At the beginning there, you heard our guest this week, Professor Richard Murphy, and we’re going to be talking to Richard in a moment about among other things, monetary operations, the Bradbury Pound, Jane Austen (yes, really), and the UK government’s standoff with the NHS regarding finances.
If you were born last week, you’ll be amazed to hear that a Conservative government doesn’t want to fully fund a nationally-cherished institution that helps sick and vulnerable people, but if you’re on to solid foods now, you’ve probably been through the five stages of grief regarding the underfunding of the NHS, and discovered a sixth stage called cynicism. The cruelty is the point. It’s branding. Sorry, I usually leave it a few minutes before I get ideological, but they started it.
Am I being unnecessarily harsh? Isn’t it the case that the government simply can’t spend any more because they’re just about to run out of money?
Well, I guess the reason humans write things down, and do journalism, and record things in various ways is so that we don’t have to remember all things at all times, so we can choose to understand our past all the way back to, oh I don’t know, this morning.
This morning, the banking system opened, it span into life, and started clearing payments. The payments from the government to NHS workers were cleared using pound-denominated central bank deposits known as reserves and those reserves were created at the central bank using keystrokes on a computer keyboard and they were created because the government told the central bank to spend the money. These pounds were created at will by the UK government because the UK government is the monopoly issuer of the British pound. From that point on, these pounds are then moved around a system of electronic ledgers until they’re deleted from the system via taxation.
This is modern money. To paraphrase MMT founder Warren Mosler, the government neither has nor doesn’t have any pounds - it’s the scorekeeper for the pound. And given that a scorekeeper with an electronic scoreboard doesn’t actually reach into a depleting, leaky bucket of points to put an additional point on the board, you can see clearly that this particular scorekeeper, the UK government, is being ideological when they say they’ve run out points and can’t possibly alter the scoreboard to stop people dying.
Numerophobic scorekeepers exist at the heart of governments all over the world, but there are ways to help them combat their fear of numbers. One is to become a defence contractor and get them excited about projectiles and tasers and teargas, that seems to help them find the resolve to put extra points on the board, but it can backfire if you have a narcissistic head of state who decides use the equipment you just sold him to gas and tase and shoot the domestic population in a bid to boost his approval rating, and to distract from the tens of thousands of people he’s killed by being criminally negligent in the middle of a pandemic.
Or, if you live in a country with a modern money system - like say the US, The UK, Japan, Canada or Australia - you can realise you have control via the ballot box of your national currency and it can be used to mobilise resources to stop people and the planet dying. I like the sound of that second one. It seems worthwhile to me.
But if you are anxious around big numbers - don't worry - we’re also going to be talking about subtracting points from the national scoreboard, or as it’s more commonly known, taxation. We’re going to be talking to Professor Murphy about his work on tax justice viewed through the MMT lens.
Because new pounds are issued into existence when the government spends, we know they don’t need our tax money to spend, so why do they tax us? The MMT view on the purpose of taxes is also known as chartalism and it’s that the government issues us with tax bills or tax liabilities payable in their unique tokens, (called pounds here in the UK) to get us to need their currency so that they can spend these otherwise worthless tokens, these scoreboard points, into existence to buy things to provision the public purpose.
So given that tax liabilities are used to drive currency from inception, what taxation actually functions to do in a modern money system is to regulate what economists call “aggregate demand”, or the spending power of the private sector as a whole. If government spending remains the same, raising taxes removes spending power from the private sector and lowering taxes boosts the spending power of the private sector - which might be desirable in an economy with rising unemployment and underemployment.
So, given that taxes function to limit the spending power of the private sector, and that spending power needs to be limited in order to drive the currency and control inflation - whose spending power should be limited the most and whose should be limited the least?
And I’d say that’s a conversation worth having in a world where the definition of an advanced economy is that several million people struggle to survive on ten grand a year, while Jeff Bezos makes 8 million dollars every hour of his afternoon nap. I know we’re all just temporarily embarrassed Jeff Bezoses, but I’m convinced there must be some slightly better way to run things. Also maybe the plural of Bezos is Bezi, I’m not sure.
Anyway, we’re going to be talking about this and much more in a moment, before we dive in, just to say, in the show notes for this episode, I’ve linked to the articles by Richard that we talk about in the interview, and to his new YouTube channel - also in the interview we talk briefly about the primary MMT tool for controlling inflation, which is the Job Guarantee, so I’ve linked to our episodes 4 and 47 with Fadhel Kaboub and Pavlina Tcherneva, and they go into more detail about how the Job Guarantee or Transition Job scheme works as a price-stabilising mechanism.
And finally, there’s a link to where you can support this podcast via Patreon dot com slash MMT Podcast - support starts at a dollar a month, which is 78 British pence at the time of recording, and no matter what level of support you give, every patron gets early access to all our shows and patron only episodes, where you can ask me and Patricia MMT questions. We really appreciate your support at this difficult time, whether it’s financially, or by recommending us to other people and of course with the time you put in to understanding MMT. So thanks for listening. Let’s dive in.