British Chancellor fails the basic test – language is meant to impart meaning

Language is meant to bring meaning to discourse. That means we want to use terms that convey information that is of use to us in making our way in the world. The problem is that economists have perverted that process and introduced a metaphorical language that is intended to persuade the reader/listener to accept a particular view of the world but which undermines their ability to actually understand the phenomenon in question. Marx knew long ago how language could be constructed to advance the interests of the ruling class. The mainstream economics commentary that is also used by politicians falls into this category. Terms are used that have no meaning in an elemental sense but provide support for ideological agendas. We, the public, allow that to happen because we are ignorant about the context. It becomes a vicious cycle of lies and fictions which undermine human and environmental sustainability but certainly transfer income to the top-end-of-town. A recent path setting address to the House of Commons by the new Chancellor is a classic example of this reality denial.

But first some music from 1959 when language is used with meaning by two of the greatest singers.

So a receptacle or storage container can have a hole in it which means it becomes permeable and loses its effectiveness.

Even at that level, one would never use the term ‘hole’ to relate to a situation where two flows combine to produce a net flow.

It just wouldn’t make sense.

In Capital Volume III, where Marx was talking about the so-called ‘Trinity Formula’ (Part VII Revenues and their Sources: Chapter 48), which relates to understanding the “secrets of the social production process”, he exposes the way in which the “vulgar economist” reasons.

He said that:

Vulgar economy actually does no more than interpret, systematise and defend in doctrinaire fashion the conceptions of the agents of bourgeois production who are entrapped in bourgeois production relations.

In other words, reality gives way to advancing the perspectives of the owners of capital in order to maintain their hegemony in the social production process.

I won’t go into his argument here – about how vulgar economists confuse concepts and combine terms in ways that are “incommensurable”, which then creates a vacuous dialogue when evaluated from a reality perspective but advances the ideological ambitions of the users.

One example he cites is:

And “price of labour” is just as irrational as a yellow logarithm. But here the vulgar economist is all the more satisfied, because he has gained the profound insight of the bourgeois, namely, that he pays money for labour, and since precisely the contradiction between the formula and the conception of value relieves him from all obligation to understand the latter.

As irrational as a yellow logarithm.

When I first read that section as a teenager I was amazed at how deep the analytical structure of Marx’s insights in profits and surplus value were and how, by failing to see through the capitalist ‘wage form’, mainstream economists could never really understand anything beyond the most superficial relations.

At 15:33 on Monday, July 29, 2024, the new Chancellor of the UK, Rachel Reeves stood up in the House of Commons to deliver an ‘address’ – Public Spending: Inheritance – Volume 752: debated on Monday 29 July 2024.

Language quickly lost meaning.

Her aim was to prepare the ground for a renewed austerity campaign – a Tory-style campaign.

And to shift the blame for reneging on their commitment not to engage in continued austerity given the state of the nation, she had to implicate the previous administration.

There is a validity in that sort of exercise – for example, she could have documented the terrible damage the Tories have done to the nation’s infrastructure through its privatisation, outsourcing approach and its failure to invest in maintaining public infrastructure.

She could have talked about the shocking lack of public housing as a result of the Tory austerity.

She could have talked about the shocking state of the railways, the water supply system, the roads, the ports, and more, all because the Tories were intent on running down the ‘public’ aspect of Britain.

She could have talked about the dreadful state that local government is in as a result of the Tory austerity.

And, then the NHS.

And more.

That would have been a valid exercise.

But the tack she took was to accuse the Tories of covering up the fiscal situation to the extent that she claimed the new government:

…. would face the worst inheritance since the second world war: taxes at a 70-year high, debt through the roof, and an economy only just coming out of recession. I knew all of those things, and during the campaign, I was honest about them and about the difficult choices that they meant. The British people knew them too. That is why they voted for change. But upon my arrival at the Treasury three weeks ago, it became clear that there were things that I did not know … (interrupted by the Speaker) …

She said that:

1. “we have inherited a projected overspend of £22 billion. That is a £22 billion hole in the public finances now—not in the future, but now. It is £22 billion of spending this year that was covered up by the Conservative party.”

2. “I am talking about the money that the previous Government were already spending this year and had no ability to pay for, which they hid from the country. They had exhausted the reserve and they knew that, but nobody else did.”

3. “The scale of this overspend is not sustainable, and to not act is simply not an option.”

4. “The first difficult choice I am making is to ask all Departments to find savings to absorb as much of this as possible, totalling at least £3 billion.”

5. On a specific policy (British Standard), “but it turns out that he did not put aside a single penny to pay for it. So we will not go ahead with that policy, because if we cannot afford it, we cannot do it.”

6. “So we have scrapped their failed Rwanda scheme, which placed huge pressure on the Home Office budget. To bring down these costs as soon as possible” – nothing about the inhumane nature of the policy – just a spending issue for Reeves.

7. On the “investment opportunity fund” (part of the levelling up agenda) – “I am cancelling it today, because if we cannot afford it, we cannot do it.”

8. On cancelling the sale of public equity in NatWest – ” It would therefore not represent value for money, and it will not go ahead. It is a bad use of taxpayers’ money, and we will not do it.”

9. She is cancelling the “winter fuel payment” for many people and will announce further austerity measures – “difficult decisions to meet our fiscal rules across spending, welfare and tax.”

10. She foreshadowed cuts to the “welfare system, because if someone can work, they should work” saying that “inactivity has risen sharply in recent years” – implying people are scamming the income support system (“unacceptable levels of fraud”), when in reality much of the inactivity rise is because workers got Covid and are now unable to work because they have long-term medical issues.

11. “They spent like there was no tomorrow because they knew that someone else would pick up the bill.”

The point here is not whether the Tories covered up spending commitments or falsified the progress of previously announced policies.

They may have done that but that bears on another issue – their competence and honesty.

But Reeves wanted the British people to believe that these policy commitments were somehow unaffordable – in a financial sense – in the same way that you and I might decide we cannot afford to buy a new car at this time because our financial flows are inadequate.

Again, we could argue that the commitments on various Tory vanity projects were undesirable, not because of any financial aspect, but rather because they would not advance well-being for the population or the nation in general.

That is not Reeves’ argument.

The quotes above contain all the mainstream fictions that render language in the usual sense meaningless.

First, is this “hole” she refers to some leakage in a storage container or covering that seals?

Of course not.

The point is that a fiscal balance is the net result of two broad currency flows – spending and revenue.

The net is a flow too.

Accordingly, the idea that the ‘budget’ is a container that can have a hole in it just doesn’t make sense.

They might argue that the current relationship between the flows is out of kilter but then they would have to relate that relationship to something tangible like the sate of the real economy.

One cannot simply say that £5 – £3 = £2 and £2 is unacceptable.

The question would be why?

Reeves would say that the British government cannot afford £2 which would be a lie.

She might want to say that the injection of that £2 flow of currency is inappropriate because there were inflationary pressures arising from a lack of available resources to be purchased.

But she didn’t say that.

Second, the idea that the government “had no ability to pay for” some things (point 2 above) is clearly a fiction.

They would ‘pay’ for it in the same way they ‘pay’ for anything – type some numbers into bank accounts or write numbers on bits of paper (cheques).

The spending commitments might have driven the economy beyond full employment which would be a problem.

But she didn’t say that.

Third, in May 2024, as the Labour Party was preparing for the election, Reeves promised that the Party would “not return country to austerity” (Source).

The Departmental cuts and the changes to reduce the fiscal deficit reneg on that promise.

Fourth, governments do not spend the funds they receive from taxpayers.

Taxpayers pay their taxes with funds that the government has spent.

Overall, the Chancellor failed to address the basic issue (relating the First point above) – why is there a fiscal deficit in the first place?

Does she think that the fiscal deficit is a thing from outer space that is not integrated into the economy?

Does she think that she can cut the fiscal deficit away without negative consequences?

Those questions have to be answered first.

Where does the spending go?

Given the external accounts and the private domestic sector’s spending and income balances, the current fiscal position is supporting the current state of growth and employment.

Sure enough the composition of the spending might not be desirable – but that is another issue.

One could run a line that government spending is poorly prioritised but you still have to face up to the fact that spending equals income – and when you are running external deficits (which subtract from domestic demand) and the private sector is not wanting to ramp up their spending then the only other source of demand stimulus is public spending (wasteful or not).

We always have to differentiate levels and composition.

Hacking away at the level of public spending to address compositional concerns is no way to go unless you also want to damage the overall level of real output and employment.

That is the biggest lie – that cutting public spending will somehow stimulate growth.

It will not in the present situation.

A society can never become rich by impoverishing the poor and depriving them of access to the resources that the rest of us have – health care, education, information, etc.

Conclusion

Rachel Reeves’s approach is not surprising.

But don’t think that British Labour is going to provide a basis for a renewal in Britain.

That is enough for today!

(c) Copyright 2024 William Mitchell. All Rights Reserved.