Zack Polanski published a new edition of his podcast last night, in which he is in conversation with James Meadway, about whom I have written here of late.
I have only had time to listen to the podcast once so far, and I may do so again. There may be nuances I have not picked up, but in writing this post, I also read the transcript, which seemed very accurate.
Three things stood out for me:
- James Meadway is obsessed with keeping bond markets happy.
- He has no theoretical narrative of change to back up any of his suggestions.
- This means that he appears to have no alternative explanations for how the economy might work, barring some very standard left-of-centre economic favourites right now, like a wealth tax. He is, therefore, offering a view that is hard to distinguish, except in detail, from that of the current Labour government, or that which the Treasury might prescribe.
What was notable about the conversation was its negative tone. That might be described by some as realism, but it came across as caution. The reason for that was easy to find. Underneath what was said was James Meadway's deep-seated paranoia about bond markets, because what he made very clear is that he sees them as holding the ultimate power and veto over democratic economic choice.
Meadway's starting point was a logical appraisal. He was right to say that Britain is currently exposed to the whims of international finance, that a significant share of government debt is held abroad, and that sudden market reactions can, in the current debt management framework and understanding of its nature, and in the absence of capital controls, have real effects on interest rates, the exchange rate, and inflation. What I stress in that sentence is the phrase "in the current debt management framework and understanding of its nature, and in the absence of capital controls". What is clear is that James Meadway has no plan to change that framework, or his understanding of it, or to consider capital controls. The implication of all he said is that markets are untouchable, as is our knowledge of them.
James Meadway lacks:
- A theory of money based on how it is actually created in the real world, whether by the Bank of England for the government, or by commercial banks for their customers.
- An understanding that the government can spend without tax or borrowing first, as is true based on real-world evidence.
- An awareness that taxes do not fund government spending, it controls inflation (about which subject it is obvious he lacks any real understanding).
- An awareness that governments need not "borrow" because they can always be funded by their own central bank.
- An understanding that what he calls debt is in fact nothing more than a safe deposit facility provided by the government to markets that are desperate for that facility because banks, pension funds, life insurance companies and the holders of sterling all need a safe place to deposit their funds and only the govbermment can provide it.
James Meadway has none of these narratives, and so he can only subscribe to the existing bond market narrative, which is that it is in charge, and can dictate its own terms and price, and can use that power to dictate the level of activity the government is permitted to undertake in the economy, and even what it might do with the funds available to it.
Over and over again, he returned to the same causal chain:
- If a government moves too fast or too boldly, he said, bondholders will lose confidence.
- If they lose confidence, they will sell gilts.
- If they sell gilts, yields will rise, the pound will fall, and imported inflation will follow.
This, he says, is how you end up with another Liz Truss moment. His language was explicit:
- Truss “kicked the bomb"
- The bomb “went off”, and
- The lesson is that any future government must carefully “cut the wires in the right order”.
That metaphor matters. It does a great deal of political work. It tells the listener that the economy is a rigged explosive device and that radical policy is not an act of democratic renewal but an act of recklessness. Once you accept that framing, the space for political choice collapses very quickly. You are no longer asking what the economy should be for. You are, instead, always asking how to avoid setting off the markets.
Meadway reinforces this by insisting that bond markets are not political actors, but are merely profit-seeking ones. They are, he says, “just people trying to make money” who want stability. But this is precisely where his analysis slips. Institutions that can punish governments for stepping outside narrow parameters are not rendered apolitical by the fact that they pursue profit rather than ideology. Power does not stop being power because it promotes a balance sheet instead of a manifesto. And if he affords the markets power - as his natrative does - they will, unsurprisingly, use it.
Meadway, admittedly, briefly acknowledges this himself when he describes debt as a “power relationship”. But, he suggested that altering that relationship will provoke resistance from those who benefit from it and instead of following that insight through to its logical conclusion, he retreated. The task, he argued, is not to confront that power directly, but to reassure it. He claimed the need is not to challenge the markets with the power government has, but to get a “social majority”, produce a credible long-term plan, and then be assured that the bond markets will calm down, although he did not explain why he thinks that will be the case. Democracy is, then, in his view, permitted to act, but only after it has persuaded creditors that nothing truly threatening will occur.
This is where James Meadway seemed to argue that the Liz Truss example is a disciplinary tale, but that was wrong. Truss did not fail because she challenged bond markets as such (because Andrew Bailey had already done that for her, the day before Kwasi Kwarteng's budget). She failed because she combined unfunded tax cuts for the wealthy, no institutional coordination, no central bank alignment, and no democratic mandate, in the context of already rising inflation. To generalise from that episode into a standing warning against bold economic restructuring is to mistake incompetence for inevitability, and that is what James Meadway did.
In fairness to Zack, he did challenge James Meadway on this. He made clear he saw me as the opponent to James' view, directly stating that:
I don't want to put words in [Richard's] mouth, but I think part of what he's saying is "kick the bomb". Like he's saying we need to entirely change the model.
That was almost right: what I am actually saying is not that we need to kick the bomb, because I would argue there is no bomb. Nor do we necessarily need to change the world by very much. What, instead, we need to do is recognise the reality of the world that exists. That is because I don't deal in models as such: I only deal in realities, and if we just understood how the world already works, we would see everything I am suggesting is possible, and no bomb, or anything remotely like it, is required. The problem is that James Meadway does not see that. He is playing with an economic model (and an incredibly conventional one) that describes debt as a bomb, and he is terrified it will go off, when it won't, because it can't, as it does not exist. That's the difference in our positions.
What emerged from all this framing was, then, not a strategy for transformation, but a politics of pre-emptive restraint. Meadway said he supports anti-austerity policies. He wants higher wages, better public services, climate action, and more equality. But all of this he made clear was fenced in by a constant injunction not to frighten the markets. Transformation, in his view, is acceptable only if it can be narrated in a way that bondholders find comforting.
This is, of course, how austerity has already survived long after its intellectual collapse. It has not done so as a doctrine that is openly defended, but, instead, as a background fear. The narrative now is not “we must cut”, but “we must be careful”. Not “markets are right”, but “markets are dangerous”. The effect is the same: democratic ambition is downsized in advance. This is the thinking of Rachel Reeves, and I can spot no significant difference in James Meadway's thinking.
The deeper problem is that this framing concedes the very point it should be challenging. If bond markets really do possess the power to destroy governments that pursue popular, necessary policies, then the question is not how to placate them. The question is how to redesign the monetary, fiscal, and institutional framework so that this power no longer operates in that way. At the very least, that means we must first understand them, as I think I do, and second, confront them rather than tiptoe around the relationship between the Treasury, the central bank, and the financial system.
Until that happens, warnings about “another Liz Truss” will continue to function as a brake on political imagination. Saying that, as James Meadway did (and as Rachel Reeves does), might sound prudent. It might feel responsible. But what it will actually do is ensure that the boundaries of policy are still set, not by democratic choice, but by fear of the bond market reaction. And the real problem is that markets will not permit:
- Full employment.
- Spending on the level of services we really need.
- The provision of care in all its forms,
- Funding for essential infrastructure investment, including social housing.
- Payment for a green transition.
The choice then, is simple:
- We play within the boundaries of what is, in effect, conventional neoliberal economics and presume that there is a ticking bomb waiting to go off that we must tiptoe around, or
- We address the economic realities of money, government money creation, the function of tax, and the realities of bond markets, and the nature of savings and investment and the current disconnect between them, and manage the world as it really is to ensure we can have all those things I just noted, which are the things people want - and which I know are deliverable, because as Keynes once said, "whatever we can do, we can afford".
James Meadway offers the first choice.
I offer the second.
I think I know the one most Greens would prefer.
And I stress, I am not making this personal: I am making the point because this matters. If the Greens are the only hope we have for decent government in this country in the foreseeable future (and I stress, I am talking England here: Wales and Scotland have other choices) - and that might be the case - then understanding these differences matters, because they are massive, and massively important to future well-being.
Taking further action
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One word of warning, though: please ensure you have the correct MP. ChatGPT can get it wrong.
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Yes, bang on the nail re politics of fear, and (it appears an almost) wilful determination to not understand the way that money works.
A really important post and podcast – and I’m quietly encouraged – that Zack Polanski seems to see the challenge of the 2 arguments. That’s a massive improvement on the current government utter refusal to even imagine an alternative economics.
But, now I’m beginning to get it on bonds, a little, I’d like to hear your thoughts on the recent stories about Canada & EU & Japan using the bond markets against Trump, and apparently scaring him into some backtracking on tarrifs & possibly Ukraine.
I realise that the $ being a “reserve currency” globally makes a difference – but that’s me stuck, I couldn’t explain why, and I couldn’t explain why, if Trump could be scared of the bond markets, as maniplulated by the combined selling power of Canada, Japan and EU, why a UK Green coalition government shouldn’t be scared of a similar threat by the City bond traders.
I dont like not knowing the answer, and I need one suitable for the omnibus. I seem to have lots of conversations nowadays – last night at a festive dinner for my men’s group, the topics included inequality, corporate wealth extraction, public utilities, Gaza, Hamas, Zionism and Christian Zionism. Thankfully no one mentioned bonds or Truss.
Immigration & Farage came up earlier the same day at exercise class.
The challenge is saying it in 5 minutes, which is how long these omnibus conversations last!
The Overton window is moving, the status quo is cracking, the conversations are encouraging, so
KYTGW!
So my request – if Trump could be shifted by a threatened bond sell-off, why needn’t Zack be? For the omnibus…
I am trying to work out what you are refwerring to.
The only thing I can think it is the reaction post tariff announcements in April. Bonds were definitely sold then, but not as a coercive actiion but as a rational reaction to Trump’s irrational policy.
Substance ruled, then. It was not a “bond strike”.
Or, have I missed something?
Yes, it is April 2025 I am referring to, and the wide variety of interpretations that were given at the time, to the “rumours” of concerted but quiet international action at the time (Canada, Japan, EU) to demonstrate to Trump, by a v slow “bleed” what could be done if things got rough.
Obviously I don’t know what really happened or why. But the widely reported threat was in the public domain and has the utility of the “what about Liz Truss then?” argument in a discussion about the “power” of the bond markets to frustrate a Polanski coalition government.
So I’d like to a
argue against that use of the story.
Issues that feel relevant include:
– it didn’t happen?
– it did happen, but it wasn’t to threaten Trump it was because of…(please fill in the dots!)?
– that argument re. the USA isn’t relevant to UK, the pound isnt a global reserve currency?
– it isn’t a group of sovereign states lined up against the UK Treasury (but Russia? but Israel?) just the City of London, and the Treasury can face them down, which is long overdue?
https://valueedgeadvisors.com/2025/04/14/did-the-trump-tariff-policies-forget-about-the-bond-holders/
https://leadership.ng/quiet-powerplay-how-canada-forced-trump-to-drop-tariffs/
https://www.independent.co.uk/voices/mark-carney-donald-trump-canada-usa-b2741502.html
https://www.linkedin.com/pulse/carneys-checkmate-how-canadas-quiet-ovx9e/
I don’t see it that way: they saw a reserve currency doing stupid things and get out whilst they could.
Was that an attack? I doubt it.
I very much doubt an attack on a sane policy of investment could induce a reaction in any way like that either.
Richard, I really don’t think there is coherence within the Green Party on economic policy. Until now it has not been needed. It felt there was a growing realisation that the current way of doing policy isn’t working during the leadership elections. I think Zack is opening the dialogue, but I don’t think the Green Party will ever be unified by economic views.
Like all British political parties it is a broad church, but with a unifying factor of a focus on environmental policies and a belief in social justice. Not all Greens are left wing, which is why Zack was seen as contentious by those in the more traditionally right wing rural seats, because he is openly left wing. Many Greens are left wing but pre Zack this was never explicitly stated. Please continue to talk to the party whilst they fine their way on this one. You see economic policy is key. I’ve done hours of door knocking and I don’t think I’ve ever been asked on question on it. Most people care about the out workings instead, like whether their local school is good, hospital waiting lists etc.
All noted, and thanks
Hazei is spot on about the members of the Greens. They are a broad church united by enviromental concerns. My local party has little understanding of many of its own policies beyond those on the need to tackle climate change. Some are deeply uncomfortable with Zack and his left wing stance. They fear it will loss us votes and some even see it as a massive change of direction.
What is left wing about Zack?
Since when was caring left wing?
Hi Richard, if I may join the party. What the previous two comments suggest in my opinion is interesting. Zak is by recent historical standards economically left wing (neoliberalism is a right wing economic ideology).
I think what the issue here might be (not suggesting the case for the commentators here), is that historically the greens have attracted a liberal middle class population (not working class). The type of people who have benefited from neoliberalism but like to see themselves as ‘good progressive people’ – aka to some people, champagne socialists.
If the greens now go economically left (to help the working class), this will of course upset some of the middle class liberals, as consciously or subconsciously they believe they’re better than working class.
Historically, the middle class do not like the working class – partly as they falsely believe they’re upper class. Problem now is, the elite are coming for the middle classes as they have took as much as they can from the working class. Some of the people your previous two comments allude to will probably go the LDs or Labour next election.
Noted
Thank you, Hazel
I think you’re very right that most people on the doorstep (or omnibus) are concerned about everyday problems, services, bills/wages etc; but we (Greens) do need some straightforward, straight talking, answers to the ‘we can’t afford it’ meme; especially in terms of media presence.
I think Richard’s pithy summary in the comments on the earlier post is very helpful in that regard.
Otherwise there’s a danger of media people ‘letting the Green flower bloom’ as a newsworthy thing for a season; and then cutting it down ruthlessly – mostly to serve their paymasters – and thereby undermining Greens’ electoral credibility, at national if not local level. (Anecdotal, past experience: I’ve spoken to many in my locality who say something like: ‘I’ll vote Green in the locals but when it comes to Westminster, it has to be Labour.’ That can and must change.)
I’m a lifetime member of the Greens.
If Polanski wants any further contributions (& I’d be happy to make them) Meadway takes a walk. The man’s a fool & confims this when he states that he dislikes MMT because it has no element of class. I guess he does not like the Carnot-cycle cos that has no element of class (MMT & the Carno-cycle are explanations for different systems – key word: “explanation”). As for the Greens & “not unified by economic views”. The first iyou need an understanding of “how money works in a fiat currency system”. One moves on from that to deciding how to make it work for society = make political choices. Modern Money is neither left nor right whinge – its an explanation, is all.
If Polanski reads this (or you care to pass on the message): get rid of the self-seeking egotistical moron (I saw him in action @ some discussion – strewth he has an ego doesn’t he?) – or don’t in which case, the Greens won’t see a brass farthing from me & probably some others.
What is left wing about Zack?
Since when was caring left wing?
Agreed.
Richard, it seems to be a matter of perception. As others have said, to challenge the neoliberal consensus as Zack has done is seen as left wing. This is further reinforced by the MSM repeatedly calling his policies “hard left”. This creates images of class struggle and “ugly” factional politics. Many joined the Greens to advance collaborative politics in their local area. Working cross party on enviromental issues.
The label left wing worries them -esp if the electorate sees it that way.
Is there a way Zack Polanski and his members can get to hear more of what you have to say?
Only here….
I am passing the post to a green councillor who is sympathetic.
Thanks
By going to Richard’s seminar on 28 February in Cambridge!
I hope some key people could participate.
(I’m not such a person, but I already signed up!)
I look forward to seeing you there
It is not sold out – but it is selling well.
I just watched this and then ran a Claude query on the podcast transcript and posted this comment on the Bold Politics site:
@nickhomboy
0 seconds ago
As a member of the Greens I would implore Zack to seek alternative voices on how the government controls the money supply. Meadway insists that it is all Financial/market based whereas MMT experts Murphy and Kelton believe its driven by Real resources & political decisions. Governments having their own fiat currency have much more power than Meadway suggests. We don’t have to live with the city tail waging the Government dog.
I hope this isn’t too far from your opinion.
It’s fine
Thanks Richard, in complete agreement with you. I have also seen rumours circulating that the greens would do a pact with Labour just to keep reform out of power. I can say for myself, as probably the same with others, as a current probable green voter at the next election, this will definitely persuade me not to vote at all. I am sick of lending my vote to spineless (non-courageous), corrupt and neoliberal career politicians who are only in it to further their own careers.
Just to clarify, there are two main options that could be done (better if done together?) to counter the current neoliberal policies(?) – spend more government created money on the public AND tax (not wealth tax) the mega rich?
Thank you
On rumours of pacts, I cannot comment on party strategy, but I would make one general point. Voters are entitled to clarity. If a party exists to challenge neoliberalism, then diluting that challenge for short-term electoral manoeuvring risks undermining the very reason people support it. Courage matters in politics precisely because trust is fragile.
On your substantive question, you are broadly right, but it helps to frame it more precisely. Countering neoliberalism is not just about “spending more” and “taxing the rich”, although both may be involved. It is about changing the operating rules of the economy.
First, government spending should be used deliberately to expand public capacity: health, housing, energy, transport, care and skills. This is not about generosity for its own sake; it is about rebuilding the productive and social foundations of the economy so that inflation pressures fall rather than rise.
Second, taxation is essential, but not because the government “needs the money”. Tax is how excessive private power is constrained, how inflation is controlled, and how rents are prevented from accumulating at the top. That includes taxing wealth, monopoly profits, land and unearned income, not just high earnings.
So yes, these two actions work best together. Spending without tax risks inflation and asset bubbles. Tax without spending entrenches stagnation and decay.
The deeper point is this: neoliberalism survives by pretending the state is weak and money is scarce. A credible alternative has to show that the state can act, that money is a public tool, and that markets exist to serve society – not the other way round.
As a long term Green I think this is highly unlikely. Labour hate the Greens with a real passion and many Greens in elected office have been burnt. Also if you look at the current predictions, Labour are very unlikely to be the leading party in a position to negotiate. Clearly we are a long way off a general election and a lot can change. A LD, Green and SNP/Plaid loose coalition is much more likely, and I hope Reform is exposed for what it is by then.
I tend to agree with you.
For the slow boy at the back of the class, can you please explain something?
“He was right to say that Britain is currently exposed to the whims of international finance, that a significant share of government debt is held abroad, and that sudden market reactions can, in the current debt management framework and understanding of its nature, and in the absence of capital controls, have real effects on interest rates, the exchange rate, and inflation.”
What is the sequence of events by which “the bond market” exercises this magical control over our economy? I thought the price of bonds and coupon rates were set by the Treasury on issue, and they are always in Sterling. I can understand how the secondary market can be affected by dealers in the City of London taking a view about the potential returns but surely that only affects downstream investors not the Bank of England’s holding. How does this impact interest rates?
This is not a stupid question at all. The “bond market” is often talked about as if it were a mysterious force, when in fact the mechanisms are quite mundane.
Start with what you are right about. The Treasury sets the coupon and maturity on new gilts, and they are always issued in sterling. The government cannot be forced to default, and the Bank of England can always ensure settlement. So there is no direct financial compulsion.
Where markets gain influence is indirectly, through policy choices and institutional design.
The sequence usually runs like this:
1. Investors in the secondary market sell gilts because they expect higher inflation, higher future policy rates, or political instability. Gilt prices fall and yields rise.
2. Those higher yields are read – wrongly, but routinely – as a “signal” that markets are losing confidence.
3. The Bank of England, committed to inflation targeting and “market credibility”, responds by raising its policy rate or refusing to stabilise gilt prices.
4. Higher policy rates then feed through into mortgage rates, business borrowing costs and the exchange rate.
5. A weaker pound raises import prices, adding to inflation, which is then used to justify further tightening.
So the market does not force higher interest rates. It creates a narrative that policymakers choose to validate.
If the Bank of England committed to stabilising the gilt market – as it did under quantitative easing or as Japan does under yield curve control – this chain would break. Yields would not be allowed to rise unchecked, and the secondary market would lose its power to unsettle policy.
So the “magic” is not in the bond market. It is in the willingness of governments and central banks to treat market movements as commands rather than opinions.
This is a great explanation. The power of central banks in relation to bond markets was made clear, as Clive Parry says, after the 2008 crash and of course during Covid. There was much moaning and gnashing of teeth from the so-called “bond vigilantes” during this period because there was little volatility to play with and nothing investors could do against the power of central banks.
We saw this most clearly perhaps in the eurozone after the 2008 crash, when government bond yields in Portugal, Spain, Italy and Greece were pushed up to extraordinary levels on speculation that governments would default. According to the LSE, “The countries that had joined the Eurozone were unable to issue debt in their own currencies and, as a result, had lost the ability to guarantee that bond investors would be paid when bonds matured. This lack of guarantee left the member governments vulnerable to movements in financial markets driven by fear and panic.”
Eventually the European Central Bank accepted it had to step in to a greater extent that it was doing and Mario Draghi, bank governor at the time, uttered the famous phrase that the ECB was “ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” And it was enough to calm markets.
The bond vigilantes have been allowed to play again since then but only to the extent that central banks let them. Journalists love to write about bond vigilantes – I found 10 headlines in the FT this year with that phrase in the headline.
Thanks
In short, might it be that Mr. Meadway is advocating that our nation becomes/is a plutocracy?
Might it also be that the government of Sir Starmer has the same submerged/unconscious policy?
People are often afraid of what they don’t understand – perhaps this applies to many of those in thrall to the Bond Market.
We should care about the bond market – its ups and downs do signal what a particular group of people (bond investors) think about policy. Their opinions, along with others, give important information. Wise policymakers should always be tracking how policy is working out and altering it if required.
But just because bond markets fall does not mean a policy is bad…. and even if they do fall the Government has huge capacity to control it. Evidence for this comes from to fairly recent events
(1) QE. The Government (via the BoE) drive long term gilt yields to the absurdly low level below 0.5%. Now, I thought it was foolish to do that but it could and it did.
(2) Truss/Kwarteng budget. The gilt market collapsed in chaos but just a single statement from the BoE that they would intervene to ensure and orderly market saw stability restored. In fact, the amounts bought by the BoE were trivially small but just the hint of intervention is enough.
If you understand bonds you realise that government holds nearly all the cards.
Now, FX markets are different (and I think this still needs thought buy MMT policy makers)… but we should have no fear of what the gilt market does.
Thanks, Clive.
Richard in your article this morning “Tax is not theft” you use the phrase “that key error is chronological.” Isn’t that the problem with most individuals in this country including Green Party members as well as James Meadway they don’t think chronologically or rather start from first principles.
A first principle is to ask what went on in human societies without money to which the answer is there was always a communitarian obligation for individuals to commit resources whether goods or labour to help mutual thriving. As time went on it was recognised that having a money tool that “monetised” the obligation had lots of advantages.
Initially, therefore, this meant money was “communitarian” in “theoretical practice” where the people owned the means of production of money. (I say theoretical in practice because monarchs often usurped this common ownership for personal advantage.) Having introduced money, however, this evolved into individuals who supplied the state over and above their obligation using money to reward others in the community for supplying them with goods and services.
This consequently introduced a second principle, which can be called the “libertarian” use of money and this enabled market capitalism to get going. It also meant there was a need for the private ownership of the means of money production because the state was predominantly interested in funding its own needs and not that of the market.
All of the above gets us to a third principle we need to recognise as a society. We need both “Communitarian” and “Libertarian” money production. Isn’t it people like James Meadway and many members of the Green Party who fail to recognise this third principle believing there’s only “Libertarian” money whilst at the same time also failing to recognise its production is controlled by the rich few? (Stephanie Kelton’s “money only grows on the rich”!) A consequence of this recognition failure is we get what is called “fiscal defeatism” and the introduction of entirely inappropriate devices like Fiscal Credibility Rules!
Second paragraph should read:-
“A first principle is to ask what went on in human societies without money to which the answer is there was always a communitarian obligation for individuals to commit resources whether goods or labour to help mutual thriving. As time went on it was recognised that having a money tool that “monetised” the obligation had lots of advantages. For example, the state could better control the quality of what it got and the timing of its delivery.”
A beast born with two heads, seldom lives?
Someone – something – has to be in charge. I don’t know about anyone else, but I prefer that those who are elected are in charge – the bond holders/gilt owners are not those people.
Meadway lacks courage. That is my emotional response to him. and he wants to dine out on dodgy thinking.
How often in our so-called intelligentsia and middle class for that matter have I seen this confection of an argument that being cautious like this denotes ‘being clever’, is somehow ‘sublime’? It is nothing but submission in my view. And it locks us in to nothing but eternity, where nothing changes.
And what is really frustrating is that history has told us that this government has never ever defaulted on any of its bonds and gilts? What is the basis of bond/gilt holder ‘fear’. Are they just as badly versed in fiscal reality as the taxpayer? Using a leverage that is just no there? Making out that the second hand sell-on market can change an agreed and guaranteed rate of return with a sovereign government – just like that!
Well Zach, (if you are reading) if I detect Meadway and his thinking are taken up by you – just one inch , I will be staying at home at the next election. And making sure that everyone else I know knows that you cannot be trusted as well. I promise you that.
Hi Richard, I’m not really sure how to frame my question but here goes. Is their a ‘golden ratio’ between government spending into the economy and then taxing back to provide the full range of services we need as a society. With fair levels of taxation and regulation to make it all work? I thought today’s video went some way to describe how a good and equitable system could work but my question here arose from watching it.
Short answer: no – there is no golden ratio. And the search for one is itself part of the problem.
In a monetary economy, government spending and taxation do not have a fixed or optimal numerical relationship. They serve different functions, and the balance between them has to change over time.
Government spending injects money and resources into the economy to achieve real outcomes: health care, education, housing, care, energy, transport, environmental repair, security and so on.
Taxation does not “fund” that spending in a mechanical sense. Its roles are to control inflation, redistribute income and wealth, change behaviour, and give money value. Because those purposes vary with economic conditions, demographics, technology and ecological limits, the appropriate level of tax relative to spending must vary too.
If the economy has spare capacity, high unemployment or underused skills, the state can spend more relative to tax without causing inflation.
If the economy is at or near full capacity, taxation has to rise or spending has to be redirected to prevent excess demand.
Regulation also matters: well-designed regulation can do inflation control and behaviour change that tax alone cannot.
Fairness adds another dimension. An equitable system is not one where a fixed percentage is taxed back, but one where the burden is distributed according to ability to pay and power to distort outcomes. That is why progressive income taxes, wealth taxes, land taxes and effective corporate taxation matter.
So what today’s video was pointing towards is not a ratio, but a set of principles:
• spend to meet real needs and build capacity
• tax to control inflation, inequality and power
• regulate to shape markets and protect the public interest
• adjust all three as conditions change
Looking for a golden ratio suggests a mechanical system. What we actually need is democratic judgement applied to a complex, evolving economy.
Thanks
I watched the video as well and you mentioned tax and protecting public services in the same breath. I understand tax controls inflation and almost understand how tax redistributes. I do not get the link between tax and protecting public services which could just be funded by money being spent into existence.
Someone help me by pointing out where my logic fails. I’d be grateful.
If we don’t control inflation then demands for austerity from a political opposition will rapidly destroy public servcies.
Never forget politics.
This is political economy, after all.
Part one of two…
I agree with Richard that Meadway puts far too much emphasis on the power of bond markets.
And Meadway readily appeased Zack by agreeing with him on the need for a Wealth Tax without discussing the other taxes on the income from wealth – with an estimated annual yield of £48 billion that are commitments in the Green Party Manifesto 2024 and would likely yield an income far sooner that a Wealth Tax.
Zack Polanski is far too nice to Meadway in this interview, but his lack of forensic questioning may be excused as he is not an economist and has no background in the subject.
But that emphasises the urgency of the Green Party settling its currently unsettled economic policy so that it can firmly support the progressive alternative narrative to the failed neoliberalism that all the other mainstream parties espouse. And it emphasises the need for the Green party to switch from a merely canvassing party to an explicitly campaigning party whose objective is to persuade electors in authentic engagement with them to vote Green, for which purpose activists must understand the alternative narrative and articulate it and understand also the key practical progressive policies that underpin the narrative.
Zack asked should we borrow to invest to tackle climate change?
Meadway then answered Yes but couched his answer exclusively in terms of borrowing at interest from commercial banks. But that is completely misleading and Zack did not question it.
The truth is that ALL government spending, including for investment, is financed by borrowing free of interest from the Bank of England. That borrowing is redeemed by tax receipts and by borrowing from commercial banks at interest, but this redemption does not need to fully cover the BoE’s loans, although at present there is a law that requires that it should.
And why would a rational government borrow at interest from commercial banks when it can borrow interest free from its own bank?
Despite Meadway’s suggestion that countries default, there is no risk of the UK government defaulting on foreign debt. But the UK has a chronic trade deficit and if there were excessive inflation that might worsen, resulting in a weakened £ sterling. Then foreign debt holders would indeed want higher interest rates on NEW bond issues to commercial UK banks to compensate for interest rate payments in devalued £s.
To be continued…
Part Two of Two
There is no need for the bond tail to wag the UK economic dog in the way Meadway suggests.
Yes, the government does not need to subsidise the commercial banks by paying interest on their reserves, although the way it does this per Meadway seemed rather suspect to me. Bar a minimum such payment, it should cease doing so at once.
Moreover, Meadway does not mention – and perhaps Zack does not really appreciate – that the base interest rate is set by the Bank of England and it has some discretion over the precise rate. Arguably it is far too high at present, justified in BoE thinking by the need to restrain inflation, even though interest rates are themselves a significant factor in inflation.
A reduction in base rate would imply lower rates of interest on new debt (gilts) issues and therefore lower interest rate payments and more affordable debt.
In L Randall Wray’s book Modern Monetary Theory he writes (page 139) “If a country wants to be able to use domestic policy to achieve full employment (through, for example, interest rate policy and by running budget deficits), and if this results in a current account deficit [i.e. a balance of trade deficit] then it must either control capital flows or drop its exchange rate peg.
Floating the exchange rate thus gives more domestic policy space. Capital controls offer an alternative method of protecting an exchange rate while pursuing domestic policy independence.”
This is well said, but capital controls can be regarded as complementary to a floating exchange rate rather than a strict alternative to it – the two are not mutually exclusive.
But none of this discretionary scope, including the possibility of capital controls, for the UK government is allowed in Meadway’s presentation to Zack. Its absence presents a thoroughly misleading picture, and I trust that it will be corrected by the Green Party’s Economy Policy Working Group, of which both James Meadway and I are members.
Thanks
Well Ian when will we know whether the Economy Working Policy Group has voted for the people “owning the production of money” for state spending as opposed to the opposite Neoliberal “fiscal defeatism” and state spending money only grows on the rich ?
Listening to Meadway (has he learned circular breathing to present his spiel?) it becomes so abundantly clear to me that he has a very bad case of “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”.
If only the “middle class”, that works for a wage/salary provided by private capital or government, accepted that they are all members of the working class and have so much more in common with those who they see as “them down there” than they have with the ruling classes. Makes me think of the story of the late Edmund Penning-Rowsell when asked “Did you not think that connoisseurship was incompatible with communism?” and Eddie answered “I didn’t think that the Tories should have all the best wine?”
Remind me, who does Meadway work for?
Hard to know.
Meadway is a neoliberal so he thinks only for himself and to grab as much money as possible.
Excellent blog post. I firmly believe that most members of the Green Party Economy Policy Working Group would agree with this. In fact, our new Economy Chapter demonstrates as much. But it can only become policy if conference votes for it in Autumn 2026. In the meantime, it would be good to broaden understanding of what is at stake.
Might you share this with that group, Nadine?
Thank you if you do.
Yes – already done so. I assure you that the vast majority of the group are aligned with this.
Thanks
If this is the resolution statement the Economy Policy Working Group will be forwarding to conference:-
“The responsibility for price stability and ensuring adequate money supply would be
transferred from Bank of England back to the government.”
Then in the case of the former and the latter these powers, working in tandem with the BoE, are already there! In the case of the latter successive Neoliberal governments have chosen not to use it using a cock-and-bull story that government has no money creating powers.
The Economy Policy Working Group has therefore failed to hit the nail on the head. It should have said something to the effect the Green Party if elected to power will use the government’s existing powers to create money to fight climate change and optimise the economy taking care to ensure there are always adequate resources available to avoid triggering inflation.
Agreed
Fine to share all the details with the Economic policy WG; and to fend off any watering down or muddying of the waters with neoliberal errors; but as said by Nadine and others, it has to be voted into party policy (and thence manifesto statements aligned thereto) by the members, in conference.
So there’s 9 months for appropriate ‘education’.
A bit of a Gramscian situation? Needs some good messaging….
🙂
@schofield
We do exactly that. I’m not going to share the whole document in this public space. I was simply answering a very specific question asked of me.
The whole chapter already exists but is being refined. We will take it to the October 2026 conference and hopefully conference will vote it through. It will then replace in its entirety the current Economy policy chapter.
AI Snapshot
As of late 2025, the Green Party of England and Wales is at the centre of an ideological clash over its future economic platform, primarily between proponents of Modern Monetary Theory (MMT) & critics like economist James Meadway.
The MMT Proponents
The party’s Economy Policy Working Group (PWG), which includes members like Ian Lovegrove & Nadine Storey, is currently rewriting the party’s official “Economy Chapter” through an MMT lens.
This approach argues that for a sovereign currency issuer like the UK, spending is limited only by real resources and inflation, not by a lack of money.
Influential advisor Richard Murphy has been consulted on this new policy draft.
Murphy is a staunch advocate for MMT, arguing it provides the only viable framework for funding a massive green transition without being constrained by artificial “household” budget myths.
James Meadway’s “Visceral Hatred”
In stark contrast, James Meadway—a former advisor to John McDonnell & a recent addition to the Green Party sphere—is a fierce opponent of MMT.
“Intellectual Toxic Sludge”: Meadway has famously dismissed MMT as “intellectual toxic sludge,” arguing it offers simplistic monetary solutions to complex political and power-based problems.
Criticisms: He contends that MMT is a “retrograde step” and a “degenerating research program” that ignores supply-side inflation and lacks a genuine theory of class or power.
Market Constraints: Meadway maintains that the UK must still consider the power of bond markets and international currency vulnerabilities, rather than assuming it can simply “print” its way out of social issues.
Think Tank Conflict: In December 2025, Meadway helped launch Verdant, a new Green-aligned think tank intended to provide “radical but sensible” mainstream alternatives.
MMT advocates within the party have labelled him a “Monetarist masquerading as a Marxist” and view his influence as an attempt to block the party’s adoption of MMT.
Current Standing
The Green Party remains “on a knife edge” between these two factions.
While the PWG continues to refine its MMT-based chapter with Murphy’s input, Meadway and other “class warriors” like Grace Blakeley are pushing the party toward more conventional, market-aware left-wing economics.
The final decision will likely rest with the party membership at a national conference, expected in 2026.
*
It’s an interesting concept for Marxists to criticise and eschew the public ownership and control of “money” in favour of control by public capital.
Feels more like class betrayal then class warfare.
And re “market aware” economics, does anyone believe that MTM proponents are NOT “markets aware”?
🙂
Thanks for this encouraging information, good to know Richard is helping rewrite the previous Green Party economic policy ‘through an MMT lens’ Have you joined the party Richard?
I don’t do party politics.
My job is to think about political economy.
@ Colin McCulloch
You’re right. For the Economic policy WG “to fend off any watering down or muddying of the waters with neoliberal errors” in their resolution statement to conference they need to take advice and who better than Richard Murphy who knows how the monetary system works back-to-front and inside-out !!!
Thanks
Since Zack got elected as leader (with two like minded deputies) Green Party membership has more than doubled and the opinion poll ratings have similarly improved significantly, so I don’t think he will have a problem taking the party’s economic policy in a more radical direction and keeping the members and voters onside. BUT he needs to ignore siren voices of James Meadway, Grace Blakely (who have recently joined the Green Party) and other MMT sceptics/deniers and frame a policy founded on your wise words Richard. Please join the the Green Party Richard and try to help Zack to steer it in the right (or should I say left) direction
I’m not sure I would describe Rachel Milward and Mothin Ali as like minded. They are presenting as a coherent team, but Rachel is unashamedly an Oxford graduate and middle class Christian and Mothin a working class Muslim.
I would agree they are like-minded in terms of being willing to be bold and radical. However, I don’t get the impression that either Rachel or Mothin has a particular interest in economics. I think they are likely to go along with Zack on this.
Richard,
Please contact Zack Polanski and let him know your objections about James Meadway. Otherwise JM is just going to clip the wings of the Green Party, as he did with Corbyn.
That would be a terrible waste, don’t you think?
We also need to convince the Scottish government in the same way. I don’t get the impression that their leaders believe in fiat money power either
Michael Clews
Michael Clews
I have sent him a copy of my post.
On the banner on the left hand side the following words are inscribed “We believe the people should own the means of production of state money!” on the banner on the right the words are “We believe there is no state money for the people to own it’s all owned by the rich!”
Guess which banner the self-labelled Marxist James Meadway stands under!
I lot to process in this post!
I admit am slightly alarmed by this Meadway chap – sounds like their is a plan to infiltrate and create lots of thought mud.
I haven’t heard this podcast but I did listen to you on this podcast a while back – I assumed that Polanski ‘got it’ from your discussion – recent news – the formation of this think tank – has left me deeply uneasy about the way things are heading…
I feel like we’ve been here before. 2015/16 you were set to become John McDonnell’s advisor but he (or those close to him?) felt you were too radical – they wanted to be more left wing within the current economic framework and you wanted to change it – so you turned them down and James Meadway was brought in. Ten years later history is repeating itself and the next left-wing leader making waves is faced with a choice of following Meadway or you – be more left-wing within the system or change it. Who knows how things would have turned out if Corbyn/McDonnell had stuck with what you were offering. I trust Polanski to make the right choice in this.
Richard, would you be willing to debate Meadway with Polanski as moderator? As good as all of your work that you do criticising neoliberal ideology is, there’s something extra that comes from you debating people like Mark Littlewood – there’s an added strength that is given to what you are saying from it being challenged in that way by an opposing view. It helps to show voters and Green party members that what you are saying is robust enough to be enacted in the real world and stand up to any challenges that might come.
I feel like a lot of good would come from the debate being out in the open between being more left wing within the system and changing it, and I believe the other two would agree to it if you would.
I would do it.
Why would Polanski waste time with Richard Murphy – no-one cares what he things, except a few devout acolytes on this blog!
The probloem with your hypothesis is, he is bothering about what I say.
The aditional problem is that why should anyone bother with you and your multiple trolling personalities?
@ Hannah
You do realise you’re being a waste of space don’t you by not putting forward any arguments? Any prat can sling ad hominems!
You really aren’t very good at trolling, Hannah person.
Your ignorant offensive drivel is obliterated with one glance at the FTF YouTube stats – is that what scared you?
You really need to put more effort into your trolling if you want to make a living from it.
Have a lovely Christmas.
@ Edward Clayton
I was thinking of this too but the podcast Zack Polanski did with James Meadway just got filled with a lot of “word salad” or verbiage by Meadway so I’m not sure Zack would keep him on point in answering Richard’s questions. It might be better to start with an off podcast question and answer approach and then do the podcast with Zack telling viewers which questions in the view of the debaters didn’t get properly answered and give each debater a second “on air” crack at answering.
Mmt as a Disraeli dishing the Whigs. Farafe and mmt?
A major shift toward MMT‑style policy is most likely to emerge from crisis, not persuasion. If a “son of 2008” arrives around 2029 — a mix of banking fragility, geopolitical threat, and collapsing public confidence — the traditional fiscal story used by right‑wing governments becomes unusable. You can’t deter an adversary or stabilise a failing financial system with balanced‑budget rhetoric. In that moment, the government needs a new justification for large, rapid, state‑directed spending.
MMT provides exactly that, even if they never call it MMT. Its core claim — that a sovereign currency issuer is constrained by real resources, not by its bank balance — becomes politically useful when defence mobilisation, deposit guarantees, and emergency support must be delivered at scale. A right‑leaning government would rebrand the approach as “Sovereign Defence Finance” or “National Resilience Economics,” framing it as patriotic necessity rather than ideological shift.
Once deployed, the taboo breaks. The public sees that the state can act decisively without “running out of money,” and inflation becomes a question of capacity, not bookkeeping. As with past economic turning points, the crisis becomes the permission structure for a new doctrine — one that quietly aligns with MMT while wearing different colours.
Just a thought.
Richard, can you explain the foreign debt issue. Is this foreigners or other countries owning UK bonds in pound sterling, or is it the UK’s debt in other currencies? What percentage of the debt is this? And how is this issue that both you and James mention solved?
They are all in sterling. Around 30% of gilts.
Members of the Green Party who presumably want a future for their children and grandchildren and understand to an extent the implications of global warming and the slowing AMOC as well as of ecosystem collapse, may baulk at the unavoidable need to radically alter economic activity, with a lot of relative economic losers (institutional and private) as collateral damage and not appreciate that there isn’t really an alternative other than the existential impact of unsurvivable conditions. I don’t know if you have any interaction with Dr Tim Morgan (Surplus Energy Economics) but Prof Keen does. Your combined expertises on the implications of tinkering vs actually preparing for smaller economies driven by costlier and scarcer energy might be valuable for the Greens and all of us. The breakdown of social cohesion is guaranteed if shrinkage is left to the markets and neoliberal chancellors.
I am becoming acquainted with Tim Morgan’s work. There is merit to it.
Readers should find this interesting, given that Jamie Driscoll has just joined the Green Party.
https://www.thecanary.co/uk/analysis/2025/12/18/bond-market/
He takes a swipe at the household analogy and at the bond vigilante trope.
That creaking noise is the Overton window going backwards at last.
Good article
We know each other and seem to appreciate each other’s work
@ RobertJ
Jamie Driscoll should join the Green Party’s Economic Policy Working Group as soon as possible he’ll take down James Meadway several pegs in very short order!
🙂
He would.
I have a lot of time for him.
The Green Party is a party looking to be moral but many in it don’t know how to because they don’t understand the “three M’s”, Markets, Money and Morality. They don’t understand how they intertwine.
In the case of Markets they fail to see that whilst it’s important to have them we still haven’t properly worked out how to prevent the occurrence of abuse stemming from the control of capital by the few.
In the case of Money there’s little recognition we need not just one type of money production but two, one for Communitarian need and one for Libertarian need. The former is necessary to ameliorate the abuses of capital, make provision for areas of well-being where the market can’t make a profit and provide goods and services where monopolistic conditions exist. The latter is needed because the state is simply not able to promote adequate profit competition which drives productive use of resources. There is what the Hungarian economist Janos Kornai called “the soft budget constraint” where a Marxist-Leninist controlled government will constantly bail-out inefficient enterprises. This is a form of abuse because need isn’t being adequately met.
In the case of Morality there’s the failure to recognise there needs to be a properly functioning democracy to control the abuses of both the market and the state. This abuse can be ideological by both the Left and the Right in particular the belief there is only one type of money production by the state “or” by the market when there needs to be two and again good democratic control of both. Failure to understand this results in death and poor health through austerity cuts or even murder, for example, the Tiananmen Square Massacre in China and of course fascist regimes like Hitler’s. With the advent of global warming failure to understand the ability of the state to create money of course undermines the ability of every country to successfully do their part in tackling the problem.
Sorry for the delay: we’ve been finalising Chrsitmas period cripts this morning.
Richard, you say
“markets will not permit:
– Full employment.
– Spending on the level of services we really need.
– The provision of care in all its forms,
– Funding for essential infrastructure investment, including social housing.
– Payment for a green transition.”
My naive reaction to this is “why on earth not?”
Who would not wish for these positive things?
Are markets evil by nature?
Or is it simply a failure to comprehend the realities?
Why?
Dogmatic belief that they are right.
And that they are entitled.
@mark scott.
In reply to your comment….
– Full employment
Sustained full employment shifts bargaining power toward workers. When people can credibly walk away, wages and conditions rise, and management loses leverage (“discipline” via unemployment). That’s good for workers, but it tends to compress profit margins and reduce employer control, so there’s constant pressure—political and institutional—to keep some slack in the labour market.
– Spending on the level of services we really need / care in all its forms
High-quality universal public services are a public option that caps what private providers can charge and reduces demand for private substitutes. If the NHS (or social care) is excellent and universal, the market for private insurance/care shrinks or has to compete on price/quality. So it’s not that nobody wants good services; it’s that some business models depend on scarcity, queues, and risk being shifted onto individuals.
– Essential infrastructure investment, including social housing
A lot of infrastructure is long-term, low-margin, hard to monetise, and full of spillovers (benefits that can’t be captured as profit). Social housing directly competes with landlords and developers by reducing rents and land values and weakening the “pay whatever the market demands” dynamic. Again: socially beneficial, but it threatens certain income streams.
– Payment for a green transition
The green transition creates winners and losers. Fossil assets and the industries built around them risk becoming stranded, and some of the largest existing fortunes are tied to those assets and supply chains. Markets also systematically undervalue long-term, collective benefits and treat pollution costs as “externalities” unless rules force them to pay.
So I’d put it like this: not “markets are evil,” but “markets optimise for private return under existing power structures.” If those structures allow concentrated wealth to shape policy, then “the market” becomes a convenient way of saying: the people who profit from the current arrangement can block or dilute changes that would reduce their returns.
Helpful intervention by Green Party’s latest new member?
https://www.thecanary.co/uk/analysis/2025/12/18/bond-market/
Indeed