The tale of Mr Hari and Dr Rose

A false and malicious identity is admitted.

A false and malicious identity is admitted.

A couple of months or so ago, my friend Nick Cohen sent me a draft of a proposed diary piece for the Spectator. It concerned a mysterious figure called "David R". Cohen first described a spat with Johann Hari, and then added:

I thought no more about it until I looked at my entry on Wikipedia. As well as learning that I was a probable alcoholic, a hypocrite and a supporter of Sarah Palin, I noticed that all reviews of my work were missing except Hari's effort. [...]

I put Hari to the back of my mind again until Cristina Odone told me a strange story. She was deputy editor of the New Statesman during Hari's time there, and had the sense to doubt the reliability of his journalism. After she crossed him, vile accusations appeared on her Wikipedia page. She was a 'homophobe' and an 'anti-Semite', the site alleged, and such a disastrous journalist that the Catholic Herald had fired her. Her husband, Edward Lucas, went online to defend her reputation, but 'David r from Meth Productions' tried to stop him.

Mr 'r' gave the same treatment to Francis Wheen, Andrew Roberts and Niall Ferguson after they had spats with Hari. It didn't stop there. Lucas noticed that anonymous editors had inserted Hari's views on a wide range of people and issues into the relevant Wikipedia pages, while Hari himself had a glowing Wikipedia profile -- until the scandal broke, that is -- much of it written by 'David r'. Because Wikipedia lets contributors write anonymously, it cannot tell its readers if 'David r' is Johann Hari, or a fan of Hari's with detailed knowledge of his life, or someone with an interest in promoting his career.

Cohen concluded:

But just as the effect of Hari's phoney interviews was to make it seem that he elicited quotes no other journalist could match, so the effect of Wikipedia is to make him seem one of the essential writers of our times.

In truth he disgraced himself because he was an ambitious man who might have been a good journalist, but yearned to be a great one, and so tried to summon a talent he could never possess by bragging and scheming.

This was astonishing stuff. At this stage I was unaware of "David R" and, whilst I had been mildly critical of Hari's journalism, I generally regarded him as a journalistic hero to those of us who promote liberalism and secularism.

However, one look at the hundreds of Wikipedia edits showed that Hari or someone close to him had been smearing other journalists in an on-going systemic manner for years.

I did not want this to be Hari. In fact, I could not see how Hari would have been malicious and deceitful. After all, this was an established and salaried writer who would not need to do this. He also would always be the first to call out others for bad conduct and duplicity.

On the other hand, the evidence was stark that it was either Hari or someone close to him, and it raised serious issues. It thereby seemed sensible just to see where the evidence would go. However, this in turn would be risky, as Hari was known to use libel threats against those who questioned his integrity. For example, in 2007 he used libel law to have a post taken down (the original is here).

Then I had an idea. Instead of questioning the integrity of Hari, I would do it the other way round. I was confident that "David Rose" (at least anyone with that actual name with the remarkable range of accomplishments, including a doctorate in environmental science) did not exist. He was patently a construct, and one cannot defame a construct. As long as I was careful not to ever publish an allegation that Hari was "David Rose" then I would be fairly safe from any meaningful libel threat. Like the dead, "David Rose" could not sue me.

So I wrote the post "Who is David Rose?".

I did this over at "Jack of Kent" rather than here at the New Statesman for two reasons. First, I could manage the libel risk, including by pre-moderating the comments. Second, there is an established band of blog followers at that site who would share in the investigation. And so it proved: over the course of 140 pre-moderated comments, the elaborate fiction of "David Rose" was dismantled. It also became clear that "David Rose" was not what many of us first thought (and hoped) he was: an over-enthusiastic fan. It was clear it was Hari himself.

And then someone emailed what was (for me) conclusive proof. The metadata of something uploaded by "David Rose" showed that it had been created only seconds before in a social media account which was under the control of Hari. There would simply not have been time for Hari to have supposedly "emailed" the item to his alter ego: it must have been part of the same quick exercise by the same person.

However, by this time, Hari had been suspended. I have no wish to see Hari or anyone sacked (my suggestions of sending him on a journalism course and putting in place measures to make readers confident in his journalism is here). When I offered to provide the conclusive evidence to the Independent, I was told "it would not be needed". So I just held back, to see what the internal investigation would produce.

Yesterday, Hari provided an apology in respect of a range of journalistic failings, and in this he has admitted to having been "David Rose" all along.

Many will now want to "draw a line" and "move on". This is a commendable reaction, but it is unlikely to happen overall - at least in respect of the "David Rose" affair - as the terms of the apology do not really approximate to what was actually done. Something very wrong happened, over a significant amount of time, involving a systemic exercise of malice and dishonesty. I am afraid there may be a lot more to come to light on all this.

However, I am drawing a line and moving on. There is really no pleasure to being involved in this sort of activity, especially against a fellow secularist and liberal, and someone whose writing I still admire. The identity of "David Rose" has now been admitted, and it may well not have been but for the legally-safe "back-to-front" approach adopted in that July post, and for the excellent and selfless work of the commenters on it.

David Allen Green is legal correspondent of the New Statesman.

David Allen Green is legal correspondent of the New Statesman and author of the Jack of Kent blog.

His legal journalism has included popularising the Simon Singh libel case and discrediting the Julian Assange myths about his extradition case.  His uncovering of the Nightjack email hack by the Times was described as "masterly analysis" by Lord Justice Leveson.

David is also a solicitor and was successful in the "Twitterjoketrial" appeal at the High Court.

(Nothing on this blog constitutes legal advice.)

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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?