleash nuclear annihilation on the world if the situation warranted it. One might ask where do we find these people?
Whoever wins, nothing will change. The Tories will remain in power for the next two years to pursue their ever more destructive policies, whilst the opposition pays little more than lip service to working people and offers nothing concretely different. Two parties from the same neoliberal stable. Sycophants to the City and the global corporations.
While the media continues to construe narratives designed to deceive in all areas, whether economic or geopolitical, on a daily basis, who of us challenging them does not feel sometimes like the little boy watching a naked Emperor pass by, as his royal subjects heap lavish praise for his imaginary garments.
The imaginary garments in this instance are the household budget tropes which prevail and determine government spending policies, and in doing so, continue to betray the nation with the lie that government spending is constrained by tax revenues or borrowing, or exploit the public’s fear of the national debt which it equates with its own household spending. Instead of focusing on the economic realities being faced by people as a result of the pandemic and events beyond our borders, the current battle being fought by the two leadership contenders is still fixated on fiscal discipline in one way or another.
Earlier in the month, Truss, whilst criticising the Treasury’s focus on ‘the abacus economics of making sure that tax and spend add up,’ rejected what she called ‘handouts’, which she viewed as short-term palliatives, in favour of tax cuts including in corporation tax, green energy levies and National Insurance, to prioritise the golden grail of growth, to create the right conditions, as she would see them, to increase tax revenues and start paying down the national debt within three years. Notice that paying down the imaginary debt seems a much more important objective in the first instance than investment in public services to undo the damage that is unfolding as a result of government cuts and austerity over the last 12 years.
She went on to insist that £30bn worth of tax cuts were affordable by using up the ‘fiscal headroom’ identified in current fiscal forecasts, as if somehow, as Peter May put it in an article in Progressive Pulse, ‘Fixing the roof when the sun is shining would be a good thing to do if the government was a house with holes in the roof. It isn’t. Households can save, governments can’t. So much for abandoning ‘abacus economics!’ Household Budgets Rule.
The current economic reality that households are facing crippling hardship right now, seems to have been missed by Ms Truss who is dedicated to neoliberally driven, ‘pro-growth, pro-business, pro-enterprise, pro-investment policies.’ Policies that will not address the immediate economic disaster that is unfolding, and will do nothing to support working people and their families.
Furthermore, as all pretence about delivering a greener and more sustainable planet is cast to the wind, as Simon Nevin summed it up on Twitter this week:
‘What’s this obsession […] with ‘growth’? The Markets will save us. Freeports Are Us! The markets are causing these problems. Price gouging energy companies, predatory banks and low paying exporters, retailers and corporations.
I mean, how can you get ‘growth’ anyway if households and workers’ wages continue to erode dramatically? Bonkers.’
Rishi Sunak, like Truss, concerned more with fiscal credibility than monetary reality has, in turn, criticised her tax plans saying that he doesn’t think ‘launching a spree of unfunded promises costing tens of tens of millions of pounds is the sensible thing to do’, warning that they would increase borrowing and fuel inflation. Unrestrained spending commitments would risk, he suggested, ‘making the situation worse.’ Indeed, to give him a little credit, there might be an inflationary risk in tax cuts, but borrowing doesn’t come into it since government is the primary money creator and has no need to borrow from the private sector.
And yet, whilst framing his argument in household budget terms as one would expect, at the same time he noted, quite rightly, that ‘millions of people are going to face the risk of destitution this winter’, describing his rival’s plans as a ‘moral failure’, since her ‘unfunded tax cuts would make little difference to those on benefits and none at all to pensioners.’
You can’t have it both ways. The government as the currency issuer has the capacity to act to mitigate the worst effects of recession if it chooses to do so through targeted spending and the implementation of a Job Guarantee. It has the capacity through its spending and taxation policies to redistribute real resources to those who need it most, both during good times, and bad. It is ironic that the man who saw fit to remove the £20 a week Universal Credit uplift from some of the already poorest people and imposed the increase in National Insurance which again hit the poorest most, calls Truss’s tax cuts a moral failure because they would fail to help the same poorest and most vulnerable in society. A short memory perhaps?
At the same time, Sunak has vowed (much like Truss) to be ‘much tougher on the welfare system’ to ‘get people off benefits’, whilst ignoring that 41% of UC claimants are in work and that 68% of families living in poverty have at least one working adult.
At the other end of the scale, the data shows that CEOs now collect 109 times the pay of an average British worker. That is a jump of 39% to £3.4m for the FTSE 100 chiefs. The bosses on the gravy train award themselves large pay-outs, whilst their workers suffer the effects of the external, supply-led inflation which is reducing what their pay packets can purchase.
The Tories have chosen to disregard the profiteering that has done so much damage, the low-wage economy which precedes the current crisis, and the consequent rising poverty which has arisen as a result of policies which do not serve the nation as a whole.
In these narratives, they also foment societal division as if somehow people choose to be on benefits instead of getting a job. Pitting young people against old, working people against the unemployed, or those who are working but obliged to rely on benefits just to survive. It is a shameful use of power. An act of sleight of hand to keep people focused on anything other than the economic record of the government. The myth of the taxpayer paying for benefits works every time.
One cannot help remembering the story of the Dutch boy saving his country by putting his finger in a leaking dike until rescue came – only this time there don’t seem to be any rescuers coming along on either side of the political spectrum. Johnson, in Churchillian mode with echoes of instilling a wartime spirit, has, like leaders across Europe, condemned their people to economic pain and suffering as Western-imposed sanctions continue to bite with no respite in sight.
When President Macron of France suggests that the times of abundance are over, a sentiment echoed by other European leaders calling for sacrifice, what he actually means is that they are over for ordinary working people, not the richest who will continue to line their wallets. His comments also ignore the fact that for many citizens both in the UK, in Europe and across the world, the word ‘abundance’ does not apply, and it is those people whom this political intransigence and unforgivable hubris will hit the hardest.
Keir Starmer, like his current counterpart Johnson, is now planning a trip to Ukraine to support a country where the ruling party has banned pro-Russian political parties and dissenting media and has introduced punitive labour legislation. So much for the endless rhetoric spouted by our leaders about protecting freedom and democracy, whilst at the same time, it seems that they are more concerned with what is happening beyond their borders than what happens to their own citizens or those in the Global South caught in the crossfire of sanctions. Cannon fodder on all fronts for the joke known as democracy.
Like the Tories, bound as they both are to the primacy of the markets and the tenets of neoliberalism, Labour is devoid of any real answers to the very real disaster that faces this country. It is just as committed as the Tories are to giving free rein to business. Rachel Reeves made it very clear last month that renationalisation of utilities is not on the cards, even when the very visible consequences of those privatisations and a regulatory regime that has no teeth and is inadequately funded, are becoming clear.
Coasts and rivers inundated with raw sewage by privatised sewage companies, water leaks that will take privatised water companies 2000 years to replace at the current rate of 0.05% a year, energy firms making vast profits when customers face a cost-of-living crisis and soaring food and energy bills. At the heart of that decision lies the madness that is the ‘iron-clad fiscal discipline’ announced by Shadow Chancellor Rachel Reeves in July, when she said that renationalisation would be incompatible with Labour’s new ‘fiscal rules’ to ‘restrain public spending’.
This is both madness and self-defeating.
As MMT for Progressives tweeted very succinctly this week:
The Left really needs to stop asking itself “Where will the money come from? And instead start asking itself, “Where will the money go?”
#MMT answers the first question, politicians need to answer the second.
It is ironic that the current government, whilst proclaiming its household budget credentials, actually already knows the answers to those questions. It knows where the money comes from and where it is going, whether it was dealing with the economic fallout of the pandemic, providing what support, however paltry, to citizens struggling during the pandemic or to pay their energy bills, or supplying military aid for Ukraine. But Labour, who cannot currently be described as being ‘on the left’, has fallen into the trap of seeking to defend its fiscal reputation by imposing fiscal rules which would be damaging to its management of the economy, in the event that it won the next election, whatever its political priorities were.
Understanding how our monetary system works is fundamental to creating a fairer and more just society for those who believe in economic justice, just as it is to create a less fair one. It all depends on the political priorities of those in power and the choices they make.
We have had Government Ministers on both sides that have failed or perhaps chosen to ignore the role they have played in setting the scene for the current crisis. The decline in wages, privatisation of public services such as the NHS and social care, the introduction of the profit motive to services which should be publicly run and properly funded by the government, and privatisation of strategic industries.
An article in the New Statesman suggested that the next general election will be ‘decided by big economic ideas.’ Oh, if only that were so. In this, the Mainstream Media is the enemy of the people when readers are confronted daily with orthodox economic propaganda which suggests as the Telegraph did this week that, ‘tax cuts need to be matched by shrinking the size of the state’, as if the two bear a direct relationship. Or the headline announcing that the pound had slumped ‘as rising costs trigger £4.7bn jump in UK borrowing to plug the gap between tax revenues and spending,’ as if government borrowing was an actual thing, not a question of smoke and mirrors to hide how the UK’s accounting model really works. Or finally, remembering the Tories’ destructive economic legacy, the priceless headline, ‘Our ailing economy needs another dose of Thatcher’s shock treatment.’ The media piper continues to lead the public down to a dead end.
Whilst neoliberal ideology still dominates, and the conversation continues to be framed in the narratives of household budgets, we can make no progress. We will fail to address the biggest challenges of our time from the climate crisis to the injustices which have been created by the prevailing toxic global economic system which is currently revealing itself in all its damaging nastiness.
We must start as a country to recognise that we do not exist in a bubble, and that we must seek as the US economist Jeffrey Sachs noted recently in an article in Consortium News, ‘the true sources of security: [which are] internal social cohesion and responsible cooperation with the rest of the world’. This applies not just to the hegemonic United States which has sought to impose its distorted version of freedom and democracy on the world to pursue its own power and influence agenda, but nations across the world. We must learn to work together.
The record profits of energy, oil and gas companies and of those dealing on world markets in vital food supplies such as grain, along with the associated profiteering and speculation which the crisis is driving, are causing great harm, particularly in the Global South. It is a shameful comment on the economic system which dominates our lives and benefits the few, through exploitation of human labour and the planet’s resources.
To put it bluntly, as Jason Hickel noted in a recent episode of Macro ‘n’ cheese:
“What we are seeing here is a systematic failure of the capitalist political economy and the capitalist class to deal with this problem. […] The capitalist system is still in place, still pursuing corporate expansion and economic growth for the sake of capital accumulation which continues to use more resources and more energy use, which also has impacts on ecosystems and other dimensions.”
We are rapidly travelling past the time necessary to change our economic model and recognise that without radical change humanity will cease to flourish. Let us not leave an inheritance of destruction for future generations. Let’s understand the real monetary possibilities offered by an understanding of how the government spends, and how they can be used to drive the real change we need.
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