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Laurie Penny: What really happened in Trafalgar Square

Neither mindless nor violent, young protesters were forced into a stand-off with police.

"We're fucked," says the young man in the hoodie, staring out through the police cordon of Trafalgar Square, towards parliament. "Who's going to listen to us now?"

It's midnight on 26 March, a day that saw almost half a million students, trades unionists, parents, children and concerned citizens from all over Britain demonstrate against the government's austerity programme. All day, street fights across London between anti-cuts protestors and the police have turned this city into a little warzone. Barricades burned in Piccadilly as militant groups escalated the vandalism; the shopfronts of major banks and tax-avoiding companies have been smashed and daubed with graffiti, and Oxford Street was occupied and turned into a mass street party. Now, night is falling on the Trafalgar kettle, and the square stinks of cordite, emptied kidneys and anxiety. We've been here for three hours, and it's freezing; we burn placards and share cigarettes to maintain an illusion of warmth.

Commander Bob Broadhurst, who was in charge of the Metropolitan Police operation on the day, later states that the clashes in Trafalgar square began because "for some reason one of [the protestors] made an attack on the Olympic clock." That is not what happened. Instead, I witness the attempted snatch arrest of a 23 year-old man who they suspect of damaging the shop front of a major chain bank earlier in the day.

It starts when a handful of police officers moved through the quiet crowd, past circles of young people sharing snacks, smoking, playing guitars and chatting. They move in to grab the young man, but his friends scrambled to prevent the arrest being made, dragging him away from the police by his legs. Batons are drawn; a scuffle breaks out, and that scuffle becomes a fight, and then suddenly hundreds of armoured riot police are swarming in, seemingly from nowhere, sweeping up the steps of the National Gallery, beating back protesters as they go.

Things escalate very quickly. In the space of a minute and a half, the police find themselves surrounded on both sides by enraged young people who had gathered for a peaceful sit-in at the end of the largest workers' protest in a generation. The riot line advances on both sides, forcing protesters back into the square; police officers are bellowing and laying into the demonstrators with their shields.

Both sides begin to panic. Some of them start to throw sticks, and as the police surge forward, shouting and raising their weapons, others band together to charge the lines with heavy pieces of metal railing, which hit several protestors on their way past. Next to me, young people are raising their hands and screaming "don't hit us!"; some are yelling at the armoured police - "shame on you! Your job's next!"

I find myself in front of the riot line, taking a blow to the head and a kick to the shin; I am dragged to my feet by a girl with blue hair who squeezes my arm and then raises a union flag defiantly at the cops. "We are peaceful, what are you?" chant the protestors. I'm chanting it too, my head ringing with pain and rage and adrenaline; a boy with dreadlocks puts an arm around me. "Don't scream at them," he says. "We're peaceful, so let's not provoke."

A clear-eyed young man called Martin throws himself between the kids and the cops, his hands raised, telling us all to calm down, stand firm,stop throwing things and link arms; the police grab him, mistaking him for a rabble-rouser and toss him violently back into the line. The cops seal off the square. Those of us behind the lines are kettled, trapped in the sterile zone, shoved back towards Nelson's column as flares are lit and the fires begin to go out.

It would be naive to suggest that small numbers of people did not come to London today intent on breaking windows should the opportunity arise. It would be equally naive to suggest that no other groups had action plans that involved rather more than munching houmous in Hyde park and listening to some speeches. Few of those plans, however, come to fruition: however the papers choose to report the events of 26 March, there is no organised minority kicking things in for the hell of it. Instead, a few passionate, peaceful protest groups attempt to carry out direct action plans, plans that quickly become overwhelmed by crowds of angry, unaffiliated young people and a handful of genuinely violent agitators.

Those young people are from all over the country, and when the word goes out at 2pm that something was happening in Oxford Street, they headed down in their thousands. By the time the twenty-foot-high Trojan Horse arrives at Oxford Circus in the early afternoon, a full-blown rave is under way, coherent politics subsumed by the sheer defiant energy of the crowd. Chants about saving public services and education quickly merge into a thunderous, wordless cheer, erupting every time the traffic light countdowns flash towards. "Five-Four-Three-Two-One..." hollers the crowd, as bank branches are shut down, paint bombs thrown at the police, and small scuffles break out.

When UK Uncut's well-publicised secret occupation plan kicks into action at 3.30pm, the numbers and the energy quickly become overwhelming. As we follow the high-profile direct action group's red umbrella down Regent Street, we learn that the target is Fortnum and Mason's - the "Royal grocer's", as the news are now insisting on calling it, as though the stunt were a yobbish personal assault on the Queen's marmalade. The crowd is too big to stop, and protesters stream into the store, rushing past the police who are too late to barricade the doors.

Once inside, squeezing each other in shock at their own daring, everyone does a bit of excited chanting and then down for a polite impromptu picnic. Placards are erected by the famously opulent coffee counters, and tape wound around displays of expensive truffles imprecating the holding company to pay all its taxes. Tax avoidance is the ostensible reason for this occupation; the class factor remains unspoken, but deeply felt.

The posh sweets, however, remain untouched, as do all the other luxury goodies in the store, as protestors share prepacked crisps and squash and decide that it'd be rude to smoke indoors. When someone accidentally-on-purpose knocks over a display of chocolate bunny rabbits, priced at fifteen pounds each, two girls sternly advise them to clear up the mess without delay. "It's just unnecessary."

Refined middle-aged couples who had been having quiet cream teas in Fortnum's downstairs restaurant stare blinkingly at the occupiers, who are organising themselves into a non-hierarchial consensus-building team. "I oppose the cuts, I'm a socialist, but I think this type of thing is too much," says property manager Kat, 32. "There are old ladies upstairs. And I just came in to buy some fresh marshmallows, and now I can't."

Outside the building, the crowd is going wild. Some scale the building and scrawl slogans onto the brickwork; others turn their attention to the bank branches across the road. I leave Fortnum's and make my way down Piccadilly under a leaden sky, past the ruined fronts of Lloyds and Santander, to Picadilly Circus, where the riots - and make no mistake, these are now riots - have momentarily descended into an eerie standoff. The police raise their batons; the crowd yells abuse at them. Noone is chanting about government cuts anymore: instead, they are chanting about police violence. "No justice, no peace, fuck the police!' yells a middle-aged man in a wheelchair. I scramble onto some railings for safety as a cohort of riot police move into the crowd, find themselves surrounded and are beaten back by thrown sticks. Someone yells that a police officer is being stretchered to safety. Flares and crackers are let off; red smoke trails in the air.

"A riot," said martin Luther King Jr, "is the language of the unheard." There are an awful lot of unheard voices in this country. What differentiates the rioters in Picadilly and Oxford Circus from the rally attendees in Hyde Park is not the fact that the latter are "real" protestors and the former merely "anarchists" (still an unthinking synonym for "hooligans" in the language of the press). The difference is that many unions and affiliated citizens still hold out hope that if they behave civilly, this government will do likewise.

The younger generation in particular, who reached puberty just in time to see a huge, peaceful march in 2003 change absolutely nothing, can't be expected to have any such confidence. We can hardly blame a cohort that has been roundly sold out, priced out, ignored, and now shoved onto the dole as the Chancellor announces yet another tax break for bankers, for such skepticism. If they do not believe the government cares one jot about what young or working-class people really think, it may be because any evidence of such concern is sorely lacking.

A large number of young people in Britain have become radicalised in a hurry, and not all of their energies are properly directed, explaining in part the confusion on the streets yesterday. Among their number, however, are many principled, determined and peaceful groups working to affect change and build resistance in any way they can.

One of these groups is UK Uncut. I return to Fortnum's in time to see dozens of key members of the group herded in front of the store and let out one by one, to be photographed, handcuffed and arrested. With the handful of real, random agitators easy to identify as they tear through the streets of Mayfair, the met has chosen instead to concentrate its energies on UK Uncut - the most successful, high-profile and democratic anti-cuts group in Britain.

UK Uncut has embarrassed both the government and the police with its gentle, inclusive, imaginative direct action days over the past six months. As its members are manhandled onto police coaches, waiting patiently to be taken to jail whilst career troublemakers run free and unarrested in the streets outside, one has to ask oneself why.

Shaken, I make my way through the streets of Mayfair towards Trafalgar to meet friends and debrief. In the dark, groups of people wearing trades union tabards and carrying placards wander hither and thither down burning sidestreets as oblivious shoppers eat salad in Pret A manger.

By 8pm, there's a party going on under Nelson's Column. Groups of anti-cuts protestors, many of whom have come down from Hyde Park, have congregated in the square to eat biscuits, drink cheap supermarket wine, share stories and socialise after a long and confusing day.

‘'These young people are right to be angry. I don't think people are angry enough, actually, given that the NHS is being destroyed before our eyes," says Barry, 61, a retired social worker. "The rally was alright, but a huge march didn't make Tony Blair change his mind about Iraq, and another huge march isn't going to make David Cameron change his mind now. So what are people supposed to do?"

That's a tough question in a country where almost every form of political dissent apart from shuffling in an orderly queue from one march point to the other is now a crime.

"I don't have a problem with people smashing up banks, I think that's fine, given that the banks have done so much damage to the country," says Barry, getting into his stride. "Violence against real people - that's wrong."

Minutes after the fights begin in Trafalgar square, so does the backlash. Radio broadcasters imply that anyone who left the pre-ordained march route is a hooligan, and police chiefs rush to assure the public that this "mindless violence" has "nothing to do with protest."

The young people being battered in Trafalgar square, however, are neither mindless nor violent. In front of the lines, a teenage girl is crying and shaking after being shoved to the ground. "I'm not moving, I'm not moving," she mutters, her face smeared with tears and makeup. "I've been on every protest, I won't let this government destroy our future without a fight. I won't stand back, I'm not moving." A police officer charges, smacking her with his baton as she flings up her hands.

The cops cram us further back into the square, pushing people off the plinths where they have tried to scramble for safety. By now there are about 150 young people left in the square, and only one trained medic, who has just been batoned in the face; his friends hold him up as he blacks out, and carry him to the police lines, but they won't let him leave. By the makeshift fire, I meet the young man whose attempted arrest started all this. "I feel responsible," he said, "I never wanted any of this. None of us did"

Back on the column, a boy in a black hoodie and facerag hollers through his hands to his friends, who have linked arms in front of the police line. "This is what they want!" he yells, pointing at the Houses of Parliament. "They want us to fight each other. They want us to fight each other!

“They're laughing all the way to the bank!"

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?