During a recent news item on George Osborne’s budget, a chirpy BBC correspondent did one of those smug pieces to camera about the ‘challenges’ facing the Chancellor and his Labour opposite number in the run-up to next year’s general election.
The biggest of all, Mr Reporter glibly declared, was they had to try and win over sceptical voters without being able to give them anything in return. Tax cuts, more health and education spending – they were all out of the question, because, broadcaster man stated like it was the most obvious thing in the world, ‘there’s no money left for big giveaways’.
It’s the message you get from practically all telly pundits nowadays. They blankly trot out the Coalition’s economic narrative as if it’s indisputable truth. Worryingly many probably believe it themselves. After all, it’s the line taken by governments all over the world, and if enough important-looking people in suits say something often enough, it’s quite easy to be duped into thinking it’s true if you’re not an especially questioning human being.
But it’s not true. It’s wrong on almost every conceivable level. Money doesn’t work like that. It’s not like gold or coal or oil, something that only exists in limited amounts and that it’s therefore possible to run out of. Treating it like it does entails flinging a century or so of economic theorising out of the window.
But that’s exactly what’s happened over the past few decades. Self-serving elites have put colossal effort into convincing the population at large that big, strategic, national-level economics is just like managing a household budget, and that ‘money doesn’t grow on trees’.
Now we’ve ‘spent too much’ and ‘lived beyond our means’ – almost always veiled or not so veiled references to the New Labour decade, when Blair and Brown actually spent a lot less than Mrs Thatcher did, even in her most frugal years in power – we have to cut public-funded services, or kill them off altogether. Because we just can’t afford them anymore. We’ve ‘run out’ of money.
Really, it’s impossible to ‘run out’ of money. The British government, through the Bank of England, has a literal license to print money. And private banks magic money out of thin air on a daily basis.
Most people think that when they put money in the bank, it goes in to a big metaphorical pot – and that banks dip in to that pot when they give out money in the form of loans and mortgages and the like.
In fact, the minute the bank’s got it, your money’s gone. Bankers will have invested it in the arms trade or logging firms or the baby-eating industry before you know it. You can withdraw money up to the amount you originally deposited whenever you like, but it’s not ‘your’ money – they don’t keep back a stack of notes with your name on.
And, more pertinently, the money banks lend out bears no relation to the money their customers deposit in them. Take out a loan or a mortgage, and the money you receive has been conjured out of nothing. Someone at the bank has pressed a few keys on a computer and created new money. It’s a difficult thing to get your head round at first, but it happens hundreds of times a day.
Even more astonishing, though, is the fact that only 3% of the money in the British economy comes from the Bank of England itself. 97% is made in this way by unregulated and ruthlessly self-interested private bankers, almost always to line their own pockets – the more they lend out, the more money they get back in the form of interest payments, and the bigger their profits are.
And while we’re on the subject, it was the financial sector’s over-use and abuse of this frightening power, not any sort of government spending spree, that was the key cause of the 2008 crash and the subsequent mess we’re in.
Regardless of where it comes from, there’s no dodging the fact – we cannot run out of money. Anyone who says we can, or we have, is either very wrong, sinisterly motivated, or, as is horribly common, both.
In the space of a single month in 2007, the British financial sector created £16bn for the sole purpose of making a killing in the housing market. After the crash of 2008, the Bank of England nonchalantly made over a trillion quid to clean up the mess. When they want to, political and economic elites can make staggering amounts of money out of nothing.
And then there’s the money that already exists – masses of it, not in the government’s coffers, or the pockets of ordinary people, but grossly concentrated in the hands of the richest 10%, who own almost half the nation’s wealth.
It’s this top tenth that’s seen its income rocket and its share of the national pie swell during decades where the wages of the remaining 90% have stagnated or fell, the prices of essential goods have risen, and vital public services have been starved of proper investment or sold off.
And the further you go up the income ladder, the more flabbergasting the gains have been. Between 1997 and 2008, the wealth of the richest thousand people in Britain more than quadrupled from £99bn to £413bn. Then, with millions suffering under the Coalition’s austerity regime, it increased a further £155bn between 2009 and 2012. That same thousand people, 0.003% of the population, or one in 60,000, have now amassed total assets of over a trillion pounds.
All of which makes the news media’s repeated assertions that we’ve ‘run out’ of money rather irksome. It wouldn’t take much to turn what Mr Reporter said from an unquestioning regurgitation of Tory rhetoric into actual neutral reporting. A little qualifying phrase would do – something like ‘according to the political consensus all the major parties have signed up to, there’s no money left for big giveaways’.
We’re not asking for Nick Robinson or Laura Keunsberg to start vigorously crumping to Public Enemy in People’s Assembly jumpsuits on the 6 o’clock news. They wouldn’t have to say anything positive or negative about said political consensus at all. Just acknowledge the fact that the version of events spooled out by official sources might – might – not be true.
If you’re going to call yourself a journalist, rather than just a spouter of stuff someone else has told you, the onus is surely on you to do a bit of digging, poke at sweeping claims made by the self-interested and powerful, rather than paraphrasing Treasury press releases and calling it news. Instead, they’re effectively colluding with big business, the financial sector and the political Right to spread a completely false understanding of how economics works.
‘Austerity’ is a political choice. It’s anything but a necessity. To say it’s ‘not the only way’ out of our current predicament implies that it’s a way out it at all. In fact, it’s a shameless attempt to use the financial crisis as an excuse to intensify the already scandalous shift of wealth, power and resources from the majority to the richest tenth that’s marred the past three decades – and that was, indirectly, largely responsible for the 2008 crash.
As the last century ably demonstrated, if you’re really interested in making your economy grow, rather than just fibbing to the nation while enriching yourselves and the rest of the already rich, the state has to intervene, invest, create jobs, fund things for people to build. It’s why growth rates were always higher during the supposedly disastrous years of tax and spend than they have been since the neoliberal revolution.
But given the small matter of impending ecological disaster and civilisation-imperilling resource shortages, we really, really need to lose our all-engulfing obsession with economic growth and ever-increasing consumption.
Urgently, we need to reach a situation where Westerners buy and waste less, where 100% of our power comes from renewable sources, where inequality is radically reduced, partly to cut the richest, most ecologically damaging sections of society down to size, partly just because it’s common sense, and where much smaller, steady-state economies direct investment towards social wellbeing and only producing what people really need.
And to do all that, and make the human civilisation’s continued existence a bit more viable, we need money. Nationalise the banking sector, stripping private bankers of that all-important money-creating power, and we can use the mind-boggling system they knocked together for personal gain to channel funds into urgent reconstruction – particularly in once-industrial areas devastated by neoliberalism.
And while we’re at it, we can seize back the sickening amounts the richest have squeezed out of everyone else over the last thirty years or so, and have ourselves a radical eco-friendly social overhaul on them.