At a public debate last night tax justice campaigner, Richard Murphy said the technical term for the UK and Scottish economy is, 'It's stuffed'. Today, at the 'Reinventing our Economy' conference, a range of speakers looked at the failure of neoliberal economics and envisaged new ways of running an economy that works for people.
First session was about understanding the big challenges. Understanding what has happened and how we need to reframe the narrative.
Tim Jenkins from the New Economic Foundation set out what's wrong with current macro economic thinking. We need to understand how Thatcher and others outsourced power from the state to the big corporations by privatisation and undermining civil society including the trade unions. We have effectively handed over control of the economy. So we need to reframe the debate by creating a new narrative that tackles finance, inequality and the environment, and then take back control.
Ann Pettifor talked about how we can use the monetary system to achieve society's goals. But it can't be used if captured by a small financial elite. In a Scottish context, she was particularly scathing about the Adam Smith Institute's case for Sterlingisation, with their underlying agenda that is aimed at reducing the choices that democratic governments can make to limit the power of capital. We need a lot of money to transform our economy, so we need to understand the monetary architecture of our economy.
Molly Cato analysed the case for 'jobs and growth' by asking which jobs and growth for whom? We should use the crisis to shift the way people think about the economy. Austerity is like hitting yourself over the head with a baseball bat, it's just that the hand and head are different people! The economy cannot keep growing within physical limits of the planet and anyway hasn't made us any happier. Just outsourcing our manufacturing carbon emissions to China won't hack it.
David Bell said we should be more concerned about unemployment (including underemployment) than inflation. Even the Bank of England has made small steps in this direction. He highlighted the huge challenges facing society, in particular an ageing population. He set out the factors that matter in tackling inequality: changing household composition, rent seeking, decline of trade unions, technical change, and the changing composition of the workforce. Tackling income inequality is crucial in tackling health inequality. We should also look at pension fund management, including modern portfolio theory and high intensity trading.
In the questions, the idea of no growth was challenged. The argument is that we should invest in jobs not carbon or speculation. We don't need to create more money or growth than is necessary to create full employment and we can localise economies. Others argued that this is a difficult political sell and localising the economy has knock on effects, particularly in developing world, so we should be careful about getting hung up on growth. It is critical to focus on ownership and tax system, including land and use of pension funds. Cooperative systems are bigger in other countries, with the growth of energy co-ops in Germany a good example.
The workshop on controlling money creation was led by Ben Dyson (Positive Money). Most people think our savings finance loans, it doesn't. 97% of money is created by commercial banks and invested in property and speculation rather than productive needs with only limited regulation. Government is now creating new regulations, but it will always have loopholes to be exploited by banks regulatory teams. There is no community interest, just bank profits. Ben argued that we need to take back the power to create money and power to decide where it goes to get money into real economy. This will help tackle inequality because it stops property booms, cased by too much money rather than just land, and makes future financial crisis less likely. A key issue with this proposition is what form of democratic control and wider monetary architecture is necessary.
Malcolm Sawyer focused on financialisation of the economy, although not great in terms of employment, it's massive in terms of assets and liabilities. A feature of this is deregulation and privatisation - a consequence is large scale occurrence of financial crisis. Equally important is how financialisation has contributed to rising inequality and slower growth. He also argued for a diversity of financial institutions.
Richard Werner continued this theme by explaining how we could establish community banks. He also demolished the theory of market fundamentalism i.e. the assumption that markets are in equilibrium, perfect information etc. In reality all markets are rationed. That is where money and power comes in. If the supply of money is rationed, who controls supply has real power. 97% money created by commercial banks who invest it (90% plus) in short term unproductive ways that maximise their profits. His solution is network of local banks, kick started by local authorities.
Richard Murphy talked about the need to control the economy and that needs a new approach to tax. There is a need to make change - reorganise economy, redistribute, re price upwards bad things (carbon etc) re price downwards good things (education). This means we need to collect more of £100bn tax dodged each year. That requires investment in taxation to build the economy we want.
Andy Cumbers spoke about reclaiming public ownership. Thatcher rhetoric about democratising economy actually led to concentration of ownership, mainly in foreign investors. The energy sector is run more by foreign governments than our Parliament. The result is an industry that has failed on price, energy security and decarbonisation. Across Europe and the world there is a move to the remunicipalisation of utilities. Germany now has 44 new local energy companies. Danish wind power revolution another example with hybrid models of ownership. He set out six principles of modern public ownership.
In the afternoon, I facilitated a session on infrastructure financing led by Andy Pike and Peter O'Brian from Newcastle University. They argued that austerity and cuts have reinforced government efforts to secure private sector engagement and resources. Local infrastructure funding and financing is increasingly marked by complex interactions between public and private sector financial institutions. These include tax increment financing, earn-back and public private partnerships. They also looked at public sector alternatives that can offer better value for money, including prudential borrowing, bonds and community initiatives.
The final session looked at what needs to change and how we might do it. This was led by a panel of speakers from the partners who organised the conference. Fundamental is the role of finance, pensions and taxation in the economy. Tackling inequality as a moral and economic necessity, together with higher wages and incomes, including stronger collective bargaining mechanisms. The role of government and economic development needs to be rediscovered, including new forms of public ownership. All this economic development has to be sustainable because the planet's resources are finite.
This was a really worthwhile conference brimming with great ideas. There was a clear determination to develop a common narrative around a different way of reinventing the economy. Identifying what's wrong is always the easy bit, the challenge is agreeing solutions. Today was a useful start on that journey.