Funding the Future

What is a business? The conventional economic answer tends to focus on firms, markets, capital and profit. I think that misses the most important part of the story: people.
Business is organised human activity. People work together to make things, provide services, solve problems and meet needs. Companies, markets and capital can all play a role in that process, but none of them is the same thing as business itself.
That distinction matters because it changes how we think about profit. A genuine business needs sufficient income to survive, invest and continue its activities. But that does not mean maximising profit is its purpose. Profit can be a means of sustaining a business rather than the reason why the business exists.
That then raises a much bigger question. If human work creates value, why does conventional accounting treat labour as a cost while treating the residual profit as belonging to capital?
I also look at the responsibilities businesses have to workers, customers, suppliers, communities, government, and the environment they depend on, and stress that business and capitalism are not synonymous. Understanding the difference might fundamentally change how we think about business, companies, work, profit and who should benefit from economic activity.
This video is part of my Understanding Economics series, which explains economics as it operates in the real world. 

In this podcast, I talk with my old friend and Tax Justice Network co-founder John Christensen about something economics rarely discusses, which is who controls our attention?
Our time is limited. So is our capacity to think, read, listen, understand other people and make sense of the world. That makes attention a scarce economic resource, and modern capitalism has become extraordinarily good at capturing it.
Advertising is the obvious example, but the problem goes much further. Corporations, social media, conventional media and political interests compete constantly for our attention. The result can be distraction from much bigger questions about inequality, climate change, public services, economic power and the way our societies are governed.
John and I discuss the ideas of Simone Weil, Iris Murdoch, John Kenneth Galbraith and Herbert Simon, alongside the warnings contained in Aldous Huxley’s Brave New World and George Orwell’s 1984.
We also ask what education and economics have to do with our declining capacity for critical thought, and whether distraction can undermine our agency as citizens.
Most importantly, we ask how we reclaim our attention.
Walking, reading, talking, observing and simply creating space to think might sound economically unimportant. We argue precisely the opposite.
If we surrender control of our attention, we risk surrendering our ability to think for ourselves.

Who really creates wealth in our economy? Is it the people who own businesses, property and financial assets, or the people who actually do the work?In this episode of my series on Understanding Economics, I argue that work is the foundation of economic value. Without human effort, care and creativity, money would still exist, but there would be very little worthwhile to buy with it.That raises some important questions about how modern economics values work. Much socially essential work, including caring for children and elderly relatives, volunteering and supporting communities, is unpaid and largely ignored by measures such as GDP. At the same time, many people in paid employment are prevented from making full use of their skills, judgement and creativity.Since the 1980s, power has also shifted from workers towards employers and shareholders. Trade unions have been weakened, insecure employment has grown, and work has increasingly been treated simply as a cost of production rather than as the activity that makes production possible.Artificial intelligence makes these questions more urgent. AI may eliminate some existing jobs, but there is still an enormous amount of socially useful work that needs doing.If we want an economy that serves people, we need to rethink what work is, what creates value, and what our economy is actually for, which is why Understanding Economics, because in the series I  ask what economics looks like when people really matter.

The Bank of England has held interest rates at 3.75%, but three members of its Monetary Policy Committee wanted an immediate increase. With inflation rising again, the threat of higher interest rates is very real, and the Bank say they may well raise rates soon.
But would raising interest rates actually tackle the inflation we now face?
The problem is that much of this inflation is being driven by disrupted energy supplies, food pressures and geopolitical instability. These are supply-side problems. Higher interest rates cannot produce more oil, gas, electricity or food. They can only reduce demand by making households and businesses poorer.
In this video, I explain why I think the Bank of England is using the wrong economic tool for the problem we face. Higher rates increase mortgage costs, put pressure on rents, discourage investment and can increase unemployment. At the same time, they increase returns for many owners of financial wealth.
I argue that the appropriate response to supply-driven inflation is very different. We need investment in energy security and food resilience, targeted fiscal support for those hardest hit by rising prices, and lower interest rates to reduce unnecessary pressure on households and investment.
Monetary and fiscal policy should work together to maintain economic and social stability. Instead, we risk having one foot on the accelerator and another firmly on the brake.

Does creating more money cause inflation? We are repeatedly told that “money printing” inevitably pushes prices higher. But that claim misunderstands both how modern money works and what actually causes inflation.
Governments create money when they spend. Commercial banks create money when they lend. Both processes happen every working day. If creating money automatically caused inflation, modern economies would be permanently experiencing rapidly rising prices. They aren’t.
In this video, I explain where money actually comes from, why government spending is not inherently inflationary, and why hundreds of billions of pounds of quantitative easing did not produce the inflation its critics predicted.
The crucial constraint on government spending is not money. It is the availability of real resources: people, skills, energy, materials, technology and productive capacity.
Inflation can occur when demand exceeds the economy’s ability to supply what people want to buy. But much of the inflation experienced in the UK in recent years has instead resulted from external shocks, including energy shortages, war and disruption following Covid.
I also look at sterling, Brexit, the financial crisis and Liz Truss to explain why exchange rates cannot simply be understood by looking at the amount of money being created.
Understanding inflation requires understanding the real economy. Money is only part of the story.

The old age pension triple lock is under attack again. The Financial Times wants it scrapped. The Resolution Foundation wants it ended. The Tony Blair Institute says it is unaffordable. But they are all looking at the wrong pension subsidy to criticise.
The UK spends around £154 billion a year on state pensions. The accumulated additional cost attributed to the triple lock is estimated at around £16 billion. That money has helped protect pensioners' incomes, including those of the many people who depend almost entirely on the state pension.
There is, however, another pension subsidy that receives far less attention: tax relief on private pensions. The total cost of private pension tax reliefs is around £83.9 billion a year, with 71% of that tax relief going to higher and additional-rate taxpayers.
Most strikingly, the cost of higher-rate pension tax relief, over and above the basic rate everyone can enjoy, is around £15 billion a year, which is remarkably close to the £16 billion cost attributed to the pension triple lock.
So why is the political debate focused on restraining the incomes of pensioners rather than on reducing tax subsidies for people already able to accumulate substantial private wealth?
This isn’t fundamentally an affordability question. It is about inequality, political priorities and whose interests government chooses to protect.
I think the triple lock should stay, and higher-rate pension tax relief should go. You may, of course, disagree. 

Interest rate markets are in turmoil. Government bond yields are rising, inflation fears are growing, and financial markets are demanding higher returns. But there is a problem: centuries of interest-rate history suggest that what is happening now is highly unusual.
In this video, I look at Bank of England research tracing interest rates back more than 700 years. The long-term trend is striking. Both nominal and real interest rates have fallen dramatically over time. During major wars, real interest rates have often become strongly negative as inflation exceeded the returns paid to savers.
Today, we appear to be doing the opposite.
With war contributing to inflation, financial markets are nevertheless seeking positive real returns on government debt. That has profound distributional consequences. Higher interest rates reward those who own financial assets while increasing mortgage costs, rents and pressure on government spending, employment and the wider economy.
This is therefore about much more than bond yields. It is about who bears the economic cost of war, whether governments should submit to financial markets, and whether attempting to maintain high positive real interest rates could create both economic and social instability.
Markets are trying to overturn a historical pattern that has persisted for centuries. Can they succeed, and what happens if governments let them try? Will the cost be too great for society to bear?

What if one of the biggest problems with conventional economics is that it misunderstands human beings?
Mainstream economic theory frequently starts from the assumption that people pursue their own self-interest. But that is not how most of us actually live. We care for our families, our friends and our communities. We also recognise obligations towards people we will never meet.
I call this economic empathy.
In this video in my Understanding Economics series, I explain why empathy should be considered an economic issue. I look at how our willingness to care for each other helped underpin social security, universal healthcare, free education and social housing, particularly in the decades after 1945.
I also consider how economists including Friedrich Hayek and Milton Friedman promoted a very different view of society, one that placed markets, individual responsibility and self-interest at its centre.
That change in thinking mattered. When hardship is treated as individual failure rather than something society has a responsibility to address, the consequences extend far beyond those directly affected.
Economic empathy is not simply about kindness. Ensuring that everyone can participate in society supports spending, economic activity, opportunity and democracy.
A successful economy depends upon recognising that human beings depend upon each other. Economics needs to recognise that reality too.
This is what Understanding Economics is all about.

John Kenneth Galbraith was one of the great economists of the twentieth century. In The Culture of Contentment, published in 1992, he offered a warning about what happens when prosperous people use democracy to protect their own economic security while ignoring those excluded from it.
More than 30 years later, that warning deserves another hearing.
In this Funding the Future podcast, John Christensen and I discuss why Galbraith’s analysis remains so powerful. We look at the rise of the home- and asset-owning democracy under Thatcher and Reagan, the political importance of rising asset prices, the mythology of individual self-reliance and the extraordinary willingness of the economically contented to accept government support for themselves while condemning support for those in poverty.
We then ask what has changed since Galbraith wrote.
The financial crash, climate crisis, cost-of-living pressures and housing crisis have weakened the old economic settlement. Younger generations have largely been denied access to the property and financial wealth that created security for many older people. Meanwhile, those who remain contented depend increasingly upon asset values that may prove vulnerable to another financial crisis.
Galbraith knew that apparently stable political systems could unravel remarkably quickly.
 
The question facing us now is what comes afterwards. Can we create an economy that provides security for everyone rather than preserving privilege for those who already possess it?

Inequality is about much more than the difference between what one person earns and another. It is about income, wealth, opportunity, security and, ultimately, power.
In this episode of Understanding Economics, I explain what inequality is, why wealth is distributed much more unequally than income, and how inequality can become self-reinforcing. Someone who has enough income to save can accumulate wealth. That wealth can generate further income through interest, profits, investments and rents. That additional income can then create still more wealth. Meanwhile, someone without savings may be paying part of their income to someone who already owns assets.
As a result, inequality can reproduce itself, including across generations.
But inequality is not simply an inevitable feature of economic life. The rules governing wages, employment, ownership, inheritance, housing and public services all influence how unequal society becomes. Tax and social security can further alter the distribution.
And that is important because inequality wastes human potential. People with talent and ambition can be denied opportunities simply because they lack the resources, security or connections available to others.
Inequality is therefore not just about money. It determines who has choices, who has security, who gets opportunities and who has power.
The question is: how much inequality are we willing to accept?