As the BBC noted yesterday, former Prime Minister David Cameron appeared before the Covid inquiry yesterday. As they noted:
He said much else, most of which was damning of his own management of the government and economy, but let's just stick with those ideas for now.
What Cameron revealed was his ignorance. The idea that we cannot have healthcare unless we sell more sugary foods is total nonsense. So too is the idea that unless we pile corporate profits high we cannot have adequate education.
The availability of public services is dependent on three things.
The first is skilled personnel to supply them, and the required skills are rarely transferred from the private sector.
The second is the means to pay those supplying those services. This is readily available at all times in the UK since all public services are paid for with money created for the government on a routine, daily, basis by the Bank of England. Tax and borrowing are only peripherally involved in this process by, in the case of tax, cancelling the inflationary consequence of the money that has been created and in the case of borrowing by providing a place of safe deposit for those funds not taxed back. Neither ever finances government spending.
Third, we need a government that understands this.
If these three conditions were met we could have the public services that we want.
There is one other thing that needs to be appreciated. That is that the health of the private sector economy does not determine the state of the public services that we can enjoy. The reverse is in fact true. We cannot have a strong private sector economy unless:
- We have well educated people, and only the state can deliver them.
- We have healthy people, and only the state can ensure that.
- There is a social safety net so that people can afford the risk of working for a private sector employer.
- Law and order are upheld, and are seen to be so.
- The government understands the economy and manages it appropriately.
- It is understood that there is an active relationship between the state and private sectors, with the dependence (if there is one) being of the private sector in the state, which is why it is so important that the state delivers.
Cameron showed very clearly yesterday that he understood none of this. No wonder he was such a bad prime minister. And no wonder we were so ill-prepared for Covid.
His performance was that of a broken man. And the ultimate question was rather like that which is now posed about Boris Johnson, which is how did a person so ill-suited to the task become prime minister?
Except, that is, that the question is not really that personal, because the real issue is how we have power vested in those with so little understanding of how the macroeconomy really works. I wish I could answer that.
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” That is that the health of the private sector economy does not determine the state of the public services that we can enjoy. The reverse is in fact true. ”
My more leftish friends would fully agree with this comment. They take the argument to what they consider to be its logical conclusion and advocate not having much of a private sector at all. They further consider that MMT will be the economics of some future socialist society but it will never be accepted by the likes of Cameron, even though he might secretly understand it, because this will be the last thing that he would want.
I’ve never quite seen MMT in these terms myself but I do accept they have a point.
I think we need a strong mixed economy
There still remains a question of what to do with the psychopaths who in a socialist ran MMT economy believe that people should be making money from private enterprise. Keynes solution, similar to that of Adam Smith solution with the merchants, is just let them ‘make’ money.
Socialists are not clear about the mechanism of trade between socialist economies. Unless strictly forbidden and harshly policed by the government; there will always be an element of free enterprise somewhere.
I am that psychopath
I thinmk you really do need to consider your language.
Not only will there be pribate business (which is not’free entreprise’) bit there should be
I think you need to wonder if you are on the right website
Yet all the products used by the public sector are manufactured by the private sector.
So what?
Doesn’t that just prove how dependent on the state the private sector is?
The private sector is a delicate flower. When a crisis hits, it collapses, stops investing, is bailed out, or depends on public subsidy in some form. The public sector (NHS, education, armed forces, etc, etc) has to continue; no matter what. You really do require to recalibrate your ideas about how the world really works: the neoliberal fantasies of Hayek are more risible than a Disney cartoon.
BBC report his contribution with no critique. Not a hint that senior economicsts utterly reject this analysis, but it is repeated day after day month after month year after year so that the lack of comment on Cameron’s uterance amounts to ‘yes – this is how the world works.’
Witness today’s questioning of Osborne which I’m following on Twitter and the complete nonsense he gives out in response. I gather he’s being questioned by the highly respected KC Kate Blackwell, who sadly seems unable to grasp that, from what I’m seeing reported, Osborne’s merrily leading her right up the garden path in matters economic. I note there are a bevy of KCs appointed to assist the inquiry https://covid19.public-inquiry.uk/news/inquiry-welcomes-the-appointment-of-eleven-queens-counsel-to-legal-team/ (all QCs at the time of their appointment, of course) and the devil in me makes me wonder if they weren’t all specifically chosen for their established unfamiliarity with real-world (as opposed to prevailing neoliberal fantasy) economics. Thus it is, I perhaps churlishly imagine, inquiries may come and inquiries may go but the good ship Privilege sails serenely on.
Layers and numbers, let alone economics, do not mix
I am wondering asking if I can give evidence
This was my thought too though I know you have a heavy schedule so I didn’t suggest it. Meanwhile I do what I can on Twitter to point out the deficiencies in the questioning and frankly I could use a hand from the troops!
Richard, good article. I have a question re Inflation. Economists of a monetarist view point believe that Govt/BoE have failed to manage stock of money in circulation citing creation of money for the pandemic at govt request as evidence. Therefore excess money leads to Inflation. Do you agree?
No, because there is no evidence it has
The Bank of England agrees with me on this one
“Your health system is only as strong as your economy – one pays for the other”
Health spending has an economic multiplier somnewhere between 2.5 and 6 i.e. gov spending on health drives more economic activity in the economy (and leads to more tax revenue). Furthermore, if wages make up a large part of the NHS, then with some small timing differences, HMG collects back much of this spending. It is circular. Arguably, if HMG spends 10 on the NHS, it probably gets back in taxes (due to the economic multipler) something around 15? 20? One can argue about these numbers, but it seems very likely that Cam-moron willfully misunderstands how gov finances work (thus attempting to fit reality to a narrative that goes “gov bad private sector good”).
The Cam-moron a nutless, gutless, brainless invertebrate often found infesting politics.
This country is well truly stuck in a doom loop with politicians like Cameron and Starmer. Not to understand at this late stage of historical money development that a pragmatic and successful economy operates as a mixture of a command economy and a free market economy where money is created from thin air by both state and private sectors is amateurish appalling. What on Earth solutions would they propose to the fact that there has been half a trillion pounds worth of underinvestment in the British economy over several decades? I’m sure they’d come up with some meaningless waffle mostly blaming others or pretending that the level of taxation bears no relationship to various factors including a key factor like productivity!
https://www.theguardian.com/business/2023/jun/20/uk-economy-in-growth-doom-loop-after-decades-of-underinvestment
I think the much under-publicised letter from the headmaster of Eton that you re-printed tells us most of what we need to know about David Cameron.
Throw in the phone call from Buckingham palace to get him a job, the get rid of the Green crap policies and you have the classic arrogant boneheaded member of the British establishment.
Exactly the sort of arrogance that led him to believe that he could win a Brexit referendum.
Apparently unaware that he was the creature of the violently anti-EU Tory support system of the UK Media and black-money Front organisations who could destroy him as easily as they made him.
The “credit card” theory of funding availability is running through this first inquiry module like a message through a stick of rock. We can be looking at an existential threat but despite having the material, people and organisational resources to avoid or mitigate the impact we must all die because we “have no money”. I wonder how strange this will sound to future generations?
If there are future generations
Unfortunately the credit card attitude you describe is subscribed to hook line and sinker by Reeves and Liz Kendall.
Listen to this podcast from the Blairite school of health service management.
https://pod.link/1685159956/episode/5425e334d0e9a000f0ceed08f2d14f0c
At least Roy Lilley gave them a jolt by saying the bleeding obvious.
But all Kendall could do was parrot “there is no money ” therefore all we can do is “reform” , which remains vague but seems to be to americanise healthcare, subcontract to the private sector and pretend that healthcare can be prevented thus enabling more cuts to an already overrun NHS.
That the “credit card” meme (for that is all it is) ever got traction is down to a servile & largely brainless meeja, incapable of even starting to ask questions (let alone the right ones). An earlier poster (Mr Kruse) made the interesting observation that one KC was led down the garden path – when questioning Gidiot (Gideon Osborne – Gideon the idiot – Gidiot). This is an illustration of the poor levels of knowledge both within the meeja and m’learned friends on how gov finances function………..and/or a reflection on their lack of curiosity to question (do govs have “a credit card for paying for stuff”?) .
it is as if epistemology was never developed 2500 years ago as both an area worthy of study and a forensic tool. Or perhaps the Covid enquiry is akin to a West End play – something to entertain UK serfs with the added benefit of “let’s pretend” – let’s pretend that the gov cares.
I would like to copy your post, principally the bullet points about the relationship between public and private sectors, for my A level sociology students – with your permission.
Please do!
Cameron obtained first class hons in PPE (according to Wikipedia). Lizz T. is also a product of PPE … as are many others in the government cabinet
Is PPE a major source of economic illiteracy?
Yes
Most with PPE don’t do the E bit – the maths is too hard
Given the track record of PPE graduates, does it stand for ‘Perfectly Pointless Education’?
In any case it would most likely be just the failed and inaccurate mainstream orthodox neoclassical stuff.
Osborne tells the Inquiry – “there is no point in having a contingency plan you can’t pay for”. This would imply that there is a direct trade off between money and deaths and that once a debt to GDP ceiling has been breached then preventable deaths must occur.
Am I missing something?
The definition of money and affordability seems to me something that the Inquiry cannot dodge.
He seemed to think that trade off does exist
Cameron failed on his own termes, he did not get the public finances in order.
If anyone wishes to know more about Oxford University’s P P E, they might find “Chums – How a Tiny Caste of Oxford Tories Took Over the U K” by Simon Kuper, disturbingly interesting reading.
Considering the poor quality and useless members of parliament, in government, the following link might be of interest.
https://theconversation.com/how-the-ancient-greeks-kept-ruthless-narcissists-from-capturing-their-democracy-and-what-modern-politics-could-learn-from-them-208042
Thanks, an excellent article – I hope many people read it.
This has also been a frequent theme of Caitlin Johnstone’s writing over the years. See e.g. https://caitlinjohnstone.com/2019/10/15/on-psychopathy-and-power/
I was hoping that you would post something like this.
You could say that Cameron is the epiphany of the ‘Tim Nice But Dim’ that you get a lot of these days but his legacy and the free reign he handed to Osbourne was a disaster.
But I also see ignorance now as one of the must have attributes to get on these days – I see it in politicians and I see it in the management of the public sector.
It’s not how much you know these days – it’s about how much you are willing to ‘un-know’ in order to gain approval and get on with the programme.
Cameron however is one thing; the complete bastard that is George Osbourne is another matter however.
Osbourne is the complete opposite of Cameron – Osbourne is not ignorant of what he is doing – hence the perma-smirk on his face. He’s like the twisted little sod who comes along and screws up that nice drawing you’ve just done for teacher or undercover copper who has infiltrated your anti-nuclear group. And smiles about it.
Let’s see what he has to say for himself next.
He was worse
Jeremy Hunt is equally illiterate . He will not help people faced with huge interest rate rises.
“Those kind of schemes, which involve injecting large amounts of cash into the economy, would be inflationary,” he said.”As much as we sympathise with the difficulties and do everything we can to help people seeing their mortgage costs go up, we won’t do anything that would mean we prolong inflation.”
As the money would be going into banks and not into general circulation, I can’t see how it would be inflationary. There would be no extra money circulating and the economy is not working at full capacity.
There is a Labour group on Facebook called Left foot Forward and they posted an article by Prem Sikka which IMHO completely demolishes Hunt’s argument. ( I don’t suppose the Labour front Bench think the same way, sadly)
Prem is very good
Inquiry barrister Kate Blackwell KC asked: “Do you agree, by the time COVID-19 hit the consequences of austerity were a depleted health and social care capacity and rising inequality in the UK?”
Mr Osborne replied: “Most certainly not, I completely reject that. I would say if we had not done that Britain would have been more exposed, not just to future things like the coronavirus pandemic, but indeed to the fiscal crisis which very rapidly followed in countries across Europe…”
…In his written evidence, Mr Osborne argues that his action “had a material and positive effect on the UK’s ability to respond to the COVID-19 pandemic”.
https://news.sky.com/story/covid-inquiry-george-osborne-rejects-claims-his-austerity-programme-left-nhs-in-parlous-state-ahead-of-pandemic-12906273
Total and utter bullshit
If the UK had monetary system literate journalists/interviewers politicians like Cameron and Osborne would be asked why the ECB has been consistently forced to do bail-outs of Euro member governments:-
https://billmitchell.org/blog/?p=60931
There is absolutely little concept in Britain of the state being an arbiter/ lender/ dealer of last resort. This is odd when the British state built an empire which had to encompass the movement of large amounts of state and private sector created capital to do so!
Osborne has followed Cameron. They have deliverd the funeral orations to their own reputations.
With refereence to the title – just yesterday?
Fair point
Built we got a reminder yesterday
But you dont need to ‘inject huge amounts of money into the economy’ you need to stop the banks sucking huge amounts of money out of the economy.
As with Gas and Electricity you could simply limit the interest rates charged on exiting mortgages, perhaps with some appropriate controls, eg not for second homes/holiday lets.
After all its only bank created money in the vast majority of cases. You may need to do something for the few remaining ‘traditional’ Building Societies but that should be easy to arrange.
Operation cygnus predicted Catastrophe in 2016.
As ever, ignored by government
It seems the common thread for all our recent truly appalling politicians other than Liz Truss is Eton, or a very similar type of public school (I believe Rishi Sunak went to Westminster School). These schools teach entitlement and confidence beyond ability, give connections and divorce people from the reality of poverty and hardship, given they have no contact with ordinary people.
I have never believed in private education and the privilege it bestows in terms of opportunity, often unrelated to true ability. The last ten years chaos has confirmed that people educated in such a way lack any empathy for the impact of their policies and leave them totally unfit to govern us. I would personally follow Finland’s lead and totally ban private education and ensure all schools are good enough for everyone. To me a vital part of education is learning to get along with people of all backgrounds and understand the impact of poverty and hardship. We would not be in our current mess if our current leaders had this experience and understanding.
Sunak want to Winchester
Agreed. My mistake, but it is of the same ilk.
Agreed
Cameron and Osborne need a lesson in cause and effect.
Department of Health and Social Care (DHSC) emergency PPE stockpile, was reduced from £831m in 2013 under the Conservative-led coalition government to £506m by March 2019.
As a result…
“The UK spent £10 billion extra in inflated prices for personal protective equipment due to an “inadequate” stockpile and a surge in global demand, a [NAO] report has concluded.” The prices paid were as much as 1300% higher than 2019 prices.
Evening Standard 24 November 2020
A stitch in time saves nine. A glitch of dumb and venial Tory politicians doesn’t!
My recollection of this scandal is that the PPE stock created for an expected pandemic was £1Bn in 2010. Austerity was then introduced by the Conservative-LibDem Government (a policy of wholesale, mindless destruction; not least of UK Public Health). The PPE stockpile was left to rot, uninvested. This meant that when the PPE stockpile was called on when the pandemic struck; the nurses and doctors discovered they were handed out-of-date, unusable PPE stock.
The Conservatives blew it. The ruin they created can be measured and reckoned. Austerity was introduced because the Conservatives claimed we had unsustainable Debt of almost £1Trn in 2010. We have had 13 years of Austerity combined with crises; and the Debt is almost £2.5Trn. The point to note here is not the funding the Conservatives had to make, but the fact that the Conservatives could find the money when they really needed it. Government can always find the money when it really needs it; the issue is always, who decides what is needed; and needed for whom, and to what end? In 2010 the need for Austerity was grossly overstated.
The Conservatives, 2010-2023 have blown multiple billions more than Austerity saved; in part because they defenestrated the NHS, the Public Health resource and the Public Sector, to say nothing of the collapse in investment in the whole economy; and then spent money irresponsibly through the pandemic and subsequently, trying to cover their incomptence and failure.
Austerity and Brexit have ruined Britain; everything else is spin.
Agreed