Labour MP Clive Lewis took to social media and made the Economist look like a tabloid. The paper’s apparently essential question in a recent article was:
How long can governments live beyond their means?
“Economic claptrap”
But Lewis dismantled the question itself with knowledge of Modern Monetary Theory (MMT):
A govt that issues its own currency can’t “live beyond its means”. It creates the means. The real limits are our resources, not the Treasury’s spreadsheet.
Instead, Lewis explained that government budgets simply do not run in a similar fashion to household budgets:
This old household analogy, that the state must “tighten its belt like the rest of us”, is economic claptrap dressed up as moral virtue. The last time Britain ran “tight budgets” for a century, as the Economist approvingly recalls, we had no democracy, no welfare state and no safety net.
People demanding food, rights or dignity were met with the sword at Peterloo or shipped to Australia like the Tolpuddle Martyrs. Today’s version is quieter but just as cruel: austerity that guts services, freezes wages and rewards the same corporations and creditors who profit from public contracts, public guarantees, and public infrastructure.
It’s also quite something that the Economist quoted John Maynard Keynes in its article. The renowned macroeconomist would have disagreed with the entire thrust of their argument. In a 1942 BBC address, Keynes made a point highly relevant for today:
Anything we can actually do, we can afford.
By “we” he means the public government and by “do” he means both the country’s resources and its available workforce.
So the Economist saying we must ‘balance the books’, as if the government is the same as a household on very limited finances, is propaganda. The government oversees the flow of the whole economy, not just one individual within it.
The government operates a flat currency – one that is not backed by gold but simply exists because the government creates or sanctions its creation. So again, as Lewis pointed out, the limits on government spending are to do with the country’s limits in resources, manpower and expertise.
So it’s like Keynes said: ‘we can afford what we can do’ – not ‘we can do what we can afford’.
The austerity fallacy
The Economist also writes that a government reduce debt through “tightening its belt”. But the facts show this is complete nonsense. According to figures from the Office of National Statistics (ONS), the Conservatives created more debt through their austerity programme from 2010-2016 than every Labour government in history combined. The Tories (propped up by the Lib Dems) took money from welfare and public services and it only increased the public debt.
On top of that, it was Labour prime minister Clement Attlee’s nationalisation of 20% of the economy that turned the state deficit into a surplus, after inheriting high debts after World War II. That’s because when the government holds key utilities as assets it can not only drive down prices for every individual and business, but use them to increase government income and as securities.
Indeed, Lewis finished by saying:
When they say “we’ve lived beyond our means”, what they really mean is you have – and they intend to make sure you pay for it.
The truth is, our economy doesn’t suffer from overspending, it suffers from under-investment in people and planet, & a political class still too scared to use the power of the state for the common good. It’s a forlorn hope- but this budget the chancellor should balance the economy, not just the books.
Featured image via the Canary
By James Wright
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