The average citizen’s idea of what makes for his or her well-being probably includes a roof, safety, health and economic security. But how should governments steer their policy to achieve that end?
By Bill Mitchell, Randall Wray and Martin Watts
Cross-posted from GIMMS
This week the GIMMS team invites its readers to think about what makes a healthy economy and society and how it can best be delivered? The answer to the first question is not a simple one, it is multi-layered and largely dependent on which side of the political divide you might be. The answer to the second tends to focus these days on its affordability in monetary terms whichever side of the political divide you are even though as we shall see later this is an incorrect assumption.
To bring some clarity to the first, in 1948 the United Nations set out its Universal Declaration of Human Rights. This is a comprehensive document which deserves to be read in full but for the purpose of this blog two of its articles stand out.
“Everyone has the right to a standard of living adequate for the health and well-being of themselves and of their family including food, clothing, housing and medical care and necessary social services and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond their control.
Everyone has a right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment”
If you picked a group of people representing world nationalities, gave them pen and paper and asked them to write down what they value in terms of their well-being, although many other worthy things are likely to figure in their list there might well be a combination of those basic human needs mentioned above. We all value having a roof over our heads, feeling safe and our health and economic security. Early ‘man’sought shelter, warmth, a full belly and safety from wild animals. Present day, those same instincts stand whether we live in Africa, India or the UK but the manner and degree to which they are catered for by elected governments will vary depending on many things such geography, political and religious conditions and resource availability. It’s not all plain sailing.
In present day UK terms such aspirations provide a useful measure for evaluating how well government is delivering what can be called public purpose even though these days financial concerns trump that of well-being. Whether it’s raising living standards, safeguarding the overall security of citizens however that is defined or investment in environmental sustainability government has an important role to play in ensuring adequate levels of deficit spending to guarantee efficient use of all resources in a fair and equitable manner. These, as we see daily, are not always delivered evenly or fairly but there is no reason why they shouldn’t be. The creation of well-being is a collective activity, linked to the democratic will that an elected government delivers what we believe to be public purpose however we define that moving target. These days, however, it is less about democratic will and more about corporate power.
Although not confined to the UK the foundations for the better society demanded by citizens were laid by post war governments which built social housing, set up the NHS and social security system, provided education for its young people, ensured public service provision through national and local government and made a policy choice to deliver full employment. Having fought a war for their country, citizens demanded that government deliver through its policy choices both economic and social well-being. People didn’t ask where the money was coming from to pay for it any more than they had when fighting the war, and as became evident when they saw their living standards rise and they could take advantage of free healthcare and education it became clear that such improvements were dependent on the government’s policy choices rather than monetary affordability. Over time not only did that generation gain from the government spending but future generations also became the beneficiaries of that long-term public investment.
While the public and politicians of all parties have been ensnared by faulty economic thinking for decades seventy years on those same policy choices haven’t gone away. They still exist. A progressive government could choose to promote a more balanced society allowing the economy to develop around public purpose goals to once again include real full employment as a policy target linked to a Job Guarantee, the provision of quality public services, healthcare, education and a social security system designed to support citizens. These things do not exist in isolation of a healthy economy they are intrinsic to it. Fundamental to this understanding is that a sovereign currency issuing government like the UK’s does not resemble our own household budgets in the slightest; that government actually has to spend before anyone can pay tax, thus exploding the myth that governments needs it to spend; and that fiscal deficits, which so often are represented as financially disabling and damaging to the economy, are the mechanism by which public purpose can be delivered to serve the economic and social interests of citizens. In this case, it becomes clear that when, for example, the banks were bailed out it was done without imposing any hardship on the population in terms of extra taxes to pay for it. And yet vulnerable citizens paid the price for the austerity deception.
So, what has gone so terribly wrong? The news this week is yet again dismal and distressing. Why has the UN had to investigate the rising poverty and inequality in a country which is rich in real resources? Philip Alston, the UN rapporteur whose final report was published this week, has said that ministers are ‘in denial of about the impact of austerity’. He described it as a ‘social calamity’ and an ‘economic disaster’. Worse, he likened Tory welfare policies to the creation of 19th century workhouses.
Also this week, Human Rights Watch published a damning report reflecting the UN’s initial findings in November in which it accused the government of pursuing ‘cruel and harmful policies’ with scant regard for the impact on the growing numbers of children living in poverty. While the government trumpets its ideologically driven programmes to get people back into work as the best means of getting out of poverty, we see children going hungry across the country and not just in areas where poverty is endemic. Teachers at the sharp end see, daily, the consequences of government policies in their own schools and are opening food and clothing banks to fill the gaps. Notably even one in Oxford. This does not reflect a government which can be in any be said to fulfilling public purpose. The exact opposite is happening. Austerity has not delivered the promised growth. It has stunted it.
As covered previously by GIMMS, at local government level England is facing a mounting crisis in social care as funding cuts go deeper, the effects of which are becoming ever clearer to families up and down the country who are having to fill the gaps which social provision cannot fill. A report published this week has predicted that more English councils will face bankruptcy unless the government fills the funding black hole in local authority budgets which has arisen as a result of government public spending cuts. When a Conservative dominated County Councils network organisation says that council finances will be ‘plunged into disarray’ and services will have to be cut to legal minimum levels we should sit up and listen. Councils of all political stripes across England are now facing difficult decisions about which services to cut and which services they can continue to provide. This has come and will continue to come at huge cost to local people who depend on them. Paul Carter, the Conservative leader of Kent Council said vital council services are likely to disappear if the government fails to respond and emphasised that even the proposed “draconian” cuts won’t be enough even for many well-run councils to balance their books.
Quite starkly, government’s obsession with book balancing and delivering its political agenda is the cause of a stumbling economy and the decaying social fabric however much their ministers want to claim the opposite. To add insult to injury the IPPR’s suggestion this week that personal care for our elders should be funded by a 2p tax rise is symptomatic of the public misunderstandings of monetary realities, as described earlier, which is continuously reinforced at institutional and governmental levels. As pointed out where the government is the currency issuer tax is not needed to fund personal care costs or improvements to the social care system. As GIMMS has observed many times cuts to vital public services are purely a government choice. Also, at a time of economic decline taking money out of the economy through increased taxation would further damage it.
Such ill-advised demands also ignore the glaring fact that if government has failed to invest in the provision of trained staff and facilities, in the short term any extra money will be to no avail and may even create an inflationary spiral. There are no short cuts to service provision. It requires the government to invest sufficiently in the long-term prosperity of the country through adequate and effective public spending on public goods from physical resources to people. The government provision of public services is not constrained by monetary affordability it is limited only by available resources. Government’s job is to balance the economy and create social and economic value through its policy decisions.
It is infinitely regrettable that Philip Alston and others shining a light on the effects of austerity on the UK and elsewhere still peddle the myth that public debt was too high and needed to be lowered. The belief that government had used its spare money to bail out the banks and thus was obliged to make savings elsewhere is still the accepted line by many speaking out for those most affected by government cuts to spending. The image that we were all in it together paying down our debts served its purpose and allowed the government to pursue its neoliberal agenda at a terrible cost to our public services and our most vulnerable citizens. If the austerity line continues to be peddled in the event of another huge financial crash what will remain of our public service sector and social security system not to mention the economy?
But it doesn’t have to be like this. There is an alternative. Our earlier short walk into history has shown what was possible in the post war years. With a debt to GDP ratio of 248%, we didn’t go bankrupt then any more than we can now. The current economic paradigm stands between us and a real progressive agenda informed by an understanding of monetary reality. Even with such there are no magic bullets as the challenges we face are complex and the solutions difficult. But we owe it to ourselves and to our children’s children to exploit every opportunity to make a better world where people are valued for their real contributions to the collective good of our nations and where value is determined less in monetary terms and more in the social benefits created by government spending.
One can perhaps ‘forgive’ those on the right for picking quarrels as any challenge to a paradigm which has served a few privileged, wealthy people is likely to come in for criticism but not those on the progressive left who are seeking to discredit those promoting modern monetary realities. We should be questioning their motives for doing so. As should they. Increasing poverty, inequality and environmental degradation will be the price we pay for adhering to a false and failed economic paradigm and failing to at least engage with monetary realities will leave us all losers.