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Laurie Penny: Blogger's Revolution - Taking Control with Digital Media

Bloggers aren’t out to take away the jobs of highly paid columnists: we’re more ambitious than that.

Remember print? Your kids might not. This week, it emerged that newspaper sales are plummeting in Britain, with only 33 per cent of the population now claiming to be regular readers of analogue news.

As more and more of us cherry-pick our media online, drawing little distinction between the mainstream press and the popular blogosphere, industry insiders are beginning to panic, predicting the violent death of quality commentary and investigative journalism at the multifarious hands of the internet.

On several baffling occasions in recent months, I have found myself at snooty media events where hosts introduce me and my colleagues gingerly as "bloggers", rather as if we were the grinning emissaries of a rogue state, ambassadors from a territory of violent cultural change which the authorities might soon see fit to brutally suppress but which, for now, must be appeased with canapés and party invitations.

Cosy members of the established commentariat eye bloggers suspiciously, as if beneath our funny clothes and unruly hair we might actually be strapped with information bombs ready to explode their cultural paradigms and destroy their livelihoods. This sort of prejudice is deeply anodyne.

Bloggers aren't out to take away the jobs of highly paid columnists: we're more ambitious than that. We're out for a complete revolution in the way media and politics are done. While the media establishment guards its borders with paranoid rigour, snobbishly distinguishing between bloggers and journalists, people from the internet have already infiltrated the mainstream.

Raw power

Many influential writers now work across both camps, such as the author, blogger and digital activist Cory Doctorow, who observes that the blogosphere need not threaten paid comment journalism. “Commercially speaking, newspapers can make enough money from advertising to pay reasonable rates for opinion,” says Doctorow.

“I know of at least one that does, and that's my site, BoingBoing, which reaches millions of readers every month. By operating efficiently, we can more than match the fees paid by the New York Times, for example, which always pays peanuts for op-eds because the glory of being published in the NYT is meant to be its own reward.

"After you take away the adverts, the personals, the filler and the pieces hacked together from press releases, the average paper contains about 15 column inches of decent investigative journalism and commentary,” said Doctorow. “And the internet is more than capable of financing 15 column inches a day.”

What the blogosphere threatens is not the survival of comment journalism itself: it threatens the monopoly of the media elite, holding the self-important fourth estate to a higher standard than bourgeois columnists and editors find comfortable. We are, in effect, a fifth estate, scrutinising the mainstream media and challenging its assumptions.

Last month, when Danny Dyer appeared to advise a reader of Zoo magazine to cut his girlfriend's face, the feminist arm of the fifth estate responded angrily, prompting a retraction and apology from Zoo, and also successfully organised a donation drive to raise more money for women’s refuge charities than the discredited Dyer’s violently misogynist film Pimp made in its first week of release. That’s the type of power that scares the wits out of the dinosaurs in analogue media.

Every day, the British blogosphere becomes less amateurish and more relevant. This weekend, the popular forum Liberal Conspiracy will host Blog Nation, an event bringing together bloggers, journalists and politicians on the left to determine how the internet can build progressive campaigns to fight public-sector cuts.

“We have a strong community that can do activism and provide niche information that escapes mainstream newspapers,” said the Liberal Conspiracy editor, Sunny Hundal. “We want to use the net to get the left to think more about strategy and action -- and get people to work together, better!”

Permanent revolution

The long-term effect of the internet on human cultural production may not be ascertained in my lifetime. Certainly the baby boomers who control most major news outlets today will not live to see what change may come. "Where we end up in five years isn't where we are today," says Doctorow. " We're not headed towards a period of technological stability where we'll know what our media will look like; we're headed for more technological change.”

Doctorow is right to suggest that we are living through what Marx and Engels might term a “permanent technological revolution”. Last weekend, in an incisive essay in the Guardian, John Naughton observed that being a consumer of media and journalism during the transformation of today's communications environment is a little

like being a resident of St Petersburg in 1917, in the months before Lenin and the Bolsheviks finally seized power. It's clear that momentous events are afoot; there are all kinds of conflicting rumours and theories, but nobody knows how things will pan out. Since we don't have the benefit of hindsight, we don't really know where it's taking us.

One thing, however, is certain: journalism is changing for ever. The notion of political commentary as a few-to-many exercise, produced by highly paid elites and policed by big business, has been shattered beyond repair.

The internet is a many-to-many medium, and those who write and comment here are not media insiders, nor are we the mob. We are something altogether new. We are the fifth estate, and we are forging a path through the miasma of technological change towards a more honest, democratic model of commentary -- alongside a lot of porn and some pictures of amusing cats.

The media revolution continues. Whatever comes next, the bloggers' battle cry must be "Permanent technological revolution".

Cory Doctorow's new novel about gaming and digital organisation, For the Win, is published by Harper Voyager (£14.99). You can register here for this Saturday's Blog Nation.

Special subscription offer: Get 12 issues for £12 plus a free copy of Andy Beckett's "When the Lights Went Out".

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

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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?