Snake Oil Party whips gullible audience into frenzy

A quick report  on yesterday’s rally of the Brexit Party in Surrey.

Brexit Snake Oil

It was absolutely packed – probably around 1,000 attendees. Very slick presentations, and even though there were two Bentleys and a massive Rolls Royce parked just outside the venue, also attended by plenty of “ordinary people”. Yet, the audience is entirely white – well, I saw one black face in the 1,000 and no brown faces. About 70% of audience are pension age. Apart from a handful of kids being dragged in by their parents, there seem to be only two people under 25 there.

The presentation begins with a short film – where two presenters introducing the film are black – before the film cuts to Farage in his ludicrous hats ranting and raving about Brexit.

Inside the atmosphere is a mixture of Christmas Pantomime and Evangelical Church Meeting, with the speakers whipping everyone into a frenzy to hold up their little placards. The candidates are presented and give a short speech each. Each have very public school plummy accents, and obviously members of the British Upper Class.
They are introduced as benign journalists and businessmen and student of European Law. In reality they are Family Office and Hedge Fund managers (Rowlands), ex-UKIP spokeswoman (Phillips), Trustee of a Charity which was given £500k by the government to send disadvantaged people on holiday and only sent nine in the first year (De Lucy), or a leader writer for the Daily Telegraph or Daily Mail (Bartholomew).

So they are really engaged in tax avoidance for really wealthy clients, ex-UKIP propaganda and spin, being connected to a slightly obscure charity and real aristocracy, and opinion former for the Brexit right-wing press and author of a book against the Welfare State. None of this, of course, is mentioned.

It does not matter – the youngish women selected (Phillips, De Lucy), with their long blonde hair will look good on Question Time in the future – undoubtedly selected for the appeal to a woman electorate – as well as their obvious eye candy appeal to the 60+ older male voters. What matters are that speeches are emotional, jokes are corny, and that it plays well with the audience.

Nobody in the hall cares about little details like the real background of candidates.

Or why we allow autocratic limited companies now to send candidates to elections, rather than democratically elected ones from a real membership base.

Or why we allow which looks like illegal funding by millionaires and payment methods which cannot be verified in our democracy.

Or why the EU parliament even allows candidates whose only policy is to leave the EU. Who gives a damn about these democratic details? Not the audience, that is for sure. They are just worried that the democratic will of the people is ignored.
The European Parliament is not even mentioned by any of the new candidates. Each candidate will make about £115,000 each year if elected and if we do not leave – as seems increasingly likely. Half a million over the next 5 years for doing sweet FA in the name of the electorate. How is this democratic? But these details would just get in the way of the coherent storyline.

And the story told for 90 minutes is one of betrayal, the incompetence of existing parties to deliver Brexit, and the threat to our democracy this poses. This is literally the only thing being said, in various forms and iterations by all the six candidates – 3 years of Brexit disasters condensed in 1.5 hours, looked at from various angles. Not one word about how exactly a Brexit negotiated by the Brexit party would look like. It is a very coherent and powerful narrative.

That narrative won in the referendum in 2016 and it will get the largest number of votes again!

All candidates studiously avoid the word Hard Brexit, but are for a “WTO Brexit”. This is the party which is against charlatans like Boris Johnson, who is against the May Deal, but then votes for it anyway. They love their hero Nigel when he finally comes on and mentions exactly that. Nigel Farage in real life comes across like a mixture of Berlusconi (he is a short-arse really) and Hitler (outdated, crappy, over-rated oratory skills). Very appropriate to the snake-oil Brexit which is being peddled here, and the story of betrayal.

These people literally stand for nothing, other than Brexit. “We mean what we say, unlike the other ones currently in power.” That is their main message. Vote for Brexit, for real this time.

As a show it is not bad, well worth the £2.50 everybody paid to be there. It is balsam for the soul of the part of the 52% who are now either upset or stupid enough to vote for the Brexit party and their right wing hedge fund candidates. They voted for Brexit – it has not happened – they are now betrayed – and Nigel is the leader of the Betrayed party. That is what it is about. Emotions not reason. Nothing else.

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How to eliminate CO2 emissions in ten years

The UK  has been one of the success stories regarding CO2 reductions. It has been able to half its emissions per person from its peak in 1973 of 12 tonnes of CO2 to 6 tonnes of CO2 now. Not many countries can match that.

CO2_Windata

Can we now eliminate the last six tonnes in the next ten years? Good question.

Here are some suggestions from the last week: Tim Harford, advocate of messy desks and creative thinking: The – not very creative – Carbon Tax.

May I suggest to the prolific Tim Harford a new entry to his “100 things which changed the modern economy” series. The yellow vest, the symbol of protest which changed the French government plans to introduce higher charges on fuels. These charges were like a carbon tax. They are now dropped. A change of plan of at least 5 billion Euro extra taxes, which is not bad for a bit of yellow plastic worn by French protesters.

And this is exactly the reason why Richard Murphy is against it. A carbon tax is regressive, and would hit poorer people more than the rich. As it would have done in France.

Anyway, the reduction in CO2 we have seen will have been the result of regulation, which Richard Murphy also proposes, not further taxes on fuels.

No suggestion of a carbon tax from Paul Johnson, father of four (according to his twitter handle) and Head of the Institute of Fiscal Studies. He is also part of the UK’s Climate Change Commission, which is partly responsible for the elimination of CO2 which we have seen in the past. “We should be aiming to get to net 0 by 2050”, I slightly paraphrase his latest article for The Times, although “we do need to get a move on”. So we do need to get a move on, but if we are aiming for 2050, that is 30 years from now – what is it? Are we in a hurry or can we dawdle?

The problem is that 2050 might be too late, as Extinction Rebellion protesters and many scientists will confirm, although nobody can be sure.

I suspect Paul Johnson might concur, were he the father of four kids in Bangladesh, which will be hard hit by climate change, or the father of four polar bear cubs.

So, what would we have to do to eliminate 6 tonnes of CO2 each in Britain in the next ten years, just to set a good example for the rest of the world that it can be done?

Here is a six point plan:

Let us look first where we actually blow CO2 into the atmosphere, by person in the UK. This now includes CO2 emissions due to flying, which increases each person’s share by about 10% to 6.6 tonnes per year. All figures derived from the UK Digest of Energy Statistics.

 

CO2_person_UK
First – The above table shows that to eliminate CO2 we need to decarbonise liquid fuels for flights and (mainly) road transport. And to do the same for natural gas used for mainly electricity production and heating. We will have to use carbon-free electricity instead.

Second – We do not use all of the CO2 personally. Only about half is used directly, the rest is used in commercial premises, factories or offices and will be used when we buy things or use services.

Third – How do we make sure that CO2 actually reduces? CO2 Certificates could be issued for free by the government to each citizen in the UK to allow them to either use them themselves or sell them to commerce, industry and government. (6,600 kg of CO2 in year 1, the following year 6,000 kg of CO2, then 5,400 kg, and so on.) These CO2 Certificates would work like loyalty cards, however, nobody would  be able to buy fuels, gas or electricity without giving up some the CO2 Certificate credits. Each petrol station, electricity and gas provider, flight booking service would need payment in money and CO2 Certificate credits. So a return flight from London to Madrid might cost £200 and 600 CO2 Certificate credits (representing the 600 kg of CO2 used for the flight)

If trade/industry/government want to emit CO2 they have to buy CO2 Certificate credits from citizens, at a price determined by the government. The money will be paid into special accounts of these citizens which can subsequently only be used for investments in renewable energy.

So poor people, who might use less CO2, would be able to benefit, while rich frequent fliers with big hard-to-heat mansions would need to buy CO2 certificates from them, just as industry and commerce does.

Fourth – Road transport will need to be electrified, alternative synthetic fuels for flights or trucks will need to be developed, and each house or flat will need to be well insulated and subsequently heated by electric heat pumps.

Fifth – Heating by heat pump currently does not make any sense. If a heating boiler in the UK breaks down, there is a theoretical choice between investing in a new gas boiler (£2,000) or an electric heat pump (£10,000). The heat pump is less powerful and slightly more expensive to run than the gas boiler. That is where carbon tax can have a useful role to play.

The last column in the table above shows that per tonne-of-emitted-CO2 natural gas is the cheapest fuel, by far. To put one tonne of CO2 into the atmosphere with natural gas costs £165 at the cheapest retail prices. It costs 3 times as much to burn diesel or petrol, as natural gas is very lightly taxed.

However, to make heating with heat pumps more attractive, the higher cost of initial investment will have to be set off by lower running cost – similar to LED bulbs and electric cars now. It will therefore be useful if gas prices could be increased each year by a new gas carbon tax to make a heat pump investment more attractive. The same is true for jet fuel. There are no taxes on jet fuel, thereby making it cheaper to fly when it might be less polluting to take a train, even after air passenger duties. So let us tax jet fuel and natural gas and let us increase taxes slowly over ten years. (Higher gas heating costs of less well off people might have to be subsidised, before gas is substituted by heat pump electricity)

Sixth – Finally, huge investments will be necessary to pay for this. Probably about £1 trillion, about an investment of about 5% of GDP a year (£100bn) for each of the next ten years. Who pays for it? Ultimately it will be a mixture of industry/commerce/government who pay for certificates from citizens, the government through government borrowing, individuals and companies through their own savings and private borrowing.

Some of it are investments which would have to be made anyway, as cars, trucks and boilers are up for natural renewals.

Other investments are new in order to double electricity generation (to run heat pumps and transport), to research synthetic fuels, to insulate homes, to switch to expensive heat pumps.

Government subsidies will play a huge part, especially for low income families and to set off huge cost of heat pumps, making up perhaps 50% of the investment of £1 trillion in total.

In total the investments are estimated to be

insulating homes – £125bn
installing solar panels on each home – £135bn
subsidising 30 m electric cars £5k each – £150bn
new electric generating capacity –  £150bn
cost of heat pumps £10k each – £270bn
other R&D costs, investments public
transport, synthetic fuel develpmt.,
factories for heat pumps, electric cars – $170bn

Total £1,000bn over 10 years

These six points are the plan in short. It will be expensive, although all of these numbers are guesses. It will take major planning and effort. And it can be done in 10 years, although is very, very ambitious.

However, an investment of £100bn a year is about 5% of GDP. In 2017 energy accounted for just under 3% of GDP. In 1982 it accounted for over 10% of GDP. (see page 19 of Digest of UK Energy Statistics)

So these investments are not completely out of line with historic costs for energy.

There is no question that it could be done. Or that it would be affordable. Which government would say that they cannot invest 5% of GDP per year to transform our country?

Is there any reason to delay? Would it be cheaper to do this decarbonisation of the UK over 30 years instead of 10 years? Exactly the same actions would have to be taken over 30 years as over 10 years. At exactly the same cost.

The only reason it would be slightly cheaper is because higher polluting assets (such as gas boilers, petrol cars, diesel trucks and kerosene planes) would be allowed to pollute for longer.

So anybody querying these figures should try to explain why it is not possible to invest 5% of GDP into renewable energy to allow for a CO2-free United Kingdom within a time frame of ten years.

Or, more importantly, perhaps the influential Paul Johnson (the one from the Climate Change Committee) can explain in detail to his four kids why he thinks 2050 instead of 2030 is a good target to aim for, when many scientists say otherwise. Everybody would be interested in his detailed answers. After all, “we do need to get a move on”.

Probably the best fiscal rule in the world

In his latest column Simon Wren-Lewis attacks the German deficit rule (“Schuldenbremse” or “debt brake”) as the possibly the worst fiscal rule ever. Simon does that while – with a nice touch of typical British understatement – only hinting that his own fiscal rule he developed for Labour is probably the best fiscal rule in the world.

 

carlsberg

 

He has got a point, of course, but he leaves two things out.

(1) The German fiscal rule has huge political buy-in. It might not make macro-economic sense but it was enshrined in the German constitution and voted on by 2/3 majority of political representatives.

In contrast, Simon’s rule is already attacked (mainly by MMT people) before Labour even is in power, because it sets limits on the government’s borrowing when (MMTers argue) there should not be any. It is an artificial ceiling on government spending.

(2) Germany runs a big current account surplus (exports much more than it imports) and can afford to run a very small government deficit of 0.35% on average. Sectoral balance analysis (made popular by MMT) comes in useful now. It will tell you that governments can collect more taxes than they spend (a surplus) and the private sector (households and corporates) can still save, thanks to booming exports. That is the case in Germany.

 

sec_bal_germany
If the UK government tried to run a surplus, the private sector will have to run down savings/increase debt, to pay for the huge UK current account deficit. So a more strict rule makes sense for a exporting country like Germany – whereas it might be unsuited for the UK.

 

Sect_bal_ons

 

Ultimately, both rules will inhibit government spending without raising taxes in normal times. (During a recession both rules would allow for additional government spending.)

The German rule does this a lot earlier and is a stricter rule – even investments like new bridges in Germany might need to be financed by new taxes.

In the UK there could be a situation (following Simon’s rule) where more nurses in the NHS can only be employed if paid for by tax rises.

MMT followers would, of course, say unless there is inflation, there is no macro-economic reason to raise taxes. MMTers could increase the deficit and pay for anything through additional government borrowing at 0% or very low interest. So there would also be a rule “tax only to avoid inflation” in MMT, just not one which Simon likes or acknowledges. Or which is yet to be formalized as the German rule or Simon’s rule.

So it’s a battle still for the best fiscal rule still.

My view is there is no inherent benefit in paying for a bridge through an increased deficit, but for additional nurses you might have to increase taxes. We could tax rich people in the UK to pay for the bridge, if we wanted to. Germans have to raise taxes, they can tax the rich (or the poor) to build a bridge.

If we in UK do not tax anybody unless there is inflation (as MMT suggests) the rich will continue to get richer and move further away from the poorer people. Inequality will rise.

So maybe a fiscal rule should state something along the lines of

– must be able to fight inflation
– must be able to reduce inequality.

Neither the German Schuldenbremse, nor the fiscal rule developed by Simon does that. But a new rule would tell you when to raise more taxes, as the other rules do, too.

So there is room for someone to develop a rule which does both, fight inflation and inequality. Economists and politicians should ensure that it gets huge political buy-in (as the German Schuldenbremse) and it would be equally applicable for current account deficit countries (such as the UK or US) and current account surplus countries (as Germany).

Some work to be done, still, probably.

Labour – the new official Remain party

Today Labour becomes the party of Remain again.

Labour should bribe voters with £500 to Remain in a 2nd Referendum, and organize General Strikes to ensure the UK remains in the EU.

Why?

Labour’s preferred version of Brexit cannot command a majority in parliament today. It never will. Labour wants to stop a damaging Tory Brexit. These damaging Tory Brexits are either “May’s Deal” or “No Deal”.

The best way to do this is for Labour to campaign all out for Remain.

What can Labour do now?

Officially Labour campaign now for a 2nd Referendum. There is, however, only a slim chance that it might be accepted in parliament, as most Tories are against it.

If they can secure a 2nd Ref, (or even if they cannot) everybody in Labour will, of course, again campaign for Remain.

Is it worth going over the old arguments again? Maybe not.
How best to secure a Remain vote?

Something has become clear now, which many did not believe before the 1st Referendum. Jobs will leave, more jobs are endangered, and national income (GDP) will fall. So the economic impact is real. Lost tax income to the government so far is £250 per person, as in a smaller economy less tax is paid.

This will continue, no matter which Tory Brexit is chosen.

May’s Deal Brexit: It will be at least another loss of £250 in two years time. Then it depends on the further negotiations with the EU, and which deal can be struck with the EU about future relationship.

No Deal Brexit. The loss might well be double that, tax losses of approximately £500 in two years time.

These future losses to government income are, of course, estimates. But the sub-standard performance of the UK will continue outside the EU, as compared with staying inside. So it is reasonable that tax losses would be repeated in the following years, as the economy is always smaller than it can potentially be by staying in the EU.

Labour should use these potential tax savings to bribe voters for Remain. It could offer the following deal to voters:

Vote for Remain, and vote us into office at the next General Election, and we will give you £500 on coming to office.

Cash – no strings attached. That would add £33bn to the deficit in the UK on Labour coming to office, 1.5% additional points in the deficit to GDP ratio.

What if there is no 2nd Ref?

Labour should get everybody to overturn a damaging Brexit and organise one week General Strike to over-turn any Tory Brexit one week before the date we actually leave (which is 29th March, but could be extended.)

Again with the promise of £500 cash if the strike action is successful.

Let us not forget, a Tory Brexit represents

  • the biggest loss of civil liberties to UK citizens (loss of Freedom of Movement)
  • the biggest threat to jobs
  • the biggest threat to future income.

Brought to us by the Tories. The anti-business party. The party cutting our civil liberties.

Brexit: Tories taking money out of our pockets to save their broken party.

Surely any last ditch effort to overturn that Tory disaster is worth it, and should be overcome by any means possible.

LAbouremblem

Time for a General Strike to halt Brexit?

Things are getting a bit heated, following the news that Theresa May will not allow a vote on the Withdrawal Agreement until the 12th of March, 17 days before the actual Brexit date. Can we do anything about it?

 

Brexit_age

 

In the 2016 referendum, voters for Remain were, in the main, the younger parts of society. (That is still the case in a more recent poll – see above.) These are the ones who are working and actually keeping the country going. If they were to withdraw their labour, the country would quickly grind to a halt. To reinforce the point, perhaps all 4 million Europeans who currently prop up everything from the NHS to Costa Coffee should also join the strike. As should all those who work for European owned companies which are majorly affected by Brexit, such as BMW’s Mini-plant and Airbus in Wales. And the union members who believe that Remain will be better for their jobs.

Everyone who wants to stay in the EU should therefore commit to strike, say from the 20th March to the 27th March, until Article 50 is withdrawn and parliament votes to stay in the EU.

Trying it would be worth a go – only to bring the Brexit nightmare to an end.

That would, of course, go against the “democratic” referendum result. The pensioners, home-county golfers, and frequenters of Weatherspoon pubs might now want to go on a counter-strike. To counteract the working people of Britain. There are of course also those workers who are for Leave. They could join also in a counter-strike.

Would it be undemocratic? Hardly, strikes are a legitimate way to make a political point. The working population will be hard hit by Brexit, as tax revenue will be lower than if we were to stay. If we want to keep services the same, or improve them, surely taxes will have to go up? The government has warned us about that before. The young, working population would be the hardest hit by tax increases or withdrawal of public services. They have every right to strike.

Further, Freedom of Movement, which allows every British person to work, live and retire in every country of the European Union will be withdrawn. This is probably the biggest withdrawal of civil liberties by a government from its population in peace-time. Ever. It is worth striking to retain these rights.

So leaving on the 29th March will hit us in our pockets and (as we now know) give us only the illusion we are now free from EU interference.

A counter-strike would be for still very nebulous benefits which come from withdrawing from the EU. They are very limited, especially as the UK will have to remain on good terms with the EU following the withdrawal agreement. The backstop will tie us into the EU potentially indefinitely (that is why nobody likes it) and a “no deal” Brexit will leave us very vulnerable in further trade negotiations with the EU. There are no pecuniary advantages for Leaving.

Strikers (for Remain) or counter-strikers (for Leave) would both have disadvantages from a strike. They would lose pay, and they might lose their jobs. However, strikers would have, as in any strike, the possibility that their action might succeed and they would ultimately be better off.

The counter-strikers would strike to be worse off – ultimately – if economic forecasts are believed. That would certainly be a first, workers striking to be worse off.

What about the “will of the people”? For a start the will of the people now seems to have changed towards “Remain”, opinion polls show. Remain is now the will of the people. We could always test it to confirm this in a second referendum.

Would a General Strike be successful? The last one in 1926 was unsuccessful. More than 1 million miners downed tools, but after 9 days they conceded defeat. However, strikers succeeded to bring transport to a standstill, even then.

Transport could be brought to a standstill today. How many Remainers would be willing to strike? There are more than 30 million workers in Britain. If 6 million or 10 million were participating in a General Strike for 7 days, just before the end of March, they could cause major disruption. Supermarkets would be empty. Operations cancelled. And coffee shops and restaurants, especially in London, would have to close.

Would parliament then give into the strike and revoke Article 50 and remain in the EU? It would certainly give MPs a fig-leave to vote for Remain, and over-turn the “democratic” result of the referendum. Something they are unwilling to do at the moment.

So perhaps a General Strike is worth a go.

 

Energy, power, money – why not part of economics?

 

Somebody asked on Twitter What is the single most important idea in economics for unconvential economists?

Here are some of the ideas I agree with.

Energy

Steve Keen is my favourite here. “The role of energy in production”. This is clearly ignored, we think we are so rich because we somehow have figured out markets, capitalism and specialisation of production. But we could have the most efficient markets everywhere, if we could not exploit energy (and so far mainly fossil fuels) we would really be nowhere. That is why we were “nowhere” prior to the industrial revolution, prior to the exploitation of fossil fuels. Income did not really rise much over the many centuries before. The world has become really rich only since it uses coal, gas and liquid fuels.

Power

The second important and popular idea is the role of power. As Devika Dutt puts it:

The economy is not driven by market exchange, but by systemically unequal relationships between firms-workers, between countries/ imperialism, between men and women, between white people and other races etc

Danielle Guizzo adds:

Agreed! Power relations in between institutions and groups, inside/outside the market, and the outcomes, conditions and decisions made. Also how it drives change (or not).

So, the question becomes who has the power? This has changed over time, of course, with Karl Marx one of the first to state that the capitalists have control over the means of production, all value comes from production, and the proletariat, the workers get exploited by the capitalists. And that they will be exploited until they themselves control the means of production.

This dominant theory was, of course, the basis of all economic production in all communist countries. However, at the time of Marx writing his theories, it was not the only theory how power could influence the bargaining power of workers. Much more popular, and much more digestible were the theories of Henry George, who suggested a single tax, the Land Value Tax on land, the only resource which is limited by supply. That would shift bargaining power in wage negotiations to workers, and limit rent extraction by landlords.

So taken over part of the means of production by the workers, or land value taxes are now ideas discussed by the Labour party to deal with some of these different power relations. But ultimately both would need to be exploited to the full, to allow for a full shift of power to the workers. So the whole ownership of companies would move to the workers. Or making a Land Value Tax really enormous, and abolishing taxes for workers, such as Income Taxes or National Insurance Contributions.

Labour’s introduction of a Land Value Tax, should they come to power, is unlikely to be as extreme. A limited Land Value Tax and just 10% of shares (given to workers from their original capitalist owners) will only shift the power balance in a very limited way.

And why do we still look to Henry George and Karl Marx to shift power from one class (the capital or land owners) to the other (the workers), ideas which were developed around 150 years ago? Do we still look at medical textbooks or scientific discoveries from the 19th century with a view of introducing them now?

Also, the means of production and or land were seen as the source of all wealth by these thinkers in the mid 1800’s.

Other sources of wealth

Now other sources of wealth are available. Using the internet as a delivery platform, for example, allows for the development of worldwide monopolies or oligopolies for online auctions, online market places, online search engines. We can choose only between a couple of operating systems for our phones and computers. All suppliers of our goods and services are more and more concentrated, be it for our food, cars or large public/infrastructure projects. There are only two electronic worldwide payment services consumers can use to pay with their credit cards.
We are struggling to find anwers for these concentrations of power and wealth. It is not the means of production any more which is the problem, but it is their concentration.

Money

If you had enough money you could, of course, buy these assets and their captive markets. So that makes money as important as the real assets. Owners of money can become owners of means of production, or owners of a large food manufacturer. If you have money you can buy land or Netflix.

Money allows you to try and influence elections via Facebook, or sponsor American congressmen, so they might sponsor a law in your favour. Money is ideal medium for corruption, it can disappear into off-shore tax havens (unlike land or means of production), and therefore the ultimate power tool.

Money can change the public consciousness. That is why rich people love to fund think-tanks and buy media. These billionaires employ millionaire-voices which will share their point of view on things. Thus the media will never advocate higher taxes, and never advocate higher welfare spending. That soft power is invaluable to billionaires who fund these “propaganda” outlets.
If we want to change the way power is exercised, we should look at money (how it is created and distributed) and not to the owners of means of production (Marx) or land (George). The theories of Karl Marx and Henry George, who describe what they saw in the second half of the 19th century are clearly not the only way to describe power relationships.

There are very practical ways of dealing with the distribution and creation of money.

Do not pay interest on government borrowing, for example. That takes literally trillions out of the pockets of the rich. (Around Euro 8 trillion if the EU countries had not paid interest on their government borrowing since 1995. Total EU government debt of all EU countries would therefore be closer to the Euro 5 trillion it was in 1995, and not the Euro 13 trillion it is now)

 

This is one of the policies which Modern Monetary Theory proposes. “Zero Interest Rate policy for government borrowing” and “use of taxes to fight inflation”. They would deprive the rich of some of their money, and therefore rein in their power.

You do not need revolutions, nationalisations, expropriations or (unless you have inflation) even taxes to limit the power of the rich. Initially, just the sensible policies which MMT suggests. If governments do not use higher interest rates to fight inflation, that will limit the wealth transfer from poor to rich, and from young to old.

grace_power

If people on the left argue that MMT does not have a “theory of power”, may I suggest that they look at the compound effect of some of the policies of MMT. It will have the effect to take money away from the powerful. That is a very practical step to take away their power.

Introducing zero interest rates on government debt and ditching monetary policy would not be the only step to get money working for all. The banks have to be reined in further, no doubt. But let the government set out proposals what it can do by itself first, before it goes on to curtail the powers of the other issuers of money, such as the commercial banks.

Dealing with money is dealing with power.

And any new progressive government should take money seriously.

 

 

 

 

 

 

 

 

Why did government not bribe us to Remain?

Simon Wren-Lewis blames David Cameron in his latest blog post for losing the Brexit vote “… his ruinous austerity policy and his immigrant scapegoating ensured he lost the referendum”

He makes a good case to support his point, but I think that is not why Remain lost.

Ultimately Cameron did not bribe the electorate enough.

What do I mean?

On the one hand we had the Leave vote promising “an extra £350 million for the NHS” on the side of a bus. We all remember it, we all still talk about it, that must have been the most efficient advertising campaigns ever, for anything.

On the other hand the Remain vote tried to scare us into voting for Remain, as otherwise the economy might collapse. That was enforced just weeks before the vote by a further dire warning by George Osborne, warning of tax rises to come to meet the black hole in public finances.

Now, 2.5 years later, the numbers are in. In a previous post Simon Wren-Lewis states that the loss to the government coffers so far are £17bn, due to a loss of GDP overall. The loss to the economy is about what was forecast. The £17 billion missing tax revenue is about £250 for each of the 65 million living in the UK.

Now the government obviously knew that if we were to remain, the situation was to be economically favourable. It had the forecasts. It also knew it was in grave danger of losing, hence the further threats by Osborne briefly before the vote.

Against this, there was the hope by the Leave camp that even if the economy was worse off, the NHS would be better off by £350m a week. Clearly leaving the EU meant leaving the EU contributions, as well, which would have paid for the extra money for the NHS. (Many knew it would be more complicated, of course, but many did not believe the experts either.)

So what should Cameron/Osborne have done instead, knowing they were just about to lose?

They should have promised £250 for each man, woman and child by the end of 2018. So £1,000 cash for a four person family, paid into each person’s bank account in the country.

Straight choice:

£250 in cash for myself  and every one in my family – Remain
£350 million for the NHS a week – Leave

I know we all love the NHS, but I am pretty sure I know who would have won.

bribe

 

After winning and paying out the money in 2018, the government tax situation would have been exactly the same as is now. But we would have a lot more GDP. And we would still be in the EU.