A challenge to neoliberal economics and the myth of market supremacy | Letter

Even in normal times, the private sector relies heavily on public money, infrastructure and services, writes Prof Mary Mellor

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.