“Premier League football clubs don’t want to engage with fans. They want to sell them stuff.”

How business is throttling sport.

“Sport saturates everyday life.” That observation, made by Professor Stefan Szymanski in a video link address to Northampton University Business School’s Future of Sport conference recently, seems so obvious as to be bland. Yet it is worth thinking about the implications of that statement – what it means for people, and for sport itself.

Szymanski is a Professor at the University of Michigan Centre for Sports Management, and recognised as one of the world’s leading sports economists. Yes. A sports economist. Also at the conference were specialist sports marketing types, sports communication consultants, cultural policy and information studies academics, media technology wonks – and a smattering of sports journalists. There is, clearly, more to sport than a bit of fun.

That last line probably seems trite, but it’s there to make a point. Any critique of the modern sports industry risks being dismissed as the hankering for an imagined Corinthian past in which playing the game for its own sake outweighed vulgar commerce. It’s a dismissal that is too simplistic, although as the debate rages about the commercialisation of sport it is perhaps ironic to reflect that it was professionalism’s sweeping aside of the amateur ethos that helped football – the sport that dominates any discussion of sport or the sporting business in Britain – become a mass sport open to all.

But as the lines between sport and business become ever more blurred, sport risks losing the qualities that make it attractive to business. What appeals to many fans about sport is that it is not business. It does not, at its best, have the certainties that must make up a successful business plan, and it’s that element of the unexpected, of genuine competition, that draws an audience. I’m reminded at this point of the great footballer and journalist Danny Blanchflower irritating his producers in the early days of televised football coverage in typically contrary style by answering the question “Who do you think will win?” with the answer “I don’t know, that’s why they’re playing this game.”

The reason sports have become successful businesses, and the reason business wants to associate itself with sport, is because of what is perceived as the essential honesty of sporting competition. When that goes, so does the attraction. That’s why Lance Armstrong is such a hugely damaging figure, why many found it hard to watch athletics with the same enthusiasm after Ben Johnson’s astonishing sprint at the 1988 Olympics was revealed to be drug-fuelled. Sport is important to people. As conference organiser Alan Seymour said in his introduction, “The attention within the UK given to sport, its place in our lives and its contribution to language and culture makes it a major influence on attitudes, behaviour and community. The marketer who ignores sport as an influence on the consumer makes a major mistake.”

The buzzword of the day was “engagement”. Seymour spoke of “a growing necessity for sports properties and organisations to develop new platforms of association with their publics, audiences and loyal fan bases” and of a need to “understand the motivations that bring individuals to consume sporting events”. And exploring this ground threw up the tension that sits at its centre, a tension which boiled over into some lively exchanges throughout the day. Because for many sports fans, being treated as consumers who can be squeezed and sold to and exploited is not what draws them in. And seeing the sporting business appropriate the passion and culture fans have created in order to sell the "product" back to them really gets their goat.

After a slick opening presentation by US sports marketing expert Bill Sutton, full of talk of brands and positioning and opportunities, John Williams – the leading academic authority on fan culture in Britain and a Liverpool FC season ticket holder for 30 years – ventured the opinion that “a lot of what is wrong with sport is down to people like you”. When I spoke to Williams later he said that there was “too much technological determinism” on show. Engaging with fans surely had to mean more than seeing them simply as units to be sold at. Times football editor Tony Evans, who I was on a panel with, was typically blunt in his assessment. “Premier League football clubs don’t want to engage with fans,” he said. “They want to sell them stuff.”

The suspicion of many is that for all the high-falutin talk of achievement and passion and prowess, the bottom line is just about getting us to part with our money. And that makes sport just like everything else. That tension ran through the conference, through the demonstration by an unprecedented alliance of football fans at Premier League HQ this week, and through the huge demonstrations in Brazil, where a population sold by the marketers as football crazy is questioning the whole ball game.

Is engagement just another sales pitch, or could it, should it, be something truer to the word’s dictionary definition as something which involves? Would genuinely engaged fans help preserve the qualities that make sport attractive? In English Premiership football, as in America’s NFL, the crowd are “extras in a show put on at a stadium” said Szymanski. The product’s consumers have become part of the product, yet seem powerless to shape it. Over half of the Premiership’s revenues are generated globally.

And as Szymanski observed in his summing up, “Advances in new media over the last 20 years are completely changing the way we consume sport.” Perhaps most worrying of all, those changes can shape the sport itself. Szymanski used the example of cricket’s Indian Premier League and its huge reach. “Kids growing up wanting to play cricket will want to play 20/20,” he said. “That means the skill that will be rewarded is hitting sixes.”

Business and media sought to link with sport because of the power of its essential qualities. As they tighten their grip on sport, they risk destroying those qualities, and therefore its usefulness to them.

Photograph: Getty Images

Martin Cloake is a writer and editor based in London. You can follow him on Twitter at @MartinCloake.

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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?