Liam Byrne MP - the former Labour Chief Secretary to the Treasury who in 2010 wrote a note to his successor saying that the UK had run out of money - seems not to have learned the lesson that he was wrong. This morning he tweeted this:
https://twitter.com/liambyrnemp/status/1406892964975087617?s=21
In the article to which he refers he says:
It is the Treasury's job to make sure the nation lives within its means.
And time and again Byrne says, with seeming pride, that he told colleagues at the time that there was no money left.
Except that was not true of course. There is always money. The government can create as much of it as it wishes. The constraint is whether there is something useful to do with it.
And this is what Byrne reveals in making his error, and that almost all who have worked in the Treasury also reveal. They think the Treasury's job is to ensure that the economy exists within that they call its means. But what they ignore is the fact that they are sitting in the biggest single national income generator that there is. Government expenditure is not a cost to the economy: it is an input into the economy that increases the national income. But the Treasury ignores that. It assumes that the private sector creates all wealth and the government dissipates it.
It is as if health, education, the justice system, good government and good governance, environmental care, addressing externalities and defence add no value. Nor come to that do transport, or agriculorutal policy, let alone social infrastructure. The Treasury would treat them also as burdens that constrain.
And that is wrong. Government adds value. It generates worth. It is not a matter for the Treasury to say what can be afforded within the limits of a private sector so obviously bereft of ideas most of the time. It is the job of the Treasury to look at what needs to be done and to fund it - including by money creation when appropriate.
And that is what Liam Byrne got wrong in 2010, when this was known.
It is what so many, including the Labour front bench, still get wrong now.
I look forward to the day when the left understands macroeconomics and realise it is not the same as microeconomics.
It will be good when the Treasury does likewise.
But it is for the left to take the lead here. I long for when that might happen and they finally realise money is not a constraint in the macroeconomy.
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Can he explain what the multiplier is and what it means.
While The Treasury can create as much money as it wants surely it needs to be mindful of the ability of the economy to absorb it?
Of course…that is the constraint
This is the first class Neo-Lib Labourite prick who left that post-it note behind – waved by the Tories gleefully to justify austerity in 2010. Thanks Liam.
There’s lots of other nasty things I could see about this ‘man’ but I will leave it at the following:
Basically this country can do very well without people like Liam Byrne.
Right on, PSR. Both Labour and Tory live in microeconland and have for years. Even some of the public appear to show more rudimentary understanding of basic macro than these twits. WTF is going on with these parties? Do you have to pass a stupid test to become a member?
Perhaps they could all listen to the Chair of the US House Budget Committee.
https://www.c-span.org/video/?512625-5/washington-journal-rep-john-yarmuth-d-ky-discusses-president-bidens-fy-2022-budget-request
I find it almost impossible to believe that there are so many politicians, current Cabinet excepted, who cannot see the reality of MMT.
Consequently I have to approach this from the opposite direction and question why politicians don’t want to take advantage of this money availability?
From a Tory perspective it makes admiral sense to restrict money going into the economy that would contribute towards reducing inequalities and making the state a greater player in therein.
But I do have trouble with Labour not wanting to invest in the country and help to reduce inequality and poverty by creating well paid jobs, whilst at the same time building a modern infrastructure.
The only logical conclusion that I can see is that all political power in the UK is controlled by a small coterie of rich people who are intent on keeping power at all costs.
Having read Philip Mirowski’s book ‘Never let a good Crisis go to waste’ I would say that the deliberate lies and deceits of Neo-liberalism (‘agnotology’) have led our politicians of all flavours down this path of uselessness just like the Mont Pelerin group advocated and intended.
Think about the message of von Hayek and Friedman – it’s all about the intellectual gelding of Government and politicians and painting a picture of powerlessness.
Liam Byrne has swallowed it all, hook line and sinker – like so many. Because the other thing that Mirowski highlights is that Neo-libralism and its credo also relies on IGNORANCE – the innate ability not to go and find out for yourself.
But if you were a REAL Labour politician you’d know that your job was about doing something about this and finding a way through using State power as evidenced by Labour’s history.
What does that tell you about Byrne and many others in Labour? Oh dear…………….
What is especially galling is that Sunak obviously gets it but won’t admit it. While Liam Byrne is clearly obtuse in not opening his eyes to the real way money is created. Both sides insist on continuing to pull the wool over the public’s eyes, the same as with first past the post. It really seems as if there a conspiracy of them against us.
Phil, could you kindly give me evidence that Sunak gets it? I don’t see it. I may have missed it, of course.
Sorry Richard that should read “ current Cabinet included”
For those interested, I used some of the blog to comment under the article (& mentioned the blog). Doubtless Byrne will ignore it since it does not fit in with his “belief system”. Hoping that these imbeciles will ever recognise they are wrong is a mistake – they don’t have it in them do so.
I always thought that his 2010 “there is no money” note was some sort of joke that badly misfired. I never imagined that he actually believed it.
On Twitter he makes clear he does believe it – citing Krugman, Summers and Rogoff against MMT
Very worrying
I have invited him to engage
Yes it was a joke. There was a tradition of Politicians in the Treasury leaving such notes for their successors when Goverments changed. Unfortunately, Byrne’s note was picked up by the Tories when they were seeking to pin the blame for the 2008 financial crisis on the Labour Party and squeezed for all it was worth. Milliband refused to engage with the Tories over this and inevitably some of this smear succeeded in sticking with the electorate.
Byrne understood the role of money in the economy very well and anyone suggesting otherwise is being disingenuous or seeking to create mischief….
Byrne’s recent comments conflict with your claims
I think we need a left-wing leadership from Labour which actually takes on board the lessons of MMT. I don’t think Starmer will last much longer, but the question is whether he’s replaced by someone better, or not. For all their good qualities, Corbyn/McDonnell weren’t on board with MMT and Starmer/Reeves certainly aren’t. Labour – and the country – deserves better.
Agreed
I tried a new tack last night to explain to a propagandised Covid denialist GB declaration believing, brexiteer, ‘my taxes’, debt repaying type, to cleave the concept of public and private finances that the 50 years since Thatcherism set us on the road to the current dystopic neoliberal perma war and plunder and addiction to daily idiocy.
I asked how does the government pay the soldiers, sailors and airmen – our ‘Heroes’ – their wages daily?
Do they first check the pot of taxes collected ? Do they come rushing to him to grab more of his money as tax to pay these icons? No, he agreed they obviously don’t.
I explained the ease of the right hand of the government, No11. Telling the left hand of the BoE to push the button so these wages get paid to these hero’s.
As well as the clown himself and his cabinet and the civil servants and yes, the health and other public services too, because that is how it is done every morning!
That the BoE creates an overdraft with all these payments and at the end of the day wipes it clean!
Because they can and we, and commercial entities can’t. That’s why we can go bankrupt and lose everything but the government never can.
That taxes are deducted from these magic payments and these along with his petty amount come back to the govt and disappear into the BoE books just like the daily magic money tree overdraft – there is no correlation between the two.
He said “I like the way you think”.
But he was drunk, so I’ll see how much of that went in when we next meet.
Liam Byrne is sorta right – the country must live within it’s means.
Problem is that he believes the country’s ‘means’ equals it’s tax take.
No, no, no, no, and umpteen times NO, Mr Byrne. Money – from conception to creation to recovery and destruction – belongs in its entirety to our sovereign government. Money is not the means the country must live within. It’s the actual assets the country has access to that it can’t exceed, not the little bit of green paper it generates to measure the value of those assets.
Why is this really such a difficult concept for people to grasp? I despair sometimes.