The first part of this three-part series looked at the often repeated claim that the only way we can spend more on our public services is for us all to work harder to grow the economy. Totally missing from the debate about the future of the NHS and our other public services has been the range of funding options available. The thinking of many politicians, economists and journalists has, it seems, been severely constrained by 40+ years of schooling in neo-liberal economics.
In the Destiny of Civilisation the economist Michael Hudson explains that even in ancient times the rulers of kingdoms in the Middle East fully understood the following:
- The importance of constraining how much wealth individuals could accumulate, so that no one could use their economic power to exert control over the sovereign.
- The value of debt cancellation and wealth redistribution, as rulers understood that burdening the population with debt was counterproductive – this squeezed disposable income destroying the motivation of people to work.
- The benefits of being able to make new money and control credit when needed.
The following graph is based on the figures in the Destiny of Civilisation showing that up to the 17th century most tax in England was raised simply by taxing land.
Additional public service funding options
There are two options for funding that are largely excluded from public debate.
In The Nature of Wealth In Britain Jon Trickett MP suggests that government should focus more on taxing wealth rather than the income of working and middle class people. The report shows how wealth taxes have been used in different countries. Included is a deliberately conservative example for the UK that shows that by levelling up taxes on dividends and capital gains, by introducing property taxes, and by improving how tax is collected, £490bn could be raised over five years.
The case appears to be overwhelming, yet there is no interest in the media in providing a platform for this to be debated.
In the forward to Wheels of Fortune by Fred Harrison, Don Riley shows why wealth taxes are needed. Every penny he had paid in taxes over the previous 40 years was returned to him as the value of property he owned shot up following the extension of the Jubilee Line that was fully funded through the public purse.
Control of money supply and credit
The decision to make the Bank of England independent took away an important lever of control from government. Contrary to popular belief, Hudson suggests in the Destiny of Civilisation that:
“Financing domestic spending by domestic money creation is no more inflationary than borrowing, and certainly is less inflationary than borrowing foreign currency”(The Destiny of Civilisation, p. 279)
During the financial crash of 2008 and the pandemic in 2020, the Bank of England kept the banks and financial institutions solvent by creating vast amounts of additional money and credit. Worryingly all that seems to have happened with the money is that it was given to the banks, where it has been used to feed the Ponzi scheme that the UK property market has become.
The slide towards an unstable economy
We are being led towards striving for ever more growth, consuming finite resources to generate wealth for a few. Politicians on both sides continue to claim that perpetual growth is achievable, but in his book Post Growth Tim Jackson shows why this is not the case, and sets out why we should move to a sustainable economy that does not depend on growth, focused on producing goods and services needed to live. Investing in our public services, and bringing them back into public ownership, is a vital step in our drive for a sustainable future.
When it becomes clear that growth cannot be sustained property prices dependent on a growing economy will fall, triggering the collapse of the Ponzi scheme that will in turn lead to the collapse of our financial institutions. We are totally unprepared for this eventuality, and there is no public debate or awareness of the potential danger that we face.
The big question is: are we smart enough to learn from history? or must we, as Hudson says:
“Suffer the fate of the debt -ridden Roman Empire, dissolving into a Dark Age of rentier austerity, with culture and wealth surviving at the top of an increasingly steep economic pyramid?”(The Destiny of Civilisation, p. 179)
We need to find an equitable way forward for the sake of future generations and let go of the drive to exploit others to accumulate individual wealth.
Next: Part 3: We need a clear and robust plan.
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