John Terry's not guilty, but football's still in trouble

Everyone has to stop racism from blighting our showpiece sport.

Football's coming back. The adverts for the new Premier League season will be hitting our screens soon, promising the usual drama, more amazing goals and plenty of action. What they won't mention is the ugly face of the game - the claims of racism which have tainted the family-friendly image of the self-proclaimed 'best league in the world'.

After several months during which ill feeling festered on both sides, the Anton Ferdinand-John Terry case has finally concluded with Terry being found not guilty of the charges. With the case coming so soon after the Luis Suarez-Patrice Evra incident, which saw the Liverpool player banned for eight matches, we have to ask the question  whether this represents a crisis in the elite game or just two unfortunate, isolated incidents.

Terry's words were caught on camera and seemed to be decipherable to most amateur lipreaders - although the sound of what he said was not recorded. His defence, which was upheld, was that he was using them sarcastically, claiming that Ferdinand had wrongly accused him of racial abuse.

Both players admitted laying into each other with swearing and trash talk - not doing a great service for the sponsors and brands who attach themselves so keenly to the English Premier League, or being terrific role models for the millions of young fans who look up to their favourite stars as players (if not necessarily as people).

The incident had wider implications too. Ferdinand's brother, the former England captain Rio, found himself booed when he played against Chelsea - and there were later suggestions that the bad blood between the two was behind England's decision not to take both players to the tournament in Ukraine and Poland. Terry was found not guilty of the offence for which he was charged, so let that be an end to the matter. It shows that England's decision to keep him in the Euro 2012 squad, presuming innocence, was probably the right one.

The not guilty verdict for the former England captain will leave many - players, sponsors and those with a vested interest in seeing the game making a healthy profit - breathing a sigh of relief that the top flight wasn't tainted by this trial. Perhaps they can think that racism on the pitch can be relegated to a misunderstanding, or a vendetta. But that doesn't mean that racism is never, was never, and will never be a problem.

The Terry-Ferdinand spat came soon after the Luis Suarez-Patrice Evra affair, which poisoned what was already arguably the fiercest rivalry in the Premier League: between Liverpool and Manchester United.

The United skipper accused Suarez of making a racist remark; the Uruguayan defended himself and said it was a cultural misunderstanding of the term "negrito"; his clubmates wore T-shirts in support ahead of a match; but Suarez was found guilty. When the two sides met again in the league, at Old Trafford, Evra wildly celebrated United's at the final whistle right in front of Suarez. Again, it was hard for anyone to find the moral high ground.

Gone are the days in England when the major focus of racism in football was off the pitch, where disgraceful racist chanting, banana-throwing and abuse were a sad reality for many black players. But while that kind of behaviour has mainly been eradicated from the terraces, it's now the players who face closer scrutiny.

It's probably the case that trash-talking has spilled over into hate speech for many years, but the issue has come to a head now, and the authorities must be seen to take a stand. When there are 40 or more cameras trained on the action at top-flight games, the top players' every cough and spit is likely to be broadcast. There is no use in pretending it hasn't happened, or hoping that the problem will go away.

Some will argue that victims of racism should just - to use that horrible phrase - "man up" and get on with it rather than complaining. Some will say that psyching out an opponent is part and parcel of the game, like sledging in cricket - and there may be some merit in that. But it has to be made clear that certain lines cannot be crossed, and certain types of abuse are completely unacceptable - not on a park, not on a pitch, not in a stadium in front of 70,000 paying punters.

Don't blame the victims for coming forward. Don't blame the cameras for zooming in on the players' faces. And don't hide behind fandom and club loyalty to protect "your" players when they behave appallingly - if you do, you are just as guilty as they are. Everyone has to work together to stop racism from blighting our showpiece sport, and it starts with the fans. If some will continue to believe that 'their' players have done nothing wrong, and line up to defend those who have done indefensible things, we will get nowhere.
 

John Terry at Westminster Magistrates court in London. Photograph: Getty Images
Patrolling the murkier waters of the mainstream media
Getty
Show Hide image

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?