What is money? That might seem like the kind of question a person asks herself late at night, staring at a handful of rumpled bills through bloodshot eyes. But as stoner queries
go, this one is actually very important, for the answer depends to a great degree on what kind of money you’re asking about, and to whom you’ve posed the question. Some “money”—a very small percentage—is cash. The rest is imaginary (“fiat currency,” as it’s known), a vast network of contracts. The $25 birthday check from grandma is one kind of contract. The payment swiped off your credit card to buy shoes is another. When your bank enters the sequence of digits on a screen that affirm your small business loan has gone through, that’s two contracts—the first guaranteeing that the bank will supply you funds for the goods and services you need, the other guaranteeing that you’ll repay the loan at a later date, plus interest. Why is it important to know the difference between “money” and cash? Well, because according to Ann Pettifor, a London-based political economist famous for, among other things, being among the few to predict the 2008 financial crash, monetary theory is a feminist issue.
Pettifor’s new book, The Production of Money: How to Break the Power of Bankers, aims to elucidate the nature of money, the better to help women advocate for their needs. Money, credit, interest rates, bank regulations, the way things are accounted for in the public budget; all of these, Pettifor argues, have tangible effects on women’s lives, and the condition of society as a whole. And in order to make change, we’ve got to get passionate about topics that most of us have been conditioned to consider dry-as-dust. Here, Pettifor talks to Vogue about money matters—and why they matter for women, most of all.
Continue reading… ›
Image from Jeff Djevdet – Flickr
It will take Big Money to steer Britain through this rocky period. Instead, Chancellor Hammond has promised to continue slashing the very departmental expenditure essential to smooth the path. We must conclude that he does not wish to invest in a safe Brexit at all.
We live in perilous times. The demand by millions of people for protection from austerity and globalisation has fuelled support for extreme right-wing parties across the world. The possible election of a far-right party to the French presidency keeps many awake at night. The American President-elect rode the wave of popular insurrection and now poses threats not just to world trade and the global economy, but to global geopolitical security. Continue reading… ›
Ann Pettifor spoke on a Bloomberg TV panel with Gerard Lyons, Ambassador Paquale Terracciano and host Francine Lacqua on The Pulse. The U.K. services industry recorded a decent expansion in the first month after Brexit, all but scrubbing the chances of the U.K. economy contracting in the third quarter. The data make it more likely that that Bank of England’s Monetary Policy Committee will refrain fromeasing further this year, although policy makers will want to see the services PMI for September, released next week, before drawing any conclusions.
Watch the full discussion here.
Ann Pettifor recently travelled to New Zealand at the invitation of Professor Ian Shirley of The Policy Observatory and Vice Chancellor Derek McCormack at Auckland University of Technology, and also Mike Smith of the New Zealand Fabian Society. She spent 10 days delivering public lectures on economics in Wellington and Auckland.
In one of her media interviews Ann spoke to the formidable and highly regarded Kathryn Ryan, host of Nine to Noon on Radio NZ about the current state of New Zealand’s bubbling economy and mainstream economics. Ann argued that increasingly we are transforming our economies into rent-seeking centres that rely on offshore and mobile finance. Listen to the full programme here.
In another interview Ann spoke to Paul Henry of the daily TV show Newshub about how central banks, including New Zealand’s Reserve Bank, are ‘sitting on their hands’ while their economies blow up asset bubbles that are unsustainable. Watch her give a ‘report card’ on the current global financial situation here.
Ann also addressed the Fabian society on the Green New Deal. Thanks to the Fabian Society the full video and presentation can be found here.
On her final day in Wellington, New Zealand’s capital city (‘the coolest little capital in the world’), Ann addressed a packed meeting at the New Zealand Treasury on the global implications of the production of money by commercial bankers.
Ann Pettifor discussed how Phillip Hammond’s stint at the treasury will differ to Osbornes on Share Radio yesterday, with their regular economics commentator John Weeks.
Listen to the full show here.
On the 1st July Ann Pettifor spoke at the FT’s Festival of Finance. Ann gave a presentation on ‘The New Nationalism: the money story’ and discussed nationalism, and Polanyi’s Double Movement. She was joined by a panel made up of Frances Coppola, Tyler Cowen, and Srinivas Thiruvadanthai. The discussion was moderated by John Authers.
The full podcast is available on FT Alphaville.
In September 2015, we were pleased to accept the invitation to serve on an Economic Advisory Council (EAC). We felt strongly that it represented an opportunity to develop a vision of a progressive economic policy for Britain that departed from the destructive austerity narrative. Our collective view is that the EAC, and its various policy review groups, has indeed had a positive influence on the development of Labour’s economic policy, and we hope it continues whatever the result of current divisions.
We have always seen this body as providing advice to the Labour party as a whole, and not as an endorsement of particular individuals within it. For example we all share the view that the EU referendum result is a major disaster for the UK, and we have felt unhappy that the Labour leadership has not campaigned more strongly to avoid this outcome. We believe it is now crucial to find a way to resolve the economic and political impasse with the EU in a way that brings the least damage possible to the UK economy and those of our neighbours. We will be honoured to advise the Labour Party in the future, should our advice be sought once the current situation is resolved.
I have been criticised by among others, Professor Simon Wren-Lewis, for the earlier blog criticising the economics profession. To bolster my case, am sharing here ex-governor of the Bank of England, Mervyn King’s, views on the profession. While his is an “on-the-one-hand-but-on-the-other” approach, nevertheless it is clear on the culpability of the profession. The quotation is from page 3 of his recent book, ‘The End of Alchemy‘ published by Little, Brown in 2016.
“Since the crisis, many have been tempted to play the game of deciding who was to blame for such a disastrous outcome. But blaming individuals is counter-productive – it leads you to think that if just a few, or indeed many, of those people were punished then we would never experience a crisis again. [Me: This is why I tend not to blame individual bankers, but the economics profession as a whole, even while evidencing my criticism with examples]. If only it were that simple. A generation of the brightest and best were lured into banking, and especially into trading, by the promise of immense financial rewards and by the intellectual challenge of the work that created such rich returns. They were badly misled. The crisis was a failure of a system and the ideas that underpinned it, not of individual policy-makers or bankers, incompetent and greedy though some of them undoubtedly were. . [My emphasis]. There was a general misunderstanding of how the world economy worked…….
If we don’t blame the actors, then why not the playwright? Economists have been cast by many as the villain. An abstract and increasingly mathematical discipline, economics is seen as having failed to predict the crisis. This is rather like blaming science for the occasional occurrence of a natural disaster. Yet we would blame scientists if incorrect theories made disasters more likely or created a perception that they could never occur, and one of the arguments of this book is that economics has encouraged ways of thinking that made crises more probable…..”
My only disagreement with this excerpt from ex-Governor King’s book is that financial crises since financial liberalisation in the late 1960s and early 1970s have not been ‘occasional’. They have been a direct consequence of financial liberalisation, encouraged and cheered on by the economics profession as a whole. .
If, as a result of Brexit, the economy crashes it will not vindicate the economists, it will simply illustrate once more their failure.
We, at Policy Research in Macroeconomics (PRIME) call for an urgent, independent, public inquiry into the economics profession, its role in precipitating both the financial crisis of 2007-9, and the subsequent very slow ‘recovery’. Finally the role of the profession in the run up to the British European referendum campaign.
As this morning illustrates, financial disarray is not unlikely under Brexit, but whether this turns into anything material depends in the first instance on economic policy. Labour’s John McDonnell was quickly out of the blocks to warn against George Osborne’s and Alastair Darling’s “punishment budget.” But, even if Osborne resigns, as he should, can we trust economists at the Treasury not to impose more disastrous policies?
Economists have once again proved themselves not only irrelevant, but a dangerous irrelevance.
For too long they have resisted call after call for reform. If they will not do it themselves then it is time for others to take control. The profession should be brought to account through a public inquiry into the this failure.
Brexit and the economics profession
While it is risky to second guess public opinion, it may just be that the prospect of hardship to come might not have been very compelling for those already suffering the hardship of low wages, insecure low-skilled jobs, bad housing, high rents, an under-resourced and increasingly privatised NHS, and other forms of public sector ‘austerity’.
With this historic vote, the British people have not just rejected the EU. They have done something that should worry the British establishment, and their friends in the City of London, and internationally, far more. They have rejected economics – and in particular the dominant economic narrative.
Unfortunately, the economics profession as a whole cannot resign, though perhaps the President of the RES, Andrew Chesher, should consider his position.
Because this hardship is indirectly a consequence of the economics profession. Economists led the way to financial liberalisation of the past 40 years, which led to soaring levels of debt, crises and financial ruin. Economists dictated the terms for austerity that has so harmed the economy and society over the past years. As the policies have failed, the vast majority of economists have refused to concede wrongdoing, nor have societies been offered alternative economics policies.
Perhaps most symbolically, even the Queen suggested they did not know what they were doing.
It is hardly surprising, therefore, that the British public did not find the opinion of Remain ‘experts compelling’.
Remain chose to focus on the economy – to the exclusion of almost all else. All the heavyweights of the economics profession – 10 Nobel Prize-winning economists, the OECD, the IMF, the Federal Reserve, the Bank of England, the NIESR, the Institute of Fiscal Studies, the London School of Economics – were wheeled out to warn the British people of economic facts known, and understood apparently, only to “experts”. The Financial Times amplified their voices and repeated their dire threats and warnings over and over.
But the “experts” and the economic stories they tell, have been well and truly walloped by the result of this referendum. And rightly so, because while there is truth in the story that international co-operation and co-ordination is vital to economic activity and stability, there is no sound basis to the widely espoused economic ‘religion’ that markets – in money, trade and labour – must be unfettered, detached from democratic regulatory oversight, and must be trusted to ‘govern’ whole countries, regions and continents.
The British people have today rejected this mainstream, orthodox economics, a strain of fundamentalism that they may rightly judge has proved deleterious to their own economic interests.
The economists will retaliate
Some economists have been getting their retaliation in first. Chris Giles, chief economist at the Financial Times, argued that vindication or otherwise for the profession will depend on whether crisis materialises after Brexit. But at the same time the Chancellor (backed up by New Labour’s Alastair Darling, the Treasury and the Financial Times) threatened the British people with an intensification of austerity – a punishment budget. One in which public spending would be further slashed and taxes raised – the most punitive and counter-productive economic strategy imaginable. And in doing so, they, and the economists that advised them, affirmed once more their contempt for ordinary voters, and their irrelevance to serious economic analysis.
I voted to Remain. I do not believe that Brexit is a wise decision. I fear its consequences in energising the Far Right both in Britain but also across both Europe and the US. I fear the break-up of the United Kingdom, and the political dominance of a small tribe of conservative ‘Little Englanders’. They will diminish this country’s great social, economic and political achievements.
But the people are not to blame.
The economics profession, and their friends amongst the world’s financial elites, are to blame. They engineered their own political and financial bail-outs after the grave financial crisis of 2007-9. Economists cheered on politicians and effectively urged them to transfer the burden of losses on to those most innocent of the crisis. Conservative and Social Democratic politicians with friends in financial circles, were only too happy to oblige.
The economics profession encouraged the imposition of austerity, in both the US (Ken Rogoff ‘Mr 90%’, who, with Carmen Reinhart, called for a ceiling on public debt), the UK (on page 3 of Economic Consequences of Mr O, see this letter to the Sunday Times from twenty of the most prominent British economists) and of course, from the OECD (see this “UK should press on with austerity” issued just before the 2015 general election).
They – and we – are now paying the price for that calculated, reckless refusal to make the City of London and Wall St. accountable in full for the crisis – by restructuring and re-regulating both these financial entrepôts.
Above all, economists failed the British people by “pressing on with austerity”. They stubbornly refused to once again promote the subordination of the finance sector to the role of servant, not master of the British economy, and to use governmental monetary and fiscal powers to alleviate the impact of a crisis made in the City, on the majority.
That is why we urgently need a public inquiry into the role of the economics profession in Britain’s financial crises.
The case for Britain to Remain within the EU is to my mind, largely a political case. The political forces pressing for a rupture with the Union are not on the whole progressive, although there are many sincere Leave campaigners on the Left of the spectrum. ‘Brexiters’ are mostly insular, nationalistic and sometimes racist, especially in relation to immigrants and refugees.
With few exceptions the Brexit leaders are market fundamentalists, anxious to blame foreigners for the state of our economy; to attack European ordoliberalism rather than the – if anything more damaging – Anglo-Saxon Osbornomics. Their approach is particularly ironic, given that today’s European Union is today much more like Britain than it was before, as Jan-Werner Müller  argues in the latest edition of the London Review of Books. European populist discontent owes much to the impact of Anglo-Saxon economic policies for the liberalisation of finance and the privatisation of public assets.
There are politically progressive arguments made by some on the Leave side against membership of a political Union which has hollowed out democratic institutions across Europe, and transferred power to unelected technocrats. One in which right-wing politicians actively use state intervention and the rhetoric of the Social Model to reshape Europe into what José Palma defines as “a major facilitator of the ever-increasing rent-seeking practices of oligopolistic capital.” 
These liberal finance principles have led to high levels of private debt, bankruptcies, unemployment and public humiliation in many European states. It is clear to many Europeans that the workings of the self-regulating market system threatens to destroy their societies. And so they are engaged in what Karl Polanyi defined as “the self-preserving actions of communities” to interfere with the system’s free functioning by turning for “social protection’ to the strong leaders of right-wing, and even fascist parties.
At this critical turning-point in Europe’s history I believe it would be wrong to walk away from the fight against authoritarianism, and to spurn European partnerships in managing the market system, and curtailing the rent-seeking practices of oligopolistic capital. Above all, after a catastrophic world war still fresh in European memories: one in which at least sixty million people died worldwide, it would be wrong for Britons to exacerbate inter-European tensions and divergences with a Brexit. It would be wrong to shun the yearning for peace, stability and neighbourliness common to most European societies.
The economic case for remaining a European partner
There are two points to be made in support of the economic case for membership of the European Union.
The first has to do with the evolution of geopolitical forces. As American power wanes and in the process becomes more dangerous, it is paralleled by the rise of a powerful, autocratic Chinese state. Given these developments, I believe it important for Britain to be part of strengthening and upholding a third bloc: one built on long-established European struggles for protection of fundamental human and democratic rights of citizens, and for security and justice. A genuinely Social Europe whose struggles, values, culture, traditions and institutions are distinct from those of both the Americans and the Chinese.
The importance of strengthening such a unified third bloc is made clear as we face three great challenges that do not recognise national borders. The first is the grave threat of climate change, when infinite expansion hits the buffer of finite natural resources. Global warming knows no boundaries, so European-wide cooperation will be vital in adapting to it. Second, the wars, catastrophes and poverty of the Middle East have triggered mass migrations of refugees which can best be managed in a co-ordinated, co-operative and (hopefully) humanitarian Union.
Third, given the global interconnectedness of an out-of-control finance sector, we face another financial crisis. It is extraordinary that almost nine years after inter-bank lending froze on the 9th August, 2007, we as an international community have failed to re-structure or reform the current system, and are stumbling mindlessly towards the next grave global calamity.
Tackling the first of these two crises as a small island state will be nigh impossible. But alone, we have no chance of dealing with the aftermath of the next global financial crisis.
While there has been much tinkering with the complexity of global finance by the Basel Committee on Banking Supervision, little has been done to re-structure the international financial architecture and system to restore stability. On the contrary: unrestrained, finance capitalism has expanded further into shadow banking, aided and abetted by government guarantees, and the European Central Bank’s largesse. This has enabled the finance sector to engage in immensely lucrative debt-creation and other rent-seeking activities – without public oversight, and without the immediate fear of failure or losses. Business for this sector, backed as it is by European taxpayers, is better-than-usual, even as it becomes mired in tax evasion scandals, fraud and corruption.
There’s fear too in the eyes of global technocrats, conscious that they are driving blind, having lost control of the financial system. They lack up-to-date information and data about the activities of anarchic finance; and they have used up the monetary tools at their disposal during the last crisis. To compound their fears, social democratic politicians in Europe and the US remain fixated by neoliberal dogma, unable to pull the levers of government spending that would stimulate demand, lift their economies out from under mountains of debt, and halt stagnation and decline.
As this goes to press, the IMF, in a paper titled Neoliberalism. Oversold? has released a belated mea culpa regarding the destructive effects of neoliberalism, and arrived at
“three disquieting conclusions:
• The benefits (of neoliberalism) in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.
• The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.
• Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.” 
This climb-down comes too late to reverse the economic and social destruction wreaked by neoliberalism over many decades. Nor will it alter the direction of events. A crisis is now unavoidable. When that day arrives, it will be necessary for progressive forces to combine across the continent. First, to amend the Union’s treaties and their embedded orthodox economic policies. Second, to fight to restore democracy, security and justice to European countries and institutions; to replace anarchy with stability and order; and to subordinate mobile global capital markets to the interests of democratic societies.
That will only be achieved by international co-ordination and co-operation of progressive forces across borders. It cannot be achieved in isolation.
Ann Pettifor is Director of Policy Research in Macroeconomics (PRIME)
 Jan-Werner Muller, Europe’s Sullen Child, London Review of Books, 2 June, 2016.
 José Gabriel Palma: The Revenge of the Market on the Rentiers: Why neo-liberal Reports of the end of history turned out to be premature. June, 2009. Cambridge Working Papers in Economics (CWPE) 0927
 Jonathan D. Ostry, Prakash Loungani, and Davide Furceri. Neoliberalism: Oversold? IMF Finance and Development, June, 2016