Labour is failing to promote core Labour values such as equality and welfare (The Guardian view on Sir Keir Starmer: his party remains a mystery to voters, 4 April) because it is still wedded to the “handbag economics” of neoliberals such as the late Nigel Lawson. The view of the state as like a household, constrained by a shortage of money, bears no relation to the public monetary largesse of 21st-century states. Since the 1990s deflation crisis in Japan, the financial crisis of 2007-08 and the pandemic, central banks in key economies have been in full flow. However, this has mainly supported the financial sector and the market generally, rather than public welfare.
To open up this new agenda, fundamental questions need to be asked about the creation and circulation of money in the 21st century. Why is publicly generated money (QE) used to bolster the (financial) market rather than public services? Why can banks borrow from the central bank, when governments have to borrow from private finance? Why is that government debt, when bought back by the central bank using publicly generated QE, not then cancelled?
