public services
Humanity sits at a crossroads as politicians re-sell the politics of public austerity
‘Growth is one of the stupidest purposes ever invented by any culture.
We’ve got to have an ‘enough’.
Always ask growth of what, and why, and for whom, and who pays the cost, and how long can it last, and what’s the cost to the planet, and how much is enough.
Donella Meadows – Environmental scientist, educator and writer.
The city of Derna, Libya, hit by cyclone Daniel. Image taken 21/9/23 by Dipartimento della Protezione Civile/Flickr. Creative Commons 2.0 license
We are living in troubling times. Whilst Western vassal leaders pursue endless wars at the behest of the hegemon, cheer on death, destruction and facilitate injustice under the illusory banner of freedom and democracy, the existential threat of climate change and its consequences for humanity has been put on the back boiler, shuffled off the list of priorities. As vast resources are poured into a profitable war machine with seemingly no end of monetary resources available, humanity sits at a crossroads as snake oil politicians re-sell the politics of public austerity dressed up as pain today for future gain.
As Antonio Guterres noted in a speech at the UN last month, referring to Derna in Libya where thousands lost their lives in unprecedented flooding:
‘Derna is a sad snapshot of the state of our world – the flood of inequity, of injustice, of inability to confront the challenges in our midst.[…]
“Our world is becoming unhinged.
Geopolitical tensions are rising.
Global challenges are mounting.
And we seem incapable of coming together to respond.”
After decades of COP conferences, it is clear that commitment to action has been little more than hot air and promises which go nowhere, by politicians driven by short-term political objectives and winning the next election, not forgetting the corporate influence which coerces political decision-making. The pandemic and the war in Ukraine have changed the world in ways that are difficult to comprehend for many, and yet the political response is to forge ahead with further destruction.
As we have seen in recent weeks during the Conservative conference, and to the consternation of many environmental campaigning organisations and some in his own party, Prime Minister Rishi Sunak has delayed or abandoned critical measures to reduce emissions and approved licences for more oil and gas development.
Whilst we should have our doubts about the concept of net zero as a mechanism to cut emissions, we are without doubt currently travelling in the wrong direction, as three climate scientists discuss in an article in The Conversation:
“The time has come to voice our fears and be honest with wider society. Current net zero policies will not keep warming to within 1.5°C because they were never intended to. They were, and still are, driven by a need to protect business as usual, not the climate. If we want to keep people safe, then large and sustained cuts to carbon emissions need to happen now. That is the very simple acid test that must be applied to all climate policies. The time for wishful thinking is over.
The only way to keep humanity safe is the immediate and sustained radical cuts to greenhouse gas emissions in a socially just way.”
This will mean a global rebalancing of access to real resources, and support for the Global South to address the Western-imposed climate injustices, exploitation, poverty and inequity which has its roots in colonialism. We urgently need to sweep away the economic model which puts growth and profit over people’s lives and planetary well-being, and then greenwashes its way to more of the same and is a toxic mix of short-termism and greed which pervades government and the corporate estate.
While politicians focus on domestic issues, important as they are, we can no longer ignore the wider planetary context of our existence and the interdependent nature of the world in which we live.
The UK may be an island (still holding on to pretensions of colonial power and influence), but it is not unaffected by the geopolitical twists and turns that are currently determining a shift in the balance of power as countries in the Global South begin to reject the western economic model of exploitation, and theft of their resources.
A model which has been promoted by a US-led IMF and World Bank predicated on the lie of household budget economics, unfair trade rules and corporate domination which has overseen more exploitation as a result of its actions and the growth of poverty and inequality to prop up what has become a monstrous economic model. Indeed, what we are seeing is a Western world in turmoil at those power shifts, doing its best to hold on to the status quo, so favourable to itself.
Equally, none of us, as we are beginning to realise, are unaffected by a changing climate which will increasingly impact water resources and global food production which will most certainly affect everyone without some strategic, targeted planning, as an unstable climate becomes the norm across the planet.
Factor into this that it is the people who are causing the least emissions that suffer the most, as more extreme weather conditions, being exacerbated by the current El Nino weather system, have produced unprecedented droughts and floods.
While the West largely refuses to accept its culpability and is unwilling to offer reparations, the Global South is, without doubt, waking up to the possibility of an alternative even at this late stage. What is needed, as the economist Fadhel Kaboub suggests, is a new financial architecture – for the Global South to ‘design a coherent comprehensive vision for south-south cooperation, complete with trade, finance, and investment policies on its own terms, then welcome cooperation and partnership from the global north on fair, equitable, and transparent terms, under a new model of multilateral cooperation.’
Even as a new world order is emerging, with all the uncertainties that occur in times of change, we have politicians in the UK and elsewhere still behaving like the colonialists of old, still able to dictate the rules of engagement.
Worse, they are still stuck with their heads in the sand, bleating about whether action on climate change or to address global inequity is currently affordable. Indeed, cuts to foreign aid announced in 2020 have been attributed to the government’s aim to cut public expenditure.
Even an article published in the Guardian in August quoting Katy Chakrabortty from Oxfam repeated the nonsense suggesting that “The UK government has tried to give what it could, but it has no emergency reserves to dip into.”
Oxfam, like so many other charities, mitigating a rotten economic model rather than challenging it, fails at the first hurdle by implying that the government has no money of its own and must pull in its horns and get the public finances in order.
At the same time, both parties are fixated on future growth as the mechanism to manage public finances and create future funding for public services. A morally indefensible use of a lie to justify cuts at home and abroad. On that narrative, we are certainly done for.
Whether it’s the yearly ‘we’ve run out of money’ joke surrounding the US debt ceiling, or an EU which, when it chooses, imposes rules on deficit and debt (unless there is a pandemic or a war), or indeed the UK where Mrs Thatcher is still alive and well, dictating to the left and right her mantra ‘There is no such thing as public money; there is only taxpayers’ money’, orthodoxy rules. If it weren’t so serious, it would be laughable.
Fiscal discipline is the guiding force for decision-making, wherever you look. Certainly, over the last few months which culminated in the latest conference season of the usual hot air, lies and propaganda on all sides, that narrative has been predominant, with institutions and the media doing their usual good job at keeping the public in the dark. The willing participation in a lie about how the government spends to deceive an ignorant public.
This is a common thread which pervades economic policy and has done so for decades, pursued by successive governments both Labour and Tory.
In a speech in 2012, Rachel Reeves said ‘Sound public finances will always be the indispensable platform for delivering better jobs, better services, and a strong, growing economy.
What I want to demonstrate this morning is that being trusted with the nation’s finances and building a stronger, fairer, Britain are imperatives that are not only compatible they are inseparable’.
Then last month in a recent article in the FT she wrote: ‘During my time as an economist at the Bank of England, I learnt a very simple lesson: your sums must always add up.’ Ergo she ‘will never spend what we cannot afford.’
Reeves still backing the austerity horse as if there were a scarcity of money, and as if the government’s role is to manage the finances and balance the books, rather than to provide stability through its spending and taxation policies throughout the economic cycle, or when disasters strike, to ensure that the public infrastructure meets the needs of all, and that there is a fair and equitable distribution of real resources. These are the starting blocks for a functioning economy.
Then, predictably, with the same message in her speech in Liverpool last week, whilst committing to ‘rebuild Britain,’ she vowed to deploy ‘iron clad fiscal rules’, stupidly comparing the state finances to her own mum’s, sitting at the kitchen table doing her accounts.
So, Labour’s big plan is to rebuild Britain but impose fiscal discipline at the same time, two clearly mutually exclusive propositions. As Professor Mitchell put it in a recent blog aptly entitled ‘British Shadow Chancellor promising the impossible:’
“The general problem with fiscal rules, […] is the government of the day does not have the capacity to directly control all variables that come together to determine the final fiscal outcome.
The point is that essentially non-government, spending and saving decisions, determine economic activity in tandem with government spending and tax decisions; and tax revenue and welfare spending are functions of that economic activity.
So, if the non-government sector reduces its overall spending, then other things being equal, economic activity falls and tax revenue declines, and as unemployment rises, welfare spending also increases.”
So much for fiscal rules and common sense.
A functioning economy needs good public services and a well-educated workforce to service it and a decade of austerity has left the sector in a state of decay. Capital investment in such things as schools and hospitals is all very well and good, but such infrastructure also requires nurses, doctors, teachers and other public sector workers to run them. Reeves’ big idea to borrow for capital investment and cover day-to-day spending through tax receipts is just more of the same old nonsense couched in household budget economics and ignores the fundamentals. That government is the currency issuer and spends the money into existence first and from that everything else flows. Rebuilding Britain starts there.
In a nutshell, with Labour at the helm spending is to be predicated on the holy grail of future growth to raise the taxes to pay for public services. Can we wait that long? How many will die in the wait?
And so much for rebuilding Britain, as if the future can be predicted with certainty. A former Bank of England economist clearly too clever by half and a plan with a potential dead end. On the basis of previous and current experience, from financial crashes to pandemics and wars, the future has proved itself to be less than certain, indeed unknowable.
In the meantime, whilst we wait, the waters in every sense will continue to rise. Indeed, the reality is that without adequate spending and appropriate legislation now to address a decaying public infrastructure, deliver a green transition and protect people from the worst excesses of a world ruled by corporate diktat, the future will be very bleak.
The Tories, also on the same old track at their Conference, ‘sound money or run out of money under Labour’, will, apparently, ‘always protect public services’ (yes Jeremy Hunt actually said that), but they are ‘always honest about the taxes that pay for them.’ Just those few words are instructive about their intentions.
This of course is nothing new. We can trace this neoliberal narrative way back to the 70s and Callaghan’s Labour government. However, George Osborne with his Thatcherite credentials gave us an austerity package that cut spending on public infrastructure and services, cut welfare spending, imposing sanctions and other destructive mechanisms wrecking people’s lives, whilst at the same time creating a fractured and divided society. The pandemic brought home to the nation the terrible consequences of those cuts to spending and we are still paying the price.
Putting it politely, the nation is being stuffed by politicians fixated on fiscal discipline to serve their own political objectives or prove they are fiscally responsible. Instead of using the power of the public purse to rebuild a fairer Britain, oversee a more equitable distribution of real resources and a green transition through targeted spending, taxation and legislative policies, what we have, as Matt Kennard describes in his book ‘Silent Coup’, is the unstoppable rise of global corporate power, with the full compliance of government. With both Labour and Tory promising yet more partnerships with big business in one way or another, the die is being cast.
In a saner world, where democracy counted and where the government put the interests of its citizens and the planet first, before those of its corporate mates, we could do so much better. The heart of change lies in understanding the power of the pound. And yet we seem incapable of even engaging with monetary reality, not even to ensure a future for our children.
Every day the evidence piles up about what happens when governments use the lie of scarcity of money to excuse their cuts to spending or to delay action. From a collapsing NHS and social care system, schools and other public buildings that are falling down due to faulty construction and lack of adequate maintenance, local authorities facing bankruptcy and all that means for local service provision, food banks, rising homelessness, the list goes on. And still the lies just keep spewing from their mouths.
Political manoeuvring to discredit the party in power or the party in waiting, while Rome burns, is the name of the game. Not only is it shameless and shameful, it is a political choice unconnected to the state of the public finances. That surely should be the wake-up call for all.
When all is said and done, the tax and spend model is destroying the infrastructure that sustains a functioning economy and is, to be frank, killing people. And yet politicians are doubling down on that narrative as if there were no alternative.
An understanding of the power of the pound, the role of government as currency issuer, imposer of taxes and legislator is the starting place. But, at heart, it is the political decisions that derive from that monetary framework that really count. Is it so hard to understand that the real constraints to spending are not financial but real resources, followed by the decisions about how and to whom they are distributed to create equity and address the key challenges we face? On current experience, we have seen exactly how that system works for the richest and most powerful.
Regrettably, it is clear how the political establishment views citizens. Outside of their inclusive rhetoric at election or Conference time, we are just expendable pieces on a chess board, pawns in the great neoliberal game of securing power and wealth for the few.
Here’s what we could do with an informed public, a functioning democracy and a political class that served citizens instead of itself and its corporate masters. It starts here. Pass it on.
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Homelessness among Indigenous peoples
I’m writing an open access textbook on homelessness and have just released Chapter 6, which focuses on homelessness experienced by Indigenous peoples—especially in Australia, Canada and New Zealand.
A ‘top 10’ overview of the chapter can be found here: https://nickfalvo.ca/homelessness-among-indigenous-peoples/
Homelessness among Indigenous peoples
I’m writing an open access textbook on homelessness and have just released Chapter 6, which focuses on homelessness experienced by Indigenous peoples—especially in Australia, Canada and New Zealand.
A ‘top 10’ overview of the chapter can be found here: https://nickfalvo.ca/homelessness-among-indigenous-peoples/
Economic delusions cannot save us from the climate crisis and societal decay
“Never forget that the economy is a wholly owned subsidiary of nature”.
Global Boiling – Kate Mackenzie and Tim Sahay
Image: Paul Walker/Flickr. Creative Commons 2.0 License
Many of us have grown up with the story of an arrogant ruler King Cnut, who placed his throne on the banks of the Thames, waiting for the tide to come in. As it did so he held out his hand and demanded that it recede. Predictably, it didn’t. What most of us don’t know, however, is rather than telling of a King’s hubris, it celebrates something quite different. An acknowledgement from Cnut that ‘All the inhabitants of the world should know that the power of kings is vain and trivial’. Whilst Cnut recognises a holy power, we might in these very different times acknowledge that far from humans controlling their environment, as we have the arrogance to imagine, it is instead the power of nature that dictates responses to our behaviour.
This arrogance is displayed daily by our politicians who seem to think they can put off action on climate change, citing economic credibility over scientific facts or putting the profits of the oil and gas producers above those of the health of the planet.
On the one hand, we have Sunak granting permits for more oil and gas drilling (whilst the industry continues to rake in huge profits), on the crazy basis that home-grown is better for the environment, which actually is not the case, as discussed in this Channel 4 Fact Check.
And on the other, Keir Starmer, fixated on household budget economics, reportedly thinks that ‘the hard grind of rebuilding economic credibility must come first, as opposed to Labour spending “vast sums of money”’. ‘Growth, investment and wealth creation will be, he said ‘the only show in town’ if Labour is to build a prosperous country with strong public services for the long term.”
At the same time, Rachel Reeves has postponed Labour’s green plan, and a few weeks ago also rejected the call to ditch the Tory imposed two-child benefit cap because, apparently, the ‘dire public finances’ means there will not be enough money to go around. Not only is the shadow chancellor intent on denying some of the poorest in our society the means to live decent lives, but also putting on hold urgent action on climate change. Here we have yet again, the eternal circus of blame which politicians indulge in (remember Liam Byrne) but which has nothing to do with monetary reality.
This is a neoliberal, monetarist pile of crock at a time of existential climate crisis and societal decay. Both the consequences of a destructive economic system which treats people and the planet as objects to exploit for profit.
We have a party opposition leader (and his shadow chancellor) dedicated not only to further economic decline, decay of public infrastructure and harm to citizens, who clearly thinks he can hold back the tide of ecological overshoot and climate change until the public finances are in good order.
Predictably King Cnut failed to hold back the tide, and now our own politicians seem to think that they can put off action because heaven forbid that we interfere with the profit streams of polluting industries or the god-like market. They talk about the economy as if it were separate from the sphere of people’s existence or the planet’s ability to sustain human activity. And with astonishing arrogance imagine that the great arrow of human progress will provide the solutions in the form of technology that is scarcely off the drawing board, or growing millions of trees (important though that is) and will save the day at some unspecified time in the future. Both questionable propositions and time is not on our side.
It surely is disturbing to be a witness to the fact that the emperor has no clothes and yet the entire political establishment fauns daily over a toxic economic system which has created vast poverty and inequity across the planet and is bringing an end to the world as we know it, to keep the consumption truck running and the profits flowing.
Then, at the same time as the media reports on the scientific evidence for climate change, and as we are witnessing the increasing incidence of damaging weather events from heat domes to drought, fire and floods which affect humans, destroy vital natural habitats and impact on food production, in the next breath is allowing politicians, government institutions, think tanks and its own journalists to reinforce the household budget narratives of how government spends.
We need a frank, public conversation about the future. As an article published in The Conversation makes clear, ‘The only way to keep humanity safe is immediate and sustained radical cuts to greenhouse emissions in a socially just way.’ The last part is key, not just from a domestic point of view but also how we address the vast western created inequity that exists in the Global South, and the ecological destruction and pillage of real resources that has occurred to serve Western consumption and reinforce the power politics of empire.
As it also points out, ‘Current net zero policies will not keep warming to within 1.5C because they were never intended to. They were and still are driven by a need to protect business not the climate’. In those few words, today’s reality is confirmed through government’s political priorities. It is time to see through the game and challenge those ideologically driven preferences.
As Jason Hickel, author of ‘The Divide; A Brief Guide to Inequality and its Solutions’ tweeted recently, ‘As climate-related damages hit, remember that this crisis is not due to generic “human activity”. Excess emissions are due overwhelmingly to the core states of the global North, and the ruling classes that control the systems of production, energy and national legislation.’
The time is now to deal with ecological overshoot and climate change in a socially just way. As GIMMS emphasises endlessly, the only way we can do that is to reject an economic system built on growth and endless consumption which benefits fewer and fewer people and destroys life, not to mention being at the heart of exceeding the planet’s ecological boundaries.
While politicians continue to count the pennies as in Labour’s abandonment of its commitment to a timeframe for spending the promised £28bn on a green transition, citing as it does the worsening financial situation, we are closing our eyes to the urgent nature of the challenge.
The question is not how we pay for it. The real challenge is to decide what our priorities are, draw up a strategic plan for achieving them and using the dual supports of legislation and tax policy to free up the real resources it will need to carry out those plans. Money in itself is never the consideration but politicians on both sides want us to believe it is. Truth is that we pay for it by spending the money. The only constraints to spending are real resources and decisions about how and to whom they are distributed.
We pay for it by spending the money - By Alan Hutchison
We need to start altering the discourse and the first candidates for change should be the phrases ‘taxpayers’ money’ and ‘government borrowing’. Taxpayers are not and never have been the source of currency. Similarly, government doesn’t borrow when it issues bonds; instead, it provides a safe place for us to store our savings.
The flat earthers need a lesson in monetary reality, to stop putting people’s lives on the line for a lie. In short, the government is the currency issuer. It spends the money into existence first, then taxes and plays the smoke and mirrors game it calls ‘borrowing’. Up until now, it has been the failsafe mechanism to keep the troops compliant and under control.
Whatever the future holds, it should be about our values which include respect for a life-giving planet and its inhabitants. Instead, and in reality, we have psychopaths in charge, prosecuting endless wars, advocating growth at any cost and, at the same time, proposing austerity (but not for the richest).
What we need now in these uncertain and unstable times is global cooperation, not a myopic focus on keeping the status quo in place for a lie, or to maintain the reins of global power.
Whilst what we face is a global challenge, we also can’t ignore what is happening at home to our own citizens as a result of short-sighted, market-driven solutions and the household budget economics that drives spending and policy.
Two articles in the Guardian in recent months report on the shocking exploitation of foreign care workers brought to the UK to plug the gaps caused by decades of government neglect, outsourcing and privatisation, and austerity in the form of public sector spending cuts. Shockingly, in the past year, the number of modern slavery cases reported within the UK care industry had more than doubled. Failures in duty of care has facilitated organised crime to exploit unfortunate victims who were desperate to find a better life but instead found slave-like conditions, long hours and below subsistence wages.
The solution is not to steal the valuable resources of poorer countries, but to bring social care back into public hands, invest more in social care provision and training, along with secure employment rights and fair terms and conditions and wages. The solution is for the nation to decide what its priorities are – more of the same contempt for citizens by its leaders, or something better.
Here, predictably we see again an economic ideology that puts private over public provision, all justified by the claim that we can’t afford better public services, or quality care for those who need it. An economic system which has taken precedence and is not fit for purpose, unless we mean the enrichment of those who benefit from government spending policy. All the government is actually doing is papering over the cracks it has caused, and the victims are both those using social care services and those persuaded that the good life awaits if they sign on the dotted line.
Again, the only constraints faced by government are related to how real resources are distributed and who benefits from that distribution. A stable and healthy society relies on government laying the foundations. However, successive governments have abdicated their responsibility and have increasingly shifted it to the corporate estate, along with public money. Whether it is the NHS, social care or indeed the many other vital public services which support citizens, all have been subjected to this false belief that there is no money, and that the private sector is more efficient.
Last week, the health minister Maria Caulfield defended Steven Barclay’s plans to use the private healthcare sector to deal with the long post-covid waiting lists, on the basis that it would provide good value for money for the taxpayer. If there are long waiting lists, this is not a new phenomenon. Prior to the pandemic in February 2020, there were 4.43 million people on a waiting list for care. The latest figures for May 2023 show that around 7.47 million people were waiting for treatment.
The fact is that the private sector is already operating in the NHS, taking public money to run health services with profit in mind. We now have a fragmented service where the word national is in name only and the NHS logo hides a myriad of private healthcare companies. From a publicly paid-for, managed, and delivered service to one that is now serving the needs of the corporate estate, where publicly paid-for means corporate welfare. If the NHS is broken, it broke as a result of the decades of reshaping it through the pursuit of an ideology that serves the neoliberal tenets of faith in markets and privatisation. When Blair said last month that ‘there should be complete cooperation between the public and private sector’, and Starmer in the Observer that we need to prioritise ‘radical reform of public services over reckless spending promises,’ the only thing to note is that they are all in it together. Blair and Thatcher’s legacy lives on.
MMT Verify: How We Can Staff the NHS Without Tax Rises - Neil WilsonSpending only happens if there was something to buy. If that spending is then deficit spending it has a lower inflationary impact than spending that is tax-matched.
Then as the Prime Minister seeks to blame striking NHS staff for record-high long waiting lists, this must surely be the final insult to a workforce that has been unfairly treated as a result of government policy and like many, struggling to manage the cost-of-living crisis on top of previous public sector pay squeezes. One minute we are being exhorted to clap for our dedicated nurses and doctors, and the next, government ministers are demonising them.
Neither health nor social care should be viewed as a business, and it certainly doesn’t involve being good value for the taxpayer, since taxes do not fund government spending. Let’s instead put the blame where it really lies. At the government’s door, resulting from a decade of cuts in real terms to spending (austerity), failure to train sufficient healthcare professionals, private sector for-profit involvement (which predates the Tories), and closure of hospitals, beds and even treatment options, all of which has been justified on the false premise of public sector unaffordability, and to push an ideological preference for private sector involvement. We can translate this as absolutely nothing to do with the state of the public finances, but rather as a political choice. The false narrative of monetary affordability constantly trumps delivery of public purpose, and when it comes to ethics, as in stealing the resources of poorer countries, as long as things can be done on the cheap, then it’s acceptable.
If we want better public services, health, and social care, it can only come through government which holds the power of the public purse. This is what we could have in a sane world where people matter more than a cruel ideology and profit. Instead, what we have is a shameless manipulation of a hapless public to justify what will be in effect more austerity, more ‘difficult decisions’ that can only cause more human distress and hardship, damage the life chances of our youngest citizens, and cause further decay of our public infrastructure.
And then, while the life-giving planet overheats because of human activity and the distribution of wealth becomes ever more unequal, last month the number crunchers at the OBR were ‘preparing to sound the alarm’ over the impact of rising interest rates on the public finances which, according to the Guardian, would ‘deliver a serious blow to the government’s scope for pre-election tax cuts.’ In its ‘Fiscal risks and sustainability report,’ it set out the impact of higher interest rates for the public purse. This would, it suggested, make it less likely that [the Chancellor] would meet one of its five key pledges – tackling Britain’s public debt. And no doubt such thinking will drive more damaging austerity thinking on both sides of the political spectrum.
Let’s be clear first, interest rates don’t hurt the public finances. Government as the currency issuer can always meet its liabilities. There are, instead, winners and losers in the private, non-government sector. The winners are savers, banks and holders of Treasury gilts, while the losers are those who will suffer the economic effects of higher interest rates which can filter through in higher unemployment and cause more pain for people struggling to pay higher rates on debt and mortgages.
Then in the same household budget vein, Chancellor Hunt, after checking thoroughly down the back of the sofa for a few stray quid, ordered his ministers to find £2bn savings for public sector pay rises. Not content with the nonsense claim that there is a threat of public sector wage spirals driving inflation, he then acts as if the government is short of money and must rob Peter’s pot to pay Paul’s.
What a choice! Taking steps to mitigate the human-induced existential threat of climate change, ecological overshoot, and growing poverty and inequality, or balancing the public accounts. While they tell the public about the hard choices and sacrifices to be made, there has been no problem finding the money for military support in Ukraine, £2.3bn in 2022 and the same for 2023, totalling an eyewatering £4.6bn.
There is no money for serving public purpose, helping people through these difficult times, feeding children or rebuilding our ailing public infrastructure, but there is an inexhaustible amount for waging war and killing people, bailing out banks, or contracts for dodgy PPE. Surely these contradictions must be hitting home by now, and the extraordinary con that is being practiced on citizens of this country with huge social and environmental costs.
The key to better public services, infrastructure, social security provision and a green transition is not growth, contrary to what politicians on both sides of the political spectrum would have you believe. It is, rather, something much simpler and direct, a political choice to deliver them.
Aside from the fact that taxes do not fund government spending (implicit in the belief in growth as the solution), faith in growth as a tool is misplaced in an uncertain, unstable and changing world in which we are currently in uncharted territory. We need action now. While politicians clearly have all had the ‘public finances are like a household budget’ briefing, and all sing from the same cruel hymnbook without question, aside from the human misery this narrative causes, it makes no economic or environmental sense.
Author Jason Hickle asked in 2021, ‘If our economic system actively destroys the biosphere *and* fails to meet most people’s basic needs, then what is actually the point?’
Time for the public to ask those same questions of the political class.
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The post Economic delusions cannot save us from the climate crisis and societal decay appeared first on The Gower Initiative for Modern Money Studies.
Homelessness in New York City
I recently helped organize a homelessness study tour of New York City. Our group consisted of 30 Canadians from the non-profit sector, government, law enforcement and academia. We toured six sites over a three-day period.
Here’s my ‘top 10’ overview of the tour: https://nickfalvo.ca/ten-things-to-know-about-homelessness-in-new-york-c...
Homelessness in New York City
I recently helped organize a homelessness study tour of New York City. Our group consisted of 30 Canadians from the non-profit sector, government, law enforcement and academia. We toured six sites over a three-day period.
Here’s my ‘top 10’ overview of the tour: https://nickfalvo.ca/ten-things-to-know-about-homelessness-in-new-york-c...
Health and homelessness
I’m writing an open access textbook on homelessness, with a focus on high-income countries. Each chapter gets uploaded to my website as it is completed.
The latest chapter, on health, is now available.
A ‘top 10’ overview of the chapter can be found here:
https://nickfalvo.ca/health-and-homelessness/
All information pertaining to the book can be found here:
https://nickfalvo.ca/book/
Health and homelessness
I’m writing an open access textbook on homelessness, with a focus on high-income countries. Each chapter gets uploaded to my website as it is completed.
The latest chapter, on health, is now available.
A ‘top 10’ overview of the chapter can be found here:
https://nickfalvo.ca/health-and-homelessness/
All information pertaining to the book can be found here:
https://nickfalvo.ca/book/
Industrial action is the only rational response to the UK’s rigged macroeconomic policy regime
After a decade of austerity and the trauma of a two-year long pandemic, the UK’s public sector workers deserved some respite come 2022. Instead, they are now enduring the largest real wage cuts in recent history.
Average settlements on offer to public sector workers are currently around 3% with inflation at 10%. This 7% cut in real wages amounts to almost a month’s salary not being paid. Furthermore, the private sector is enjoying wage deals more than twice as high at around 7% as shown in Figure 1.
Figure 1 (Source: Office of National Statistics)
Under such conditions, the withdrawing of labour is an entirely rational response. It is even more understandable when you consider the wider macroeconomic policy regime that appears rigged against the public sector.
The argument being repeatedly made by both the government and the independent Bank of England is that paying public sector workers close to or above the current rate of inflation would be self-defeating because it would lead to higher prices. This is due to the so called ‘wage-price spiral’ where higher prices lead to calls for higher wages which then feed through to higher prices and so on.
There are four reasons this argument is flawed.
Firstly, in capitalist market economies the public sector does not set prices, firms do. So the wage-price spiral can only apply to the private sector in as far as it is a direct relationship between wages and consumer prices.
The only way the government could finance additional wages for the public sector would be raise taxes or borrow more. Taxing directly removes money from the economy so it is difficult to see how this could be inflationary.
Borrowing involves investors spending money buying government debt instead of other assets. Bank of England governor Andrew Bailey has stated this would affect “overall demand in the economy” and force the Bank to raise interest rates, further adding to the cost-of-living crisis facing low paid workers.
There is evidence that bond financed fiscal deficits are associated with higher inflation. But this relationship is almost exclusively found in developing countries with weaker institutions and tax raising powers, not in high income economies like Britain.
Second, current inflation in the UK is mainly driven by supply-side factors, in particular rising energy prices caused by the Ukraine war feeding through to other sectors. There is evidence that rising energy costs have led firms to raise their prices and evidence that other firms have exploited the situation of rising prices to use their market power to raise prices above inflation, generating excess profits. If anything, there is more evidence of a ‘profit-price spiral’. None of this has anything to do with what public sector workers are paid.
Thirdly, public sector workers make up only around 17% of the workforce. Thus inflation-linked wages to help public sector workers catch up with years of real wage cuts would have much less impact on total demand in the economy than they would in the private sector.
Finally, the public sector is suffering from a serious shortage of labour caused by the COVID pandemic and difficulty recruiting workers from the EU post-Brexit. In particular the healthcare sector is in crisis, making up 13% of all jobs advertised in the UK last month.
Keeping wages well below those available in the private sector — which they have been over most of the past eight years (Figure 1) — will make the situation worse as employees are more tempted to leave. In turn, this will require even larger pay increases down the line to bring workers back.
Given flatlining growth, fears about excess demand and entrenched inflation have to be tempered with the risk of rising unemployment and even more individuals leaving the workforce, worsening an already extremely weak macroeconomic environment.
Striking public sector workers have the support of the majority of the public. They seem to recognise, better than the politicians and policy makers in charge of our economy, that a strong public sector is the building block for sustainable economic growth. Let us hope that those taking industrial action succeed in pushing through higher wages for all our sakes.
This blog was first published on 14th February 2023 on the official blog of the UCL Institute for Innovation and Public Purpose | Rethinking how public value is created, nurtured and evaluated | Director @MazzucatoM | https://www.ucl.ac.uk/bartlett/public-purpose/
The post Industrial action is the only rational response to the UK’s rigged macroeconomic policy regime appeared first on The Progressive Economy Forum.
Ten things to know about the 2023-24 Alberta budget
On 28 February 2023, the Danielle Smith government tabled Alberta’s 2023-2024 budget. Projecting a $2.4 billion surplus for the coming fiscal year, the budget announced some spending increases; but many are effectively cuts when one accounts for both inflation and population growth.
Here are 10 things to know:
- The budget itself contains projections pertaining to inflation and population change. In the upcoming fiscal year, the budget projects 3.3% inflation (using the Consumer Price Index) and a 2.9% population increase. When you add those figures together, you get 6.2%. That means any increase in nominal spending needs to be at least 6.2% in order to keep up with current spending.
- Operating expenses in general will see an effective cut of 3.2%. For the 2022-23 fiscal year, they’re forecast to be $55,384,000,000. For 2023-24, they’re expected to be $57,038,000,000. In nominal terms, that’s a 3% increase. But after one accounts for this government’s own projections with respect to both inflation and population growth, that’s effectively a 3.2% cut.
- Compensation for Alberta’s public service will see an effective cut of 2.9%. For 2022-23, it is forecast to be $28,522,000,000. Its estimate for 2023-24 is $29,580,000,000. In nominal terms, that’s a 3.7% increase. However, when one accounts for both inflation and population growth, it’s effectively a 2.9% reduction.
- In spite of an aging population, health operating expenses will see an effective cut of 2.1%. According to the budget document: “Budget 2023 provides $24.5 billion for Health operating expense in 2023-24, an increase of 4.1 per cent or $965 million from the 2022-23 forecast.” After one accounts for inflation and population growth, that translates to a 2.1% cut.
- Operating expenses in the K-12 education sector will see an effective decrease of 2.0%. Total operating expenses for the Ministry of Education are forecast at $8,477,000,000 for the current fiscal year. In 2023-24, they’re estimated to be $8,836,000,000. In nominal terms, that’s a 4.2% increase. But after taking inflation and population growth into account, that’s effectively a 2.0% cut.
- The provincial government will give post-secondary institutions less operating funding. Provincial operating funding for post-secondary institutions is forecast at $2,431,000,000 for 2022-23. For 2023-24, its estimated at $2,446,000,000. In nominal terms, that’s a 0.6% increase. After accounting for inflation and population growth, that’s a 5.6% decrease. The budget also announced that post-secondary institutions won’t be able to increase tuition fees by more than 2% annually, beginning in 2024-25. And according to the budget speech, “the student loan interest rate will be reduced and the no-interest, no-payment grace period will be extended to one year after graduation.”
- There will be important enhancements to income assistance programs for low-income households. The Alberta Child and Family Benefit (ACFB), Income Support,Assured Income for the Severely Handicapped (AISH) and the Alberta SeniorsBenefit will all be indexed to inflation. What is more, according to the budget document: “Seniors with an adjusted householdincome below $180,000 are [now] eligible for six monthly payments of $100.Similarly, parents or guardians are also eligible for monthly payments of $100for six months for each child under 18 if their adjusted household income isbelow $180,000. Albertans on these core programs were automatically enrolledto receive affordability payments.” The ACFB, AISH, Income Support and Seniors benefits will also see a one-time 6% increase. And with the ACFB: “Families will also benefit from the increase to phase-out thresholds, as the maximum benefit begins to be reduced at a higher income level.”
- Funding was announced for affordable housing and homelessness. In terms of housing, the budget announced nearly $198 million in new capital funding (over three years) for affordable housing, with the breakdown as follows: $137.7 million for the Affordable Housing Partnership Program; $16.8 million for the Indigenous Housing Capital Program; $9 million for Capital Maintenance and Renewal Funding; and $34.3 million for “Stronger Foundations strategy implementation capital funding.” As for homelessness, the Homeless and Outreach Support Services program provides funding to municipalities for homelessness. For 2022-23, the forecast amount is $224 million. For 2023-24, it will be $244 million. In nominal terms, that’s an 8.9% increase, which means new homelessness funding for communities overpowers both inflation and population growth for the upcoming fiscal year.
- Several initiatives were announced with respect to substance use. According to the budget document, $155 million has been committed over three years for “recovery communities” in several communities. And according to post-budget analysis in the Edmonton Journal: “The province is also spending $30.4 million on ‘initiatives that reduce harm,’ such as supervised consumption services, Naloxone kits and other outreach supports. This is an increase of $410,000 from the 2022-23 forecast, but down from $35.5 million in 2021-22.” A lengthy Twitter feed from Anna Junker provides further disaggregation of these figures here.
- Alberta remains Canada’s lowest-taxed province, and by a considerable margin. According to the budget document itself: “In 2023-24, Albertans and Alberta businesses would pay at least $19.7 billion more in taxes if Alberta had the same tax system as any other province.” Alberta continues to be the only Canadian province without a provincial sales tax.
In sum. When one accounts for both inflation and population growth, this budget announced several cuts, all of which would be unnecessary if provincial taxes were even modestly higher. Measures pertaining to both income assistance programs for low-income households and affordable housing will help address both poverty and a lack of affordable housing.
I wish to thank the following persons for assistance with this blog post: Jacqueline Alderton, Yale Belanger, Ron Kneebone, Heather Morley, Meaghon Reid, Sylvia Regnier and several persons whose identity is being protected.