From this morning's Guardian letter's page:
The secretary of state for work and pensions uses his office to exaggerate the small amount of benefit fraud (Report, 31 December). He claims the benefit system "is out of control and unfair for hard-working taxpayers who have lost £10bn due to illicit claimants and fraudsters". That needs some qualification. The Office of National Statistics shows that 0.7% of total benefit expenditure was overpaid as a result of fraud in 2011-12 among the 5.9m working age benefit claimants and the 10.6m state pensioners.
Rev Paul Nicolson
Taxpayers Against Poverty
Paul is right.
Of course there is fraud in the benefits system: there's fraud in any system. But the fraud rate runs at less than 1%, which is quite amazingly good.
Tax fraud in the UK, on the other hand, might cost £70 billion a year.
IDS chooses to ignore that. But he would, wouldn't he?
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Hi Richard I understand that benefit fraud of 0.7% means it in fact costs the Government £1.1bn – £1.2bn and this £10bn figure is also wildly inaccurate. Or am I wrong?
£10 bn is made up by adding together all the fraud from the beginning of the system to make the biggest number he could find
It’s fabrication of evidence
Fraud, if you like
Actually, I’m not sure that’s right.
The figures IDS quoted conflate overpayment by error and fraud, and the percentage of claims which were genuinely fraudulent is a small fraction of the whole. IIRC the original IDS claim was that Labour had spent £171bn on tax credits in a decade (which was actually untrue, the figure being £148bn, because the last £23bn were spent after the coalition came to power). 0.7% of £148bn is about £1bn.
But even if it were £10bn, £16bn of benefit owed goes unclaimed every year because the system is too damned complex and the people who are entitled to it are too damned frightened to claim because any error will be treated as “fraud”.
In any other walk of life, IDS’s recurring misuse of available evidence would be called lying.
Write to him via the Ministry and say why you are calling him a liar. I did something similar last week, and rather sounded off, I’m afraid. I got a polite note appreciating my interest in the work of the government. You could always call him something else much more serious, and when you are in court defending yourself, you can explain your strategy, that you are actually here to call him a liar, and could the charges me amended?
Benefit Fraud as often as not has Mitigating Circumstances, with Tax Fraud its pure Greed over Need..
It easier to fling benefit claimants in jail. They’re far less likely to have a good solicitor defending them! Why tackle tax evasion? That’s far trickier to deal with?
It can’t be long before they privatise the prisons here. Then like the US they’ll be occupancy targets. The cosy relationship between Government and significant Private Sector interests will then collude to ensure the numbers are kept. We all know where that will lead….
By the way Happy New Year Richard and keep up the good work.
I think he craftily combines fraud and error. By far the biggest part of that is error. Made by the Department. Of which he. Is in charge.
I agree with these comments in principle but wonder if, as a Christian, you’re saying that IDS is simply a nasty person like the party he represents and that he went in politics purely to ensure that poor people starve. I think you should avoid emotive language, as you can see that when you use it, as I have, it triggers a response that isn’t always linked with the facts. And before you question my motives, I’m self-employed with no pension, holiday or sickness pay etc and earn about 15,000 per year. I just had people making judgements whichever side of the arhument they’re on. Happy New Year everyone – I’m going back under the duvet until things improve
All of life is ab out judgements
Christianity is about judgement
Why not the rest?
‘IDS chooses to ignore that. But he would, wouldn’t he?’
Why the question mark, Richard? It’s a statement of fact. Leaving aside the other facts – that his figures are dubious and his use of them fraudulent – which you and others have already dealt with, lets looks at why it isn’t a question.
The first and most important reason is that ever since the Tories came into power they have done their utmost to demonsise benefit claimants so as to create the basis for an attack on the benefit system. This has been a very successful strategy so far, but this is quite likely due to the fact that many of the benefit cuts have not so far been implemented. 2013 see’s the end of that period of grace. Consequently there now has to be a second wave of attacks on the benefit system to maintain the narrative established since 2010 in the face of a likely and growing public backlash.
I have no doubt whatsoever that IDS’s PR team (and advisors) and various people in the Cabinet Office have been working on the direction and content of this latest attack for some while (attack being the best form of defence). And what better than to dovetail the latest assualt with an attack on the record of the previous government. After all, this also plays to the Tories other narrative – that new Labour was profligate and wasteful, hence why we have such a big deficit.
But there’s something else here too. Unless a miracle occurs – and it won’t – either the IT system or the actual universal benefit system itself – or both – will prove not fit for purpose. Furthermore – and this is the key issue – they will not save anywhere near as much as IDS and the Tories claim. Indeed, I confidently predict that the IT system alone will cost many millions more than planned before it actually does what’s claimed for it, if it ever does. So the second reason for the latest attack on the existing benefit system – and particularly the selective use of highly manipulated figures, is to begin to put in place an insurance policy for when the new systems fails to deliver and costs far more than we have been told. In short, ‘It cost loads more and isn’t saving us that much (anything?) but it’s still cheaper than the new Labour system.’
I’ll leave aside the ‘costs’ in term of human misery. As I’m sure IDs and his advisors know, that’s an intangible so we needn’t worry about that.
I think if this thread is to have any legitimacy it needs to not just preach to the converted – are you saying categorically that the ‘Left’ don’t also manipulate figures to their ends. I’ve read the original letter several times and still don’t understand exactly what it says – how can anyone know precisely the amount of fraud because by its very nature, it’s undisclosed, so people on both sides are manipulating the numbers for their own benefit (excuse the pun). And if IDS’s figures are imagined then where did the 70 billion a year come from – a crystal ball? I hate big business and how it evades its fair share of tax, and think many lawyers who create these loopholes should be imprisoned but please, less of the name-calling. Not all Labour people are saints, not all Liberals are sandal-wearing hippies, and not all Conservatives want to crush the poor out of existence
The fraud figure quoted is that identified by the ONS
It may not be right, but it is the audited data within a quantifiable data set – the claims actually made
And IDS’s usage of that data is simply wrong
I’m not extrapolating a generality. I’m stating a specific
I don’t think the 70 billion tax fraud is IDS’s responsibility, hence he hasn’t commented on this but wish a government, of whatever colour, would tackle it as a priority because such action has been promised for years and never happened. Government is definitely in hock to big business and that also included the Labour government under Blair. One more question – do you not think the welfare state has become unwieldy and that it’s role, as a net to catch those who fall on bad times, has changed over the years and that some people become dependent on it, or is this just a figment of the right wing press? Life isn’t as black and white as portrayed – and if Labour didn’t overspend at all why did Liam Byre quip, ‘there’s no money left’ when he was leaving the treasury
Life is not black or white
Byrne thought he was writing a joke
Only those without a sense of humour thought otherwise
Albeit, it wasn’t a good joke: his timing was wrong
Richard – you write “Byrne thought he was writing a joke”.
Alas, I don’t agree: as an unreconstructed Blairite, who started last year with some pretty far out attacks on welfare dependency and benefit scroungers, and read this as a hand grenade lobbed into the reputation of the departing PM, Gordon Brown, who had had the temerity to ask Blair to keep to his promise, and to step down in Gordon Brown’s favour, for whom Byrne, as a Blairite, had very little respect, and towards whom he felt little loyalty.
You may be right….
I have little affection for Byrne
The growth of benefits is just an indication of the economic failure of the Labour government. The emphasis should have been on increasing the return to labour by, for instance, raising the minimum wage to the living wage level, and, more importantly, strengthening workers’ bargaining power against that of employers.
The reason there was ‘no money left in the kitty’ was because of the bailout of the banks, not because of welfare spending. (And those banks are still bankrupt!)
Many a word spoken in jest – I’m not certain many of the population thought it was funny.
Was he stating an untruth? And, I’m still open to be persuaded by the original argument but
you’ve avoided every question about whether the welfare state is working as intented. Was the labour minister Frank Field who started the work on improving welfare speaking out of turn when he said drastic changes needed to made in the whole system because it was being abused. And why did the Labour government not tackle tax fraud as they had over a decade in power
Answer me a simple question
Where is the wrok all these people are meant to be doing?
Show me the demand for their labour and I’ll agree we do not need to pay some people to remain idle
When there is no work for the fit and able tell me how those with disability are going to find work?
When you can resolve that conundrum come back to me on whether the social security system is working, or not
There are plenty of jobs around Peterborough where I live that have been taken by immigrants because only they are prepared to do the work – and that was a fact found by a Panorama documentary. And all credit to them as they work hard doing awful jobs in terrible conditions. I agree that we need to support people who are unemployed, sick or suffering some trauma in their lives. I still feel that the welfare state is struggling to support many more people than was initially intended and, irrespective of tax fraud – which is far worse and hasn’t been tackled, and that changes are required. I assume your book takes a completely different stance and that political bias doesn’t colour everything so, when I have some money, I will challenge my perceptions by reading it (if an A level in economics is sufficient qualification!). I think if I was planning a system that was fair, I wouldn’t start from here and have almost given up hope of it ever really changing
So you think work should be for terrible pay in awful conditions
Why?
Sorry – but your assumptions are just wrong
Where on earth did I say that – I was saying that there are jobs there but that people won’t take them. Vegetables have to be picked and they grow in fields which means working in wet conditions – as I have on many occasions as many of the jobs I’ve done have been outside. How would you pick them? I have said numerous times that I think the system is wrong in how it’s set up, but many people of all political persuasions have said the welfare state isn’t working properly and is doing much than Nye Bevin ever intended – does benefit dependency not exist at all in your opinion
You pay a living wage to get people to do such work
As you well know, that is not being done now
I agree a living wage is essential but fear that, the way the system is now, companies will
shed jobs and unemployment will rise – they will say they can’t afford a pay rise.
Having said that, while many large companies exploit the system, several have gone bankrupt in recent years so even they are struggling. How can the system be managed to create higher levels of employment without these companies becoming uncompetitive
Your question is the wrong way round
How can companies be profitable unless they pay wages high enough for people to be able to aford their products
Henry Ford realised that was the right question
You, like many others, have not
Indeed – the fallacy of composition – which neoliberal (or micro-based) economics ignores.
Testimony of Marriner Eccles to the Committee on the Investigation of Economic Problems in 1933
Below are excerpts from the testimony of Marriner Eccles to the Senate Committee on the Investigation of Economic Problems in 1933. It is an historic document — laying out the future terms of the Federal Deposit Insurance Corporation, the management of money supply nationally through open market operations, the Bretton Woods Accord on currency stability, mortgage refinancing as monetary stimulus, and reforms of the Federal Reserve System to eradicate the excesses of untamed capitalism and financial dominance of Wall Street. He proposes higher income and inheritance taxes as essential to promote economic growth, curb inequality and forestall political instability. He encourages federal regulation of child labor, unemployment insurance, social security and other farsighted reforms. And he avows himself a capitalist throughout.
Although he was a titan of industry – with banks, railroads and corporations spanning the American west – Eccles was born the son of an illiterate, bigamist, Mormon, Scottish immigrant. He was about as far as you could get from the Eastern elite ranks that ran US banking on Wall Street. But he sure understood money, economics and trade, and had the personal drive and charisma to carry his point with the president and with Congress.
Following his testimony, the Utah banker was invited by Franklin Roosevelt to come to Washington to spearhead legislation to enact his proposed reforms. Within two years he had drafted and enacted the Securities Act of 1933 and the Banking Act of 1933(a.k.a., The Glass-Steagall Act, which separated investment and commercial banking and established the FDIC) and the Banking Act of 1935 (which created the modern Board of Governors of the Federal Reserve System and Federal Open Market Committee). He served as Chairman of the Board of Governors of the Federal Reserve System from 1934 until 1951.
Read this and know that just one person, with vision and principles, can make a difference to the world in a time of crisis, establishing the basis for decades of prosperity and growth.
[page 8]
Before effective action can be taken to stop the devastating effects of the depression, it must be recognised that the breakdown of our present economic system is due to the failure of our political and financial leadership to intelligently deal with the money problem. In the real world there is no cause nor reason for the unemployment with its resultant dsestitution and suffering of fully one-third of our entire population. We have all and more of the material wealth which we had at the peak of our prosperity in the year 1929. Our people need and want everything which our abundant facilities and resources are able to provide for them. The problem of production has been solved, and we need no further capital accumulation for the present, which could only be utilised in further increasing our productive facilities or extending further foreign credits. We have a complete economic plant able to supply a superabundance of not only all the necessities of our people, but the comforts and luxuries as well. Our problem, then, becomes one purely of distribution. This can only be brought about by providing purchasing power sufficiently adequate to enable the people to obtain the consumption goods which we, as a nation, are able to produce. The economic system can serve no other purpose and expect to survive.
If our problem is then the result of the failure of our money system to properly function, which today is generally recognised, we then must turn to the consideration of the necessary corrective measures to be brought about in that field; otherwise, we can only expect to sink deeper in our dilemma and distress, with possible revolution, with social disintegration, with the world in ruins, the network of its financial obligations in shreds, with the very basis of law and order shattered. Under such a condition nothing but a primitive society is possible. Difficult and slow would then be the process of rebuilding and it could only then be brought about on a basis of a new political, economic and social system. Why risk such a catastrophe when it can be averted by aggressive measures in the right direction on the part of the Government?
* * *
[page 9]
We could do business on the basis of any dollar value as long as we have a reasonable balance between the value of all goods and services if it were not for the debt structure. The debt structure has obtained its present astronomical proportions due to an unbalanced distribution of wealth production as measured in buying power during our years of prosperity. Too much of the product of labor was diverted into capital goods, and as a result what seemed to be our prosperity was maintained on a basis of abnormal credit both at home and abroad. The time came when we seemed to reach a point of saturation in the credit structure where, generally speaking, additional credi was no longer available, with the result that debtors were forced to curtail their consumption in an effort to create a margin to apply on the reduction of debts. This naturally reduced the demand for goods of all kinds, bringing about what appeared to be overproduction, but what in reality was underconsumption measured in terms of the real world and not the money world. This naturally brought about a falling in prices and unemployment. Unemployment further decreased the consumption of goods, which further increased unemployment, thus bringing about a continuing decline in prices. Earnings began to disappear, requiring economies of all kinds — decreases in wages, salaries, and time of those employed.
[page 10]
The debt structure, in spite of the great amount of liquidation during the past three years, is rapidly becoming unsupportable, with the result that foreclosures, receiverships and bankruptcies are increasing in every field; delinquent taxes are mounting and forcing the closing of schools, thus breaking down our educational system, and moratoriums of all kinds are being resorted to — all this resulting in a steady and gradual breaking down of our entire credit structure, which can only bring additional distress, fear, rebellion, and chaos.
* * *
As an example of Government control and operation of the economic system look to the period of the war, at which time, under Government direction, we were able to produce enough and support not only our entire civilian population on a standard of living far higher than at present, but an immense army of our most productive workers engaged in the business of war, parasites on the economic system, consuming and destroying vast quantities produced by our civilian population; we also provided allies with an endless stream of war materials and consumption goods of all kinds. It seemed as though we were enriched by the waste and destruction of war. Certainly we were not impoverished, because we did not consume and waste except that which we produced. As a matter of fact we consumed and wasted less than we produced as evidenced by the additions to our plant and facilities during the war and the goods which we furnished to our allies. The debt incurred by the Government during the war represents the profit which accrued to certain portions of our population through the operation of our economic system. No Government debt would have been necessary and no great price inflation would have resulted if we had drawn back into the Federal Treasury through taxation all of the profits and savings accumulated during the war.
* * *
[page 11]
How was it that during the period of the prosperity after the war we were able in spite of what is termed our extravagance — which was not extravagance at all; we saved too much and consumed too little — how was it we were able to balance a $4,000,000,000 annual Budget, to pay off ten billion of the Government debt, to make four major reductions in our income tax rates (otherwise all of the Government debt would have been paid), to extend $10,000,000,000 credit to foreign countries represented by our surplus production which we shipped abroad, and add approximately $100,000,000,000 by capital accumulation to our national wealth, represented by plants, equipment, buildings, and construction of all kinds? In the light of this record, is it consistent for our political and financial leadership to demand at this time a balanced Budget by the inauguration of a general sales tax, further reducing the buying power of our people? Is it necessary to conserve Government credit to the point of providing a starvation existence for millions of our people in a land of superabundance? Is the universal demand for Government economy consistent at this time? Is the present lack of confidence due to an unbalanced Budget?
What the public and the business men of this country are interested in is a revival of employment and purchasing power. This would automatically restore confidence and increase profits to a point where the Budget would automatically be balanced in just the same manner as the individual, corporation, State, and city budget would be balanced.
[page 12]
During the past three years there has been such tremendous liquidation and scaling down of debts that extraordinary measures have had to be taken to prevent a general collapse of the credit structure. If such a policy is continued what assurance is there that the influences radiating from a marking down of the claims of creditors will not result in a further decline of prices? In other words, after we have reduced all debts through a basis of scaling down 25 per cent to 50 per cent, what reason have we to expect that prices will not have a further decline by like amount? And then again, the practical difficulties of bringing about such a adjustment on a broad scale seem to be insurmountable.
The time element required would indefinitely prolong the depression; such a policy would necessitate the further liquidation of banks, insurance companies, and all credit institutions, for if the obligations of public bodies, corporations, and individuals were appreciably reduced the assets of such institutions would diminish correspondingly, forcing their liquidation on a large scale. Nothing would so hinder any possibility of recovery. Bank and insurance failures destroy confidence and spread disaster and fear throughout the economic world. The present volume of money would diminish with increased hoarding and decreased credit and velocity, making for further deflation and requiring increased Government support without beneficial results until we would be forced from the gold standard in spite of our 40 per cent of the world’s gold, and, at that point, an undesirable and possibly an uncontrolled inflation with all its attendant evils would likely result, and thus the very action designed to preserve the gold standard and re-establish confidence would destroy both.
[page 13]
We have nearly one and a half billion currency more in circulation at the present time than we had at the peak of 1929, and under our present money system we are able to increase this by several billion more without resorting to any of the three inflationary measures popularly advocated. There is sufficient money available in our present system to adequately adjust our present price structure. Our price structure depends more upon the velocity of money than it does upon its volume.
* * *
In 1929 the high level of prices was supported by a corresponding velocity of credit. The last Federal Reserve Bulletin gives an illuminating picture of this relationship as shown by figures of all member banks. From 1923 to 1925 the turnover of deposits fluctuated from 26 to 32 times per year. From the autumn of 1925 to 1929 the turnover rose to 45 times per year. In 1930, with deposits still increasing, the turnover declined at the year end to 26 times. During the last quarter of 1932 the turnover dropped to 16 times per year. Note that from the high price level of 1929 to the low level of the present this turnover has declined from 45 to 16, or 64 per cent.
[page 14]
I repeat there is plenty of money today to bring about a restoration of prices, but the chief trouble is that it is in the wrong place; it is concentrated in the larger financial centers of the country, the creditor sections, leaving a great portion of the back country, or the debtor sections, drained dry and making it appear that there is a great shortage of money and that it is, therefore, necessary for the Government to print more. This maldistribution of our money supply is the result of the relationship between debtor and creditor sections — just the same as the realtion between this as a creditor nation and another nation as a debtor nation — and the development of our industries into vast systems concentrated in the larger centers. During the period of the depression the creditor sections have acted on our system like a great suction pump, drawing a large portion of the available income and deposits in payment of interest, debts, insurance and dividends as well as in the transfer of balances by the larger corporations normally carried throughout the country.
[page 15]
The maladjustment referred to must be corrected before there can be the necessary velocity of money. I see no way of correcting this situation except through Government action.
[page 21]
Mr Eccles: Of course, the way I look at this matter is that we have the power to produce, just as in the period of prosperity after the war demonstrated when we had a standard of living for a period from 1921 to 1929 which, of course, was far in excess of what it is now. Yet in spite of that standard of living we saved too much a I have previously tried to show.
Senator Gore: You have got Foster in the back of your head?
Mr Eccles: I only wish there were more who had. We saved too much in this regard, that we added too much to our capital equipment. Creating overproduction in one case and underconsumption in the other because of an uneconomic distribution of wealth production. . . . Of course, we are losing $2,000,000,000 per month in unemployment. I can conceive of no greater waste than the waste of reducing our national income about half of what it was. I can not conceive of any waste as great as that. Labor, after all, is our only source of wealth.
[page 22]
There could be no waste in post offices or in roads or in schools. You would have something to show for it. With war all you have left is the expense of taking care of maimed and crippled and sick veterans. That is what is left from war. And it is all wastage.
Senator Gore: You have touched the point. The real cause of the existing trouble was the war, with destruction of over 300 billion dollars of wealth in four years. We are paying the price now. The boys paid the price in blood on the field. We are paying the economic price today. And you may just as well pass a resolution to raise the dead that fell in France as to try to pass laws to avert the inevitable consequences of that war.
Mr Eccles: It is true we are suffering the consequences of the war, but there is no reason why we should be suffering from the consequences of the war if it had not been for the international or the interallied debt that resulted from it. WE are suffering from a debt structure. We are not suffering from the waste, because after all, we know today that we have the power and the facilities to produce certainly all that the people of this country need and want.
* * *
We now see, after nearly four years of depression, that private capital will not go into public works or self-liquidating projects except through government and that if we leave our “rugged individual” to follow his own interest under these conditions he does precisely the wrong thing. Each corporation for its own protection discharges men, reduces pay rolls, curtails its orders for raw materials, postpones construction of new plants and pays off bank loans, adding to the surplus of unusable funds. Every single thing it does to reduce the flow of money makes the situation worse for business as a whole.
[page 24]
I am talking about private credit. If it is credit we need why do not say 200 of our great corporations controlling 40 per cent of our industrial output that are in such shape that they do not need credit — they have great amounts of surplus funds — if it is credit that is needed why do they not put men to work? For the very reason that there is not a demand for goods, that we have destroyed the ability to buy at the source through the operation of our capitalistic system, which has brought about such a maldistribution of wealth production that it has gravitated and gravitated into the hands of — well, comparatively few. Maybe several millions of people. We have still got the unemployment and have got no buying power as a result.
[page 25 — proposal of bank deposit insurance and failed bank resolution]
[page 27 — laying out the basis for what was later to be the FDIC]
However, there is always this danger about that class of thing [Government guarantee of bank deposits]. It encourages bad practices and bad management. It may put a premium on them, which of course we do not want to do, and if it is done there must be rules and regulations for the proper conduct of banks requiring eligibility, and if they fail to meet the eligibility they would be suspended after so much notice, and the fund would be drawn upon to take care of any loss.
[page 31]
Farm mortgages at present are possibly the most undesirable and frozen of all loans, and frozen loans are preventing, to some extent, the necessary expansion of credit. The plan I have proposed [to refinance existing farm mortgages at new lower rates] will very effectively and immediately make liquid billions of dollars of assets for which there is no market today, while at the same time it will bring about a reduction of at least one-third of the average annual payments on the farm debt now required to be made by farm mortgage debtors without requiring any financing or loss by the Federal Government, thus bringing about the necessary relief in the farm mortgage field. This plan has the advantage, as a result of the Government guarantee of the Federal land bank bonds, of diverting surplus funds carried in the great creditor sections into the indirect financing of farm mortgages where it is impossible even at a high rate of interest, which farmers can not pay, to attract those funds directly.
* * *
No program designed to bring this country out of the depression can be considered apart from the relations of this country to the rest of the world unless a policy of complete isolation is adopted and an embargo put on gold exports and our domestic economy adjusted to meet such a condition.
Our international problems are far more difficult and will be slower to work out because of our inability to control the action of other nations. These problems can be met only through international conferences over a period of time. The most important of these problems and the one which must be settled before any progress can be made in the meeting of our domestic or other foreign problems is the problem of interallied debts.
There is a great demand on the part of the public and most of the press of this country that these debts be paid. It seems to me that our political leaders have lacked the courage to face this problem in a realistic manner. This has greatly contributed to prolonging the depression. The public, generally speaking, is not fully informed as to the impossibility of our foreign debtors complying with these demands, which cn only be complied with at the expense of our own people.
[page 32]
It is elementary that debts between nations can ultimately be paid only in goods, gold, or services, or a combination of the three. We already have over 40 per cent of the gold supply of the world — that is not true; it is between 35 and 40 per cent — and as a result most of the former gold standard countries have been forced to leave that standard and currency inflation has been the result. This has greatly reduced the cost of producing foreign goods in terms of our dollar and has made it almost impossible for foreign countries to buy American goods because of the high price of our dollar measured in the depreciated value of their money. This naturally has resulted in debtors trying to meet their obligations by producing and selling more than they buy, thus enabling them to have a favourable balance of trade necessary to meet their obligations to us. If this country is to receive payment of foreign debts, it must buy and consume more than it produces, thus creating a trade balance favourable to our debtors.
* * *
We must choose either between accepting sufficient foreign goods to pay the foreign debts owing to this country, or cancel the debts. This is not a moral problem, but a mathematical one.
[page 33 — the outline of what later became the Bretton Woods Accord]
Cancellation, or a settlement of the debts on a basis which would practically amount to cancellation, in exchange for stabilisation of the currency of the debtors, together with certain trade concessions and an agreement to reduce armaments would be a small price for this country to pay as compared with the great benefits which the entire world, including ourselves, would derive therefrom. Without a stabilisation of foreign currencies it will be difficult, if not impossible, in my opinion, to substantially raise the price level in this country as long as we stay on a gold basis. Our debtors will default and we will likely be forced to abandon gold and depreciate our currency in relation to that of other countries in order to raise our price level in this country and to meet foreign competition unless we are instrumental in inducing foreign countries to stabilise their currencies on a gold basis, or gold and silver basis if action is taken internationally to remonetise silver.
[page 33]
Senator Shortridge: Then I take it you would have the tariffs reduced?
Mr Eccles: No. Debts cancelled. Then I think with the prosperity that you would get in this country you can collect more than that in income and inheritance taxes when you stop this loss of $2,000,000,000 a month through unemployment. You start the process of wealth, and even a capitalist is far better off. I am a capitalist.
* * *
The program which I have proposed is largely of an emergency nature designed to bring rapid economic recovery. However, when recovery is restored, I believe that in order to avoid future disastrous depressions and sustain a balanced prosperity, it will be necessary during the next few years for the Government to assume a greater control and regulation of our entire economic system. There must be a more equitable distribution of wealth production in order to keep purchasing power in a more even balance with production.
If this is to be accomplished there should be a unification of our banking system under the supervision of the Federal Reserve Bank in order to more effectively control our entire money and credit system; a high income and inheritance tax is essential in order to control capital accumulations (this diversion of taxes should be left solely to the central government — the real property and sales tax left to the States); there should be national child labor, minimum wage, unemployment insurance and old age pension laws (such laws left up to the States only create confusion and can not meet the situation nationally unless similar and uniform laws are passed by all States at the same time, which is improbable); all new capital issues offered to the public and all foreign financing should receive the approval of an agency of the Federal Government; this control should also extend to all means of transportation and communication so as to ensure their operation in the public interest. A national planning board, similar to the industries board during the war, is necessary to the proper coordination of public and private activities of the economic world.
Such measures as I have proposed may frighten those of our people who possess wealth. However, they should feel reassured in reflecting upon the following quotation from one of our leading economists:
It is utterly impossible, as this country has demonstrated again and again, for the rich to save as much as they have been trying to save, and save anything that is worth saving. They can save idle factories and useless railroad coaches; they can save empty office buildings and closed banks; they can save paper evidences of foreign loans; but as a class they can not save anything that is worth saving, above and beyond the amount that is made profitable by the increase of consumer buying. It is for the interests of the well to do — to protect them from the results of their own folly — that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not “soaking the rich”; it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment.
[page 35]
I feel that one of two things is inevitable: That either we have got to take a chance on meeting this unemployment problem and this low-price problem or we are going to get a collapse of our credit structure, which means a collapse of our capitalistic system, and we will then start over. And I therefore would like to see us attempt to regulate and operate our economy which today requires more action from the top due to our entire interdependency than it did in our earlier days.
http://londonbanker.blogspot.co.uk/2011/09/testimony-of-marriner-eccles-to.html
How do I become a wealth-creator?
I am extremely distressed by the scapegoating that the government has been indulging in, demonising the unemployed and skivers, and even suggesting that sick and disabled people are dishonest.
As a sick and disabled person, dependent on state benefits all my adult like, I would now like to become a wealth-creator. Not just someone who earns a living, that is not good enough, because wealth-creators are the most admired people in our society, so I must become a wealth-creator.
But how do I become a wealth-creator? What does that actually mean?
I am quite artistically talented, and I plan to set up a pottery using my own designs and artwork.
If I successfully sell my pottery in shops, or online, I can see how I can make a profit, by having money left over after I have paid for all the production costs of my excellent pottery. But that is not creating wealth, it is just transferring wealth, moving someone else’s money from their account to my account.
Similarly, when I pay my supplier for my clay, I am not paying with money I have actually created, but with money that has come from other people (my customers, who now have pots, but not the money they paid for the pots).
So at this point I am completely stuck. I do not know how to become a wealth-creator.
Have I missed something? Is there in fact no such thing as creating wealth, just acquiring wealth from other people? If that is so I will be crushingly disappointed, and I will lose all interest in setting up a pottery.