“MMT is fully consistent with the notion that those who opposed government (deficit) spending for public purpose, might gladly embrace such spending if only directed towards subsidizing and ‘derisking’ the private sector, and maintaining the existing distribution of income and wealth.”
The events of the past week set the scene for an attempt at reinforcing the deteriorating economic and political order which has prevailed for decades. A system of class privilege, corporate power, and deference to a decaying royal institution. The death of the monarch poses an opportunity to distract a nation with endless pomp and ceremony whilst a government, headed by an undemocratically elected Prime Minister, pursues more of the same policies that have already created economic turmoil and will lead to further crumbling of public and social infrastructure, and deny the urgent action needed to address the climate crisis.
Furthermore, the UK does not exist in a vacuum. One cannot view the domestic crisis that faces us without placing it in the context of the geopolitical earthquake that is currently shaking the West, and the tectonic shifts in political power and influence that are currently taking place. Western leaders, with their heads in the sand, are still trying to play the game according to their rules and seem to be acting with complete disregard for the fate of their own citizens through their imposition of sanctions and oil price caps in response to a conflict that did not have to happen.
After decades of a neoliberal order which has created economic decay, increased poverty and inequality, and served the interests of multi-national corporations, who could have imagined the speed at which that established world order which has done so much damage is being threatened with change, and the boundaries of power redrawn. The outcome remains to be seen as yet, and the establishment will not let go of its power easily.
In the meantime, the domestic crisis grinds on, and the status quo looks set to dictate the pace, at least for the time being.
In the build-up to the wholly undemocratic election of the new PM, Liz Truss and her acolytes made it absolutely clear that actually no change to direction was being considered at all. In an interview, Truss suggested that it was ‘fair to give the wealthiest more money back’, through reversing the National Insurance increase imposed by the former Chancellor Rishi Sunak. She noted too, that whilst some people don’t pay tax at all, we should not look at everything through the lens of redistribution, adding that her objective was, ‘to grow the economy, which benefits everyone.’ It beggars belief that she supports a reduction that will benefit the highest earners 250 times more than the poorest.
As Prem Sikka noted in a tweet this week: ‘Tories have declared war on the poor.’
Those of us who have lived through the ‘trickle down’ lie which has permeated government policies over decades, will know categorically that nothing has trickled down, and that the fruits of productivity have been shared unequally, with ever more going into the hands of fewer people. The wealthier have got wealthier, and the profits of global corporations have become increasingly obscene, a fact which has become glaringly evident as major western oil companies report record profits.
Working people are enduring excessive rises in the price of energy, not to mention food. This distress has added to the economic pain they have already suffered, which has derived from a decade of Tory spending and legislative policies which have benefited corporations and allowed them to continue to exploit their power. Price gouging at its best. As the head of BP surprisingly admitted in 2021, his company is ‘a cash machine’.
Furthermore, plans by the new PM to scrap Sunak’s proposed increase of corporation tax will not, as trumpeted by her, incentivise more investment by companies, nor will her promise for ‘full-fat free ports.’ The evidence for such economic benefits has been shown to be thin on the ground. As Torsten Bell from the Resolution Foundation, and normally an acolyte of neoliberal thinking, suggested this week, ‘academic literature from around the world finds corporation tax cuts have no big overall effect.’ And LSE economists have also noted that ‘despite the evidence such handouts to big business do little to rekindle investment and growth’.
At the same time, Truss’s big plan to deal with the energy crisis which includes lifting the ban on fracking, (so much for COP 26), shows yet again who will be the beneficiaries of Tory spending. Take a guess. As Cat Hobbs, the director of the anti-privatisation campaign group We Own It noted, Truss is ‘handing out public money to the profiteers.’
This time it’s not the banks that are being rescued by the government; it is the privatised energy companies. Calls for those energy companies to be renationalised have been rejected by both parties, with Keir Starmer at neoliberal towers suggesting that you ‘can’t nationalise for free’. Frankly, that is just a lot of bilge.
With the government as currency issuer and legislator, it could do just that tomorrow. It is a political choice. But predictably, politicians on both sides of the political spectrum bow to markets and corporations, and suggest such action is unaffordable. For anyone interested, Professor Bill Mitchell discusses here in a 2016 blog, the case for renationalisation and notes that ‘There is no unambiguous evidence that shows the privatised sectors now offer lower costs, lower prices better services and better working conditions.’
It is absolutely laughable when the former PM, Boris Johnson, suggests people buy a £20 kettle to save 2.7p a day in electricity, or Edwina Currie announces that the answer to the cost-of-living crisis is to ‘stick tin foil behind one’s radiator.’ As they sit in their ivory towers looking down on what they consider as the lazy, undeserving, it clearly demonstrates their disregard for the struggles of working people who have been the unfortunate recipients of legislative and government spending policies.
Currie in a recent tweet asked the Money Saving Expert Martin Lewis ‘to stop using words like ‘catastrophe’ and instead advise people to take sensible steps to reduce the effect on their families and businesses. And stop pretending that governments can do everything. They can’t.’
This is neoliberal central. The idea that we are all responsible for our own fate. A point made by George Monbiot in an article in 2016:
“Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counterproductive and morally corrosive. The market ensures that everyone gets what they deserve.
We internalise and reproduce its creeds. The rich persuade themselves that they acquired their wealth through merit, ignoring the advantages – such as education, inheritance and class – that may have helped to secure it. The poor begin to blame themselves for their failures, even when they can do little to change their circumstances.”
Currie ignores the fundamental truth that during times of economic crisis such as the one which we are experiencing, it is only the government that can act to prevent a complete collapse of the economy, through its spending and legislative policies. That was the case for the Great Depression in the 1930s after an initial attempt to impose austerity which resulted in riots, it was the case during the Second World War, for the banking crash in 2008, the pandemic, and now the energy crisis.
Expecting citizens to help themselves in such circumstances is an easy piece of meaningless drivel designed to create distraction and divide people and is a cop-out of the biggest order. It is a denial of government powers to mitigate such crises. It is a denial of its currency-issuing powers. And a denial of its capacity to legislate to create a fairer foundation for national economies, whilst at the same time recognising its responsibility to balance the economy (and not the budget) to avoid inflationary pressures. Such recognition will also apply to the climate tsunami which is bearing down upon us, and which now seems to have been relegated to the back burner until economic conditions and the public finances have improved. As if the fate of the planet can wait. Fighting wars and filling the coffers of the military machine is also taking precedence over saving the planet for future generations.
Waiting for growth (and that concept is a whole separate question) to find solutions to the public debt or share wealth through trickle-down, as Truss demands, expecting taxpayers to come up trumps or the markets to lend, is just part of the smoke and mirrors which prevails in political, economic and media circles. No less so than during this last week when the PM announced her plans to deal with the energy crisis through borrowing. But immediately and predictably up went the cry by economists, politicians, and the media, ‘how will it be paid for?
Dr Jeevun Sandher, an economist and political scientist finishing researching inequality and poverty at King’s College in London, claimed in a tweet that ‘It’s irresponsible to borrow £130bn for an energy price freeze when we could get £75bn in windfall, wealth and corporation taxes.’
The Labour opposition leader, in his response to Truss’ energy statement, whilst calling for a windfall tax, claimed that this ‘support does not come cheap’ and that ‘the real question the government faces, the political question, is who is going to pay?’
In the same vein Grace Blakeley, an economics and politics commentator, journalist and author, tweeted that ‘there is more than enough wealth in this country to feed our kids. It’s just in the wrong hands.’
The predictable offering from those who should know better is that you just need to get the rich or the corporations to pay for it.
The same old narrative touted by so-called experts, that governments like the UK run their finances like household budgets. It is irresponsible of Sandher to talk about borrowing when the UK government doesn’t borrow to fund its spending, or for Starmer to suggest that windfall, wealth, or corporation taxes should be imposed instead. Such narratives are quite simply part of the smoke and mirrors which deceive a public that understandably equates its own finances with how the government spends.
An understanding of monetary reality allows us to challenge that model and show conclusively that it is never a lack of money which prevents governments from acting. As has been said many times before, governments make political choices to fund their priorities, and the only constraint to that spending is the availability of real resources. With this understanding in mind, it is clear that there is no justification for allowing people to go hungry or be homeless, or to lay waste to the public and social infrastructure that a healthy economy depends on.
Equally, citizens, whether present or future, are not harmed by government debt, assuming it is measured in a country’s unit of currency and where those government liabilities can always be settled by the currency-issuing government. It is best described as a public asset, but fear of it is used by those in power as justification for austerity and cuts. We are paying a heavy price for ideology.
Citizens are, however, harmed by the ideologically driven decisions governments make in relation to who benefits from its spending. In the case of the energy companies, it is clear who will be the beneficiaries, just as it was during the pandemic when all and sundry got in on the corporate welfare act, often with the help of their MP mates, while ordinary people got the scrapings from the table.
Taking this argument a step further, out of the domestic context, world citizens will also be harmed by the failure of governments to address the climate crisis through adequate spending and taxation policies to drive change. This cannot be left to transnational corporations who dress up their strategy in false green credentials, and whose objectives are less about the preservation of the planet and more about how to keep their profits rolling.
While preparations for a funeral continue, a new king is proclaimed, and the life and times of a departed monarch take precedence in the mainstream media whose coverage is wall to wall, a Guardian headline, ‘World on brink of five ‘disastrous’ tipping points, study finds’, is relegated as an after-thought to a less prominent spot. Whilst the study suggests that giant ice sheets, ocean currents and permafrost regions may already have passed the point of irreversible change, the authors stress that it is ‘not too late to change course.’
This is no time for silence. Accepting a continuing economic and political status quo, based on class privilege and deference, excessive wealth by the few, and corporate power will be a recipe for disaster. Understanding monetary reality isn’t a solution in itself, but awareness of the possibilities it offers to address the climate crisis which threatens human existence, and the global poverty and inequality that the current economic paradigm has created, is.
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