The digital symposium was produced throughout the pandemic ‘lockdowns’ as they rolled across the globe in 2020-2021, the purpose was to speak across the silos of academic disciplines to ask what is the state of the art in terms of what is known about inequality? Why is knowing about inequality important? The purpose was to connect academic research to practical, inclusive and innovative solutions to inequality because it is the issue of our time. The Progressive Economy Forum was featured in podcast discussions of the edit collection, The Return of the State: Restructuring Britain for the Common Good (Agenda Press: 2019), by Patrick Allen, Sue Konzelmann, and Jan Toporowski, and Coordinator, James Meadway, contributes to the debates throughout. 

Progressive economic ideas thinks about inequality through the lens of distribution, rather than scarcity. When we think about what is just, we think about who gets what. A distributive paradigm looks at wealth and income levels, material goods and social position to evaluate the wellbeing of society. The term inequality measures the separations between groups within society, either at the national or global level, and asks whether these distributions are just. The digital symposium was a series of dialogues seeking to advance our thinking about what creates inequality as well as our considerations of how inequity touches our lives in really meaningful ways.

PEF Coordinator, Dr James Meadway draws out the distributive paradigm driving contemporary inequality via Piketty’s thesis,  ‘when returns to capital from wealth surpass those from employment, income inequality worsens’ – in order to connect economic ideas to the practical reality. Specifically, that the wealthiest 1% of people globally produce the same emissions as the poorest in the bottom half, over 3 billion people. Thomas Piketty ‘Capital in the Twenty-First Century’ featured prominently in the dialogue because, as Paul Krugman articulated Piketty’s thesis changed the way economists in particular think and talk about wealth and inequality. This very point is discussed with Professor Mike Savage, from the LSE’s International Inequalities Institute, as his newest book, ‘The Return of Inequality’, is considered the sociological reply to the Parisian economist. Savage calls for more iconoclastic thinking around inequality, a recognition that inheritance (via state tax policies tax income compared to wealth) isn’t just about passing on economic resources, but passing on cultural capacities. In recognising this, the true legacies of capitalism can be articulated. Indeed, colonialism is central to configuring global inequality – the historical geographies that inform global hierarchies of states by wealth and GPD. In national domestic economies income and wealth inequality connect to systems of race, gender and class as social stratifications. Combining understandings of the weight of history, with the economic frames of income and wealth, reveals the conditions that create and reproduce inequality between groups.

The role of the state in generating, perpetuating and/or addressing inequality is discussed in terms of how economic ideas are applied in the exercise of public policy. This is the context, the dialogue asked if we change how we think and talk about inequality, what really changes? We can understand inequality in all its guises, we can measure it in all kinds of different ways, we can agree, it’s an urgent economic and social policy, but nothing changes if this knowledge is not put to good use. Fatalism is not an option. We are social beings, the greatest problem solvers on the planet (according to David Attenborough), and we can build a better, more sustainable and equitable way of living. For practical solutions, there are plenty of examples of when inequality was not just a social problem, this suggests that changes in economic ideas that inform public policies can lead to improvement or worsening of inequality. Having established that inequality is not just a personal experience of extreme poverty or exorbitant wealth, we consider how widening inequality impacts political stability and social cohesion. 

The Return of the State, is featured in the symposium discussion on how what starts in the economy as income and wealth inequality radiates outward through society and politics in ways that generate polarization. What effect does inequality have on the balance between the state, the market and society? In turn, what effect can social democracy have on addressing inequality? The discussion begins with a need to stop talking about equality as a playing field. When policy makers frame inequality in this way, they are putting people on opposing teams to compete in a winner takes all game of life. Imagine how much life would improve if governments framed equity as a ‘common good’ or a resource for society to draw on, providing widespread prosperity and cohesion rather than individual gains and division. Where ideas lead, practical solutions follow – so we must change how we think and talk about inequality, the issue of our time. 

PEF Council member, Sue Konzelmann contributes to the symposium by articulating how insecurity-cycles are engrained in economic policies that generate worsening inequality. She explains how historically and geographically different economic policy regimes inform distributive paradigms (who gets’ what) which either worsen or improve inequality. Economic ideas are central to understanding why inequality exists where it does, but also points to what policy levers to pull to promote greater equity in society. Throughout the dialogues the tension between seeing inequality as systemic, rather than an individual or personal (moral) failing, is why the state via public policies is so important in shaping inequality. For instance, the role of the state is seen as central to how finance shapes contemporary inequality. This point is expressed clearly in Lisa Adkins, and Martjin Konings contribution to the dialogue in their discussion of their new book, ‘The Asset Economy’, which articulate how the foundational shift in center of gravity capitalism from a commodities-based economy to an asset-based economy creates a system of ‘lock-in’ via residential housing, which is a key aspect of inequality in urban centers across the globe. In the Asset economy, wealth is accumulated because asset prices increase at a faster rate than wages and consumer prices – having family wealth or inheritance have become more important than income in contributing to financial security through asset ownership. 

PEF Council member, Jan Toporowski, contributes to the dialogues with key reflections on the systems of oppression that underpin asset, income and wealth inequality. Looking historically at industrial feudalism and contemporary financialized capitalism and how these epochs shape the intimacies of life – not simply as labour but also in terms of age, race, gender, and where you live. He articulates the key points where economics meets social configurations of oppression by excluding groups from wealth accumulation via barriers to accessing employment and finance, which are the only routes to holding assets, besides inheritance of course. This reflection summarizes the arc of the dialogue on key fault lines of inequality. For instance, the transformation of residential housing as the site where employment, debt and assets come together and appear in everyday life. The home evolved from a place where people live, into an asset, and then to an asset in which capital gains are expected. Housing has been promoted by governments as a form of welfare, a way of providing for one’s own security and that of your family, central to the narrative of self-reliance above state provision. Mehrsa Baradaran, ‘The Color of Money’ examines how marginalised groups are adversely incorporated into the financial system: “Just as exploitative credit arrangements, like sharecropping were created because of the demand for worldwide cotton, subprime lending was connected to the worldwide demand for mortgage loans. Global capital markets found yield in the cotton produced by sharecroppers and in the interest paid by subprime borrowers. That the black community was exploited in both situations speaks to their lack of wealth, political power and their exclusion from the main channels of financial power.” Having to access financial markets in order to access the basic provisions of life, like housing, is deeply entangled with the discrimination of historically marginalized groups in society. Interestingly, in addition to racial inequalities, this dynamic can also be seen in age-cohorts. For young people, access to family wealth they can use for a down payment on a property gives them a decisive advantage over those without, even if they earn more money. What becomes clear is that whether an asset or a debt, it is the deeper integration of finance into everyday life that shapes the fortunes and misfortunes of society.

In conclusion, many people already recognize inequities in everyday life whether as categories of inequality, such as being poor, experiencing racial or gender discrimination, also inequity can be seen in the differential experiences of climate breakdown or the historical geographies of colonialism. Those least responsible for society’s ills are suffering disproportionately, breeding further division in society. This podcast miniseries articulates why inequality is one of the greatest challenges facing humanity in the 21st century –  it erodes prosperity and destabilises society. Inequality is another word for the serious, deeply unjust, social challenges facing human society which are systemic, woven into the very fabric of daily life. Progressive economics provides a set of economic ideas that can bring greater cohesion to solve collective problems, whether inequality, climate change or the threat of a viral pandemic.

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The cause of this stagnation is clear: the underlying condition of chronic debt dependence, euphemistically termed ‘secular stagnation’ by economists. After decades of public policy encouraging the build-up of all kinds of debt, the economy is trapped by the debt overhang. Prior to 2008, private debt levels grew rapidly each year until the Global Financial Crisis struck, and for over a decade since public debt has grown too, with the Bank of England’s balance sheet growing by over 500%. 

To put it simply, the current UK economy operates based on an overlapping set of dependencies on debt. Financial institutions use debt as a major source of profits; households depend on debt to participate in the economy and sustain their standard of living; and of governments of all stripes depend on private debt to keep the economy growing and, when this strategy fails, use public debt to fill the gap. 

It all begins with households. Households are central pillar of debt-led growth because their ability to maintain monthly remittance of income as debt repayments into global financial markets is paramount to the overall stability of the UK and global economy. The Money Charity publishes monthly statistics on the overall picture of private household debt in the UK; for February 2020, at the cusp of the Covid-19 outbreak, the indicators are stark. Overall, UK households owed £1,675 billion (or £1.7 trillion) – the highest amount ever recorded, equivalent to 112% of average earnings. These statistics demonstrate without doubt that the entire household sector is quite literally ‘under water,’ because their debts exceed their incomes. 

However, the £139 million per day transferred from households into financial markets as interest payments is essential for financial markets to survive, and this is a big problem when it comes to coping with Covid-19. The banking system and the government are as dependent on households servicing their debts as households are – without that money everyone is in real trouble. Covid-19 has the potential to catalyse the deepest peacetime recession we have ever seen, bringing with it the potential for large scale human suffering because the economy is as sick as its people.

The problem facing households prior to the pandemic was income insecurity and financial fragility, caused, in part, by debt. People had jobs but their incomes were increasingly insecure, and most people in work were also loaded up with debts. This has always been blind spot for most economists and public policymakers because they frame the economic problems facing households in terms of unemployment and the cost-of-living, which were the major economic problems in the 1970s. This policy bias is why the economic challenge of the Covid-19 response seeks to support the banks and business, or the supply-side: the hope is that these emergency loans will keep people employed.

In this sense, just as in 2008, the response to Covid-19 induced economic shock is to treat the symptoms without combatting the underlying disease: make more cheap debt available to banks and firms without ever considering how it will be paid for.

As with austerity, the household, or ordinary people, will absorb the shock of the oncoming economic collapse, but with the added stress of trying to survive a pandemic. The UK’s Covid-19 response expects households to continue working, continue spending, continue paying old debts and continue to take on more debt to help the economy survive. This is as irresponsible as it is fanciful. Unlike in 2008, we must protect households from bearing the brunt of this crisis. To do so, two main interventions are required. 

First, temporarily suspend existing debt payments. My recent book, Should We Abolish Household Debt, shows how equivalents to the bailout packages now on offer for banks can be made available to households as a means of ending chronic debt dependence. In response to Covid-19, a temporary suspension of debt repayments would immediately give households more money at their disposal. It would be easy to implement through existing regulation for lenders to offer forbearance to borrowers struggling to meet payments. The recent Bank of England cut to interest rates can be passed on to households by offering all debtors a 0% balance transfer of up to £14,000 of outstanding debt for all borrowers (called a Long-term refinancing operation, or LTRO). 

Next, supporting incomes is paramount. The government’s 80% wage guarantee for those employed was a start, but it didn’t go far enough for the precarious or the self-employed. Income supports – either through increased unemployment benefits or direct transfers – are urgently needed for these groups. The Resolution Foundation has published proposals for automatic stabilisers such as extending Statutory Sick Pay (SSP) targeting small and medium size businesses and those earning less than £118 per week (£120 from April), who are currently ineligible, and increasing the amount to £160 per week. Alternatively, Guy Standing advocates introducing a guaranteed minimum income as a means of protecting people from the harm caused by the economic shock of the Covid-19 pandemic. 

Together, these economic measures will provide some basic social security for a population coping with a virulent disease. Economist Steve Keen explains how they can be funded using Coronabonds, which would give markets, people, and the state the money they need now to cope with the pandemic and its aftermath. What is not clear is whether the government are listening. 

This piece was originally published by Tribune Magazine, the original post can be found here. Photo credit: Flickr/JD Mack.

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Austerity has changed the landscape of the UK (and Europe) since the 2008 economic crisis. Austerity is the new normal and we are getting used to it. No one believed Phillip Hammond’s 2018 claim that austerity was over, and everyone expects an emergency budget the moment the UK leaves the European Union. Austerity has become more than a public policy platform: it is a mood, a depression, a chronic case of financial melancholia. Austerity is, above all, an experiment. This means that its policies are in motion and can be contested, but also that its results and consequences are not yet fully known.

In my research I look at the hidden cost of the austerity-led recovery of the UK economy, and untangle the causes and justifications made to build what is now an unprecedented debt at the national, firm, and household level. I argue that what moral story is told and what remains untold about the crisis is a way of weaponizing ‘debt’ to justify economic decisions that generate inequality. For example, while unconventional monetary policy has benefited the top 5% of households, austerity-induced cuts have ravaged the bottom 95%. In post-2008 Britain, the narrative constructed articulated a set of ideas that made austerity possible. The need of ending ‘reckless overspending’ (caused by previous Labour governments); the presentation of cuts as the only way to restore fiscal credibility; and welfare reforms as a necessary measure to put an order in the public expenses are the pillars of what has been said to justify harsh intervention.

Economic storytelling involves how economic expertise is used in meaning-making about austerity. In particular, ‘the debt story’ acts to justify austerity in order to maintain financialised debt as a driving force in the economy. Austerity prevents the much-needed structural reforms to the economy by endlessly subsidising the financial services sector, which must be ‘paid for’ with cuts to government provisioning. Put simply, there is no alternative to austerity if the objective is to sustain finance-led, debt-driven growth. Austerity will be endless because another financial crisis is always around the corner. Will it be Brexit? A US recession? China has its 2008 moment? Any or all of these are possible outcomes in the next year. The response will be more bailouts for the ‘strategically important’ financial industries and more austerity for everyone else.

Austerity creates the economic stagnation which cultivates a deeper melancholic aesthetic. Austerity requires re-engineering the role of the state away from providing services, investment, and transfers to households in order to continue to prop up the financial sector, using high levels of government debt as justification. As the mountain of debt gets bigger, there can be no more government spending or investment in case the same financial institution decides sterling is over-valued. Yet, government debt acts as a driver of financialisation as well, acting as capital from which banks can lend on private debt to firms and households. What starts as the Zombie Bank becomes a Zombie Financial Sector requiring a subservient state to feed it privatised contracts, government debt as collateral, and artificially low interest rates that fuel a relentless hunt for yield. This is a basic model of financialised growth in the age of austerity.

The economy, the state, and the household are drowning in debt, thus how you use economics to explain which are the ‘good’ and the ‘bad’ debts is important. However, debt-driven growth has generated a wider mood of austerity as a growing proportion of households struggle to manage their own debts and, looking to the future, see only a future of endless debt repayment. The time-trap of debt colonises the UK’s economic future into a debtors’ prison. When the BBC broadcast its newest adaptation of Charles Dickens’ Little Dorrit, the melancholia of 19^th century debtors’ prison seemed an eerily familiar mood to contemporary Britain.

Today’s debtors’ prison is walled with legal contracts to service the £1.7 trillion of public debt (which does not include the government debt held on the Bank of England’s balance sheet) and the £1.64 trillion of household debt. This enormous stock of debt must be fed a steady stream of present-day income, flowing from households (through income and taxation) straight into financial markets. Global debt securities markets are many times bigger than global GDP: according to the IMF, global debt reached an all-time high of (USD) $184 trillion in nominal terms, the equivalent of 225% of GDP in 2017. On average, the world’s debt now exceeds $86,000 in per capita terms, which is more than two and a half times the average income per capita.

This debt must be governed, it must be managed. Therefore, the economic stories you tell about debt – whether it is the national debt, corporate debt, household debt – these are the stories of power. The justification of austerity is that it is necessary to deal with debt. At the same time, austerity is the reason there is so much debt. This endless cycle of credit-fuelled ‘boom’, debt-induced ‘bust’, followed swiftly by a necessary bailout and compulsory austerity.

Breaking away from austerity requires cultivating an alternative economic story that brings about a new mood. A hopeful vision of an alternative path will bring a better economic future for those currently surviving or suffering from austerity-induced melancholia. Structural reforms away from debt dependent growth are the only viable alternative to boom, bust, bailout, austerity ‘doom loop‘ we are currently stuck in. Just look at Japan: we could be stuck for another 20 years and still see no renewal.

Ending austerity requires more than just a public policy platform, although that would be a good start; it requires a change in the elusive animal spirits of a market society. A shift from austere to effervescent economic policy, and a political message of a hopeful future that is better than the present.

This article was originally published on the LSE British Politics and Policy blog. Photo credit from: Flickr / MOD

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Earlier this month, Professor Philip Alston embarked on a two-week tour of the UK – not to give lectures or to present at conferences, as one might expect of a visiting academic, but rather to investigate the UK in his official capacity as the UN Special Rapporteur on extreme poverty and human rights.

Over the course of his inquiry, Alston spoke to politicians of all stripes; met with civil society groups, community organisations and front line workers; and most notably, listened first-hand to the testimonies of people living in poverty. On Friday 16 November, the UN published a statement summarising his findings – one which can only be described as an excoriation of austerity.

Before moving on to these findings, it is worth noting that this isn’t the first time British austerity has been the object of such UN scrutiny. In 2015-6, the UK had the honour of being the first country investigated by the UN over “grave and systemic violations of the Convention on the Rights of Persons with Disabilities”. The investigating committee found that welfare ‘reforms’ – e.g. changes to Housing Benefit entitlement, the closure of the Independent Living Fund – enacted by the Conservatives in the name of austerity had indeed led to grave and systemic violations of disabled people’s rights.

But of course, the Government rejected all the recommendations made by the committee to rectify the situation.

Findings of the UN inquiry

Professor Alston’s statement – well worth reading in full – is nothing short of damning. It lays bare the extent of misery and poverty that the Government has visited on the most vulnerable people in our society. He has dutifully collated individual testimonies from the victims of austerity, and has interwoven these with statistical evidence showing that these stories are far from anecdotal or anomalous – they are representative.

“I needed full time care, and my husband had to leave his job. Suddenly we were living on disability. Then our landlord gave us eight weeks to vacate the apartment. We discovered that no one will let you view a house when you’re on disability benefits…. I do not know where I’ll be putting my child to bed soon. Should he be made homeless?” 

Erin, Jaywick

“14 million people, a fifth of the population, live in poverty. Four million of these are more than 50% below the poverty line, and 1.5 million are destitute, unable to afford basic essentials. The… Institute for Fiscal Studies predicts a 7% rise in child poverty between 2015 and 2022, and various sources predict child poverty rates of as high as 40%. For almost one in every two children to be poor in twenty-first century Britain is not just a disgrace, but a social calamity and an economic disaster, all rolled into one.”

Professor Alston’s headline summary of the impacts of austerity

Austerity was a political choice

Most importantly, Alston does not accept the logic that such hardship was necessary. He puts it plainly in the conclusion of his statement:

“The experience of the United Kingdom, especially since 2010, underscores the conclusion that poverty is a political choice. Austerity could easily have spared the poor, if the political will had existed to do so. Resources were available to the Treasury at the last budget that could have transformed the situation of millions of people living in poverty, but the political choice was made to fund tax cuts for the wealthy instead.”

Earlier on in his report, Alston warns that discussing post-2010 policy under the rubric of ‘austerity’ risks implying that there was some underlying economic driving force that necessitated the cuts – the need to ‘eliminate the deficit’, for instance. Rather, the motivation for the cuts was “a commitment to achieving radical social reengineering”. He describes this social re-engineering as follows:

“great misery has… been inflicted unnecessarily, especially on the working poor, on single mothers struggling against mighty odds, on people with disabilities who are already marginalized, and on millions of children who are being locked into a cycle of poverty from which most will have great difficulty escaping”.

The Government’s response has been cold. The new work and pensions secretary Amber Rudd chose to respond to the statement by expressing her disappointment – not at the rapporteur’s findings on the extent of deprivation in the UK, but rather at the “political nature of his language”.

100 Policies to End Austerity

Theresa May and Philip Hammond may have flirted with the idea of “an end to austerity”, but there are more cuts to come. Until the government acts decisively to repair the unnecessary damage inflicted in its name, austerity will continue, regardless of rhetoric.

The UN report makes it clear that austerity is unnecessary, that to continue with it would be an explicit political choice. There are many routes from economic crisis to lasting recovery; austerity is not one of them, not least because of its high human cost.

This may be vehemently denied by conservatives, indicating a broader trend (noted by John Lanchester) for conservatives to depend less on moral justifications for their brand of capitalism and more on the insistence that there is no other option. Such obstinacy often translates into a refusal to see the hardships caused by austerity – see Conservative MP Kwasi Kwarteng’s response to the case of Emily Lyndon on The Andrew Marr Show for an example.

The Progressive Economy Forum seeks to present an alternative vision for economic leadership. By curating 100 Policies to End Austerity – a series of succinct, concrete and accessible proposals for elements of a renewed economic programme – we hope to paint a picture of what a better future could look like.

Together, these proposals will show us how we can end austerity for good and redress the harms it has inflicted – more broadly, how we can change the way our economy is run. You can see the first few entries in the series on our blog, and find out more about the series in our launch post here. If you would like to contribute to the series, please see our call for submissions.

Photo credit from previous page: Flickr / UN Geneva

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What makes households a central pillar of debt-led growth is the amount of money they send each month into global financial markets, either as payments on debts like mortgages and consumer loans, or as income claims on debt securities.

From this constellation of forces, debt has become a cure-all for governments seeking to expand employment and investment; financial institutions seeking capital gains, and the wealthiest segment of households with significant financial assets. But, at the same time, debt has become a poison pill for an ever-growing number of households by destroying their financial security.

As incomes have stagnated (and, for some, even declined in real terms over the last decade), the demand for debt to plug the gap has grown and the burden of repayment has become more onerous.

Since the 2008 financial crisis, unconventional monetary policy and austerity have prevented any systemic reforms of the UK economy to end its chronic dependence on debt. Instead, debt dependence became a strategic silence.

Everyone knows household debt is a major cause of entrenched economic malaise but no one in a position of power is willing to do anything about it. In a cruel political sleight of hand, household debt is reduced to a personal problem or failing, ignoring the stark reality that the UK economy is as dependent on household debt as individuals are.

Cancelling household debt

A comprehensive package of debt cancellation measures available to households will target harmful debt to provide relief to those that are struggling. By extension, this will create uplift in the economy and society, as those who were once struggling to pay old debts can spend and contribute to the real economy instead.

The package will involve rewriting existing ways that debt is written down and written off. It would start by creating a household debt cancellation fund, with the same amount that was offered to bail out the banks ten years ago as its capital. That’s roughly, £500 billion cash and £2 trillion in guarantees in the UK.

My proposal is to use the £2 trillion in credit guarantees to fund a long-term refinancing operation for consumer and mortgage debt loans that have started since 2009. The £500 billion in cash in the household debt cancellation fund will be used to pool together old (originating before 2007) and onerous (those that cause harm) debts for a negotiated settlement with lenders.

This method targets specific types of debt, rather than specific populations of debtors, to amplify the positive impact of debt cancellation across the economy and society.

Everyday experiences

Understanding the effects of debt and locating the harm it can generate begins with the everyday life experiences of people who have personal experience of debt dependence. They cannot buy a home without taking on more debt than they can afford. They can only get a university degree by taking on more debt than they will earn when they graduate. They borrow to get through a family member’s illness or period of unemployment. Credit cards get them to the end of each month – or they live in their overdraft.

For many, debt is a necessity, not an option. Others are not adversely affected by debt; they tend to be older, live near a major city, or they have wealthy parents. For the baby boomer generation, and even most of Generation X, everyday economic life is very different. These people bought a house with a reasonable amount of debt and, in return, have seen its value triple (or more) over their lifetimes; getting a university degree was affordable because they didn’t need loans, and when they graduated, jobs were plentiful and paid well.

Many recognise that times have changed. Debt was once an option, a choice, something that could be managed with buoyant incomes and would deliver wealth gains. Today, debt is a necessity and the prospect of ever being free from it, for many people, is very unlikely.

Cancelling a significant portion of the enormous debt overhang will end austerity on the macroeconomic level by providing households with much needed debt relief. This is the most direct way of ending the financial crisis that continues to grip households, one which means they must simultaneously continue to pay their debts and absorb both the shock of economic downturn and the costs of austerity.

Let’s not forget that the lenders and the entire financial sector received hefty bailouts and direct financing from the central bank to protect them from the consequences of the financial crisis they caused. I contend that abolishing household debt would be more effective than current monetary policy. It would also better enable an end to the UK economy’s long-term dependence on debt.

This article is part of our 100 Policies to End Austerity series, and is cross-posted from The Conversation.

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The lost decade?

A decade on from the Global Financial Crisis (GFC), now is the time for serious reflection on where we are, how we got here and what future lies before us. In the aftermath of the 2008 crisis, finance-driven capitalism appeared to be on a precipice. The collapse of leading global financial institutions in the US and UK led to a freefall in global markets, followed by the European Sovereign Debt crisis. It all seemed to herald the end of unfettered financial expansion. Indeed, many believed 2008 was another 1929 moment. A systemic crisis would bring about a New Deal style recovery and a Bretton Woods agreement for the 21^st century to establish clear parameters for a stable global financial system. A decade later the outcome is far different: financial capitalism has never had it so good.

The initial bailouts, deemed necessary to keep the financial system afloat, were followed by drastic reductions in interest rates that have yet to return to pre-crisis levels. Risk guarantees offered by Central Banks and Treasury Departments across the globe were committed to providing the money (liquidity) necessary to maintain the stability the global financial system. This was followed by asset buy-back schemes and long-term refinance operations which became systematised into successive rounds of Quantitative Easing (QE). Technocratic speak refers to the last decade, euphemistically, as the ‘era of unconventional monetary policy’, or the biggest ever helicopter money drop onto the financial sector in living memory. Those who believed 2008 could have been a reckoning for the failures of finance-driven growth could not be more disappointed. The financial sector is more entrenched than before the crisis, and the political power of finance to control the public policy agenda stronger than ever.

Looking to the future and seeing much of the same

Looking back over the past decade, even achieving an economic ‘recovery’ took longer than the Great Depression. The promises of a rebalancing of growth across Great Britain, well-funded health and education services, and prosperity for 95% that did not benefit from QE, never materialised. The failures of austerity are plain for all to see: the economy is stagnant and most people are worst off now than a decade ago.

Our shared economic future only promises more austerity. Wages and incomes will continue to stagnate. The economy will be still dependent on private debt to fuel asset bubbles and ever more household debt will be needed to sustain meagre economic growth. With the economy in the doldrums and Brexit looming on the horizon, we face entrenched economic malaise or another severe financial crisis. When growth is forecast over the medium term, it is always revised downward. To put it simply, no one is predicting the UK’s economic future getting any better.

Making another future possible: we need an alternative policy agenda

In the face of peril, we cannot lapse into fatalism. We need to break out of the perpetual loop of anti-austerity, which points to the real failures of the austerity policy agenda without clarity on viable alternatives. The Progressive Economy Forum (PEF) seeks to dispel the myths and lies of austerity economics and replace that pernicious ideology with a progressive macroeconomic vision and narrative that makes another future possible.

The aim is to develop a 21st century Keynesian policy platform, that will end today’s austerity just as Keynes’ ideas in practice helped end the Great Depression and usher in a generation of economic stability and prosperity.  In his pioneering work, The General Theory of Employment Interest and Money (page 383), Keynes famously wrote:

“Practical [people] who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

Today, the global economy is gripped by these same “madmen in authority” that bring us austerity. The current “voices in the air” come from economists who are very much alive and whose scribbling continues unabashedly. In response, we must begin mapping out a new direction, to forge a different path that leads to a better future.

100 policies to end austerity: a call for interventions

The goal of PEF is to build a policy platform that will end austerity in a way that embraces the progressive values of equality, dynamism and sustainability. In line with openDemocracy’s New Thinking for the British Economy agenda, our aim is to cultivate a rich garden of new ideas, policies and plans to end austerity by forging a new path. Our bold plan is to curate 100 Policies to End Austerity as a starting point for a better future. We will bring together contributions from economists and policy experts that articulate clear proposals for a progressive, sustainable and equitable British economy for the 21^st century. This is the start of an interactive conversation, not a definitive policy platform, about a vision of a better future.

In practice these means debating the key ideas that inform public policy, like the monetary, fiscal and taxation policy needed to end austerity. In addition, it requires addressing the problems created by austerity. For example, creating an investment bank, green jobs, affordable housing, a fully-funded NHS and education system, compassionate care for an ageing population, a secure social security system, better local authority services and regional development. The list of ways to end the harm caused by austerity goes on. The challenge for progressives is to create a policy agenda that can foster a better future for everyone.

This article is cross-posted from openDemocracy.

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John Weeks: “austerity in real time”.

Every three months the Office for National Statistics (ONS) reports data on the main sectors of our economy, providing numbers on economic activity as a whole, the major sectors (manufacturing, construction and services), and categories of expenditure (by government, business, exports and imports).

The media and politicians invariably transform this rather bland non-event into a ritual of economic assessment, with the prime focus on “growth”, the aggregate measure of national economic activity as indicated by gross national product.  The commentary on this near-magic number, “percentage change in GDP” should carry a health warning, because special interests rush forward to provide their self-serving interpretation without explaining to the public what is being measured and why that measure enlightens our understanding.

Earlier this morning the ONS initiated the seasonal ritual with the announcement that “UK gross domestic product (GDP) in volume terms was estimated to have increased by 0.4% between Quarter 1 (Jan to Mar) 2018 and Quarter 2 (Apr to June) 2018.”  Many of those who read this statement, or found it in second hand reports, might conclude that our national production had increased, albeit by a very modest annual rate of 1.3% compared to a year before.

This conclusion would be false.  Delving further down in the ONS announcement, the reader discovers that activity in the “production” category – manufacturing, electricity and water, mining and agriculture – declined by 0.8% quarter-to-quarter, its sharpest quarterly fall since the end of 2012.

The production of goods declined, and businesses and households used less power and water – how could GDP increase?  Services and construction rose, counteracting the decline in production sectors (numerically, if not substantively).  To compensate for less domestic production our balance on international trade dropped deeper into the red (trade balance declined from £6.8 billion to 9 billion).

To put it simply, the increase in GDP from 0.2% in the first quarter to 0.4% in the second brought us an economy with less production and more imports.  This unpalatable combination results from the feckless continuation of Tory austerity policies that depress domestic demand (household consumption rose by a meagre 0.3%).

A few may hail this dismal outcome as a harbinger of good things to come.  I expect the many to take a more jaundiced view, because, to quote from section 6 of the report, compensation of employees “slowed to 0.6% in Quarter 2, which was the weakest growth since Quarter 4 (Oct to Dec) 2016.”

Slow expansion of our economy, depressed productive activity, and stagnation of earnings, austerity in real time.

Johnna Montgomerie: “people going into debt is how the UK economy putters on”.

Growth figures released today say the UK economy grew by 0.4%, compared to 0.2% last quarter. There is nothing to celebrate in yet another fraction of a percent of GDP growth. It is clear the UK economy is in the doldrums without any prospect of the winds picking up. The UK is at the bottom of the G7, the ‘sick man’ of the advanced economies around the world.

The biggest problem is that even this meagre performance is heavily reliant on record levels of consumer credit. People going into more and more debt is how the UK economy stays on life support; neither thriving or in recession, it putters on. UK households have seen their outgoings surpass their income for the first time in nearly 30 years. Economic stagnation has taken hold because wage growth is so slow it cannot stimulate economic activity or, increasingly, just manage current outstanding debts. This is why GDP growth isn’t translating into people’s pay packets.

Let us not celebrate mediocrity, and face the fact that the UK economy is a sinking ship. Without a bold and credible plan to chart a new course, expect more of the same in the months and years to come.

Danny Dorling: “the contraction of the financial sector takes place very quietly”.

Hidden in the detail of these figures was the news that Britain’s finance and insurance industries had shrunk, albeit only by a tenth of one percent. While the rest of the UK economy was growing, very slightly and slowly – more slowly than in recent years – growth in finance and insurance activity was negative.

The size of the contraction in these industries in the last quarter was roughly half of that in public administration, which has continued to be squeezed by public spending cuts. Most recently, it was reported that Northamptonshire County council will be making future cuts of up to £70 million. When the cuts in public sector spending were announced, the BBC reported one protestor as saying: “When people die this winter, because they will die this winter, the blood will be on your hands.” Contraction often occurs through a thousand small cuts.

In April 2018, the European Banking Authority (EBA) announced that that the salaries of the highest earning bankers in Europe had begun to fall. Almost all of the highest earning bankers are based in London. The EBA is currently based in London, but will be moving to Paris soon.

Unlike public sector cuts, which have immediate and obvious effects and result in protests reported by the BBC, the contraction of the finance and insurance industries in the UK takes place very quietly. It is not in the interest of the banks to point out who among their staff is moving to Paris or Frankfurt or Amsterdam and whether it is the younger bankers and lawyers without families who are moving first. And it is not in their interest to point out that they are now paying themselves less, as most people still understand that the highest paid bankers have been paid far too much. But hidden in today’s ONS report is yet more evidence of the contraction of what had been the UK’s most successful industry.

Richard Murphy: “nothing of any substance to celebrate here”.

The UK’s growth figure for the second quarter of 2018 has just been reported to be 0.4%. Compared to the 0.2% reported in the first quarter this sounds like an improvement. And in purely statistical terms it is, of course. That is the only indisputable thing about it.

Standing back this data remains deeply unexciting. And if it is understood that the first quarter may simply have been depressed by poor weather, which meant consumers deferred some spending simply because they could not, or would not, get out, then the bounce (if it can be called that) might well be little more than a correction.

And let’s also be candid; when the figures are so small, and the boundaries for reporting are so wide in proportion to them, the margins for error in this reporting are very high. No wonder the pound is still falling – they’re treating the change as no sign of a significant difference in the overall economic environment.

So my point is that we should go back to fundamentals. This growth rate is still very low. There is, despite what the Bank of England is forecasting, little sign that it is flowing through to wage rates. There are signs that it is private debt that continues to fund consumption growth. And there is massive uncertainty for the UK ahead, which is one reason why we remain so weak in comparison to other economies.

There is nothing of any substance to celebrate here. But there is ample reason to think there may be more trouble ahead.

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Ten years on from the Global Financial Crisis we are still in the grips of the Debt Economy. To put it simply there is a mutual dependence on debt: on the one hand, by government to drive flagging growth; on the other hand, by households to maintain their standard of living. This debt-dependence is a strategic silence. Everyone knows it is the root of entrenched economic malaise but no one in a position of power is willing to do anything about it. The economic governance of debt is on auto-pilot. The only real discussion is whether interest rates will nudge up by a fraction of a percent, or remain at historic lows of half a percent, for yet another four months. While politicians will occasionally rail against the perils of ‘public debt’, there is never a discussion of ‘private debt’, or the growing indebtedness of households.

My provocation to break the strategic silence on debt is that – all debt is both public and private at the same time. In the era of unconventional monetary policy, the boundaries between public and private debt are porous. What began in 2008 as bailouts became unquantified risk guarantees, asset buy-backs and long-term refinancing packaged together as Quantitative Easing, which after successive rounds has turned credit into a publicly subsidised commodity that only a handful of actors get access to. For example, a bank can borrow from the Bank of England at nearly zero percent interest – negative real rates when inflation is factored in. A large corporate borrower would get very close to 1%, again negative when inflation is factored in. Small businesses, if they can access credit at all (which is a big ‘IF’) could get between 2-6%. A homeowner, depending on how much equity in the home can borrow at 2-5%. Lines of credit, from 3-6.5%. A student loan, 6-8%, a credit card 18%, overdraft 35%, a pay day loan 350%.

To put it another way: if you need a £50 million loan you get negative rates, if you need £15,000 to get a University Degree you pay 6% and if you need £50 to make it to the end of the month it is hundreds of percent. At a time when government debt is the collateral for the entire financial system, the terms of credit show clearly how who the winners and losers of unconventional monetary policy are.

Furthermore, debt intervenes into the intimacies of everyday life; the young need a lot of debt to get an education (to hopefully get a job), a prospective homeowner needs ever more debt to access residential property. Debt is also a safety net. When someone in the household is made redundant, get a loan. When an elderly parent needs care, borrow. When a baby is born, run the credit card. The only thing worse than drowning in debt is having no access to credit at all – then all paths to education, housing and personal security are off limits.

It’s not just about monetary policy, but also the complete lack of effective (or meaningful) fiscal policy that enables the debt economy to flourish. It is bailouts and subsidies for some, and austerity for the rest.

As successive rounds of QE pumped more and more government debt into financial markets, the British public were told ‘we need to cut back on spending to reduce government debt’ and that ‘there is no magic money tree’. Over the past decade the Bank of England’s balance sheet has grown to a size never known in history to feed the financial sector. During this same period child poverty has risen by a million because there is no money to feed hungry children. As Mervyn King stated in 2011: “It is those people that absolutely did not cause the financial crisis, who now must pay for it”.

The standard critique of austerity focuses on the misuse of the ‘household’ metaphor to justify why the Treasury must curtail spending to pay down the national debt. Here, the boundary between the public debt and private debt is enforced because of the different terms under which governments and households access debt. The government can ‘monetise debt’ by creating its own national currency (money) by issuing sovereign bonds to pay for existing debt stock. By contrast, households borrow from banks at market interest rates, and these debts are paid for with waged income. This qualitative difference between public and private debt is accurate, but creates a misdirection. Making the distinction between public and private debt is done to advance another argument altogether: government spending needs to be used for investment and to stimulate growth, rather than more austerity. 

The problem of this anti-austerity argument is its focus on the numerical representations of debt as a stock of outstanding claims. It overlooks how debt is managed through emotional labour of people to care for, take responsibility for, and honour the obligations debt imposes. Thinking in these terms makes the emotive power of the austerity argument more obvious. The argument in favour of retrenchment, or cutting back to tackle the national debt, is merely re-articulating the everyday reality that a growing number of people face. They are dealing with a personal financial crisis, their income is not enough, their debts are too big to manage, and they must cut expenditures to pay down their debt in the hope that one day (many years from now) they will be prosperous again.

Austerity makes sense at the scale of the household, using the logic of everyday life. So much so that sound economic reasoning about the different institutional configuration of gilt-funded fiscal policy (and its role as guarantor of the global financial markets) does not resonate with people on an everyday level or in a way that can foster resistance to austerity.

The Progressive Economy Forum is a place where the everyday reality of people will be the starting point for the end of austerity. We need greater pluralism in economic thinking and an effervescent progressive debate about the economy. Entrenched economic malaise is fostering ever-greater forms of political and social instability, so much so that people are prepared to believe it when a strong man tells them it is as easy as ‘taking back control’ or being ‘great again’. Progressives must forge new economic discoveries that lead us out of crisis and into renewal. Our future depends on it.

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