Paul Samuelson, the author of what still might be the most-sold textbook of the post-war era had this to say on page 427 of his first edition, addressing a subject then very close to the thoughts of many of his readers:
Can it be truthfully said that “internal borrowing shifts the war burden to future generations while taxing places it on the present generation”? A thousand times no! The present generation must still give up resources to produce the munitions hurled at the enemy. In the future, some of our grandchildren will be giving up goods and services to other grandchildren. That is the nub of the matter. The only way in which we can impose a direct burden on the future nation as a whole is by incurring an external debt or by passing along less capital equipment to our posterity.
I have added the emphasis.
The point is important. Labour is living in fear of taunts from the Tories about debt and has caved in. But that borrowing would be in sterling to pass along the capital equipment to future generations that might not only deliver prosperity, but our survival. And it cannot see that.
As I said in the Guardian this morning, Labour has not even learned the most basic of economics: this is the evidence that is true.
But will they ever have the courage to admit their mistake?
Hat tip to Joe Polito
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“Labour has not even learned the most basic of economics”
Indeed not even learned that human beings use money to survive any threat including climate change and even worse haven’t learned money cannot be used undemocratically since the effects of climate change will affect everyone.
Starmer and his accolytes need removing they are intellectually not up to the job.
“But that borrowing would be in sterling…”
To get the UK to Net Zero will require heavy duty funding for 20 plus years, as we wean ourselves off fossil fuel.
Unfortunately the solar panels, wind turbines, mini nuclear plants, electric vehicles, battery packs, insulation, cabling etc requires expensive imports of kit, metals & material. So a large part of the borrowing will be spent in euros, dollars & rand.
If we have an economy functioning at or very near full employment, so what? That would mean we could afford whatever we need as well.
It was reading Samuelson, notably on fractional-reserve banking (Ch.16, 8th edition – more years ago than I care to remember, and I still possess it); that convinced me that if this passes muster (it was the student ‘bible’); there must be something wrong with the discipline, and it was best to work around the theory offered by economics wherever possible. I am glad Richard, that you found something buried in there worth reading. A lot of trees were pulped to produce the endless editions.
Overall, agreed
John,
I read The Price of Peace. Money, Democracy and the life of John Maynard Keynes.
Paul Samuelson was the American interpreter of Keynes and many think he didn’t quite ‘get’ what JMK was saying.
However, in this case, I agree with him.
Most neo-Keynesians did not get what Keynes said
“But will they ever have the courage to admit their mistake?”. It’s not a mistake. This is who the right wing of Labour is now. Expect many more deselections from any dissenting voices in the Labour party in the run-up to the election. Socialist CAM MPs should defect to the Green Party.
https://www.politicshome.com/news/article/rebel-labour-mps-final-warning-patience-whips-office-wears-thin
Good. It’s time labour MPs stood up for their electorate. It’s a shame that it took a war in the middle east for them to find their backbones.
This last week there have been three separate groups setting up schemes to find out what the candidates for the next election are standing for.
One is Compass. Unfortunately their system does not have the new constituencies yet. I have been asked to ask my present MP in my present constituency what he stands for. My constituency is disappearing.
Today Byline Times has a system set up called Votewatch, where they want us to tell them of any electoral disinformation and exclusion.
Next week there will be the start of a weownit campaign centred on asking our prospective MPs to sign up to a pledge on the NHS. They have the right constituencies by postcode (trialled yesterday) If you don’t have candidates for any party, the request will be sent to Wes Streeting and Starmer as head of the labour party, etc.
Labour seem to have the fewest candidates in place, which looks as though there is still gerrymandering going on.
I often thought Jeremy Corbin might have been more comfortable in the Green Party. Clearly he doesn’t think so, but I fancy he could have led an exodus.
The National Debt is but one element of a balance sheet. Politicians discuss without a balancing reference to the value of the nation’s assets. Many areas have been allowed to depreciate (both within and outside direct state ownership). Further, much essential national infrastructure has not expanded in line with population grow or demographic shifts e.g. an ageing population.
Absolutely
You spend £28bn on infrastructure and you are £28bn wealthier.
Problem for politicians is that you then you either need to up your revenue expenditure to protect the investment and reduce depreciation, or you need a sinking fund to replace it at end of useful life..
The nation’s wealth is its fabric and its services.
You really are missing the multiplier effects
I will be doing more on this next week.
Looking up Samuelson’s book on Amazon (as I do), it suggested related works (as it does), including one that caught my eye: “Understanding Economics: A work of science fiction” (by Dan Hicks). I would emphasise the sub-title, which must say something about the subject.
I don’t whether to laugh or cry, to read it or ignore it…
Samuelson (and Marshall) … That’s brought back memories from 1966/67! The thing I remember about applied economic theory is that (within reason) it is relatively easy to understand, it’s assumptions can be tested, and the theory applied and re-tested; consequentially, it may be generally correct.
But introducing a political agenda (neocon/lib) to direct theory means that unfavourable or wrong assumptions are not tested thus corrupting the theory.
Have I got the wrong end of stick, Richard?
No, you’re right
Where you can test, where it is testable; it isn’t very robust. At its kindest, the testing of theory statistically offers results in which the standard deviation is too wide to offer secure forecasting; and since economics can’t do predictions, and is poor at forecasting (this is obvious and can’t be fudged); the subject has only modest value, and an insecure methodology. The politics is less significant within the theory, more important in the politically motivated over-inflated vle of what it is capable of doing.
That is my opinion. Happy to be proved wrong, but I am not sitting on the edge of my seat.
“politically motivated, over-inflated value”
Sadly most of the UK’s politicians won’t do any testing of the Neoliberal monetary system arguments they make revealing they’re just mindless suckers for cults! We deserve better but so few who understand this!
🙂 Glad you like it Richard
Another version of the same text is here – the versions are not always available
https://archive.org/details/in.ernet.dli.2015.499549/page/n443/mode/2up?q=grandchildren
My edition of his book was 1970 I think. I still have it. I liked a lot of what Samuelson said.
He recognized Keynes was right about money being created out of thin air by banks.
He recognized the paradox of thrift, the fallacy of composition (household fallacy)
He recognized Keynes thoughts on investment and finance coming before savings
He advocated full employment budgeting which meant mostly deficits.
He popularized the history of goldsmith bankers
He advocated not borrowing from foreign sources.
He was good for taxation as Richard advocates
He saw a land tax as a smart idea – taxing the unearned income rather than productive people
My edition was like 1500 pages – best Economics course I ever took.
The thing that stuck in my mind the most from economics courses in the early 70s is “other things being equal”
Seemed a bit of a massive assumption to me
It was Homo Economicus as the unicorn that did economic theory for me…
Reliance on a rational man with full knowledge seemed a strange form of monotheism..
Since the national debt is really the nation’s wealth, when we inherit that wealth from our forebears, we are inheriting the national debt. Is anyone disappointed when they inherit money and property?
Dear Richard,
Labour has indeed “caved in” to the Tories on debt but one can, in a sense, understand why. It proceeds from the fact, and no condescension implied, that thanks to Margaret Thatcher, and so many egregious politicians since, the man or woman on the Clapham omnibus has got it into their collective heads that a nation’s economy is the household economy writ large.
That is, of course, nonsense but people’s own experience of budgeting, the way they manage their income and expenditure a la Wilkins Micawber, is what they understand and colours their belief in how government finance operates.
Given the hostility towards Labour evinced by the Tory press, it is difficult to counter what to many is regarded as simple common sense, hence the reticence (I touched on this reticence in my response to your other blog of re Labour’s resiling on the £28bn green pledge.)
Best,
Lawrence
Thanks