Does deficit spending increase national debt?

A national economy, with a sovereign currency, is big money system. Unlike a household the independent inputs and outputs are not income and expenditure. The input to a national economy is currency that is introduced into the system through public spending. The output is the money that leaves to go abroad, as a trade deficit, currency that is saved by the private sector (households and business) and money that is removed from the system through taxation.

The diagram below illustrates this system for the UK in 2016. The government spent £745 billion1All data is approximate and values are indicative. Data was drawn from www.ukspending.co.uk into the economy on things like health, education, welfare and pensions and defence etc. It removed £680 billion in tax (income tax, corporation tax, VAT etc).

We are net importer, so our trade deficit was approximately £87 billion. In other words this currency left the domestic economy.

To balance this, private sector savings had to reduce to by $22 billion to meet the shortfall. For many individuals this means increased private debt. In other words £22 billion was introduced into the economy from the private sector. The private sector was using reserves or borrowing to deal with a private sector deficit created by government economic policy.

This model is the idea of former University of Cambridge economics professor and government adviser, Wynne Godley. Godley proposed that all surpluses had to match all deficits in the economy. This an accounting fact and not an economic theory.

A government with a sovereign currency does not borrow to spend . It simply credits the accounts of health trusts, local governments and welfare recipients.

Then, it is important to understand how the national debt arises.

Government bonds or gilts are used to reduce excess reserves accumulated in private sector saving accounts in commercial banks. This is necessary to maintain interest rates. If savings are too large then interest rates, as a result of supply and demand, will have to reduce. In order to stop them going negative the government has to reduce the amount of saving by exchanging currency reserves for bonds.

The private sector and its investors, in times of economic certainty prefer to limit risk. Government bonds are one of the least risky investments even though returns might be low. When the government cuts spending, like the Conservative-led government in the UK since 2010, demand reduces and private debt increases. Investing in business or development becomes risky, there is uncertainty that there will be sufficient demand to make the business sustainable. Currency that has gone overseas in trade or that has been accumulated in the domestic private sector ends up in banks and it is necessary for the government to exchange these for bonds, i.e. to increase the national debt.

This explains why, even when we cut spending, the national debt does not reduce and can even increase (see chart below). In fact, taking Wynne Godley’s approach demonstrates that the normal operating condition of a healthy economy is with a public sector deficit.

The period from 2010 shows a decrease in the deficit yet the national debt increased. It also happened 2004 to 2007 and 1993 to 1996. National debt is as much dependent on economic confidence as it is on public sector deficit.

Reference

Mitchell, W. F. (2016). Modern Monetary Theory and Practice: An Introductory text. CreateSpace Independent Publishing Platform.

This changes everything

I was feeling numb at five minutes to ten last Thursday. I had been campaigning intensely for the Labour party – both professionally and in a personal capacity – for months. It came up on Twitter, the mainstream media were saying that exit polls predicted a hung parliament. And while the Conservative party were predicted to be the largest party, the result for me marked a major change in British politics. It was going to be an exciting night.

So it turned out. As the results came in through the night it was clear that Labour had increased its share of the vote from April polls of about 25 per cent to 40 per cent in the General Election. This was unprecedented.

What is so significant, is the election result demonstrates strong support for a radically different economic and social policy. Radically different from the consensus that had existed between the major parties since the 1970s.

Keynes is back baby. The manufactured consent around a liberal/ neoliberal political economy which focuses on controlling public-sector spending and facilitating wealth creation has been shaken to its core. Particularly because it was the cause of the 2008 Global Financial Crisis and it prompted the austerity approach adopted by the Coalition government and Tory governments from 2010 to 2017. Neoliberalism and austerity has undermined public services and exacerbated inequality.

When I say Keynes is back, I mean that we stop the purblind view of the importance of wealth creators, but begin to look again at the role of government spending in creating demand. Wealth creators cannot attract wealth unless ordinary people have sufficient money to purchase things in the economy.

Government can increase that wealth through redistribution (e.g. progressive taxation), increased investment in the economy (e.g. through infrastructure, health and education) and more robust regulation of the financial sector (addressing exploitation of private debt). Since the UK government has a sovereign currency it can use its capacity to spend, tax and regulate to rebalance the economy.

Keynes is back, but it’s been upgraded by contemporary economists. I have written about it in the following posts:

http://stevenwatson.co.uk/2017/01/mmt-school-spending/

http://stevenwatson.co.uk/2017/02/spendandtax/

The consequence for teachers, educators and academics is that we have to start thinking differently. We have to think about what education might look like in a post-neoliberal world. Some of my thoughts are in the following post:

http://stevenwatson.co.uk/2017/05/laboureducationge2017/

Since the Labour Party’s positive manifesto has been welcomed by the country, we must now go further and think about how we transform our education system. Transform from a marketised, privatised and commodified system into a democratic system that serves communities and the nation in an inclusive way. Paying attention to social justice, peace, environment, community cohesion and individual and collective intellectual development. A system that must effectively serve people more and serve less those that run and control it.

Exciting times, I look forward to the debate.

 

Upon the rejection of a research article, nightmare and hope

I have a number of research strands going on at the moment. There is my research into mathematics teachers’ professional development – this goes back to my interests as a teacher and head of department and was followed up with my PhD research at the University of Nottingham. I also have an interest in learning processes in mathematics education, particular around school students engaged in rich tasks and problem solving. This relates, also, to my experiences as a teacher and again was something I looked at obliquely in my PhD research. The professional development I evaluated was to support teachers in implementing approaches that promoted the learning of problem-solving skills.

And then of course – those of you who have been reading my blogposts will know – I have got increasingly interested in political economy and public spending. This a result of my professional development research. I recognised, as part of this research, there are significant constraints and limitations on teachers in having access to good quality professional development. I followed the money, and power, and identified the source of these limitations. You really only have to look at Marx and Keynes to begin to comprehend the basis of decisions about the funding of the public sector. It is not based on a rationality of equity.

I am not going to mention my work on geodemographics here with Tim Mullen-Furness. That’s for another day.

While my research has grown to be diverse, I look up and down my inquiry trail. For a number of reasons, I find myself looking deeply, again, into professional development research particularly in respect to mathematics teachers. In part, this is prompted by the death of my PhD supervisor, Malcolm Swan. Sadly gone too soon. But also by the unexpected rejection of a research article. I submitted a theoretical/ empirical paper to a journal early in 2016. It came back in late summer with the ‘accept subject to major revisions’ tab. I duly revised and wrote a report about my changes and resubmitted. This was last September.

The night before last (these things always seem to come late at night and I always foolishly look at them) I received an email from the editor rejecting the paper. I had expected the reviewers to judge my paper based on the original reviews. But they had looked at it afresh. And rejected the blighter.

‘They have bloody well moved the goal posts’ I thought to myself angrily, as I laid a wake with insomnia. Insomnia directly related to my decision to look at and contemplate the email from the editor. In those dark hours, one can grow irrational. I do. I always have. I enter a dark terrain, like a bad acid trip. I began to consider that this single event may have a catastrophic effect on my progression from probation to tenure. Foolish and irrational, I know, over such a relatively small setback.

But it has focussed my mind on the overall purpose of my research and the direction in which it is going. While I have been merrily skipping on, on to new ground, it has taken me back. It has made me review my core interest. That of professional learning.

I need to thank my resplendent colleague Rupert Higham for his generous mentoring yesterday morning. He has inspired and encouraged me, as has done in the past, to steer my course as I feel appropriate. I must follow my water. He helped me make sense of myself.

In spite of the journal editor and reviewers’ final response to my piece. I recognise that I have been trying to bung my theoretical act onto an empirical stage. I am not anti empirical, its just that I am a thinker and schemer. Those dark terrains, the bad acid trips are the dark side of my imagination. The positive side of my imagination, the hope and vision that my overdosed imagination has given me has always outweighed the negative. As I have got older I can manage and ride out the extreme imagined fear knowing that experiences and people (and a good night’s sleep) can restore my positive frame.

The experience of this, in the last couple of days and the shocking events in Manchester, have, oddly, resulted in me being buoyant today. There are so many challenges in the world, on an unthinkable scale. But today I see my place, the way in which I can contribute, the way in which I can use my imagination to see a better world and contribute to some solutions.

 

Malcolm Swan – a few memories about my PhD supervisor

Malcolm was a kind-hearted supervisor. His real passion was designing mathematical tasks. I was lucky enough to become his PhD student at the Shell Centre in the University of Nottingham in 2010. The Shell Centre provided me with funding to evaluate the impact of the Bowland Professional Development materials on secondary mathematics teachers’ beliefs and practices. The materials were designed by Malcolm based on his years of experience designing tasks and classroom materials. They are superb.

Malcolm and I found that we had a spare couple of days in San Francisco in 2012, having been working with Alan Schoenfeld at UC Berkeley. We had a great time, Malcolm was always engaging and gentle company. Here we are fooling around on a cable car.

What I could never really figure out is how Malcolm could understand how students and teachers would think and act when working on the activities he designed. But he seemed to know. I know he did lots of careful observation and would refine his designs as a result. But he had something extra, some extra bit of magical imagination. It was like that of any creative, an artist, poet or writer, he had an imagined world, a very sophisticated one. When you engage with a Malcolm task you are entering his world. It is a wonderful world.

You don’t just venture alone into Malcolm’s world, he entices you to go as a group. His tasks are wonderfully infectious. Even before I met him I was using the Improving Learning in Mathematics (Standards Units) materials with low-attaining learners who had lost a lot of confidence in mathematics. They couldn’t help but argue and think together. I remember smiling at two or three year 10 girls, who initially refused to suffer the indignity of doing maths while in detention, but within a short time they were furiously debating the meaning of negative numbers and operations. A testament to the power of Malcolm’s task design.

We didn’t always agree during my time as a student. Sometimes it could be downright frustrating. Malcolm had his ideas and I had mine. But we got through. Malcolm was always patient. We realised we were never going to agree on how teachers’ beliefs worked and how they influenced what teachers did in the classroom. But through this it made me make sure I knew my stuff. It made me a better academic.

It was only in the last year or so, while training new mathematics teachers, that I really realised what a profound influence Malcolm had on my thinking about mathematics education. I stress to trainees the importance of tasks in assessment. That is real assessment, diagnostic assessment. Using tasks so you can see and understand the deep concepts and processes that learners struggle with or master. None of your gap filling rubbish.

Malcolm will be missed. Gone way too soon. But in my practice as a teacher educator and researcher Malcolm is with me always. Farewell Malcolm, I’m sure there’s a corner of heaven really busy with a card sort of yours right now.

One of my favourites from the Standards Units or Improving Learning in Mathematics

We all need to get out there and make sure we elect a Labour government

This is a plea, primarily, to those working in education: teachers, teaching assistants, lecturers, professors and administrative staff. This is the sector that I work in. But it is also a plea to all. The General Election, on June 8th, is probably one of the most important elections for a generation.  It may look like the Tories have already got it won with a commanding lead in the polls.  But they haven’t.  There is everything to play for yet.

If the Tories were to win another term in power, there would be further devastating cuts to public-sector education.  It would be privatized, commidified and marketized further.  This destruction would lead to a diminished service and unequal access.  The notion of a quality, free at the point of use, universal education service, from early years through to higher education would be at an end.  Replaced by a poorer outsourced system of provision.

The Tory education system will lead us to for-profit schooling, where the wealthiest will be able to extract profits, subsidized by the state, from our children’s attendance at school and college.  It is called choice, but it is no choice at all.  It is the creation of a market and commodity where there should be none.

On the other hand, the Labour Party offers a public service vision of education.  A National Education Service which will be universal, inclusive and free at the point of use.  No markets, no commodification, no privatisation.

It is not just education, it is health, welfare and the values and principles by which the citizens of the UK want to live their lives.  In the last 40 years, there has been a growing preoccupation with individual achievement and income. Competing with one another has drowned out our sense of community.  It has overridden the essential value of taking care of one another.  People are growing tired of this.  We seek a change.  A better balance between individual and collective.  One in which we can be individually successful, through our endeavours, and collectively successful, through what we share.

Not in my lifetime has the Labour Party offered such a bold, positive and hopeful vision for the future.  One in which the economy works for all, rather than for a tiny percentage of the population.  One in which we have properly funded public services.  And one in which we have full employment which offers fair reward, conditions and progress in return.

This is the vision of the Labour Party under the leadership of Jeremy Corbyn.

Corbyn has been the subject of immense personal attack from the media, from other political parties and even from within his own party.  However, he has withstood this without one word of abuse in retaliation.  He has shown steely determination in pursuing a programme of reforms that have the best interests of the majority of people in the UK.

In the past, we have relied on presidential style leadership.  We have expected that, once elected, a political party will act for us all, going about their work intelligently, efficiently and effectively.  But they haven’t, they have focused on soundbite and swing voter. Too often, they have been self-interested or acted in the interests of too few.

In Corbyn, we have a very different kind of leadership.  An inclusive, consultative and collective approach.  It is a leadership style that listens and facilitates, rather than commanding and controlling.  That is not to say, should the need be, decisive action would not be taken.

We are living in a divided society, a dangerous divided society.  We need leadership that is going to bring us together and unite.  This can only be achieved through careful, thoughtful and insightful leadership.  Leadership that is sensitive to divided voices.

For these reasons, Jeremy Corbyn will make an excellent Prime Minister.

The establishment perceives the election of the Labour Party as a serious threat.  The wealthiest in society control much of our media, the financial sector and large corporations.  They will not give up their control, their power or share their wealth without a fight.  People must demand, together, that they do.

It is not like other elections, where you go and vote and express your preference.  It is not like that anymore.  We need to explain to everyone what is going on and how a positive vision for the future is possible.  We need to fight for this.

That is why I ask all educators to get involved, that is if you want change.  You need to do more than just vote.  In a hostile media environment that is opposed to change we need to get out on the doorstep and talk to people, explain to them and reassure them that another world is possible.

Jeremy Corbyn and the Labour Party have approached this general election campaign with a positive and hopeful vision for the UK.  Already we are seeing people become motivated by this message.  There is growing belief.  But that will not be enough.  We need everyone who wants change, who wants a better education system and a fairer society, to get involved.

Don’t let this election be lost by not acting.  It is an opportunity of a lifetime.  Let’s take it and make it work.

Modern Monetary Theory (MMT) does not change things in an instant

The idea that MMT can just change politics and economics the moment people engage with its ideas is wrong.  While I very much believe in the efficacy of MMT, I do not accept some of the views about how it should be taken up by politicians.  Particularly, the suggestion that leftist and progressive politicians should lead with the ideas of MMT.  That they should be bold in talking about the real limits of government spending, when that government has the sovereign powers to create a currency.  From the perspective of MMT, currency is introduced into the economy through government spending,  it withdraws currency through taxation.  This is contrary to the orthodoxy of seeing taxation as a revenue and government spending as an expenditure.  MMT aficionados become hot under the collar when they hear politicians, media presenters and lay persons relating tax to spending:  that all government spending must be matched up to tax revenue.

A short while back I found myself responding to a blog post from the heterodox economist Bill Mitchell. British Labour has to break out of the neo-liberal ‘cost’ framing trap. Bill was incredulous with the British left, that John McDonnell (Shadow Chancellor) and Jeremy Corbyn (Leader of the Opposition) had abandoned progressive economics. There is another out to day. British labour lost in a neo-liberal haze. Mitchell’s argument is that UK Labour are being lured into the neoliberal thinking because they are explaining their economic policy based on tax and spend.  A crime against MMT.

Now I have greatest respect for Bill Mitchell, I have learnt a great deal from his books, his blog and various videos on YouTube.  It is his writing that has helped me understand post-Keynesian economics and MMT.  It has empowered me politically.  While the economics is crystal clear, I feel Bill has a blind spot politically.

I’ve also had arguments on social media with MMT supporters about this.  And it is perhaps my own research in education that makes me realise why the introduction of a new theory or a new idea—no matter how brilliant, how insightful or how effectively and accurately it reflects the real world—does not change people’s thinking and behaviour easily.

The reason for this is to do with human reasoning.  There is a duality in our reasoning facility.  At one level, we are rational and logical.  We have the capacity to consciously reason based on the evidence, assumptions and premises in front of us.  At another level we are highly intuitive, we make judgements based on the situation we see in front of us.  With this kind of reasoning we draw much less on our capacity to consciously reason.  We rely on our experience and judgement.  We rely on our memory and previous experience.

For the most part, humans are much more reliant on intuitive reasoning than they are conscious reasoning.  The reason is simple, conscious reasoning requires much more effort, the mental processes required draw on the body’s resources.  Unlike a powerful computer, human beings are not able to sustain conscious logical and deliberative reasoning for sustained periods.  We therefore must rely on our intuitions.

But if we were simply to rely on our intuitions, our social lives would be chaotic.  It would be an interaction of individuals making fairly random intuitive judgements and responses to the situations they met.  Fortunately, we have culture to overcome this.  This provides us with a shared pattern of behaviour to make our actions more predictable and more understandable for each other.  Call it what you will, these are life’s protocols, mores, manners, and even language.  It is like much of our behaviour is pre-programmed but constantly adapting. Vary it too much and your behaviour appears abnormal or even unacceptable.

My research has been largely about the professional learning and development of mathematics teachers in secondary schools.  I have observed many lessons and they mostly follow similar patterns, like a cultural script.  The teacher begins by explaining or demonstrating a mathematical method or idea.  The students will follow this with practice on exercises or working through textbook questions.  Even the dialogue follows fairly predictable patterns.  Notably, the initiation-responds-feedback routine of teacher-student dialogue predominates.  The teacher asks a closed question to the class, a student responds and the teacher replies yes or no.  It is predictable classroom rhetoric.

The classroom is an intense and demanding place.  The teacher has little opportunity to consciously reason through their actions and decisions in carrying out their teaching.  They are relying on patterns and routines, heuristics and cultural scripts in order to make complex social interactions more predictable.  By the same token, students also become familiar with the cultural script and the ground rules.

And this is how I understand the frustrations of MMT economists.  Why is it that we have a theory that is so good, it explains the economy so effectively and so comprehensively but everyone is not using it?  And I felt the same way when I started researching the professional learning of mathematics teachers.  Why is it that we know so much about learning, through a combination of anthropology, sociology, psychology and neuroscience?  Why isn’t the teaching and learning that I observed in the mathematics classroom reflecting this knowledge?

My explanation, which draws on the work of philosopher and cognitive psychologist, Philip Johnson-Laird, is in the duality of human reasoning and the limitations of our capacity to consciously reason.  Furthermore, it is our reliance on culturally defined patterns of behaviour and thinking.

That is not to say, humanity is incapable of change, that it is incapable of adopting new ideas, new thinking and acting in different ways.  However, the assumption that new ideas will simply change behaviour, no matter how good that idea is, simply misunderstands the nature of human thought and behaviour.

In terms of economics, the orthodoxy that government spending is dependent on taxation is not simply a construct of neoliberalism—of liberal economics—from the last few decades.  No, once we start to dig and search for the origins of this thinking we go back centuries.  Mark Blyth, in his recent book, Austerity: The History of a Dangerous Idea, sees the source of cultural thinking about economics in the work of John Locke in the 17th century.  It can be tracked through the work of Adam Smith and David Hume, for example.  It is embedded within cultural thinking about political economy, it is a fundamental cultural artefact: that in order for government to spend it must raise tax.

Of course, this is reinforced by the media and by mainstream economics.  It is easy for people to accept since it is analogous to every individual’s experience of their own personal finances.

So, we do not simply change people’s thinking with a radical idea.  We need so much more.  Education is at the heart of this, people need time to think about and muse on how the economy works.  People need teachers to guide and challenge their thinking and help bring heterodox economic ideas into everyday use.  It is complex, demanding and it needs time and investment.

I acknowledge therefore, that no political leader, however progressive will be in a position in the current cultural orthodoxy to change thinking.  No matter how eloquent, how compelling and how richly they explain MMT, without addressing cultural dispositions towards economic ideas, thinking will not change.

However, what political leaders can do is move the argument on.  They can present progressive economic ideas in terms that mean things to people.  At the same time, as Jeremy Corbyn and John McDonnell have done, they can get more people talking about how the economy works and in many cases people are reaching for further understanding.  This presents an opportunity for heterodox economics, such as MMT.  People are looking for something different.

It is important to think about economics in political economic terms.  Orthodox economics lends itself to the worst forms of exploitative capitalism, like for example, neoliberalism.  There are indeed vested interests in retaining the status quo.  You don’t have to listen to the BBC for very long or read any of the UK’s leading newspapers to realise how embedded politically and culturally, orthodox economics is in our society.  Vested interests prefer it that way and will do everything to retain it.

It is necessary therefore, that any project to revolutionise the economic thinking of the masses is seen as a political project.  That doesn’t mean that progressive forces seize power and impose new economic thinking.  No, it is a more consensual project.  One that must concurrently develop economic thinking and political purpose.  This is about the development of economic literacy in tandem with political empowerment.  These two elements are inseparable.  You can’t have political empowerment without economic literacy.  MMT aficionados recognise this and find it frustrating, understandably.  However, they must also recognise that economic literacy only comes through political empowerment and action.

I was listening to a podcast from Novara Media on Saturday as I pottered round the house. The Long Depression: Michael Roberts on Capitalism and Crisis.  The presenter James Butler questions the guest, Michael Roberts, about post-Keynesian economics.  As a Marxist economist, Roberts puts forward a view not dissimilar to the one that I present here.  It was interesting, as I was made to think about tensions between Marxist economics and post-Keynesian MMT.  The former, as described by Roberts, is rooted in a political struggle of between capitalist and proletariat.  On the other hand, MMT does not have the political dimension.  It is an economic model with political consequences.  As this discussion unfolded, between Butler and Roberts, I found myself in sympathy with both positions.  I have a good understanding of MMT but also recognise that economics is necessarily a political project. In other ways Marxist and post-Keynesian economics are not incompatible.

And this is why I ask that progressive economists back the UK Labour Party, Jeremy Corbyn and John McDonnell.  Their proposal for the economy, while not exactly in the language of MMT is not inconsistent with it either.  I refute the claim that it is neoliberal. If we are generous, we can see that they are attempting a combined political and economic project.  Increasing public spending, progressive taxation and potentially greater regulation of the financial sector.  However, they are using the language of the economy that people are familiar with.  As a political project, their aim, in my opinion, is to make government more democratic and transparent.  It through this that economic literacy can be expanded.

At a personal level, this is the first time in my fifty-two years that there has been anything close to the faintest sniff of something radical or different.  We must support it.

The Labour Party’s radical vision for education: the opportunity of a lifetime

Judging by the polls, as UK Prime Minister Theresa May announced a snap General Election on the 18 April, you would be forgiven for thinking that the result is a foregone conclusion. And, for that matter, with a resounding Tory victory. But this election is anything but a foregone conclusion. It is set to be closer than commentators predict. People must now make a serious choice, a serious decision — rather than simply express a preference.

And already, after a week of campaigning, the polls have narrowed. Even though the Tories continue to retain a commanding lead over Labour Party, it is evident that the Labour Party have gathered some momentum. Compared with the Tories, the Labour Party have campaigned very effectively in this first week.

The following is the standing ovation Jeremy Corbyn received from the headteachers at the National Association of Headteachers (NAHT) conference in Telford 30 April 2017. While I expected him to be given a polite reception, I was surprised by this. There is clearly something in the air.

 

And so, there is everything to play for.

An end to austerity, neoliberalism and privatisation in education

There probably never has been a more important election for education. The choice between the two main political parties has never be starker. The Tories will continue with academisation, free schools, privatisation, marketisation, a return to selective schools and a school choice agenda. While the Labour Party plans to restore Local Education Authorities and create a National Education Service. The Labour Party plans to bring education back into the public sector.

This general election could mark the end of an education policy consensus that has existed since the 1970s. Since then, education policy has been moving toward marketisation and privatisation. Schools have increasingly come to compete with one another; with an emphasis on centralised accountability (which is frequently punitive); high-stakes assessment and progress measurement; surveillance and performativity; managerialism and hierarchical management structures; intensification of teachers work; and the undermining of teachers’ pay and conditions.

Some argue that these reforms have improved the educational outcomes of many children. They also argue that closer the scrutiny of schools ensures that students make progress and achieve in final examinations. And that this, they claim, has improved the quality of teaching and learning.

These are exaggerated claims, educational reforms have led to more heat than light. There has been lots of noise and increasing demands placed on schools and teachers, yet with very little real insight into the implications of policy. Furthermore, claims made by successive governments are too often based on a selective reading of data. They ignore the complexity of education and identify simple—and frequently overly reductive—measurements to try and determine the impact of policy.

While I don’t personally have a particular passion for international comparisons, the following data visualisation for reading performance in the OECD PISA tests shows negligible change in students’ reading performance in England. There is a similar picture for mathematics and science.

That is not to say that the general level of teachers’ knowledge and skill has not improved over the last 40 years. Education research, theory and practice has developed in that time, comprehensive schools have matured and developed. But this is in spite of policy rather than because of it. I would go as far as to say that marketisation has hindered the progress that teachers, themselves, have tried to make through this time.

A new economics for a post-Keynesian age

It is important to recognise that the Labour Party’s education policy, like its other public sector policies, is based on a different kind of economic approach. All governments in the UK since the latter half of the 1970s have adopted a similar economic approach. An approach that prioritises and privileges the freemarket. The privatisation and marketisation of education is a consequence of this economic thinking. The electorate are encouraged to accept freemarket policy in education because it will supposedly give them more choice. Furthermore, choice and competition will motivate schools and teachers to deliver higher standards. However, there is little evidence to support this conclusion.

Privatisation and marketisation in state education is justified with claims of increased efficiency, higher standards and the advantages of parental choice. These disguise the economic thinking and political choices that drives policy in this direction. The real reason is a response to the problems faced by capitalism more generally. Capitalism is a system of political economy which involves using resources, money and labour to return profits. For 200 years it has been the dominant political economy in the UK.

In the 1960s, capitalism was undergoing one of its periodic crises. Capitalists were finding it increasingly difficult to sustain profit levels. Over the next decade governments used economic policy to make it possible for capitalists to preserve their profits. A key part of which involves reducing the role of the state and the control of state spending. Subsequently, all governments have been preoccupied with reducing public sector deficits. In other words, reducing the amount of public spending and reducing the size of the state. Additionally, and increasingly, governments have privatised and outsourced public services. The argument has been, of course, for efficiency and choice. When in fact the aim has been to preserve profits in the private sector.

A smaller state provides opportunities for private-sector providers to move into providing public-sector services. We have observed this trajectory in the UK, in health, education and even with prisons. While some private providers claim to be not-for-profit organisations, for all intents and purposes, they are capitalist organisations. And necessarily they must accumulate capital. This may not be through generating surpluses or profits, as we might imagine. But it is also achieved through the expansion of their organisation.

In 1988, with the introduction of the Education Reform Act, the process of the privatisation of education was enacted in legislation. City Technology Colleges under Conservative governments in the late 1980s and 1990s were the initiates of privatisation. The New Labour government refined this idea and introduced their Academies programme. The process was further accelerated under the Coalition government where Multi-Academy Trusts were established as private limited companies and billions of pounds of a publicly owned assets were transferred to the private sector. The history of this has been one of cross-party consensus in the privatisation of education by stealth.

This is what is referred to as neoliberalism. It goes under many names: liberal economics, deficit reduction, living within our means and austerity. All these mean the same thing, the preservation of the profitability of capitalism. While I do not intend to go into it in detail here, the reduction in public sector spending leads to increasing levels of private sector debt. In addition, the power of individuals to organise at work and protect pay and conditions is undermined by limiting the powers of Trades Unions. Neoliberalism leads to growing inequalities in society, the rich get richer the poor get poorer and in turn this leads to social unrest . It gives an opportunity for the far right to promote simple divisive answers, attractive to those that have not benefited from neoliberalism.

The following illustrates the trend in wealth inequality in the UK. Notice the upward trend after long period of decreasing inequality in the first part of the twentieth century.

Wealth inequality in the UK

 

The following shows the growth in wealth inequality (The Gini coefficient ranges from 0 for perfect equality to 1 where one person has the majority of income). Note how this rises in the mid 1970s to the 1990s where it has remained constant subsequently.

The following shows UK inequality compared with other nations based on the Gini coefficient.

This video illustrates the extent of inequality in the UK.

Teachers and schools must cope with the challenges of high-stakes inspection and accountability. Furthermore, they must respond to the social problems created by neoliberalism. The managerial and hierarchical system combined with accountability results in a bureaucratic system. The bureaucracy places further demand on teachers since it undermines their capacity and power to use their judgement in their job. While efficiently run schools are often characterised by systems, rules and procedures, these often become a dominating rather than supporting structure. This limits teacher agency within this environment.

We are in a period of economic change. The Global Financial Crisis of 2008, was the clearest of indicators of the failure of neoliberal economics. Mounting private debt and an unregulated financial sector in the USA led to a truly global financial collapse. Governments, in leading nations worldwide, have subsequently failed to heed the warnings and reform their economies. Instead they have continued with neoliberalism and austerity.

It really doesn’t have to be this way. Governments, like the UK government, can increase public spending with economic justification and keep education within the public sector. The preoccupation with deficit reduction is disingenuous. It is a matter of simple accounting, that as part of the normal operating condition of an economy, where the government has its own sovereign currency, the country will run a public-sector deficit. This ensures that the private sector, that is, people, households and businesses, can hold a surplus. In other words, they can save for a rainy day. The government with its power to create currency does not have to save in the same way, because it has the power to spend when needed.

John Maynard Keynes recognised that when the economy has excess capacity, it is a necessary for the government to inflate the economy through public spending. Currently we have excess demand for health, social care, education and training. By increasing spending, we can fulfil more of this demand, and improve the quality of our education system. This is a necessary and valuable investment in our education system.

Increasing public spending, making taxation progressive (fairer), regulating the financial sector and controlling the movement of capital will reduce the level of wealth and income inequality in the UK.

While the Labour Party has not published its General Election manifesto yet, this has been the essence of the economic policy put forward by Jeremy Corbyn and John McDonnell since they assumed the leadership of the Labour Party in September 2015. It is for this reason, they have been vilified by mainstream media and establishment. This proposal for wealth redistribution is an attack on the 1 per cent, the same people who have controlling interest in the media and in establishment institutions. It is little wonder that Corbyn has been subject to ferocious attacks in the media.

Labour’s education manifesto: the National Education Service

There have been several policy announcements. The most important, and the most overarching policy proposal is the National Education Service. This is analogous to the National Health Service, a cradle-to-grave national service which provides education for all and free at the point of use. This provision is from early years right through to higher education. This provides a complete and complementary collaborative service for the provision of education.
It will not be a fragmented system of providers competing for resources or competing to educate pupils and students who require least investment. The National Education Service restores collaboration. It would put knowledge, skills and experience at the heart of its mission. This is because, under a different economic model, organisations would not be preoccupied with narrowly defined outcomes as they are in the current neoliberal system.

There would be less emphasis on bureaucracy, hierarchy and managerialism. The focus of organisational leadership would be on collectives, comprising stakeholders, practitioners and experts. All with diverse views and experience, but with a commitment to developing education through participation and democratic approaches. Leadership becomes important in a different way. No longer will it be presidential or in the style of a chief executive officer. It will be a role in which the leader must convene and ensure effective participation, deliberation and decision making.

The current neoliberal system tends toward bureaucratic processes, which undermine the power of practitioners to use their judgement. The reality teachers’ day-to-day practice involves moral judgement much more than it does logical or scientific reasoning. Practitioners, teachers and education workers need to be empowered to use their judgement. They also need opportunities to develop and test their judgement, they need sophisticated understanding of their professional learning and development. They also need to contribute to the overall philosophy, rationale and principle of the National Education Service.

To support a National Education Service requires first-class research and development. Currently there are calls to make educational research a science. It isn’t a science. But it can draw on scientific principles. But central to the development of educational policy and practice is the relationship between theory and practice. This means that human judgement must intervene in logically derived conclusions. That is not to say that scientific research is not an important part of educational research. Although, it is a mistake to believe that by simply undertaking a randomised-control trial education research becomes scientific. Merely following scientific procedures does not mean that we have been scientific. The process of educational research has much in common with science in that we scrutinise our knowledge of the world, elaborate on existing theory and attempt to make predictions. The key difference with educational research is that it is in the field of complex human relationships, cultures and practice. It is necessary to recognise that a refutation or a new theory does not by itself change behaviour. Advanced educational research acknowledges the humanity of thinking and behaviour.

One of Jeremy Corbyn’s aspirations is to transfer more power to the people. The participatory nature of the National Education Service allows for greater democratic participation of practitioners and stakeholders. It would also see the restoration of the Local Education Authority. This would also restore education to the ownership of local communities, with local democratic accountability.

Jeremy Corbyn speech to the NAHT can be found at the following:

http://press.labour.org.uk/post/160149172594/jeremy-corbyn-speech-to-the-national-association

Further details about education policy have been announced. The Labour Party will reverse the £3 billion worth of cuts that the Tory government have planned for schools. They will also abolish tuition fees for undergraduates. They have announced £160 million worth of funding for arts education. There will be universal free school meals for primary children and the introduction of VAT on independent school fees. They will reintroduce Educational Maintenance Allowance for young people still in education. I also expect to hear further support for Further Education, adult learning and part time courses such as those with the Open University. Similarly, I expect proposals for the funding of higher degrees and research degrees at masters and PhD level. I would also expect to see the recent Higher Education and Research Bill, which legislates further marketisation and privatisation of higher education, to be repealed by a Labour government.

Jeremy Corbyn speech to the NAHT can be found at the following:

http://press.labour.org.uk/post/160149172594/jeremy-corbyn-speech-to-the-national-association

While the Labour Party’s proposals are still taking shape, an understanding of the underlying economic vision that is driving policy proposals, means it is possible to give a sense of what a future education system could be like. It would be an inclusive system for the many and not the few. It would promote social mobility, and help young people in becoming educated and informed participants in democracy.

Though there will be cynics who will say this is not possible, who will say that it cannot be done and who do not trust the inherent good nature of humanity. It is this cynicism and apathy that is the barrier to an ambitious future of something fairer and better.

For the first time in my life, we are closer than ever to something truly transformative. And it is through working together, and a belief in something better, that this vision can be realised. It is not dependent on a single leader to deliver it, like in the past, but it is dependent on a political leader to facilitate and empower the many to turn a collective vision into reality. As Corbyn recently described his own leadership style:

For many years, I couldn’t see much beyond how so many political leaders manipulated us while giving in again and again to vested interests. I didn’t want to be like that. And it wasn’t clear to me there could be another way. But I’ve learned there is. Whereas insecure leaders want to feel stronger by asking you to give them more power. I recognise strong leadership as equipping you with more power…Because there’s no doubt that these are anxious times. Individually, more of us face uncertainty at work. Nationally, we wonder how we will make the transition out of the EU in a way that protects jobs and living standards. And globally, we wonder how safe we are as extreme right wing movements and violent conflicts spread. I hope you can see now that there is more than one way to respond. We could seek a fragile calm. And hope someone in power knows what they’re doing and will guide us through. That means looking to whoever’s in charge and welcoming their reassurance. We don’t look further, we don’t ask questions. It’s the response the few have bet on the many settling for. I’m in this job because I believe there is a better way to respond. It’s about rejecting fake reassurances or simple slogans from government. It’s about sharing ideas and deciding upon real and lasting answers. We are not going to have free thinking shut down by a hostile media or an elite that scoffs at anyone who dares to step out line. No, each of us has a contribution to make. We have ideas for a better tomorrow and we are going to respond together. Jeremy Corbyn, Leader of the UK Labour Party, April 2017

Let us not miss this opportunity.

Responding to Teach First’s Social Mobility Report

In many ways I was pleased to see the publication of the Teach First report on social mobility. The publication of this analysis is important in drawing attention to the problems of inequality and social mobility in education.

But it also annoyed me greatly. Because I see that the levels of inequality and lack of social mobility are a result of successive governments’ economic choices. We have, since the 1970s, in the UK and the USA particularly, adopted a system of liberal economics, neoliberalism. The aim has been to reduce the size of the state with controls on public spending and the transfer of public-sector services and nationalised industry to the private sector.

The result of the adoption of neoliberalism has led to an increase in inequality as a result of controls on public spending, regressive taxation and the deregulation of the financial sector  . The barriers to social mobility are attributable to economic inequality . The adoption of neoliberalism creates a system whereby value flows from the less well off to the wealthiest.

As part of reducing the role of the state, public-sector provision has been transferred to private ownership, in the case of Academy schools, or new private-sector not-for-profit provision has been created, as in the case of Teach First. Teach First, like other forms of outsourced public provision, is a product of neoliberal thinking. Teach First’s proposition is that through the deployment of high-achieving individuals in schools, the effects of disadvantage can be mitigated.

I believe this to be wrong, since it is only through economic policy that inequality and poor social mobility can be addressed. That is not to say we don’t need good schools for all and in them skilled professionals, but it is important that we address society’s problems with appropriate policy making as a priority.

Neoliberalism can’t solve the problems created by neoliberalism. It is a paradox. It is with this in mind I was reminded of a great literary paradox and, as you will see, the striking similarities this has with outsourcing the solutions to neoliberal inequality.

Joseph Heller’s Catch-22 (1962) is a dark satirical comedy set in an American airbase in Italy at the end of the Second World War. The story follows the main character Captain John Yossarian and his associates, as they participate in a seemingly endless number of bombing missions over Germany. The ‘Catch-22’, the novel’s leitmotiv, and a term subsequently absorbed into the English language, is a paradox. It is first expressed in the novel thus:

There was only one catch and that was Catch-22, which specified that a concern for one’s own safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn’t, but if he was sane, he had to fly them. If he flew them, he was crazy and didn’t have to; but if he didn’t want to, he was sane and had to.

World War II, although often seen as a geopolitical war, was the consequence of the economic conditions in the preceding period. Liberal economics had prevailed, with substantial deregulation of the financial sector. Speculation and credit ran rife. The bubble burst in 1929, this plunged the US into a deep recession and took much of Europe with it. The instability created by a crisis of capitalism led to the Second World War.

These conditions are not unlike those that led up to the Global Financial Crisis in 2008 and also the inequality we have in the UK now.

Milo Minderbinder, a comrade of Yossarian, is an entrepreneur, a war profiteer. Heller presents him as a symbol of the American capitalist Dream. Initially, Minderbinder’s syndicate, M & M Enterprises appears small and benign. It involves selling and buying eggs in a complex series of profitable transactions. While flying a mission, Yossarian asks Milo why he buys eggs from Malta for seven cents and sells them to the mess hall for five cents. Milo explains that he does it to make a profit. Perplexed, Yossarian asks if he then loses two cents on each egg. Milo explains:

But I make a profit of three and a quarter cents an egg by selling them for four and a quarter cents an egg to the people in Malta I buy them from them for seven cents an egg. Of course, I don’t make the profit. The syndicate makes the profit. And everybody has a share (Milo Minderbinder, p. 265).

Yossarian thinks he is beginning to understand, he asks if the people Milo sells to are making a profit of two and three quarter cents when they sell them back to him for seven cents. He asks: “Why don’t you sell the eggs directly to you and eliminate the people you sell them to?” Milo responds: “Because I am the people I buy them from.” Milo further explains that he initially buys the eggs in Sicily for a cent each. He makes profit of six cents on each egg overall, except when he sells to the mess hall where he makes four cents. The convoluted process is simply to expand the reach of his business activity.

Arguably this is not dissimilar to the complex contractual arrangements we have with outsourced service providers and academy chains. None of which, like Milo, make a personal profit. There is a contract in which Milo’s syndicate benefits from the activity of the enterprise. Similarly, with outsourced business, through its not-for-profit activity, society supposedly benefits.

“Really?” You ask.

“Yes, really.” I say. “Well, make your own mind up.”

However, Milo like all capitalists expands his business. M & M Enterprises are contracted by the Germans to carry out bombing raids for them. The enemy outsources their combat to the enemy. The Americans then end up fighting on both sides in the battle at Orvieto, and bombing their own squadron at Pianosa. At one point Minderbinder orders his fleet of aircraft to attack his own base, killing many American officers and enlisted men.

I did not realise, when I first read Catch-22 as a teenager, how Heller captured the deep irony of capitalism and liberal economics. That the suffering and damage it creates also provides opportunity for profit and capital accumulation.

The mechanisms by which we employ outsourced providers, like Teach First, to address inequality is a business scheme that capitalises on economic failure. If we address the economic issues, we would not need an enterprise to provide the service, the resources could be absorbed into the public sector to contribute to quality education for all.

I  do not wish to denigrate the many good people who work for and have trained with Teach First. No doubt, their motives are good. They want to do the best for the students they teach. My criticisms here, are at the level of political economy and policy, where I challenge the assumption that within neoliberalism it is possible to create educational programmes that promote social mobility and mitigate for inequality that is, itself, a consequence of neoliberalism.

Neoliberalism can’t solve neoliberalism. It’s a catch-22, we have to change the economic system.

References

Stiglitz, J. (2012). The price of inequality. Penguin Books.
Wilkinson, R. G., & Pickett, K. (2010). The spirit level: why equality is better for everyone. Penguin Books.

Trolling, abuse and harassment on Twitter: the context of education (eduTwitter)

I will begin with a little context, for those of you who are not involved in education and social media in the UK. The issues of trolling, abuse, harassment, free speech on social media are general, so it is probably worth you tolerating an explanation of context to begin. Following this are my own views about how to deal with such issues.

In the last seven years, a growing group of activist teachers have been espousing a return to traditional teaching. An approach where the teacher leads and learning is characterised by the memorisation of facts, methods and information. It demands a strict approach to behaviour management. There is a widespread view that teaching methods should be assessed using  science-based research. There are teachers who share some of these views, but they do not believe in all these principles of teacher-led teaching, learning as memorisation or science-based education. For them traditionalism is not a panacea or a global solution to education. The traditionalists (trads) identify this dissenting group as progressives (progs). Progressives are all educators and teachers who are not traditionalists. I imagine the traditionalists view this more as a factional dispute. But I see it as a struggle of one group to assert power and a particular viewpoint over all of education. The traditionalist would view it as two tribes, trying to prove the validity and effectiveness of their preferred method over the other’s preferred method of teaching.

On Twitter, of a weekend, evening or during the school holidays, you will observe some intense interactions. Whether you see it as one side trying to assert their view or whether you see it as two tribes. Interactions are passionate, sometimes fierce, they can be aggressive, people get furious, things can become tense. Nothing every really gets resolved, the traditionalists don’t seem to persuade the progressives and vice versa. It is a stalemate, unresolved, tensions persist; it can appear really tense and tribal.

So you have the context.

I want to talk now – within this context – about trolling, abuse, harassment, insult and offence. First trolling. A trad may put a tweet on twitter, something like “progressives ignore science and harm kids in school [link to related news article]”. To the trad this looks like a fair comment. “It’s evidenced-based, it’s true, there is no arguing with it. It’s fact.” To the prog this is first-order trolling. “Oh! Dear God! It’s more complex than that! Why would they be so reductive?” They tweet: “Trads are like fascists, they want everyone to do it their way. Idiots.” Or something of the like.

Day-in-day-out, twenty-four-seven, you can find trolling and counter trolling. It may or may not erupt into combat. If a twitter battle ensues, the warriors rush in, daubed in their war paint. They arrive in hordes. Shoulder-to-shoulder they battle. A war of words in 140 characters. “Take that!” They cry. When pride is injured, tiredness takes over or they have something other to do, they limp back home.

It’s generally good fun. No one really gets hurt. Each army usually consist of the same people. They all know each other. They are sworn enemies, but they are regulars. Just like the Sealed Knot. Nothing ever gets resolved. No one ever says, after one of these exchanges, “You know what, I was wrong, let me join your gang.” Well, not as a result of a twitter skirmish anyway.

So trolling is OK generally. It’s a thing that happens on Twitter. It happens on British EduTwitter. It’s provocative, the language can be rich and colourful. The accusations and assertions and the ad hominem can be quite fruity, on both sides. It is mostly in general terms: “trads are like …” or “progs are like …”. You know, it’s bit like West Side Story.

Abuse is more serious. This involves singling someone out and attacking them individually. Intimidating and undermining them. If this persists, then it is harassment. Repeated abuse is harassment. It is up to the individual to deal with abuse and harassment when they are subject to it. It is hard and emotionally demanding.

In the first instance, if you find that you are subject to abuse and harassment on Twitter, it is important that you are assertive. If the abuse is concerned with race, gender or sexuality, then it should be reported to Twitter and to the police. If it is a threat of violence it needs to be taken seriously. The following advice is from Twitter:

Online abuse
Being the target of online abuse is not easy to deal with. Knowing the appropriate steps to take to address your situation can help you through the process.

When to report it?
We’ve all seen something on the Internet we disagree with or have received unwanted communication. Such behavior does not necessarily constitute online abuse. If you see or receive an reply you don’t like, unfollow and end any communication with that account.

If the behavior continues, it is recommend that you block the account. Blocking will prevent that person from following you, seeing your profile image on their profile page, or in their timeline; additionally, their replies or mentions will not show in your Notifications tab (although these Tweets may still appear in search).

Abusive accounts often lose interest once they realize that you will not respond. If the account in question is a friend, try addressing the issue offline. If you have had a misunderstanding, it may be possible to clear the matter up face to face or with the help of a trusted individual.

If you continue receiving unwanted, targeted and continuous replies on Twitter, and feel it constitutes online abuse, consider reporting the behavior to Twitter (see Twitter online support for further information).

Much abuse and harassment is at a lower level. It is still serious, upsetting and unhealthy, for all involved. In these circumstances, if you find yourself the subject of abuse, if it is directed at you personally, a useful starting point is to let the person know how you feel. This might be enough to make them stop. They might have been unaware of the impact of their words or actions. It might have been a misunderstanding. It is important that the person being abused lets the abuser know the impact of what they are doing. It is only the abused person who experiences those feelings and the interaction with the bully, it is only they that communicate this to the bully. An individual being abused may not feel they can do this. The abuser or harasser may seem so much more powerful. This is where friends can lend support and should encourage the individual to be assertive.

From the bully’s perspective, the testament of the abused can be very powerful, in my view it is more likely to change the character of interactions and relationships than punitive measures.

It may not work, the bullying behaviour may persist, if so then mute, block and report. But it is a an important and powerful first step.

I was involved in a discussion this morning about this (with a trad :)). Their view was that friends and associates should confront abuse on behalf of the person being abused. I disagree. In the prog versus trad context, this just exacerbates the tribalism and deepens tensions. It is important that your ‘tribe’, should you be associated with one, support you and not try to rectify the situation through confrontation, by proxy, with the bully. This leads to gang warfare and not to a productive solution. It also leads to false flags about online abuse i.e. using vexatious accusations of abuse in a harassing and intimidating way.

There are many things said and presented on Twitter that are offensive and insulting. It has to be remembered that offence is not necessarily abuse. If something is insulting or offensive and it is not aimed at you personally, you are not being abused, you are being offended. This is uncomfortable, but healthy. It is the exercise of free speech. If you don’t want to be offended do something else and don’t engage with social media. Offence as hatred toward a particular race, gender or sexuality is a hate crime that’s different. That must be reported.

Social media is a vibrant space for free speech and to share ideas. It should be kept that way. Hate should be called out. Prepare to be offended or insulted. Act assertively, if you are intimidated, bullied or abused.

On this issue, I welcome your comments below.

Labour’s Universal Free School Meals policy: an economic not an educational policy

Labour’s Universal Free School Meals Policy, for primary schools, funded by adding VAT on private school fees was generally well received. Those that opposed it, generally, did not see it as an economic policy and it perhaps reveals a limited understanding of how a nation’s economy work. So in this blog, I want to outline how our economy works. It is brief, so it may be a little crude in places. On the whole, though, I feel I offer a succinct explanation of the model.

No, don’t go anywhere! It’s worth reading. Really it is.

The recipe for happiness, according to Dickens’ Mr Micawber, is through fiscal prudence:

Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery (Dickens, David Copperfield, 1850).

It’s simple isn’t it? And if you follow these rules then you will be happy.

It follows then that the same rules apply to a national economy. Income £721 billion (from national and local taxation for 2017), annual expenditure £720 billion result happiness, annual expenditure £784 billion (all government spending for 2017), result misery.

Oh dear! No wonder there is so much misery about. We are in deficit to the tune of £63 billion. Surely, it follows then, that we have to make savings and cut back or increase taxation.

While this is the narrative that is perpetuated in the media and by government, it is not the way the national economy works.

A national economy is not like a household with incomes and expenditure. A household has money going in and going out again. A national economy does not have money going in and out of it, in the same way. The national economy includes all the money that is in its own currency. Some may get saved up, some my go abroad. But the only place that money is going to be spent is in the national economy, even if that activity is overseas.

The national currency is introduced into the economy through government spending. There is no other way of creating currency. The way in which currency is introduced by the treasury is by spending on health, education, defence and welfare, for example. The government either credits the accounts of public-sector organisations or gives contracts to private companies to provide goods and services.

A government’s currency is an IOU. The reason these IOUs have value is that the government expects us to pay taxes in the national currency. The government will not accept anything other than its national currency. We accept it as salaries and shops accept it because, essentially, we have to pay our taxes in the national currency.

Before a government can raise any tax it has to spend. It has to introduce IOUs into the economy. This year, in the UK, it will be £784 billion.

If we apply the Micawber principle and cut spending to try and get it down to £721 billion, you would expect tax revenue to reduce. The reason it doesn’t is because people and organisations increase their borrowing. Much growth in the economy in the last few years has been a result of consumer spending funded by private debt. Individuals and businesses (the private sector) have to borrow from commercial banks to help fund a reduction in public spending. Or they have to use up their savings. The government’s cuts in spending mean that public sector deficit is transferred to private sector debt.

Cutting public spending leads to a reduction in spending on things like health, education and welfare. We have to make decisions about what to spend limited resources on. We have to prioritise spending. This is austerity.

Austerity increases the amount of private debt, with households and businesses borrowing from commercial banks and lenders who profit from the process. Currency entering the system as a result of government spending becomes unevenly distributed. With the lenders and those with capital accumulating further, while the rest become poorer and indebted. It trickles up rather than down.

The accumulation of currency at the wealthier end of the private sector ends up in the banks. The treasury and Bank of England have to create bonds in order to buy back this currency to maintain interest rates. This is what the national debt is, it is not what we think it is. It is private sector-accumulation of currency.

A regressive taxation, one where the more wealthy pay a smaller proportion of their income and wealth in tax, than the less wealthy, adds to inequality. It also increases accumulation at the top end and adds to the national debt.

We need a progressive taxation, one that increases the proportion of tax paid by those at the top end and gives more income to those on lower incomes. I am not going to go through the benefits of universal welfare here. Abi Wilkinson offers an excellent explanation here in The Guardian. Kevan Bartle’s blog about Universal Free School Meals argues the benefits of this policy excellently, too. The important point is that this policy should be seen as an economic policy and not an educational policy.

The austerity programme (it has actually been with us since the mid 1970s, to a lesser or greater degree) is system that allows finance unrestrained access to our economy. Politically, by drawing on Mr Micawber, a consensus has been established amongst the electorate. Consequently, we find our public services starved of funding. But the Mr Micawber doesn’t work on a national scale and if applied, like it has been done,  it leads to growing inequality.

The government can increase public spending. Additional spending, more currency entering our economy, increased pay, better working conditions for teachers, more investment in research and development. And the currency that enters the economy does not just remain in schools, it is spent in the private sector. More wages, more spending in the economy, more tax revenues. It will not increase the deficit, but it will mean more money going to the less well off (including most public-sector workers e.g. teachers).

That national debt will come down if we have a more progressive taxation system, discouraging the accumulation of currency, and so the treasury does not have to issue bonds to maintain  interest rates.

We, like the US and many countries in Europe, need an end to austerity, an end to deficit reduction. We need to increase public spending and we need progressive taxation. Labour’s simple policy is the latter. It is a very good policy proposal. More of this please.

Further reading and information

You can read previous blog posts:

Taxation and government spending: which comes first?

There is plenty of money to spend on schools: a Modern Money Theory Perspective

More information about Modern Monetary Theory on this page:

Modern Money Theory

The following books are useful background and all readable:

Pettifor, A. (2017). The production of money: how to break the power of bankers. Verso.
Mitchell, W. F. (2016). Modern Monetary Theory and Practice: An Introductory text. CreateSpace Independent Publishing Platform.
Wray, L. R. (2015). Modern money theory: a primer on macroeconomics for sovereign monetary systems (2nd edition). Palgrave Macmillan.
Stiglitz, J. (2012). The price of inequality. Penguin Books.