“As long as we labour under the delusion that financial choices are the same for a government as they are for households or firms, who don’t have a [central] bank or a money printing machine in their front room whenever they need to spend, we’ll be having the wrong conversations”.
What a week that was! As the political pundits dissect the results of yet another round of so-called ‘democratic’ local elections, the other charade plays out. The crowning of a king aims to distract a disenchanted and disenfranchised public with the costly pomp and circumstance of ‘a people’s coronation’, while the media obliges with wall-to-wall coverage of the event.
Behind this unreal façade lies something much more sinister. The growing immiseration of the people stands in contrast to a world of elite privilege and wealth. Not an accident but by design. As Clara Mattei suggests in her book The Capital Order;
‘…austerity policies cannot be reduced to mere fiscal or monetary policies from central government institutions. Industrial policies, public and private, that create favourable conditions for profit and discipline workers are central to austerity. […] Our experts’ fixation on debt repayment, balanced budgets, foreign exchanges, and inflation reveals a more fundamental purpose: taming class conflict, which is essential for the continued reproduction of capitalism.’
Whilst austerity is not a new phenomenon as Mattei shows in her book, the Conservatives have made it into an art, or rather the starting point for all their policies, with hugely damaging consequences. Labour, by the same token, is driven by the same principles that balanced budgets come before the economic well-being of citizens. Pledges fall at the first hurdle – fiscal discipline trumps common sense and monetary reality.
According to the household budget logic that reigns in Labour circles, not only can’t it commit to a full pay restoration for the junior doctors because it won’t know what the state of the economy will be, if and when it returns to power, but now it has also done a U-turn on its promise to abolish tuition fees because, apparently, we are ‘in a different financial situation’. The economic circumstances may well have changed, but what hasn’t is that the government is monetarily sovereign. However, it is becoming ever clearer that fiscal discipline is hard-baked into the economic system, not because it is necessary but because it suits the political class to impose it for the benefit of the rich elites to whom they are joined at the hip. How many more promises will fall by the wayside on the basis of a lie that they are unaffordable?
While Labour rows back on its promises, it then further entrenches the same false narrative by declaring, in the words of Keir Starmer, that Labour, ‘would deliver a proper windfall tax on oil and gas giants to freeze council tax.’ He tops off the nonsense with the predictable gibberish that, ‘Labour has a fully costed plan to cut the cost of living, making you better off.’
Please don’t be taken in by these shallow sound bites. What they actually promise is the reverse. Taxing the gas and oil giants may be a good plan for the purposes of equity and reducing influence, but it won’t improve the spending capacity of the government one penny, and a fully costed budget implies financial limits. Politics may indeed be about choices as Starmer tweets, but it is not about divvying out a limited pot of money. Rather it is how real resources are distributed and to whom.
As economist Bill Mitchell explains:
“Tax revenue does not provide the government with any extra spending capacity. The taxation just ensures it can buy productive resources from the private sector without having to enter a bidding war for their services.”
The only plan required by any government dedicated to meeting the needs of its citizens is one that means functioning, publicly paid-for and managed services and supporting infrastructure, full employment policies and a strategy to create an environmentally sustainable economy. That is a government in service to the people, not a government in service to the corporations and the wealthy elites. In the current economic climate, the responses to which are dictated by the politics of austerity, that prospect seems non-existent.
It’s time to ask ourselves what is the role of government, and how do we measure its economic success or otherwise? Should it not be to create a functioning economy, redistribute real resources equitably and ensure that public infrastructure meets the needs of society for today and tomorrow? It shouldn’t include counting the pennies and balancing the books or giving itself brownie points for fiscal discipline and sorting out the financial mess the previous government left. The message should ring out loud and clear. The measure of a government’s economic record is not the state of the public accounts, but what it did to improve the lives of citizens.
And yet, it is difficult to escape the drumbeat of austerity. Apparently, we’ve had the jam in increased public expenditure resulting from the pandemic, and frankly the harmful economic consequences of an avoidable war, and now we have to pay for it, is the inexorable message from all quarters, political and institutional, while the instruments of dissemination, the media, pump out the message in the daily grind.
Huw Pill, an economist at the Bank of England was explicit, ‘people need to accept’ that they are poorer. How poor? Starving? Homeless? Dead?
Against a backdrop of structural poverty and inequality, people are being asked to accept their condition as necessary to the economic health of the nation. The ‘we can’t afford it’ message has created a vicious circle of deprivation; all for the golden grail of balanced budgets which should, in reality, be translated as who gets the pie. Cruel experience on that score should be our teacher. While governments sell us the narrative of growth promotion, (and that is quite a separate discussion), to create the tax to spend on public services, they remove the very building blocks that facilitate it through their obsession with austerity. But we should be clear, this is about keeping power firmly in the hands of the wealthy elites and nothing less.
The consequences are no longer behind closed doors, they are in full view. Austerity harms and kills. Not only has data shown that over 300,000 excess deaths can be directly attributed to UK government austerity policies but people’s lives are being wrecked by it.
The Trussell Trust reported last month that a total of 2,986,203 emergency food parcels were given out between April 2022 and March this year, with more than a million being provided to children.
Brian Thomas, Chief Executive at South Tyneside Foodbank, commented:
‘We are experiencing an unprecedented rise in the number of people coming to the food bank, particularly employed people who are no longer able to balance a low income against rising living costs. We’re also seeing a really high number of families needing support as people struggle to afford the essentials. Food donation levels are not keeping up with the significant increase in need and this is putting us under a lot of strain, it’s a real pressure cooker situation for food banks.’
The ideology of austerity is hard-baked into every aspect of our lives, not just in monetary terms, but also in terms of who is responsible for a functioning society. Over decades we have seen a gradual shifting of accountability from government to the wider society, charities, and volunteering.
Tony Blair started the rot by embracing charitable partnerships which, over time, became the pillar that, along with austerity, propped up the economy and society, until now that is, as charities find their donations and other support drying up. As an aside, it is ironic that the savings guru Martin Lewis called on government in 2021 to bail out charities at risk of collapse due, he said, to Covid.
The bigger picture is the one of the consequences of government austerity, piled on to by the pandemic and a war which have induced a cost-of-living crisis, adding to a society already creaking at the seams, in every way.
It is a shameful state of affairs when the current Chancellor of the Exchequer, Jeremy Hunt, tweets thanks to those who donated to raising money in the recent London Marathon for a, ‘state of the art Cancer and Surgical Innovation Centre’, when it is that same government that has played an ongoing part in the demise of the NHS. Whose objective has been to create a US-style, two-tier health service, not because there is no money, but because it serves its ideological preferences. That of the merging of government with big business to ensure profits continue to flow, meaning, in reality, public money pouring into private profit at patients’ expense. All part of the plan. Not a small state but a state funding of corporations, instead of providing publicly paid-for, managed and delivered services.
We should all know by now that a country that issues its own free-floating fiat currency is never fiscally constrained. In the words of John Maynard Keynes, ‘Anything we can actually do, we can afford.’ Meaning that it is always a question of how finite real resources are used and for whose benefit.
As MMTer Malcolm Reavell so rightly states in a recent article on Medium ‘…funding the NHS is a policy choice. It is also a policy choice to defund it and privatise it.’
To continue the story, David Cameron’s Big Society speech in 2010 was followed a few years later by the founding of Pro Bono Economics, which was co-initiated by a former Bank of England economist Andy Haldane, who said shamelessly that volunteering was ‘good for the economy’. What he meant was, people working for free!
However, predictably, as the economic situation has gone downhill, that enthusiasm has declined. Figures from the Civil Society Organisation show that there was a general decline in volunteering between 2005 and 2015 which has been further highlighted in more recent times by the reduction during the pandemic and the apparent lack of interest in the Big Help Out project being promoted as part of the coronation celebrations.
As Sabine Goodwin, coordinator of Independent Food Aid Network which represents 1,172 food banks across Britain, noted in an article:
‘No amount of goodwill and generosity can replace a person’s right to be able to afford a decent standard of living. Compassion is vital but a day of volunteering can’t address the poverty and inequality crises in the UK today’.
What she undoubtedly meant is that volunteering cannot replace a government that acts in the best interests of citizens, to ensure public purpose through its spending and legislative policies. What the Conservatives have created is a broken society, hanging on by a thread, and increasingly affected by the consequences of low wages, underemployment, and insecure working practices, not to mention a collapsing public sector and vital infrastructure.
What we have is a government that has chosen to impose austerity as a deliberate political choice. In doing so it has denied people a stable existence and all that means for a stable, functioning economy.
Volunteering has been used by government to wash its hands of responsibility for the health of the nation and we are now living the consequences. As a part of service to one’s community, volunteering may have a role to play, but only in a functioning economy. Serving public purpose starts with government, not with charities or community-minded individuals wanting to give back. As donations or volunteers dry up, it exposes with clarity the cracks in the ‘Big Society’ model promoted by those wanting to abdicate responsibility for citizens who are being nudged into accepting responsibility for their own fate. This shows us that what is needed is for these voluntary roles to be replaced by public-sector jobs, to secure service provision as well as providing good quality employment for the workers.
While our public and social infrastructure decays before our eyes, in other news the IFS published its report, ‘Challenges for the UK Pension System; The case for a pensions review.’ Predictably, it didn’t take long for The Telegraph to sound the alarm with the headline, ‘The generation doomed to pension poverty; Falling home ownership and poor investment returns threaten the living standards of future retirees.’
According to the paper, future pensioners are ‘hurtling’ towards a pensions crisis. Predictably, the blame lies with people who are not saving enough, rather than with Mrs Thatcher whose pension reforms in the 80s lie behind the current ‘failure’, in what was a deliberate attempt to undermine and weaken the state pension system, using the promise that markets could, and would deliver. They didn’t and haven’t.
Thatcher talked about choice and claimed it was anathema to socialism. We are now paying the price for the illusion of choice, and relying on fickle, unstable markets to deliver a stable retirement, which is also dependent on people being financially able to retire. It’s all very well to tell people to save more to avoid their coming penury but expecting them to do so in times of economic crisis when their incomes are insufficient, is unrealistic to say the least. Saving for a pension in such times is a luxury for many.
If three million people are failing to save enough, there is a reason for it. A government obsessed with fiscal discipline instead of economic well-being. And let’s not forget those who don’t have the financial means to save for retirement, and who must rely on a paltry state pension to survive.
In a similarly titled article in the same paper, ‘The era of the state pension is almost over; The kindest thing we could tell young people is: don’t expect a taxpayer-funded retirement’, we are being led to believe that the state pension is no longer affordable given changing demographics. The claim is that unless we deal with this coming disaster it will be a heavy burden on future taxpayers. So, in effect, whichever way you look, pensioners are according to this message, going to live miserable lives in poverty and die young.
There is an alternative to the scam of private pensions where greedy pension companies take their cut in fees, are not beyond behaving badly as in the pension mis-selling scandal, and where pension pay-outs are liable to the ups and downs of the economic cycle.
To reiterate the oft-made point that, with the government as the currency issuer, as such there is nothing to stop it from paying people a good state pension, assuming that it has spent enough on creating the infrastructure that creates a productive economy. So far, there is little evidence that successive governments look beyond their own term in office.
Let’s stop allowing politicians and pension review bodies to fob us off with the lie that as birth rate demographics change, state pensions will become unaffordable and necessitate delaying retirement, or that the triple lock will have to go. All just part of the smoke and mirrors keeping people chained to a rotten economic system which survives through enslaving its citizens and keeping them in mortgage and tuition debt, to keep the profits flowing. It’s as if history and all previous economic collapses have taught us nothing.
We have paid a heavy price for Liam Byrne’s now infamous joke note left to his successor at the Treasury, which advised him that there was ‘no money left.’ It should leave a sour note in the mouth, given how it has been cynically used by all parties to justify their spending policies both in the past, and in what is being proposed in the future. On this basis, the future could seem very bleak, particularly in existential terms, as governments fail to grapple with the pressing challenges of climate change and continue to allow the polluting corporations to greenwash the world with their smoke and mirrors. Recent data collected by the US National Oceanic and Atmospheric Administration puts us in, ‘uncharted territory’ as, ‘unprecedented warming indicates climate crisis is, according to scientists, taking place before our eyes.
All political parties, even those that have recently been considered progressive, such as the Labour blip under Jeremy Corbyn now firmly reversed, have promoted household budget models of the public accounts. The fact that they continue to do so should be of no surprise to anyone. Both main parties shroud their proposals in lies to justify more austerity. Not because it’s necessary but because it suits their political agenda. Neoliberalism is a pervasive ideology which has infected the world of politics and drives policy. Such narratives ultimately constrain what is achievable and promises that are made are conditional on economic circumstances which, as we know, are unpredictable and veiled in uncertainty.
Contrary to what we are told, public debt is not the enemy, austerity is. And yet political parties around the world, and global institutions like the IMF are still proposing it, as if balanced accounts are the panacea for all economic ills. Public debt in itself tells us nothing about economic reality but such debt-mongering influences public opinion and keeps the status quo in place.
Talk of ‘fiscal consolidation’ should be replaced with spend now for a better future tomorrow. Our measures of economic well-being should be those related to public infrastructure, employment levels, job security and wages, and who has been the beneficiary of public spending. Without such discussions, our future risks a further descent into more societal, economic and environmental decay for which the human price will be high.
We can demand better if we are equipped with the knowledge to do so. To emphasise yet again, the question is never ‘is there enough money’ but ‘what resources do we have and how should they be distributed?’ In other words, who should benefit? People, public infrastructure, the environment, or the wealthy few? These are political decisions, and people are dying in every sense of the word for a lie.
As the BBC’s economics correspondent, Andy Verity recently tweeted, ‘It’s not the public finances that constrain us so much as a lack of imagination and political vision. It’s finances of hard-pressed households, not government finances, that are the locus of human suffering right now – and which therefore should be the focus of policy attention.’
And that goes for just about every measure of human existence.
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