Is anyone paying attention to the rise and rise of Qatar?

The country's quick backing of the Libyan rebel council was the behaviour of a reliable internationa

The man standing next to Cameron, Sarkozy and Merkel in the recent pictures at the Elysee Palace to mark the first 'Friends of Libya' meeting is the Emir of Qatar. Back in March Qatar was first, after France, in publically recognising the Libyan Opposition group, the National Transitional Council. Qatar then went on to not only provide military support for the NATO operation in Libya, but also played a proactive mediation role with members of the Arab League in gathering support for the NATO intervention.

Qatar has also shown strong political leadership, willingness and influence in bilateral relations with its Arab neighbours throughout the Arab Spring -- from rumours of having frozen their investments in Syria, to public messages of support for the opposition in Syria and Yemen -- though Qatar's role may not always seem consistent, as with Bahrain.

The key questions are -- Does the highly nationalistic Arab Spring need an Arab champion that will 'step in', with its military might, to help oust dictators; and what are Qatar's broader international political ambitions? Does the world now need new political players?

We may not have seen the Arab Spring coming, but the motives and ambitions of possible rich and powerful frontrunner countries that support opposition against dictatorship and are willing to fund long-term growth and stability, should not go ignored. That Qatar stepped in quickly with its shuttle diplomacy and military backing for the Libyan NTC and made clear their long-term plans for stability in Libya and the wider region is indeed laudable, and are the appropriate strategic trajectory moves of a reliable international relations player.

As relations between Turkey and Israel continue to slide downwards, stability in the Middle East during and post the Arab Spring rightly concerns many. While the quartet may send over Tony Blair to help mediate between Israelis and Palestinians, is it time to seek out other more capable partners? Qatar will show further leadership this week with their support of the Palestinian Authority's bid for UN recognition of Palestine, building on their recent supportive role at the Peace Initiative Committee in Doha.

While other emerging powers with strong balance sheets such as China and India appear to have more insular political agendas, where international forays are confined to the economic, and while traditional Arab allies are either disappearing, or like Saudi Arabia have remained relatively silent and inward looking, Qatar is perhaps seizing on political ambitions that others lack.

As Egypt has shown, whilst protesters are rejoicing in their nationalistic verve and strength in ousting a dictator and his cronies, hoping to replace them with more democratic government and institutions, they do not yet know what ideological or political colours those replacements should take. The vacuum that this could create across the Arab region -- with its oil, Islamic tone and over 100 million young people -- is what rightly interests many, including in the West.

So what do we really know about Qatar? Their 'vital statistics' are impressive to say the least. It is the world's richest country per capita with growth at 19.4 per cent in 2010, and projected growth beyond 2014 of 9 per cent, and with oil and liquid natural gas reserves, production and export capacity that would make Saudi oil pumps foam at the rim. Its ambitions for its future are remarkable -- while our own government seems to tie every policy initiative to 2015 (coincidentally the next election), Qatar is working to a vision for 2030.

We have seen Qatar burst to the forefront of the international agenda with its savvy and ambitious portfolio through winning the 2022 World Cup bid and investment in brands we all know, including Barclays, the London Stock Exchange, Harrods and the 2012 Olympic Park, and rumours of buying football clubs surface periodically. It has also established major international institutions in media through the Al Jazeera news network, banking through the Qatar Financial Centre, technology and R&D through Qatar Foundation and the Qatar Science and Technology Park attracting leading universities and think tanks from the US and UK to have bases in Doha.

Qatar has a population of just 300,000 Qataris, and over 1.3 million expatriates. The government has invested considerably to enrich the lives of its citizens, with unemployment in 2011 almost non-existent at 0.2 per cent, and the CIA World Factbook section for 'population below poverty line' for Qatar showing 'N/A'. In contrast, the section on foreign reserves and gold shows over $31bn in assets held.

Qatar is no democracy: it is an absolute monarchy with no political institutions, yet Qataris did not join their Arab neighbours to revolt against their leaders in the Arab Spring. Its local population appears content with its stability and national investment programmes to increase education, health and services and overall living standards, though its low-paid expat population still await higher labour standards. The internal call for democracy among young Qataris fell sharply from 68 per cent in 2008 to just 33 per cent in 2010. The question of involvement in the Arab Spring -- where protesters call for democratic governance and inclusion -- will unravel within Qatar's borders in time, no doubt.

At a time when a large proportion of the world's wealth and power is held by BRIC countries, where the question of 'are you a democracy?' is no longer the price of entry for engagement in international relations, and where long-term economic and political stability and citizens' rights are vital, the world does need more players willing to mediate, challenge and support intervention when necessary.

Qatar's ambitious and capable political trajectory should not go unnoticed.

Zamila Bunglawala is Non-Resident Fellow at the Brookings Institute.

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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?