A view of The Empire State Building in April 2013 (Photo: Michael Loccisano/Getty Images)
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Laurie Penny on everyday surveillance: Why I was afraid to take a picture in New York

Power is about who gets to do the watching and who has to put up with being watched.

If there’s something called a soul and it moves at walking pace, mine was hundreds of miles behind me a few nights ago as, sleepless, I took a stroll through Lower Manhattan. When they have things to forget, some people drink, some people take drugs, and others clear out their savings to pound the streets of a different city until the scale and pace of it makes them feel appropriately small.

New York’s financial district is a good place for this. At night, since Occupy Wall Street was cleared away, the streets are mostly empty, apart from all the ghosts, and the autumn air is moist and weird. Over everything looms One World Trade Center, recently completed. This past week, the artist Banksy wrote that the large, unremarkable edifice “clearly proclaims the terrorists have won. Those ten men have condemned us to live in a world more mediocre than the one they attacked.”

Not just those ten men. It will take years for the US and its notional allies to feel the chilling effect of the Edward Snowden revelations, detailing the extent of the US National Security Agency’s snooping on global communications data. Britain is complicit, and has no First Amendment to prevent the prime minister threatening newspapers with the prospect of court action if they don’t shut up about those NSA and GCHQ leaks. But it is still the US that is understood to be spying on the whole world.

What gives America the right to hoard all that information without consent? How can it justify doing so even as it hunts down anyone, such as the British hacker Lauri Love, who is suspected of trying to peek into its own systems to see who’s talking to whom? Power is about who gets to do the watching and who has to put up with being watched.

Viewed from Europe, the way that millions of citizens have had their data stored and Angela Merkel’s mobile phone has been tracked without permission looks like a monstrous invasion of national sovereignty. From here in New York, the entitlement is obvious: this is the heart of global capitalism, huge, beautiful and empty. Of course human rights come second to making sure that nobody thinks about attacking the United States ever again.

As I crossed the street in a light rain, a middle-aged couple walked ahead of me. It was too dark for the shadow of the new tower to fall over the street, but that’s how it felt and that’s what they were talking about – change and resurrection: “You know,” she said, “I still have a box of matches from Windows on the World. How much do you think they’d be worth now?”

Her companion thought about it. “Fifty cents,” he said. “This is New York.”

People in New York really do say, “This is New York,” as if they’re reminding themselves. I turned around to take a picture. I stood for a while trying to fit the intimidating scale of that dull glass-and-metal erection into the screen.

And then a curious thing happened. I stiffened and looked around. The couple had disappeared. I was alone on the street. Had anyone seen me take that picture? Was it even allowed? Did I look suspicious? Last time I checked, I was still white, which makes me significantly less likely to be hassled by any New York police officer. But just to be on the safe side, I posted the picture to my public Instagram site, with a cheeky message and a pretty filter. Smile! Nothing to hide. Anyone tracking my feed can see that I’m just an ordinary tourist, standing here being very impressed by your very impressive building.

The next day, over drinks with a security expert friend, I told him about my little attack of paranoia. That’s ridiculous, he said. That’s not the way the tracking gets done. What the NSA and GCHQ are interested in isn’t the content of your calls and emails, but the metadata –who you’re emailing, who you’re speaking to and for how long. Unless, of course, you’re a hacker or a head of state, in which case you might warrant a little more personal snooping. It takes far too long to process hard data.

Metadata is cheap to store.

Metadata. That’s what most people are, to the US government: part of the metadata, unless they are important or unlucky enough to merit special attention.

Before I came to New York, I didn’t really believe it existed. After I arrived, I knew for sure that it didn’t. It’s a city of a thousand film sets, a hundred thousand novels, plays, diary entries and feverish dreams. In the bookshops you can buy collections of essays by famous writers telling their own stories about coming to Manhattan, and all of them are true. The New York of legend is bigger and more brilliant than any real place could ever be, and everybody here is walking through the film set of their own life, imagining a city.

It has that in common with the rest of the enormous country it hangs off like a lifeboat: the idea of America is bigger than the hundreds of millions of actual Americans the country happens to be full of. People, going to work and falling in love and taking sleepless walks late at night, are just the metadata for that myth. It is a powerful and frightening myth, and the more powerful and frightening it becomes, the harder it gets to live inside it.

Laurie Penny is the contributing editor of the New Statesman

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.

This article first appeared in the 30 October 2013 issue of the New Statesman, Should you bother to vote?

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?