The Thomas Attwood seal of approval? Gesell money, public investment and government preference for British manufacturers
In the FT, Robert Skidelsky, Emeritus Professor of Political Economy at the University of Warwick (below right), advocates the issuing of Gesell money to consumers in parallel with the monetary financing of a public investment programme.
He recalls that Silvio Gesell’s idea was to give cash directly to households and to give people an incentive to spend the money and not hoard it – just as much of the cash already issued under QE lies idle.- unspent currency notes would have to be stamped each month by the post office, with a charge to the holder for stamping them.
How can this be done today?
Skidelsky points out that smart cards could be created with £1,000 for each person on the electoral register. The cards could be programmed to reduce the value of the balance automatically each week and this would boost its multiplier effect: “There are 46m voters on the register in the UK. Thus £46bn of new money might be injected into the economy (and) the effect on sales and prices would be widespread”.
John Maynard Keynes advocated a public works programmes which would get money into the pockets of workers who would be guaranteed to spend most of what they received from the jobs created and thus generate further spending. The tax on Gesell money does the same. Skidelski continues:
“The issuing of Gesell money to consumers should, therefore, be done in parallel with the monetary financing of a public investment programme. The government should pay for, say, an investment programme not by issuing debt to the public but by borrowing from the central bank. This will increase the government’s deficit, but not the national debt, since a loan by the central bank to the government is not intended to be repaid. Thus the government acquires an asset but no corresponding liability”.
For example, a £50bn programme of transport, housing, hospital, and school-building would not just restore capacity in the construction industry, it would simultaneously increase demand in the retail sector. If you build a new school or hospital you set up a demand for all the equipment needed for them to work.
However, as the prolonged recession and mediocre recovery has destroyed a great deal of industrial capacity, increased consumer demand ideally means increasing the economy’s capacity to meet that demand.
To limit the leakage of the extra spending power into imports, the government should give preference to British firms. An infrastructure programme financed by borrowing from the Bank of England that gives preference to British manufacturers would give Mrs May the industrial policy she is looking for.
The investment programme and Gesell money initiative together spread over, say, two to three years, would inject a total of £100bn of extra spending power into the economy — £50bn on consumer goods, £50bn on producer goods.
Here is a two-pronged strategy both for fighting the next recession and for rebalancing the British economy. And if it is a step too far for a Treasury still mired in Osbornian austerity thinking, it should be taken up by the Labour party.
See also on the Political Concern site: Shinzo Abe and Jeremy Corbyn advocate increased public investment, lower taxation & a high wage policy: https://politicalcleanup.wordpress.com/2016/08/05/corbyn-abe-increased-public-investment-lower-taxation-a-high-wage-policy/