10th April 2022 – by admin
The Gower Initiative for Money Studies https://gimms.org.uk/2022/04/10/people-over-myths/?fbclid=IwAR0A0s2KYC6QqVr_h9tELePRy6_vVyyDkni5695sWYSfLQjem3M5DTj0y5U
“Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius — and a lot of courage to move in the opposite direction.”
Illusionists with their smoke and mirrors and monetary make-believe rule the roost. After the Chancellor spent big, doing only what a sovereign currency-issuing government can do to stop an economy from collapsing, the message now being promoted by that same Chancellor is that fiscal discipline must take precedence; that getting the public finances under control is vital to the future health of the economy, but noting at the same time, that his £30bn ‘fiscal headroom’ could be threatened by energy market volatility. Sunak, still in household budget mode, has also been clear that he is not prepared to sacrifice his fiscal target of keeping debt falling, supposedly to protect future generations from excessive tax burdens.
The nonsense keeps coming. Here we have it yet again. Sunak claiming that he’s got a difficult job divvying up scarce monetary resources when nothing could be further from the truth. Or suggesting that too much spending now will burden future taxpayers. All this is artifice and trickery and represents self-imposed and unnecessary targets for the public finances, not monetary reality.
The reality is that it is only real resources, not monetary ones, that give life to and sustain an economy. From people to the physical resources employed in providing the things that keep society functioning. That is what must be managed for the public purpose. And the only burden that will be faced by future generations will be the one caused by insufficient government spending today to ensure a productive and sustainable future tomorrow.
Others, like Boris Johnson, alluding to the household budget narrative of how government spends, said this week that he had no problem with raising National Insurance contributions to help fund the NHS. The banker from the Department of Health, backing up his leader, suggested similarly that this increase was both right and a fair way to fund it.
In the light of the Chancellor raising the NI threshold, after the rise had been sold to the public as being necessary to fund the NHS and social care, it reveals a simple truth. It demonstrates the nonsensical position that taxes (of any sort) fund spending. Since, according to the prevailing myths about how government spends, the Chancellor will now have to find the funds to make up the shortfall arising from raising the NI threshold, and begs the logical question, where will the money come from to plug the gap? The Guardian suggests that it will come from general taxation, and yet again, we have the media, unsurprisingly, pushing a defunct model of government spending.
The government will, instead, as it did for the banking crisis in 2008, and the pandemic, create it out of nothing, as it always does. Because, quite simply, taxes do not fund government spending. But of course, it is not in the interests of the powerful for the general public to know that – they might in Oliver Twist style, revolt and ask for more.
This tax will do nothing to fund the NHS or social care, or any of the other things being claimed for taxes as a whole. Furthermore, it is a regressive tax which, regardless of the threshold rise, will do nothing to help the low paid, as inflationary pressures bite and the cost of living rises, taking as it does, more from the poorest than from the wealthiest.
The government, Johnson said this week, has to do ‘difficult things, … take big decisions.’ Gosh! Really? So, when pressed about the cost-of-living crisis he agreed that people would have to choose ‘cheaper food, old clothes and no heating.’ It seems that hurting the poorest, sickest, and most vulnerable in our society, whilst at the same time driving the economy further into the ground and affecting everyone, is the price we must pay for the government’s economic mismanagement.
What government chooses to impose further harm on those who have suffered the consequences of government policies over a decade by suggesting again that there is no alternative to austerity? What responsible government chooses book balancing over national economic well-being at a time of economic uncertainty? This is a government with its currency-issuing powers shifting avoidable pain onto a nation already burdened and facing worse to come. As Michael Marmot noted this week ‘Poverty is literally a matter of life and death for those on the margins, and the government has so far failed to step in.’
And yet, the illusion of truth continues to keep the public blindfolded and compliant to the message that fiscal discipline trumps human well-being. When there is an alternative.
As a result of insufficient government support, recession, which will affect individuals and businesses alike, cannot be far behind. These are not the actions of a government that has the interests of its citizens at the forefront of its mind, or a functioning economy. Without sufficient spending support, the economy will shrink. As people have less in their pockets to spend, businesses will stop investing and reduce their inventories, unemployment will rise and living standards will continue to fall. It becomes a vicious circle. Many think tanks, even while they promote the household budget model of the state finances, acknowledge that the Chancellor’s actions or lack of them will cause further harm to the poorest.
Clearly, Government ministers have also been on the orthodox economics induction course. Sajid Javid, the Secretary for Health, fresh from his 101 class said this week:
“When we spend money on public services, whether it’s NHS or anything else, for that matter, the money can only come from two sources. You raise it directly for people today, that’s through taxes, or you borrow it, which essentially you are asking the next generation to pay for it.’
For forty years, Margaret Thatcher’s dictums have guided the spending policies of both the right and left of the political spectrum. Whilst the right wing pushes its fiscal discipline message (with jam tomorrow, maybe, possibly, let’s see), the left wing embraces a false narrative by talking incessantly about raising revenue to pay for its programmes from taxing the rich, or most recently imposing windfall taxes on the fossil fuel corporations that have exploited the current economic instability to increase profits and CEO pay. Whilst it was shocking to learn last month that the CEO of Shell took home a monstrous £6.1 million pay package, it doesn’t change the fact that such ‘windfall’ taxes would not fund anything, let alone provide better public services or a fairer distribution of wealth. Indeed, taxation has quite a different purpose.
And yet as corporations price gouge and rake in higher profits, as reported in the MMT Lens two weeks ago, the Resolution Foundation forecast that the fall in real incomes would push a further 1.3 million people in the UK into absolute poverty, including 500,000 children, bringing the total to 12.5 million. When we talk about the cost-of-living crisis, it fails to convey what this means to some of the poorest and most vulnerable who are having to choose between heating and eating, a situation which, in fact, preceded the pandemic and is evidenced by the huge growth in food banks. Austerity has a lot to answer for. It is the difference between a good life without want and living in fear of it.
The blame lies with a government that has not only had an empathy bypass but also plays the blame game by dividing workers into the deserving and undeserving. But worse still, it has deliberately chosen this path, when it has the fiscal tools to avoid it. Currently, we have a prime minister who thinks that there is no alternative to more suffering. Whatever happened to the concept of ‘levelling up?’ And this is before we factor into the picture the effects of climate change on the poorest, who without action, will pick up the real bill, whilst the rich continue to live off the fat of the land, while it lasts, at any rate.
While the human suffering continues by government choice, the climate crisis seems to have been displaced on the front pages by the war in Ukraine and the associated consequences related to rising prices and shortages of oil, gas, food, and other vital resources. But it hasn’t gone away. It is the elephant still stalking the room.
As the IPCC (the Intergovernmental Panel on Climate Change) published its third and final report this week which draws on the work of thousands of scientists, the Cabinet Minister Jacob Rees Mogg suggested that the government wanted to extract, ‘every last drop of oil and gas from the North Sea,’ saying that ‘2050 is a long way off’. He said that the profits of the fossil fuel companies had to be protected from the prospect of windfall taxes, so that they could invest in further North Sea drilling for oil and gas. So much for COP26 and any hope that we can avoid the worst effects of climate change. The political priorities are clear.
Antonio Guterres, the UN secretary-general said this week, “Nations and corporations are not just turning a blind eye to planetary disaster but adding fuel to the flames,’ and added that ‘it is a file of shame, cataloguing the empty pledges that put us firmly on track towards an unliveable world.
We are in the last chance saloon, and yet, western style, neoliberal oriented governments, that put markets and profit above people and the planet, are fixated with economic development, and uncontrolled growth at whatever cost, not to mention ramping up the war machine with public money, to keep the distorted economic system going, and the profits rolling in.
Remind us from where the money is coming for that dead-end exercise? When Rishi Sunak cuts spending on public and social infrastructure or fails to support the economy with adequate spending to match the economic conditions, or indeed allocate sufficient funding for climate action, all predicated on the lie of monetary scarcity and paying back debt, there seems to be an endless porridge pot for arms and killing people. When so much is at stake shouldn’t the public be demanding answers at the gates of Parliament? Monetary reality is displayed in those choices.
The fancy rhetoric of COP26 has been short-lived, and the promises watered down or swept away if indeed it was ever intended to fulfil them. The corporate body, which includes the damaging fossil fuel industry, dictates its terms using its huge wealth, power and influence, and governments around the world cosily comply as politicians stand to gain through the revolving door.
As the former astrophysicist and climate scientist Peter Kalmus noted in a Guardian Op-Ed piece this week:
‘Earth breakdown is much worse than most people realise … The science indicates that as fossil fuels continue to heat our planet, everything we love is at risk. For me, one of the most horrific aspects of all this is the juxtaposition of present day and near-future climate disasters with the ‘business as usual’ occurring all around me. It’s […] surreal. If everyone could see what I see coming, society would switch into climate emergency mode and end fossil fuels in just a few years.’
Kalmus joined over 1000 other scientists protesting around the world about the lack of urgent action and was arrested for locking himself onto an entrance of JP Morgan Chase in Los Angeles. They warned that the IPPC’s report language had been ‘watered down at the behest of governments unwilling to rapidly phase out fossil fuels.’
If we are to act at all, it cannot be piecemeal. It cannot be left to individuals, communities, or businesses to do their bit, however committed, without an overarching strategy in place. It must start with government serving its citizens as the planner, legislator, and currency issuer, to address the climate crisis and deliver a just green transition. Everything that comes next stems from that. This government has so far abdicated its responsibilities.
Based on current conditions, it is depressing to realise that we might be waiting forever for that, or that what is delivered is a greenwashed world, based on the same toxic and unjust economic model. But never let it be said it was not possible to change the very basis upon which our society operates and where the power lies.
As David Graeber, co-author of the Dawn of Civilisation, and Five Thousand Years of Debt, wrote just before he died:
“… the crisis we just experienced was waking from a dream, a confrontation with the actual reality of human life, which is that we are a collection of fragile beings taking care of one another, and that those who do the lion’s share of this care work that keeps us alive are overtaxed, underpaid, and daily humiliated, and that a very large proportion of the population don’t do anything at all but spin fantasies, extract rents, and generally get in the way of those who are making, fixing, moving, and transporting things, or tending to the needs of other living beings. It is imperative that we not slip back into a reality where all this makes some sort of inexplicable sense, the way senseless things so often do in dreams.”
The pandemic opened our eyes to a different way of thinking and doing things. We cannot turn our backs on it, facing as we are the next great crisis, climate change, which, coupled with the human dimension of already existing gruelling poverty and inequality can only get worse if we carry on as we are. We must grasp the moment and push for concrete action, not half-hearted promises that are designed to go nowhere. Understanding how governments really spend offers us the framework for that change.
MMT is a more accurate understanding of economics than the idea governments push, the idea that its like a household budget and you must balance the books.
The economic reality for government is that the economy is a cookie jar and big business has it hand stuck in it.
Wealth is really create by people though Labour, everything is parasitical, financial markets are horse racing tracks, bankers are corrupt crooks!
we need to start using our wealth to bring up our familys, health, education, mutual aid, reduced working hours this is the basis for a real society.