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“Let the children once see clearly the gross injustice of our present land system and when they grow up, if they are allowed to develop naturally, the evil will soon be remedied.” – Elizabeth Magie, inventor of “The Landlord’s Game”, the precursor to Monopoly.

For a game about rampant, exploitative capitalism and a race to deliberately bankrupt your mates, in some ways Monopoly looks remarkably egalitarian compared to modern Britain

Everyone at least starts with the same amount of wealth as everyone else; no-one is locked out from certain life chances because of upbringing or status; everyone is subject to the same rule of law (although bribing one’s way out of jail is common); property prices – even in the richest areas like Mayfair and Park Lane – are a reasonable multiple of average annual income; there aren’t (initially) any ancient landed families around blocking development of areas; and, perhaps most progressively, everyone receives a Universal Basic Income which is often enough to maintain one’s costs of living.

Of course while we call it “the Bank”, it’s actually more than a savings and loans company. It also regulates property, collects fines and taxes and distributes welfare (the UBI). It’s not really a bank. It’s the government of the state of Monopoly.

And like many real-world governments, it has a power which people often overlook in the rules.

That’s right. The Bank can issue as much money as it needs – via cash, IOU’s or just giving you a ‘bank account’ – to keep the economy of the game going.

So where am I going with this? Well, there’s a bit of a revolution going on the economics circles at the moment. Especially since the 2008 crisis there’s been a revaluation in the relationship between governments, money and debt.

The conventional view of national budgets is that governments tax people and companies within their state – which removes money from the economy – and then spends it on public services – injecting it back in. If there is any mismatch between the public spending out and the tax in then it results in a surplus or underspend if the spending is lower than tax receipts or in a budget deficit if spending is higher than receipts. The government must then issue bonds in order to borrow money to make up the gap.

If a deficit is maintained then the government builds up debt and the interest paid to service this debt eventually burdens the government’s ability to continue to pay for public services. Therefore we need Austerity to balance the budget. It’s for our own good.

However, proponents of Modern Monetary Theory like Richard Murphy or Steve Keen propose a very different story about money and debt.

In this view, governments with their own currencies and their own, independent means of creating government bonds can take an alternative approach. In this MMT view, the bonds are created by the government and are used to finance public services. Now, we’re all aware and afraid that the unlimited printing of money leads to inflation – and, yes, even excepting the Hyperinflations such as Germany in the 1920’s – there is a direct correlation between money issue and inflation – but this isn’t the whole story.

In the MMT view, tax isn’t used to raise revenue but is used to claw money back out of the economy to prevent the inflation occurring. If inflation begins to increase, then it may be a sign that taxes aren’t reclaiming enough money and should be increased or re-targeted.

(Tax is also used to redistribute wealth – something particularly missing from Monopoly – and to reshape public behaviour by incentivising or disincentivising certain activities but we’ll stick to the revenue side of things for now)

In this view it is also realised that government debt itself isn’t the whole story. The national balance of payments and the levels of private debt have to be factored into policy as well.

In the former case, if the country has a large trade deficit then more money will be leaving the country than is coming in. This is also an effective “deficit” on the accounts which must be considered – although for simplification, let’s assume a balance here for now.

Private debt is the major issue to be concerned with. There’s a principle known as the “sectoral balance” which states that all three of these factors – Public deficit, private deficit, balance of payments – essentially sum to zero. So if our balance of payments is zero and the government’s Austerity results in the long promised budget surplus then private deficits must increase.

Think of it this way. If the government decided tomorrow to fully privatise all healthcare your taxes (i.e. National Insurance) might drop somewhat but now you’d need to buy healthcare or health insurance from the private market. If you couldn’t do this with your income, you’d have to borrow money. If you keep doing this, eventually you’ll max out your credit card and you’ll no longer be able to pay for the healthcare. The government’s budget deficit is YOUR budget surplus.

But that doesn’t solve the government’s debt problem, does it? It eventually grows out of control and consumes the public sector budget, doesn’t it?

Well, Murphy points out something that may well prove significant. Quantitative Easing changes a lot of the assumptions.

Normally after a financial crash the response would be to reduce interest rates to stimulate borrowing and spending but after the 2008 crash the economy remained sluggish even after rates dropped to almost zero. QE was brought in to help further. This involves the central bank printing money and buying up government bonds. This is supposed to reduce the value of bond and stocks and thus encourage investors to put money back into the “real” economy.

A secondary effect of this though is that the Bank of England now owns some 25% of the UK’s national debt. The government still pays interest on these bonds and the Bank of England profits from them. But the BoE is owned by the government and pays its profits back into the UK Government’s coffers. This is a bit like paying rent to your landlord’s bank account when you own the property and ARE the landlord. By taking it off the book like this the debt is sterilised and is effectively cancelled. Like the Monopoly banker, Governments which have their own currency and their own ability to issue bonds cannot ever run out of money.

There’s another reason that QE changes some of the assumptions. It had been hoped that it was only going to be used for a couple of years, tops, whilst the crisis was at its worst but almost a decade on and QE is still pumping money into the system. Inflation is rising again but wages remain stubbornly stagnant. Private sector debt levels are on the increase and it’s starting to get to the point that consumer spending is levelling off because, basically, we’ve all maxed out our credit cards and can’t afford any more even with interest rates on the floor. Normally when inflation rises, interest rates would increase to hold it down but the Bank of England knows that the moment they do this thousands of people are going to go bankrupt and/or default on their debts. It’d crash the economy in a heartbeat.

So another solution is required. Something which involves pumping money not just at the top end of the financial industry to encourage more debt-fueled spending but something which actively improves and invests in the real economy. We need innovative ideas such as a National Investment Bank or a more redistributive welfare system and we need it urgently.

I am pleased to announce that Common Weal is working on exactly these problems as part of version 2.0 of our White Paper Project. If you heard Robin McAlpine on Newsnet Scotland yesterday, you’ll have heard that we’ve been able to receive the help of Richard Murphy who has written a proposal for a new Scottish tax system which brings in many of the ideas I’ve talked about here. You can expect that to be published very soon along with papers by others on redesigning our welfare system, and IT infrastructure as well as a proposal for our own central bank.

There is certainly no monopoly of ideas about the way the economy should be run and this should be a lesson to any who think that the UK’s path towards ever more debt and inequality is the only possible way around the board. Maybe we need to try playing a different game.

Common Weal are the only group regularly publishing research of this kind to reinvigorate and remake the case for independence. We are entirely reliant on the generosity of small donors, both one-off and regular, to be able to do this work. If you would like to contribute, please visit our website at: allofusfirst.org/donate/