‘We can afford what we can actually do’ — 1

Across the country people from all walks of life — from those running families to those running organisations and Governments — are wrestling with financial shortfalls that restrict what they can do. This three part series asks ‘Is there a positive way forward?’

Sometimes, in order to deal with a difficult problem, we have to embrace a paradox. Paradoxes happen when one thing — call it Proposition A — is clearly, incontrovertibly, undeniably true, but when something else opposite — call it Proposition B — is also clearly, incontrovertibly, undeniably true. In situations like this, to move forward, we have to find a way of holding both ideas in our minds at the same time.

Right now this paradox is hitting us all. Increasingly. With a vengeance. This is the paradox of ‘affordability’.

The first part of this paradox — the Proposition A bit — is the common understanding that “we can only do what we can afford”. If we’ve only got so much money to spend, there is only so much we can spend it on. Full stop. The simple reality of our situation. And, if because of circumstances beyond our control, we find ourselves with less money, then there are even less things that we can spend it on … less things that we can do.

This is not a happy situation. It’s a tough, harsh reality affecting millions of people today in every walk of life. It’s the day to day misery of millions of families wrestling with poverty. It’s looming centre stage across the nation’s local authorities, with 20% of them verging on bankruptcy. It’s causing a crisis in health and care.

It’s also dominating Government policies. ‘Only doing what we can afford’ — ‘austerity’ — has been the one theme that has dominated UK Government policies for decades now, particularly since the great financial crash of 2008. Over many years the Scottish Government has promised to do many things such as abolish child poverty. But in the last few months it has presided over a budget which will result in the exact opposite. It, too, is knuckling down to the harsh realities of ‘we can only do what we can afford’.

If the Labour Party gets elected at the forthcoming UK General Election things may not change all that much either. Labour leader Keir Starmer is making a big point that whatever promises he makes “in the end the fiscal rule comes first”. We can only do what we can afford.

Yet …

We’ve been here before!

As a society we’ve been here before, only worse. In the dark days of the Second World War for example, Britain had run out of money. It had spent every penny fighting the Nazis. Then, in the early days of 1942, there was a chink of light. Perhaps, after all, we might actually win the war! As this thought took hold, peoples’ attention began to turn to the question: what comes next? How to win the peace? How to rebuild?

This triggered an almighty spat between the forces of financial orthodoxy — the people whose worldview was dominated by the mantra ‘we can only do what we afford’ — and those whose focus was on underlying economic realities.

John Maynard Keynes believed that keeping to the mantra ‘we can only do what we can afford’ would be disastrous. “At one level — the formal level of bank balances — it’s true we can only do what we can afford,” he said. “But at another level — of underlying economic reality — it’s nonsense. In fact, the exact opposite is true. In reality, we can afford what we can actually do”. This was his Proposition B.

Keynes didn’t actually use the words in the above paragraph. But below are the words he used in a BBC broadcast on 2 April 1942, when he took the spat between the two worldviews public. Keynes called for an ambitious programme to “build homes, libraries, theatres, concert halls and dance halls” so that “every substantial city [has] the dignity of an ancient university or a European capital”.

But the financial establishment would have none of it. We don’t have the money, they argued. We can only do what we can afford.

This is how Keynes replied to the financiers (whom he addressed as ‘Sir John’) in his BBC talk.

“The money?”, I said. “But surely, Sir John, you don’t build houses with money? Do you mean that there won’t be enough bricks and mortar and steel and cement?”

“Oh no,” he replied, “of course there will be plenty of all that”.

“Do you mean,” I went on, “that there won’t be enough labour? For what will the builders be doing if they are not building houses?”

“Oh no,” he replied, “of course there will be plenty of all that”.

“Well,” I said “if there are bricks and mortar and steel and concrete and labour and architects, why not assemble all this good material in houses?”

Keynes finished his talk by saying “anything we can actually do we can afford”: wherever there are people with skills and energy capable of doing work, and wherever there are sources of energy and materials that could be deployed, then it’s possible to bring them together to meet human needs. When push comes to shove it is what we can actually do that defines ‘affordability’.

Riding two horses

The point about paradoxes is that to embrace the truths they both contain, we need to keep them both in mind at the same time. For many people running families, organisations, institutions and Governments today Proposition A — that we can only do what we can afford — dominates their days. Day in and day out, they struggle endlessly with the realities of financial constraints; of having to make hard, miserable choices that stop them doing things they really want to do.

They feel they don’t have a choice and in one sense they are right. The institutional reality of their situation is that the less money they have, they less they can do. If they start spending money they don’t have — beyond what they can ‘afford’ — they risk going bankrupt.

Yet only acting on Proposition A ignores the truth of Proposition B — that, as a society we can afford what we can actually do. And the more we focus only on Proposition A the more we actually reduce what we can actually do. And over time, that makes our situation worse, not better. Focusing only on Proposition A is a trap, placing us on a spiral of decline.

Somehow, then, we have to find a way of acting on Proposition B even as we wrestle with the constraints that Proposition A forces upon us.

What does this mean? It means that none of us has only one job. None of us can focus only on doing what we can ‘afford’ to do. Even as we wrestle with the constraints of Proposition A, somehow, somewhere, we need to find ways of also opening up and expanding what we can actually do. We all have two jobs to do. Two horses to ride, even if very often they pull us in different directions.

Our next blog looks at some of the ways we can do this.