We could fix our economy by giving every man, woman and child £6,000 in cash

It's hard to believe in the economy's so-called recovery when 2.5m remain unemployed and 1.5m are stuck in part-time jobs because they can't find full-time work. So how do we get growth beyond the Square Mile?

Have you heard the good news? The economy is “turning a corner”. Growth is back. Green shoots abound. Hurrah! Forget that this is the slowest recovery in a century; forget that George Osborne promised us 7.7 per cent growth three years ago and yet we’ve had less than 3 per cent. Ignore the 2.5 million people who are still unemployed and the 1.5 million people who are stuck in part-time jobs because they can’t find full-time work. Turn a blind eye to the longest squeeze on workers’ incomes since the 1870s, to the 500,000 people who have been forced to visit food banks in the past year.

OK, you get my drift. To talk of a “recovery” is self-serving spin from the discredited austerians. If you want to see “green shoots”, you’ll have to head for the City of London. Bonuses there are up 64 per cent, while RBS and Lloyds are enjoying combined half-year profits of £3.5bn.

So how do we get growth beyond the Square Mile? Forget fiscal stimuli. Yes, Labour’s proposed VAT cut would boost demand – but by less than 1 per cent of GDP. Forget monetary stimuli. Interest rates have stood at a record low of 0.5 per cent since March 2009.

Then there is quantitative easing (QE), in which the Bank of England, according to the official explanation on its website, “electronically creates new money and uses it to purchase gilts from private investors such as pension funds and insurance companies . . . [This] lowers longer-term borrowing costs and encourages the issuance of new equities and bonds to stimulate spending.”

We have had a massive £375bn of QE so far, which may have saved the financial sector but has done very little for the rest of us. According to the Bank of England, 40 per cent of the gains from QE since 2009 have gone to the richest 5 per cent of households. “QE is a policy designed by the rich for the rich,” says Nigel Wilson, the chief executive of Legal & General.

There is, however, a way of using QE money in a bolder, much more daring way. It’s called “quantitative easing for the people”, or QEP.

QE of £375bn amounts to around £6,000 per man, woman and child in the UK. So why not electronically add this to the current accounts of every member of the public? Why not give the QE money directly to ordinary people to spend, save or pay off their debts? Wouldn’t it be better to inject new money into the real economy, rather than the City of London (where it usually sits unused, unspent, unlent, in bank vaults)?

QEP, incidentally, isn’t my idea. It’s Steve Keen’s. A professor of economics at the University of Western Sydney, Keen was one of only a handful of economists to have warned of the dangers of a financial crisis, several years before Lehman Brothers imploded in 2008.

QEP might elicit snorts of derision from the inflation hawks and deficit scolds, not to mention lazy references to hyperinflation and Weimar Germany, but it isn’t quack economics. Far from it. Remember the freemarket economist Milton Friedman, a hero to Thatcher and Pinochet, who said that downturns could be fought by “dropping money out of a helicopter”?

And remember his liberal-left rival John Maynard Keynes, who called for the Treasury to “fill old bottles with banknotes” and then bury them for people to find, dig up and spend?

QEP bypasses the tired and stale debate over austerity. Having the Bank of England hand over cash directly to consumers would boost aggregate demand without adding a penny to the national debt.

What’s not to like? Well, there’s no such thing as a free lunch, right? Wrong. There is if you’re a banker or a bond trader. The question is: why use QE money to bail out the masters of the universe rather than members of the public?

It’s a taboo topic, I guess. QEP is, in the words of the veteran economics commentator Anatole Kaletsky, formerly of the Times and now of Reuters, “too controversial for any policymaker to mention publicly”. Only a handful of pundits, such as Kaletsky and the Guardian’s Simon Jenkins, have so far dared to discuss the option of QEP. Kaletsky refers to “citizens’ dividends”, Jenkins to “people’s bonuses”.

It’s still a tough sell. Ever since Liam Byrne, the outgoing Labour chief secretary to the Treasury, left behind his now notorious note in May 2010 – “I’m afraid there is no money,” he joked – the austerians have pretended that the UK is broke, bust, bankrupt. In a speech in March, David Cameron declaimed that there’s “no magic money tree” to fund what he dismissively described as “ever more wishful borrowing and spending”.

This is the big lie of the debate over growth and deficits. Don’t take my word for it. Or Keen’s. A briefing document published by George Osborne’s Treasury to coincide with the Budget in March noted how: “It is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money. In theory, this could allow governments to increase spending or reduce taxation without raising corresponding financing from the private sector.”

The Treasury agrees: there is a money tree – and it isn’t magical. It’s called QE and it can, if we so choose, be deployed to support households, not banks; to encourage spending, not hoarding. QEP isn’t just doable: in an age of collapsing living standards, it’s vital.

It would also be revolutionary. To borrow a line often attributed to Henry Ford: “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

Mehdi Hasan is a contributing writer for the New Statesman and the political director of the Huffington Post UK, where this article is cross-posted

Economic growth can't only be focused on London's financial district. Image: Getty

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

This article first appeared in the 23 October 2013 issue of the New Statesman, Russell Brand Guest Edit

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Theresa May’s stage-managed election campaign keeps the public at bay

Jeremy Corbyn’s approach may be chaotic, but at least it’s more authentic.

The worst part about running an election campaign for a politician? Having to meet the general public. Those ordinary folk can be a tricky lot, with their lack of regard for being on-message, and their pesky real-life concerns.

But it looks like Theresa May has decided to avoid this inconvenience altogether during this snap general election campaign, as it turns out her visit to Leeds last night was so stage-managed that she barely had to face the public.

Accusations have been whizzing around online that at a campaign event at the Shine building in Leeds, the Prime Minister spoke to a room full of guests invited by the party, rather than local people or people who work in the building’s office space.

The Telegraph’s Chris Hope tweeted a picture of the room in which May was addressing her audience yesterday evening a little before 7pm. He pointed out that, being in Leeds, she was in “Labour territory”:

But a few locals who spied this picture online claimed that the audience did not look like who you’d expect to see congregated at Shine – a grade II-listed Victorian school that has been renovated into a community project housing office space and meeting rooms.

“Ask why she didn’t meet any of the people at the business who work in that beautiful building. Everyone there was an invite-only Tory,” tweeted Rik Kendell, a Leeds-based developer and designer who says he works in the Shine building. “She didn’t arrive until we’d all left for the day. Everyone in the building past 6pm was invite-only . . . They seemed to seek out the most clinical corner for their PR photos. Such a beautiful building to work in.”

Other tweeters also found the snapshot jarring:

Shine’s founders have pointed out that they didn’t host or invite Theresa May – rather the party hired out the space for a private event: “All visitors pay for meeting space in Shine and we do not seek out, bid for, or otherwise host any political parties,” wrote managing director Dawn O'Keefe. The guestlist was not down to Shine, but to the Tory party.

The audience consisted of journalists and around 150 Tory activists, according to the Guardian. This was instead of employees from the 16 offices housed in the building. I have asked the Conservative Party for clarification of who was in the audience and whether it was invite-only and am awaiting its response.

Jeremy Corbyn accused May of “hiding from the public”, and local Labour MP Richard Burgon commented that, “like a medieval monarch, she simply briefly relocated her travelling court of admirers to town and then moved on without so much as a nod to the people she considers to be her lowly subjects”.

But it doesn’t look like the Tories’ painstaking stage-management is a fool-proof plan. Having uniform audiences of the party faithful on the campaign trail seems to be confusing the Prime Minister somewhat. During a visit to a (rather sparsely populated) factory in Clay Cross, Derbyshire, yesterday, she appeared to forget where exactly on the campaign trail she was:

The management of Corbyn’s campaign has also resulted in gaffes – but for opposite reasons. A slightly more chaotic approach has led to him facing the wrong way, with his back to the cameras.

Corbyn’s blunder is born out of his instinct to address the crowd rather than the cameras – May’s problem is the other way round. Both, however, seem far more comfortable talking to the party faithful, even if they are venturing out of safe seat territory.

Anoosh Chakelian is senior writer at the New Statesman.

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