Determination and optimism mingle in Tahrir Square

Looking ahead to the first anniversary of the Arab Spring, Egyptians hope to finish in 2012 what the

"2011 ended honestly," says Khalid Abdalla, a 31 year-old British-Egyptian filmmaker and activist, about the New Year's Eve celebrations on Tahrir Square. "It felt balanced: an appreciation of what we have achieved over the year and what there is still to fight for, a sense of mourning over the cost."

The price Egyptians paid for the last year of revolution is astonishing. 2011 saw almost 2,000 protesters killed and 12,000 face illegal military trials, as well as a loss of 32 per cent of Egypt's tourist trade and an estimated $10 billion dollars of the country's money.

The revolutionaries are still pushing for the changes they demanded back in January. The government is no rush. Prime Minister Kamal El-Ganzouri even said in a press conference last week, "for a country that was silent for 60 years, why are we pressing ourselves over five or six months?"

As Egypt moves into 2012, emergency law is still in place, there is no president, no constitution and the military, led by Supreme Council of the Armed Forces (SCAF), is in power. There has been no reform of the police force, whose brutal behaviour towards civilians sparked the revolution. Little legislation has changed.

The ongoing elections, which saw violence, vote-buying, stolen ballot papers and illegal campaigning, will produce a parliament with no legislative powers that is overseen by the SCAF. Judging by the electoral results so far, this will also be a predominantly Islamist People's Assembly, even though no party was allowed to have a religious basis.

The military continue to authorise increasingly violent crackdowns. During the closing months of 2011 they used live ammunition, brutal beatings, sexual assault, tear gas and rocks against civilians in battles which stretched over five days. In November they resorted to walling protesters into Tahrir using concrete blocks to build barricades on its surrounding streets.

Even though Mubarak and a handful of his cronies are facing trial, the financial and political infrastructure of the regime is still very much in place. But yet they feel hope, people said during the New Year's Eve celebrations on Tahrir Square.

"I believe it's a duty to be optimistic," says Khalid, who has been documenting the revolution since January.

"It was very uplifting," adds Ghada Shahbender, from the Egyptian Organisation of Human Rights who was also on the square that night. She likened the gathering to the initial 18 days of revolution: "It was the first fully festive assembly in Tahrir since 18th February, a week after Mubarak stepped down."

The square was lit up with candles and fireworks. Christians and Muslims gathered around protest tents on the central roundabout wearing homemade party hats. Families held posters of their loved ones lost in the year's numerous battles. Balloons in the Egyptian flag colours were released into the night sky.

Revolutionary singers such as Ramy Essam, who was imprisoned and tortured in March 2011, sang against the military, Coptic hymns came from a nearby church and a Sufi singer performed for the crowds.

Muddled with these messages of hope was the quiet acknowledgement that this year is sure to be harder.

"We will have a bigger fight than last year. We have a long way to go, " admits Amani, 54, a Christian researcher who also celebrated New Year on the square. She talked about the 9 October Copt-led demonstration at Maspero where the army killed 27 Christian and Muslim protesters. "The religious 'differences' are all politics. The government wants us to be divided. We will win."

"The military are not backing down," agrees Omar, 42, a musician and producer, "They have regularly escalated events and have repeatedly antagonized otherwise peaceful demonstrators."

It is clear when you talk to protesters they are mentally preparing to lose their lives in 2012. There will be more blood, many say.

"They will attack us but we will keep fighting," explains Ramy Essam, who has been nicknamed the singer of the revolution, "What I hope is people will go to the streets in January, stay and make a sit-in in every square in Egypt until change happens."

Although the international media focuses on these squares, last week's riot-police raids on nongovernmental organisations illustrated there are many frontlines of this revolution.

"The authorities try to stop our work because these organisations have succeeded in winning in court against the ruling military council," explains Khalid Ali, a prominent lawyer and director of Egyptian Centre for Economical and Social Rights, who fears further attacks.

"We speak about their crimes so they want to shut us up" adds Ghada.

The Internet has been another battleground this year. Bloggers like Maikel Nabil and Alaa Abd el Fattah have been imprisoned for the blog posts they write. Even the aged military council got involved by issuing communiqués via its Facebook page.

"Citizen journalism is also going to be increasingly vital as people recognise it as a tool of civil engagement," explains Khalid who is part of a media collective Mosireen. Mosireen collects and compiles footage from protests and disseminates the short clips via the Internet, which often end up in the traditional media.

Their YouTube Channel became the second most watched channel in the whole of Egypt following their continual stream of new videos documenting human rights abuses by the security forces.

This sparked a decentralised movement called Kazeboon. Meaning 'liars' in Arabic, in the last few weeks, it has seen groups spontaneously erect screens in streets and on squares and play these clips, all over Egypt. Kazeboon has become so popular it spread internationally; people are organizing screenings in New York, Paris and London.

The protesters face a lot of criticism that they are marginalised, divided and leaderless. Omar disagrees, adding the movement's strength is because "it's always been led, not by a person but by very basic, very simple precepts... Freedom, Liberty, Social Justice."

"We never had the 'majority' nor, and I say this with some ambivalence, have we needed them," he continues, "one per cent of Cairo would give you 200,000 people in Tahrir. If even 5% of Egyptians come down on the 25th of January the SCAF would realise their clock is ticking."

The anniversary is looming on the horizon and everyone is gearing up for it. Despite frustratingly slow change, when you look back to pre-revolution Egypt the people are bolder. If you look at the 18 days, you see maturity, especially on Tahrir. The last year seems to have been a process of self-education about what it means to go through a period of social change.

"What is crucial for me is my sense of time has shifted - no one really knows whether you will inherit what you are fighting for or whether you're fighting for a future generation. Everything is uncertain," explains Khalid, "But we all know the 25th of January is coming. That is really the New Year."

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?