Effect on the Mind of the Words “Spending” and “Investing”

In a recent talk based on a paper by Louisa Connor and Bill Mitchell, Mitchell considers the way in which the mainstream framing of the economy serves the neoliberal ideological agenda and how the framing could be altered to suit progressive viewpoints. Among the examples he gives are the terms “government spending” and “budget deficit”.

Acceptance of the term “budget” in connection to the government’s fiscal policy suits the neoliberal effort to maintain a false analogy between a financially constrained household and a sovereign government. A “budget deficit” probably seems bad, even unaffordable, a “budget surplus” good, to anyone taken in by the folksy neoliberal nonsense, so much so that these positions would strike many as “common sense”. In numerous instances the opposite of the truth appears to be widely regarded as gospel, such as the misconception that surpluses add to saving when of course the reverse is the case.

The concern with the term “government spending” is the associations it apparently conjures in the minds of many. Spending something is taken to mean it is “gone” or “wasted”. Mitchell suggests it would be better to refer to government “investing” both for government consumption and investment expenditure. It seems that to the human mind, to invest is to “build up”, to spend is to “use up”.

Meanings or associations of the word “invest” include to commit money to obtain a return; to devote morally or psychologically to a purpose; to endow with authority or power.

Government spending should always be an investment in the sense that it enhances the capabilities, opportunities and freedom of individuals to reach their full potential. A sovereign government has the capacity to empower individuals and communities through the investments it makes.

The example of the effect on the human mind of the words “spending” and “investing” is reminiscent of an interesting passage in volume 2 of Capital (ch.19, section II.4):

The labourer sells his commodity — labor-power — to the capitalist; the money with which the capitalist buys it is from his point of view money invested for the production of surplus-value, hence money-capital; it is not spent but advanced. (This is the real meaning of “advance” — the avance of the physiocrats — no matter where the capitalist gets the money. Every value which the capitalist pays out for the purposes of the productive process is advanced from his point of view, regardless of whether this takes place before or post festum; it is advanced to the process of production itself.) The same takes place here as in every other sale of commodities: The seller gives away a use-value (in this case his labour-power) and receives its value (realises its price) in money; the buyer gives away his money and receives in return the commodity itself — in this case labour-power.

Evidently the capitalists, at least according to Marx, do not like to think of themselves as spending, just as the public apparently does not like the idea of the government spending. People prefer to see themselves as investing or advancing.

Other meanings or associations of the word “advance” include to move forward in a purposeful way; to make progress or cause to make progress; to develop or improve.

Just as capitalists advance money in return for the commodity labor-power, government when it consumes or invests advances its money in return for a good or service.

Taking the analogy a step further, just as the invested or advanced wages paid to workers return (in large part, at least) to capitalists as a class when workers spend on consumption items, government investments or advances return to the government, ultimately, as tax revenues.

The advances, of course, should be sufficient to enable net saving when this fiscal choice better supports the intentions of the community.


6 thoughts on “Effect on the Mind of the Words “Spending” and “Investing”

  1. Tricky one.

    A Govt must surely be constrained by a ‘budget’ otherwise the politicians will never stop ‘investing’. The budget just needs to be based on public purpose rather than revenue.

  2. Just wanted to say thanks for this great blog.

    I’ve only begun reading your recommended first readings. They’re great.

    Keep up the good work. This blog is now one that I’ll read on a daily basis.


  3. This post started as a comment at billy blog to which Tom Hickey responded. He sums up the idea nicely:

    “Advance” is a key concept for understanding the cycle from the perspective of firms and government. … MMT points out that currency can only be obtained for taxes/saving if it is “advanced” (lent) or spent by the monetary authority, now usually the CB. But spending is also an advance since what is spent is taxed back unless the monetary authority makes space for net saving through policy choice, e.g., planned deficits or unplanned deficits through automatic stabilization. In this sense, the fiscal deficit and accumulated debt constitute an advance to non-government. But unlike lending, the fiscal advance does not come at the cost of interest but with the reward of interest for net saving.

  4. One of the key complaints against MMT is that MMT conflates ‘lending’ and ‘spending’.

    I think that highlights the ‘lending is special’ assumption that seems to underlie so much thought in this area.

    Once you say ‘lending is fairly ordinary – and might not really be necessary at all’, that changes the whole viewpoint.

  5. ‘But unlike lending, the fiscal advance does not come at the cost of interest but with the reward of interest for net saving.’

    I think we need to get away from the lending/advance thing altogether.
    That implies that what will be advanced or lent will be taxed back at some point and if a government is happy to accommodate increasing private savings then it is not accurate is it . I know we are chained to the accounting but..

    Can not any difference between the budget (based on public purpose) and taxation not be transferred over to the central bank’s operational accounts ?

    i.e. then 3 distinct Govt financial entities

    Treasury. The budget designed to advance public purpose
    Central bank. To control the monetary operations to maintain the interest rate
    Savings management office. To provide Govt savings vehicles as demanded

    A nice consolidated balance sheet prepared each year and some kind of oversight /coordination of the whole thing.

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