Modern money language.
Confucius said: "When words lose their meaning, people lose their freedom" both before and during Covid-19 many meaningless words are being used to describe government accounting. In fact, much of the language attached to our public money has negative connotations and this is harmful to democracy
and for our human rights. Lets examine some of the fiscal and monetary linguistic tropes which are used regularly by both our politicians and most media pundits.
Hunt down the money
Let's start with the oft heard phrase used by those interviewing our politicians, “but where will we find the money". 'Find' is a word that implies urgency , a similar word would be 'hunt'. The implication is that something has been lost and we better get busy folks as uncertainty lies ahead if the government cannot hunt that scarce money down. Apocalypse now! This is a nonsense of course, the UK government doesn’t have to find money, it creates the money we use because it is the monopoly issuer of our currency, the Pound. What the government does have to find are real resources, and our public money not only procures and allocates
resources, it can also be used to create resources, like roads, street lighting, doctors, nurses, teachers and the police.
Probably the most alarming words right now in the political and media linguistic armoury are
‘government deficit’, but should we really be alarmed by this word ‘deficit’? It certainly sounds like a negative word, but take a look at the opposite side of this fiscal coin, a government deficit can also be described as the private surplus. The word ‘surplus’, on the other hand, is so much more inherently comforting, luxurious even, don’t you think? If the government taxed back all of the money it spent into the economy there would be no cash in shop tills, change in your pockets, savings or public infrastructure. Not taking this into account when describing fiscal bookkeeping is equivalent to describing the score in a football match as Celtic 1.
If both our politicians and the media talked about government provisioning instead of government spending would this console you instead of frighten you? Perhaps try this out for linguistic size - government borrowing is actually private sector saving, this sounds much more positive. ‘Borrowing’ is a stress word, it implies scarcity or an inability to manage, but ‘saving’ is a happy word, saving money, saving lives, that’s all good stuff, right? Government bonds are those private sector savings and the equivalent of the safest of saving accounts, your own deposit account with the Bank of England. (3) There is no shortage of demand for UK Government bonds right now, in fact there never is as those with money to invest eschew the instability of the stock markets and place their savings into the safest bank account in the land.
Yet more misleading language can be found on Her Majesty's Treasury (HMT) website, where you will find that one of their listed priorities is "spending taxpayers money responsibly" (2) 'Responsible' is a word that has very positive connotations, especially if you are aged over twenty-one and your frontal lobe is now fully-formed, after all, who wants reckless governance?
But at the UK level, taxes don't fund public spending, so the factually correct language would be public money because the UK government always creates new money for public spending. Tax is simply money deleted on the government spending spreadsheet.
HMT also claims to be busy "reducing the deficit and rebalancing the economy". Balancing, another positive word, using the sensible and solid language of the accounting profession who always like to balance the books. Perhaps the word ‘balance” conjures up the image of Justicia with her scales, therefore equating justice with reduced spending of public money. This mis-use of language around government finance is powerful and it’s eroding our democracy. When voters go to the ballot box holding their noses because they believe their grandchildren will have to pay, unless they vote the right way, we have a problem. Bearing this in mind, does 'balancing the books' still sound just? Or is the government's attempt to balance its books the exact opposite of justice? When you consider how many have died due to ten years of austerity and the lack of preparedness for the pandemic, balancing the books starts to look deadly.
The power of lying
The story of government money, where the language of fear is fully engaged, locked, loaded began with Margaret Thatcher. In 1983 she declared that “the state has no source of money, other than the money people earn themselves. If the state wishes to spend more it can only do so by borrowing your savings or by taxing you more. We know that there is no such thing as public money,” she added. “There is only taxpayer money.” (1) This was a lie because in reality it’s back-to-front, at the UK government level there is not such thing as taxpayers money, it’s public money. However, it’s important to stress that this does not apply to the devolved nations or to English councils who are currency users and not currency issuers. Money, more specifically the UK’s currency the pound, is public money and it is a public tool. The UK government is in no way dependent on tax payers money because it is the monopoly issuer of the pound. We elect our government, they make spending decisions and then they instruct our central bank, the Bank of England, to credit the relevant accounts. Importantly, if we don’t like our elected government’s spending decisions, we can vote them out.
The UK government can never run out of money, but what it can run out of are real resources. During the Second World War this became obvious to many as unemployment ceased and all available resources were mobilised, including all available labour. Seventy-five years later Covid-19 has again exposed the fear of deficits as misplaced. The UK chancellor currently spending to keep us at home, thus explicitly demonstrating that the currency issuing government can always be the employer of last resort. Alas, money creation cannot ensure Government purchasing of scarce resources, which during the pandemic is Personal Protective Equipment. Steady state Government spending for pandemic preparedness would have been a more sensible option.
If we want to move our democracy forward into the twenty-first century, we as citizens should no longer accept this non-descriptive language around government finance and instead use accurate descriptions to describe the realities of government accounting. It is our public money and it is the tool of our policy makers who work for us. We need to flip the negative language, used to describe our public money, on its head and not be fearful in demanding UK government spending on the infrastructure that we need for our country, and our grandchildren don’t need to pay for our spending. Quite the opposite in fact, they will enjoy the infrastructure we created for them. As for media pundits, pleased stop asking politicians how we can afford it and start asking how we find, create and mobilise the real resources required to produce the results they promise to deliver.
(1) Kelton S, The Deficit Myth. 1st ed. London: John Murray; 2020