Spotted by Bob E in The Guardian:
Bewildered CBI chief John Cridland today bemoaned how the government's austerity programme is going too far too fast by creating severe bottle-necks in the usual orderly transfer of public funds to private industry and warns Prime Minister David Cameron and Chancellor George Osborne that their flagship private sector jobs for former public sector workers programme is at risk because of lack of government funds coming forward to private sector to meet the costs of running it.
"We in the CBI are fully behind the austerity measures in principle" he said, adding "the principle being that the austerity measures shouldn' affect the flow of public money into our coffers.
"We for our part continue to fully endorse the line expounded by successive governments as explained to them by us that private industry is always much more cost effective than the public sector. Which is why we deserve increasing, not decreasing, amounts of public sector funding.
"The more public funding that we receive, directly in the form of being gifted control of publicly developed assets under privatisation measures, or simply hard cash in the form of grants, enterprise allowances or contracts etc. or indirectly in the form of additional taxpayer subsidies like working tax credits which allow us to hold down wages, the better off the taxpayer is, that is a well established fact.
"And our members are all large taxpaying corporations - so the more money we get, the more money the government gets. But this government risks flying in the face of these facts and unless it quickly comes to its senses and removes the bottle-necks that are stifling the flow of taxpayer funds our way or arranges means by which we can access other sources of funding at negative interest rates and under taxpayer underwritten risk arrangements, well, our member's natural entrepreneurship will continue to be stifled. And that wouldn't be good for CBI members and so won't be good for anyone.
"Give us the money. You know it makes sense."
Signs Of Desperation From Remainers...
19 minutes ago
15 comments:
I'm compiling a list of the advantages of LVT: http://james-notepad.blogspot.co.uk/2012/07/incidental-improvements-caused-by-land.html
Any more suggestions?
Yep, that's a pretty fair summary of those CBI comments, MW!
JJ, I have linked.
AC, Bob did the reading between the lines, so credit to him, I just posted it.
John Cridland is a twit... there, I've said it :-)
The MMTers have pointed out the following monetary accounting identity
[Public surplus/deficit] + [Private surplus/deficit] + [Capital account] = 0
which implies that the private sector can only make an overall profit if the public sector (ie the government) runs a deficit or the capital account (ie the balance of trade) runs a deficit or both. There's a pretty neat graph in this essay demonstrating the equation in real life.
So you can understand why Mr CBI is suddenly a lover of governmant spending. It's either that or exporting. And exporting is such hard work!
JP, feel free to say it.
D, in cash terms that formula makes sense, but in overall terms it's complete nonsense, because a public sector deficit means that every person's share of the National Debt goes up.
If you do full accounting and reallocate government debt pro rata back to the private sector, the whole thing represents a wealth transfer from one part of the private sector to another.
Consider: some countries do not have a national debt at all and have never run deficits. Does this mean that their citizen's all have zero savings or zero wealth? Methinks not.
Oh, agreed that it only makes monetary sense. If you take the non-monetary assets into account as well (which of course you must when calculating net worth) then it stops being a zero-sum game.
D, the MMTers are quite right when it comes to explaining how things work (lending creates deposits, government deficits are not the end of the world, fiscal and monetary policy are the same thing etc), and i am grateful to them for that.
But they extrapolate this to arrive at some rather baffling policy recommendations.
"the construction of a possible toll road to unblock the congested A14 route, which carries container traffic to the port of Felixstowe in Suffolk."
Or they could build a railway, put the containers on that and tranship them at a hub like Daventry Inland Rail Freight Terminal. Oh, wait, there's a railway there already. We'll skip that idea then.
MW Do MMT'ers understand the difference between credit, commodities, commodity money and credit money?
NP if not, just wondered.
Mark, I think that reason for the baffling policy recommendations is that MMT is what it says on the tin, ie a monetary theory. It doesn't take account of land, labour or non-financial capital from what I can see. The problem happens when its proponents try to use it to predict what will happen to the entire economy. But as far as I am aware MMT doesn't give any sort of guidance as to whether one kind of tax is better than another or whether one kind of government spending is better than another. So while MMT describes the fundamental behaviour of money and debt quite well, it doesn't have much to say about the non-monetary economy. Hence the odd policy recommendations.
Personally I think that the MMTers have to extend their theory to cover the connections between the financial economy and the "real" economy and to look at the incentive effects of spending and taxing in particular ways before they can recommend anything. Of course if they did it would be a Modern Economic Theory rather than a Modern Monetary Theory.
Perhaps then they'd see the benefits of LVT/CI as the tax/spend mechanism.
B, they like toll roads because that enables them to collect rents.
RS, I don't know. I've only a very basic understanding of MMT, but what I know about it makes sense. Derek is far more versed in these matters.
D, good summary, I don't think that MMTers are fundamentally opposed to LVT (some of them like it, others haven't given it any thought). Like you say, we can regard it as a different way of looking at different things.
Their way of looking at things is a good explanation of how things work, but doesn't really give any solutions. It's like pointing out that if a small child falls of a bike it will hurt itself. That's quite different to working out how to teach a child to ride a bike or knowing how to patch up wounds.
Robin, I would say that MMTers actually have a very good handle on what credit is and what money is. They do seem to understand the difference between fiat money, credit money and commodity money.The terminology is a bit different -- they call credit money "horizontal money" and government money "vertical money". They don't talk much about commodity money because it doesn't play a big part in most national economies but they do seem to know how it behaves. And they know the difference between credit and credit money.
Steve Keen recently held a joint seminar with Michael Hudson and two of the MMTers, Stephanie Kelton and Scott Fullwiler at the Fields Institute in Toronto. Stephanie Kelton's lecture was basically about the MMT view of money and credit if you want to know more.
Good analogy, Mark. Yes, I think that they have a long way to go before they can make recommendations outside the financial sphere that have a chance of working. But Michael Hudson is on their team so I know that they are aware of the Land dimension. My hunch is that the end result of their work will vindicate the Georgist position in a few years time. That's why I'm excited to see some of them collaborating with Hudson and Keen.
I can't find a link but I am pretty certain that MMTer Scott Fullwiler has gone on record as saying that a land tax (or at least a property tax) is the "best" tax to have.
In my observations of MMT proponents there is (much like LVTers) a complete left-right spectrum; From big government fans (Bill Mitchell) to small government libertarians (Warren Mosler). I think this is encouraging because it suggests the thinking goes beyond raw politics.
One thing that I quite like about the MMT thinking is the idea that with a sovereign fiat currency, tax collection is about controlling aggregate demand rather than bringing in money that is then spent by government. (I think this is technically correct in our modern system, money is created and spent first then taxes are collected later). This means that in reality governments have far more flexibility to cut taxes and/or increase spending than they ever admit to - they like to hide behind an out of date model to attempt to validate their particular ideology. MMT shows that monetary policy and fiscal policy must be linked together for an effective economy. I think the current plight of western economies highlights how this is true.
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