There are days when I genuinely wonder what parts of the left think the state is for.
The capacity to create money is the most fundamental power any modern government possesses. It is the basis of its authority. But most importantly, money creation is how the resources to pay for the essential fabric of society, whether they be health, education, care, energy, infrastructure, or more, are mobilised. It is the very foundation of democratic economic choice.
And yet, as is apparent from debate here, swathes of the political left refuse to acknowledge this. They deny the reality that the UK government, like every government with its own central bank and free-floating currency, spends by creating new money, and always has. They cling to the fiction that the state must first tax or borrow before it can act.
Why? Let me suggest the reasons.
First, many on the supposed left have internalised neoliberal ideology. They have swallowed whole the myths crafted to constrain democracy: that governments “must live within their means”, that “the markets” decide what is possible, and that public purpose must bend to private confidence. They confuse households, who really do have financial constraints, with the state, which has the legal authority to create the currency we all rely upon.
Second, some on the left reduce everything to class struggle alone. Power, they say, is all that matters. Understanding the plumbing of money is seen as technocratic, and technocracy is the enemy. The irony, of course, is that they grant the finance sector unchallenged power precisely because they won't understand how the system works.
Third, scarcity suits their politics. When money is claimed to be scarce, the left can pose as noble defenders of whatever is available. Scarcity demands tough decisions; tough decisions demand heroic gatekeepers. Abundance threatens that role. If we admit the state can always afford to employ the willing to meet social need, their drama is over.
Fourth, credibility politics rules. Too many fear appearing unserious to the guardians of economic orthodoxy, whether they be the media, the think tanks, or those within the shadowy world of Treasury orthodoxy. Better, they think, to manage decline respectably than to advocate the truth impolitely.
All these positions share one common thread, which is fear, including the fear of being mocked, the fear of responsibility and the fear that if the government can act, people might start demanding that it must because once it is accepted that governments create money when they spend, then:
- Unemployment is a choice
- Austerity is a choice
- Poverty is a choice
- Failing public services are a choice, and
- Climate breakdown by inaction is a choice
No government can claim “we can't afford it” ever again. The resources to address these failures can always be assembled if the state so chooses. They can only admit “we will not choose it.”
So what do these parts of the left think the state is for if not to deploy its sovereign monetary power for the common good? Their answer implies a bleak vision. It seems that they think the state is, at most, just a household with a flag:
- It must beg from the markets.
- It must prioritise private wealth over public well-being.
- It must deliver balanced budgets even if that means broken lives.
- It must be the administrator of scarcity, not the organiser of possibility.
This is not socialism.
It is not social democracy.
It is capitulation dressed as prudence.
What would change if the left faced monetary reality?
Everything.
We could invest in the energy transition at the scale required.
We could pay carers and nurses decently.
We could have the education that would liberate people to live life to the full.
We could guarantee full employment as a matter of economic design, not wishful thinking.
We could direct the economy to meet needs, and not serve rentiers.
We could build a state that cares.
And all without asking permission from the City.
Money is not the constraint.
Real resources, whether they be people, skills, energy, technology, or materials, are.
Those are the things we must steward wisely, and the power of the money creation in combination with wise taxation lets the state do just that.
The irony is that modern monetary theory does not ask the left to believe in anything new. It simply asks them to recognise the world we actually live in.
And then to take responsibility for what that makes possible.
Politics is the art of deciding what we will do with the power we undeniably possess.
It is time the left stopped denying that power. It is time they used it.
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Maybe the best solution would be for someone who understands MMT to prepare a draft Budget Statement that a Socialist Government could deliver, that would deliver exactly what they want. It’s perfectly possible. I expect you’d be a little bit reluctant to volunteer! There must be someone out there?
I have already done it. It’s called my Alternative Budget.
I think a fully socialist budget would go further on four fronts.
Ownership: It would move beyond directing private capital and instead take all key utilities, energy, transport and major banks into public ownership, not just regulate them.
Workplace power: It would go past taxing excess profits and introduce worker control in firms, mandatory worker boards and stronger rights to co-determination.
Property and housing: It would go beyond better taxation of property and implement land reform, large-scale public housing construction, and a decisive shift away from private landlordism, involving compulsory redistribution of land, wholesale expropriation of private landlords, and a fundamental restructuring of the housing market
Corporate power: It would supplement stronger taxation with breaking up dominant corporations and replacing rentier markets with democratically planned investment.
In short I think a truly socialist budget would want to go further with who owns, who decides, and who benefits. Up for it?
1) I talked at length about nationalisation
2) This is stuff I have talked about, but no one ever gets very excited about it or notcies it
3) I addressed this at length. Do you read what I write?
4) Hallo! Did you read what I wrote?
Why not read what I have written Cliff? I really don’t like being criticised for not doing something when I have done it by someone who is a regular commentator. I suggest you read more and use ChatGPT less Cliff.
Cliff – is this challenge directed at Richard (who HAS produced HIS Alternative Budget based on his arguments) or is it directed at, say, Grace Blakeley or another Novara-based Socialist economist?
But, but, but, it is not just the ‘left’ that espouses these things, it is every government in power that I have ever known, that keeps telling us constantly that the government must,
” – beg from the markets.
– prioritise private wealth over public well-being.
– deliver balanced budgets even if that means broken lives.
– be the administrator of scarcity, not the organiser of possibility.”
Reading your articles on MMT in recent days, a few things are beginning to fall into place:
1. how quickly our Australian government could find money – without borrowing – to support businesses, of course not individuals, during the Covid pandemic. Billions were found over night without a moment’s hesitation and no mention of borrowing it.
It is clearly a lie that we have been fed by every government regardless of its leanings. The annual hype about the nations AAA standing with Standards & Poor credit rating agency.
But how does printing money not lead to inflation? And why does the government still talk about needing to borrow money?
I have written time and again why more money does not lead to inflation. The most recent was this weekend.
I think it is as I alluded elsewhere – modern politics is too much about faith and beliefs and ‘convictions’. Perhaps there needs to be a law that limits human conviction to facts? Not beliefs? Or partialities?
We need a higher level of proof.
This is what charismatic and conviction politics style leadership like Thatcher has bequeathed us.
Belief in dreams. Other peoples’ dreams – such as the rich, sold to us wholesale.
Many on the Left have failed to understand the lesson from the Chinese Tiananmen Square massacre that it was caused by the state’s undemocratic and irresponsible way of using money:-
https://en.wikipedia.org/wiki/1989_Tiananmen_Square_protests_and_massacre
The importance of MMT is that it provides voters the “technical tools” to decide a better balance between market and state for the purposes of general well-being.
Interesting when handed the possibility of power on a plate the Left seem to have failed to grasp it……………..
What do they think government is for? I’d say, To protect us from enemies, which I guess would mean military defence and (for some people) defence from immigration. But (1) they rarely accept that we need immigration as well as having a moral and legal duty to welcome asylum seekers; (2) we don’t seem at all good at defending ourselves against Trump, Putin, Zionism, financial power or foreign companies!
I don’t recognise this characterisation of the left, at least the left I’ve associated with for many years. We’ve consistently argued for state control and funding of resources and services we want prioritised at local and national level – housing, education, health, transport… We opposed privatisation and the selling off of council homes.
I don’t recall conversations along the lines of, but where’s the money going to come from. Part of the point obviously is to stop/reverse our resources falling into the hands of the wealth extractors and it’s been all too apparent that a lot of state funds and resources – and people – end up in their hands.
You may not, but I do.
And I do so most especially in those with vested interests in maintaining the status quo from Marxist entryists, to many in tax justice NGOs to a lot in policy in aid agencies, for all of whom the idea of real change is anathema because if it happened where would their funding come from?
I was encouraged to see the MMT UK stand at the Your Party founding conference. Even more so by the fringe session on alternative economics with Steve Keen, Stephanie Kelton and at least one other MMT espousing economist. I only caught her first name, Patricia.
The fringe session was well attended.
The message is getting through.
My main thought is your fourth point on credibility.
After 4 lost elections they were told by ‘professional’ analysts’ they must attract the centre vote. Even divert some of the Daily Mail readers ( a paper losing circulation ). They must appear ‘reasonable’, not extreme, and ‘balanced enough’ for some to say ‘they are safe to elect’ i.e. not change too much.
Then there is the argument for having the City on side, support from Murdoch -as in 1997, and to attract donations.
It looks plausible but the Telegraph and Mail people are not going to vote Labour and in the meanwhile its own supporters despair of real change and stay at home or vote for another party.
Much of politics is about creating an image . It is less tribal than the 1950s and 60s. The Labour image has failed. Partly due to media but mainly due to themselves.
They half apologise for ‘welfare’ spending but don’t come back with ‘wages have stagnated for two decades and dividends have more than doubled. We need to talk about that.’
Individuals sometimes create false self -an outer mask-and it fails as its not authentic. It is a lack of courage.
You are so right about fear. It underlay the problems of many people I saw in therapy sessions.
Bringing about change needs a number of things and a willingness to be criticised and stand up for one’s beliefs is pretty important. Courage in a word.
Here endeth the rant.
It’s depressing that allies are treated as enemies by some. I still would like an in-depth blog about capital controls because I do believe globalised vested interests will try everything possible to sabotage a sovereign government trying to address social inequality and ecological vandalism