Why David Cameron is the ultimate "seagull" manager

He flies in, makes a lot of noise, dumps on everyone from a great height, and then flies out again.

Back when I worked for a large organisation, we had a term: “seagull manager”. It described someone, usually a consultant, who flew in, made a lot of noise, dumped on everyone from a great height, then flew out again, leaving others to deal with the consequences.

Parachuted into action more than two years ago, Cameron squawked hysterically about difficult decisions, the mess he inherited, a new kind of politics and the big society (whatever happened to that?). Since then, he has proceeded to spend the majority of his term, so far, defending arrested pals, disgraced ministers, fiascos, scandals and u-turns.

This week sees another spate of threatened strikes and underlying unrest. To the growing list of greedy doctors taking industrial action for the first time in four decades, unyielding police officers demonstrating outside Parliament, uncivic protesters occupying shops and banks, dishevelled students disturbing the peace and politically motivated nurses and teachers picketing No 10, we can now add unreasonable dairy farmers and unpatriotic border control officers. At what point in this nexus of insubordination, do we begin to consider that the fault may lie with the country’s leadership?

Apologists have posited that Cameron is powerless, caught in the middle of a battle on two fronts; with his torysvestite coalition partners and his own backbenchers. The truth is those are mere political skirmishes. The real battle, the one which threatens to be his Waterloo, is entirely self-inflicted. It is a battle with the country’s public servants.

When a young David William Donald Cameron, son of a stockbroker, grandson of a Baronet and direct descendent of King William IV, was caught smoking pot at Eton College, his punishment was to copy 500 lines of Latin text. I wonder if they included Cicero’s “Ut sementem feceris, ita mete” - whatever you sow, you shall reap.

Last year, he announced that he was “taking on the enemies of enterprise; the bureaucrats in government departments…” Every nurse, every civil servant, every immigration officer, every policeman heard that declaration of hostility. In the midst of the severest programme of cuts, an economic downturn unseen since the Depression and a radical reorganisation of just about everything, he declared war on the very people on whom he depended for delivery.

You may have opinions on the individual policies, cuts, measures; on the rights and wrongs of each dispute. What is indisputably cack-handed, however, is alienating the entire administrative arm of the state at a time when you depend on their effort and good will to deliver your programme; at a time when you require their stiff-upper-lipped acquiescence to having their pensions and salaries looted. The most basic experience of management would teach one that the key ingredient, in securing the success of an organisation, is the staff’s support.

So, is it any wonder those unionised chickens are coming home to roost and choosing a time when they can cause him maximum embarrassment? The government’s reaction is an overwhelming sense of embarrassment that visitors to these shores might be confronted with dairy farmer boycotts, airport queues, terrible traffic, strikes, riots, homelessness and economic misery -  in short, the reality of what most of us experience every day. Instead of seeking resolution, they say “not in front of the neighbours”. Throw a doily over child poverty. Pop some flowers on top of the half-dismantled NHS. A few cushions scattered around unemployment. Make the place look nice.

They even went as far as to announce they were seeking a High Court injunction to prevent border staff from taking action, before the strike was called off at the eleventh hour. A course of action guaranteed to polarise rather than facilitate. Mark Serwotka specifically commented on “the vitriol and vilification” to which PCS members had been subjected by ministers. More evidence of poor management – engaging with staff only when a disagreement has snowballed into a vendetta and, even then, aggressively and destructively.

Cameron never misses an opportunity to mock Ed Miliband’s friendly relations with Trade Unions. But shouldn’t any PM or would-be PM aspire towards friendly relations with Unions? They represent ten million working people in the UK, not even counting their families. The belief that having a pathologically unhealthy relationship with such a large and productive part of UK society, is evidence of strong leadership is not only illogical, but dangerous in the extreme. In what other line of business would you see a CEO boasting that he has a dreadful relationship with his staff?

That indefensible approach has been characteristic of this administration – not only in its industrial relations, but across the spectrum. Unmeasured words keep falling out of this fuchsia, angry man’s mouth.

Attacking immigrants may give him a boost with one part of the demographic. Attacking pensioners may curry favour with another. But what is the long-term strategy? Eventually all those groups start to merge into one angry, explosive mass. The unemployed, the working, the disabled, the impoverished, students, charities, parents with too many children, parents with too few, those with cars, those with caravans, the small business who can’t borrow, the small business who sells pasties, the cleaner paid in cash – it all adds up to an entire country seething with anger.

The difference between good opposition and good government is that the former is judged primarily on the quality of the talking, while the latter on the quality of the doing. But there are no comforting results to which one can point. This week, the IMF predicted that, far from reducing national debt as a ratio to GDP, it will continue to rise and peak by 2015/16. In 2010 it was less than £1 trillion. By 2015 it will be more than £1.5 trillion.

An Austerity Programme is like an episode of The Biggest Loser. Inspirational rhetoric and sweaty montages cannot save the contestants when they step onto the scales. There is a pre-agreed goal – in stones and pounds, or pounds and pennies. And lately what has become painfully clear is that, despite starving the country, the coalition will fail to meet its key self-imposed targets. It seems that the economy stubbornly refuses to be orated up and the debt just won’t be sound-bitten down. Words are not enough.

There is a limit to the credibility with which one can say “I’m not being nasty. Times are nasty.” The evidence disproves the flannel: Privatising public assets, mass outsourcing, protecting The City, lowering taxes for the wealthy and corporations, handing out contracts to friendly donors, cutting services to the bone – when has a Tory government ever done any different, in good times or bad?

There is a limit to the rhetoric of “difficult decisions”. Difficult decisions are made harder to deliver and less likely to succeed when they are meted out in an arrogant, mean-spirited, ill-tempered manner. The progressive voter understands this and will condemn Cameron for his character. The conservative voter understands this and will condemn Cameron for his failure to deliver.

Flashy but incompetent, clueless but obdurate – Cameron is the ultimate seagull manager. Whether judged on attitude or aptitude, he is truly, hopelessly bad at his job.

 

David Cameron: scary seagull. Artwork: Dan Murrell/New Statesman

Greek-born, Alex Andreou has a background in law and economics. He runs the Sturdy Beggars Theatre Company and blogs here You can find him on twitter @sturdyalex

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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?