In a commodity-backed money system, a common currency union, or a fiat-money system with a fixed or pegged exchange rate, external undemocratic constraints are imposed on governments which limit their freedom to use fiscal policy for public purpose. A consequence of this is that governments – and wider communities – become constrained in what they can do by unnecessarily erected financial constraints that have nothing to do with real resource limits. The provision of health care, education, infrastructure, and other goods and services, can fall far short not only of what is desirable but of what is possible given the availability of doctors, nurses, teachers, engineers, construction workers, etc., because of a lack of money.
A government that is the issuer of its own fiat currency, in contrast, can never be short of money unless it voluntarily imposes such squalor on itself. It is a topsy-turvy view of things to imagine that at a time of high unemployment and excess capacity it is “unaffordable” to employ these workers or put idle resources to work. It is only unaffordable within the voluntarily constructed constraints governments have imposed on themselves to limit net expenditure to arbitrary proportions of national income.
To take just one of many possible examples, when people in need of medical treatment but without the means to pay for it are being left untreated at the same time as qualified medical practitioners are unemployed, how could it be unaffordable to employ the medical practitioners to attend to the patients? Neoliberal mythology would suggest it is unaffordable, because the government is “short of money” and sufficient private demand (backed by private income) is lacking. But the government is unconstrained in its capacity to pay for these health services.
Net financial assets increase when the government undertakes such net expenditure, but so too does productive activity, unless somebody wants to argue that attending to the sick is socially unproductive. Actually, that is what neoliberal logic suggests. It implies that the expenditure is unproductive because the source of demand was not private. The patients were too poor to pay, so meeting their needs was unproductive.
In a society of individuals, it is arbitrary to privilege private demand over public demand in this way and is simply a reflection of the ideological bias of neoliberalism and the class-interested motivations involved. What is productive? That question is answered socially. A market is a social institution. A market assessment of whether an activity is productive is merely one social construction of productiveness. Since the market assessment depends on private incomes and preferences, the market assessment will change with every alteration of the distribution of private income. Unless somebody wants to argue that there is one ‘natural’ distribution of income, and that the one we have right now happens to be it – just like the one we had yesterday used to be it! – there is little to recommend such an assessment of productiveness over any other.
An alternative evaluator of productiveness is democracy. If, as a society, we deem caring for the sick to be a productive activity, we may vote or campaign for the government to spend some of its freely created money on training more medical practitioners. Whether the assessment of productiveness is through a market, democracy or some other mechanism, it is always and everywhere a social construction. To attach an aura of ‘naturalness’ to one mode of social construction – the market – is a superstitious act. It attaches god-like qualities to something that has – and could only ever have – been created by us. There is nothing natural about the current distribution of income, nor any measure of productiveness that hinges on that distribution.
Those who suggest that mass unemployment and idle capacity reflect a lack of productive uses for available resources may as well argue that we have run out of things to do with ourselves. No one with any imagination could think there is a lack of ways to improve our lives. No need for activities that help to preserve or regenerate the environment. No reason to develop alternative energy. No scope to invest in education, research and development, and technical innovation. No need to improve health care, public transport systems or other social infrastructure. No way to make our cities, towns and communities more liveable. No benefit to providing more personalized care for the elderly, better childcare, services and facilities to enhance physical, mental and social well-being. No point in enhancing facilities for social, creative or sporting pursuits. No point using our brains to think of anything worthwhile to do at all.