Modern money language.
Confucius said: "When words lose their meaning, people lose their freedom"
Before and during Covid-19 much of the language used to describe government accounting is not really accurate. In fact, many of the descriptions attached to our public money have negative connotations and this harms our democracy and our human rights. Lets examine some of the fiscal and monetary linguistic tropes which are used regularly by politicians and media pundits.
Hunt down the money
Those who are charged with interviewing our politicians often ask - “but where will we find the money" and urgency is implied with the word 'find', a similar word would be 'hunt'. The implication is that something has been lost and we all better get busy as uncertainty lies ahead if the government cannot hunt that scarce money down. This frequent question is illogical because the UK government doesn’t have to find money - it creates the money we use because it is the monopoly issuer of our currency. 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 two 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 because a government deficit can also be described as the private sector surplus. This word ‘surplus’ on the other hand is so much more inherently comforting. If the government taxed back all of the money it spent into the economy there would be no cash in shop tills, change in 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.
Perhaps, if both our politicians and journalist talked about government provisioning instead of government spending would this console instead of frighten? Try this out for linguistic size - government borrowing can also be described as private sector saving. ‘Borrowing’ implies scarcity, an inability to manage, but ‘saving’ is a positive word, saving money, saving lives, that’s all good stuff, right? Government bonds are private sector savings - 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 with very positive connotations, especially if you are aged over twenty-one and your frontal lobe is 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' not 'taxpayers money' because the UK government always creates new money for public spending. Tax is simply money deleted on the government spending spreadsheet and is used for social engineering and to keep inflation down.
HMT also claims to be busy "reducing the deficit and rebalancing the economy". Balancing is another positive word and included in the sensible lexicon of the accounting profession who always like to balance the books. The word ‘balance” perhaps conjures up the image of Justicia with her scales, equating justice with reduced spending of public money. This mis-use of language around government finance is powerful and it is eroding our democracy. When voters go to the ballot box believing that their grandchildren will have to pay, unless they vote a certain way, we have a problem. So does 'balancing the books' still sound just? Or is the government's attempt to balance its books the opposite of justice? When thousands 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 here 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 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. Again, seventy-five years later Covid-19 has exposed the fear of deficits as misplaced. The Conservative UK chancellor is currently spending to keep many of us at home and demonstrating that a currency issuing government can always be the employer of last resort. Alas, money creation cannot ensure Government purchasing of scarce real resources, which during the pandemic is Personal Protective Equipment. Steady-state Government spending for pandemic preparedness would have been the sensible, life-saving path.
If we want to move our democracy forward in this twenty-first century, we as citizens should no longer accept the non-descriptive language used by both the political class and the media and we should insist on 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 should not be fearful in demanding UK government spending on the infrastructure that we need for our country to thrive. Our grandchildren don’t pay for our spending, the opposite in fact, they will enjoy the lasting infrastructure we created for them. As for media pundits, please stop asking politicians "how we can afford it" and start asking how they will 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