There should at least be one kind of inflation that is nourished by lax banking rules – housing costs. I don't know the British figures but in my country 90% of bank lending is to home loans. And since the banks create these money out of thin air they contribute to the rise in housing costs. More money goes to buying the same amount of things, that is the definition of inflation.
And housing costs is a big chunk of peoples' outlays.
It’s about 50% in U.K. Whilst less than 10% goes on lending to productive businesses. Plus of course commercial banks create the money that they are lending on property. It’s a massive factor in property inflation. See Josh Ryan Collins on the subject
The two questions you ask at the end are fundamental to the current polycrisis.
1. How, if at all, can we move away from private consumption without exacerbating the sense of decline that has fueled the far right?
2. How, if at all, can we persuade people of the need to pay for better public services?
The third question that never gets asked is:
3. How can we move to a sustainable way of life that allows us to live fulfilled and healthy lives within planetary boundaries?
There are three counter questions.
A. If we continue to privilege private consumption based on the increasingly unequal distribution of means, won't that consolidate the sense of decline into a very real and obvious actual decline?
B. If we do not restore or improve our public services, won't that mean that only those with the means will be able to substitute them with private consumption (see A), and won't that simply exacerbate the sense of decline?
C. If we continue to pursue economic growth beyond planetary boundaries, won't that turn a sense of decline into an actual collapse, impacting most strongly, iniitially, on those least able to mitigate it, but eventually affecting everyone, even the elite.
The sad truth is that we are nearing the terminal stage of capitalism, which was always an unsustainable process of ever increasing consumption and waste production allied to a hierarchy of means. Those that were able to accrue the largest shares were able to use that to accumulate more and more (and push the waste away). So long as growth rates ensured that everyone had more it could give the illusion of permanence and progress. In the long term it is a zero sum game because growth can not continue indefinitely given limited resources, and the waste is contained within the same physical space we all occupy. The only inhabitable self-sustaining space we know of in the universe - which we are ever more rapidly degrading and disrupting.
Growth can, in fact, continue indefinitely, practically speaking.
The idea that the world is currently at some kind of natural limit is not supported by any good evidence. People in the 1970s were saying that 8 billion people would lead to famine like never before, but increases in agricultural productivity prevented that. You can see in the data that economic growth and carbon emissions have been decoupled in recent years. Every time someone invents a supposed limit, technological innovation solves it.
Also, the UK and much of the world has a problem with low fertility rates, so the idea that countries like the UK are about to experience some form of cataclysm because there are too many people is absurd.
Growth cannot continue indefinitely in this universe. Practically or theoretically. All the laws of physics tell us this. To pretend otherwise is insane.
That said, what might happen in the ‘foreseeable’ future is a matter of guess work or extrapolation and inference. None of us has a crystal ball so we are just expressing our opinions. Mine differs from yours. Neither of us ‘knows’, and neither of us will ever be able to say “told you so”. That said…here is my response:
If by ‘practically’ you mean for the next century, then some growth, in some places, yes. But everywhere, at the rate it has been happening, no. The impact of the changing temperature, precipitation, ocean currents, patterns of atmospheric pressure, and rising sea levels will render some places uninhabitable. This will drive people to forced migrations, leading to war and destruction. There may be growth in weapons production, but very little else.
It’s always possible that some clever people will devise technology that allows people to continue living on islands and coasts that are inundated by the rising seas, but it seems wildly unlikely, especially that it would be affordable or make any economic sense at all.
As an agricultural botanist I can assure you that the trend in productivity is flattening and even turning downwards for some crops. The rising temperature, erratic rainfall and increasing severe storm incidence are all impacting on harvests. Some important growing areas for key crops will become much less suitable over the next 100 years. The era of cheap fertilizers is over, along with the passing of cheap fossil fuels, so the cost of food is rising and like it or not, this has an impact on ‘availability’. Famines are rarely the result of a complete absence of food, but more the absence of affordable (i.e. available to the average person) food.
I understand why people prefer an imagined future where progress is inevitable, and every problem will be sorted. I would have thought that the last 5 years might have dented that optimism, but cognitive dissonance is a powerful force. If it makes you happy, carry on in your fantasy - but please don’t try to drag me in.
The UK has a growing number of working age, economically inactive people. The challenge isn't to turn someone who is neet into a surgeon, or force a profoundly disabled person into becoming a bricklayer, the challenge is to get someone who doesn't work for 'cultural reasons' to get a job in retail, or to get someone with non-profound health issues to do some form of work that is more productive than being subsidised to do nothing. If the unproductive can move to being the lower productive, and the lower productive can move to being a bit higher productive and so on, we bring under utilised resources into play and then we get the growth.
Where I live the healthy young men on mopeds are mostly immigrants, leaving aside the safety issues of this line of work, it doesn't seem optimal to me for UK to import workers for this kind of low value work. They, and more importantly their dependents, just add to existing housing and public service pressures. I'd much rather we were importing them to work on a building site than driving over pavements to squeeze in an extra KFC drop.
Could you provide a definition of "middling well off". At twice the median income I suspect it includes me, but frankly I'm feeling rather poor between high housing costs and student loans. I fear that I and my cohort are being priced out of third spaces and childrearing, both valuable for society in some way. But perhaps this is motivated reasoning! Or perhaps I have an inflated sense of my social position, and your "middling well off" is rather better off than I imagined?
"One possibility is to raise the inflation target and ditch the fiscal rules. There is, however, no sign of the government being willing to do either, maybe rightly so".
Isn't this the crux of the problem? We know the rules are bad in macro economic terms but it's being enforced for politcal reasons. No wonder we cannot have nice things in this country.
The problem isn't the rules; the problem is the precarious financial situation of the UK government. The UK government is already spending an enormous amount on debt interest; this is money that isn't going to hospitals, schools, infrastructure, etc. If the government were to significantly increase its borrowing and simply ignore fiscal prudence, then not only would the volume of debt increase, but the interest rates themselves would increase even further, resulting in an explosion in the amount of money the government would have to use to pay the debt interest. The result of this would be that eventually, and not in the distant future, the UK government would have to practice brutal austerity in order to reduce the deficit and find the money to continue paying the debt interest.
One obvious measure would be to raise VAT, to be closer to those lands of milk and honey, Denmark and Sweden. This has the virtue of being broad based and helping to shift resources away from current consumption to strategic government led investment- but politicians must make the case.
It’s true that income taxes on middle earners are low, but that’s less true for the huge numbers of workers paying an additional 9p every month above about £25k towards student debt repayments. Better to allow some pensioners to forego those cruises so that the government can use the money to help them receive care when they need it
VAT is a deeply regressive tax as people on low incomes spend most of their income. Wealthy people save and ‘invest’. That’s why those defending the status quo and the wealthy focus on reducing income tax
If you use VAT revenues to redistribute income and pay for public services, then the net result is progressive, because this process does decrease inequality. The fact is that the bottom 40% or so of the income distribution tend to be net beneficiaries of expansions of the Welfare State. How do you think Scandinavian countries reduce inequality so much with taxes and spending? It's by taxing everyone heavily and then redistributing heavily, and as a natural consequence of this process, poor people benefit the most.
There should at least be one kind of inflation that is nourished by lax banking rules – housing costs. I don't know the British figures but in my country 90% of bank lending is to home loans. And since the banks create these money out of thin air they contribute to the rise in housing costs. More money goes to buying the same amount of things, that is the definition of inflation.
And housing costs is a big chunk of peoples' outlays.
It’s about 50% in U.K. Whilst less than 10% goes on lending to productive businesses. Plus of course commercial banks create the money that they are lending on property. It’s a massive factor in property inflation. See Josh Ryan Collins on the subject
The two questions you ask at the end are fundamental to the current polycrisis.
1. How, if at all, can we move away from private consumption without exacerbating the sense of decline that has fueled the far right?
2. How, if at all, can we persuade people of the need to pay for better public services?
The third question that never gets asked is:
3. How can we move to a sustainable way of life that allows us to live fulfilled and healthy lives within planetary boundaries?
There are three counter questions.
A. If we continue to privilege private consumption based on the increasingly unequal distribution of means, won't that consolidate the sense of decline into a very real and obvious actual decline?
B. If we do not restore or improve our public services, won't that mean that only those with the means will be able to substitute them with private consumption (see A), and won't that simply exacerbate the sense of decline?
C. If we continue to pursue economic growth beyond planetary boundaries, won't that turn a sense of decline into an actual collapse, impacting most strongly, iniitially, on those least able to mitigate it, but eventually affecting everyone, even the elite.
The sad truth is that we are nearing the terminal stage of capitalism, which was always an unsustainable process of ever increasing consumption and waste production allied to a hierarchy of means. Those that were able to accrue the largest shares were able to use that to accumulate more and more (and push the waste away). So long as growth rates ensured that everyone had more it could give the illusion of permanence and progress. In the long term it is a zero sum game because growth can not continue indefinitely given limited resources, and the waste is contained within the same physical space we all occupy. The only inhabitable self-sustaining space we know of in the universe - which we are ever more rapidly degrading and disrupting.
Growth can, in fact, continue indefinitely, practically speaking.
The idea that the world is currently at some kind of natural limit is not supported by any good evidence. People in the 1970s were saying that 8 billion people would lead to famine like never before, but increases in agricultural productivity prevented that. You can see in the data that economic growth and carbon emissions have been decoupled in recent years. Every time someone invents a supposed limit, technological innovation solves it.
Also, the UK and much of the world has a problem with low fertility rates, so the idea that countries like the UK are about to experience some form of cataclysm because there are too many people is absurd.
Growth cannot continue indefinitely in this universe. Practically or theoretically. All the laws of physics tell us this. To pretend otherwise is insane.
That said, what might happen in the ‘foreseeable’ future is a matter of guess work or extrapolation and inference. None of us has a crystal ball so we are just expressing our opinions. Mine differs from yours. Neither of us ‘knows’, and neither of us will ever be able to say “told you so”. That said…here is my response:
If by ‘practically’ you mean for the next century, then some growth, in some places, yes. But everywhere, at the rate it has been happening, no. The impact of the changing temperature, precipitation, ocean currents, patterns of atmospheric pressure, and rising sea levels will render some places uninhabitable. This will drive people to forced migrations, leading to war and destruction. There may be growth in weapons production, but very little else.
It’s always possible that some clever people will devise technology that allows people to continue living on islands and coasts that are inundated by the rising seas, but it seems wildly unlikely, especially that it would be affordable or make any economic sense at all.
As an agricultural botanist I can assure you that the trend in productivity is flattening and even turning downwards for some crops. The rising temperature, erratic rainfall and increasing severe storm incidence are all impacting on harvests. Some important growing areas for key crops will become much less suitable over the next 100 years. The era of cheap fertilizers is over, along with the passing of cheap fossil fuels, so the cost of food is rising and like it or not, this has an impact on ‘availability’. Famines are rarely the result of a complete absence of food, but more the absence of affordable (i.e. available to the average person) food.
I understand why people prefer an imagined future where progress is inevitable, and every problem will be sorted. I would have thought that the last 5 years might have dented that optimism, but cognitive dissonance is a powerful force. If it makes you happy, carry on in your fantasy - but please don’t try to drag me in.
Exactly this.
The UK has a growing number of working age, economically inactive people. The challenge isn't to turn someone who is neet into a surgeon, or force a profoundly disabled person into becoming a bricklayer, the challenge is to get someone who doesn't work for 'cultural reasons' to get a job in retail, or to get someone with non-profound health issues to do some form of work that is more productive than being subsidised to do nothing. If the unproductive can move to being the lower productive, and the lower productive can move to being a bit higher productive and so on, we bring under utilised resources into play and then we get the growth.
Where I live the healthy young men on mopeds are mostly immigrants, leaving aside the safety issues of this line of work, it doesn't seem optimal to me for UK to import workers for this kind of low value work. They, and more importantly their dependents, just add to existing housing and public service pressures. I'd much rather we were importing them to work on a building site than driving over pavements to squeeze in an extra KFC drop.
Could you provide a definition of "middling well off". At twice the median income I suspect it includes me, but frankly I'm feeling rather poor between high housing costs and student loans. I fear that I and my cohort are being priced out of third spaces and childrearing, both valuable for society in some way. But perhaps this is motivated reasoning! Or perhaps I have an inflated sense of my social position, and your "middling well off" is rather better off than I imagined?
"One possibility is to raise the inflation target and ditch the fiscal rules. There is, however, no sign of the government being willing to do either, maybe rightly so".
Isn't this the crux of the problem? We know the rules are bad in macro economic terms but it's being enforced for politcal reasons. No wonder we cannot have nice things in this country.
The problem isn't the rules; the problem is the precarious financial situation of the UK government. The UK government is already spending an enormous amount on debt interest; this is money that isn't going to hospitals, schools, infrastructure, etc. If the government were to significantly increase its borrowing and simply ignore fiscal prudence, then not only would the volume of debt increase, but the interest rates themselves would increase even further, resulting in an explosion in the amount of money the government would have to use to pay the debt interest. The result of this would be that eventually, and not in the distant future, the UK government would have to practice brutal austerity in order to reduce the deficit and find the money to continue paying the debt interest.
One obvious measure would be to raise VAT, to be closer to those lands of milk and honey, Denmark and Sweden. This has the virtue of being broad based and helping to shift resources away from current consumption to strategic government led investment- but politicians must make the case.
It’s true that income taxes on middle earners are low, but that’s less true for the huge numbers of workers paying an additional 9p every month above about £25k towards student debt repayments. Better to allow some pensioners to forego those cruises so that the government can use the money to help them receive care when they need it
VAT is a deeply regressive tax as people on low incomes spend most of their income. Wealthy people save and ‘invest’. That’s why those defending the status quo and the wealthy focus on reducing income tax
If you use VAT revenues to redistribute income and pay for public services, then the net result is progressive, because this process does decrease inequality. The fact is that the bottom 40% or so of the income distribution tend to be net beneficiaries of expansions of the Welfare State. How do you think Scandinavian countries reduce inequality so much with taxes and spending? It's by taxing everyone heavily and then redistributing heavily, and as a natural consequence of this process, poor people benefit the most.