Time to stop believing the lies

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The latest (was it the eighth since November?) budget from the Chancellor was a tame and inadequate effort – like many others, I suspect he’ll be back for his ninth, tenth and eleventh efforts within the month when it becomes clear just how much of an unemployment disaster is facing us. The tame and inadequate nature hasn’t stopped the fans of austerity – who believe, in essence, that the poorest should be the ones to pay for everything, by cutting services, pensions and benefits – who are at it already, saying that all this money will have to be paid back at some point. The IFS were at it yesterday saying that the debt will take decades to repay, and the warnings about pensions and services were delivered in sombre tones by the chief spokespersons for the government, otherwise known as BBC reporters.

I actually think that ‘decades’ is exceedingly optimistic – centuries would be closer to the mark. But here’s the thing – it really doesn’t matter. It’s true that the government has ‘borrowed’ a lot of extra cash as a result of the pandemic, but it’s ‘borrowed’ that money from itself. The Bank of England has simply magicked the money into existence (under the instructions of the Treasury which owns 100% of the Bank), placed it into the government’s accounts with a few deft keystrokes, and set up a loan account which nominally needs repayment at some future date. The Bank can continue to magic money into existence as long as, to simplify somewhat, one basic condition is met: there are sufficient spare resources in the economy such that inflation does not result. With potentially 6-9 million likely to be unemployed within a few months, resource shortage is the least of the worries.

Those who demand a timescale for repayment of the deficit argue that it’s currently at ‘too high’ a proportion of GDP – but there is no agreed definition of how high is too high. And there can’t be, because that limit is not an absolute one, it depends on a whole range of factors, all of which are variable. As far as I’m aware, no-one argues that the Japanese deficit is unsustainably high. It’s certainly higher than many would like, but it’s been above 100% of GDP for the last 20 years and is currently approaching 200%. No-one is panicking about that. The UK reaching 100% may also be higher than many would like (although it’s actually a lot lower if we don’t count the magic money which the government ‘owes’ itself) but there’s nothing especially sinister about 100%, other than being a nice round number. It’s ideology, not economics, which demands that the least well-off suffer to reduce the debt as a proportion of GDP – ideology based on protecting the interests of the owners of capital first and foremost.

There’s been another lie associated with the deficit in recent days too, when the PM said that it was “the might of the UK treasury” which set up the furlough scheme and distributed cash to all parts of the UK economy. It was intended as a rebuke to the Scots, implying that they could not have afforded it themselves, and as though the money that they have created belongs exclusively to the government which is generously sharing it with other parts of the UK. (Well, some of it, at least – those parts which aren’t simply being doled out to cronies.) It’s utter nonsense, as one might expect in relation to anything issuing forth from the Johnson word mincing machine.

It’s true, of course, that a larger economy can generate more financial resources at a time of crisis than can a smaller economy; but it’s also true that a smaller economy needs fewer resources as well. Asking whether an independent Scotland (and the same applies to Wales) could afford to create enough money to meet its own needs is a silly question – asserting that it can’t is assuming that Scotland would somehow be unique amongst all other states in the world. In fairness, however, I don’t think that’s the assumption that Johnson and his gang are making – they are actually making a rather different one, which is that England is uniquely able to do things which no-one else can do. In that exceptionalist mindset, evidence to the contrary doesn’t count, and since we can learn nothing by looking at what anyone else does, we can simply assert that they can’t do it. It’s a message which works only so long as the Scots (and the Welsh) are stupid enough to fall for it. Like austerity, which also only works because people have fallen for the ‘household budget’ analogy.

They want us to believe that they are maxing out the credit card so we don’t spot that they are actually maxing out their own credibility. It’s proving less and less effective in Scotland – it’s about time that we started to catch up.