By CJStone Author, Columnist (Guardian, Whitstable Gazette)
Previously published by CJ Stone:
Economics is easy to understand
During the 2010 election campaign I heard the Sun columnist Kelvin Mackenzie talking about economics.
“Economics is very complicated,” he said. “You have to be a genius to understand economics.”
This is not true. Economics is easy to understand. Wealth comes from human beings. It’s as simple as that. It comes from human beings engaging with nature in an intelligent and productive way in order to make all of the things we want and need. It is work that makes wealth. This is so obvious an observation that it hardly needs commenting upon. All of the classical economists understood it: Adam Smith and John Stuart Mill, as well as Karl Marx.
The reason that modern economics has become so complex is that it has attempted to obscure this simple fact behind a fog of distraction in order to hide the processes by which a very few people have become more and more obscenely wealthy, while the rest of us are being squeezed to the point of desperation.
We do the work. Someone else takes the wealth
We’ve been living under an illusion for the last 30 years or so. The illusion goes under the collective name of “Monetarism”. It is also sometimes known as “Thatcherism” or “Neoliberalism”. In the US it went under the name “Reaganomics”.
It is the idea that the market knows best, that everything in the public sector is bad, and everything in the private sector is good, that the private sector only needs to be deregulated for it to provide wealth for everyone. Take away the fetters and wealth will expand, it says. If the rich get rich, we all get rich as a consequence.
The idea was that the rich are “wealth creators” and the wealth they generate will eventually “trickle down” to the masses.
Do you remember being told that?
Actually it turns out that none of this is true. The rich aren’t “wealth creators” at all, they are wealth extractors. The world hasn’t been becoming richer, it has been becoming poorer. The wealth hasn’t “trickled down”, it has been siphoned up. The rich have accumulated even more wealth while the poor have been shafted.
Do you ever get the feeling that we’ve been ever-so slightly conned?
I was listening to the Secretary-General of the Organisation for Economic Co-operation and Development on the radio. He was here to meet the Chancellor of the Exchequerto discuss Britain’s economic future.
“The market has confidence in Britain,” he said.
That is actually a very revealing statement. What it tells us first of all is that he thinks he knows what the market thinks. You wonder how he is privy to such information? Does the market talk? Or has the Secretary-General learned to read its collective mind?
Secondly it tells us that the market has human responses. It can have confidence in things – or not, depending on the circumstances.
Thirdly it tells us that Britain is one of the “good guys” in market terms, that is, it is doing things that the market likes; whereas other countries presumably are the “bad guys”, doing things of which the market does not approve.
The question that arises from this is what we think this thing called “the market” actually is.
It doesn’t take all that much thinking about to realise that the question itself is wrong. It’s not “what”, it is “who”.
The market is not like the weather – some natural force which shifts according to laws over which we have no control – it is a bunch of people who, through their control and manipulation of various financial levers, are able to tell us what to do. It is not a law of nature, it is the mechanism by which we are ruled.
The “confidence” we are talking about is a kind of collective pat on the back for the British government for doing as it is told. What we are seeing is a coup d’état against our public services. Public services are being cut in order to serve the interests of the markets.
Our choice in the general election was between a government which said it would cut public services immediately, and one which promised to do so at a later date.
The choice we didn’t get was for a government which would put the interests of the public first.
So that’s what we chose: a government intent upon making cuts. It’s cuts across the economy. Almost £2 billion in cuts immediately, and then another £8.4 billion in “reviews”. Reviews refer to cuts that haven’t happened yet, but which will happen in the future.
There are plans to cut a scheme that would extend free school dinners to primary school children, plus one that would have seen 7,000 new homes built. There are plans to cut over £1 billion from council budgets, to scrap free swimming for children and pensioners, and to cancel a hospital being built in Hartlepool, amongst other things. Cuts, cuts, cuts.
We were promised no cuts to front-line services. You can’t get more “front-line” than a hospital.
The cuts are being implemented in order pay off the deficit.
The deficit represents the difference between what we are earning as a country, and what we are paying out. We are paying out more than we are bringing in. In order to cover the difference we have to borrow. Last year we borrowed £170.8 billion. This year we are set to borrow £167.9 billion.
We do this by issuing bonds, known as gilts. These are essentially promissory notes: IOUs. In other words, we hand out a big pile of paper, and we get a big pile of paper in return.
Actually, we don’t even get paper in return. We get credit on a computer screen. They just add a few more noughts onto the end of the noughts we already owe.
Now here’s the question: who exactly do we owe all this money to? That’s when things start to get really murky. It’s not at all clear.
Mainly, it seems, we owe money to “financial institutions” in the UK. Banks, in other words. We also owe 35% of our national debt to “overseas investors”. We can assume these are banks, too, in some form. They lend money, so they must be banks.
In other words, we are cutting public services in order to service interest on debts owed to foreign banks.
Tell me: at what point did we vote to give our sovereignty away?
Deficits are a good thing
Meanwhile the cuts have hit home in our local area with the announcement that up to 200council jobs are at risk as Canterbury City Council is set to lose a third of its government grant.
We all know why this is, of course. We’ve been told often enough. It’s that pesky deficit again.
The problem with this is that actually it isn’t true. In the past deficits have always been seen as a good thing.
The post war boom in Europe was funded by a deficit. The New Deal programme of Franklin D. Roosevelt, which brought America out of the Great Depression, was funded by a deficit. The Industrial Revolution was funded by a deficit.
It is deficits which fund industrial and social expansion. It is deficits which pay for public services and infrastructure and everything which makes the economic world go round.
It depends on who you owe the deficit to. Effectively a deficit is a borrowing from the future. It is borrowing on the prospects of future earning.
Traditionally deficits are funded by state owned central banks. The bank simply credits the government with the money and the government spends it into existence by funding large scale infrastructure projects: creating jobs, spending, and serving the interests of the economy as a whole.
The problem with the current deficit is that it is being funded not by a publicly owned central bank, but by borrowing from private banks. Private banks create credit in exactly the same way that central banks do: they simply write the money into an account, which is then “owed”.
The difference being that private banks charge interest, thus making the money more expensive. The future is expected to pay back more than the present borrowed.
The banks almost crashed the world economy back in 2008, having made a bunch of bad loans in pursuit of quick profits. The economy was only saved by the public sector bail out.
In other words, rather than running a deficit in order to fund public services, we are cutting public services in order to prop up a bunch of greedy private speculators.
How crazy is that?
ABOUT THE AUTHOR:
CJ Stone is an author, columnist and feature writer. He has written four books: Fierce Dancing: Adventures in the Underground (Faber & Faber 1996); The Last of the Hippies (Faber & Faber 1999); Housing Benefit Hill & Other Places (AK Press 2001); and The Trials of Arthur (Thorsons/Element 2003).
The Guardian Weekend.
From 1993 till 1998 he was a regular columnist with the Guardian Weekend in the UK. His column Housing Benefit Hill was a runaway hit, observing life on a run down housing estate in a small town in England, while his travel column CJ Stone’s Britain took a wry look at the state of Britain in the 90s. You can read the entire collection of of CJ Stone’s Britain columns here, while a number of Housing Benefit Hill columns can be found on the links page here.
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Great article Chris. Thanks for sharing. 🙂 Until the Left around the world and the Labour Party address the issue of Off Shore Financial Centres and Tax havens, the treadmill of loans from banks we will make no change. The time is well overdue to make that change.
Chris .. What a stunningly clear expose of the reality… thank you. I almost expect that your piece will be followed on this website, by an article from Charles Moore of the Telegraph. Surprisingly, he seems to agree with your analysis, albeit from a right wing perspective*.
If both the right and the left are beginning to come together in recognising that ‘austerity’ is another word for national asset stripping by the banks, transnationals and the super-rich, we have hopes of real change to the current ‘parasitic’ exploitation with its disastrous consequences for the majority of the global community.
Thanks for your comments and I’m glad you like the article.
I agree about the offshore financial centres., but unfortunately national governments can’t do anything about them; not while certain governments with a stake in the current system continue to block reform. But money reform on a national scale would begin to counteract the worst effects of these forms of “financial terrorism”.
The article in the Telegraph was interesting. Not that I agreed with most of it (I don’t blame Trade Unions or Arthur Scargill) but it was fascinating to read a right wing perspective on some of these problems and to find that we do at least agree on some things. Maybe there’s hope for us yet?
I like the layout of this btw. Is it a wordpress blog or a wordpress website?
Hi Chris. I agree wholeheartedly. It is crucial to destroy the myths and lies presented regarding neoliberalism, the policies of Blair, Thatcher, and to return to the principles of the Atlee government, to rebuild and repair our welfare system. The press have supported these lies. Can the Internet get through to those millions who have chosen not to vote, who say, understandably, “They are all the same”? WE need the youth to be politically literate, to be reawakened. I think there are signs of this and I live in hope. Thanks for the comments on the web site. It is a blog web site.. is there a difference? Our aim is to present intelligent, left wing discussion, to help formulate policy, to inform and educate.
It is a WordPress.com site which we are learning to adapt to our purposes.
Thanks again for your very welcome contribution, and please do let us know if you would like to contribute again in the future. Our perspective is from the Left, which is I hope where the UK government is starting to move.
Chris … I agree with you about the lack of control over the Swiss banks and the ‘Lichtensteins’ but the UK has responsibility for 10 tax havens, most of which are struggling to pay for their public services. I believe that the Coalition have agreed to underwrite the borrowing of the Turks and Caicos islands and were certainly asked to do the same for the Caymans. Jersey and the Isle of Man’s economies are equally in a mess. George Osborne’s plans are to reduce Corporation Tax in the UK to 23%, which will effectively make the UK a tax haven too. Do you have any ideas about how to bring the City of London under control? At the moment, it appears to operate as a state within a state.
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