There are *Infinite* Government Funds For Anything we Need. So what’s stopping us?

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Austerity is a political choice, and with political will we can have a fair and just society for the many.

This is why the right wing parties, and the UK media owned by ultra-rich, reviles Jeremy Corbyn and Labour’s superb manifesto. They know it is the truth, that there are infinite funds, and that tax is not required for funds, but as a tool for redistribution and to control inflation. Money can never just ‘run out’.

We can invest and build anything we want, as long we have resources and people to do the work. We have plenty of both, so what are we waiting for? Let’s build a society which prioritises people before privilege.

Most voters accept that the Tories are the party of privilege, and when presented with a manifesto, often refer to it as a ‘wish’ list promised just to achieve power, and feel it is  unaffordable and therefore the Labour Party has unrealistic aspirations. What is true, is that there does need to be a government with the political choice to oppose austerity, and to invest in people’s lives. What is untrue, however, is that we are limited by affordability.

Few people would disagree that we need homes, health, education, a good standard of living, and to protect our planet in a Green New Deal. The Labour Party has the political will to deliver this, but needs to have an overall majority in parliament to oppose those who act in self interest and to challenge those whose politics are designed to benefit for a few ultra wealthy individuals and not the vast majority of ordinary people.

ACCEPTING THE TRUTH:

The first thing in achieving a fair and just society is to realise two shocking facts:

    Firstly, we have been sold the greatest and most effective political lie ever told. It was been repeated relentlessly for as long as most of us can remember and in reality for even longer.
    1. And secondly, the fact that the

UK Government’s supply of  money is **LIMITLESS!**

** NB ** INFINITE  as long as there is a sovereign currency, as we do in the UK. Countries like poor Greece, in the €uroZone do not.

Yes, we have an unlimited supply of funds to achieve our aim, but unbridled spending does depend on adequate resources and inflation control.

1) Resources: Trained personnel, natural resources and energy

There needs to be adequate planning of training and natural resources in order to invest. This is not limited by funds, but still limits what can be achieved. Boris Johnson’s ill fated claim that he would build 40 hospitals may have been affordable, but it would be pointless without sufficiently skilled medical personnel to staff them. In simplistic terms, there is no point in building a diamond mine without any diamonds. Or to promise every citizen a diamond when limited by availability of diamonds.

2) Inflation is caused by too much cash in the system, and allowing those with the cash to bid higher and higher for resources, hence prices rise.  The solution to avoidance of inflation this is either:

a) Austerity- put less cash into the system or

b) To tax more cash out of the system hence it’s called a “tax return”.

Austerity is a political choice. It makes a horrible mess of society. It destroys lives, decimates public services, and the estimated unnecessary deaths from the Tory/Lib austerity programme is 130,000 lives, and most likely is many more.

Austerity is not and never was necessary. It was never designed to ‘fix the economy in the national interest’. After WW2, so many homes were destroyed, yet even when there was a shortage of resources, the Labour government set about building the 750,000 homes needed.

The Tories’ concern is not about the economy, but a cynical diversion of cash in the system to the billionaires in their tax-free-islands who already have more wealth than they can ever use.

Tax

The alternative way of limiting inflation is to reduce the cash in the system by taxation, by retrieving some of it, but not by taxing the poor. So many of the rich and wealthy are avoiding paying any or little tax.

Taxes have three functions:

✅ control inflation

✅ redistribute wealth (progressive/ regressive)

✅ Influence public behaviour (i.e. reduce smoking, fines for speeding etc.)

❌ Taxes ARE NOT required to fund public expenditure. We can print infinite cash.

 

Dispelling the Myth

So we need to break free of this crazy “household budget” analogy; it’s a falsehood. Margaret Thatcher justified her economics by putting government expenditure on the same footing as household budgets. This idea is accessible because it’s something we all need to do if we are to survive. But the idea that governments depend on some kind of biscuit tin full of cash, hidden at the back of some gigantic larder is ludicrous. In the past there was a limiting factor when currency was tied to Gold Reserves. Since the link was broken, ( MMT), cash is infinite and created by fingers on keyboards instantly. So the idea that the government is spending the taxpayers’ money and needs them to pay for it is absurd, and framing language in this way is a deceptive politically device.

It is difficult to accept that truth because of that great effective lie which has kept the obscene wealth owned off-shore by the ultra rich untouchable for generations.

That cynical Tory lie is unravelling as they come unstuck by their own sudden alarming availability of funds for dubious reasons, while denying the affordability for projects which most people would find admirable.

The Tory lie is coming unstuck when they:

  • Bribe DUP £1bn
  • Can’t explain where cash is coming from for spending promises (because it will undermine the lie)
  • Can pay £600m to repatriate Thomas Cook customers but …
  • Won’t pay £450m to save Thomas Cook and save people’s jobs (saving £600m)

We should not think of money being “spent” or “wasted”.  All are  transactions, so money (much like energy in physics) cannot be destroyed, just transferred. It then becomes a simple matter of analysing the transfer:

* from rich to poor people

* or from poor to rich people?

Households have to earn cash and if they spend more than they earn they go bankrupt but governments (with sovereign currency) can never go bankrupt; that is an impossibility.

The unhelpfully named ‘National Debt’ is not a debt owed by Government or by the nation but it is cash lent by Central Bank, to society, to facilitate exchange of resources.

INSTANT MONEY

Ever since August 15th 1971, states have created money out of thin air by typing on keyboards at the Central Banks. Those keystrokes make the balance of accounts in private banks go up when a person or company receives a payment, and they make those balances go down when a person or company pays taxes to the state. Therefore, the state can’t run out of its own money and the idea of it saving its own currency becomes nonsensical. Companies and families do need to save because they are users, not issuers, of money, but the state doesn’t save in its own currency because it can always issue as much as it wants and it can never run out of it. In this way, money stops being a commodity and becomes a mere accounting entry (Wray 2012). Furthermore, the capacity of the state to spend stops being dependent on the collection of taxes or on the issuing of debt (Mosler 2010). However, taxes keep on being necessary, but not to finance the current spending of the state, but to accomplish a double function: they give value to money and they control aggregate demand (consumption capacity). Through the first function, they assure that state money will be accepted as a payment means , and through the second, they control inflation.

IMMIGRATION

In terms of resources, there is a link between economics and current politics  which concerns immigration. It is not an issue about whether immigration is good or bad. There has always been a movement of people since time began; in fact it is necessary in evolutionary terms.

But the issue is how people are being utilised. If wages are undercut and held back, if there is not an investment in training and in education in local populations, then the labour resources are unsustainable, and so is the standard of living.

The government has kept wages low. There is inadequate work for people to enable them to afford homes and food for their families. Short term employment – often of an hour  a week – falsifies employment levels, and people on short-term or zero-hours contracts have little or no employment rights and protection. In reality there is unemployment and underemployment which is intentional, artificial and political,  and so wages become more and more depressed.

In contrast, while there is insufficient well-paid work, skilled staff are in short supply because of a failure of the government to invest in education and training. For example, there has been a cut to bursaries for nursing staff to train, and to provide adequate childcare for workers.

There will be a shortage of staff beneficial to society such as trained nurses and doctors because of under-investment in training and education, and therefore without  further immigration those skills are unavailable.

It is no way anti-immigrant to argue that human resources and skills are underdeveloped and underused in the local population, people who are unable to afford tuition fees for training, and who cannot live and support themselves or a family without maintenance grants. However, it is understandable when people are living in poverty and are paid less than it costs for housing and food become resentful and that  they feel the cause is immigration, when in fact the cause is economics and utilisation of people. It is arguable that there should be greater  investment for training more local people who are otherwise unemployed or underemployed rather than draining skills and labour from other countries.

Objections are not anti-immigrant but anti-exploitation and it is questionable (if all things were equal) whether there would be mass immigration of people from their homelands and whether freedom of movement is a true liberty, or that it is simply driven by economic and sociological conflict factors.

Movement as a choice, rather than movement resulting from having no alternative, is a different issue and separating families as we have seen as result of recent anti immigration policies is appalling and must be rejected.

EUROZONE

** In the UK, we have the ability to turn our economy around to benefit the people, and not the billionaires, because we still have our own currency. Because of the Euro, the Greek government could absolutely go bankrupt, as per the household budget analogy as they had no sovereign currency, i.e.) they couldn’t print the cash to meet obligations to the EU.

It was a false comparison to scaremonger the UK electorate with Greece, and it is false scaremongering in the news that the expectation of the EU is for UK to join the Euro. Those states who signed up to the Eurozone are trapped within it.

Fiat socialism is a name for an open and prosperous society ruled by the principles of the modern monetary theory and functional finance. It is a society without unemployment or poverty, in which everybody has a decent job (either in the private sector, or in the public sector) which allows him or her to fulfil all basic needs and coordinate working and private life because of reasonable time schedules. A society in which public services, education and health access are of the highest quality, and in which the level of prices remains stable.

Further Reading

From Think Left:

Published Books:

  • NHS plc The Privatisation of Our Health Care: Allyson M Pollock
  • The Courageous State: Richard Murphy
  • Treasure Islands Tax Havens and the Men who stole the World:  Nicholas Shaxson
  • Tax Havens How Globalization Really Works:  Palan, Murphy and Chavgneux
  • School Wars The Battle for Britain’s Education : Melissa Benn
  • The Plot Against the NHS:  Colin Leys and Stewart Player
  • Bad Pharma: Ben Goldacre

References

 

@Dave Gillian Twitter https://threadreaderapp.com/thread/1178436669789356033.html 

https://braveneweurope.com/carlos-garcia-fiat-socialism

It’s you, Conservative government. Please stop.

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It’s you, Conservative government.  Please stop.

By julijuxtaposed – first posted 7.10.15

Please, Conservative Government, stop putting Britain’s people down.  It is fatuous, unpatriotic and downright rude.  You are our government; our leaders and representatives.  You are privileged to hold the highest offices of public service.  Why do you disrespect us so easily?  Don’t you like us?  Are we embarrassing you?  Why do you keep speaking at us and about us as though we were the ones who are letting you down?

Stop selectively comparing us to other countries and other people to bully us and mask your inadequacies.  This inferiority complex is yours.  It is insulting and becoming tiresome to hear you carping on with your political envy.  If their peoples work longer, earn less and have fewer rights, then that is not a competition I wish to enter.  In fact, I would prefer that you openly disapproved of such economies.  But stop, too, this flippantly pitting of our regions, counties and cities against each other.  Stop expediently pointing generalised and judgemental fingers at people.  And, please, stop expecting us to be grateful for your mean-spirited crumbs.  It is our bread that you are eating.

And stop peddling paranoia to the xenophobes and stop perpetuating scarcity myths over resources that you are squandering.  We do not lack the means but that you lack the political will.  We do not lack compassion but you lack integrity.   We do not lack aspiration; we do not lack gumption and we do not lack self-respect but that you would strip us of dignity and decent opportunity.  We do not lack social cohesion but that you keep fostering fear, division and discontent.

Who is in charge of our country’s finances?  Who is formulating our country’s policies?  Who is devising our country’s laws?  YOU.  Who has been in charge for the last five years?  YOU.  Who, in that time, didn’t build enough housing; didn’t train sufficient doctors, nurses, teachers…?  Who has denigrated and undermined public service?  YOU.  Who has introduced welfare reforms without first creating an economy in which this is justifiable?  YOU.  Who perpetuates a socio-economic system that requires the exploitation of your own citizens?  YOU.  Who makes blanket policies based on simplistic and insulting stereotypes?  YOU.  Who is blithely building on and recreating the same conditions that got us into such a fix in the first place?  YOU.  Who has bent over backwards to accommodate the hyperbole of bigots and Chicken Littles?  YOU.  Who governs by dubious moral whim?  YOU.  Who gambols greedily around on the world stage like an oversized and untrained puppy, begging to join in, no matter the recklessness and disingenuousness of the cause?  YOU.

Who is ignorantly and wickedly cutting away at the very heart and soul of Britain?  YOU.

Who is the biggest threat to the security of our isles, our economy and our families?  YOU.

YOU.  YOU.  YOU.

You are the Government.  You are responsible for the tone, content and quality of your narrative and you are responsible for the consequences of your governance.  What we really lack is the practical wisdom, maturity and the competent service of an honourable leadership.  Change your attitude and behaviour.  Stop.  Turn around or get out of our way.

State Funding (Missing out the Middle Man) is nothing new – even Ford and Edison knew

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The UK, like the US is a sovereign state. Unlike European countries using the Euro, the UK has its own currency.  This is why Jeremy Corbyn has proposed PQE ( People’s Quantitative Easing). It is issuing funds directly for the benefit of people. It is intended for specific use, which is whatever is needed to provide full employment, to eradicate poverty and ensure that the government’s responsibility is met, so that citizens have their basic needs and are not left dependent on foodbanks and homeless. It is not radical, it is not new. It just is direct funding, missing out the middleman , or the speculative banks.  Speculative Banks are erroneously named – they would be better called Opportunists, who are benefitting from a system where they milk the funds themselves. Let us just  remember that wealth is created by people, using skills and the earth’s resources.

Our task is to find a way to repay the existing National Debt and fund new public spending, without always having to borrow from the private banking system, and without raising taxes. from Prosperity from Debt Slavery

THE ANSWER IS GOVERNMENT CREATED DEBT-FREE MONEY

Former Economics Spokesman for the Labour Party, Bryan Gould, referred to funding the National Debt in this manner when he wrote his essay “Jobs for all the boys – and girls: The Choice for Labour” produced by his Full Employment Forum (undated, but circa 1993): “It may also be sensible – in the precise circumstances at present – to ‘monetise’ part of the debt, that is, to finance it through government-created credit, rather than through borrowing or taxation. However, shocking this may seem to monetarist opinion, it is hard to see why private sector banks should have a monopoly over credit creation, or why credit creation by the government for the purpose of investment should be inherently more objectionable than credit creation in the private sector which largely goes on consumption. He also stated, shortly before he left the Labour Party for New Zealand, in the New Statesman of 19 February 1993: “Why shouldn’t a socially aware and economically responsible government create credit where it is appropriate … in order to ensure investment is made and at the same time strike a great blow for the democratic control of the economy?”

This is an excerpt of a letter written by Thomas Edison to the NY Times in 1921. The letter is in full below. It is a bit long but bear with it – it is well worth a read.

“Thomas Edison and Henry Ford were asked about the financing of a large infrastructure project at Muscle Shoals. Edison’s answer, as it appeared in the New York Times on December 6, 1921

“….“Then you see no difference between currency and Government bonds? “Mr. Edison was asked.

“Yes, there is a difference, but it is neither the likeness nor the difference that will determine the matter; the attack will be directed against thinking of bonds and currency together and comparing them. If people ever get to thinking of bonds and bills at the same time, the game is up.

“Now, here is Ford proposing to finance Muscle Shoals by an issue of currency. Very well, let us suppose for a moment that Congress follows his proposal. Personally, I don’t think Congress has imagination enough to do it, but let us suppose that it does. The required sum is authorized –say $30,000,000. The bills are issued directly by the Government as all money ought to be. When the workmen are paid off they receive these United States bills. When the material is bought it is paid in these United States bills. Except that perhaps the bills may have the engraving of the water dam, instead of a railroad train and a ship, as some of the Federal Reserve notes have. They will be the same as any other currency put out by the Government: that is, they will be money. They will be based on the public wealth already in Muscle Shoals, and their circulation will increase that public wealth, not only the public money but the public wealth—real wealth.

“When these bills have answered the purpose of building and completing Muscle Shoals, they will be retired by the earnings of the power dam. That is, the people of the United States will have all that they put into Muscle Shoals and all that they can take out for centuries—the endless wealth-making water power of that great Tennessee River—with no tax and no increase of the national debt.”

“But suppose Congress does not see this, what then?” Mr. Edison was asked.

“Well, Congress must fall back on the old way of doing business. It must authorize an issue of bonds. That is it must go out to the money brokers and borrow enough of our own national currency to complete great national resources, and we then must pay interest to the money brokers for the use of our own money.

Old Way Adds to Public Debt.

“That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.

“Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000—that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work.

That is terrible the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost on that account. Under the present system of doing business we simply add 120 to 150 per cent. to the stated cost.

“But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money brokers collect twice the amount of the bond and an additional 20 per cent., whereas the currency pays nobody but those who directly contribute to Muscle Shoals in some useful way.

“If the Government issues bonds it simply induces the money brokers to draw $30,000,000 out of the other channels of trade and turn it into Muscle Shoals:

Funding without Debt

If the Government issues currency, it provides itself with enough to increase the national wealth at Muscle Shoals without disturbing the business of the rest of the country.

And in doing this it increase its income without adding a penny to its debt.

“It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay: but one promise fattens the usurer, and the other helps the people.

If the currency issued by the Government were no good, then the bonds issued would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges at the hands of men who control the fictitious values of gold.

“Look at it another way. If the Government issues bonds, the brokers will sell them. The bonds will be negotiable: they will be considered as gilt-edged paper. Why? Because the Government is behind them, but who is behind the Government? The people. Therefore it is the people who constitute the basis of Government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency on the Muscle Shoals instead of the bankers receiving the benefit of the people’s credit in interest-bearing bonds?”

Says People Must Pay Anyway.

“The people must pay any way: why should they be compelled to pay twice as the bond system compels them to pay?

The people of the United States always accept their Government’s currency. If the United States Government will adopt this policy of increasing its national wealth without contributing to the interest collector—for the whole national debt is made up of the interest charges—then you will see an era of progress and prosperity in this country such as could never have come otherwise….”

The Deficit Narrative – Understanding and Reframing : Richard J Murphy

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The deficit narrative: understanding is the key to successfully reframing it

I have argued for longer than I probably care to remember that the last thing we need in our economy right now is a balanced budget. When and if we have full employment, higher productivity and a confident business sector that is investing heavily and exporting at considerably higher levels than at present I will change my mind: right now we are so far from that situation that a government surplus makes no sense, in theory or in practice.

To complicate consideration of the issue I have also argued that, as a matter of fact, having a balanced budget is something no government can expect or promise to deliver. There is good reason for this. As I have argued in more depth here (and many other places):

The reason is that there are, in macroeconomic terms four sectors in the economy and they must balance. The first is consumer spending. If consumers borrow more to increase spending then someone must lend it to them, or borrow less, as a matter of fact. That person who must borrow less might be business, who might invest less as they borrow less to compensate for more consumer borrowing, or it might be net overseas trade, or it can be the government. But the point is that the net lending and borrowing of these four sectors, consumers, business, overseas and government, will always balance, as a matter of fact.

So, frustrating as this might be to a politician who wants to appear to be in control of the destiny of their government and the state, the fact is that they have remarkably little control over how much they will borrow. If consumers insist on saving, as does business, and trade is running a deficit, (which in effect means foreigners are saving in Britain) then as a matter of fact the government will run a deficit whether it likes it or not. And there is nothing, bar stimulating business investment, exports, or consumer borrowing that they can do to change this.

Let me put this in context. These are the sectoral balances and forecasts for them as per the March 2015 budget data:

All of these balances add to zero. And, as is clear some factors make it very hard indeed to achieve a balanced budget, let alone a budget surplus. The only time it happened in this period, from 2000 to 2002, it was only really possible because of the enormous corporate borrowing during the dot.com era. That Labour kept the deficit under reasonable control from then on was, as is widely known, because consumers borrowed during this period to compensate for the fact that after the dot-com crisis business simply stopped net borrowing – which is why they have ended up with what Gillian Tett of the FT has called ‘zombie piles of cash’.

And throughout this period note the enormous impact of the ‘rest of the world’. Because of trade and investment flows flows the ‘rest of the world’ has persistently saved in the UK throughout this period. The result has been that even if business and consumers decided to just lend and borrow from each other and always themselves equalled their flows out to zero (which is very unlikely to happen, but is technically plausible) the UK government would have, for this one reason of the overseas flows, have had absolutely no choice but, as creator of the UK currency, to have run a deficit throughout this period to meet the demand for lending that overseas savers had in the UK and which in that circumstance could only be met by government borrowing. And I stress, there is nothing the government can do about this because, unlike business and households (and the rest of the world when it is stated vis-a-vis the UK) only the government is the creator of currency that can make this equation work. It supplies this currency by running deficits. As a previous post argued, this means it must either create gilts to satisfy the demand for savings products that the actions of others in the economy demands that the government must meet or let reserves at the Bank of England accumulate, but one or other must happen.

In that case the real issue to be discussed when it comes to deficits, as John McDonnell MP, a close colleague of Jeremy Corbyn did in the Guardian recently, is ask just what aspect of the deficit is really being discussed. There are a number of obvious splits within the data to be made to make such discussion meaingful. The first is between current and capital deficits. It baffles me why this distinction is not normally offered when discussing deficits. For the record, this is the data I am using from the June 2015 PSA1 Summary of public finances from the ONS:

Screen Shot 2015-08-16 at 17.41.21

The current deficit is anything not for investment, of course. Net investment is government investment in this case, not that for the economy as a whole. Figures are in millions barring the last column which is in billions. This is that data plotted:

Screen Shot 2015-08-16 at 17.39.32

But suppose that borrowing to pay for net investment (i.e. cost net of sale proceeds) is charged to a capital account. £444 billion over this period then falls out of current account borrowing. From 1997/98 to 2011/12, when QE ended, the borrowing for capital spending was £350 billion. £375 billion of QE did, of course, pay for all that. In fact, you could argue it looked suspiciously like PQE did actually take place, retrospectively, for the entire cost of state spending for that period. If PFI had been added in it would have been less, but the point is QE cancelled all that investment spend: it has now gone from the state balance sheet as debt and is now paid for with much cheaper reserves. So, we have already, in effect done PQE and still met the demand for savings.

What about the rest of the deficit? Go back to the sectoral balances and look at this data, based on the OBR for March 2015 using historic data for the overseas element of the sectoral balances combined with ONS GDP data to indicate a cash value:

Screen Shot 2015-08-16 at 20.44.49

Since 2000 more than £640 billion of deficits have occurred in the UK simply because people from the rest of the world insist on saving in the UK, in sterling and the government had no choice but create the currency they need to let them do so. That effectively meant it had to run deficits for almost all that period for this reason alone. I stress: they had no real choice.

Now compare this data with the data on borrowing and if you exclude borrowing for investment, which it can be argued should be on a separate loan account, and you deduct from the remaining deficit that which had to be created to fuel foreign demand for sterling savings you end up with this data with the reported deficit shown just for comparson:

Screen Shot 2015-08-16 at 21.15.46

Which looks like this when plotted:

Screen Shot 2015-08-16 at 21.15.57

This implies the UK only ran a deficit to meet current domestic need from 2009/10 to 2012/13. Overall it ran a surplus for this purpose over the period.

Is this a fair way of viewing the deficit? I suggest it is. I also suggest, immediately that this is not the only alternative way of looking at deficit data: I can and maybe will juggle this data in numerous other ways as yet to see what might be useful. But my points are threefold.

The first is that, as I repeat, some parts of the deficit are out of the governments control. This is most especially true of the net amount of foreign saving in the UK in a time of floating exchange rates. This demand for sterling has to be met and the government has to meet it: only it can create the currency to do so, usually in the form of gilts. Not recognising this would be absurd. To also try to eliminate this would be to look a gift horse in the mouth: do we really want to stop people from outside the UK effectively subsidising us, which is exactly what they are doing, at incredibly low interest rates over very long debt repayment periods, with a fair chance that a good part of the debt will be written off by the impact of inflation in the meantime and without foreign currency risk as they are saving in our currency? I suggest not.

Second, it is also absurd to lump together the borrowing for government investment with that to meet current domestic need not funded, in effect, by overseas lenders. This borrowing for investment to be accounted for quite separately. This is borrowing to fund improvements in our national infrastructure. We need this. We should be proud that we make such an investment and want to continue to do so. We should be really worried if it declines – as in real terms it is at present. That puts our well being at risk. We need a way to separately and clearly identify this spend to make sure it is properly recognised and managed. No one is going to be surprised that I think this is  a role for PQE.

And, thirdly, what’s left? Well, as the last graph shows, all too often it is a government surplus, much (but not all of it) happening because of increasing household debt. I am not too sure that is something we should be celebrating, and so there is an issue to consider here and how it is business surpluses that need to be addressed here.

I stress: this is a quick analysis. What I am suggesting though is that the deficit narrative is far too constrained and and that if discussion of the deficit and whether or not part of government activity is to be run in surplus is to take place then we need to be aware of what the surplus is made up of, what elements might be controllable, what parts might be fundamentally useful and essentially suited to a controlled borrowing programme, and how the remaining balances need to be managed to ensure overall wellbeing of people in the country is maximised. And in the process I am saying that the deficit narrative we have suffered to date has utterly missed the point in economic terms and been deeply misleading in terms of its consequences for political economy.

If we’re going to have a debt and deficit narrative let us, for heaven’s sake, make it one that is useful and based on what really happens. That’s the least the left should be doing now because if and when we do so the policy implications would be deeply significant.

by Richard Murphy (under a Creative Commons Attribution-NonCommercial 3.0 Unported License.)

From Think Left:
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The Observer’s bankrupt when it comes to Labour

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The Observer is Bankrupt when it comes to Labour

Richard J Murphy from Tax Research UK

If you read the Observer today (19/7/15) you would think that the Tories will rule in the UK until at least 2030.

You would also believe that Labour has taken leave of its collected senses to even have Jeremy Corbyn as a member.

And that a triumvirate based around Liz Kendall, Chuka Umunna and Tristram Hunt is the only group in touch with reality.

It goes on, and on, and on, all based around Andrew Rawnsley’s jaded perspectives, an appeal to people to believe the findings of a small set of focus groups (Really? After all Labour’s experience of them?) that say some people might never return to the Labour fold after 2015 and a poverty of analysis that belittles the paper.

What do I mean? Take this example (and there are so many more in today’s paper it could provide enough material for a PhD thesis) from the editorial, where it is said that Labour must learn that:

Parties can help shape … questions, but they can’t tell voters what they should be and certainly can’t ignore the ones that they don’t like.

And yet only paragraphs later the same editorial notes:

Even as the Conservatives are masterfully shaping the territory on which the 2020 election battle will be fought, Labour is focused on an introspective conversation with its members, not a dialogue with the country.

When the paper cannot even be internally consistent on what is politically possible from the left and right – one of which can apparently define the whole agenda for discussion, and so opinion, and yet the other can’t – within the same editorial its inability to construct an argument becomes painfully clear.

The whole paper is riddled with that inability today. Take this wonder from Alistair Darling from today’s edition where he says:

We want people to get on, each generation building on the achievements of the last.

Quite right Alistair. And then he adds:

That needs a strong stable economy, but also needs investment. Borrowing to provide housing or a decent transport system is a good thing and we should say so.

I agree. And then he offers this next observation:

And yes, we need to get debt and borrowing down, as I have always said. I’m glad Osborne was able to meet my target.

Any you wonder why people aren’t voting Labour? Let me explain it as a non-party member who looks at politics but does not partake in it at a party level.

The problem is threefold. First what Alistair Darling says is incoherent economically unless you say a) that you are going to screw the electorate for large sums of money to pay for the investment or b) you’re going to do more of the much hated PFI that is shifting vast amounts of public funds to the private sector or c) you’re going to do what I call Green Infrastructure Quantitative Easing but which Jeremy Corbyn calls People’s QE (as far as I can tell they’re the same). But Alistair did none of those things. I don’t suppose he has a clue what that form of QE is so he looked stupid, and deservedly so. And people, even people who know little of economics, have rumbled that. Until Labour talks economically literately it has no hope, and it is not.

The second problem is also implicit in Darling’s comment: he ended up playing on Osborne’s territory. That’s because Labour has no story of its own. This myth of the middle ground is nonsense. It’s a fabrication. It’s a lie that there is such a thing. The middle ground is simply where people are in the prevailing narrative. It’s where that  narrative has taken them, but let’s not pretend that parties cannot move where that is or should not want to do so: the Observer editorial recognises implicitly – but without the candour or wit to admit it – that this is what the skill of the Tories in the last decade has been: they have been able to move the middle ground their way. But what they then argue is that Labour should not seek to change that fact, or where the middle ground is. What the Observer is saying is that Labour must play by Tory rules on the middle ground the Conservatives have created.

But why would they do that?  If sending people into poverty, deliberately; slashing funding for the NHS; cutting investment in education; sending undergraduates deeper into debt; holding wages at near poverty levels; offering tax cuts for the richest and no one else; threatening to end the BBC and going to war without bothering to tell anyone is the middle ground then the Observer has clearly lost the plot. And anyone saying that this is where Labour needs to be, or thereabouts, has also lost any scintilla of reasoning they might have once possessed. It is this loss of reason so that they are even unable to identify the true nature of the problem that they face that is the third problem the likes of those in the Observer who think that they are on the left face.

It is this lack of intellectual capacity to reason that impoverishes Darling, and it is the same problem that cripples the Observer: somewhere within it (I can’t be bothered to re-find the link) it is said that all parties die in the end and so, it is claimed Labour must die if the left is to go forward. But implicit in that statement is the glaringly obvious fact that so too will the Conservative Party and its current narrative die, and yet there is not in any one the many articles the Observer publishes today (with the single unifying theme of attacking Jeremy Corbyn) any hint of this possibility. What is astonishing is that when the Tory narrative on Europe is close to shredding itself and that people may reject the whole Tory edifice when they lose parts of the NHS, education, the BBC, or just the nation as Cameron shatters the Union which was supposed to be the basis of his party, the Observer seems quite unable to notice any such possibility, at all.

So let me offer explanation for what is happening. What the Observer is really saying today is that it thinks there is one hegemonic narrative in UK politics and that it thinks it is neoliberalism.

It is saying that any threat to that narrative, from wherever it comes, should be challenged. So Corbyn is unacceptable.

And it is saying that Labour must oppose the Conservatives from within that constraint of subscribing to neoliberalism when the whole basis of neoliberalism is the shrinking of the state, the increasing division of reward, the privatisation of gain and the outsourcing of risk, all of which should be antithetical to Labour as I understand it.

So let me tell the Observer a simple fact: opposition on that basis is not possible. If the middle ground is neoliberalism a policy called neoliberalism lite is not going to work: from the outset that is by definition both a failure and bound to fail.

Opposition now is to take control of the narrative. Opposition then, when neoliberalism has become so universal in apparent appeal (except, that is, in Scotland, Wales, Northern Ireland and significant parts of the North), is about offering a different narrative. It has to be: neoliberalism is a totalitarian logic of exclusion. The Observer’s logic is not just appeasing that totalitarianism in that case, it is in the process supporting it. This is not a situation where ambiguity is possible. You’re either for or against neoliberalism: there is no possibility of sitting on the fence and the Observer has made clear today on which side it fits.

So what is the alternative narrative? Is it some bizarre logic, as all Jeremy Corbyn’s opponents would wish to suggest? Without wishing to be involved in party political debate – because, I stress, that is not my bag – I suggest not.

Instead it is  a narrative that says people are the foundation of wealth, whoever they work for.

That means this is a narrative that values people equally whether they work for the state or private sectors.

And it is a narrative that says let each do what it is best able to deliver.

But which also says that if markets are best able to deliver then they have to be based on certain rules, like transparency, accountability, paying taxes, the prevention of monopoly power and the promotion of enterprise and not rent seeking speculation, because in case the Observer has forgotten it, these are the qualities that make markets work when the concentrated power of neoliberalism is simply about reward extraction by a few from the effort and assets of the many, and is as far removed from real market theory as Soviet tractor factories were.

None of which then says that this alternative narrative is opposed to business: far from it, this is a more pro smaller business agenda than anything that the right has put forward for decades because of the right’s bias towards wealth, big business and globalisation, all of which are the antithesis of small business success.

And that narrative has to recognise that effort is and will be rewarded but that the right to enjoy that reward is dependent upon complying with the democratic wishes of the society of which a person is a member, including its expectation that redistribution to deliver greater equality is not just the right thing to do, but a basis for enhanced prosperity for all in the long run.

That narrative also says that the state must and will use the powers available to it to deliver these goals if it is to be responsible. So it will invest when it thinks fit, and create the money to do so (back to QE) when the market will not deliver the scale of economic activity that the country can sustain. Wouldn’t anything else be wholly irresponsible?

And it will regulate to correct market failure, whether by banks or in the environment.

And it will foster employment by reducing the taxes on labour and increasing them on unearned income.

And it will not waste resources paying housing benefits when it would be better off building houses.

And nor will it penalise the young and lay a lifetime burden of debt upon them when they are the basis of our future prosperity.

There is much more to the vision, of course.

But for heaven’s sake, if the Observer cannot see that it is only by talking about alternatives that Labour (or any other left of centre party) can put together the necessary coalition of interests to create change in this country then no wonder they back Labour leaders who might, like the last shadow chancellor, feel comfortable discussing VAT on replacement windows but ducked big issues like the tax gap.

Or to put it another way, if a debate is to take place, shall we make it about something more than the positioning of deckchairs whilst neoliberalism steams on?

– See more at: http://www.taxresearch.org.uk/Blog/2015/07/19/the-observers-bankrupt-when-it-comes-to-labour/#sthash.UH3VtZ9Q.dpuf

The Real Greek Crisis, – Bryan Gould

The Real Greek Crisis

By Bryan Gould

Most people will feel that they don’t need to look far for an explanation as to what lies behind the Greek crisis. Lazy reporting and racial stereotyping will persuade them that the Greeks – a feckless lot, no doubt – have spent more than they should, got into debt, taken out loans from the hard-working Germans and now won’t repay the loans because they refuse to tighten their belts.

But there is another narrative that tells a somewhat different story. That story is one of a powerful economy enforcing its will on its weaker neighbours and refusing to acknowledge that it has thereby made it impossible for them to dig themselves out of a hole.

The story begins at the turn of the century when the Greeks, along with many others, were persuaded that being part of Europe required them to give up their own currency and accept the euro. A single currency meant a single monetary policy and a single central bank – and guess who decided what that policy should be and what the central bank should do?

Germany, by far the most powerful economy in the euro zone, ran it to serve its own interests, but life wasn’t so easy for the weaker countries. The Greeks, for example, with their smaller and less developed economy, had no chance of surviving the competition from efficient German manufacturing. We do not need the benefits of hindsight to make this point, since many commentators, myself included, foresaw the inevitability of this outcome at the time.

As things began to go wrong, and they had to borrow to keep their heads above water, the Greeks were assured that they could look to the Germans and others to help them out. But this was in the days of cheap and plentiful credit; when the Global Financial Crisis struck and the cheap credit dried up, the creditors who had happily lent to the Greeks wanted their money back.

The Greeks didn’t have the money. But the price they had to pay for borrowing yet more from the IMF and the European Central Bank was to accept a programme of savage austerity. The cuts they have already been forced to make have meant that 25% of the Greek economy has simply closed down and 60% of young people are without a job. Again, as some commentators observed at the time, it was impossible to see how the Greeks could ever – from an already weak economy that is now so much smaller and still going backwards – find the resources needed to repay their debts.

And so it has proved. The price that creditors insist upon for a continued bail-out is yet more austerity which can only mean yet more closures and unemployment. Leaked papers show that the creditor institutions themselves recognise that more austerity will make it even less possible for the Greeks to pay back their debts.

So why are the Germans and other creditors determined to force the Greeks into such a damaging dead end? The answer is that they care little for the travails of the Greek people. Their focus is on those countries that are watching the Greek situation closely – countries like Spain, Portugal, Bulgaria, even Italy, that have faced similar problems, and suffered similar penalties, but that have not yet been compelled by pressure from their populations to resist a further descent into even more austerity.

The fear from the financial establishment and from the Germans in particular is that the Greeks might find a way to demonstrate to other similarly afflicted countries in the euro zone that there is a way out – and that those other countries would then follow a similar course. The rational course for the Greeks to take, after all, would be to leave the euro zone, restore their own currency and then print the drachmas needed, as monetarily sovereign countries are able and entitled to do, and repay their debts in devalued drachmas.

The difficulty that Greek Prime Minister Tsipras faces is that he has committed to resist austerity but also to retain the euro. It is doubtful that he can achieve both. In the forthcoming referendum, no one can be sure whether the dislike of austerity or the fear of leaving the euro zone will prevail. The poor and the unemployed – those who have suffered most from austerity – will vote to reject the new bail-out offer; the holders of assets and the pensioners will vote to stay with the euro.

Either way, the outlook for the euro looks bleak. In the long run, the attempt by the financial establishment to over-ride the wishes and interests of ordinary people and to negate the power of a democratic government to protect them will fail. The only question is as to how many more crises there will be and how much more suffering has to be endured before common sense prevails.

Bryan Gould 

“I once contested the Labour party’s leadership myself. The answers to the dilemmas facing British politicians today seem to me to be more clear-cut than was the case in 1992. It is easier now, with a longer perspective on the orthodoxy that has prevailed for so long, to see what has gone wrong, and to see what is needed to put it right. What is needed now is to unlock the intellectual straitjacket in which Labour has been shackled for too long. Where is the leader to deliver that?” Since Bryan Gould wrote these words,  Jeremy Corbyn agreed to stand as leader, and there is hope for a change from the intellectual straitjacket Bryan speaks of.

Restoring Balance to the Economy #Enoughness

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A balanced economy should be a system designed to ensure everyone has enough – no need for excess and greed. “Enoughness” is about restoring balance to an economy which has become unbalanced and skewed.

How we see the world determines how we act. Western thought sees us at war with each other over resources. Indigenous philosophy, we are all related as individuals in balance with nature. Watch ENOUGHNESS:

Resorting Balance to the Economy and learn more at http://www.FirstPeoples.org. Please share on Facebook and Twitter using #ENOUGHNESS.