Taking back control of malfunctioning markets must mean challenging neoliberal economics and the myth of market supremacy (Editorial, 29 August). The market is not the sole source of money and wealth. The public economy is equally important – and vital when markets fail or in times of crisis. Even in normal times, the private sector relies heavily on public money, infrastructure and services. The biggest myth of all is that public expenditure is funded from the (private) taxpayer’s pocket. There is a growing alternative economics which shows that it is the state’s capacity to create money that underpins the market, through the authorised banking system and government spending.
The illusion that the latter is based solely on borrowing from the private sector or taxation is sustained by the ambivalent role of central banks. When national debt is held by the (national) central bank, the reality is that the government effectively owes the debt to itself. Public spending is not inflationary if it is balanced by taxation.
The time has come to recognise the autonomy of public money and the role of the public economy in sustaining the market system. Proposals for public spending for the public good need not fear the neoliberal question: “Where is the money to come from?” We know where it comes from. It doesn’t come from magic money trees – it comes from us, as citizens.
Prof Mary Mellor
Author of Money: Myths, Truths and Alternatives
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