David Cameron has said he will spend whatever it takes to provide flood defences.
Respectfully, everyone knows that if he does that benefits will be cut again.
Labour's Simon Danczuk has instead suggested we cut overseas aid.
Both would be exercises in deliberately imposing pain wholly unnecessarily.
This country can afford flood defences, and as many of them as we want within our physical capacity to build them. We can pay for them in three ways.
First, we could issue new gilts. That is, of course, government debt. But given that markets are buying any amount the government creates without flinching or demanding higher interest rates this is entirely possible.
Second, we could create a National Investment Bank and have it issue bonds to cover the cost with a yield either covered by the government, or insurers, or, if the money was spent wisely on developing new technology by marketising it and creating a new world leading industry in this area.
Third, we could of course do People's Quantitative Easing using either of these bond issues, although I do not think that would be necessary at present.
So, we can pay for this without raising taxes any time soon and maybe ever and, if done wisely, this problem could be turned into an opportunity.
In fact, if we thought long term enough we would realise that we really do have to invest big time in this issue. For example, if the whole of the area from the Wash to Bedford is not to be flooded regularly in the future it really is time we dammed the Wash. Then we would also have a tidal energy source and would preserve and create new wildlife habitats when soon many will be lost.
But that may be going too far when at present the government can't seem to think beyond finding the cash for sandbags.
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“deliberately imposing pain” is an odd phrase. Cutting governmental overseas development aid would reduce pain based on the 2008 work ‘The Curse of Aid’ from economists Garcia Montalvo, Djankov, and Reynal-Querol. A conclusion which has been corroborated many times.
Humanitarian aid, and work to eradicate communicable diseases are excluded from the above conclusion.
I do not think aid is unambiguously good
But if you think offering unconditional assistance is bad then I suggest you have not the first clue how to help others
Your view is that governmental development aid is ambiguously good ( or on aggregate a good thing ). This is the opposite of what economists have found which is that it is on aggregate bad.
Economists are telling us the way to lift up poorer countries is free trade and free movement for work, but the UK public isn’t ready to embrace this yet.
To suggest all economists have found that is absurd: it is a wholly unjustified claim
You can say many have found fault with some of it and I would agree
But to generalise as you have is incorrect
As it is wrong to say I find aid unambiguously good
Actually, I am working, through tax reform to remove the need for aid
But until we get that reform I recognise the need for it
And as for suggesting ‘free trade’ will work, that is risible and exactly the opposite of what countries in Europe and the US did
That will never work and the economists who suggest it will have never encountered the real world
I believe that China liberalising its citizens, to allow free trade with the west, helped pull 650 million people out of poverty in 25 years. The single greatest alleviation of poverty in human history. Obviously Mao’s great leaps were not as effective – so I think its fair to say that Government action alone is not the answer, that people respond to economic incentives quite well – a Government which understands free market incentives will do better than one which doesn’t.
I’d recommend the books Poor Economics, and The Bottom Billion on the subject – which both show how actually Government corruption is one of the biggest indicators of if a nation will stay poor. Both left-wing and right-wing states tend to succeed, if they are not corrupt – even semi authoritarian or dictatorial states do ok (such as Singapore or South Korea) if corruption is cleared out of politics. In my own humble opinion it is easier for a smaller free market state to avoid corruption, simply because their Governments have fewer resources to plunder – and even if they do have exploitative private companies inside their state, if the market is left free and uncorrupted by Government there will always be other (self-interested) companies fighting to replace them.
I do not dispute the role of markets. They can produce amazing outcomes
And I have spent years arguing against the mechanisms used by corrupt governments, politicians and officials, as well as businesses, of course: the curse is universal
And I am a firm advocate of the mixed economy
I am not sure what your point is with me
Hello, I am interested in your comment regarding damming The Wash. I agree that it could provide potential tidal power and create new habitats. However the consequences of doing so would need some detailed modelling to make sure that the long term situation is not worsened by human action. Another alternative, both long term and equally as startling, could be to consider managed withdrawal from areas at risk from increased flooding , as sea levels rise.
The social, political and economic re-imagining needed to consider such a change in our behavior would indeed be radical and far reaching.
In the case of The Wash managed withdrawal would go as far inland as Bedford
If the false economy of cutting back Environmental Agency spending doesn’t get the message accross now after YET more flooding then I don’t know what will – the inundation of the whole island?
I noted yesterday that Cameron was in Swaledale – a part of Yorkshire that votes Tory-surely some coincidence?
As you say short term thinking by the government with Osborne’s PR man otherwise known as the Prime Minister saying he’ll do what it takes – pity his record shows that he has already cut the flood defence budget!
Tidal power is also long overdue for proper development. There is slow progress being made in Swansea Bay http://www.theguardian.com/business/2015/jun/09/swansea-bay-tidal-energy-scheme-on-brink-of-winning-planning-permission . It must be getting on for 10 years ago there was a small tidal power experiment on the North Devon coast of the Bristol Channel which produced if I recall, more than six times the expected power – but it was not developed as no government money….
This may be of interest: http://www.theguardian.com/commentisfree/2014/jan/13/flooding-public-spending-britain-europe-policies-homes
Agreed
In the past 3 years we’ve seen major floods in Somerset, the Thames Valley, Severn Valley, Cumbria, Lancashire and Yorkshire to name just the ones I can remember. Apart from the immediate human suffering and cost of clean-up, the new reality for householders on or near flood plains is that there properties are now liabilities not assets, they face uninsurable or unaffordable future risk and their lives are now completely insecure.
The financial remodeling of Britain as a result of climate change is one that has already got several million people’s attention, with the inevitable political blame game playing out in the media. Meanwhile the real questions are not yet being aired loudly, including how the private financial markets are going to leave many hundreds of thousands (if not millions) of householders and businesses literally underwater in debt from taking out mortgages on properties that are no longer viable security.
Not sure what academic studies have yet been carried out on this, but when major city centres start to submerge it is no longer a far off problem for rural communities to deal with alone.
I believe the technical term for this is a ‘no brainer’
Plant millions of trees in the uplands, coupled with improved flood defences in vulnerable areas. A perfect Green QE/MMT job guarantee. Everybody wins.
Jeff, I’m afraid no-brainer is the term any intelligent person can use to describe the current political environment. A monumentally stupid, vindictive, hypocritical and dishonest government that lied, bribed and conned it’s way into power, voted for by no more than 25% of the electorate, many of whom only voted for it because they were voting against a weak Labour party that made very little effort to defend itself against the lie that it caused the financial crisis.
Given the cuts to the Environment Agency’s budget, all I can say about these floods is ‘roost, to, home, chickens, coming’. But of course, the political right, as per usual, refuse to take responsibility for the disasters their own policies have caused. All they can do is start whining about money spent on foreign aid rather than admit that the whole cut the deficit meme is wrong.
Yes, that’s right Daily Mail, blame it all on the nasty foreigners! All I can say is, I’ve sympathy for non Conservative voters who are affected by these floods, but very little for anybody who voted for this government. This, to be blunt, is what you voted for.
George Monbiot’s articles are always well researched and thought provoking, sadly in this case they also show the lack of joined up thinking between economic, agricultural and environmental thinking at the European as well as UK level.
There is a major challenge to rewilding and reforesting the UK uplands, in that most of the land is in private ownership (even within the so called National Parks) and those landowners will always be motivated to maximise the financial return from their assets.
Under private land ownership the most likely “best case” market outcome would be commercial re-forestation in selected areas of high productivity. The thought of paying private landowners annual subsidies in perpetuity to set aside land for re-wilding, raises more fundamental questions of whether the uplands of the UK should actually be in private ownership at all?
Perhaps re-instating the commons and reversing the enclosure acts is a better idea!!
🙂
Mr Fletcher – I agree with your final comment (commons & reversing enclosure acts etc), but perhaps as a fist step, some sort of tax on land that is often used for “pleasures?” such as shooting grouse (& I thought the Monbiot article nailed it when he observed that such land is often given money to accelerate the run-off of water to lower-lying populated places – I guess that would be “maximising the return”?). Gradually rising land taxes on such land could lead to an “attitude change” amongst landowners possibly leading them disposing of the land due to costs (taxes).
At the moment they’re being subsidised to graze sheep and/or clear the land, so if we’re paying the money anyway we should pay them to rewild and reforest instead, as George Monbiot suggests.
Land ownership is a big issue for the future but lets take it one step at a time and win the battles we can.
There is a wonderful synthesis to be made out of all these ideas, when are the Labour party going to speak up? Their silence on all these issues and others is worrying.
I am astonished no one is talking about this
Fear of farmers?
Re-reading some more of Monbiot’s re-wilding blogs is very illuminating:
“Sheep farming throughout our hills is a loss-making activity, and persists only as a result of public money, that takes the form of farm subsidies. We pay £3.6 billion a year in this country to have our watersheds destroyed and our wildlife wiped out.”
I’ve got nothing against sheep farmers per se, but it really does look like the money could be put to better use and help reforest our major watersheds.
http://www.monbiot.com/2015/12/17/walk-on-the-wild-side/
I have a lot of time for George
He’s a great guy
So much land not registered in UK, how to find the owners needs some detective work. I understand the aristocracy trickle a little land for building houses occasionally at a cost. How questionable is the legitimacy of ownership of land by a privileged few. This subject is a tricky one, needs examination by brave souls.
Jeff
The Labour party is in utter disarray at a time when we need them the most. The Tories have provided numerous open goals which have not only been missed, but not even recognised. Jon Cruddas, in spite of his incomprehensible comment to Richard re Danczuk, is a good business economist, yet for some reason he is sitting with the reserves while he could have scored numerous hat tricks against this utterly incompetent government. The Greens have also disappeared.
What is going on?
That is not the real Jon Cruddas, I am sure
Richard
I thought it might be a minion – but why? It would be good if the real Jon would get in touch to tell us why he has gone missing.
Jeff “he Labour party is in utter disarray at a time when we need them the most “-that disaster has already happened. I’m afraid Cruddas won’t be saying anything worthwhile either. I suspect, if Corbyn is to create hope there will have to be a lot of painful change first which might leave us with a rump Labour party at first before it can really build (I suspect we are talking of 10 years, unfortunately). There have been signs of change in Spain and Portugal but because of our Americanisation the change will be slower here, I think. I hope I’m wrong.
You missed out the forth option that MMT would recommend first, “Deficit Spending” by the government sector. Your first two options do not create any new “fiscal assets” and remove spending power (fiscal assets), from other sectors of the economy into the flood defence sector.
Deficit spending by the government sector, the currency issuer, creates increased spending power in the economy; and, can trigger some inflation if it gets into sectors that are tight on capacity to deliver their goods and services. Not likely to be a problem at the moment. The government can and will take back all its spending eventually with taxes. That’s how FIAT currency systems work.
Also, a sovereign fiat currency ISSUING government, never has to borrow its own currency from anyone, it has a bottomless pit of the stuff. Gilts and Taxes are not used to get “money” for the government to spend. Have a read of “Deficit Spending 101”. http://bilbo.economicoutlook.net/blog/?s=Deficit+spending+101
But I would warn MMT has some things seriously wrong: like the role of tax
Perhaps you could explain where you think Randy Wray is getting it wrong in the following http://neweconomicperspectives.org/2014/05/taxes-mmt-approach.html
This is OK
I argue there are six reasons to tax:
1) To ratify the value of the currency: this means that by demanding payment of tax in the currency it has to be used for transactions in a jurisdiction;
2) To reclaim the money the government has spent into the economy in fulfilment of its democratic mandate;
3) To redistribute income and wealth;
4) To reprice goods and services;
5) To raise democratic representation – people who pay tax vote;
6) To reorganise the economy i.e. fiscal policy.
These clearly overlap with Randall Wray
But many MMTer’s forget all this and at best think tax is about reclaiming money and preventing inflation without ever considering the social consequences. That is just wrong
“But many MMTer’s forget all this and at best think tax is about reclaiming money and preventing inflation without ever considering the social consequences. That is just wrong”
They do? Which ones?
MMT approach to inflation is Abba Lerner’s Functional Finance combined with very strong auto stabilisers (like the Job Guarantee.)
I have it as an evolution – “Keynesianism” onto Functional Finance onto Modern Monetary Theory.
All relate to their era: Keynes to the Gold Standard monetary system. FF to Bretton Woods and MMT with a fully floating fiat currency.
Many who have commented here
Those ones
I accept not all do
But I also do not buy the JG
That’s as mumbo-jumbo as austerity
“Many who have commented here
Those ones
I accept not all do”
I don’t think they understand it fully. The *theory* does not state that.
“But I also do not buy the JG”
It was a well known fact throughout the post war era that if you couldn’t get a ‘proper’ job you’d end up working for the council. That was the implicit job guarantee of the post war era, and is the source of the ‘only rubbish people work for the council’ feeling that still resonates.
The structure started to break down as the number of ‘proper’ jobs declined and more and more people ended up working for the councils — and because there was no currency issuer funding — lots of people unemployed. Because it was implicit rather than explicit nobody did a sales and marketing job on the output of these workers (shining lights on people causes the Hawthorne effect) and so they ended up being labelled ‘non-jobs’.
In step the right wing promising to strip out waste and cut taxes, and the whole thing collapsed to what we have today — privatised non-jobs subsidised by tax credits.
The difference is that the output of the workers has been transferred to the private sector — and we have hand car washes and coffee baristas to show for it, rather than automated machines doing those jobs.
It doesn’t mean you can’t have a BIG or other things. JG just ensures full employment.
Noted
And my position is clear
JG is good on a blackboard
Neil has replied to you can’t say I agree 100%. After all the rich have gained lots of savings unjustly under the current unfair distribution. But fixing the distribution is very important.
“The problem Richard has is that he believes that tax has some higher religious or moral purpose. It doesn’t. It’s just garbage that needs collection. Just like putting out your recycling. You should do it, and should be reprimanded if you don’t, but anybody who puts out loads of recycling and then struts around with a superior than thou attitude should be rightly laughed at. Because of course what they are actually doing is likely depriving others of stuff.
Taxation is depressive after all.
The idea that paying tax causes people to vote is just daft. People who feel represented vote, along with a dozen other correlations to why people do or don’t vote. Certainly not only tax. But if your only tool is the tax hammer then everything looks like it is the result of a hammer blow. It’s a classic example of curve fitting data to a belief.
Nobody likes paying tax yet it has to be done and therefore it should be kept straightforward and to a minimum – much like cleaning out drains. The good stuff should be done on the spending side. Another reason basic income is such a silly idea – since it cripples the spend side auto stabilisers and requires a basic tax rate of at least 45%.
Minimising taxation is consistent with the loss aversion issues from social psychology – Everybody loves a bung, they don’t like other people getting bungs and they certainly don’t like having things taken away from them once they’ve got it.
MMT people understand all the redistribution very well, and it is of course a straw man to suggest that they don’t. But we realise that it is not the only tool in the toolbox and that there are better and more specific tools that should be used instead – and that are consistent with human psychology. (Like asset restricting banks for example to make them narrower – which frees up space you don’t have to tax into).
Randy Wray wants to jail bankers rather than ‘punish’ them with taxes.
If Richard thinks MMT ‘forgets’ all that, then he is just demonstrating what was suspected. He doesn’t actually understand MMT at all. There were quite a few examples of the lack of understanding in the talk with Bill last year in London. Bill pulled him up on quite a few.
Taxation is a sign that your distribution system has failed to work properly. Rather than bolting on tax ‘fixes’ just correct the distribution system.
“To avoid redistribution’s insecurity, social divisiveness and wasted resources, we could instead distribute income much less unequally in the first place. Then redistribution would be unnecessary and society could avoid all its negative aspects.” http://www.truth-out.org/opinion/item/23725-better-than-redistributing-income
Tax obsession is unfortunately a politically fatal disease. It’s the black lung of the left.”
I have read MMT
I don’t like the cultishness of it
I don’t like the aggression of some of its followers
I think that like a lot of things it is a good idea pushed too far
I think it denies some economic realities
Richard check out the impact of Gordon Brown’s Future Jobs Fund:
http://cesi.org.uk/blog/2012/nov/future-jobs-fund-worked-we-shouldnt-bring-it-back-%E2%80%93-we-can-do-even-better
The main weakness is the ideological obsession with the private sector being involved.
We can do even better. A Job Guarantee.
I simply do not believe that such a guarantee can work
You can aim for it
But I am not sure you can guarantee it
It seems to me that there is a flavour of “here be dragons” from Richard, and perhaps it is coming from being a macro-economist? I have found that there is too little interest from macro-economists in the reality of work itself – and I don’t mean entrepreneurs. I mean organising to apply resources to meet a need that requires paying for at an economic price.
When I attended one of Randall Wray’s talks I was impressed by the eminently practical approach, which met all four of the above criteria; something that the Citizen Income does not achieve.
As a businessman I can say that there is nothing so satisfying as employing people, except perhaps pleasing the customers. The experience of being paid to do something meaningful and learning a skill is one of the most empowering, especially as you earn a living wage. This is what JG offers, and Wray’s case studies attest to that. Consequently I am not sure I understand Richard’s reservations.
I agree re employing people – I have done it
BUT guarantees don’t work
We live in an uncertain world
Let’s not pretend otherwise
“We live in an uncertain world. Let’s not pretend otherwise.”
That’s why we need a JG.
An implausible offer is not the answer to uncertainty
“An implausible offer is not the answer to uncertainty”
The uncertainty of whether you and your family may need to visit a food bank or lose your house with a couple of months would be removed, which, as far as most right minded people are concerned, is what uncertainty in this context really means.
Aside from that point, can you enlighten me as to why you think a JG is implausible but a BIG isn’t?
Both politically and economically, I see it the other way around.
Well, keep trying to persuade me