The Big Society aka BS

Happy new year to everyone! It is starting out pretty poorly despite the nice weather and personal fun. On the last day of last year, the British Government released its Giving Green Paper, which apparently provides some detail about how it sees its Big Society concept working. As one commentator said it reads like it was written by a bunch of amateurs. But what it tells me is that the conservatives haven’t really evolved much since Maggie Thatcher declared there was no such thing as society. The Big Society is just a reprise of that concept with some mention of mobile phone apps and ATMs to match the historical period of technology that the latest attack on the welfare of the citizens is occurring. The Big Society is a blatant relinquishment of essential government roles and in that sense is a politically cynical attempt to cover up the impossibility of individual action relaxing systemic spending gaps. My training as a macroeconomists tells me that individuals cannot ease such macroeconomic constraints. Only the national government via appropriately sized budget deficits can do that. Which is exactly the responsibility the British government is recoiling from. The Big Society aka BS. More the fool anyone who believes in it.

Many people seem to go through the charade on December 31 or January 1 of making a New Years Resolution, often related to diet or exercise, and then after a period of adherence to the new routine – maybe a week – the patterns of old return and nothing much happens until the next year when the process is repeated. I don’t bother – if I am unhappy with something I change it.

The US President seems to be in the former category and told US citizens during is Weekly Address (January 1, 2011) that his resolution was:

… to do everything I can to make sure our economy is growing, creating jobs, and strengthening our middle class. That’s my resolution for the coming year.

I think he abandoned his commitment to his resolution immediately because in the rest of the speech there is no recognition that the US government could be creating jobs immediately. Instead, there were generalised statements of the American dream and his willingness to work “to work with anyone of either party who’s got a good idea and the commitment to see it through”.

The problem is that the political sway in the US now (after the mid-term elections if not before) is all anti-jobs and it is likely the demand for fiscal austerity will actually undermine the growth that is now emerging.

Then you read a recent blog from the Director, Congressional Budget Office (December 10, 2010) which summarised this publication – Economic Impacts of Waiting to Resolve the Long-Term Budget Imbalance and you realise what the daily advice Obama is receiving which makes it virtually impossible for him to live up to his resolution. The main conclusion of that blog was:

Waiting to put fiscal policy on a sustainable course would lead to higher levels of government debt, which would be costly in several ways:

* Higher debt would reduce the amount of saving devoted to productive capital and thus would result in lower incomes than would otherwise occur.

* Higher debt would lead to higher interest payments, meaning that larger tax increases or cuts to spending programs would be needed to make fiscal policy sustainable.

* Higher debt would make it harder for policymakers to respond to unexpected problems, such as financial crises, recessions, and wars.

* Higher debt would increase the likelihood of a fiscal crisis.

My responses to each of the dot points are:

– No, as long as the deficits are supporting growth they are creating savings not reducing the pool. But at any rate, loans create deposits in the banking system and private spending brings forth its own saving. Please read my blog – Why budget deficits drive private profit – for more discussion on this point.

– Higher deficits imply nothing at all about interest payments nor the future direction of tax rates. Further interest payments are private income which is typically something we desire (equity considerations notwithstanding). Please read my blogs – Will we really pay higher taxes? and Will we really pay higher interest rates? – for more discussion on this point.

– The financial capacity of the US government to increase (or decrease) its discretionary net spending is not dependent on decisions made in the past. It is true that spending programs can be captured by political lobbies which make them hard to undo. But the reality is that the government can respond to a crisis by expanding fiscal policy whenever it so chooses. The other point is that running surpluses is likely to undermine the economy (in usual conditions) and necessitate deficits to counter the spending decline exacerbated by the fiscal drag. Please read the suite of blogs – Deficit spending 101 – Part 1Deficit spending 101 – Part 2Deficit spending 101 – Part 3 – for more discussion.

– Final point is nonsensical. What is a fiscal crisis when we are dealing with a sovereign government that is never revenue constrained because it is the monopoly issuer of the currency? There is no meaning to statement that the US government will encounter a “fiscal crisis”.

So Obama’s resolution is just a piece of political cynicism – welcome to 2011.

Which brings me to the idea of the Big Society!

On October 31, 1987, the then British Prime Minister Margaret Thatcher told the UK Women’s Own Magazine:

I think we’ve been through a period where too many people have been given to understand that if they have a problem, it’s the government’s job to cope with it. ‘I have a problem, I’ll get a grant.’ ‘I’m homeless, the government must house me.’ They’re casting their problem on society. And, you know, there is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first. It’s our duty to look after ourselves and then, also to look after our neighbour. People have got the entitlements too much in mind, without the obligations. There’s no such thing as entitlement, unless someone has first met an obligation.

Two years earlier she had been victorious in destroying the National Union of Miners (NUM). In her famous speech to the 1922 Committee on July 19, 1984 she called the workers the “enemy within” who were “dangerous to liberty” and a “scar across the face of our country” because they were “ill motivated, ill intentioned … [and] … politically inspired”.

I was living in the UK at that time (doing my PhD at the University of Manchester) and I have first-hand experience of the travails that the poor went through dealing with the attack by their own government on their entitlements.

A major campaign against the miners triggered the 12 month’s long coal miner’s strike (1984-85) which ended in disaster for the workers. Thatcher also systematically undermined the “triple alliance” (coal, steel and rail unions) – the steel unions capitulated early and the rail unions were bypassed by government-organised road transport.

The Trade Union Congress leadership effectively sold the NUM out and the government won the battle. This was also, arguably, the point at which the Labour Party and the trade union leadership turned to the right and abandoned their commitment to a just society. We started to hear about the “New Realism” which led to “New Labour” and the “Third Way” – all sell outs.

But the “there is no such thing as society” was a dominant theme of that era and there were many harsh policies introduced to force people to “take care of themselves”.

For example, Thatcher’s government decided that “thousands of unemployed young people living in bed and breakfast rooms” on government benefits would have their payments “stopped unless they move elsewhere after a certain length of time”. This was part of a plan to force the unemployed workers who were under 26 years of age to “return to their families” and thus privatise the lack of jobs.

This article – Benefit curb turns young into ‘nomads’ – appeared in the The Sunday Times on June 23, 1985 and was written by journalist Brian Deer, who had a long record of reporting on social issues in the UK. It describes what was going on at the time.

The conservatives have learned a bit along the way. The current conservative government aided and abetted by the turncoat liberals (who I predict will get wiped out at the next election) are reprising Thatcher’s harshness but dressing it up as the Big Society.

The Big Society is another example of political cynicism. The swing to the right over the last 30 years in many nations has served to undermine the quality of education being offered. No wonder they think we are so stupid as to actually believe this sort of stuff.

The Big Society which I think of as BS – claims its aim is:

… to put more power and opportunity into people’s hands.

We want to give citizens, communities and local government the power and information they need to come together, solve the problems they face and build the Britain they want.

Compare that to Maggie’s “there is no such thing as society” quote – the Tories haven’t changed at all – they are just pitching the same denial of government responsibility in a slightly softer way now.

The BS is about “volunteering”, “charitable giving and philanthropy”, indoctrination of children via the “National Citizen Service” program (an army of 16 year olds being brainwashed into believing this stuff).

I read the latest piece of obscenity in this piece of politically cynically campaign today in the guise of the Giving Green Paper – which the British Government released on December 31, 2010. I wish this nonsense had have stayed in 2010.

The Green Paper emphasises the message:

The main lesson is to acknowledge the limits of government. Social action is not something that government can, or should, compel people to do; it has to be built from the bottom up, on the back of free decisions by individuals to give to causes around them. This is not easy, particularly given the pressures of life in 21st century Britain. For many of us it can feel like a struggle just to keep up with commitments spanning work, family, and friends.

If it wasn’t so serious the document would be a total humiliation. Its proposals are almost child-like in their naivety and their “bright eyed and bushy-tailed” enthusiasm. The ignorance that underpins those who embrace this stuff is staggering.

Clearly, I don’t consider the government has a role in dictating social actions. I am a social libertarian and consider there is very little role for government in making policies to control the way we interact. About the only controls I approve are those that restrict adults taking advantage of children (sexually or otherwise).

But I also understand that we should not conflate these “limits” on governments in directing our social interactions with the national government’s fiscal policy capacities where there are no financial limits. We should always understand why we bother with government in the first place.

We want government to advance the well-being of the populace which I often refer to as advancing the public purpose role of government. The dimensions of this are clear in my mind and most of the commonly considered constraints on the national government pursuing this role are illusory.

The state should maximise the potential of its population – a zero waste of people – which at least requires the state to maximise employment. Once the private sector has made its spending based on its expectations of the future, the government has to render those private decisions consistent with the objective of full employment.

The non-government sector typically does not spend all of its income over the business cycle. What does this imply? It means that non-government spending gaps over the course of the cycle can only be filled by government.

The national government always has a choice:

  • Maintain full employment by ensuring there is no spending gap – that is run budget deficits commensurate with non-government surpluses; OR
  • Maintain some slack in the economy (persistent unemployment and underemployment) which means that the government deficit will be somewhat smaller and perhaps even, for a time, a budget surplus will be possible.

The BS approach reflects that fact that the British government has chosen the second option.

But the Green Paper doesn’t acknowledge any of that. It is bereft of any understanding of the way the monetary system operates and ranks along with the documents that came out of Nazi propaganda machine in the 1930s and 1940s.

In releasing the Green Paper, Francis Maude the Minister for the Cabinet Office said that BS is about “(p)eople giving time, money, assets, skills and knowledge all drive social action and help make life better for all … [creating] … new social attitudes that celebrate giving”.

So you might think Maude is leading the generosity. You might be wrong. He was one of those who were caught out rorting the public purse for his own gain.

We also should not forget that he was a supporter in the Major Conservative government of the Section 28 legislation that pressured local authorities to eschew any positive recognition of homosexuality. The British PM was also a vehement critic of the last government’s plan to abolish the Section 28 clauses.

So some social action is fine but for Maude and Cameron (and the conservatives in general) but apparently government should still be heavy-handed as long as they don’t have to spend anything!

The UK Guardian article (December 31, 2010) – Private charity is never a substitute for public welfare – sums up the hypocrisy of Maude in this way:

The personal wealth of Francis Maude, the Cabinet Office minister who has just issued a green paper on “giving” in the hope of “building culture change” in our attitudes to charity, is estimated at £3m. No doubt it was to maintain his own levels of “giving” that, having rented out a central London house he already owned, he bought a flat nearby and put £35,000 in mortgage interest on expenses. No doubt, too, he stopped to ladle out soup to the homeless on his way to board meetings of Prestbury Holdings, a financial services company that benefited handsomely from sub-prime mortgages and paid Maude more than £3,000 each time he put in an appearance. But, it should be admitted, we are short on detail. Asked on Radio 4 this summer for particulars of his voluntary charitable work, he replied “that’s a very unfair question”. Perhaps he and the 22 millionaires among fellow ministers who attend cabinet meetings regard constructing the “big society” as a sufficiently charitable contribution in itself.

You get the picture.

I especially liked the article in the UK Guardian by William Keegan yesterday (January 2, 2011) – Big society or no, don’t let yourself be distracted at the cash machine.

He concludes that the BS is “cynically political. But at another level, it is a genuinely bizarre notion dreamed up by a bunch of amateurs”. When you read the Green Paper that is the impression you get. A rather awful political ploy relying on a bunch of T-shirted BS volunteers in the party office who have little understanding of what they are pushing.

Keegan says that the “big society” got off to a bad start” when a once prosperous local council (now facing severe financial cuts) begged local business to “pay half the cost” of its festive street lights. Not much was raised. The example generalises across Britain.

The government’s plan is clear – cut the hell out of the deficit and then offer tax cuts at the next election to persuade voters that they inherited a Labour nightmare but want to help families in the long-term.

Of-course, as the data emerges you will see that the automatic stabilisers (reacting to the policy-induced slide back to recession or stagnant growth) will provide headaches for the government. They will struggle to reduce the budget deficit in this current climate.

Keegan notes that political considerations aside:

… the big society is a half-baked idea dreamed up by a bunch of amateurs who – I am not making this up – are now reported to want us to make charitable donations when we use cash machines to help fill the gap left by austerity.

Anyway, the Green Paper’s genius idea is that ATMs (cash machines) will be programmed to automatically allow customers to donate to charity. Everytime you withdraw some cash you can automatically have some sent to charity.

Standby for some mobile phone apps and E-mail campaigns to promote donations.

The UK Guardian article – Private charity is never a substitute for public welfare – correctly notes that a reliance on personal charity is very patchy. That is, some areas of need might gain while other areas of need will be starved of funding.

We read:

Unfortunately, private charity doesn’t always have the same priorities as public policy. In the UK, the most popular causes are children, animals, cancer and lifeboats. Overseas causes, for relief of famine, disease or effects of natural disasters, tend to do well, helped by celebrity endorsements and fundraising concerts. Mental illness and disability, ex-offenders and unqualified school leavers are less likely to arouse our compassion. Again, volunteering tends to be most common in areas that need it least.

The notion of the “deserving poor” was the hallmark of pre-Welfare State thinking. It led to all sorts of inhumane outcomes as the rich felt they were entitled to determine how the poor lived etc.

That is why the concept of the Welfare State evolved to match the increased sophistication among policy makers as to how the business cycle worked and the fallacies of composition that pervaded conservative economic (and social thinking). The recognition that government could maintain high standards of living in tandem with private enterprise was also combined with an advanced understanding of what entitlements citizenship engendered.

The Post World War 2 economic and social settlement in most Western countries was based on three main pillars. First, the Economic Pillar was defined by an unambiguous commitment to full employment, although this commitment became blurred in the debate about the trade-off between inflation and unemployment in the 1960s.

Second, the Redistributive Pillar was designed to ameliorate market outcomes and defined much of the equity intervention by government. It recognised that the free market was amoral and intervention in the form of income support and wage setting norms was a necessary part of a sophisticated society.

Third, the Collective Pillar provided the philosophical underpinning for the Full Employment framework and was based on the intrinsic rights of citizenship. We accept that our depiction is a stylisation and that there were many individual nuances in particular countries over the period considered.

The UK Guardian article – Private charity is never a substitute for public welfare – says:

The point of post-1945 European welfare states was to free the needy from dependence on private generosity, which tends to miss out the socially marginal, and to be least available when times are hardest. Welfare gave a sense of security and dignity that the less fortunate had never previously enjoyed. It was particularly important to continental societies that had seen how insecurity bred fascism. Those who volunteer time to hospitals and homeless centres or who take out direct debits for guide dogs and cancer research are admirable, but no more or less admirable than those who pay taxes without vociferous complaint. Nor is a society with a “culture of giving” more admirable than one where workers receive living wages, decent pensions and reasonable employment protection; executives exercise restraint in remunerating themselves; and everyone has sufficient support to look after their ailing grannies.

The Great Depression taught us that, without government intervention, capitalist economies are prone to lengthy periods of unemployment. The emphasis of macroeconomic policy in the period immediately following the Second World War was to promote full employment. Inflation control was not considered a major issue even though it was one of the stated policy targets of most governments. In this period, the memories of the Great Depression still exerted an influence on the constituencies that elected the politicians.

The experience of the Second World War showed governments that full employment could be maintained with appropriate use of budget deficits. The employment growth following the Great Depression was in direct response to the spending needs that accompanied the onset of the War rather than the failed Neoclassical remedies that had been tried during the 1930s. The problem that had to be addressed by governments at War’s end was to find a way to translate the fully employed War economy with extensive civil controls and loss of liberty into a fully employed peacetime model.

From 1945 until 1975, governments manipulated fiscal and monetary policy to maintain levels of overall spending sufficient to generate employment growth in line with labour force growth. This was consistent with the view that mass unemployment reflected deficient aggregate demand which could be resolved through positive net government spending (budget deficits). Governments used a range of fiscal and monetary measures to stabilise the economy in the face of fluctuations in private sector spending and were typically in deficit.

As a consequence, in the period between 1945 through to the mid 1970s, most advanced Western nations maintained very low levels of unemployment, typically below 2 per cent.

While both private and public employment growth was relatively strong during the Post War period up until the mid 1970s, the major reason that the economy was able to sustain full employment was that it maintained a buffer of jobs that were always available, and which provided easy employment access to the least skilled workers in the labour force.

Some of these jobs, such as process work in factories, were available in the private sector. However, the public sector also offered many buffer jobs that sustained workers with a range of skills through hard times. In some cases, these jobs provided permanent work for the low skilled and otherwise disadvantaged workers.

The full employment commitment (the Economic Pillar) was buttressed by the development of the Welfare State, which defined the state’s obligation to provide security to all citizens. Citizenship embraced the notion that society adopted a collective responsibility for welfare and abandoned the failed dichotomy that had been constructed between the deserving and undeserving poor. The Redistributive Pillar recognised that the mixed economy (with a large market-component) would deliver poor outcomes to some citizen, principally via unemployment. Extensive transfer payments programs were designed to provide income support to disadvantaged individuals and groups.

Underpinning the Welfare State and the economic commitment to full employment was a sophisticated concept of citizenship (the Collective Pillar). The rights of citizenship meant that individuals had access to the distribution system (via transfer payments) independent of market outcomes. Furthermore, a professional public sector provided standardised services at an equivalent level to all citizens as a right of citizenship. These included the public sector employment services, public health and education systems, legal aid and a range of other services.

It was clear that the stability of this Post-War framework with the Government maintaining continuous full employment via policy interventions was always a source of dissatisfaction for the capitalist class and its conservative “intellectuals”.

Following the first OPEC oil price hike in 1974, which led to accelerating inflation in most countries, there was a resurgence of pre-Keynesian thinking. The Keynesian notion of full employment was abandoned as policy makers progressively adopted the natural rate of unemployment approach or the more recent terminology of the Non-Accelerating Inflation Rate of Unemployment (NAIRU) approach. This approach redefines full employment in terms of a unique unemployment rate (the NAIRU) where inflation is stable, and which is determined by supply forces and is invariant to Keynesian demand-side policies. It reintroduces the discredited Say’s Law by alleging that free markets guarantee full employment and Keynesian attempts to drive unemployment below the NAIRU will ultimately be self-defeating and inflationary.

The Keynesian notion that unemployment represents a macroeconomic failure that can be addressed by expansionary fiscal and/or monetary policy is rejected. Instead, unemployment reflects failures on the supply side failures such as individual disincentive effects arising from welfare provision, skill mismatches, and excessive government regulations. Extreme versions of the natural rate hypothesis consider unemployment to be voluntary and the outcome of optimising choices by individuals between work (bad) and leisure (good).

As, what is now referred to as, neo-liberalism took hold in the policy making domains of government, advocacy for the use of discretionary fiscal and monetary policy to stabilise the economy diminished, and then vanished. In the mid-1970s the opposition to the use of budget deficits to maintain full employment became visible for the first time and the inflation-first rhetoric emerged as the dominant discourse in macroeconomic policy debates. The rhetoric was not new and had previously driven the failed policy initiatives during the Great Depression.

However, history is conveniently forgotten and Friedman’s natural rate hypothesis seemed to provide economists with an explanation for high inflation and alleged three main and highly visible culprits – the use of government deficits to stimulate the economy; the widespread income support mechanisms operating under the guise of the Welfare State; and the excessive power of the trade unions which had supposedly been nurtured by the years of full employment.

All were considered to be linked and anathema to the conditions that would deliver optimal outcomes as prescribed in the Neoclassical economic (textbook) model. With support from business and an uncritical media, the paradigm shift in the academy permeated the policy circles and as a consequence governments relinquished the first major pillar of the Post-War framework – the commitment to full employment. It was during this era that unemployment accelerated and has never returned to the low levels that were the hallmark of the Keynesian period.

The NAIRU approach extolled, as a matter of religious faith, that government could only achieve better outcomes (higher productivity, lower unemployment) through microeconomic reforms. In accordance with the so-called supply-side economics, governments began to redefine the Economic Pillar in terms of creating a greater reliance on market-based economic outcomes with a diminished public sector involvement. In many countries successive governments began cutting expenditures on public sector employment and social programs; culled the public capacity to offer apprenticeships and training programs, and set about dismantling what they claimed to be supply impediments (such as labour regulations, minimum wages, social security payments and the like).

Within this logic, governments adopted the goal of full employability, significantly diminishing their responsibility for the optimum use of the nation’s labour resources. Accordingly, the aim of labour market policy was limited to ensuring that individuals are employable. This new ambition became exemplified in the 1994 OECD Jobs Study.

As a result, successive governments in many countries began the relentless imposition of active labour market programs. These were designed to churn the unemployed through training programs and/or force participation in workfare compliance programs. The absurdity of requiring people to relentlessly search for work, and to engage in on-going training divorced of a paid-work context, seemed lost on government and their policy advisors. That the NAIRU approach seduced them at all is more difficult to understand given stark evidence that since 1975 there have never been enough jobs available to match the willing labour supply.

And it is in that context that we should understand the Big Society. We can be as generous to each other as we like but if there is not enough spending overall in the economy then there will be unemployment. Mass unemployment arises from a lack of overall spending – What causes mass unemployment?.

Plans for one group to be socially aware will only re-distribute existing spending or run down savings within the non-government sector. It will not create new net financial assets which support aggregate demand growth.

But the British Labour Party shouldn’t complain too much. The BS is just a harder-edged version of their promotion of social entrepreneurship which was one of the central tenets of the Third Way.

Please read my blog – Social entrepreneurship … another neo-liberal denial – for more discussion on this point. In this blog, I provide a very detailed macroeconomic critique of the concept of charity and volunteering.

Please note that I am not against people helping each other and being charitable. Far from it. My objection (outlined in the previously cited blog) is that it will not work unless there is adequate fiscal support. You might also find my blog – The revolving door – how social policy is co-opted – interesting in this regard.


So while “there is no such thing as society” it is “big”. Neither concept has any credibility.

The alleged motivation of the Green Paper and the BS is the work of British sociologist Richard Titmuss who outlined a model of personal altruism in his last work the 1971 Gift Relationship. This is a book about blood transfusion service systems if you didn’t already know and Titmuss provided an “in-depth analysis of the systems for supplying blood in the United States and England and Wales (American Journal of Public Health, 1972 August; 62(8): 1153-1154).

But it is about the benefits of public service. I agree that public service is the basis of society. But I am also a macroeconomist and I understand spending gaps and aggregate demand constraints on employment. I understand that mass unemployment arises from a lack of overall spending.

I understand that without government spending to fill the private spending gap then you cannot have full employment. I understand that without full employment a society cannot aspire to generosity and inclusion.

That is the fundamental role of government – to ensure the budget deficit is large enough to support full employment (which might in some situations like a strong external surplus mean a budget surplus). By inventing concepts such as the BS when all you are really using it for is as a smokescreen for cutting what are essential net public spending positions and thereby increasing social alienation and starving communities of resources required to engage in fullsome social action is an act of political cynicism of the worst kind.

My first real post for 2011 – a depressing start. Lucky I have nice social interactions – but also the personal resources to facilitate them!

That is enough for today!

This Post Has 31 Comments

  1. David Cameron did not originally intend the Big Society to be a smokescreen for cutting services. He had the idea before most of the effects of the GFC had hit Britain.

    Now, being a smokescreen for cuts, it is obviously doomed to failure – which is a shame, because it’s actually a very good idea.

  2. “The Trade Union Congress leadership effectively sold the NUM out ”

    Not really. It was more the idiot that was running the miners union. My old dad should have chucked Scargill down the pit shaft when he threatened to. He was always a firebrand prat who clinically abused the unthinking loyalty that tends to build up in mining communities who depend on each other for their lives day by day in the furtherance of his own ideological position.

    You don’t prepare for a battle by first running down your troops reserves with an overtime ban and then splitting your troops in two by ideologically refusing to comply with the current law of the land.

    The unions were a huge problem in the 70s and 80s in the UK. They were exactly like the white farmers in Zimbabwe. They refused to be reasonable and constantly wanted more resources pumped their members way. In Zimbabwe they got Mugabe. In Britain we got Maggie. That is what happens when ideology blinds rationality.

    Brown and Blair completely messed up the massive mandate they had by relying on the financial sector to ‘fund’ their programme and now we have the three wise men of Cameron, Osborne and Clegg in charge.

    Worse that that the opposition is run Miliband who is definitely the boiled Tofu of politics – he just picks up the flavour of anything he comes in contact with.

    I despair for our great country. I really do.

  3. Thatcher’s line “there is no such thing as society” is like saying there is no such thing as macroeconomics. But I’m with you, Bill: Individuals cannot ease macroeconomic constraints.

    From 1945 until 1975, while “governments manipulated fiscal and monetary policy to maintain levels of overall spending sufficient to generate employment growth in line with labour force growth,” the U.S. federal debt was falling relative to GDP. And until the mid-60s, inflation was approaching zero. And, of course, people could get jobs!

    I like it when you do history, Bill.

    Neil — “My old dad should have chucked Scargill down the pit shaft when he threatened to.”
    Oh, that’s funny!


  4. One thing I learned from the US President during his first six months in office is to listen to what he says he will do and then expect the opposite. What Obummer says in public is only to conceal what he has agreed to in private.

  5. A major campaign against the miners triggered the 12 month’s long coal miner’s strike (1984-85) which ended in disaster for the workers. Thatcher also systematically undermined the “triple alliance” (coal, steel and rail unions) – the steel unions capitulated early and the rail unions were bypassed by government-organised road transport.

    …And it was probably the best thing Thatcher ever did when she was in power.

    Strikes had previously crippled the country and were continuing to do so. It was right to prevent unions from causing so much damage. And though the way they did it was less than ideal, at least they did something, unlike their predecessors.

    The Trade Union Congress leadership effectively sold the NUM out and the government won the battle.

    After a miners’ strike had brought down the previous government, the government was determined to win this time. The TUC were sensible to get out of the way!

    This was also, arguably, the point at which the Labour Party and the trade union leadership turned to the right and abandoned their commitment to a just society.

    That would be an incredibly weak argument, as those genuinely committed to a just society would find it difficult to support the strikers.

    Labour didn’t abandon their principles in the ’80s! I don’t know exactly when they abandoned their commitment to a just society, but I suspect it was when Blair took charge.

    We started to hear about the “New Realism” which led to “New Labour” and the “Third Way” – all sell outs.

    There is a genuine third way. The redistribution of wealth is entirely compatible with a market economy. The problem with New Labour wasn’t that they were committed to the third way; rather ’twas that they weren’t. They talked a lot about it, but in reality Gordon Brown was only in appearances, not genuine economic efficiency

  6. The word “unsustainable” has become the most overused, meaningless, and most unquantified word in the economic world. No one who uses it EVER specifies what is being “sustained”, when the “sustain” runs out, or what exactly happens when it does. It is left as some mysterious, horrifying cloud of hobgobblins, looming over us, waiting to eat our children and grandchildren, much (exactly) like our never-found “weapons of mass destruction”. It is like a lot of things I’ve noticed in economics as I’ve buried my head into the subject in response to the crisis: Stuff that is supposedly “common knowledge” is often ill-defined, and, if discussed at all, is treated in a very sloppy, non-quantified manner, with often quite conflicting explanations left unnoticed and unaddressed.

    I’m afraid that economics (current company excepted), for all the airs of sophistication it pretends with its mathematical presentations, PhDs, and highest awards, is still somewhat more akin to alchemy and astrology than it is to the real physical and cosmological sciences. It is a shame that our “leaders” cannot see this, for it should be that even fools must eventually notice, “The emperor has no clothes.”

  7. The Arthurian: Thatcher’s line “there is no such thing as society” is like saying there is no such thing as macroeconomics.

    That is precisely the intention. Modern political conservatism is individualistic, and economic neoliberalism is anti-Keynes. Their basic ideas are 1) that society is a random group without inherent relationships, even though the strong commitment of conservatism to kinship contradicts this, and 2) that macro is scaled up micro.

    Government is just a participant in the market on the level of other players, and since it is privileged in many ways, it has to be on a tight leash, limited to providing the domestic apparatus for protecting personal security and private property, and the military for defense (not to forget foreign adventurism – remember the Falklands). The monetary function has to made as independent of government as possible, that is, delivered to the bankers.

    This is the basis of the present kerffufle. One side holds that society is an aggregation of inherently free individuals with no common purpose or shared commitment, and the other side holds that society is a system of elements and subsystems, each having social responsibilities, and that this system is order to an end, namely the common good at which public purpose aims. The former party believes that coordination is optimally provided by the invisible hand of self-interest, leaving individuals free to choose and act within the bounds of law, which should be very limited, whereas the latter holds that coordination is rationally-based in advanced human societies and this involves considerable intricacy extending into many areas of life. These ideas are the basis of competing ideologies.

  8. Benedict at Large: The word “unsustainable” has become the most overused, meaningless, and most unquantified word in the economic world.

    That is true in many respects, but energy economics and environmental economics are pretty specific about “unsustainable” e.g., in terms of units of energy used per capita and EROEI, and consequences of temperature rise on human and other populations in terms of degrees added.

  9. “there is no such thing as society”, only individuals, I think it reads.

    A curious consequence of the logic behind this statement is that human bodies do not exist either: only individual cells. But, wait, cells are also societies of molecules, so they do not exist either. Therefore, we end in a world where we can only speak of quarks, which according to physicists are the ultimate “individuals”.

    Maybe this can be a useful argument, depending on the people taking place in the conversation.

  10. Such talk of cosmology and the sciences. Those who have some knowledge of physics understand the laws which govern the universe.
    ‘Relativity’ explains how the macro universe works and the effects of large objects on other large objects.
    ‘Quantum mechanics’ best explain the universe at a sub-atomic level. This is quite different to the macro-universe.
    So too I believe that which governs society.

    What we deem as how we would have our country managed is quite different to how we organise our families and Thatcher saw this. She represented the ‘greater good’ in breaking the stranglehold of the militant unions. There are plenty other examples of how most of society is happy with its leaders inflicting some pain society-wide or on individuals for the perceived greater good (periods of conscription, austerity, high taxes etc).

    However, within our families all changes. None of us would give up a wayward child or easily cut their toe off to save a foot. Who would tax their kid 40% for boarding and meals or not want to send them to the best school available?
    As such, it is all well and good to talk about redistribution of wealth society-wide however to get such an idea off the ground, individuals have got to put advancement of society above the welfare of their own family.
    PIIGS would sooner fly (if you will excuse the pun).

  11. Hi Bill,

    I have been thinking recently about our small, crowded world, and wondering if the correct prescription in Keynes day is still correct now. While I understand the macroeconomic logic of MMT, I wonder what will happen to our planet if we collectively pursue policies to increase aggregate demand. I have not reasoned this out all the way, but at first blush it would seem billions of people trying to live the same life North Americans have been enjoying for the past 60 years is a recipe for ecological disaster. Granted, billions of people living in poverty and ignorance isn’t working out so well either. This is not a criticism of you, Bill, or your enormous body of work.I’m just contemplating the idea that the problem may be even more complex than we realize.

  12. “But the “there is no such thing as society” was a dominant theme of that era and there were many harsh policies introduced to force people to “take care of themselves”.

    For example, Thatcher’s government decided that “thousands of unemployed young people living in bed and breakfast rooms” on government benefits would have their payments “stopped unless they move elsewhere after a certain length of time”. This was part of a plan to force the unemployed workers who were under 26 years of age to “return to their families” and thus privatise the lack of jobs.”

    Small historical footnote, from someone who was working with homeless people in the UK at the time.

    There was a bit of a moral panic about dole claimants moving around the country at will, because the regs allowed them to claim in a town where they didn’t normally live.

    You might have thought that Tebbitesque – hordes of people getting on their bikes to search for work. But one of the rags, could be the Mail, came on strong about young people living at the seaside at “our” expense, as though that was a bad thing or they were having a great time. Loads of young people moving to Brighton or Blackpool, and claiming for housing costs. Guess the journos hadn’t spent too many holidays in our seaside resorts on dole money, if they thought it was a laugh a minute.

    And so the government passed our equivalent of pass laws. People under 26 were required to move after 2, 4 or 8 weeks, to prevent them settling into a lifestyle choice of sponging off the rest of us. Sound familiar? Are we hearing some of those strains again?

    The policy was partly about denying the cause of homelessness (ie saying that people could go “home” suggested that homelessness was an act of volition, rather than an expression of the lack of affordable housing; and partly an act of social control, the older and wealthier punishing those who were perceived as making joblessness and homelessness acceptable costs to be borne by all of us.

    It wasn’t so much privatising the lack of jobs, and so forcing the economic consequences onto the families, as reacting to an emerging culture which supported people in unemployment (and in which regard, the many activities of the miners strike offered a template of what to do). Clearly, this sort of thing had to be broken.

    The policy didn’t last. It was clearly daft. However, it resurfaces from time to time.

    There are many resonances between the Britain of 1985 and today, and however he may try to distance himself from her, Cameron is the lick spit of the witch herself.

  13. nmtdoc:

    Sustainability in regards to the environment is one of the biggest challenges of our times. You might be surprised to see how MMT can be one of the best indirect weapons in the environmentalist’s armory.

    1. Overpopulation. The most effective and ethical method of bringing birthrates down is through education. Most western countries have below steady-state birthrates because the women are highly educated and prefer to have careers. Education is a labour-intensive undertaking; it requires little in the way of consumable resources. Yet it happens to be consistently underfunded. MMT shows how the government will always be able to afford education and has no excuse in underfunding it. Also, check out

    2. Renewable energy. What is the first and only thing fossil-fuel apologists say when confronted with renewable energy? Jobs, jobs, it will cost us jobs! Do you think this will have quite the same ring to it if people realized the government could always afford to directly employ the unemployed miners and oil tycoons? If unemployment was down to 2% and you could easily get a job in a seller’s labor market?

    3. Renewable R&D. It costs too much – we can’t afford it! Well, MMT shows us that we can. We don’t even have to give up a single aircraft carrier to pay for world class solar research.

  14. 1. The largest factor affecting population growth rate is economic development. Bucky Fuller showed the result of electrification on population over half a century ago.

    2. MMT shows how to counter the effects of lagging demand (inject NFA) and excess demand (withdraw NFA). In terms of sectoral balances, this only affects quantities. However, injections and withdrawals can be targeted specifically to affect quality, e.g., by ordering demand toward environment sustainability and ecological balance through R&D, basic infrastructure, education, etc.

  15. Not only does Mrs. Thatcher not exist by her own logic, the very cells of her body do not exist, being merely collections of molecules. And those molecules themselves do not exist, being composed solely of atoms, none of which are joined to each other by any physical substance, but are instead separated by pure vacuum.. And these atoms, 99% of which are pure empty space, are in turn composed of other elementary particles likewise separated by comparitively vast stretches of pure nothingness.

    But neither the elementary particles nor the vacuum in which they reside exist either, being merely apparant and purely virtual expressions of the only “real” thing, the quantum probability field, if the word “real” can be applied to such a vague word which yet, by experiment after experiment after experiment is the only “thing” in our universe that actually has anything approaching “reality”, whatever that is.

    I am sure the nonexistance of Maggie Thatcher is an excellent thing considering the harm her purely imaginary existance created. Just think of how much harm she could have created if she had been real!

  16. Neil – can you recommend any _progressive_ account of the harm done by the UK unions in the 1970s?

    There are obviously plenty of diatribes out there but many of these just oppose unionism full stop, and so are of less interest.


  17. Interesting link up there, Tom. Funny they should mention subsidiarity. It is logical from a particularist, globalisation sceptic point of view, but doesn’t necessarily set the right focus in my opinion. Switzerland basically invented subsidiarity and the whole EU is built following its principles. It has proven quite handy in some respects (sustaining national idenitities in the EU for example), but rather disastrous in others. I believe that the Euro troubles are the economic price for adhering to political subsidiarity. And I think it is the distinction between the two that shows the limits of the principle itself. Subsidiarity of whom to what? What is a community? Does a community follow geographical boundaries, etc..

    It is both a problem of theory, in that individual > community > nation > region > world is an insufficient sequence by which to capture reality and reciprocally of practice, in that the political entities are built upon that same sequence but are left to deal with problems that transcend its artificial boundaries to the extent that they are often meaningless. I say there needs to be an adaptation of both understanding and political practice if we are to move forward. The nation bound particularism vs. transnationalism / cosmopolitanism dichotomy can’t be solved by preaching either one or the other. Somehow the streams of factors must be measured and portrayed in a credibly complex way, and ultimately aligned in a way that takes modern global realities into account and doesn’t assume them away. This is where the article falls short imo.

  18. “Neil – can you recommend any _progressive_ account of the harm done by the UK unions in the 1970s?”

    Not really – history is written by the victors. The main issue was the number of strike days which constantly interrupted the supply chain. You don’t see that in the German or US systems. Unions have exactly the same problem as large corporations. They have a tendency to get captured politically and lose their way. We’re seeing the same process happening today with large unions pushing political agendas, paying secretaries crazy amounts of money while failing to protect their members. They are not fit for purpose.

  19. Oliver, the principle of subsidiarity, which states that “a larger and greater body should not exercise functions which can be carried out efficiently by one smaller and lesser, but rather the former should support the latter and help to coordinate its activity with the activities of the whole community” (source) is a core libertarian principle. Libertarians of both right and left agree on it. It’s the bulwark against authoritarian centralism, toward which established institutions tend.

    I am not claiming that that article has all the answer. It only a short piece, and as you say the issues and challenges are complex. But as a philosopher, I am reminded of Aristotle’s observation, summarized by Aquinas at the outset of De Ente et Essentia, as I recall, “A small mistake at the beginning becomes a great one at the end.”

    The question from which we must start involves whether human beings are chiefly individual or social. Contemporary economics is based on the notion of the representative agent (idealized individual). We see where institutionalized unfettered competition leads.

    According to the person in community theory that view is unrealistic because it does not accord with human nature, and it is also impractical because it is essentially destructive of social harmony. They emphasis the need for cooperation and coordination.

    Libertarians of the right are committed to the individualistic view. Libertarians of the left are committed to the person in community view and get around the charge that this way is the road to socialism through invoking the principle of subsidiarity. Libertarians of the left point out that libertarians of the right are not actually committed to the individual they way they say they are anyway, since they hold that family and kinship relations are primary.

  20. Thanks Neil – I hear you; so in this case what’s the solution?

    You seem to be sufficiently progressive/reflective not to accept the mainstream consensus that unions are inevitably a bad thing. Looking at the long term struggle between wages and profits for their share of GDP, I’m not sure what better countervailing force there is to business than unions…

    Thanks, MMTP

  21. MMTP,

    Freelancing and worker-ownership gets you part of the way there. Paternalistic smaller businesses get you a little bit further. I think if you then put in a base where the businesses are genuinely competing for the workers (against a ‘minimum acceptable standard’ JG type job) you will start to get an improvement as a result of competition. Beyond that…

    For me there is too much focus on large companies, large public sector setups and large unions than is warranted by their impact in the grand scheme of things. It’s the boil a frog problem in reverse.

  22. MMTP and Neil, the emerging problem is multinations v, workers of the world. The New World Order is already fast-emerging, and it’s run by multinationals, presided over by international finance. The ruling elite is intent on driving developed nations in a race to the bottom wrt wages and to limit government in order to increase rent-seeking opportunity. The affluent consumer of the developed world is no longer the driving force in a global market place. The middle class of the West is expendable.

    Middle class workers are just beginning to figure this out, now that the middle class is fast disappearing in the developed world. Expect more labor unrest, a political push toward protectionism, and possibly a re-invigorating of the labor movement. I think that this will eventually become worldwide. The capitalists, both industrial and financial, think they have a free rein now that “the red menace” has been buried except in NK and Cuba. But Marx is far from dead.

    The powers that be should know this since they preach that the market economy is the basis for liberal democracy. They think they can control democracy, but I think this is a false wish. There is going to be push back against overreach and corruption, and we are already seeing some of the blowback beginning as more and more people get crammed down the ladder. The problem is not so much the people at the bottom, but the people who were well-off, or even very well-off, who are now either getting pushed down or cut off from advancing up. I don’t think it is realistic for a relatively small group of very wealthy and powerful people to think that they can dominate the entire world for long.

    In the US, “red” has become synonymous with conservative. It is going to revert to its previous meaning as the race to the bottom speeds up. I am not anticipating a resurgence of Marxism. However, the dynamics that Marx correctly observed will come into play in a new form, perhaps along lines that Schumpeter anticipated in Capitalism, Socialism and Democracy. When? Ravi Batra’s The New Golden Age: The Coming Revolution against Political Corruption and Economic Chaos, and Strauss and Howe’s The Fourth Turning speak to this.

  23. Dear Tom,

    The principle of subsidiarity, a basic tenet of the European Union is a neoliberal concept constructed to promote the individual unit as a private initiative of self interest. It attempts to limit public institutions from performing functions that enhance common attributes as they claim that private units can engage in “free” agreements to achieve their proprietary “rights” (work, family creation, etc.). Any public engagement should be only subsidiary and dependent to such agreements. So be careful of your support for such tricky agenda!

  24. Hi Takis, I learned the principle of subsidiarity in my political science class as a college freshman in 1958, long before the EU was conceived. While today “subsidiarity” is generally associated with the EU, it has a venerable history in political thought, especially Roman Catholic political teaching since Rerum Novarum (1891). Oswald von Nell-BreuningIt developed it in Quadragessismo Anno (1931).

    It is also the basis of libertarian thinking within federalism because its purpose is to limit the power and reach of the state as a centralized power through decentralized decision-making. It is basic to the political structure of the US, and it has been a bone of contention from the outset with one faction pitching for a strong central government and weak states, while the other championed a weak central government and strong states. This kerffufle has emerged in full force in today’s US politics.

  25. Maybe the term subsidiarity has been misappropriated by the neo liberals just as the term libertarianism has by the right.

    I’m quite partial to the concept of person in community but I don’t know how one would define community. An example: I am certain that you and I share more common values than I will ever share with any of my my immediate neighbours in town, most of who (whom?) are orthodox Jews. In this case, the relevant social community is billyblog, but the political community governing my actions is the city of Zurich. There needs to be some geographical congruence of economic, social and political communities for the principles of subsidiarity to work. I think globalisation has made even defining comunity, let alone legislating congruity much more complex and I think we need new models. Subsidiarity seems a bit 2 dimensional in that sense and that is probably why it has become so compatible with the neo liberal agenda – the only remaining common denominators are the individual followed by some vague notions of nationalism.

  26. Dear Tom,

    What matters is its use and what the concept allows for its interpretation. So watch out when it is used by neoliberal thinkers to legitimize a ‘small” government with limited fiscal capacity. Furthermore, I am suspicious of libertarian thinking of the right or of the left because it limits identitification down to an atomic or aggregate level (excluding a social level) which can be linked to the private unit trading in markets rather than a civic unit sharing common attributes in a community.

  27. I think the current issue revolves around the neoliberal and Austrian rejection of society as a complex and interdependent system of relationships in favor of modeling based on aggregation of individuals subsumed under “the representative agent” as “rational.” It violates what has been shown extensively in the biological and social sciences.

    It is often claimed that the model is “just a model” and is not meant to be an accurate picture of reality. However, then neoliberals and Austrians go right on to presume in their conclusions that the assumptions of the model are factually based and are proved by the model, when they are not at all. Moreover, the model is only a gross approximation that fails when pushed, like most loose analogies, in this case because it is an oversimplification.

    If we can establish that, which is an economic issue, then we can argue about the principles of social democracy. But that probably goes beyond the scope of this blog, since it goes beyond economics.

  28. Dear Takis, I agree with what you say and don’t dispute its centrality. These are the philosophical and scientific issues that are logically prior to doing economics at all. The relationship of individual and society is a key issue that has engaged thinkers from ancient times, Greece in particular, where most of the enduring issues were formulated and debated.

    As a philosopher, I just roll my eyes at the lack of understanding or interest in examining the foundations of moden economics, which presumes philosophical issues realting to foundational principles that have been hotly debated over millennia and ignores scientific findings in other fields relevant to key assumptions.

    I conclude that economics as it is presently done is largely based on magical thinking dresseed up as rigorous in the guise of mathematical models. Which is why I am here, where this is sanity in the field.

  29. Dear Tom,

    Agreed. This is why I emphasize the imprtance in examining assumptions and the consistency of hypothesis. As for math, being a mathematician ( a logical language only) I find it distressing to observe the casual and elemetary use by so many mainstream economists and their apologists!

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