IOU what?

As you know I am a fan of economics, albeit as an outsider. This morning the Today programme had former Chancellor Norman Lamont and left-wing economist Mariana Mazzucato discussing the appropriate economic response to the COVID epidemic, for about a minute and a half. ‘We’ll be talking about this again,’ concluded Nick Robinson. You bet. But the minimal discussion nevertheless unveiled what will be the broad outlines of the divide: using the levers of government and society to rebuild economic life in a better way, versus getting everything back to normal as quickly as possible. Lord Lamont characterised Dr Mazzucato’s approach as ‘political … based on prejudice’, which, if you take ‘prejudice’ as a rude way of describing ‘opinion’, is not an inaccurate description, but it leaves out what should be the equally obvious truth that to return to the status quo ante is also a political choice: it’s not some sort of neutral option.

Naturally I would prefer change. An economy that works better for the poor and secures human future against the threat of a shifting climate is a goal worth thinking about, and revolutionary events open up the possibility of such change. But revolutions are a dangerously universal solvent and there is no guarantee that they make things better: in fact usually the opposite is true. I worry that all the weight will be behind business-as-usual, never mind how catastrophically damaging that business has been: acting against that will require courage, imagination and international co-operation, and I don’t see much of any of those about. Where will the resources come from that we will need to spend to make a fairer and more sustainable world?

We’re used to people arguing that the current dramatic increases in government spending will make previously fiscally conservative states permanently more willing to pour resources into the economy: the UK furloughing scheme is costing more than the NHS each year, which makes the Government’s previous qualms about increasing health spending by 1% look a bit risible. But under the current financial system it all has to be paid for eventually. Now, it’s true that government debt isn’t the same sort of stuff as the debt we owe one another, small-scale concrete amounts of money, or perhaps objects (a lawnmower, for instance), that we provide for a limited amount of time and which remain our property even while the other person is using them. Commercial debts become something rather different: the money loaned often exists only notionally – it exists as something that could be repaid in the future - and of course it was the overlending of non-existent money which resulted in the financial crisis of 2008. Debt, then, is something separate from real property that someone owns; or rather, is a thing in itself as opposed to representing real property. This is how it can become an investment and can be bought and sold.

When governments borrow from each other debt becomes even more notional. In some circumstances, it does no harm for debt to be written off. The Jubilee 2000 campaign successfully resulted in more than $100BN of inter-governmental debt being cancelled and arguably helped a number of African economies begin to take off over the last decade-and-a-bit before the coronavirus came and kicked them in the teeth.

However a lot of the money the UK government (and I suppose others) is having to borrow comes not from other governments but from private sources: pension funds, investment banks, individuals. My three pensions – local government, Army, and Church – all include quantities of Government bonds. Cancelling any of that debt would be problematic to say the least: it's property, in a way, including property owned by me.

The philosophy of money is a bit beyond me, as economics and finance is beyond most of us, most of the time. For instance I only discovered today, as a result of some stray reference to the transparency or otherwise of the Bank of England’s Covid Corporate Financing Facility, about the debt instrument called ‘commercial paper’, a short-term promissory note issued by a financial institution to a large company for a specific purpose, effectively a loan. The financial industry’s creativity in devising ways of moving notional money about from place to place really dazzles in some ways. But it produces a system of such complexity that we are in danger of forgetting that nobody really knows what money is, and that it merely represents real interactions and real goods passing between people; a system that constrains and controls us rather than serving our interests. Distinguishing between different sorts of debts with the aim of making sure that we are not crushed by the ones we are incurring now is a task I have to pass to those who know more than me, but one I do think is urgent, especially as growth-based economics is almost certainly coming to an end, and growth essentially powered by the exploitation of fossil fuels definitely is.

Anyway, the swifts are back in Swanvale Halt, including this one caught on camera flitting behind the Rectory (just in front of the window). They are free even if we are constrained and confined.