As I mentioned a couple of days ago, Danny Blanchflower and I have written a feature for The Mirror on how to get out of the economic crisis we are in. It is out this morning:
If you click on the image and then click again you get a much larger version.
I especially like The Mirror's explanation of the multiplier on the left-hand side.
What do we say? In seven parts, it's this:
- Admit we have a crisis. Face up to the reality of this in other words, and stop saying this is just a cost-of-living issue but call it what it is: a full-blown economic meltdown.
- Cut bank interest rates. The Bank of England needs to reverse its disastrous policy now. They are making things much worse than they need be.
- Cut taxes - especially those on the lowest paid. NI should be cut more. Income tax for the lowest paid could be cut (the rate, and not the allowance) and VAT cuts are required.
- Raise benefits - and not just universal credit, but all in line with current inflation.
- Create jobs - which is where green issues come into play as they are easy to create and the payback is high. We are going to need those jobs very urgently soon unless action is taken now.
- Align UK rules on goods with the single market to save business money and to stop the excessive costs that are fuelling inflation. Poverty is a price not worth paying for rule non-alignment and the chaos they are causing.
- Pay for this with tax increases on the best off and especially on capital where inflation is a real issue and where nothing else can work; by changing tax rules to redirect savings to investment; by using QE which has never so far created inflation, and by letting the deficit grow, because having a deficit is vastly better than having people in need.
As we argue, all of this is possible. But is there the political will? Time will tell.
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Clicking on the image didn’t work for me, so I went to read the article on the Mirror website (https://www.mirror.co.uk/money/cost-living-crisis-dragging-country-26775425#).
It’s an absolute nightmare to dodge all the adverts inserted – and they have Danny Blanchflower identified as “David” in the byline – but you can, eventually, read the whole thing.
Danny is David, officially
It depends on your device. Double tapping worked for me and then I used a 2 finger spread to enlarge the image.
Good article, written in clear, simple language.
The last is the challenge
I seem to be able to write Mirrorese
My understanding is that the power to set interest rates currently rests, by virtue of legislation, solely with the Bank of England. Would your point 2 require firstly that this legislation be repealed so that this power once again rested solely with the Chancellor of the Exchequer?
The Chancellor can overrule the Bank by law, and they largely do what he wants
This is surely on the right lines but to me, though, the climate and ecological crises are the first concern.
Look at the daily record of global atmospheric carbon dioxide concentration (https://keelingcurve.ucsd.edu/) [You may need to click on the image of Dr Keeling to see the unrelenting upward trend – The saw-tooth aspect is because there is more greenery in the northern hemisphere, so that more CO2 is absorbed by leaves in the northern summer than in the southern summer.]
Look at the INSECT CRISIS: habitat loss from big agriculture and climate change are combining to threaten the world’s insects, and insects are essential for growing food.(https://www.independent.co.uk/news/ap-scientists-indonesia-david-wagner-nature-b2061694.html)
Where are this year’s UK April showers? One cannot be sure that a few dry weeks are a climate change effect rather than a weather variation but fields in Dorset are rock hard where corn was growing last year.
From Pearl Harbour to the end of WW2, the US produced no private cars and there was a national maximum speed limit of 35 mph. That’s the sort of thing that is needed. Rich people (countries?) have far more than their share of flights, cars, clothes, houses and food. How can we get to a stable climate and somehow make the economy work for everyone no matter where they live?
UK war-time posters demanded ‘Is your journey really necessary?’ Others instructed, ‘Make do and mend’. Current television shows no restraint in programmes advocating the purchase of huge homes, frequent foreign travel and advertising that urges ever greater ephemeral extravagance.
Of course we don’t want ‘recession’ if that means that poor people have to suffer, but there must be some combination of taxation, rationing, restraints or regulations that might give our children a better chance of a reasonable life.
Nothing new here.. it’s keynes boom bust revisited.. obviously the more inflation gets embedded the more painful the bust
So, tell us your answer?
Detail, please
Exactly what needs to be done. BUT if you were a bookie, what odds? With the ghost of Thatcher in one corner (household budgeting) and the recent memory of Cameron/ Osborne in the other (balancing the books), the chances of good sense winning over ideology are in my view slim. Do I hear 10/1?
I’d take that…..
Yes, I agree the LHS is simple and powerful.
… and the rest of the content is good, too!
🙂
Point 7 you say, “Pay for this with tax increases on the best off” &c. Why do you say this when you know that a) taxes don’t pay for anything and b) therefore don’t need to be used to pay for the interventions mentioned above?
Have you read the six reasons for tax?
Controlling inflation is one – and the rich are fuelling inflation now
Redistribution is another
In shorthand for a Mirror article this became paying for it
If you think perfection is worth ascribing the good for, you choice
But you’re wrong
“Pay for this with tax increases…”
Did I misread your explanation of government spending in the new book?
Tax withdraws money from use in the economy
In the space available in a Mirror article that is called paying for it
You can call it balancing the macroeconomy if you like
Is this an admission that, ultimately, all government spending is paid for by taxation revenues?
Since the article glaringly obviously says not that just makes you look very stupid
Not a criticism of the article which is excellent and gets the point over clearly to its target audience but how about
1. The Government setting targets for the percentage of GDP going to wages and how it is distributed, this could include statutory controls over higher pay and dividends, especially aimed at Companies employing large numbers of low paid workers.
2. Setting targets for house prices and rents. relative to earnings my home costs about three times what it did when put up in the mid 1960’s but no more to build than it did when new as building costs. Possibly including a freeze on all rents and granting all private tenante security of tenure.
There’s only so much possible in a Mirror double spread
Well done Richard & Danny —
The Mirror has a circulation of almost 330,00, so this is a simple & effective way to spread these important messages.
Let’s hope each reader discusses the issues with family, friends, workmates and even in schools and colleges.
The differences between the Irish and UK economies are interesting – and how they have diverged, particularly over the past few years. In the context of your article, what would you say the Irish have done to achieve their relative success?
https://countryeconomy.com/countries/compare/ireland/uk?sc=XE34
Being a tax haven is not a success
Hmmm – I wonder if that intellectual power house of the centre ‘The Guardian’ is looking at this? They ought to be ashamed. The Mirror has made them look superficial as far as I am concerned.
This is excellent in my opinion – well done the The Mirror and you and David/Danny.
About the climate: look – it’s simple, you cannot sort out the climate until you’ve sorted out the money (in this case the investment in Green as stated, Point 5). You also cannot sort the climate out until we are properly accounting for its degradation because of capitalism- something that Richard already has on his radar.
The Guardian would not have run this
It was too long
Too long?
Too little imagination in my view.
It could have done a ‘The Long Read’ on this issue and got the debate going. My view remains that it has been unhelpful.
While climate change and the environment need a huge amount of attention, you will not get ordinary people to focus on that when they are terrified that their children may not eat tomorrow. Or to put it another way, if they fear their children will not be around to suffer the appalling consequences of our treatment of the planet, the planet will not be their priority. The effects of the current financial catastrophe for many people needs to be the first priority, even if only slightly ahead of the environment.
The stand out line for me is “Balancing the books is much less important than ensuring everyone can live without fear of poverty. What baffles us most is that politicians do not understand that.”. More sense in one line than the entire govrnment.
‘Baffled’? Why are we baffled that modern politicians do not understand about fear and poverty?
https://www.theguardian.com/commentisfree/2022/apr/24/westminster-star-politicians-parliament-political
What’s worse is that they pretend to not understand how MMT works.
And what is MMT?
Reality – another reality like fear and poverty. MMT is just an explanation of how a courageous State looks after its people – an epiphany from WWII to make economic war on domestic poverty, want, ignorance, ill health in the name of a stable society that is then not tempted to go down extreme Left or Right modes of existence.
Instead, what we’ve had since the 70’s is the ‘Manufacturing Consent State’ (as defined by Chomsky) where by negating MMT and breaking their post war promise, politicians under pressure from the rich have created an artificial funding crisis so that they can open up Government services to the private sector who claim to be ‘pushed out’ so that public services become cash cows for investors to charge rents and maintain the value of their money (and their power).
To me there is no bafflement about any of this. Your MPs have even fallen for the oldest private sector trick in the book by giving themselves well above inflation pay and pension awards after having the nod from the Establishment to enable all of this to happen. They’ve been co-opted into the ambitions of the rich.
It’s just corrupt – that’s all it is, a State ran for the rich – all that has been achieved in the post war period has been pushed back. I’m not saying that it will stay like this but that’s how I see it. Democracy has actually stopped working because the people running it have been BOUGHT.
And that’s why I think that most of them aren’t worth a light. And voting won’t remove them. That’s the really dangerous thing to consider, because most of our politicians are nothing more than proxies for the rich – a front for them, pretending to be a part of a ‘democracy’.
It’s disgusting, and no wonder the Russians and the Chinese look down their noses at us. And really, all our choices are just bad choices in terms of whose ideas dominate the world.
Picking up on Poiints 5 & 7 – agree.
Investment in “green stuff” has a positive return so gov’ “spending is on assets (with measurable ROI) . Does the deficit matter in this context?
Cloud on the horizon. The Tory-s have finally recognised that local/UK content on stuff such as off-shore wind farms needs to rise. Rules have been changed to reflect this. Oops, EU is unhappy and WTO cases are being developped against the UK. Had the tory-s developed schemes in the period 2010 to 2015 when off-shore was in its infancy (or Liebore had not cancelled the Britannia turbine project) things would have looked different. As it is, the industry is maturing and it is all becomes more difficult to push local content rules as the EU/WTO case shows. I mention this to show that what is needed (and has been lacking) is a strategy, implemented over e.g. a decade or two. The Tory-s are functionally incapable of this (too much partying? too many imbecilies?) and Liebore are far far too stupid (or perhaps just selectively deaf).
If the Chancellor were to overrule the BoE on interest rates using the “public interest” provision, wouldn’t this cause a major political and financial crisis? I can just see the headlines. And what politician would take that risk? Least of all a Labour one – which see Anneliese Dodds Mais lecture last year. Although the thought of Rachael Reeves , a former BoE staffer overriding her old boss does give me a certain frisson, it just ain’t gonna happen. So should we campaign for the power to set interest rates to return once again solely to the Chancellor?
Bank of England independence is just a charade, left over from the 90s. The Governor always knows what the Chancellor wants, and delivers it.
What do you think would be the bigger crisis? Letting millions starve or over-ruling the Bank? Does the question need asking?
I’m not arguing against reducing the interest rate as you suggest. Just asking if you think that setting the rate should be formally handed back to the Chancellor by changing the law , to regularise and acknowledge the current “charade”.
I do think that should be done
Mmm…I can see just who would be advantaged if all this is done – pretty much everyone.
Just who would be advantaged (in the short to medium term) were it not done?
It’s good to see something detailed like this appearing in the Mirror. I worry that the Labour party shadow cabinet will be more shocked by its contents than the Tory party.
It has taken all day to work out how to read the article – but well done, you have indeed mastered Mirrorese.
Guardianese is very different, but I am sure you could learn it if there was an opportunity for one of those Long Reads (as PSR suggests).
And I agree about the simple clarity of the explanation of the (negative) multiplier, it would be good to formulate a similarly clear description of a positive multiplier effect from government investment in carbon-free technology.
Leigh has nailed it though, those two sentences express an entire approach to politics in unanswerable brevity. Congratulations.
I used to be a regular Guardian columnist – but access is now very restricted