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Laurie Penny on the Occupy movement, three months on

The protest has become a network of mutual support for the lost and destitute.

The protest has become a network of mutual support for the lost and destitute.

The Bank of Ideas is almost empty. It's midnight, and on the roof of London's financial district a serious discussion about the future of the Occupy movement has been interrupted to allow two stray humans to chase after one stray cat.

"We found him in a scrapyard," says a young man called Spiral, cuddling the rescued ginger tom into his hoodie. Spiral is homeless, having left Essex to live in the London occupations last October. "He didn't seem to have any owners, so now we all take care of him," Spiral says. He's talking about the cat, which purrs like a happy engine as more dart-eyed young people approach to offer it some of their dinner -- homemade vegetable soup supplemented by hunks of fish they found in a skip.

Three months on, this is what the Occupy movement looks like: a network of mutual support for the lost and destitute, with anti-capitalist overtones. The Bank of Ideas, an abandoned building owned by the Swiss banking giant UBS and transformed into a space for art sessions, lectures and late-night discussion on the future of the free market, is one of four sites squatted by London's branch of the movement. The occupations began with the encampment on the steps of St Paul's Cathedral, which has just lost its battle against eviction at the Royal Courts of Justice, and branched out to Finsbury Square, and an empty magistrate's court on Old Street. As other world cities have seen similar protests violently evicted by local police, the occupiers of London have clung on through a winter that has seen the nature of the camps change profoundly.

"I came here for the community," says Declan, 29. "Before this I was living in Galway, essentially trying to get together enough weed to get through the day. It's better here." He passes a glowing spliff around the other roof-dwellers. The tranquility group, with its strict policy against drugs and drunkenness, would not approve this gesture of friendship. Muriel, a french artist in her forties, is excited and a little stoned, examining the walls daubed with murals, slogans and lovingly pasted pamphlets. "If bird catcher comes, occupy the sky," she says, reading off the brickwork. "That is truly beautiful. I feel that something beautiful is happening here."

As the winter drags on, many of those who have stayed are those, like Spiral and his cat, who can't or won't go home. They are the waifs and strays and nuts and eccentrics, the wide-eyed young men with theories about how computers can calculate the perfect democracy, the straggle-haired women with bags full of paintbrushes and dirt in the creases of their cheeks. For the more media-savvy organisers of Occupy London, this has created something of a public relations dilemma.

The people who live full or part-time in the camps can now be divided into roughly three categories: those who were homeless before the occupations, those who will shortly be homeless, and those who merely look homeless. Three months of sleeping in tents, washing in the bathrooms of nearby cafes and working around-the-clock to run a kitchen feeding thousands with no running water and little electricity will transform even the most fresh-faced student into a jittering bundle of aching limbs and paranoia. Even those who haven't been living here full-time have an air of righteous exhaustion about them.

This is the part where the noble adventure of political resistance becomes a straightforward slog.

There are many for whom the unglamorous parts of maintaining an honest counter-culture do not fit into the narrative of presentable protest. Last week in New York City, activists from the original occupation in Zuccotti Park were turned away at the door of an event being held in their honour, because they looked and smelled precisely as if they had been living in tents and abandoned buildings since September. In London, at St Paul's, City workers in smart suits stop to snap pictures of the camp's battered marquees, but shy away when a man dressed entirely in pillowcases offers to take a shot with them in it. They're not going to let these people anywhere near their smartphones.

The struggle to keep a polite face on the movement can slip into censoriousness. At the late-night cabaret at Occupy Justice, the empty magistrates' court on Old Street, the burlesque dancers have been forbidden to expose their breasts. "There were some people who didn't think that was a good way of furthering the cause of the Occupy Movement," says Naomi Colvin, a long-time organiser who has become one of the unofficial spokespeople of Occupy London, regularly appearing on panels and in media coverage of the protests. The walls of the courthouse are plastered with signs instructing the heaving crowd of tramps, activists and trendy young Shoreditch hipsters not to smoke, not to write on the walls, not to leave rubbish. "This is a nice place," says one of the working group leaders. "We're nice people here."

Nice, however, has rarely trembled the walls of power.

It should be noted that no amount of scrupulous cleaning stopped the police in New York, Los Angeles, Seattle and other major cities from using the excuse of "unsanitary conditions" to evict protest camps calling for banking regulation -- it's infectious ideas, not infectious diseases, that really have the authorities worried. In London, some of the cleaner activists I meet, including those who have been involved in organising the camps from the start, quietly express the opinion that eviction might now be the best thing that could happen to the occupations. But not everyone agrees.

In the back room of the courthouse I meet Tom, 24, who describes himself as "tramp liaison". Like many members of the movement with less reliable access to showers, Tom has a lot to say about the way "sociology students in jumpers" are setting the agenda. "They talk about 'the homeless problem' at general assemblies, and I stand up and say, 'I'm homeless, are you talking about me?'," he says, sipping from a can of cheap Polish lager. "Yeah, there's definitely tension. All the camp beauraucrats will come up to you and say, 'oh, you can't roll a spliff in the uni tent', and I'm like, 'fuck off man, I'm an activist. I've been out fighting the EDL in Barking all morning'."

The main bone of contention is not drugs, but direction. Some activists are unhappy that Occupy London has chosen to work so closely with the Church on whose ground they have been camped for three months. The St Paul's occupation, which now describes itself unconfrontationally as a "guest" of the Cathedral, has without doubt had its radical bite dulled by the Church of England's grudging, eventual decision to work with the protests. Religiosity seems to ooze out of the flagstones here: ministers and police officers wander unopposed through the camp, which is festooned with signs asking "what would Jesus do?". Three months on, those signs have lost all their irony.

Others believe that movement has been taken over by external lobby groups with their own agenda, and still others are concerned that the general assemblies are choosing to focus, in Tom's words, on "the legal thing". Much of the camps' energy has indeed been directed towards fighting running battles to keep the sites open, and occupiers in the legal working groups hope to set a precedent in English case law to protect protesters' rights to free expression under Article Ten of the European Convention on Human Rights.

This explains some of the anxiety about keeping the camp clean and presentable. "We're really trying to keep the occupation fluffy," says Anna, 31. "There are some people living here who just aren't very used to being listened to." Anna, showing me around an impromptu pro-Palestine photography exhibition in the courthouse, describes the camp's internal conflicts with a generosity that is typical of the Occupy movement at its best. "It's been a massive learning curve for all of us here," she says. "Although, yes, the drinking can be a problem. I think if Occupy achieves anything at all, it'll be a whole load of people getting their voices heard for the first time."

There is a stubborn percentage of the 99 per cent who will never be able to communicate their message politely on Newsnight. Back at the Bank of Ideas, an overweight old man called Boba cannot make it up the stairs because he uses a wheelchair and the lifts are out of order. Throughout the night, the younger and sprightlier occupiers ferry the makings of sweet tea and pieces of food on scrupulously clean plates up and down the stairs to him, and are rewarded with conversation. All of this gives the lie to Orwell's axiom that "serenity is impossible to a poor man in a cold country".

On the roof, the talk turns to meditation, and to the spiritual toxicity of the banking sector. A young Romanian man called Valentin will not stop grabbing my hand and demanding my phone number. Subtle and then decidedly unsubtle hints about personal space do not put him off, and eventually Muriel invites me to sleep beside her; I observe, not for the first time, that there are far fewer young women here than there were in November. When I wake in the morning, someone has put a borrowed sleeping bag around my shoulders. There is a dawn chorus of hippies and homeless teenagers coughing up last night's tar, and the kettle is on.

There are different ways of being on the streets, and all of them are political. As the recession immiserates more and more of us, resistance will increasingly become a process of negotiating trauma, of developing economies of care that include the lost, the destitute, the down-and-out, those who cannot be "fluffy" because they have become crusted over with the debris of desperation. When these occupations are evicted, not everyone involved will be able to go home, scrub the dirt out of their hair and go back to work. Those who have lost their jobs and homes, those who left them to protest, and those who never had them in the first place attract disapprobium from their own side as well as from those determined to slander the anti-capitalist movement as filthy and unkempt. Useful activism, however, usually involves getting your hands dirty.

 

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?