boris johnson holding a pie and wearing a get Brexit done apron
Ben Stansall/Pool via Reuters

The Tories Could Feed Poor Children – They Just Don’t Want To

by Francis Brewer

@hf_brewer
30 October 2020
  • Estimated read time: 5 mins

Throughout the pandemic, the government has continually failed to provide the needs of the British people, continually pointing, along with much of the media, to a scarcity of money as a reason. The furlough scheme and the self-employed income support scheme provided people with up to 80% of their income, which may be fine for those who live comfortably, but if you were already struggling is nowhere near enough. Even then, around three million people have been completely excluded from this help. In some cases, those who are supported have now seen this reduced to around 40%.

Regions are faring little better. Andy Burnham asked the government for a figure of £65 million, which he called the “bare minimum”, to help the people of Manchester during the new lockdown measures. He was refused. Reportedly offered £60 million, he walked away. At the same time, the government has voted down plans to provide free school meals to children over the holidays, despite widespread public support for the campaign led by footballer Marcus Rashford. In each case, the argument for insufficient help is that there is not enough money.

Generations of Britons have accepted monetary scarcity – the idea that there simply isn’t enough money to go around – as a fact of life. Of course we want to feed schoolchildren – there isn’t the money. Of course we want to help people during the pandemic – it’s just there’s a limit to what we can do. Since the government relies on taxes and borrowing to be able to spend, what we want just isn’t possible.

Whilst this idea was certainly true when we had the gold standard backing up the currency, there is a finite amount of gold in the world, modern monetary theorists, notably economist Stephanie Kelton, argue that fiat currency, the kind we have been using since 1971, is not a finite resource. Understanding why enables us to envision a better society for all.

Running Out of Other People’s Money

In 2010, then treasury secretary Liam Byrne left a note for his successor: “There is no money left”. With the national debt standing at £1.2tn, and the threat of sovereign default very real, Byrne’s claim wasn’t far-fetched. Yet it heralded a decade of Conservative austerity whose the entire basis was a lie.

The stated aim of this long period of national “belt-tightening” – which led to inequality not seen since the Victorian days and an estimated 130,000 deaths – to tackle government borrowing. Yet between [x year] and 2019, total government debt increased by 50% to a total of £1.8tn. We have, in other words, borrowed an additional £600bn since 2010, when the money supposedly ran out. The pandemic hasn’t helped matters. In July, the national debt passed £2tn for the first time in British history, and it is set to continue rising.

The standard view is that we are heading down a path to ruin. Any day now, the economy will collapse, and we’ll be forced into a Greece-style sell-off of public assets to pay back hungry creditors. This or our grandchildren will be weighed down by costly repayments.

Yet, our debt is fundamentally different from Greece’s. Whereas the Central Bank of Greece cannot print Euros, the Bank of England can print pounds. Britain can never go bankrupt.

Constraints on the Imagination

Modern Monetary Theory (MMT) challenges the mainstream economic conception that in order for governments to spend, they first need to tax. A relatively recent development, it is a combination of Chartalism and the work of economists like Keynes, Minsky and Lerner. Proponents of MMT, Stephanie Kelton, L Randall Wray and others contend that the mainstream view fails to ask where money originates. The government can’t tax the people if the people don’t have money to tax, and this money comes from the government.

To understand this idea more clearly, consider a historical example. Perpetually short of British coins (which they were prohibited from minting themselves), the American colonies developed their own currencies. They printed paper notes and spent them into circulation, removing some through taxes. Taxes don’t finance government spending – government spending finances taxes.

As David Graeber argued, the real role of taxes is to generate demand for it. People use state money because they need state money to pay their taxes. Warren Mosley uses a fantastic example to illustrate this point. A father offers his kids five of his business cards to wash his car. What would the children want with his business cards? Well, the father taxes them five business cards per day to go and play with their friends. Suddenly, the children are more than happy to clean the car for his business cards. The taxes create demand for currency.

This example also shows us that taxes are not necessary for government spending. If the father (the government) wants to spend more of his business cards (currency), he has no need to tax his children (citizens) first – he just prints the cards. It makes no sense to talk about the government not having enough money to pay for something; they will always have enough. “It really just amounts to a keystroke, pushing a key on a computer that generates an entry on someone’s balance sheet,” wrote. Randall Wray, a prominent advocate of MMT, “Government can never run out of these keystrokes.” These fictitious budgetary constraints have informed our policy discussions for generations and prevented us from realising the possibilities that come with having a sovereign currency.

Recognising Real Limits

This is not to say that there are no limits at all on government spending. Although money is essentially infinite, people and resources are not. We cannot build more houses if there is no one qualified to build them, or no resources with which to build them. Additional government spending in these cases would have no positive effect.

Government spending can lead to inflation if spent at the wrong time or directed to the wrong part of the economy. If all the qualified builders are already working for private construction firms, the government must offer them a higher wage to attract them to building government homes, creating inflation. The same is true if there is a shortage of resources and the government bids up the price.

In our current economy, however, millions of people are un- or under-employed, meaning the government could safely increase spending without the risk of inflation. We’ve seen exactly this with the huge pandemic stimulus, which has not increased inflation as there were spare workers and resources in the economy. There would be little to no inflation if we decided to increase the government support package to protect the most vulnerable as there are plenty of unused labour and resources available.

Another World is Possible

To paraphrase Keynes, you don’t make school meals out of money, you make them out of food. The real question is not whether there is money, but whether there are the resources. The answer is clearly yes: there are millions of people looking for work in Britain, and more than enough food to feed everyone. If the resources exist, then, the question becomes not one of finance, but of distribution: how do we get the resources to the people who need them?

The government’s decision to give inadequate support to certain cities or schoolchildren during the pandemic is not an economic necessity but a political choice; it is about creating an artificial scarcity in the country. Putting people on the edge of destitution makes them more willing to accept poor working conditions and serves as a warning to those above not to challenge their bosses lest they too end up at the bottom.

If the government had provided everything people need during the pandemic, it would have shown people that his level of support had always been possible and that the decades-long assault on public services was unnecessary. It would have left people asking the question: why if the government can provide for people’s material needs, hasn’t this been done before?

Understanding MMT shows us that the government has greater control over policy than it admits. It could help – it doesn’t want to.

We must resist the narrative of scarcity and instead focus on the question of distributing resources. We don’t need to raise taxes in order to raise revenue. No child should go hungry in a country that has enough food. The fact they are is as obscene as it is unnecessary.

Francis Brewer is a writer, activist, and tutor living in Glasgow.

Published 30 October 2020

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