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How will you pay for it? With money.
Where will the money come from? The usual place.
And then we tax back as much as necessary.
Next.
A neat summary
Thanks, Richard. I bought Stephanie Kelton’s book on your recommendation, which has been very helpful. This lecture shows her to be a class oral communicator also. By the way, the video was followed by another interesting one by Mariana Massuchato. Although less competently delivered, it is well worth a listen.
I’d be interested to hear your thoughts on:
“Money from nothing”
What if money could appear in our bank accounts out of thin air — without increased taxes, longer work hours, austerity measures or any other strings attached?
https://www.humanities.uci.edu/SOH/calendar/story_details.php?recid=2145
A bit too home spun philosophy 101 for my great liking, but interested to see what you make of it.
Cheers
JC
My post this morning is a reply to that
An addendum please:
Why do you tax?
To stop the inflation that the anti-statist neo-liberals say the Government will cause by trying to help you by creating the money.
What goes in must come out. Tax is a good way of stopping inflation.
I agree, tax was not mentioned enough
On my long list of things to write is modern taxation theory
By Jove, She’s got it!
Looks like she has been paying attention to your work here for years Prof.
I know,I know …
What i didn’t hear her say – didn’t want to spook the horses too much? – is how Tax is to be used to curtail the wealth gaps so that society is not separated ever further – I didn’t hear her say that levelling DOWN is as important as building infrastructure and security for all (levelling up!).
I am happy to hear the Death Knell of Maggies Handbag! To finally join her in her crypt. And ‘There is No Such Thing As Society’.
If only enough of our ‘celebs’ weren’t in the same pockets.
The dumbed down generations of Brits are being really thick, as the MSM , Foundation funded Academia and Pocket Politicians keep spewing the hoary fable of Maggie while filling their Masters boots for their Seats At their Table.
Historically, they thump their drums and drive up the hatred within society with fake causes, fake rights and fake enemies at home and abroad, to keep the poor into believing they will always be poor, and it’s someone else fault. Anyone except their aristo, educated Masters and their cultural hegemony.
Fascism (Jingoism is just that) is what keeps their privileges in place. Taking away and disappearing dissenters is how they operate.
Fear is the Key they always use.
Diktat and New Orthodoxy is how they condition us.
Maggie wasn’t born She was made by the Frankensteins of PR, Advertising, DS and the forever Owners. The Monster must be destroyed for there to be any change!
This is so far from being generally understood.
This ought to be the focus of all the party conferences.
Labour in particular keeps on volunteering how ‘responsible’ it’s going to be with the (implicit household) finances.
Calling it a ‘theory’ may be unnecessarily off-putting.
It would seem more a proper and precise description and definition of what money is, and how it is created. Not theory – but a description.
QE- during the pandemic d offers an absolute irrefutable illustration of how it works – as SK demonstrates. We should be banging on and on about this, challenging the need to raise taxes to pay for necessary investment in climate mitigation etc etc .
Keynes’ ‘if we can do it we can afford it’ should be intoned and intoned.
Right across Labour there is a refusal to acknowledge mmt – from the so-called Progressive Economy Forum and it’s far from enlightened adviser James Meadway onwards
It’s quite shocking how Neanderthal they are
It would be interesting to know how much Labour’s economic ideas are influenced, maybe unconsciously, by orthodox Marxism. Marx thought that ultimately value is derived from the value of human labour, as was the common view among economists at the time. A manufactured article is given value by the work that went into making it, although his explanation is quite complex because you have to take into account the work that went into creating the factory, tools and machines that went into making it. It is thus that commodities acquire value. In das Kapital. He says that money “crystallizes” into a commodity from which it acquires its value. The example he gives is gold, but he knew perfectly well that other commodities had been used historically. He seems to have regarded this as an entirely natural process which happens whenever money is used, even though the majority of users, or perhaps all, may be unaware of what this commodity is. It follows that there always is a finite quantity of money available and that whenever something is paid for the money to pay for it must be found somehow.
I have spoken to orthodox Marxists whose reaction to being told that we are not on the gold standard any more that in order for it to have a value there must be some commodity convertible to and that either the government and banks are lying or they are in denial. Some even claim that this commodity must be gold since Marx mentions gold in das Kapital. They have no idea how this is supposed to work but to deny it is true is to claim that Marx’s form of the labour theory of value is wrong.
This is a good explanation of the attitudes of the likes of James Meadway who rejects mmt as it has no theory of class
Sometimes I despair.
Whilst I agree with many of Keir Starmer’s criticisms of the Tory’s Social Care ‘policy’ one of his proposed funding solutions doesn’t appear to have been thought through very well, if at all
On funding, Starmer will add: “The government act like there was no alternative but there clearly was. The money could have been raised by taxing the incomes of landlords…………
Who does he think will end up paying for this, the landlord or the tenant?
https://labourlist.org/2021/09/starmer-sets-out-alternative-to-tory-social-care-reforms-in-lga-labour-speech/
Stephanie Kelton is a such good communicator, both orally and in print. I am half way through the Deficit Myth (which I bought at your recommendation Richard) and am being alternately cheered and elightened by the possibilities she reveals, and enraged and depressed by the pig-headedness of US politicians who are just as bad as ours.
Social media is currently awash with outrage at Johnson’s latest mandate-busting tax hike. Rightly so, but the response: “Tax the rich” also buys into the stock narrative of tax-payers funding government spending. Thanks for this post, which provides a link to Stephanie’s Ted Talk and also to your excellent blog, from which I’ve learned so much. I am answering as many of the wrong-headed posts as I can by linking to this.
Thanks
Kelton is not so strident about taxing the rich. It’s hard to separate economic wisdom from envy. My concern is that the nation’s wealth gets into the coffers of the mega rich so quickly that the wider society may not benefit. The more hands the money passes through on the way back to the government the better. Maybe we need to encourage small business over conglomerates.
As well, we know that wealth is power and there are so many examples of the very wealthy pushing their personal values which might not accord with the broader views or needs of society at large nor with rational evidence. Taxation might control this, maybe, but education and legislation might be better solutions.
Tax can’t do everything but it is very useful
More to come on this
I heard Stephanie Kelton speak on CBC last year, bought her book, read it, passed it around to my friends – I thought it was brilliant and realized how conned we’d been all these years by governments rabbiting on about deficits and how we can’t have all the good things like adequate housing, pharmacare, mental health care, dental care, free post secondary education, and greening the economy so we don’t all fry or drowned, etc etc. It got me interested in economics of all things. I read Richard’s blog and recently read about THE MULTIPLIER! This is an amazing article which shows how all these good things we need to keep not just people but the whole planet well and happy – why they pay for themselves! In fact they make the government richer. I hope I’m understanding what you are saying, I think I do.
Sounds like you do
Pretending that the multiplier is >1 for any government spending is clearly nonsense, no wonder it is appealing for some on the left.
Go on, explain that, because no credible economist would agree with you so what you’re saying, if true, would by Nobel prize winning.
Help. I get the idea of money creation and that to avoid inflation we must remain within our productive capacity. But, are we saying, because the £ is a Fiat currency, it can simply be created without the need to balance through tax and borrowing?
Yes, of course. What’s your problem with money creation in a fiat currency economy? It has to happen all day every day.
Why do I have a problem with it? With respect I’ve been told it for decades. Including when I studied economics (admittedly at Liverpool during the Minford years in the early 90s). I have a problem with it because after I’ve been lied to and wonder if I’m missing something.
I am struggling to work out what your comment means
If lectures like this stop the myth of “households” budgets absolutely great. I notice her examples were both UK examples – Thatcher and May.
Hmmmm………………..Bernard’s point concerning Marxism…….I can see how thinking that the Gold Standard is still operating is rather silly but I still think Marx’s theory on workers and value work (not necessarily money itself) is relevant and quite correct.
No – we don’t have to have a revolution either – all we needed is for workers to have a fair share of the money output from production. That fair share of output – money wages, pension money etc., has been declining since the mid to late seventies to what we have now – ever shrinking incomes and jobs lost abroad in the West.
MMT can contribute to the medium of this wealth/output distribution – money – along with other policies (tax) and law and also areas like the environment. Money is really what enables wealth transfer to the worker and wider society from private or State means of production.
As a function of a courageous State, MMT has the potential to help the citizens who are low waged, without jobs and also promote new jobs (Green jobs for example).
No one can argue that the money savings from winding up production in labour/pension/NIC costs have gone into the pockets of the rentier class and senior managers – a disproportionate re-allocation of output that ends up off-shore, undertaxed (where it causes other problems – spill overs etc., and even perverts our democracy).
Marxists need to grow up and update right quick about money. Really, the only class these days is money in my view – especially right at the top. The other class is those who don’t have money or not enough to influence politics and get their fair share of money and politics.
Money is power and modern Marxism should be concerned with that particular element and how it can be controlled fairly by using more refined and sophisticated methods than ‘revolution’. The answer lies in the State, and therefore as the law maker, any changes would be lawful and Marxist objectives would be achieved lawfully – not through revolution.
This blindness to the power of the State and the negation therefore of State money is what is puzzling to me about contemporary Marxists – if indeed they are not living in the past.
The other think to say about Labour is that it is not just ancient Marxism that stalks the party’s halls and corridors; there’s a large and corrosive Neo-liberal element too who passively accept that markets are better allocators of wealth. I think not.
But I say again where Marxism has been proven to be right is that worker input into wealth creation has been under valued historically. It was undervalued right from the industrial revolution (if not before – agricultural workers – the first real industrial workers – are even now are underpaid having been long neglected) – and then eventually Liberal and labour movements acted to improve matters. We had a bit of a golden age after WWII, and then as I said things started to roll backwards from the 1970s and have not stopped since. Marxism was also right about the destructive power of capitalism even on itself. We’ve seen that happen but even Marx himself might never have anticipated how capitalism would end up imperilling the planet as it does now.
What does Marxism say about the environment?
As for money, it is the unequal distribution of it that is the most pressing issue in my view – it’s distribution amongst the citizenship and its mis-application in terms of investment. These are big problems that politicians should be dealing with right now.
Thanks.
How long are the far left going to mid-quote Maggie’s “ There is No Such Thing As Society’”?
I wonder if it deliberate, or just ignorance?
Hang on, your name was Brian Hodge just now. Have you got an identity problem?
Neil (or whatever your name is) – Thatcher’s assertion about society was a lie – like much of the Neo-liberal statements about the facts of life.
Human beings dominate the world because they actually worked together as part of their survival – not exclusively in their own self interests.
It’s called Solidarity, and Thatcher and her acolytes only tolerate it amongst their own – especially those who fund them – oh they like THAT sort of solidarity – but not those who question what they do.
Therefore Thatcherism and Reaganism can be seen un-democratic – that is the dirty residual of Thatcher’s way and which is now fully expressed in Boris Johnson’s cabinet.
Today I watched solidarity in action on the Great North Run – my partner is taking part in it in honour of her late mother who died of dementia as are many others. All those people taking part in that run are better human beings than anyone in the Johnson’s Government or his party.
We have a country where we have the worst of us ruling the best of us. This is because the worst of us have most of the money. That Thatcher’s legacy too.
Tell me – is that something to be proud of?
For the avoidance of any doubt Margaret Thatcher did say “There is no such thing as society”. The standard error has been to assume that she said it in the famous and notorious set-piece ‘Sermon on the Mound’, at the General Assembly of the Church of Scotland, May, 1988. She didn’t, but the fatal mistake is to assume that means she never said it.
She said it, the exact words, quite unambigously, quite deliberately; in a long forgotten ‘Woman’s Own’ interview of 31st, October, 1987. The assumption regarding the General Assembly ‘sermon’ may have arisen in part because Downing Street “elucidated” the meaning of the remark in July, 1988 in a ‘Sunday Times’ piece, following the newpaper requesting clarification; and I would merely speculate, sought clarification perhaps in the light of the political controversy that followed her appearance at the General Assembly. The details of the interview and the elucidation can (ironically) be found on the Margaret Thatcher Foundation website: the Foundation is now based in Washington, but appears to have been dissolved in Britain (perhaps through lack of funds).
I stand by what I said about this quotation a couple of years ago: it needs to be read in context. Here it is. https://www.margaretthatcher.org/document/106689 And a couple of quotes:
“… who is society? There is no such thing! There are individual men and women and there are families and no government can do anything except through people and people look to themselves first. It is our duty to look after ourselves and then also to help look after our neighbour and life is a reciprocal business and people have got the entitlements too much in mind without the obligations …
… There is no such thing as society. There is living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate.”
What she is saying, as she clarified later, is that the free-standing concept of a society cannot exist on its own. It is an artificial construct, made from people and their relationships, and their reciprocal duties and entitlements. Where she goes wrong, in my view, was in failing to recognise sufficiently the incredible power that comes from bringing people together as a society to take decisions and get things done collectively.
To build on a recent post at Progressive Pulse, it is one of those slippery abstract nouns. http://www.progressivepulse.org/economics/beware-of-abstract-nouns
Thanks
The problem is that the “elucidation” was merely a feeble attempt to explain away a proposition that was ill-conceived, poorly articulated, and muddled in conception; but which was constructed principally to eliminate the possibility of any collective responsibility beyond the individual, and certainly never in the hands of Government; of ‘society’ even having the capacity to be effective in achieving collective goals in pursuit of the common good. The reason for that is that Margaret Thatcher simply applied the principles of Hayek’s ‘Road to Serfdom’ (her political bible) – to everything: a book that is in fact a polemical rant against socialism so extreme that it effectively defines all collectively sponsored Government effort of any kind as ‘socialism’; so stupefyingly angry and ill-discplined in execution that it defines all collective effort, literally from Beveridge to Hitler, as ‘socialism’; as sharing a common intolerable attack on human liberty which must be destroyed.
Whatever Margaret Thatcher believed, she could never have consistently or coherently applied her own Hayekian principles of liberty to the decisions of Government she actually made; but presumably she never noticed the irony.
Well said
This has been long awaited, the text was published weeks ago but, as someone said, her presentation skills are so good (there’s lots more out there).
What I appreciate, especially in terms of the spend needed to mitigate and adapt to Climate Change, is that this is a political, both right & left wing gov’s follow the myth of the “pay for” game as she puts it, with the circular arguments over the wealthy or non-wealthy getting us nowhere generation after generation, let’s grow up smell the fire and water and stop playing left/right politics with this stuff.
On the understanding of gov’t spending she and Richard are trying to put across the best analogy I’ve heard recently is the air miles one. As you fly, you receive air miles (govt spending) when you next fly you redeem some of those (taxation). The air miles company doesn’t have a stock of air miles to hand out it just gives out and collects as separate processes.