Helicopter Money?

Simon Jenkins (The Guardian, Wednesday 26 November, 2014), as he suggests in his article advocating “Helicopter Money” by citing Keynes, is recommending a form of Keynesianism, but the EU and the Tory party want nothing to do with it.

Keynes, together with our rulers’ fear of communism spreading west, gave us the 30 odd years of post war satisfaction with “welfare capitalism”, “one nation Toryism” and “social democracy”. The world’s capitalists did not like it, because their greed makes them resent losing any of “their money” unnecessarily, and they are evidently not bright enough as a group to realise that they were actually doing well themselves out of it. As soon as their fear of communism went, they decided to return to their old authoritarian ways, having followed the US in making suitable preparations for it throughout the Golden Post War Age.

Hitler and then FDR were early to recognise the value of Keynesianism.

Ever since the credit crunch the continent has been suffering what Keynes called a classic liquidity trap. There is too little money around and thus a chronic shortage of demand. People have too little to spend, which means shops close, supplies dry up and no one invests.(S Jenkins)

Hitler solved it and got Germans working again by building infrastructure that would be needed in the war he planned, and the military to effect it. Western capitalists helped him do it, expecting him to show his gratitude by attacking the USSR, not the west. FDR invented the New Deal which also used public works to get people back into employment.

It works. Money need not be put into everyone’s bank accounts, but paid as wages to those being employed rather than out of work. Keynes showed that every pound put in at the grass roots was spent and spent again—there was a multiplier effect. Ian Duncan Smith has exactly the opposite policy in trying to stop people from receiving welfare benefits, forcing down demand from the unemployed and badly paid. The point is, that people need to spend in any form of capitalism that does not exclude a deprived underclass from the social benefits of civilization.

What saved Britain was George Osborne not practising what he preached.

Again, as Jenkins says, the only way that Osborne has given his austerity policy an illusion of success is by furtive Keynesianism. Why this persistent idiocy?

Perhaps they are idiots. Perhaps they are not idiots but are preparing for a society in which a super class will live in luxury, served by robots serviced by a small class of technicians, and everyone else will have to scratch a probably criminal living among the underclass. Or perhaps they want an intermediate state in which most of us are reduced to that underclass which will serve the luxurious rulers by cutting out any form of Keynesianism and making them fight for the few jobs available, while an authoritarian state keeps them in check. Umm! Well that is where we are now.

Yet versions of helicopter money (HM) are now emerging into public debate.

John Muellbauer, professor of economics at Oxford, points out that, as existing policies to revive Europe’s growth have faltered, “proposals for distributing money directly to citizens have been quietly gaining traction among critics of orthodox central banks—QE for the people”.

The commentator Anatole Kaletsky points out that if the £375bn of QE had gone to private bank accounts rather than to buying bonds from banks, it would have meant £24,000 per British family. This would have transformed the demand economy.

Keynes did not propose, so far as I know (but I am not an economist), giving away money to everyone, and even socialists do not expect to get something for nothing. He saw his proposal working by creating public sector jobs, which allow fresh government money to circulate boosting private industry (capitalism) as it circulates. It could not therefore have been seen as a handout and so a “moral hazard”. No one is getting “cash they have not deserved”.

Jenkins rightly says the EU and the ECB “are in a line of descent from those who sealed Europe’s fate with the 1919 Treaty of Versailles, the Great Depression and the 2008 credit crunch”. But presumably they have a plan like those already mentioned, the last of which it seems to be. The real purpose of the austerity brigade is to impoverish ordinary people, making them compete viciously for the limited work available in an increasingly automated society and thereby reducing labour costs, while redistributing wealth via quantitative easing and the booming stock market into the hands of the super rich.

It is a plan that is working for them but democracy is a nuisance, so neither the EU nor the USA is democratic, and authoritarianism, fed by bogus fears of “extremists” (extremists are, of course, “terrorists” our rulers surmise!) is on a sharp rise.

The next government could use traditional Keynesianism to stimulate the economy by building houses, restoring the NHS and the civil service, funding it largely by taxes on the rich like stiff income tax, and a wealth tax, together with borrowing in the knowledge that once the economy grows then so will taxation and so a carefully planned stimulation package would pay for itself. Oh, and get out of the EU and its military arm, NATO!

Why the US has a Perpetual War Economy

During WWII, government decisions stopped all market fluctuations. A major power in the middle of a serious war, cannot allow markets to boom and bust. Economic effort was singularly aimed at victory. Besides victory, people just worried about what things would be like once the war was over. The Americans were not themselves suffering from bombing. They never have done. So, an extra year of war was not nearly as great a worry as the question of how the war economy could be switched to peacetime conditions.

Most economic experts thought the transition would involve a violent crisis. Americans were pessimistic. Post-war unemployment, counting women engaged in war work, of up to 20 million were commonly predicted, based on the heavy readjustment crisis after WWI. Things would be no different after WWII, they predicted.

Then there occurred the American economic miracle—the demobilization of ten million people without any upheavals. Transition to a peacetime economy was smooth. Unemployment rose to less than four million—half as much as before the war. The US had mild recessions in 1946, 1949, and 1954 but nothing like a real crisis. America's faith in heaven on earth revived, and the specter of 1929 faded.

Economic optimists quickly became confident, for three reasons:

1. the American economy was less speculative, as post war stock exchange transactions show, and speculation was strictly controlled compared with 1929, when reckless gamblers used unlimited credit to drive stock to precipitous heights—something that is again familiar
2. Keynesian principles were applied—a downward trend in the economy was helped by a dose of inflation, and conversely an unhealthy boom invited deflationary measures such as a gentle credit squeeze.
3. the main one, now obviously swept under the carpet, was rearmament—the perpetuation of the war economy. After WWII, the US continued to spend twenty times as much money on its armed forces and military aid abroad as before the war. In the early post war years, between 12% and 15% of the national income was directly or indirectly spent on war and war preparations, employing 10-12 million people on the Federal budget, near enough the same number as were unemployed pre war.

Post war, financial speculation gradually returned, and Keynesianism was abandoned under pressure from the right wing fad of monetarism, and eventually, Reagan and Thatcher abolished all the regulations that had kept banks and markets under control and stable.

As for the third, and most important factor, it never changed! Rather it has become increasingly important. In fiscal year 2010, total US defense spending accounted for 38–44% of estimated tax revenues. Over sixty years after the war, Americans still spend a large fortune on warfare and armaments supporting, with their tax dollars, the death of their own boys, 6000 miles away murdering mainly innocent Moslems, people simply trying to assert their own freedom in their own country. All of this mayhem to avoid giving benefits to those Americans they call idle—people who cannot find work—and profits to billionaires who could do with a lot less.

The US since the last war has maintained a war economy, supporting utterly wasteful and cynical military adventures all over the world. And the American people seem to be happy it should remain the case when the federal government could be creating useful jobs through civilian projects. Alternatively, why not just give the unemployed sufficient benefits to live on, so that by spending them they thereby employ others! Every tax dollar spent by the government at the grass roots of society is multiplied five times over, as it is successively spent.

A fabulously wealthy country spends over a third of its tax revenue supporting the military industrial complex, when it could transform derelict cities like Detroit, and the decaying suburbs of many other famous cities, taking millions of US citizens off drugs and tranquilizers by letting them live decently. Yet the childishly unselfcritical Yankees profess bafflement that the wicked world does not love them! Will enough Americans ever realize that they are being treated with contempt by the political caste in Washington, the gentlemen soldiers of the ruling megarich elite? They are too ready to believe the bullshit they are constantly fed.

Pay the People (2)

The Reverend Paul Nicolson, Zacchaeus 2000 Trust, Professor Peter Townsend, London School of Economics, and Professor Guy Standing of Bath wrote to The Guradian in response to journalist Polly Toynbee’s proposed government guaranteed job scheme. All had better ideas for the economy than the government has so far conjured, especially the insanity of rewarding the original crooks—the bankers. A policy of special assistance for the unemployed is desirable for reasons of compassion and civil obedience. The Labour government’s policy has been to cut benefit costs by introducing coercive work conditions of entitlement, echoing the 1834 Poor Law Act. The unemployment benefit of the newly unemployed is a workhouse rate of £60.50 a week. Ministers told Julie Jones MP that increasing it in the welfare reform bill would undermine what the benefits system and the welfare state are there for. Blair and Brown, in their 12 years, have ignored the fact that millions in the population are unable to obtain a working wage or can only work part time—children, students, adults obliged to provide personal care, many disabled people, the elderly, mentally ill, and the many simple people (Labour ministers seem not to know that half the population have an IQ below 100!)—and so cannot match the earnings of the able bodied. All deserve a decent compensation income for their personal wellbeing—so they can enjoy family and social activities and a decent quality of life—but also because the economy requires everyone to have spending money. Spending is what keeps the economic wheels turning. Labour ministers, and maybe Labour activists, if there still are any, should re-read the 1942 Beveridge report, which recommended that the benefit scheme should unite administrative responsibility and adequacy—social security was meant to make want unnecessary under any circumstances. Sixty years on its administration is spallated among many agencies, the only possible reason being to make it more difficult to claim, especially for those who are less than 100% sound, physically and mentally. Professor Standing says only a minority of the unemployed now receive unemployment benefits so they do not act as the automatic economic stabiliser some economists still treat them as. The government should give every adult an unconditional grant—say £25 a week—adjusted according to the state of the economy. It would boost demand and therefore real jobs, would be transparent, fair, non-stigmatising and easy to implement. Moreover, it would provide assistance to everyone suffering from the crisis, not just the favoured interests who caused it! And for those who do not need it, the wealthy, and the bankers, it would be clawed back and subsidized through their tax. It would also supplement the income of those on involuntary part time working, enable more of the unemployed to take part-time jobs without suffering a totally inadequate income, and give the unemployed a top-up over the present starvation allowance. Being unconditional and not means tested, it would avoid this government’s obsession with coercing people.

Pay the People not the Banksters

Governments have given trillions of dollars to banks in the last few months, yet our economies are still shrinking. The banks are not lending the money, they are using it to cover the bad debts—the so-called toxic loans—they set up in vast numbers to reward themselves with outlandish bonuses. The idea of governments giving away money is supposed to be Keynesianism, the idea had by John Maynard Keynes that only by getting people back to work by large government spending projects would the long depression of the twenties and thirties be overcome. US President F D Rooseveldt tried the policy with the New Deal, and it worked. People got a job, spent the earnings they previously did not have, so shopkeepers sold their goods, and factories had to start making them again. It was a multiplier effect! Adolf Hitler also tried the policy in severely depressed pre War Germany by pouring government money into military projects in preparation for the second world war, and he also found it worked. Unemployed workers were building roads, aeroplanes and ships, spending their money in shops who wanted supplies, and so factories outside the military had to resume full production. Keynesianism works! But it depends on ordinary workmen being employed by the money the government spends. The government money has to go to people to employ them. Merely giving it to banks who then keep the money to cover for their own ineptitude does not employ anybody except the incompetents whose greed created the problem in the first place. Governments should not have given money to banks at all, but directly to the poor. Favouring the rich, just convinces us at the grass roots that governments are there to bail out the dolts and nincompoops using our money to make themselves richer, when their get rich quick schemes fall flat. Rooseveldt called the bankers “banksters” to imply they were “banking gangsters”, and if one of the few great presidents thought bankers were gangsters then it even more true now. In the UK, the Brown, supposedly Labour—that is as in labourer!—government has been bringing in a mass of repressive legislation similar to the Patriots Acts in the US, allegedly directed at terrorists, but ready to be used against anyone they choose to label as a terrorist, like anyone rioting because they are unemployed and forced on to workfare—another oppressive British law in the new welfare reform act. It shows the unscrupulous class nature of the New Labour Party. Keynes realized that not everyone could work! Always some people were too ill, disabled, unskilled or too simple, and some were always unwilling to work for whatever psychological reason, yet these people could not be left unprovided for. There were two reasons for it:

• No civilized society could leave people destitute. It was not morally right
• The same principle Keynes advocated applied to them too. Give them money, they will spend it out of necessity, and that will help to keep the factories running.

This is just where Labour under Dr Brown—yes, he’s got a higher degree! Can you believe it?—are typically blinded in their dogmatic class allegiance. They give crazy money to banksters who keep it, doing no good at all to relieve the economic bind, when they should be giving modest sums to every ordinary working person, because they will certainly spend it. That is where they missed the point of Keynes’ theory. Rather than forcing people on the workfare, they ought to be gladly giving everyone a modest basic sum every week, then those who work will get the basic besides their wages, but those on the basic will still have a modicum of spending power. Spending power is the crux of Keynesianism, not lining the pockets of bankers. We should not vote for anyone who is not willing to see the sense of this, and promises to get the robbers in the banks to repay their ill-gotten wealth or face clink. But we must nevertheless use our votes because our rulers cannot be displaced if we refuse to use it at all. Vote out the liars and grifters.