I think it's safe to say that Katy Balls of the Spectator has a fair take on the Conservative mindset. She wrote this in an opinion piece for the Guardian last night:
With the UK's debt now worth more than its economy for the first time since 1963, it's not clear that Sunak could keep emergency measures in place indefinitely even if he wanted to. While this government is comparatively relaxed about borrowing compared with the Cameron/Osborne era, there is an acknowledgement that a plan needs to be in place to return to a normal level of borrowing. Speaking earlier this month, Sunak appeared to throw the few remaining fiscal hawks a bone when he said he would need to come up with a plan to balance the books over the “medium term”.
What Balls is addressing is the Tory Paranoia about debt.
Sunak had to suspend that in March.
What Balls is signalling is that this is back, and big time. According to her it's got to be to placate ‘the new coalition of Tory MPs in traditional Conservative seats and those in the red wall of former Labour heartlands'.
But what Balls has to say shows us that this ‘new coalition' is driven by old economic tropes.
They include the belief that there is a ‘normal' level of borrowing. But there is no evidence for that. The rate has varied enormously over time.
And those tropes include the belief that if only the books could be balanced all would be fine with the world, which ignores the fact that there has been no serious attempt to balance the books, let alone one that succeeded, since 1694 and we've more than survived despite that fact.
After which those MPs do, of course, believe the trope that austerity works to cut debt, when all the evidence shows that it makes things worse.
This is all very profoundly worrying, because these dangerous, and wrong ideas will dominate the political narrative if we let them.
There are in fact only five things to know about the UK's debt.
The first is that it is no more than. £1.3 trillion at present. I explain how this is calculated here. The figure is UK audited debt at 31 March 2019 adjusted for QE and an increased deficit since then. The figure is right, unless the UK national accounts are wrong.
Second, because no one can be quite sure what UK GDP is right now it's not possible to express this as a percentage of GDP at present, but it is likely to be less than 65% of that GDP when it stabilises again. And this is not an issue for anyone.
Third, we need a national debt. It's a good thing. I explain why here.
Fourth, we need never repay this national debt because people want to own it, and there's no need to stop them doing so.
Fifth, the long term nominal debt interest cost on new thirty year government bonds is 0.6% right now according to the Debt Management Office. That means all our existing national debt could in theory be refinanced for about £8 billion a year (and yes, I know the issues in making that extrapolation) - a figure that is reflected in the steady forecast downward cost of this debt now being made by the Office for Budget Responsibility. This means debt need, eventually, cost no more than about 1% of government spending.
So we have a modest (in real terms) long term debt, which is costing a historically low sum to finance that is easily affordable and is at the same time providing an invaluable service to savers and financial markets and yet the Tories are obsessed with the issue and how to remove this apparent non-problem by imposing other, very harmful measures on society.
I'd love to know how they come up with their list of economic priorities since however it is looked at debt should be coming in at below 100 on the list. And yet they're making it number 1. No wonder they are getting governing so wrong.
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How this lot can be shackled by this fear is beyond me. It is not rational.
Responsibility comes first – the responsibility to help – especially those who voted for these idiots.
Their mindset is still about helping themselves and their mates first – that is their problem. And they are captives to their own lies.
They used debt-lies to justify their cruelty and destroy the credibility of the Labour party.
And now they’ve left themselves no where to manoeuvre which means that the whole country is going to suffer.
How very intelligent – the fact that many of those involved were educated in our public schools and best universities is not lost on me either. A pox on all of them.
To help makes MMT and the State look legitimate. The Tories and their crony backers know that. That is why they will do things badly or not at all. There is no cavalry with this lot. We are on our own?
This is what happens when money comes to dominate democracy. Where the rich and their strange anti-democratic projects can be funded by party donations and slippery characters can be bought and profit personally by saying and doing them most outrageous and stupid things.
I’m thoroughly disgusted by them. So this is how it well end? That is bad enough. But what an earth is coming next?
Your guess is as good as anyone’s
I am compelled to acknowledge how much Pilgrim Slight Return resonates with my own outlook. The austerity years had a cruel message for those of us who live in towns and cities which have already had the misfortune of losing most, if not all their industries and the wages which kept what little affluence they brought with them.
In Swansea where I live, the once bustling city centre has lost probably 50% of its footfall and taken with it much of the disposable income which the shop workers once had. We now look on disposable income as something rich people get and eke out wages that have seen a microscopic increase since 2011.
Surely to raise benefits a little would harm no one. The extra support would not go on sun, sand and a bit of the other on the Costa del Sol or into bank vaults of the Square Mile, rather it would go straight into the local economy supporting local trades people, businesses and ventures. Now is the time, maybe not for helicopter money, just to apply a toe to the accelerator in the right places instead of dumping these people who, for no fault of their own have become the whipping boys of the Tory government.
Is this Conservative waffle on Debt not just a surreptitious re-heat of the badly congealed Reinhart-Gogoff thesis? Surely they are not so short of ideas, to still be attempting to cook the rotting carcase of that old Turkey?
I can do no better in short-form answer, than to quote the Abstract from the ruthless, forensic deconstruction of the Reinhart-Rogoff thesis by Thomas Herndon, Michael Ash and Robert Pollin, ‘Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff’; PERI Working Paper No.322, University of Massachusets Amhherst, April 15, 2013; pp.1-25:
“We replicate Reinhart and Rogoff (2010a and 2010b) and find that coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies in the post-war period. Our finding is that when properly calculated, the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not −0.1 percent as published in Reinhart and Rogoff. That is, contrary to RR, average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different than when debt/GDP ratios are lower.
We also show how the relationship between public debt and GDP growth varies significantly by time period and country. Overall, the evidence we review contradicts Reinhart and Rogoff’s claim to have identified an important stylized fact, that public debt loads greater than 90 percent of GDP consistently reduce GDP growth.”
Conservatives are unbelievable in their refusal to take any cognisance about what’s been going on in the world of economic ideas. You could pour liquid manure over their heads and they still wouldn’t make the effort to properly explore economic ideas! There’s Margaret Thatcher saying the government has no money of its own but utterly failing to explain how the country’s medium of exchange, its currency, is actually created never for a moment anticipating the following constraints:-
http://rogueeconomistrants.blogspot.com/2011/10/what-is-net-financial-asset.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+RogueEconomistRants+%28Rogue+Economist+Rants%29
For Thatcher it seemed the political game was all about thinking up cheap and empty rhetoric she thought would sway the public and the natural resentment of having money taken away from you by government in the form of taxes was an easy emotional chain to pull. After all who is 100% satisfied with the things government spends money on, welfare of others being a contentious issue for the more self-obsessed voters in British society.
It’s not as those politicians and voters haven’t been warned that the role played by money is not a straightforward one. Keynes pointed out in the mid 1930’s that money was a link between the present and the future both in good times and bad. This was essentially an attempt to say the future will contain economic crises and people will seek to protect themselves by hoarding money but this process simultaneously is self-defeating by reducing demand. In which case you need an entity or agency that has the power to hold the private sector’s hand and provide a means to deal with the crisis and its economic downturn effect by being able to create money and boost demand.
It beggars belief that after the Great Depression, the Great Recession and now the Coronavirus Recession that politicians and voters can’t see that uncertainty in life does actually require the help of a “Nanny State” as Thatcher termed it and not just in moments of extreme crisis!
And what’s so striking is that, for those who believe that states have no money of their own, what do they think when they look at the money in their hands, and how come they don’t simply set up a printing press and get going? Thatcher’s lie is so blatant and obvious yet so many cannot see what is before their very eyes.
“The debt problem” is one aspect of the Tory mind-set, “pull yourself up by your own efforts” being another. These are both belief systems falling into the same category as “a virgin gave birth to jesus”. Rationale argument tends not to work to well against beliefs & the idiots holding them. Which leaves having an oposition that is capable of articulating economic reality in a form that voters can understand and which, hopefully, they can agree with. Sadly, people often tend to prefer fairy stories (“Let’s get Brexit done”) to reality & I remain unconvinced that Starmer et al even want to articulate a reality with respect to economics in a form that gets traction with the populace. As for Katy Balls – always nice when somebody publicly exposes their lack of intellectual capacity/ability to only think in terms of fairy stories.
🙂
When you think about it Britain is like a Stalinist state where the mainstream media and politicians collectively air-brush out the “inconvenient views” of individuals. One of the biggest of these air-brush jobs is John Maynard Keynes and his later disciples the developers of MMT. Keynes clearly furthered the explanation of how monetary economies really work when mediums of exchange have to be used in an environment of uncertainty. This uncertainty leads to a constant state of fluctuation in the private sector whether to hoard or invest this medium and this in turn necessitates a state to play the role of nanny using its power to create the medium without liability to others to even out the fluctuations. Whilst Keynes’s 1936 book “The General Theory of Employment, Interest and Money” was written for his fellow economists he did realise the need to write a synopsis of his arguments or views both for them and the general public and this can be found in the following 1937 article:-
https://www.hetwebsite.net/het/texts/keynes/keynes1937qje.htm
When you consider what has happened to his views since then especially in this country and when even so called progressive newspapers like the Guardian (for which Keynes’s wrote extensively) simply ignore his full arguments and their development of them by MMT academics, or make an ignorant dog’s breakfast of them, you can hardly say this country is a proper democracy and definitely has authoritarian leanings in the way information and ideas are made to disappear!
That paper is well worth reading
But like everything Keynes wrote, seemingly open to too much interpretation
Keynes’s argument that contrary to the Classical economists’ model of a self-equilibrating economy we live in a conditional monetary economy (conditioned by uncertainty) is central to MMT.
But it feeds into peoples fears.
High functioning sociopaths have no compunction about playing on people’s fears. Trumps’s re-election campaign epitomises this so did Brexit. What can you do though when so many voters refuse to take democracy seriously by making sure they’re informed in depth about issues. It would appear they’ll only do that after a lot of battering and bruising from their foolish voting choices!
“What can you do though when so many voters refuse to take democracy seriously by making sure they’re informed in depth about issues. It would appear they’ll only do that after a lot of battering and bruising from their foolish voting choices!”
Most voters will never willingly find the time to a) inform themselves b) think about the information they have collected. A diversion: courts & juries only function because of the coercive element – there is little choice in taking part – and jurors are forced to think. The only way to get voters to “take democracy seriously” is by making them part of the process – with no choice about taking part, or not. David van Reybroeck in his book “Against Elections” puts forward the case for “participative democracy”. This offers a route forward. However, it would also mean political power being more widely distributed. Could it happen? maybe. Could it be used to address in a more adult fashion national economic questions? Probably. Would it reduce the power of know-nothings such as Katy Balls – most definitely.
Another aspect of the debt obsession is the drive for outsourcing and PFI. In practice this is driven by the desire to get debt (and headcount) off the government’s books, in other words financial engineering. The drivers are much the same in the private sector though it rarely delivers in either sector – I speak from first hand experience having played on both sides and acted as ‘referee’! Combined in the case of the state with the deluded ideology that the private sector is always more efficient/effective.
Discussion of Keynes prompts me to think that a neglected aspect of all these outsources/PFIs/privatisations is their impact on the Keynesian multiplier effect. They use financial engineering with the use of offshore ownership and other mechanisms to reduce declared profits and avoid tax,
and invariably pay their employees less. That must reduce the multiplier effect compared to the state paying that money directly into the economy.
I believe PFI is pretty low now Robin…
It is effectively out if fashion, except in Scotland (maybe)
PFI yes, but outsourcing and privatisation still in fashion as we’ve seen eg with test, track, trace.
Then there is social care, 85% private with a large chunk with private equity
Agreed
What has been useful for me is to talk about government/national debt over the past xx or xxx years and point out that it has never been repaid except on the odd occasion – 4G e.g.
That does seem to make people begin to think a little bit more.
There are other snippets that are incredibly useful in getting through to more people. Certainly many will not engage any mental effort, but some do.
Conversely there was a lady on TV many weeks ago who was trying to explain MMT and GND in full, quite breathlessly and completely failed to land any useful point. It seemed it was her opportunity to explain but she had not been guided on what to say or how to communicate.
Although it may seem pointless, there is much to be gained by discussing simple concepts with the people we already know.
Meanwhile Richard can get on TV and radio and make some pithy comments (please..)
I go if invited
All the media have my number
Even Talk Radio
How can a bond that someone bought 15 years ago paying ,say, 5 percent for 30 years be “refinanced” so that it only pays 0.6?
On redemption it is…