What is termed Corbynomics is Jeremy Corbyn's proposal that:
"The Bank of England to be given a new mandate to upgrade our economy to invest in new large scale housing, energy, transport and digital projects: Quantitative Easing for people instead of banks... These funds could be used to establish a 'National Investment Bank' to invest in the new infrastructure we need and in the hi-tech and innovative industries of the future."
The money to fund these projects will be created electronically by the Bank of England. Critics are shouting, this is terrible, inflation will take off and our savings will become worthless. That seems to be the main objection voiced by Yvette Cooper. Let us keep an open mind and logically think this through: only 3% of the money in circulation is in the form of coins and notes; the remaining, 97%, is created electronically by private banks every time they make a loan and by the bank of England under its Quantitative Easing programme. So it is not the creation of money that causes inflation; it is the quantity of money we create, and how we use it.
If the injected money expands the economy, creates employment and develops skills that the economy needs, why should that be inflationary! The recovery in the British economy thus far has been mainly based on inflating property and financial assets prices. Jobs that have been created have been low paid and contributed little to government finances in terms of income tax. What is needed is a recovery in the engineering and manufacturing sector, where high-skilled, high-paid jobs are to be found. Injecting electronically created money into these areas will not, in my view, be inflationary.
The Bank of England has created £375bn, following the 2008 economic crash, that went into banks and financial markets through the buying of existing government bonds (Quantitative Easing for banks). Positive Money calculates that only 8% of that money went into the real economy, with the rest trapped in financial markets, inflating financial assets and property prices, and benefiting the top 5%. This has been money creation that creates bubbles in the economy, and when they burst, the fall out can devastate the lives of millions.
Quantitative easing for people (PQE), in contrast, will bypass the financial markets and private banks with the money channelled through a National Investment Bank into the areas that Britain needs. This seems to me, less risky to the economy than conventional Quantitative Easing. In any case, the worry at the moment is deflation not inflation. Here are two examples:
First, housing. The government spends £20.8bn on housing benefit. A substantial part of that is going to private landlords. There are 1.8 million households on waiting lists for social housing. Investing to build social and affordable homes would boost our GDP. It would have the effect of reducing the price of housing so that more people, particularly the young, could afford to buy, which would help with labour mobility. With all of that, it is likely that such investment would produce only modest inflation, if at all.
Second, climate change. It is estimated that $5trn needs to be invested globally in the next decade to meet a CO2 emission target of 450ppm. A substantial part of that investment must come through developing renewable energy sources. A report by the IPCC, quoted in the Guardian, estimates that "Renewable energy could account for almost 80% of the world's energy supply within four decades"
What better way for Britain to grow the economy sustainably than to invest PQE in renewable energy sources! The investment would develop industries, the products of which the world would need to move it away from its addiction to fossil fuel. It is an excellent investment in the talent of British scientists, engineers and industrialists, and creates a great export potential for Britain to earn its keep in the future.
So let us escape from the straightjacket imposed by the "moneymen", and invest in the future of Britain through Quantitative Easing for people.