I have said things like this for a long time:
You can't cut your way to prosperity, you have to build it: investing in modern infrastructure, investing in people and their skills, harnessing innovative ideas and new ways of working to tackle climate change to protect our environment and our future.
Our job is to show that the economy and our society can be made to work for everyone. That means ensuring we stand up against injustice wherever we find it and we fight for a fairer and more democratic future that meets the needs of all.
Today that comes from an article by Jeremy Corbyn in the Observer. The core of what I have argued is now at the core of the national debate that will develop over coming years. I am, of course, pleased about that.
Fleshing out the case and then winning the argument is next on the agenda.
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I am not an economist but “common sense ” tells me that if I let my house go to ruin I would have lost all my investment. However, even if I have to borrow to maintain or improve my house it would be beneficial for me in the long term. One I would be living in a nice house and two the value of my asset would probably increase or at least be protected.
Beware of household analogies when it comes to economics!
The government neither has, nor doesn’t have money, any any tangible sense. The ££ we think of as money are just the IOUs of govt. Just as someone else can possess your IOUs and assign a value to them you can’t possess your own. So borrowing for govt isn’t at all the same as a householder borrowing.
Govt has two prime economic objectives. Firstly the keep its economy functioning at close to as full capacity as possible to maximimise the creation of real wealth ie goods and services produced. Secondly to ensure that its IOUs don’t lose their value too quickly. ie that inflation is kept under control. Sometimes these are in conflict so a sensible middle course needs to be steered.
I hope Corbyn really meant his closing words…
“Our aim is now to take that spirit and hunger for change, that has won the support of the Labour party, to reach out to the whole of Britain”
If he genuinely thinks ‘reaching out’ is essential he should give very serious thought to forming a Grand Progressive Alliance (with the Greens and other progressives such as the SNP) with a common platform centred on binning FPTP for full PR.
And the prize?
Winning by a landslide (and the slight matter of forever banishing neoliberalism to the dustbin of history).
http://www.independent.co.uk/voices/comment/my-message-to-jeremy-corbyn-i-can-help-you-build-a-progressive-majority-10469934.html
Caroline Lucas is right – all anti-auterity groups need to get together.
I sincerely hope Carline and I will talk to each other for a long time to come
“Winning by a landslide” won’t just happen through having PR.
Look at the GE in May.
A glance at the hysterical headlines in most of the Sunday newspapers indicates winning the argument ain’t going to be easy!
Not in the media
Perhaps we can now look forward to far more honest and down earth debate in paliament and the media, as now a “real” person will be sat opposite the PM.
I will say it now the result is in but Blair is totaly wrong, a political party’s job is not to do what ever it takes to get elected it is to speakout on a set of values it believes in.
I agree with you
But unless you get elected you remain a protest group -albeit one with some good ideas whilst your opponents push forward their agenda via legislation.
But there is no point being elected to do the wrong thing
Exactly-Milliband’s great mistake. I really hope that Corbyn is the start of the end of a type of suited, creosoted, soundbite, spun politician.
I really like Michael Hudson’s endorsement of PQE here, he distinguishes it from QE quite well too! It starts at 23 minutes.
https://www.youtube.com/watch?v=0iPb9xhogoY
Thanks
Michael is good
Hudson is one of the clearest communicators of the nature of the neo-liberal scourge.
The thing that really concerns me is the series of housing bubbles (and its continuation) that will remain an underlying threat to the vitality of the economy and the life of communities. With these genie well out of the bottle, how do we get it back in? This could be the ever-present ‘scupperer’ of any attempt at progressive economic developments-this transfer of wealth from the young to the old.
I love Michael Hudson. He, practically more than anyone else, cuts through the neoliberal bulls**t.
I was talking to a small-holder farmer yesterday who volunteered that although he voted Ukip in May, he’d consider the Labour Party again. He said that he wasn’t really political but Jeremy Corbyn sounds normal. Interesting…
I think that is one of his strengths
Good to hear
First on Jeremy’s list should be, I feel, the introduction of new vocabulary and ways of talking about debt and deficits. My list would be:
1) There cannot be a shortage of money (for a sovereign country) there can be too much and it can be badly allocated, but not a shortage.
2) Taxes don’t fund public services-they remove money, help incentivise and disincentivise in vital ways.
3) Governments don’t need bonds before they can spend
4) Government is not a household
5) National debt can just as easily be called National Credit.
6) Unemployment does not need to be used as a price control we can have FULL employment
7) using housing as a pension scheme is socially divisive and economically destructive.
This would represent a vast re-education project, and would need to start at school level where students are given misleading ideas about economic choices and underlying realities.
As you know, I know all those
Let’s see what can be achieved
yes, of course, it’s a step by step approach and I don’t think the public want to be lectured-some of the leading MMTers are so steeped in the stuff that they fail to acknowledge that people need to be coaxed and encouraged gently with CLEAR explanations.
Wow.
1) There cannot be a shortage of money (for a sovereign country) there can be too much and it can be badly allocated, but not a shortage.
Yes there can, if the government (or monetary authority) fails to provide sufficient currency to facilitate transactions then there is a shortage of money. With real gdp growth the money supply needs to increase over time or the price level will fall.
2) Taxes don’t fund public services-they remove money, help incentivise and disincentivise in vital ways.
Taxes nearly exclusively fund public services in the UK.
3) Governments don’t need bonds before they can spend. Governments need resources. They raise resources through i) taxes, ii) borrowing from households/firms/abroad, iii) revenue generated by government enterprises.
4) Government is not a household
Correct!
5) National debt can just as easily be called National Credit.
Crazy. The government borrows. This is a liability for the government and an asset for whoever holds the bond. The total value of the liability (government debt) is equal to the total value of the asset (bonds held by households / firms / government).
I really don’t see how a lot of people here are mistaking an accounting identity for an economic relationship. The government cannot issue as much debt as it wants. Households / firms / foreigners are not obliged to hold government debt. Of course the national accounts balance for government bonds which are issued. They do not balance for government bonds which no-one will buy. Nor is anyone obliged to use the currency of a particular nation.
6) Unemployment does not need to be used as a price control we can have FULL employment
Yes! The Phillips curve is not an empirical regularity. We can have full employment or nearly empty employment and prices can do whatever.
7) using housing as a pension scheme is socially divisive and economically destructive.
Why? There needs to be a supply of rentable properties.
John
I note what you say
I do think you need to read both the Bank of England First Quarterly report of 2014 and some modern monetary theory
And I also suggest looking at the real role of central banks and QE
Your comments read like a time warp from an out of date economics textbook (of the sort the Bank of England describe)
Richard
Richard,
I appreciate your comments.
I see noting remotely novel in MMT. It is simply the notion that governments can meet any value of nominal obligations because they issue currency. This is of course true – though they might need to print a lot of it. I don’t see why we need to introduce payment of taxation as a motive for holding money. Agents use money for convenience as a social convention.
I am really interested to see how PQE etc. develops. I completely agree that it is feasible and legal and probably isn’t wildly inflationary in reasonable doses (though I cannot see how it could possibly be deflationary).
I don’t use textbooks – I teach from my own notes. And PQE will certainly be making an appearance next semester!
John
Thanks John
I am not an out and out MMTer: I do see it as useful explanation, including on tax
Would be interested to see your notes when you do PQE
Richard
Following up Richard’s recommendations, I think you might find this article by Chris Cook illuminating, especially on the National Debt/National Credit question:
https://blogs.ucl.ac.uk/resilience/2013/03/11/the-myth-of-debt/
John-you are right to say there is nothing novel about MMT (discussion along these lines was going on in the 1940’s [Beardsley Ruml, Abba Lerner]) BUT what is novel is that it reminds us of real choices that are available and dispels mythical constraints by pretending austerity is based in a metaphysical reality -this devalues the human capacity for freedom and, as such, is pernicious because it deliberately hides the manipulative power of the financial sector.
On the issue of Bonds-I like Bill Mitchell’s clear explanation of their function:
“”the continued issuance of public debt is a form of corporate welfare which makes the task of making profits through trading financial assets in private capital markets that much easier…… the Treasury [issues] securities not because it needs cash, but because market participants need securities.”
Could that also be a theme in the coming semester?
John Gathergood @ September 14 2015 at 9:21 am
“though they might need to print a lot of it.”
That implies sometimes they sometimes print and sometimes do not, which is incorrect. Its always ‘printed’. The government only creates and destroys money. It has no stock of money as such – not one brown penny.
“I don’t see why we need to introduce payment of taxation as a motive for holding money.”
As a thought experiment what would happen if we stopped taxing and just printed? The money would then just pile up and its value head south. Taxes are necessary to keep the currency strong. Regarding motivation. You can’t pay UK taxes using $, gold, diamonds etc. Only £ sterling will do and if you refuse to pay (or offer anything but) you will end up in jail. That motivation has nothing to do with ‘social convention’ and, lets be honeste, everything to do with menace…but all in a good cause of course :).
Saw the Sunday paper headlines – mainly Tory gloating over “the Corbyn of history” and other such feeble puns. And attack dog Michael Fallon (he of the “Ed stabbed his brother in the back, and will stab Britain in the back”), wheeled out to proclaim Labour is now a threat to our social, financial and physical security!!!
The Tories – indeed, the Labour Right – REALLY don’t get it, about the sea-change that is now taking place in English politics, as ocurred last year in Scottish politics – a REAL willingness to question, and an almost visceral mistrust of Westminster.
Shakespeare has it in “Julius Caesar”: “there is a tide in the affairs of men, which, taken at the flood leads on to fortune” – which is where we are now in this sea-change, with the warning following – “Omitted, all the voyage of their life Is bound in shallows and in miseries”.
The difference being that Shakespeare is speaking about individual fortunes, where this “sea-change” is about national fortunes, and about great movements of ideas, such as Jim Callaghan told his Foreign Secretary, David Owen, about – great tidal changes that cannot easily be resisted.
The tidal changes ARE on the side of the progressive majority, but even with that bring so, we STILL need to heed Shakespeare’s warning, and take these “at the flood”, and WORK unremittingly (as has Team Corbyn, and our own Richard Murphy) or the forces of reaction who survived – unbelievably – their total discrediting in 2008, will find a way to beat us again. So it’s all hands to the pump, working together, to ensure we make it this time.
Thanks Andrew
Glad it won’t only be me…
I think there is much to do
But this does feel to me like the mood in Scotland
And the Tories do not get that either
Fallon comes across as greasy and disingenuous to the nth degree and I think many will see through it. They look worried-rather different to the poor quality public school boy jokes and guffaws they directed at Corbyn only a short while ago.
The evidence point to almost all western interference and illegal invasion reulting in INCREASED insecurity and terrorist recruitment.
I would be interested to see how Corby plans to merge (for example) action with respect to reducing CO2 emissions and industrial policy. Example: the UK has the largest on-shore & off-shore wind resource in Europe. The UK has no home grown wind turbine manufacturer – (the bunch developing the Britannia turbine folded some years ago). Most of the power enegineeering industrial base in the UK is owned by non-UK companies. This has implications for R&D, value added and tax.
There are one or two “bright sparks” in the sector but so far UK (non)industrial policy shows no signs of nurturing these sparks into “home grown flames” which then have the potential to turn into the likes of, for example, JCB. Notice that this (world-class) company is… privately owned.
I am desperately keen to link the two
Jeremy knows that
He has spoken of 1 million green jobs
I think that came from
I’ve got to say that I have been mightily heartened to see someone from one of the ‘mainstream parties’ listening to you for once Richard. I did not expect this to happen. I confess that I had lost hope. Shame on me!!
I’ve noted before in another guise that the neo-libs are good at sticking together when pedalling their myths – the people involved in convincing voters about this gathering counter-narrative needs to do the same.
Hold the line.
Stick together.
At Derby’s Roundhouse, Corbyn got a 20 minute standing ovation before he even opened his mouth and it was standing room only.
I hope that Corbyn gives hope to those who have stopped voting and it is they who vote Labour at the next election.
Hope is key
I have said so for a very long time
Remember it is the opposite of fear
And there’s a lot of that about
I recall that the Day Mark Reckless won the by-election for UKIP, he appeared in the House of Commons for the debate on money creation. It may be that he can influence some of UKIP on the merits of PQE. I don’t imagine Farage would be sympathetic but there may be some support outside of the Left.
I have no knowledge of how the Lib Dems might respond but there must be some fertile ground there.
May I risk your wrath and ask a stupid question? I understand nothing of People’s Quantitative Easing. Does it make truly terrible vanity projects like HS2 more likely? HS2 will aid the migration of jobs from North to South, while reducing local commuter services. Any number of rail experts, MP’s committees & the House of Lords have said this, yet the project continues.
Supposedly there’ll be something like £60 billion interest to pay and the cost has already cancelled other better value rail projects like the electrified Midland Mainline. Is there no or less interest due with PQE?
With projects like HS2, the rail industry is holding out a begging bowl for money to spend on any nonsense, for the sake of receiving money. Will PQE enable a wave of poor investment projects?
I would argue against PQE for HS2 come what may
PQE needs to be jobs in every constituency and so smaller scale
I actually see no reason for HS2 at all
Vanity indeed for a select few no doubt