Monthly Archives: June 2015

New report: Money Creation for the Common Good

This site focusses on plans and measures taken to improve the political and  economic life of the country. Today:

The Green economy can be stimulated through targeted quantitative easing: report from Anglia Ruskin University

James Phillips (Business Green) reviews a major new report from Anglia Ruskin University commissioned by Molly Scott Cato MEP [below] and published by the Greens/EFA group in the European Parliament.


It was written by Victor Anderson, Visiting Professor at the Global Sustainability Institute, Anglia Ruskin University*, Cambridge.

Full report: Green Money: Reclaiming Quantitative Easing – Money Creation for the Common Good.

At the launch, Molly Scott Cato said: “Quantitative easing to date has simply further benefited wealthy elites. But QE is just a technique to create money and we need to reclaim it for the common good. We need the money we create to be invested in energy from safe, clean renewable sources and provide safe clean homes for all the citizens of our continent. This public investment will create jobs for the thousands of unemployed across our continent while simultaneously building up our green infrastructure . . . It is time for us to liberate the power of money and make QE our own. In producing this report, we have benefitted greatly from comments by Andrew Waldie, Fran Boait, Colin Hines, Richard Murphy, Francisco Padilla Olivares and Grace Murray.

James Phillips writes: “European governments should adopt a policy of ‘Green Quantitative Easing’ (GQE), The report, which was commissioned by Green Party MEP for the south west of England, Molly Scott Cato, offers a detailed assessment of the Party’s previously stated plans for a round of targetted QE that would see central banks directly inject capital into low carbon infrastructure projects.

“Report author Professor Victor Anderson highlighted so-called ‘carbon bubble’ risks: “As well as damaging the environment, fossil fuel companies have also become a risk to financial stability. As action to combat climate change spreads, the value of fossil fuel investments will fall. This is a threat not only to those companies but also to the pension funds, insurance companies and other organisations which have shares in them. The Bank of England has a duty to play its part in helping the shift towards a greener economy no longer dependent on dirty sources of energy.”

The report, which follows last week’s G7 agreement to move away from fossil fuels and deliver full decarbonisation of the global economy this century, suggests that the European Investment Bank should also pioneer GQE policies across Europe.

Scott Cato said GQE would allow money to be reclaimed “for the common good” through direct investment in the green economy.

“Quantitative Easing to date has simply further benefited wealthy elites,” she said. “But QE is just a technique to create money and we need to reclaim it for the common good. We need the money we create to be invested in a future we want to see. So, for example, we need to invest in energy from safe, clean renewable sources and provide safe clean homes for all the citizens of our continent (and) . . . create jobs for the thousands of unemployed across our continent while simultaneously building up our green infrastructure”.

“Quantitative easing (QE) is a mechanism for putting new money into the economy. Central banks create money which they then use to buy bonds from investors such as banks or pension funds. This increased amount of cash in the financial system, aims to stimulate the economy by encouraging banks to make more loans and in turn increase investment.

“The European Central Bank (ECB) recently agreed a new round of QE in an attempt to tackle stagnation and deflation in the Eurozone. This report argues that evidence of conventional QE in the UK has shown it to fail in its objectives and that it has simply benefited wealthy elites. It calls instead for a mechanism of Green QE and identifies how this could be implemented.

“Green QE works in a similar way (but) the difference is that the money created in Green QE is used specifically to boost the green sectors of the economy with the aim of helping Europe transition to a sustainable economy”.

James Phillips ends: “We need urgently to respond to two crises: the crisis of climate destabilisation, and the after-effects of the 2008 financial crisis. Green QE is a practical plan to tackle both finance and the global environment together. This report clearly demonstrates that implementing such a plan would help create a more stable, secure and prosperous Europe”.

From the report:

Areas assisting the transition to a greener economy and society include:

  1. Insulation and ecological design and construction of buildings
  2. Public transport, walking & cycling schemes
  3. Arrangements for the collection, recycling and/or re-use of materials, and for waste minimisation
  4. Renewable energy projects
  5. Energy, water, metals and other resource efficiency promotion & implementation
  6. Nature conservation schemes
  7. Research, development, and application of environmental technologies for monitoring and measurement, e.g. for pollution control
  8. Environmental and sustainability education and awareness raising
  9. Ecologically sound agriculture and food production
  10. Noise reduction barriers and technologies
  11. Land and soil decontamination

Building political support to make the idea a reality.

“Given the European Commission’s emphasis on the importance of investment via the Juncker Plan, it is of concern that at present there is a very limited amount of new money to fund the plan. We would strongly recommend that they consider the route of new money creation rather than the highly leveraged system which might introduce its own instability and would also influence the sorts of projects that would be funded. The long-term nature of investment for the green transition requires patient capital of the sort that Green QE could provide.

“What is needed above all is a determination to take some political control over the finance system. There is absolutely no need to accept that banking and the creation of money are matters which have to be left to the private sector, when they are so crucial to the functioning of the whole economy, and when they have recently gone so badly wrong.

“This lesson was learned by policy makers who introduced conventional QE but they have not used that power strategically and, as argued earlier, the money they have created has not provided useful investment and has increased inequality.

“We need to respond to both crises: the crisis of climate destabilisation, and the after-effects of the 2008 financial crisis. Green QE is a practical plan to tackle both finance and the global environment together. Doing so would create a more stable, secure and prosperous Europe.”

*Victor Anderson is a Visiting Professor at Anglia Ruskin University. He worked as an economist for the Sustainable Development Commission, a government advisory body, where he contributed to the “Prosperity without Growth?” report. in 1858, when the art critic, patron and philanthropist John Ruskin opened Cambridge School of Art. The art school grew to become Anglia Ruskin University, and is still at the heart of its modern-day campus in Cambridge. Over the years, a number of colleges and institutes have become part of Anglia Ruskin. They include the Cambridgeshire College of Arts and Technology (CCAT) and the Essex Institute of Higher Education (formerly the Chelmer Institute – itself formed from the Mid-Essex Technical College and the Brentwood College of Education).



‘The homes we need’: safeguard social housing, build on brownfield sites

“A civilised society should be so ordered that every person has secure housing”

The FT reports that the Scottish parliament has voted to “safeguard Scotland’s social housing stock for the benefit of citizens today and for our future generations”. Its local authorities own over 300,000 social housing units.

Scotland had already restricted the right to buy in areas where social housing shortages were acute and in 2001 reduced the discount to houses’ market price to £15,000 or less.

margaret burgess msp housingHowever, the prohibition on using the purchase price to fund the building of new social housing made it more difficult for local authorities to provide suitable homes for disadvantaged groups and later generations of tenants.

Margaret Burgess, housing minister [far right] therefore said earlier this year: “With 185,000 people on waiting lists for council and housing association houses, we can no longer afford to see the social sector lose badly needed homes”.

In May, Shaun Spiers, Chief Executive of the Campaign to Protect Rural England (CPRE) wrote to the FT pointing out that successive major reforms in recent years have not led to an increase in housing output. He criticised the political corporate reluctance to build on brownfield sites because they believe that ‘no one wants to live on them’. He continued:

Edinburgh“Our most successful cities (Edinburgh, number one above) are full of people happily living on “old industrial sites” whose reclamation makes life better for everyone. But brownfield development is more likely to involve small-scale infill or the regeneration of existing housing estates or high streets than “old industrial sites”. CPRE’s research shows there is suitable brownfield land for at least a million new homes in England, most of it in London and the wider south east: let’s use it”.

He then raises the question of who is going to build the homes we need, saying: “There is absolutely no evidence that the industry is either willing or able to build on the scale promised by the political parties. When we consistently built more than 200,000 houses a year, the state built more than half of them”.

His conclusion? “Unless governments — and distinguished newspapers — focus on who is going to build and pay for the homes we need, the result will be the same as it was after the last round of planning reforms: too few homes built, too much countryside lost”.

The FT examines the feasibility of the Californian remedy: a parallel currency for Greece

A summary of its recent article:

Central government could settle its domestic bills with pensioners and civil servants in IOUs, while using the euros collected via the tax system to pay back the IMF and other creditors, including the ECB. The IOUs become a de facto parallel currency and can be traded ‘on the street’ (ie with local businesses). The government may also decide to accept them as tax payment, a move which could increase their value.

IOUs have been issued in the past in Greece and elsewhere. Shortly after the Greek debt crisis erupted, Athens began paying some of its suppliers using IOUs. In 2009, the government in California, during a fiscal crisis, printed $3bn of IOUs for businesses, individual taxpayers and local counties in lieu of cash. It sent more than $450m of them to court-appointed attorneys, county-run health schemes and taxpayers awaiting rebates, among others. They continued to be issued until Arnold Schwarzenegger, California governor and the state legislature agreed a deal to close the $26bn budget deficit. Despite the opposition of large banks this measure was proposed again in 2010 see Bloomberg.

However, the FT ends, there are problems with the use of these documents:

  • the legality of a new currency would be questioned under EU law, which states that the euro should be the sole legal tender in eurozone member states;
  • the eurozone authorities would see these measures as a deviation from the stringent fiscal rules to which governments, including Athens, have agreed;
  • by issuing IOUs, the Greek government would probably be spending in excess of budget deficit limits and
  • tax credit certificates risk blowing a hole in future budgets, if the recovery they are supposed to prompt fails to materialise.

Some economists doubt the long-term sustainability of a country-wide parallel currency system because when there are two currencies in circulation and one has more value than the other, consumers would prefer to store the more valuable banknotes – euros in this case – and use the paper which is worth less – the IOUs – for day-to-day transactions.

The FT article by Ferdinando Giugliano, Economics Correspondent may be read here:

In a civilised country there would not be 3.4 million people – c13.5% of its population* – on the housing list

Bearing in mind the tenet that a civilised society should be so ordered that every person has secure housing, it is disturbing to see local councils robbed of their housing stock by political devotion to the corporate sector which favours the landlord interest and delights builders of ugly, expensive, yet ‘poky’ housing.

Having failed to induce charities to take over social care at low prices (Big Society agenda to increase the sector’s role in public service provision), government has reduced their funding and is now attempting to break up the housing trusts set up by philanthropists. Government proposals will eventually benefit the landlord and corporate building sector by destroying the cherished legacies of philanthropic groups and individuals, the Guinness Partnership, the Fry Housing trust, Aster, B3Living, Midland Heart, Orbit, Poplar HARCA, Riverside, Sovereign, SpectrumTrafford Housing Trust, the Haig Housing Trust and the Bournville Village Trust (below).

bournville social housingFurther questions:

  • Will they hand over the sort of unsaleable accommodation provided by the Church Housing Trust to Serco or G4S?
  • Will much of the Peabody Group’s huge social housing provision pass eventually into the hands of private landlords?

Deplorable case history in brief:

About 800,000 housing association tenants already have a “right to acquire” their homes. Phoenix Community Housing, in south-east London, retains only a small proportion of the proceeds from each right-to-buy sale under current legislation. One of its homes valued at £205,000 in 2014 was sold through right to buy for £105,000, so the housing association only received £27,332 – far short of the amount needed to build a replacement. Those who cannot afford the ‘right to buy’ housing will be driven to the expensive private renting sector which will happily receive the extra taxpayer subsidy.

The government states that every house purchased will be replaced “on a one-for-one basis”

Sadly, their track record does not instil confidence; Patrick Collinson records an admission by the Department for Communities and Local Government that, though 1.88m council homes in England have been sold since right to buy was introduced – which is 37% of the total stock of council homes – local authorities have built just 345,000 homes over the same period. They were hamstrung by central government restrictions on the use of money derived from the right to buy sales of local council housing.

If government means to keep its word this time, profit-driven building corporations will demand subsidies – taxpayers’ money – to induce them to build the social housing needed and promised by government.

Whilst these proposals will not unduly disturb government grandees with second and third homes inherited, acquired or bestowed [latest taxpayer funded stately home in the Cotswolds ironically for unelected minister for social equality], they will give no help to the 3.4 million people now on the national waiting list for social housing in England.

*!3.5% derived from:

For background information:

A ‘final hour’ plea for economic sanity and humanity from Thomas Piketty, Joseph Stiglitz and colleagues

They believe that the future of the EU is at stake in the negotiations between Greece and its creditor institutions.

In the Financial Times yesterday the need for both the EU and Greece to make concessions and “preserve the integrity of the Eurozone” was stressed by twenty-six concerned and experienced people, some of whom are seen below at a gathering of the OECD’s ‘High Level Experts on economic and social affairs.

stiglitz 2 etcThey are advocating forbearance and finance from the EU, to promote structural reform and economic recovery, and a “credible commitment” from Greece to show that, though it is against austerity, it is in favour of reform and wants to play a positive role in the EU.

With dismay, they have seen that a further six months of austerity is undermining Syriza’s key reforms. Instead of collaborating with the Greek government to overcome tax evasion and corruption, the EU has emphasised the need for austerity which has drastically reduced revenue from tax reform. Reduced resources have hampered the work needed to make public administration accountable and socially efficient.

Constant concessions to the EU mean that Syriza is in danger of losing political support and its ability to carry out a reform programme that will bring Greece out of the crisis.

The writers emphasise that it is wrong to ask Greece to commit itself to an old programme that has demonstrably failed, been rejected by Greek voters, and which large numbers of economists (including themselves) believe was misguided from the start.

They believe that Syriza is the only hope for legitimacy in Greece and warn that failure to reach a compromise would undermine democracy and result in much more radical and dysfunctional challenges, fundamentally hostile to the EU.

A revised, longer-term agreement with the creditor institutions is advocated, avoiding an inevitable default which would impose great risks on the economies of Europe and the world.

How Greece is treated will send a message to all its eurozone partners

Their prescription: a rapid move to a positive programme for recovery in Greece (and in the EU as a whole), using the massive financial strength of the Eurozone to promote investment, which would rescue young Europeans from mass unemployment with measures that would increase employment today and growth in the future. The writers believe that this could transform the economic performance of the EU and make it once more a source of pride for European citizens.

They end, “Like the Marshall Plan, let it be one of hope not despair”.