Why we shouldn’t intervene in Libya

Views from the five countries that abstained on UN Resolution 1973.

When last week's UN Security Council Resolution 1973 was passed – enforcing a no-fly zone over Libya and authorising member states to "take all necessary measures" to "protect civilians and civilian-populated areas under threat of attack" – only five countries chose to abstain, rather than support it.

Given the consensual nature of the exchanges in this afternoon's Commons debate, it's worth seeking out the views of Brazil, Russia, India, China and Germany, whose early reservations may soon become more commonplace. Whilst it could be argued (with the exception of Germany) that they have an anti-west foreign policy agenda, or corrupt regimes to protect, many of the points they make are being echoed throughout the general populace.

So, here is our rundown of who abstained, and why.

Brazil

Brazil's permanent representative to the UN, Maria Luiza Ribeiro Viotti, said:

We are not convinced that the use of force as provided for in operative paragraph 4 of the present resolution will lead to the realisation of our common objective – the immediate end of violence and the protection of civilians.

Russia

UN Ambassador Vitaly Churkin stated:

We participated actively in the discussions on the draft resolution. Unfortunately, work on this document was not in keeping with the Security Council's standing practice . . . In essence, a whole range of questions raised by the Russian Federation and other Security Council members remained unanswered, questions which were both concrete and legitimate, questions regarding how the no-fly zone would be enforced, what the rules of engagement would be, and limits to the use of force would be. Furthermore, the draft was morphing before our very eyes, transcending the League of Arab States' initial stated concepts . . . Introduced into the text were provisions potentially opening the door to large-scale military intervention. Through the negotiations of the draft, statements claiming an absence of any such intention were heard. We take note of these.

Prime Minister Vladimir Putin has since said that he is "concerned about the ease with which it has been decided to use violence" and that the resolution reminded him of "medieval calls for crusades".

India

Deputy Ambassador to the UN Manjeev Singh Puri said:

We do not have clarity about details of enforcement measures, including who and with what asset will participate and how these measures will be exactly carried out . . . The financial measures that are proposed in the resolution could impact, directly or through indirect routes, ongoing trade and investment activities of a number of member states thereby adversely affecting the economic interests of the Libyan people and others dependent on these trade and economic ties . . . Moreover, we had to ensure that the measures will mitigate – and not exacerbate – an already difficult situation for the people of Libya. Clarity in the resolution on any spillover effects of these measures would have been very important.

Of the supposedly indiscriminate air attacks that have been taking place over the past few days, a New Delhi statement said:

India views with grave concern the continuing violence, strife and deteriorating humanitarian situation in Libya . . . It regrets the air strikes that are taking place. The measures adopted should mitigate and not exacerbate an already difficult situation for the people of Libya.

China

UN Ambassador Li Baodong stated:

In the Security Council's consultations on Resolution 1973, we and some other council members asked some specific questions. However, regrettably, many of those questions failed to be clarified or answered. China has serious difficulty with part of the resolution.

China, as a permanent member of the UN Security Council, could have blocked the resolution altogether, but because it attached "great importance to the relevant decision by the 22-member Arab League on the establishment of a no-fly zone over Libya" (the League initially supported the motion), the Chinese chose merely to abstain instead.

A Chinese foreign ministry spokesperson, Jiang Yu, explained:

We oppose the use of force in international relations and have serious reservations with part of the resolution.

However, now that the Arab League has criticised the air strikes, claiming they are beyond the remit of the resolution, China could step up the rhetoric. Jiang Yu has already said that "China has noted the latest developments in Libya and expresses regret over the military attacks on Libya".

Germany

This is the most interesting case, as Germany was the only EU member state to abstain. It would seem that memories of war and imperialism are still too contentious when handling a situation that actually or potentially involves both.

UN Ambassador Peter Wittig said:

We should not enter a military confrontation on the optimistic assumption that quick results with few casualties will be achieved.

Whilst Wittig stated that Germany recognised the plight of the Libyan people, he also argued that Berlin sees "the danger of being drawn into a protracted military conflict".

Guido Westerwelle, the German foreign minister, defended his country's position:

The impression that Germany is isolated in Europe or the international community is completely wrong . . . Many other countries in the European Union not only understand our position, not only respect it, but also share it.

Liam McLaughlin is a freelance journalist who has also written for Prospect and the Huffington Post. He tweets irregularly @LiamMc108.

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?