The Olympics opening ceremony shouldn't be a political football

Neither the left nor the right has a strong claim to an "authentic" British identity which their opponents cannot engage with.

The dissonance of "an isle full of noises" was at the heart of Danny Boyle's celebration of the role of democracy, dissent and disruptive technologies in making modern Britain. So it would be rather un-British if nobody tried to start a bit of an argy-bargy about it all.

But attempts to turn the Olympic opening ceremony into a political football have been rather unconvincing.  Most people thought the show both represented Britishness well (by 61% to 9%) and was entertaining (65% to 7%), which seem strong findings given that another one in five of those surveyed in the snap poll by Survation hadn’t seen the event.  Newspapers from across the political spectrum were highly positive too, with the Telegraph titles praising Britain’s "can-do" ability to deliver a spectacle, and liberal papers warming to the inclusive vision of Britain.

Boyle’s show did demonstrate a  "Heineken ability" in prompting feelings of British pride among those who are more often allergic to that idea. Sarah Ditum captured this thought in her blog, writing that "this was something else: a vision of Britain, its history and its people that I recognized, felt good about and (despite my reflex cynicism) loved".

That feeling of liberal pride in the opening ceremony seemed to grow over the weekend, stoked by the sense that the right found less to enjoy in the Olympic curtain-raiser. Most of the attention was grabbed by Tory MP Aidan Burley, winning fifteen minutes of infamy for the second time in a short political career. He can’t have intended his 'tweet before you think' dismissal of the show as "leftie multi-cultural crap" to spark the (eminently predictable) social media and political furore which followed. Burley seemed unaware, too, of the "stop digging" maxim of political common sense as, having oddly claimed that he did not wish to criticise multiculturalism itself (which he would have every right to do if he thought so) his attempts to elucidate - including bemoaning a "huge focus on rap music", presumably referencing the ceremony's sole rapper Dizzee Rascal - struck many ears as signalling discomfort with something else; any portrayal of the settled reality of Britain as a multi-ethnic society, even when opening an Olympics in east London. 

But to regard Burley as the authentic voice of the Tory take on the ceremony would be misleading and wrong. Any scan of right-of-centre opinion shows his views to be pretty marginal. Most of his political colleagues will despair not only at the crudity of Burley's comments but also his impolitic contribution to Tory brand retoxification.

Toby Young thought he had watched "a £27 million Party Political Broadcast for the Labour Party", because of the love letter to nurses, Great Ormond Street hospital and the NHS. After decades in which every Conservative minister has sought to argue that the NHS is not the party property of the Labour Party, there is an irony in right-of-centre commentators arguing that it is. The politics of the NHS reform Bill have trumped the early politics of Cameronism, where loving the NHS was going to be the foundation of the modernization project. (There was a warm generosity of spirit to James Cleverly's view that the show was a bit of a lefty tract, but no less enjoyable for all of that, but this does essentially accept those terms of the debate).

Other centre-right voices have offered a milder critique of the perceived politics of the show. Some of these were arguments about the balance between the traditional and the modern. Telegraph music critic Michael White enjoyed the spectacle but thought the traditions of literature, music and the Church were missing, asking "does none of this count for anything any more on the checklist of national identity?". Since Boyle began with Nimrod, Jerusalem and Shakespeare, and Emile Sands' moving Abide With Me tribute, it would make more sense to conclude that they do.

Yet these conservative depictions of the show as left-wing arguably misread the history of their own traditions. British Conservatism was, across the last century, probably the most electorally successful political force in western Europe. Its secret was to be conservative, but rarely reactionary. It has only rarely, more recently, advocated radical change, but it has very often showed a talent for living with it. 

Having believed that the loss of the aristocratic veto would end Empire, order and property, Conservatives surprised themselves in the ability of Baldwin and Macmillan to expand their electoral appeal. This is the conservatism of di Lampedusa's The Leopard, "if we want things to stay as we are, things will have to change”. And there is a lesson here for the progressive left too: those radical changes which endure are those which are ratified by acceptance across the political spectrum. 

To challenge Boyle's narrative of the twentieth century as a leftie tract is, in this sense, profoundly unconservative. It fails to acknowledge how the suffragettes and Windrush, and indeed the NHS, have become part of the furniture of the national consciousness. Sixty nine per cent of Britons say they are proud of the NHS as a symbol of Briton, which is 40% higher than the Labour vote in May 2010. Conservatives might particularly want to be grateful for the achievement of the suffragettes, given that they have secured more votes from women than men in almost every general Eeection since 1918. (Fortunately, Nick Clegg was not silly enough to challenge Danny Boyle's inclusion of the suffragettes as a partisan attack on the Asquith government of 1911!) Perhaps those Conservatives who recognise how the hangover of the Enoch legacy even now creates barriers to the party's ability to appeal to non-white Britons might regret that the sanctuary offered to the Ugandan Asians fleeing Idi Amin, a decision taken by Ted Heath and Robert Carr, was not included alongside the Windrush.

From the market liberal right, Phillip Davies of the IEA found the show impressive but parochial (which it was, though this was arguably its core strength) and worried too that the portrayal of the industrial revolution was "anti-business". Yet the point of those dystopic scenes of Pandemonium was surely that this is how our modern world was made. A "good thing/bad thing" debate about the age of the factory versus the unspoiled countryside, or about whether we would want to love in a world where the internet and mobile phone had never been invented misses the point.

But there is something problematic about the claim that the ceremony suggests that a new distinctively liberal-left patriotism is now in the ascendant, as Labour MP Tristram Hunt argued in the Observer, contrasting Boyle’s vision with that of the Jubilee.

But what a different history to that offered by the Thames two months ago, when the jubilee flotilla celebrated the Queen's public service but also codified a staid and nostalgic national identity.

It is true that the opening ceremony seemed to resonate for the Republican minority that June’s Jubilee left cold. And it is certainly possible to be pro-Olympics and anti-Jubilee – contrasting the meritocracy of athletic competition with the hereditary monarchy – or, indeed, pro-Jubilee and anti-Olympics, contrasting the extra cost of the Games and the lack of a need for Zil lanes. But most people responded positively to the meaning of both events for similar reasons. The local response to the Olympic torch’s procession reflected the spirit of the street parties the month before, reflecting a strong appetite to participate in collective experiences, as much as the particular occasions and causes which gave rise to them.

It is hard to make sense of a claim that Britain was a patriotically traditional country in early June (or, according to taste, an embarrassingly deferential Ruritarian theme-park) yet a patriotically progressive and modern country by the time it was lighting the Olympic torch at the end of July.  Arguing over different versions of patriotism will be part of the political debate between left and right, but neither has a strong claim to an "authentic" British identity which their opponents cannot engage with. Rather, the two major national events of 2012 suggest a rather British synthesis, rejecting the idea of a British identity which must choose between traditional and modern garb.  

This was also why Boyle’s British story resonated, where efforts like the Millennium Dome failed, because it portrayed modern Britain not as a break with our past, but as the consequence of a long history of adaptation and change that has made us the country that we have now become.

The Olympic Stadium is illuminated during the opening ceremony. Photograph: Getty Images.

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.

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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?