The UK Election and Some MMT Policies

UK-ballot-boxA while back I outlined some MMT-based policies I support for the UK government. Now that it’s time to vote, I thought I’d share some thoughts about which parties are closest to promoting anything remotely resembling these policies. The picture is not pretty.

1. Target Unemployment, not Debt

None of the parties are even close on this. The SNP and the Greens are the most dovish on the deficit, but Nicola Sturgeon emphasized the need to reduce the deficit during the TV debate, and the Greens’ fiscal policy, such as it is, is focused entirely on taxing the rich. That might be good for morale, but it doesn’t help working people to earn more. No major statement by any party nor any manifesto I’ve read has said anything like this: We’ll spend what is necessary and reduce taxes as necessary to achieve full employment; we won’t worry about the size of the deficit unless there’s some credible risk of inflation.

So I think everyone loses on this one. A shame, because it’s the one that matters the most. It should be Labour’s policy. But boy is it not.

2. Employer of Last Resort (ELR)

Labour has something they call a ‘Youth Job Guarantee’, but upon inspection it turns out to be a form of workfare: ‘These would be jobs people would be required to take, or else risk losing their benefits.’ This is nasty stuff and nothing to do with what I support. In a sense, Labour is the worst on the ELR policy, since they propose a policy that promises to taint the idea of a job guarantee with ugly associations and render it all the more difficult to promote in the future.

The Greens at one point had something that looked more like ELR on their manifesto, but it doesn’t appear here.

All the parties talk about ‘creating jobs’ in the private sector, but the only way to do this is to deficit spend, so we can ignore this. The Conservatives boast of having created 2 million manufacturing jobs, glossing over the fact that they did so only by failing to meet their deficit-reduction targets.

3. Control House Prices on the Supply Side

All the parties talk and talk about building more houses, but none of them propose anything like this, nor any serious plan to control house prices in general. Promises are cheap. I promise to build twenty houses tomorrow with my bare hands. See? That wasn’t very hard.

4. Zero Interest Rates and the Elimination of Long-Term Bonds

Nobody’s proposing this, although to be fair it’s a central bank policy as well as a Treasury policy. Still, the inability of politicians from any party to even think on this level – their determination to speak as though the government has to compete on the international bond market in order to ‘borrow’ – is one big fat cross against all of them. How can you be counted on to manage the budget when you don’t even understand the government’s spending operations?

5. Close Secondary Markets and Regulate Banks

Both Labour and the Conservatives are focused on the wrong issue with banking. They seem to believe that by fiddling with ‘ring-fencing’, capital requirements, leverage ratios, sanctions to punish ‘reckless’ behaviour, etc., they’ll encourage banks to participate less in socially damaging activities and start to take up useful activities. The Greens are obsessed with taxing banks; so, to a lesser extent, are the Liberal Democrats, as though that will help make them work more in the public interest. The Lib Dems are fixated on the size of banks, hoping that smaller banks will engage in the right activities in virtue of being smaller. None of them seem to recognise that the only way to make banks stop doing damaging things is to make it illegal for them to do so. Nobody is proposing to ban banks from selling loans to third parties, holding assets off balance sheet, accepting financial assets as collateral, issuing default insurance, speculating in forex markets, etc.

All parties indulge in some vague talk of a national investment bank. This shows that they think of banking in completely the wrong way. All banks are public-private partnerships and should be forced to work in the public interest. Instead of messing around with banks’ funding costs and trying to control them on the liabilities side, the state could reduce their funding costs to zero in exchange for their commitment to working for the public purpose. Guess what? Nobody is proposing that either.

The Verdict

Nobody likes any of these policies. I had hoped at least one party might like at least one of them. I don’t think things can stop getting worse for most Brits until there are more jobs paying better wages – enough to cover rising living costs. I don’t think that can come about unless governments start pursuing policies more like these. So this is a sad result. These policies aren’t even radical or ideological. Most of them are about as centrist as can be. I just don’t get it.


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