How To Get The Economy Working For Us

In his analysis article (The icebergs are outnumbering the lifeboats, 1 June) Larry Elliott rejects the lifeboat of helicopter money (the injection of new publicly created money into the economy) as likely to cause a flood of imports or hyperinflation. This is only the case if the money is released directly into the hands of consumers. Even then, while there may be increased imports, hyperinflation is very unlikely under the present deflationary conditions. However, as I point out in my forthcoming book Debt or Democracy, if the money is issued into the economy through public expenditure and matched by a subsequent tax take if there are any inflationary pressures, there is a double benefit. The money would provide public services free of debt and then feed through into the wider economy. At present nearly all the new money in the economy is accessed only through borrowing, which feeds boom and bust.

Recognition of the benefit of publicly created MONEY FREE of debt will relieve the burden of debt on everyone. The illogicality of the current position is that the new public money created through quantitative easing has been used to buy back government debt, yet that debt has not been cancelled. People are still subject to austerity for debt that has been repaid. It needs to be recognized that new money creation and circulation should not only be used by “independent” central banks to periodically feed the faltering banking sector; it is a public resource and its creation and use should be a matter of democratic debate.

Mary Mellor
Emeritus professor, Northumbria University; author, The Future of Money

• Central banks printing more money through quantitative easing do not risk hyper-inflation. The US, UK, Japan and recently the EU have printed or plan to print about a staggering £5tn of QE money and yet deflation, not inflation, is still a major economic threat. To encourage activity across the whole economy the UK government should set an example and again have the Bank of England print tens of billions, but this time to pay for a carefully timed and costed, hence non-inflationary, infrastructure programme.

Hobbes was also right in arguing – against his own precepts – for greater equality of income

William Dixon and David Wilson
There have already been calls for such an alternative from environmental groups and green business (Letters, 29 November 2014). They detailed how green infrastructure QE could generate jobs in every corner of the UK by building the new low-carbon homes required and by making all the country’s existing 30m properties energy efficient. Such an approach would have the additional advantage of freeing up some Treasury funds to be redirected to the country’s hard-pressed social infrastructure. 

Colin Hines
Convener, Green New Deal group

• As Larry Elliott reports, the fundamentals have not changed since 2008. There are too many “rich” people trying to hang on to what they think they have. There are not enough “workers” producing consumer goods to give value to all the money in the financial system. Quantitative easing might have postponed the resolution of the shortage of financially viable work, but the downside is that this has just made the problem bigger. Since 2010, the British government has chosen to stick the excess money into property, as it hides the shortage of work in our trade deficit. George Osborne’s benefit cuts just reallocate the problem; cuts don’t provide the solution.

The sad part is, we have just had an extended election campaign, but no politician anywhere has said anything sensible about the economy. 

Martin London

Henllan, Denbighshire
• In your editorial (The hubris of the economists laid bare: a cautionary tale about quirky overconfidence, 30 May) we were struck again by how closely the modern mainstream economist’s understanding of human behavior follows that of the 17th-century political theorist Thomas Hobbes. This is your quote from Freakonomics: “incentives are the cornerstone of modern life”. And this is Thomas Hobbes: “rewards and punishments”, he says, act as the very “nerve-centre” of social life. Unfortunately, what neither recognizes is that incentive structures always operate within – and sometimes undermine – an already existing moral community, carrying with them an implicit notion of what is right and what is wrong.

Where Hobbes is right, however, and modern mainstream economics is wrong, is in thinking that if we are just incentive-monkeys and natural gamers then to some degree at least political authoritarianism must follow, and not the small-state nirvana that Conservative (and Ukip) politicians promise us. Hobbes was also right in arguing – against his own precepts – for greater equality of income and a properly functioning system of publicly funded welfare. If only the contemporary political and economic mainstream would follow him in those respects too. 

William Dixon and David Wilson
London Metropolitan University

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