This censored isle

Our very British attitude to porn.

There's a reason that the story of King Canute is so familiar.  The image of a monarch vainly trying to hold back the inflowing sea resonates strongly because that is the way in which authorities in this country have always behaved.  Nowhere is this clearer than in the history of official attempts to to stem the tide of (usually foreign) erotic literature and film. 

In the legend, Canute was trying to make the point that, king though he was, he remained a mortal.  He was demonstrating the folly of his courtiers' flattery.  His successors, though, have rarely demonstrated such wisdom.  No doubt because Great Britain is an island, the authorities -- politicians, police, customs officials, film censors -- have tended to behave as though it is possible to preseve the country inviolate: a censored isle set in a sinful sea.  They may only have been delaying the inevitable, but it was at times a very long delay.

In the repressive 1950s, works by such authors as Henry Miller had to be printed abroad and smuggled into Brtain, where they were liable to be seized by the police.  Copies of Madame Bovary and even Moll Flanders were burned on the orders of overzealous local magistrates, along with more than 30,000 "saucy" seaside postcards in 1953 alone.  A new Obscene Publications Act in 1959 introduced a defence of artistic merit, famously tested the following year with the prosecution of Lady Chatterley's Lover, DH Lawrence's novel first published (in Italy) in 1928.  That case is remembered as a great watershed in the history of British censorship, the moment when a new age of permissiveness dawned, or else when the floodgates opened to an unstoppable tide of pornography and moral degeneration.  But it can equally be seen as one stage in a much longer struggle for control over what people in the UK were allowed to read, see and even think.

Looking back, the forces of liberalisation might seem to have prevailed.  One wonders what Mervyn Griffith-Jones QC, who asked the Lady Chatterley jury whether they would want their wives or servants to read the book, would have made of Fifty Shades of Grey, to say nothing of the hardcore material that can be accessed in almost every modern home with a couple of clicks of a mouse.  But the censors did not simply give up in 1960.  They merely turned their attention to other things. 

Offical censorship was always imposed in the name of public standards of decency, yet the British public has often been more liberal than their rulers.  One of the striking features of prosecutions under the Obscene Publications Act, which are now extremely rare, has been a repeated reluctance by juries to convict.  The Lady Chatterley case was thrown out.  So, at the start of this year, was the attempt to convict Michael Peacock for distributing videos featuring anal fisting.  It was because it became almost impossible to secure convictions, rather than any official permissiveness, that OPA prosecutions of the written word died out. (One problem, according to the late John Mortimer, who acted as defence barrister in OPA cases, is that it was difficult to find anyone who would admit to having been "depraved and corrupted" by reading a book.)  As for the moving image, the British Board of Film Classification conducts regular surveys to check that its guidelines bear at least an approximate relationship to popular taste, and usually discovers that adults are less horrified by depictions of sex and nudity than they expected.

The BBFC held the line against explicit sexual imagery until the late 1990s.  Thirty years after hardcore pornography became widely available in Europe it was still officially banned in Britain, even from sale in sex shops.  An experiment in liberalisation was eventually given the green light by Michael Howard as Home Secretary.  The theory, as the former BBFC director James Ferman told a 1998 edition of Panorama, was to "draw the line between sexual portrayals which are simply within the range of normal sexual practice and sexual portrayals which are degrading particularly bestiality or lavatorial practices or force, or violence or restraint".  But, in a foretaste of the moralism that was to come, the incoming Labour Home Secretary Jack Straw called a halt, describing Ferman's attempt to distinguish standard porn fare from the extreme variety as "circular and risible".

Ironically, that is precisely what his government went on to do in its 2008 legislation against "extreme pornography", defined as anything involving animals, dead bodies or threat of "serious injury to a person's anus, breasts or genitals".  The BBFC, for its part, now allows sex to be shown in "sex works" (and arthouse movies, preferably in French, intended for viewing by an elite audience of middle class film buffs) but continues to cut scenes of sexual violence and other material that it considers obscene, including fisting and urination. (In one typical case, a distributor was offered a choice between keeping the sex and removing the urination, and keeping the urination but removing the sex.  They couldn't have both.)

That the forces of official censorship have moved from banning works of literature featuring rude words (or even seaside postcards) to cutting out scenes of erotic strangulation from porn videos may suggest that there has been a headlong retreat from the overt moralism of the 1950s.  Now censors and proponents of censorship cite potential harm to viewers, rather than public morality, as justification for banning things.  Harm, though, remains ill-defined, and British censorship remains by modern Western standards fairly strict.  Last year it banned outright a US horror film The Bunny Game, citing its "strict policy on sexual violence and rape".  The DVD is now on sale in the USA and in continental Europe, with "Banned in Britain" featuring strongly in the publicity material.  Are British people uniquely vulnerable to such harm?

It seems that someone thinks so.  The view from the Daily Mail has always been of a conspiracy by liberal elites to unleash a tide of depravity on an innocent and unwilling British populace -- with only themselves, or eccentric campaigners such as the late Mary Whitehouse, standing between ordinary people and the deluge of filth.  Yet official censoriousness and desire for control has been remarkably consistent.  Regulated sectors such as broadcasting and adversing still enforce standards of "decency" that are, by international standards, remarkably strict.  The interent might, as yet, be beyond the censors' control.  That's what makes it so frightening, and so tempting for lawmakers.  But the Canutes haven't given up just yet.

Photograph: Getty Images
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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?