State finances are not like a household or a maxed out credit card

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 Prue Plumridge patiently explains to a Conservative MP the true nature of Osborneomics and their devastating impact on the UK’s economy and people.

 

Dear Mr Whittingdale

I would like to take up where we left off at Sunday’s hustings on the subject of the national debt/ deficit, since not being a quick witted politician, I was unable to reply in the way I would have liked.  Let’s start with the Tory pledge that they’d balance the books by 2015.  Clearly this has not happened and, not only is the government on course to break this promise with the deficit set to be £75 billion next year, but is also set to borrow £207 billion more than planned. George Osborne’s plans to make more cuts (whilst not saying, unsurprisingly, where these cuts will fall) will take Britain back to 1930s levels of public spending, and that’s without the planned £7 billion of unfunded tax cuts. The effect on our economy and our people don’t bear thinking about.

Now, unlike you and David Cameron, I have not studied economics.  However, I do know that people have been deceived by a lie which compares our State finances to a household budget or a maxed out credit card.  In our ignorance this is the analogy which people can most identify with, but it is simply untrue.  Furthermore Britain was neither bust nor bankrupt – this sadly was used by coalition ministers to justify their ideologically inspired cuts to public expenditure. What was a genuine private debt crisis caused by reckless banks and absolute greed became a supposed sovereign debt crisis in order to justify austerity and the sale of public assets to the private sector.

As the economist David Blanchflower commented about the oft repeated lie about maxed out credit cards ‘Cameron is an economic simpleton who shows no understanding of basic accounting’. Furthermore the idea that future generations will pay for so called Labour government profligacy is yet another of those lies which the coalition has used to deceive the people of this country.    George Osborne’s statement in 2010 that ‘we have taken our country back from the brink of bankruptcy’ and that spending cuts were vital to avoid ending up like Greece was another of those misleading statements. We have full monetary sovereignty i.e. control over our own currency (unlike Greece) and we are the sixth biggest economy in the world whilst Greece the 32nd[1].  When Chuka Umunna asked Lord Turnbull who was testifying to the Treasury Select Committee in October 2010 whether he thought that the UK had been on the brink of bankruptcy he replied quite simply ‘No I don’t.’[2]

As Johann Hari wrote in the Independent ‘If we are bust today, as George Osborne has claimed, then we have almost always been bust. We were bust when we pioneered the Industrial Revolution.  We were bust when we ruled a quarter of the world. We were bust when we beat the Nazis.  We were bust when we built the NHS.’[3]

You pointed out quite rightly that my own party is planning to reduce the deficit and balance the books, albeit more slowly.  I cannot pretend that I approve of such a move but as a member of a democratic party I am entitled to disagree with it. However, my support for Labour is given on the basis that it wants to create a fairer and more socially just society – something the Tories have been working to dismantle over the last five years. It has created myths and lies about the state of our economy in 2010 and pointed the finger at every one other than those who are the real authors of our economic collapse, in order to justify disabling the welfare state, selling off our public assets, not to mention privatising our NHS.

George Osborne in 2010 said ‘reducing the deficit is a necessary precondition for sustained economic growth’.  This is the biggest deception of all. Deficit reduction, book balancing and surpluses simply remove money from the economy and make the situation worse.  Patently you have never studied Keynes or the conditions which led to the Great Depression in the 1920s. The economists Ann Pettifor and Victoria Chick studied data from 1918 to 2009 and concluded that the evidence runs counter to conventional economic wisdom and such policies have not improved the public finances – instead they increase rather than reduce the level of public debt associated with prevailing economic conditions[4]. In terms of people they destroy lives.  Indeed Keynes wrote in 1937 that ‘The boom not the slump, is the right time for austerity at the Treasury’.  Austerity can never be a solution but then this has been an ideological choice by the Tories rather than a necessity. I should point out that on seven occasions in US history when the government balanced the budget it was followed by recession/depression.

Mr Whittingdale – it doesn’t have to be like this.  There are alternative economic models which, over decades, have been airbrushed out of the mainstream in favour of this destructive neoliberal dogma which has brought many people to their knees whilst enriching a few. We are paying now for the dominance of the ideas of Hayek and Friedman which posit that the individual can best determine his needs and that free markets will always find their equilibrium, not to mention trickle down wealth.    Keynes’ ideas obviously spring to mind along with John Kenneth Galbraith and his son James, Wynne Godley, Mary Mellor, Bill Mitchell and Warren Mosler.  The thing seems to be that we have lost sight of the idea that money should be a public resource and not for private gain. The debt based society of the past decades is crushing us, indeed enslaving us.

We should see our monetary system as a public utility which is employed to finance the production and exchange of goods and services, not an opportunity for greedy speculation. It is our monetary system and it should be used to achieve the full potential of society and improve the lives of our citizens.

To finish where I started whilst there are always limits in terms of, for example, environment and resources there can be no such thing as an economic limit due solely to our society being ‘out of money’.  Government deficits do not take away from savings; government revenues are not constrained i.e it does not need to tax or borrow in order to spend – indeed logically government must spend first before it can tax or borrow; our children will get to consume what they produce and it has nothing to do with the deficit; tax is a mechanism to balance budgets and distribute wealth more fairly; and finally as the issuer of its own currency governments cannot be forced to go bankrupt[5]. The push for privatisation of public sector services and decimation of our social security system, on the basis that we can’t afford it, has been ideological and simply a way to destroy the foundations of a fair society and generate more profits for the private sector, as you most certainly know.

The emphasis on the national debt, deficit reduction and book balancing, hides the real issues that should be of concern to all – the trillions of pounds of private debt and the worst trade balance in history. But I notice Mr Osborne says nothing of that – he is relying on debt based consumption and a housing bubble to keep the economy afloat.

Yours sincerely

 

[1] Summer of Unrest: The Debt Delusion Medhi Hasan

[2] Summer of Unrest: The Debt Delusion Medhi Hasan

[3] The Paradox of Thrift: Johann Hari

[4] The Economic Consequences of Mr Osborne: Ann Pettifor and Victoria Chick

[5] The Seven Deadly Innocent Frauds: Warren Mosler

The Flawed Policy of “Right to Buy”

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 The Flawed Policy of “Right to Buy”

By James Grundy

Jim Grundy's photo.

Yesterday, the Tories announced plans to extend the ‘Right to Buy’ to housing associations. In the middle of a housing crisis, when 1.8m households are stuck on council waiting lists, the Tories want to get rid of what social housing remains.

It is so crazy that even the Daily Telegraph referred to it as “economically illiterate and morally wrong.” [1]

In Hucknall we are building the first council homes for 30 years. At a time when there are around 2,500 households in the town on the council’s waiting list, the Tory solution is not to help to address that but to actively make it worse. And, cheeky beggars, they want the tax payer to pay for the privilege!

The National Housing Federation (the representative body for housing associations) estimates that the extension of the ‘Right to Buy’ (‘cos it’s ‘Wrong to Rent’ – from a council or housing association at least) would cost £5.8bn – some say £20bn. [2]

What we need, need desperately, are more homes that people can afford to rent or buy. Changing tenure of any council or housing association property will solve nothing, rather it will only worsen an already appalling problem. How many homes could be built with the money (that they’ve found on the magic money tree – same place as the £8bn for the NHS)?

Rather than an electoral bribe – who can pretend it is anything else? – we need to provide people with places to live and thrive. And today we learn that the Tories want those lucky enough to live in a council property to be threatened with homelessness, scrapping life-time tenancies. [3]

This will do nothing to deal with the waiting lists but undermine the stability of our local communities. It’s simply insanity. But confirmation that, as far as the Tories are concerned, not being a millionaire is simply a lifestyle choice.

We need – and we will – build more homes that people need desperately. The Tories have overseen a huge increase in the level of homelessness. Only last month it was confirmed that the number of children made homeless had grown by 10,000 in just one year. [4]

These latest announcements show just how little they care about that.

  1.  Extending “Right to Buy” Morally Wrong – Telegraph
  2.  Why Extending “Right to Buy” is a Bad Idea – Opinion 24 Dash
  3.  David Cameron annouces plan to end lifetime council tenancies – The Guardian
  4.  Shock, Anger and Dismay at “shameful” rise in homelessness  – 24 Dash

The crisis consists precisely in the fact that the old is dying….

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‘The crisis consists precisely in the fact that the old is dying and the new cannot be born’― Antonio Gramsci, Selections from the Prison Notebooks of Antonio Gramsci 

Capitalism is in its dying days… but what might follow?  Gar Alperovitz offers some pointers as to what he calls these ‘pre-revolutionary’ days.

Gar Alperovitz Straight Talk About the Next American Revolution

Published on Aug 29, 2013

May 30 2013 Gar Alperovitz speaks about why the time is right for a revolutionary, new-economy movement — what it would mean to democratize the ownership of wealth, what it will take to build a new system to replace the decaying one, and more. What people may be surprised to find out is that this revolution is already well under way in the United States with organizations like worker owned cooperatives, credit unions and local currency collectives already taking up a huge portion of the economy. The renowned historian, economist, activist, and writer, is presently the Lionel R. Bauman Professor of Political Economy at the University of Maryland. His latest book is What Then Must We Do? Straight Talk About the Next American Revolution. Cameras by Todd Boyle and J Glenn Evans

Guess Who Profits From Selling Off NHS?

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Russell Brand speaks ‘human’ about the Coalition’s heist of the NHS – selling off the publicly owned ‘Crown Jewels’ to the highest bidder or rentier, under the duplicitous fraud of Austerity.  The EU-US trade deal, TTIP (or NAFTA on Streoids) is intended to make these sell-offs impossible to reverse in the future.

Guess Who Profits From Selling Off NHS: Russell Brand The Trews (E208)

Published on Dec 10, 2014

Russell Brand The Trews (E208).
Reaction to news that a £1billion contract – the biggest ever in the history of the NHS – is out for tender to private companies.
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