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Child Poverty on the Rise

By On · 24 Comments · In Blog, In the News, Uncategorized


You can’t ignore the basic rules of economics  …

In response to predictions that child poverty is on the rise as family incomes plummet, business minister David Willetts, speaking on behalf of the Government on on BBC Radio’s Today programme on Tuesday 11th October, said:

“We’ve tried to do the things that help but you can’t ignore the basic rules of economics, that when you inherit a situation where the economy has shrunk by 7% there isn’t the money there“.

He’s got that the wrong way round.

Governments can and do ignore the basic rules of economics, if, when the shops are full of goods, and materials, labour and human ingenuity are abundant, they make no attempt to put money in circulation to tap these resources and help families to maintain a decent standard of living.

The basic rules of economics do not require child poverty  -  or indeed any other kind of poverty.

It is the present rules of finance, not the rules of economics, which encourage poverty, by insisting that the number of financial units lent into existence by profit-making private businesses should determine both the level and nature of economic activity and the distribution of purchasing power.

The rules of  economic prosperity are very different from those of finance.  The rules of economic prosperity do not state that financial scarcity rules, ok.  The rules of economic prosperity put money firmly in its place by requiring that anything which is physically possible and socially desirable should be made financially possible.

The Government may have inherited a situation where the money isn’t there: but it should stop acting helpless and ignoring the basic rules for a thriving economy.

Instead, it should accept its responsibilities, and legislate for a stable money supply, issued free from any debt at source, and spent into circulation on projects which increase the nation’s real wealth.

 

 

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Gillian Swanson (Guest Author)

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  • Rick

    Could we end child poverty under current FRB / debt based money system ? Well of course we could – it would simply entail a massive redistribution of wealth and power through taxation and benefit changes. Via our voting choices we choose collectively not to do that.

    Implementing the PM monetary reforms would effectively lead to massive redistribution of wealth and power through the shift in who controls the money supply. We could then end child poverty with targeted Government issued money. Up to now we have chosen collectively no to make those changes – it is of course early days……

    I can see a common problem with both scenarios – the “massive redistribution of wealth and power” bit. Is it any wonder the ICB decided to effectively blank out the PM/nef/University of Southampton proposals ?

    This I grant you is a simplistic argument but is at the heart of the matter I suggest ?

    • DozyHole

      I don’t think this is a simplistic argument, I think it may well be at the root of the issue.

      In fact, this argument is at the back of my mind all the time and is the thing I worry about most.

      • Rick

        I believe many of our social ills are the consequence of our collective indifference – it is perfectly possible that after debt free money was introduced, little would change for those on limited income.

  • Gillian Swanson

    Rick – The problem with simply redistributing money under the present monetary system is that, as long as huge amounts of profit are being drained off into the financial sector, poverty would simply be shifted around from one group of people to another, while systemic debt – public, commercial and private – would continue to escalate exponentially.

    As for our “voting choices”, these are extremely limited, with the question of control over our means of exchange not on the agenda of any of the main parties, or the mainstream media.

    Our job is to remedy this lack of publicity,and generate a grass-roots demand for reform. Those currently in control only enjoy their power because of the ignorance of the vast majority.

    • Rick

      Hi Gillian,

      I totally agree with you on those points. I think I failed to make my point clearly – that any change in the structure of our money supply, be it debt free or anything else, will have a major knock-on effect throughout our social and economic fabric – it will not be as simple a process as it might first appear. Change will certainly meet enormous resistance from those that stand to be dispossed.

      • Gillian Swanson

        Yes – resistance by vested interests is a foregone conclusion, and achieving reform will certainly not be a simple matter. I just feel that focussing on the forces ranged against reform is dispiriting. Change always does meet with resistance – but, somehow, change frequently does happen. And one thing that’s in our favour is increasing discontent and questioning of the present system.

  • Dhavar

    Gillian:

    I would like to ask you (and the rest of Pm people) a question I do not know:
    -Is there any express Act in U.K.that vetoes the government from issuing money?
    Because one thing is to grant the sovereign power of money creation to a particular group (in UK 1694 Bank of England creation)as EXCLUSIVE POWER and another to retain formally your own original power along with the unjustly granted one.
    I know in the USA is a “matter of fact” question, as shown by the Kennedy Executive Order 11.110 in june 1964 partially.
    How are things legally set up in UK?

    • Rick

      I believe there is a European directive that expressly prohibits EU nation Governments from directly issuing their own money – the UK must be subject to that regulation – hence the charade of QE. As to a UK specific law, I’m not sure.

      • Dhavar

        Many thanks Rick

        • Rick

          I might add, (assuming I am right), by extension, if the UK did adopt the PM monetary reform, then we would probably have to exit the EU completely ?? Perhaps another reason the ICB decided to sweep the PM ideas under the carpet ??? As far as I know, our illustrious leaders are pro Europe.

      • Dhavar

        I was wondering – just thinking aloud -what would happen if, say, the UK or USA Treasury started to issue money directly, with recognizable features making it different than money issued by Central and Commercial banks.I don´t see the implications, just exploring the idea.

      • Gillian Swanson

        According to the quarterly paper ‘Prosperity’:

        ‘Article 123 (Chapter 1, Economic Policy) of the Lisbon Treaty (ex Article 101, Treaty Establishing the European Community) says: “Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.”

        ‘This clause prohibits the Bank of England from lending money to the government or any agency of government. It also prohibits the Bank from buying debt instruments directly from the government. This is the reason why Quantitative Easing monies have been used to buy debt instruments from the private sector, rather than directly from the Treasury.

        ‘However, this prohibition does not prevent the Bank creating money and granting it to the government … .’

        • Dhavar

          Many thanks Gillian.I will read it carefully.

        • Rick

          Gillian: Your last line looks like a lucky oversight by the EU – lucky for money reformers that is ! Perhaps they never imagined that central banks would simply gift money to their governments?

          Many thanks for correcting the info I gave to Dhavar – I thought I had read somewhere that there was some sort of restriction.

          • Gillian Swanson

            Me too, until I came on Alistair’s article! At least we’re lucky to have stayed out of the euro.

  • Dhavar

    By the way, now that we talk about chidren poverty and fiscal austherity:
    http://www.guardian.co.uk/business/2011/oct/11/goldman-sachs-interest-tax-avoidance

    Nice affair, isn´t it?

  • David

    Nice article Gillian! As Mr Bill Hicks said, there’s a big market for righteous indignation right now. Huge market. A lot of people are feeling that indignation.

    As one monetary reformer said (was it Mike Rowbotham in the Grip of Death? I forget) “How dare the government claim it doesn’t have enough money to do things when it doesn’t bother to create any money?!”

  • Simon

    Because all money is created as debt, then either people, business or government has to take on more under the existing system. The government has taken on substantial debts in recent years to pay benefits, pensions, tax credits and those that work in the public sector which includes me. The real economy needs to be stronger to pay for all the things we want like reducing child poverty. I strongly agree with getting rid of debt free money, but if we just create more money to eliminate child poverty or increase pensions, there is a danger of inflation, or just sucking in more imported goods and not reducing unemployment here. Getting rid of the debt based system however would free up many billions to help maintain benefits and reduce taxation. The gain from modern technology and more efficient production methods should allow all of us to enjoy a very good life, and work a lot less than we had to say 50 years ago. The problem is the wealth has been concentrated in fewer hands. We are in a 1930s style situation ,but many of the extreme effects are hidden because the government pays out to many millions of people in benefits and tax credits, 5 million on benefits and 7 million subsiidised with tax credits. I don’t think there is enough work in a very automated world for every adult to work 40 hours per week, so reduce the working week to 20 hours, share the work so more people are economically self sufficient, and share the huge productivity gains over the last 50 years. Wishful thinking maybe, but Douglas proposed it in the 1930s. The average working week in terms of hours per working age adult is probably about 20 hours if you take 5 million or so on benefits, 8 million economically incative, and 7 million on tax credits (most of whom work 16 hours or less).

    • Gillian Swanson

      I agree, Simon: Douglas was already saying in the 1920s and 1930s that new ways must be found to distribute incomes – and in the fifties and sixties journalists were writing articles discussing how we would fill up all our leisure time, as we worked fewer hours for the same, or greater, purchasing power.

      Instead, the reward of automation has been increased unemployment – as Mike Rowbotham said, in “The Grip of Death”, enforced leisure for millions, rather than leisure distributed evenly throughout the population.

      Worse, it now takes the average family lucky enough to be in work around 70 hours to earn a viable income, with both partners employed outside the home full-time. In the post-war years, 45 hours basic was the norm, with the wife working for pin-money part-time once the children were old enough to take care of themselves.

      Many of today’s two-wage-packet families are living hand-to-mouth, despite the number of hours they put in, and are twice as insecure as they used to be, both because of the huge mortgages resulting from two incomes being taken into consideration, and double vulnerability to loss of income if hit by the redundancy or sickness of one earner.

      Douglas suggested a non-means-tested national dividend, to distribute the benefits of automation to all; but objectors consider this would be encouraging idleness by offering something for nothing. This, of course, doesn’t take into account the fact that work done without pay in the home and local community is just as valuable, in terms of human well-being, as paid employment (more valuable,in fact, than the non-productive jobs dreamed up by governments attempting to control unemployment figures).

      • Rick

        Neither the “fifties and sixties journalists” or “Douglas” could have known about the falling EROEI (Energy Returned on Energy Invested) figures that have effectively taken away that hope of more leisure time. Falling EROEI along with wealth concentration are the twin drivers of our current financial and social woes.

        • Gillian Swanson

          Obviously they didn’t foresee the complete waste of human energy in non-jobs created by the government – but Douglas certainly did foresee the waste of human lives through through unemployment and its attendant poverty, and suggested policies which would solve the problem.

          It is amazing, reading books – not just Douglas, and not just books focussed on economic problems or non-fiction, from years ago which accurately highlight problems which are now reaching crisis point.

      • Simon

        Work done by nurses, or a family member looking after another relative, whether young, ill or old is a darn site more valuable than anything done by a banker or footballer, but our society does not reward this work. I see many pensioners who themselves are not in the best of health looking after their wife or husband through a sense of duty. I like Douglas ideas, we do however need to incentivise those who do not wish to contribute to society or look after themselves, although this is just as relevant with the present set up. As Rick says above, I think we are going through a period of huge economic and social change. The mainstream politicians are in denial, and think more debt to add to the existing mountain is the solution.

        • Rick

          Simon: Totally agree with you. I wonder, does being a politician make one unable to make a leap of faith and see things from a different perspective, or, is it the other way about ? The problem of denial that money reformers are experiencing today is exactly what those concerned about energy supply have endured for many years.

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