Ann Pettifor is a director of Prime Economics, which advocates for a more Keynesian view of macroeconomics, and has been involved in development and environmental economics for many years. In The Production of Money: How to Break the Power of the Bankers (Verso, 2017) she correctly identifies that ‘money enables us to do what we can within our limited natural and human resources’, and so ‘creates economic activity’ rather than being a result of it. It does this by creating the finance needed for productive employment and investment. Bank finance ensures that there is never a ‘shortage of money’ and so we are only limited by humanity’s capacity and the physical ecosystem. Yet when 95% of the money in existence has been created by the commercial banking system, whose aim (quoting Michael Hudson) ‘is not to minimise the cost of roads, electric power, transportation, water or education, but to maximise what can be charged as monopoly rent’, this power must be rigorously regulated. So much should be uncontroversial today and I have written about this here. Continue reading The Production of Money: How to Break the Power of Bankers – by Ann Pettifor
Why do I consider myself to be of the ‘left’ rather than the ‘right’, despite the tendency for each term to be converted to a straw-man for all the pet hates of those attaching to the opposing label? For me, to be of the left designates a prioritisation of co-operation over competition. It is to believe that human satisfaction and happiness depends more on the former than on the latter and it is to believe that co-operation comes logically and practically before competition. Co-operation should therefore be actively promoted. How much competitive superstructure is to be placed on the co-operative base is then entirely up for debate, much of it empirical in nature.
Free exchange of goods, services and labour is the essence of co-operation, and as such genuinely free markets, which being an expression of ‘the propensity [in human nature] to truck, barter, and exchange one thing for another’ (Adam Smith) are completely compatible with maximum co-operation and thus, I would argue, with any viable conception of socialism. The competition that arises from free exchange, to provide better quality goods at lower cost, is on the face of it, also pure social benefit. This can be misleading, however, if reliance is placed on the abstract economic concept of perfect competition – where all market participants are equal in access and power, fully informed, infinitely lived and have perfect foresight. This concept requires isolation of the market from the human, the social and the physical world. To harness markets for benefit therefore requires a huge degree of co-operation in terms of setting up the infrastructure and regulation of market institutions. Continue reading Socialism, Free Markets, Capitalism and Christopher Snowdon
Launched in 2009, and of wider interest since 2013, the ‘cryptocurrency’ Bitcoin has seen both a rise in its value in relation to existing national and supranational currencies, and in the discussion of its forming a partial or even complete replacement to those currencies. This article outlines the nature of Bitcoin and of traditional currencies and how they differ, and so examines the case for Bitcoin’s future acceptance and valuation.
The urtext of Bitcoin – the so called ‘White Paper’ by Satoshi Nakamoto – focuses on the reversibility of traditional electronic money transfers and how this necessitates banks as trusted third-parties in these transactions. The ‘cryptographic proof’ method of transferring bitcoins was devised initially to lock-in successive electronic transactions as part of a ‘blockchain’ of data, so as to eliminate the role of banks in preventing reversibility and double spending. In essence the collaborative use of computing power is used to verify the chronological order of transactions. The security and anonymity aspects of conducting transactions in this way is not the subject of this piece. The transactions thus carried out and recorded could be actually be denominated in any existing currency. Chains of such transactions would need to be closed by the transfer of that currency (physical or electronic) from the initial donor to the final recipient. Continue reading The Fragility of Bitcoin
Thomas Piketty’s “Capital in the 21st Century”, published in 2014, played an important role in directing attention to the issue of inequality in the developed economies of the 21st century. The book was both praised and criticised from many parts of the political and economic spectrum. Least controversial was his laying out of the evidence that inequality of both income and wealth has increased markedly since the 1970s, particularly in the US and the UK. A little more controversial is the suggestion that this increasing inequality is harmful to the societies of those countries. Most controversial, and more technical, was Piketty’s espousal of a ‘fundamental law of capitalism’ that when the return on capital (r) exceeds the rate of economic growth (g) inequality will increase.
The chart below shows the change in the fraction of total income going to the top 10% of the distribution for 1900 – 2010.
What is it about ideological free marketeers and their shaky relationship with the facts? Everyone likes markets and free exchange is one of the best manifestations of human co-operation there is – so why tell lies about their limitations and the infrastructure required to make them work for our benefit?
Sam Bowman of the Adam Smith Institute is keen to adapt the often pejorative label of ‘neoliberalism’ to his cheery brand of paid-for market propaganda, and promotes it under this banner in an article in the online i newspaper. He defines a neoliberal as
someone who thinks that lightly-regulated markets, free trade and free movement are the best way to create wealth and innovation domestically and globally, but that the state does have a role to play in redistributing some of the proceeds to the least well-off. Continue reading If ‘Neoliberalism’ Is So Great, Why Lie About It?
For most of us, it’s a great boon to live in a world in which travel between even distant parts is relatively cheap and takes hours rather than days, weeks or months. We can visit, explore and learn about places and people we never could have done only 40 years ago. More than that, if things are difficult for us at home this gives us the option to try our fortune elsewhere where resources, attitudes and the style of governance may suit us better.
Is there are approaches which are systematically superior to others then it is entirely to be expected that people finding themselves where these are sub-optimal will, if they are courageous and determined enough, seek to move to those where things are better. In Western Europe and North America we regard ourselves as fortunate in having considerable freedom to say, do and trade what we wish. We think of these as rights to which most global citizens aspire. If we are right about this we must expect the arrival of people from abroad at our ports and airports who would like to live and work in our countries. Continue reading Bad Targets for Policy 2: Immigration
This is the first blog in a two-part series on ‘Bad Targets for Policy’. The second in the series will be on immigration.
We’ve seen a lot of focus on the ‘costing’ of policies in the parties’ manifestos for the forthcoming UK election. But we must remember that money is only a means of keeping account. Accounts are important but they are not reality. An account of debt is important, but it is not a physical reality. When a government has a debt in its own currency which only it (or its institutions) can issue, its obligations are important but not physically binding. They are not even legally binding, since the debt can be devalued virtually to zero by inflation. It follows that the real implications of government debt are not simply consequences of current government spending and taxation and the gap between them. Indeed these may be among the least important causes.
The real consequences of government debt result from the physical burden implied by the future obligation to transfer some control over a portion of real goods and services from the state to holders of the issued debt, either as interest or in repayment of capital. That debt in the nominal quantity of the national currency (the total amount in pounds or dollars say) is only a starting point. Inflation changes the relationship between that number and the obligation in real goods and services; the changing size of the national economy alters the ability to fulfill a fixed obligation. Continue reading Bad Targets for Policy 1: Government Debt
Having recently had the opportunity to visit China and combine that with some reading about the country, I’ve come away with some inevitably fairly superficial thoughts about how the Chinese and the West do things differently. While the Chinese government sets limits on voiced or organised challenges to the Communist Party’s control of the country, it seems that most Chinese are able to pretty much get on with their lives as they wish. Having visited the great open spaces at the centre of London, Paris, New York, Berlin and Madrid, it felt disturbing to be shooed off Tiananmen Square at dusk, but otherwise despite the presence of police and soldiers at nearly every turn in central Beijing, I felt able to move around and take photographs pretty much as elsewhere.
I suspect the vast politically apathetic majority of Westerners would feel no restriction of their freedom under the Chinese regime. If the rise of Donald Trump and apparently popular strongmen such as Russia’s Vladimir Putin and Turkey’s Recep Tayyip Erdo?an, along with Brexit, show that the ability to vote is not enough to sustain government by reason then Mao Zedong’s Great Leap Forward and Cultural Revolution show that the lack of a democratic buffer leads to the deaths of millions.
I attended a fascinating meeting last weekend arranged by the East Midlands ‘Blue Labour’* group on the theme of ‘How Do We Champion the Cause of the Working Class?’ There was a panel of academics, journalists and local Labour politicians. I am interested in Blue Labour’s approach because they are the only group within Labour that seems to have a coherent view of how to remodel the economy away from the dominance of financialised capitalism without returning to widespread nationalisation. The essence of this view is that goods and service provision should be based less on anonymous (usually monetary) transactions and more on the basis of relationships. This implies an expansion of co-operative, mutual and stakeholder businesses, and more regional and community input into local, social and health services. I have myself written about why this is important. Continue reading Blue Labour, Relationships and Free Movement
Just how much cash does the NHS and social care need to prevent the distressing stories of patients languishing on trolleys for hours in A&E departments? Can we possibly afford what it needs, or is it really a ‘bottomless pit’ as often claimed? Do we need to lower our expectations of what can be provided for us? Or does the whole funding system of the NHS need to be overhauled, with charges and/or insurance-style payments? Sadly, we are frequently being directed by politicians’ state-shrinking agendas and commentators’ ignorance towards the wrong numbers and the wrong reading of those numbers, with the result that the wrong answers are given to these questions. The truth is that if we look at things correctly, there is no reason why we cannot have an excellent healthcare system in Britain without any great sacrifice in our enjoyment of the other goods and services that the modern economy has to offer. Continue reading Explaining the NHS Crisis: Lies, Damn Lies and Health Spending