Pussy Riot's protests threaten more than just the Putin regime

The treatment of Pussy Riot says much about the close relationship between Church and Kremlin in Putin's Russia.

The arrest and prosecution of three members of the Russian female punk collective Pussy Riot looks to many foreign observers as a purely political event, and one that reveals the increasing authoritarianism and intolerance of the Putin government. 

Maria Alyokhina, Nadezhda (Nadia) Tolokonnikova and Ekaterina Samutsevitch were arrested in March after footage of Pussy Riot protesing at Moscow's Cathedral of Christ the Saviour was posted on YouTube. On 21 February the group had invaded the cathedral's sanctuary (an area normally off-limits to worshippers) and sung a satirical "prayer" to rid Russia of Vladimir Putin, who was then seeking re-election. The performance lasted under a minute. The three women, all of whom are in their twenties and two of whom have young children, have been in prison ever since, forbidden even from seeing their partners. Their trial began yesterday, when once again they were denied bail. They face up to seven years in jail if convicted, and acquittals in Russia are rare.

Pussy Riot's cathedral stunt was one of several public protests the group staged against Putin in the run-up to this year's presidential election, and their treatment fits a pattern of official clampdowns on consent. In June, for example, Putin signed into law new and stronger penalties for public order offences that many saw as aimed at frustrating peaceful and legitimate political protest. There's little faith, either inside or outside Russia, in the independence of the judiciary. The arrest and unusually harsh treatment of the three women, many believe, must have been ordered from the very top and thus reflect the personal vindictiveness of the president who was, after all, the target of the protest.

But the case also throws a spotlight on the leadership of the Russian Orthodox Church and especially its head, Patriarch Kirill. According to Peter Verzilov, husband of one of the imprisoned women, it was only after the Patriarch saw the video that any move was made to identify and arrest the women involved.  Originally, the police had taken no action, but on seeing the footage the patriarch had personally contacted both Putin and the head of the Moscow police. 

Kirill has certainly been vocal in his condemnation of Pussy Riot, describing the group's action as "blasphemy" and telling a rally in April that the church was "under attack by persecutors". He objected strongly to "derision of the sacred" being "put forth as a lawful expression of human freedom which must be protected in a modern society." The church leadership has demanded that the three women be punished severely for their act of desecration.

Western reporting has downplayed the sacrilegious nature of the women's performance, seeing it primarily as a political stunt. Perhaps it was. But it was also genuinely shocking in a religious culture that still retains (unlike much Western Christianity) a sense of the numinous and of sacred space. Russian Orthodoxy is a religion rooted in experience rather than doctrine. Its founding myth concerns a delegation sent by Prince Vladimir of Kiev to Constantinople which returned awestruck by the beauties of the Byzantine church: "We knew not whether we were on earth or in heaven." Ever since, Russian Orthodox churches and services, with their icons, clouds of incense and intense, deep-voiced choruses, have represented an attempt to recreate heaven on earth.

Kirill's spokesman, Archpriest Vsevolod Chaplin, has compared Pussy Riot's action and its effect on believers to the burning of the Koran and said that he was "deeply concerned about the future of any society in which extremely divisive actions are ignored." 

Not all the Russian Orthodox faithful agree. Many have protested against the harshness of the church's official position - one seemingly uninformed by Christian ideals of forgiveness and turning the other cheek - and called for the women's release. It's no doubt convenient for Putin to leave it to the church hierarchy to condemn the protests. By ensuring that the women are treated harshly he is not merely reinforcing the message that no dissent is to be tolerated but also burnishing his neo-Tsarist credentials as defender of Orthodoxy.

When he was elected in 2009, Kirill was initially seen as a more moderate figure than his predecessor Alexy II, a former KGB agent whose strident nationalism had, on occasion, embarrassed even Putin. But he has been both politically and personally close to the president. He is often seen at the president's side, sometimes sporting an expensive-looking watch, while for his part Putin (oddly, perhaps, for an ex-KGB man) has regularly been photographed taking part in religious ceremonies. In the run-up to this year's election Kirill even praised Putin as "a miracle from God",  sent to deliver Russia from the "horrible, systemic crisis" of the Yeltsin years.

I can't imagine any British prime minister getting such an endorsement from any Archbishop of Canterbury. But then the Russian Orthodox Church is not the Church of England. In Tsarist times, it was the sacred embodiment of the state, completely subordinated to the ruling dynasty. Even under a Communist regime that, at its height, bulldozed churches or turned them into Museums of Atheist Thought, the leadership of the Orthodox Church remained politically docile. A former dissident priest, Gleb Yakunin - who spent five years in a detention camp and was later elected to Parliament - was shocked by the extent of church-state collaboration when he gained access to the archives in the late 1990s.  The church, he concluded, had been "practically a subsidiary of the KGB".

Nevertheless, the end of communism marked the political rehabilitation of the Orthodox church and has seen it steadily grow in influence - a change symbolised by the rebuilding of Christ the Saviour which had been bulldozed by Stalin to make way for a swimming pool. This is partly why Pussy Riot's protest caused such a scandal: it was aimed not just at the authoritarianism of the Putin regime but at the privileges that the church has enjoyed for giving it unquestioning religious and moral legitimacy.

 

Nadia Tolokonnikova inside a defendants' cage in court. 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?