“It is a trope of twentieth and twenty-first century-life that governments faced with financial shortfalls look first to the services they provide their citizens when making cuts. Instances like these are innumerable and span every country in the world. When this happens, they produce highly predictable, uniformly devastating effects on societies. Call it the ‘austerity effect’; the inevitable public suffering that ensues when nations and states cut public benefits in the name of economic solvency and private industry. […] austerity policies underscore the most common tropes of contemporary politics: budget cuts (especially welfare expenditures such as public education, health care, housing and unemployment benefits), regressive taxation, deflation, privatisation, wage repression and employment deregulation. Taken together, this suite of policies entrenches existing wealth and the primacy of the private sector, both of which tend to be held up as economic keys that will guide nations to better days.”
Clara E Mattei – The Capital Order; How economists invented austerity and paved the way to fascism.
Photo by Ricardo Stuckert/PR on Flickr. Creative Commons 2.0 license
It’s difficult to know where to start this month’s blog. If one thought one could not get further down into Alice’s surreal world in the rabbit hole, as we consider both the connected domestic and international crises and the reactions to them, then we would be deceiving ourselves. Any sense of ‘normality’, however one might define that word, has been replaced by a world at war with itself, geopolitically, socially, and environmentally.
Whether we wish to engage with it or not, we are living in epochal times. The dominant western economic structures, instead of creating a more stable and equitable world have delivered the exact opposite. They have propped up vast inequalities in wealth, and mercilessly exploited humans and real resources. They are responsible for ecological overshoot and the associated plundering of resources, and destruction of planetary life support systems. In other words, living beyond the planet’s means, and all that will signify for human existence. They are connected to the game of empire where the rules are imposed by the reigning hegemon intent upon maintaining its power at any cost, including political interference, bloody wars, regime change, and building military machines to maintain that dominion. All in the name of the illusion of freedom and democracy. The picture that is painted to justify actions, but which scarcely has any real meaning in the lives of citizens in many countries around the world.
Those structures are revealing themselves in their true nature as sand which is shifting under our feet, exposing in all their horror their unstable and exploitative nature, and, at the same time, aided by a compliant media, leaving us feeling disconnected from any sort of reality. It isn’t any wonder that many of us choose to hunker down in ignorance. Challenging our belief systems is hard in itself, but actively doing so in a world of a media controlled by the Establishment, makes it doubly difficult.
One might think at times that the world presented by that media doesn’t seem to fit with any sort of reality. If it weren’t so serious, it would be laughable. Last month, the G7 met in Japan. In its final communiques, it promoted its intention to create ‘open, transparent sustainable societies that champion human rights, justice and dignity and address the needs of the vulnerable’. A world in which they reaffirm their intention to ‘promote security and continue building a global community that leaves no-one behind…and to work together to build a better more prosperous and more secure future’. It is, however, the exact reverse of where we are, despite decades of similar promises.
Surely, it cannot have escaped our attention in a world that increasingly finds itself in chaos and social, economic, and environmental breakdown, that this rhetoric, remains just that, elusive and undelivered, despite, for example, numerous anti-poverty campaigns down the decades. Campaigns that never sought to challenge the system, only mitigate it with charity and aid.
The real question is why? How can it be delivered, based as it is on the dominant economic structures which dictate policy? As Jason Hickel noted in his book ‘Less is More’.
‘This is the core principle of capitalism; that the world is not really alive, and it is certainly not our kin, but rather stuff to be extracted and discarded – and that includes most of the human beings living here too. From its very first principles, capitalism has set itself at war against life itself.’[…].
For the past forty years, guided by the dogmas of neoliberalism, governments have privatised public services, slashed social spending, cut wages and labour protections, handed tax cuts to the richest and sent inequality soaring. In an age of climate breakdown, we need to be doing the exact opposite.’
This neoliberal dogma has been underpinned for decades by world institutions like the IMF and the World Bank, along with national and supranational entities like the EU, by the notion of affordability. That is the measure that is used to determine government policy and spending choices. Across the board, austerity in one way or another is a political act, a choice not borne out of any sort of monetary reality. The damage that it has done to the functioning of societies around the world, including the UK, is immeasurable. From structural adjustment programmes imposed on indebted poor nations in the Global South, to austerity as a response to economic crises such as occurred in 2008, which did so much damage in the US, Europe, and the UK alike, and in which we are still mired in, due to its consequences.
Such ideas are promoted by all parties as being necessary to restore the public finances, regardless of the pain they cause to the most vulnerable in our society, the decay of public services and infrastructure, or the effects they have on a wider economy. Instead of renewal, it brings pain and suffering to those who have no control over their lives. We are invited to be willing sacrificial lambs.
George Osborne’s austerity programme is a case in point. In 2019, the UN Rapporteur, Philip Alston, called poverty ‘systematic ‘and ‘tragic’, saying that ‘ideological cuts’ to public services since 2010 had led to ‘tragic consequences.’ He also said that government policies had led to ‘systematic immiseration’ of a significant part of the UK population, meaning they had continually put people further into poverty. The government, however, remained in denial about those consequences and still does.
That was the backdrop to the pandemic and the ongoing cost-of-living crisis. Crisis upon crisis for public services unable to navigate the emergency adequately, and those who had been at the sharp end of government spending policies for a decade.
Now, after a period of higher government spending to support the economy through the pandemic, and the subsequent disruptions to the supply of food and energy resulting from the conflict in Ukraine, the same old story about the need for fiscal discipline is being resurrected by all political parties. And while some economists on the left of the spectrum might agree that austerity has done a great deal of damage, they still can’t quite let go of their household budget credentials.
The big story these last few weeks did not originate in the UK but in the US and serves to illustrate the point. The US debt ceiling. The political and media rhetoric on the subject has been shocking. Janet Yellen warned that without more borrowing, the US would not have enough money to meet all of its financial obligations, Ron De Santis (Republican and governor of Florida) claimed that the US was ‘careening towards bankruptcy’, and Kevin McCarthy, (the Speaker) promoted the old canard that the US was in debt to China. Even the BBC, not unsurprisingly, jumped on the bandwagon with its article ‘US debt ceiling – what it is and why there is one?’, in which it suggested that the government could have run out of money and defaulted on its debt if an agreement to lift the country’s borrowing limit hadn’t been lifted.
However, the debt ceiling is not a natural phenomenon, it is a politically motivated decision made by those who, to serve their agenda, portray public spending as a household budget which relies on income or borrowing to spend. This is just all part of the smoke and mirrors that politicians of whichever stripe or whichever nation’s government use to justify austerity policies which impoverish people and lead to the decay of public and social infrastructure.
And yet, at the same time without a blink of an eye, those same politicians have no trouble pouring billions of dollars into the industrial military complex or fomenting wars around the globe to pursue their geopolitical agenda. A hierarchy of extreme wealth and extreme poverty, along with exploitation. The degradation of people, the land, and seas, to keep the capitalist truck rolling onto its inevitable end, led by the supposed immutability of the ‘Great Arrow of Progress’.
Whether it’s the US, the UK, or Europe, citizens are bearing the damaging brunt of political choices made by politicians with psychopathic tendencies. Deliberate harm meted out for a lie.
Over the last few months, that same destructive narrative has continued to rear its ugly head in the UK. Last month the Chancellor, Jeremy Hunt, demonstrated either economic ignorance or those same psychopathic tendencies already mentioned, when he suggested that he was ‘comfortable with Britain falling into recession, if it is necessary to defeat inflation.’ He said that ‘I have to do something else, which is to make sure the decisions that I take as chancellor, very difficult decisions, to balance the books so that the markets, the world can see that Britain is a country that pays its way – all these things mean that monetary policy at the Bank of England (and) fiscal policy by the chancellor are aligned.’
A better headline in the Telegraph which reported his words, would have been, ‘Chancellor comfortable with rising unemployment’, with a sub-headline, ‘Let’s see how much harder I can make life for people, by consigning them to the unemployment scrapheap, and keep the markets happy while I’m there.’
Some might say that he is an economic ignoramus following the herd, bowing to the infamous god of the market and central bank monetary policy, whilst aligning it at the same time with fiscal policy which, on both counts, will create more economic pain for working people and their families. One might even think it is a deliberate attempt to maintain an economic system which uses interest rates ostensibly to control inflation but which, in reality, subdues labour power and controls wages.
Such thinking is embedded and promoted in the public domain. At the same time as the Telegraph reported that a former Bank of England official had suggested that interest rates would have to rise further and more aggressively, Sky News ran an article with the headline ‘A rising unemployment rate gives further reason to hope interest rate rises will now be paused.’
That anyone celebrates unemployment and the suffering it brings is shameful, verging on sadistic. This is everything that is wrong with monetary policy. Inflation is not being driven by rising wages, it is being driven by greedy corporations exploiting continuing supply issues. Profits over ethics. So, let’s punish the victims, not the perpetrators. Those lumbered with higher mortgages, credit card debt or potentially in the unemployment line. When hurting people is defined as an economic necessity, isn’t it time we swept away the economic system that perpetuates it?
Those ‘difficult choices’ are just another re-working of Thatcher’s ‘There is no alternative.’ We should be clear, this is a political decision, a choice to make life harder for people, deny them functioning public services and other vital infrastructure, good health and education, secure employment with good wages.
When a has-been politician suggests that in this time of cost-of-living crisis that there is ‘no given right’ to low food prices, and that if people can’t afford the ingredients for a cheese sandwich, then they should go without, it clearly demonstrates the thinking that goes behind Jeremy Hunt’s and previous Chancellors’ decisions. Instead of providing the ingredients for people to live the best lives they can, supporting them both during good times and bad, the government is committed to denying them that possibility. A choice that the government could change through using its powers of the public purse, not just for the public good today, but also to prepare for what is likely to be a very uncertain, unstable world tomorrow.
Depressingly, the same narrative is repeated in the opposition ranks. Fiscal discipline over public purpose. Promises for a better tomorrow if and when we have balanced the public accounts.
Rachel Reeves, in a speech made last month in Washington DC, suggested that her ‘securonomics’ strategy would be ‘built on the rock of financial stability and economic security.’ In a Guardian article she was reported to have ‘conceded that Labour would not be able to do everything it wanted to do because money would be tight, but […] insisted that the party’s manifesto policies were all fully costed.’ She also promised to ‘cut Britain’s debt burden by binding a future Labour government to strict borrowing limits.’ After all, in this false narrative, the money has to come from somewhere.
There, in just a few words she consigned Labour’s ‘green prosperity plan, whatever that means, to the dustbin of history. If fiscal rules are allowed to dictate what can be achieved, then economic security is a political pipe dream, and the green prosperity plan is not worth the paper it is written on. When most governments around the world are mesmerised by fiscal discipline, then a future which delivers a healthy economy, citizenry and planet, hangs in the balance.
Rachel Reeves, in her recently published report, ‘A New Business Model for Britain’, (the title of which tells one a lot), wrote, ‘I believe that a good society can only be built on a strong economy.’ Those words sound remarkably similar to Jeremy Hunt’s who said in 2016, ‘A strong NHS needs a strong economy.’
The implication is that a civilised society arises out of the tax revenue that is realised when an economy is growing, along with the sound management of the public finances. In other words, a civilised society is dependent on taxpayers.
Reeves went on to say that ‘A modern state must be more active making and shaping markets that are essential to a nation’s resilience and prosperity’, but typically then frames it in the language of fiscal rules and dealing with debt, she, just like the Tories who through the politics of austerity starved public services, is using the same arguments that serving public purpose is dependent on tax. which in turn, is dependent on a strong economy.
Here, once again we have the ‘jam tomorrow’ proposition. So, logically, Labour or indeed any other political party can only deliver a green plan for prosperity once the economy is growing again. Indeed, a Labour spokesperson has confirmed it in a recent Guardian article:
‘The green prosperity plan, along with all of our policies, is subject to our fiscal rules being met and fiscal stability being maintained as we seek to tackle climate change – one of the biggest challenges of our time…’
As the ‘waters’ pass over our heads.
For starters, the growth proposition defies common sense in a world in which we are already exceeding the ecological limits to planetary sustainability, and which is structurally unstable as a result of ‘manmade’ rules, and for all the reasons discussed above.
In such circumstances, it is not clear what can be achieved, and certainly that ‘going for growth’ plan is not guaranteed to be successful in these unstable times. And, undoubtedly, it is not a framework that can deliver a sound economy. We need to build an economy on firm foundations, not shifting sands, so we can address the coming existential challenges posed by climate change and ecological overshoot, to create a fairer distribution of wealth and resources and weather the inevitable economic cycles humanely.
At the top of the list should feature sound economic strategies which put public purpose first to serve both the citizens of today and tomorrow. Such a sound economy depends primarily on functioning public services, access to good healthcare and education, a social security system which treats people with respect and provides adequate support, good wages, and secure, truly productive employment.
Instead of ‘fostering new partnerships between the free market and the active state’ as Reeves proposes, and which suggests the maintenance of the current rotten, toxic neoliberal status quo of a cosy relationship with the corporate establishment in which public money flows into private profit, government should be acting for its citizens. As the holder of the public purse and with its legislative power to set the rules, the government is acting in the interests of quite another estate, and as such, people’s lives will continue to be ruined as public infrastructure decays and environmental degradation continues.
When all is said and done, fiscal rules are nothing better than a killing machine, whichever side serves them up in fancy words.
So, when Keir Starmer says, ‘The money you need for the NHS will only realistically come if we’re able to grow the economy’, know that he is lying. The economic circumstances are irrelevant, and if truth be known, Labour has quite another set of plans for the NHS, and that doesn’t include restoring a universal, publicly funded, managed and delivered service. As the economist Steven Hail tweeted:
Imagine just after WWII the UK Govt had said
‘We can’t have an NHS yet. We will put some money into a fund, and if it makes a profit, then eventually we will be able to pay for an NHS, although if there is a loss on financial markets, unfortunately not.’
This is where we are
— Steven Hail (@StevenHailAus) May 21, 2023
Whether it’s Conservative or Labour, Republicans or Democrats, or the unelected politicians in Brussels making the rules, financial constraints are constructed limits, not natural ones. The only real limits to spending are those of real resources, human, or those used in the manufacture and provision of goods and services. The decisions are not financial, but how those real resources will be distributed and to whom, to create a stable functioning economy.
In these days, when politicians cannot be unaware of monetary reality, one can only assume that they stick to their narratives because otherwise they would have to explain to the public the political decisions that they make about spending and its beneficiaries. It would also mean challenging the economic status quo which serves a bloated, greedy corporate estate, not to mention an increasingly wealthy few.
When the former Labour Chancellor, Gordon Brown, thinks we need a ‘distribution revolution for the urgent relief of poverty in our midst’, he is entrenching that killing machine. Plugging the gaps with charity and other aid whilst necessary to alleviate the current deliberately constructed suffering, should not be considered a permanent solution.
What we need is a government that actually acts in the interests of citizens through its spending and legislative policies, not expecting the Big Society, charity or volunteering to step in and shoulder the burden.
Politicians, like Reeves with her fine-sounding pledges for a nation built on fairness, are offering little more than a deceitful illusion when neoliberal ideology remains firmly in the driving seat and sound finances dictate the strategy. It is no accident. We are being scammed by a dishonest, greedy, self-serving political class.
While fiscal discipline remains the guiding principle for government policy, lives and real potential for change will continue to wither on the vine. Again, austerity is a political choice dictated by a lie. Its aim is to divide and control society to maintain the capital order, meaning who gets the wealth and resources. It cannot be emphasised enough, that poverty and unequal access to those resources are political decisions unrelated to the state of the public finances.
Until we have a government willing to use its currency-issuing powers to address the economic and social decay, which is blighting society, the parasitic status quo will continue.
Watch the Power of the Pound video to reveal the scam by explaining how government really spends and shows what is possible with this understanding.
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