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The New Depression

The business and political elite are flying blind. This is the mother of all economic crises. It has

We are living through a crisis which, from the collapse of Northern Rock and the first intimations of the credit crunch, nobody has been able to understand, let alone grasp its potential ramifications. Each attempt to deal with the crisis has rapidly been consumed by an irresistible and ever-worsening reality. So it was with Northern Rock. So it was with the attempt to recapitalise the banks. And so it will be with the latest gamut of measures. The British government – like every other government – is perpetually on the back foot, constantly running to catch up. There are two reasons. First, the underlying scale of the crisis is so great and so unfamiliar – and, furthermore, often concealed within the balance sheets of the banks and other financial institutions. Second, the crisis has undermined all the ideological assumptions that have underpinned government policy and political discourse over the past 30 years. As a result, the political and business elite are flying blind. This is the mother of all postwar crises, which has barely started and remains out of control. Its end – the timing and the complexion – is unknown.

Crises that change the course of history and transform political assumptions are rare events. The last came in the second half of the 1970s, triggered by the Opec oil price spike and a dramatic rise in inflation, which marked the end of the long postwar boom. Its political consequences were far-reaching: the closure of the social democratic era, the rise of neoliberalism, the discrediting of the state, the embrace of the market, the undermining of the public ethos and the espousal of rampant individualism. For the next 30 years, neoliberalism - the belief in the market rather then the state, the individual rather than the social - exercised a hegemonic influence over British politics, with the creation of New Labour signalling an abject surrender to the new orthodoxy.

The modalities of this present crisis are entirely different. Extreme as they may have appeared to be at the time, the economic travails of the 1970s were progressive rather than cataclysmic. The old system did not hit the wall, but became increasingly mired and ineffectual. What swept the social democratic era away was not the force de frappe of an irresistible crisis but that it was accompanied by the steady rise of a new ideology and political force in Thatcherism - and Reaganism in the United States - and its victory in the 1979 general election.

In contrast, the financial meltdown of 2007-2008 demolished the neoliberal era and its assumptions with a suddenness and irresistibility that was breathtaking. The political class, from New Labour to the Conservatives, is standing naked. They are still clinging to the wreckage of their old ideas while acknowledging in the next breath that these no longer work. The financial crisis is a matter of force majeure; political ideas and discourse change much more slowly, even when it is obvious that the old ways of thinking have become obsolete. Meanwhile, there is no political alternative waiting in the wings, refining its radical ideas in think tanks ready to storm the citadels of power as there was in the 1970s, notwithstanding the fact that think tanks are now far thicker on the ground. Instead, it has been the mainstream which senses that neoliberalism no longer works, fatally undermined by events and, ultimately, the author of its own downfall. This crisis will have the most profound and far-reaching political consequences and will in due course transform the political landscape, but it remains entirely unclear in what ways and when that might be.

In all these senses the financial meltdown has far more in common with the Great Depression than the Great Inflation. When the financial crisis consumed Wall Street in 1929 and proceeded to undermine the real economy, engulfing Europe in the process, it was not accompanied by a radical shift towards Keynesianism, but rather a reassertion of sound finance orthodoxy, followed in due course by the adoption of protectionism. The political mainstream as represented by Labour's Ramsay MacDonald and Philip Snowden and the Conservative Stanley Baldwin all sang from the same hymn sheet. Only Keynes and a faction of the Liberal Party enunciated a plausible alternative. Eventually a programme of fiscal deficits and public works was pursued by Franklin D Roosevelt in the United States, but in Britain Keynesianism was not properly embraced until rearmament and the approach of war. Indeed, it was not until 1945 that the combined legacy of war and the Depression belatedly resulted in a fundamental political realignment and the birth of the social democratic era.

The Grim Reaper has finally spoken:

a boom pumped up by credit steroids and a bust that takes us back to the 1930s

Since the financial meltdown dramatically intensified in September 2008, Gordon Brown has managed to ride the economic storm rather more successfully than the Conservatives, or, for that matter, than Tony Blair would have done. It is Vincent Cable, the Liberal Democrats' econo­mics spokesman, however, who has indubitably emerged as the political sage, unafraid of confronting neoliberalism's shibboleths, demonstrating a clarity of mind and the political courage to tell things as they are, in a way that has escaped all other prominent politicians. Although Brown was the economic architect of the past decade and was responsible, more than anyone else, for its excesses and was shaping up to be a rather disastrous Prime Minister, he displayed last autumn, at least initially, an agility of mind and nimbleness of foot that defied the expectations of those who believed he was capable of neither. He revelled in the sense of purpose and vision offered by the crisis, seemingly prepared to jettison the thinking that had imbued his previous decade as chancellor.

But Package Part I, widely hailed at the time and imitated elsewhere, proved woefully inadequate, and the financial system remains frozen. Meanwhile the waters are rising up the Good Ship UK, threatening to transform the banking crisis into a fiscal and currency crisis. It seems unlikely that, if that should happen, Brown will survive the next election.

Even if it does not happen, Brown faces a serious problem about his own past role, because Britain’s crisis has been greatly exacerbated by the soft-touch regulation, easy credit, runaway house inflation and overexpansion of financial services over which he presided and for which he is accountable. So far he has refused to admit or accept responsibility for his actions – he initially had the temerity (or foolhardiness) to argue that the UK was better placed than other countries to deal with the credit crunch, even though it has become abundantly clear since that the very opposite was the case. So while Brown remains in denial, the plausibility of his new turn, and his understanding of what is entailed, must be seriously doubted.

Indeed, after its initial boldness, the government now seems trapped by its past actions and its former ways of thinking. Brown's failure to accept the need to nationalise the banks suggests the limits of his new-found political courage, and his inability to embrace the logic and imperatives of the new situation. He is still a prisoner of his old timidity and his conversion to the neoliberal cause. It is his good fortune that the Cameron Conservatives have been hugely wanting in their response to the financial meltdown. Having spent his first years as leader of the opposition seeking to reassure the country of his centrist credentials, David Cameron, at the first whiff of gunfire, has turned on his heels, rejected Keynesianism and, at the very moment when events have shown Thatcherism to be deeply flawed and historically out of time, headed back to the Thatcherite womb of sound finance, arguing that a government must balance its books and that deficit financing, Keynesian-style, is reckless and irresponsible.

But all this, it must be said, is the small change of politics. The crisis threatens in time to sweep away the political world as we know it and those who fail to grasp its magnitude and meaning. Far more is at stake than the fortunes of a few leaders, be their name Brown or Cameron. Who knows where things will be this time next month, let alone next year or, indeed, in 2012? The financial meltdown now rapidly plunging the western world into what increasingly looks like a depression is the first great crisis of globalisation. There was plenty of warning. The Asian financial crisis of 1997-98 proved a salutary lesson about the dangers posed by huge capital movements that were subject to precious little regulatory control. Three economies capsized (South Korea, Thailand and Indonesia) and others stood on the brink.

There were other earlier warning signs, notably Mexico in 1995, when GDP fell by 9 per cent and industrial production by 15 per cent, following a run on the peso. These crises were blamed on the immaturity and fecklessness of national governments - in the case of east Asia on so-called crony capitalism (which, incidentally, prompts the question of how we should describe Anglo-American capitalism) - which the International Monetary Fund obliged to engage in swingeing cuts in public expenditure as a condition of their bailouts.

Yet what if such a crisis were to be no longer confined to the peripheries of global capitalism but instead struck at its heartlands? Now we know the answer. The crisis has enveloped the whole world like an uncontrollable virus, spreading from the US and within a handful of months assuming global proportions, at the same time mutating with frightening speed from a financial crisis into a fully fledged economic crisis. In so doing, it has undermined the foundations on which the present era of globalisation has been built, namely scant regulation, the free movement of capital, a bloated financial sector and immense reward for greed, thereby bringing into question the survival of globalisation as we now know it.

Enormous international flows of unregulated capital have capsized the international financial system - with disastrous consequences for the real economy - in a manner akin to the effect of a roll-on, roll-off ferry shipping too much water. We can now see the cost of free-market capitalism and light-touch regulation. Iceland may provide an extreme example of the consequences of the credit crunch but it also illustrates the dangers facing the more vulnerable economies, the UK included, in a deregulated world where the market rules: a small, open economy; a large, internationally exposed banking sector; an independent currency that is not a serious global reserve currency (of which there are only three); and limited fiscal strength. These propositions have constituted the core economic beliefs - from Thatcher and Lawson to Blair and Brown - that have informed policymaking over the past three decades and without which, it was claimed ad nauseam, an economy could not succeed. Heavy-handed regulation and an overbearing state would serve only to frighten off capital and condemn a country to slow growth, stagnation and global marginality. Now we know the fallaciousness of these claims and the consequences of "letting the market decide".

Like Iceland, albeit not as extremely, Britain has been living in a fool's paradise. A failure to regulate the banks and other financial institutions in any meaningful fashion allowed bankers to behave in a grossly irresponsible and avaricious fashion; a boom that was made possible only by a government-enabled credit binge in which people borrowed recklessly; a bloated financial sector that grew to represent over 8 per cent of the total economy and which was found to have been built on foundations of sand; an overvalued currency that made manufacturing exports uncompetitive and thereby resulted in an unnecessary and counterproductive contraction in the manufacturing sector which must now be reversed; an absurd belief that boom and bust had been banished for ever, allowing the banks to turn a blind eye to the inflating of various asset bubbles and display a profound ignorance of the history of capitalism; a persistently chronic current account deficit that can no longer be compensated for by inward capital flows; monstrous salaries for those at the top of the financial and corporate tree, which were justified in terms of a trickle-down effect that remained a chimera, and as the reward for risk which was, in fact, a reward for greed and failure; growing inequality, which was justified in the name of a more competitive economy accompanied by declining social mobility in the cause of an open and flexible labour market; and, finally, the mushrooming of what can only be described as systemic corruption on a mega-scale as the state ignored the gargantuan abuses of those who ran the banks and other financial institutions, while regulatory authorities willingly colluded in their excesses.

This is the sad story of the New Labour era.

The ultimate cost of this debacle as yet remains unknown. What began as a financial crisis is threatening, as the government seeks to bail out a bankrupt financial sector, to become a currency crisis, with foreign investors concerned about the effects this might have on the value of sterling, and perhaps even worse, ultimately a sovereign debt crisis, with growing doubts about the UK’s financial viability. Until there is some end in sight to the financial crisis, and a line can be drawn under the banks’ indebtedness, we will not know the answer to these questions. One thing is clear, however: whatever the limitations of the social democratic era, it was never responsible for such an all-enveloping and cataclysmic crisis as the one that the neoliberal era – and the Thatcherites and New Labour – have managed to produce. After all the boasting about the virtues of the Anglo-American model of capitalism, the Grim Reaper has finally spoken: a boom pumped up by credit steroids and a bust that takes us back to the 1930s.

There are two key aspects to this crisis: national and global, with the latter promising to be rather solutions are concerned, we are in uncharted territory, with close to zero interest rates, a Keynesian-style fiscal boost that may prove inadequate to the task and could well fail, a hugely indebted financial sector that threatens to leave us with an enormous future tax burden and a greatly expanded national debt. All of this, furthermore, must be addressed in the context of an open-market regime which is very different from those of previous eras, and which could render Keynesian-style national solutions ineffectual. What would greatly assist any national recovery is a co-ordinated global response to the crisis; in other words, global co-operation at the highest level. This cannot be ruled out, but it would be a brave person that would bet on it. It was exactly the lack of international co-operation that bedevilled recovery in the 1930s and eventually led to the Balkanisation of the world into regional currency and trading blocs.

The most important single question in this context is the relationship between the US and China. Will the Obama administration be able to resist the slippery slope of creeping protectionism? Will arguments over the revaluation of the Chinese renminbi be resolved amicably? If the answer is in the negative, then the global outlook will be very bleak indeed and so, also, as a result, will be the prognosis for national recoveries. Indeed, the prospects would look disturbingly like those of the 1930s, with growing international antagonism and friction and a continuingly intractable crisis at a national level, with only the very slowest of recoveries.

Around the world there is growing evidence by the week of a resort to national solutions at the expense of others: measures to subsidise industries that are in severe difficulties; the Buy American clause that was inserted by the House of Representatives into Barack Obama's latest package (though since weakened); the industrial action in Britain against foreign workers; the withdrawal of banks to their national homes; the attack by Timothy Geithner, the US treasury secretary, on China as a currency manipulator. No Rubicon has been crossed but the warning signs are clear. A retreat into protectionism and beggar-thy-neighbour policies will deliver the world into a second Great Depression.

So what will be the political effects of the financial meltdown? Some are already evident. Just as the Great Inflation of the 1970s played to the tunes and concerns of the right, with its invocation of the market, the New Depression suggests the opposite, the inherent limitations of the market and the indispensability of the state. Indeed, the speed with which the neoliberal refrains and invocations have unravelled has been breathtaking. The single most discredited aspect of the social democratic legacy was nationalisation, and yet the government, with the most extreme reluctance, has been obliged to nationalise Northern Rock and partially nationalise the Royal Bank of Scotland and the merged Lloyds TSB and HBOS. Who would have ever imagined, at any point during the past 30 years, that no less than the financial commanding heights of neoliberalism would have ended up in the hands of the state, with precious little opposition from anyone except a few disgruntled shareholders? Even now, however, the Labour government, still trapped in the ideological straitjacket of New Labour and displaying extreme timidity in the face of powerful vested interests, which has always been a New Labour characteristic, is running scared of the inevitable logic of the situation, namely that all the high-street banks should be taken into public hands until the mess is sorted out. Anything else leaves the public responsible for all the debts and risks, while the banks continue to be answerable to the very different interests of their shareholders. But such is the fury and depth of the crisis that this scenario is highly likely.

The state is experiencing an extraordinary revival. The credit crunch is the most catastrophic example of market failure since 1945. It became almost immediately obvious to wide sections of society that there was only one institution that could potentially sort out the mess: the state. Far from being a rational distributor of resources, the market had proved the opposite. Far from bankers and financial traders embodying the public interest, they have been exposed as irresponsible and dangerous risk-takers whose primary motivation was voracious greed. If trade unionists and the nationalised industries were the demons of the 1970s, bankers and the financial sector have assumed the mantle of public enemy number one in the late Noughties. In fact, the irresponsibility of bankers, and the damage they have inflicted on the economy, hugely exceeds anything that the unions could possibly be held responsible for in an earlier era. Meanwhile, the fallen heroes of the pre-Thatcher era, most notably Keynes, are duly being exhumed, restored to their rightful position, and pored over for their ability to throw light on the present impasse and what might be done; if the recession turns into a depression, Marx will once again become required reading.

This political shift is not just a British phenomenon, but a more general western one. The most striking feature of President Obama's inaugural speech was the way in which it embraced and legitimised African Americans for the first time in American history. But it also had another powerful theme, namely its invocation of the public interest and public service. After decades during which American political discourse has been dominated by the language of individualism and the market, it came as a shock to hear a US president articulate a very different kind of philosophy, renouncing private greed in favour of the public good. Obama's election can in part be seen as a response to the failure of the neoliberal era, as well as of Bush's neoconservative agenda; certainly his election represents a remarkable shift to the left in US politics, in contrast not just to Bush, but every recent US president, including Reagan, Bush Sr and Clinton. That Obama is the first African-American president also represents a remarkable redrawing of the political landscape. There is no more powerful - nor difficult - way of redefining society or to embrace a new form of representivity than to include a racial minority that has been excluded.

This brings us finally to what might be the longer-term global consequences of the crisis. Again, we are inevitably stumbling around in the dark because so much depends on whether the recession metamorphoses into a fully fledged depression and in what way and shape the world eventually emerges from the debacle. That said, two key points can be made. First, the credit crunch signals the demise of the Anglo-American, neoliberal model of capitalism, which has exercised a hegemonic influence over western capitalism and been the blueprint for globalisation since 1980. Because of its catastrophic failure there seems very little chance of its resurrection. The process of recovery - whenever that might be - will be accompanied by an overriding concern to ensure that the events of 2007-2009 are not repeated in the future, just as happened in the US in the 1930s with the strict regulatory framework that was introduced for the banks after their comprehensive failure in 1929. This will include the search for a new global regulatory framework that controls and constrains international movements of capital, as well as strict controls over the financial sector at a national level. A new set of political priorities - and with it a new political language - will be born.

Meanwhile, the influence and prestige that the US, and to a far lesser extent Britain, have enjoyed will vaporise in the same manner as their neoliberal model. Their 30-year project has failed and they will be obliged to pay the price in their reputation and the esteem in which they are held. The countries of the former Soviet Union and the casualties of the Asian financial crisis that were forced to swallow the neoliberal medicine will have good reason to feel aggrieved and resentful. The west has been forthright in accusing the non-western world of corruption. The financial meltdown suggests that the west has been guilty of huge hypocrisy. Systemic corruption has lain at the heart of the western financial system. An entirely disproportionate and extortionate level of bonuses has ensured the enormous enrichment of top executives in the financial sector, all in the name of reward for success, when in fact it was the reward for failure. In addition, we have had the collusion of the credit-ratings agencies; a regulatory system characterised by its failure to act as any kind of constraint; and governments that ensured the continuation of this web of relationships and applauded its achievements. The corruption was on a breathtaking scale as evidenced by the size of the bailouts required to rescue the banks. It will be difficult for western governments to make these kinds of accusations of others in the future. That Obama represents such a voice of hope will help to mitigate the inevitable ill-will towards the US, but this should not be exaggerated amid the euphoria surrounding developments in Washington.

The second point is more far-reaching. It is doubtful whether we can still describe ourselves as living in the American era or, indeed, the Age of the West. If not yet quite over, both are certainly drawing to a close, and it seems likely that the effect of the financial meltdown will be to accelerate the rise of China as a global power. The contrast between the situation in China and that in the US could hardly be greater, even though it has been partially obscured by the depressive effect of the western recession on Chinese exports and on China’s growth rate. While the US economy is contracting, China’s grew at roughly 9 per cent in 2008 and is projected to grow at about 6 per cent in 2009. Its banks, far from bankrupt like their US counterparts, are cash-rich. China enjoys a large current account surplus, the government’s finances are in good order and the national debt is small. This is a crisis that emanates from the US and whose impact on China has been essentially indirect, through the contraction of western markets. It is the American model that has failed, not the Chinese.

One of the factors that intensified the Great Depression, and indeed was part cause of it, was Britain's growing inability to continue in its role as the world's leading financial power, which culminated in the collapse of the gold standard in 1931. It was not until after the war, however, that the US became sufficiently dominant to replace Britain and act as the mainstay of a new financial system at the heart of which was the dollar. The same kind of problem is evident now: the US is no longer strong enough to act as the world's financial centre, but its obvious successor, namely China, is not yet ready to assume that mantle. This will undoubtedly make the search for a global solution to the present crisis more difficult and more protracted.

Martin Jacques's new column will be published fortnightly in the New Statesman. His book "When China Rules the World: the Rise of the Middle Kingdom and the End of the Western World" will be published in June (Allen Lane, £25)

the global downturn in numbers

    0.5%

    IMF prediction for global growth in 2009 - worst since WWII

    Up to 40 million

    Number of people who will lose their jobs this year, according to the International Labour Organisation

    $9.7trn

    Total pledged by the US alone towards solving the crisis

    3.6%

    Proportion of GDP pledged by the G7 and BRICs countries towards fixing the crisis (1.5% this year)

    2.3m

    Number of US properties that received a default notice or were repossessed in 2008. In the UK, 45,000 homes were repossessed - another 75,000 are expected to be taken in 2009

    14

    Number of major global banks which collapsed, were sold or were nationalised during 2008

    200,000

    Number of European companies expected to fail this year; an additional 62,000 are expected to fail in the United States. These figures represent record levels of insolvency

    52%

    Increase in UK company failures between late 2007 and late 2008

    14%

    Drop in level of Chinese exports during January

    1%

    Current UK interest rates (down from 5% in October 2008). In the US, rates have fallen to between 0 and 0.25%

How the crisis unfolded

13 September 2007 Run on Northern Rock begins when it is revealed that the bank has requested emergency support from the Bank of England

21 January 2008 FTSE suffers worst falls since 11 September 2001

February 2008 Northern Rock nationalised

17 March 2008 JP Morgan Chase takes over the US investment bank Bear Stearns

12 July Mortgage lender IndyMac collapses - second biggest US bank in history to fail

9 August 2007 European Central Bank pumps ?95bn into banking market

7 September Financial authorities step in to rescue Fannie Mae and Freddie Mac

9 September Bradford & Bingley becomes second British bank to be nationalised

15 September Lehman Brothers files for bankruptcy

16 September AIG, biggest insurance firm in the US, receives $85bn rescue package

3 October 2008 US government announces $700bn Troubled Assets Relief Programme

8 October UK launches its first bank bailout plan, making £50bn available

October 2008 Iceland's banks collapse. IMF extends £1.4bn ($2.1bn) loan a month later

24 November Alistair Darling announces a temporary cut in VAT from 17.5 to 15 per cent

23 January 2009 UK enters recession

28 January US Congress passes Barack Obama's $819bn stimulus package

5 February UK Monetary Policy Committee votes to cut interest rates to 1 per cent - the lowest in over three centuries

Michael Harvey

Martin Jacques is a journalist and academic. He is currently a visiting fellow at the London School of Economics Asia Research Centre and at the National University of Singapore. Jacques previously edited Marxism Today and co-founded the think-tank Demos in 1993. He writes the World Citizen column for the New Statesman. His new book on the rise of China, When China Rules the World, will be published in June.

This article first appeared in the 16 February 2009 issue of the New Statesman, The New Depression

ELENA HEATHERWICK FOR NEW STATESMAN
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The maid slaves: how wealthy visitors to Britain trap servants in their homes

Each year 17,000 domestic workers accompany wealthy families to the UK – helped by a special visa regime that campaigners call a “recipe for slavery”.

It was 6am on 15 August 2014. Amara should have escaped an hour earlier; she was running out of time. Had everything gone to plan it would have been easy to slip out of the house in the affluent Home Counties town of Ascot unnoticed, as her employers were away, but Amara had made a misjudgement. She had asked her fellow maid if she wanted to flee, too, and now her terrified colleague was threatening to call their boss, an Emirati diplomat, and inform on her.

A Facebook message popped up on her tablet: she had five minutes until her rescuer would give up and drive home, leaving her stranded. Amara would have to abandon her suitcase. She tucked her most precious possessions – a photocopy of her passport, her employment contract and her tablet – down the front of her pyjamas. Then she sneaked downstairs and out through the front door.

Her friend’s car was parked a few hundred metres down the road. Amara jumped in and they sped past the gated houses and through the tree-lined lanes of Ascot towards London, not quite 30 miles away. Amara felt a rush of elation, followed by the familiar pang of apprehension. After almost a year in captivity she was free, but she had nothing. No money, no plan, not even – and this was the small, humiliating detail she would always mention when she later told her story – a change of underwear. It was the end of ten months of “hell”, labouring under slave-like conditions as a domestic worker, and the start of a new ordeal as an undocumented migrant in the UK.

Amara is 40 years old and about 5ft tall. She used to be chubby but she never regained the weight she lost eating only her employer’s leftovers, and now her waist looks tiny in her belted trench coat. She dresses with care, her long hair set in soft 1950s waves one day and worn straight the next, with a smudge of grey eyeshadow and a slick of berry lipstick to match her handbag. Out of habit, and a residual fear of being caught and deported, she mostly speaks in a whisper. When we met in London in October, Amara asked that, for her safety, I give a false name and not reveal her nationality.

She grew up in south-east Asia, one of six siblings supported by money sent home each month by her mother, who had migrated to Macau, a wealthy special administrative region of China, to clean for rich families. After leaving school, she studied pharmacy at a prestigious private university, then transferred to a cheaper midwifery course when the fees became unaffordable. It was hard to find work as a midwife. It was often difficult to find any job, but sometimes she worked as a secretary. Her husband, a van driver, was often unemployed, too.

They had three children and lived with her in-laws to save money. Amara says they were neither rich nor poor, by which she means they could afford three meals a day but little else. When her son was about to turn 16, she realised that the only way she could afford to pay his college fees was to work abroad. (Her two daughters were 13 and six.) Amara’s mother warned her that the life of a domestic worker was brutal, but she shrugged off such concerns. “I said that, for me, if you just think of your children, everything will be easy. You can do anything for your children.” Now ­Amara concedes that she was only half right. Sometimes, thoughts of her children were the only thing that kept her going.

Things looked promising initially. She can’t remember exactly how much, but she had paid several thousand dollars to an ­employment agency for her medical clearances and to complete a training course in domestic work. She and her family were thrilled when she was offered a post at a royal palace in the United Arab Emirates, and even more so when her employers pushed back her start date by a month but paid her anyway. To celebrate her first monthly pay cheque of 1,600 dirhams (about £350), ­Amara took her children to their favourite restaurant, McDonald’s.

When she finally left her home country in September 2013, her husband and children accompanied her to the airport. The children were distracted by the promise of another McDonald’s meal on the way home, and Amara’s sadness at saying goodbye was tempered by the excitement of her first ever plane journey and the feeling that her plans were finally working out.

The flight landed in Dubai at 4am, and Amara and another maid were met by a driver. As soon as they were in the car, the driver took away their passports. Then he drove them to their temporary lodgings, where they were shown to a room with a double bed, a television and a small bathroom. There were security guards stationed at the entrance to the building who barred the two maids from going outside. Their lack of freedom seemed strange, but they were comfortable enough. Someone delivered three meals a day, and they spent their time watching television and thinking, over and over again, “We’re so lucky!”

After four days, Amara was taken to her employer’s home. It was not, as she’d been expecting from her contract, a royal household, but even so she’d never seen anywhere so grand. “It’s like a palace,” she says of her boss’s home. There were two vast rooms for entertaining, decorated with gold furnishings. Upstairs were five large bedroom suites, each with its own bathroom and reception area. A swimming pool was being dug outside. Amara thought the garden was enormous: whichever window she looked out of she could not see where the landscaped lawn ended and the rest of Dubai began. But she could not be certain – because for the ten months she lived with the family in the United Arab Emirates she was forbidden from going outside.

“Sometimes people think that if you’re living in a huge, nice house, even if you’re a household worker you’re lucky, because your employers are rich. But they don’t know what’s happening inside the house,” she told me.

Usually she worked from 6am until 1am or 2am. Even after she had gone to sleep, on the bare floor of the servants’ quarters, she would often be shouted for to fetch a glass of water or run some other errand, and so Amara started wearing her uniform through the night. Once a month, a driver was despatched to buy phone cards and the household staff were allowed to call their families to confirm that their salaries had been remitted; but otherwise she could not speak to her husband or children.

The abuse grew steadily worse, particularly after another servant was taken away by the police and sent home under mysterious circumstances. Her boss, whom Amara still calls “Madam”, started cutting down on the number of meals the remaining two maids were given, until eventually they received no food at all and had to scavenge the leftovers from the family’s dinners. Madam began cutting Amara’s salary as punishment for the smallest infractions, and after nine months she stopped paying her. When Madam’s husband was home he was a moderating influence and Madam would speak to Amara politely and without raising her voice, but he travelled often. In his absence, Madam’s moods grew increasingly volatile. She shouted at Amara, hit her and threw clothes and drinking glasses at her.

When Amara was told in the summer of 2014 that she was accompanying the ­family to the UK, she prayed that her visa would be rejected so that she would be able to stay behind and get some rest. But at the last minute her paperwork came through and Amara accompanied the family on a private jet to London.

***

In 2015, the UK granted 17,352 visas for domestic workers – cleaners, nannies, drivers, cooks, and so on – to accompany wealthy families visiting the UK. The largest number of domestic workers, more than 8,000, were originally from the Philippines, followed by Indians and Indonesians. According to the Home ­Office, roughly three-quarters of them were working for households from the Gulf, which often travel to Britain for business, shopping and medical treatment, or to escape the Middle East’s sweltering summer heat.

Until 2012, household staff were granted visa terms similar to those for other migrant workers: they were allowed to change employer, but not job sector; they could be accompanied by their partner or children; and after five years in the UK they were permitted to apply for indefinite leave to ­remain, meaning they could settle in Britain permanently.

But five years ago, the coalition government introduced new regulations for overseas domestic workers (ODWs), ostensibly to try to reduce net migration. A 2012 Home Office impact-assessment document mooted the idea of abolishing the ODW visa altogether, so that visiting families would have to recruit household staff from within the UK.

Families might want to bring their domestic staff with them for benign reasons, such as their children being attached to their nanny. But sometimes employers choose to hire servants overseas because British workers would never accept the gruelling conditions under which they work. This, at least, was the conclusion drawn by one employment tribunal in 2015, which ruled in favour of an Indian maid who took legal action against her bosses over religious discrimination, unfair dismissal and illegal working conditions. The tribunal concluded that the only reason the employers had made no effort to recruit a maid in Britain was that they “wanted a servant in the Indian style. They wanted someone who would be not merely of service but servile, who would not be aware of United Kingdom employment rights . . .”

The ODW visa was not scrapped; the Home Office document expressed concern that doing so could “deter wealthy visitors” to the UK. (The US and a number of European countries also have special visa schemes for domestic workers accompanying visiting families, but the rules vary.) Instead, under a new system introduced in April 2012, ODWs were permitted to stay in the UK for no longer than six months. They could not be accompanied by their immediate family or apply for indefinite leave to remain. And, crucially, they were prevented from changing employer.

For domestic workers employed by Gulf households the new rules were familiar: they mirrored the widely criticised kafala, or sponsorship, system, which is common among the oil-rich Arab states. Kafala, which prevents migrant workers from leaving abusive employers without losing the right to work, has contributed to the widespread abuse and exploitation of financially desperate labourers and domestic workers across the region. No migrant workers in the UK other than ODWs faced such restrictions. In October, I met Father Aodh O’Halpin, a missionary now based in London who has campaigned for domestic workers’ rights for decades. He described the UK’s ODW visa rules as “a recipe for slavery”.

The change of rules had an alarming and almost immediate effect. Research by Kalayaan, a small London-based charity that supports overseas domestic workers in the UK, suggests that rates of abuse shot up. Among workers who registered with the charity between 2012 and 2015, 81 per cent of those on the new tied visas were given no time off, against 66 per cent of those still on the old system. Two-thirds of workers on tied visas were barred from leaving the house freely (against 41 per cent with non-tied visas), more than 30 per cent were not paid for their work (against 11 per cent) and 14 per cent reported physical abuse (against 9 per cent). Kalayaan staff identified 64 per cent of the ODWs on tied visas as victims of trafficking, meaning that their employers forced or coerced them into coming to the UK with the intention of exploiting them.

Even so, those campaigning for domestic worker rights in 2015 had some cause for optimism. The new ODW visa had a negligible impact on migration numbers. This was unsurprising, as even at their peak in 2012 ODWs and their dependants accounted for just 0.7 per cent of net migration. More significantly, the Conservative government had pledged to give priority to the abolition of modern slavery and human trafficking. In March 2015 parliament passed the landmark Modern Slavery Act, and the government committed to an independent review of the ODW visa to determine if its immigration rules were compatible with efforts to tackle slavery.

The review, by James Ewins QC, was published in December 2015 and its findings were unambiguous. “The existence of a tie to a specific employer and the absence of a universal right to change employer and apply for extensions of the visa are incompatible with the reasonable protection of overseas domestic workers while in the UK,” he concluded. He recommended that household workers be allowed to change employers freely and extend their visas for up to two and a half years, a period he described as the “minimum” required. Abused domestic workers “need the freedom to change employment, which in turn requires that they stay for long enough to be able to find safe alternative employment”, Ewins wrote.

Yet the subsequent bill for the Immigration Act 2016 rejected many of Ewins’s recommendations. It granted ODWs the right to change employer, but did not allow them to extend their visa beyond six months. Campaigners argue that this concession is meaningless, because once abused workers have summoned up the courage and the means to leave their employers, most will find it impossible to find decent, short-term work before their visa expires.

I asked the Home Office to respond to these points. A spokesman said the government was introducing additional reforms to protect ODWs, including mandatory information sessions to inform workers of their rights, and pointed to special provisions and support for victims of slavery and human trafficking.

Under the new act, ODWs who are identified as having been enslaved or trafficked – a decision that follows a long and arduous process, known as the National Referral Mechanism (NRM) – can be granted a visa of up to two years, provided they can prove they are able to support themselves financially in the UK. Ewins’s report and rights campaigners have argued that this does not do enough to protect domestic workers.

For a start, many forms of abuse commonly experienced by household staff fall short of legal definitions of trafficking or slavery. “Do we need to be raped, to be beaten, to be starved to death to access protection?” Marissa Begonia, an overseas domestic worker from the Philippines and a rights campaigner, asked me.

Second, many abused domestic workers are fearful of seeking referral to the NRM. They know that if their claim is rejected they will be sent home. Emily-Anna Gibbs is a solicitor and co-founder of the independent Anti-Trafficking and Labour Exploitation Unit (ATLEU), and often represents domestic workers. She told me that the NRM “provides no escape clause for the thousands of overseas domestic workers who are trafficked and are faced with the choice: do I escape and take a load of risk ­going through the NRM, which I know very little about, getting legal advice which I fear I won’t understand and risking my livelihood? Do I take that risk? Or do I sit tight, suffer this exploitation, continue to do so because I have to pay the school fees for my kids’ education next month?” As a result, she believes, many domestic workers continue to suffer in secret.

All the advocacy groups and lawyers I spoke to agreed that the best way to protect domestic workers from being enslaved or trafficked, and the only way to empower them to flee abuse, is to allow them to extend their visas and switch employers freely. “It’s about the power relations: they can negotiate, because they can ultimately withdraw their labour,” said Kate Roberts, the head of the Human Trafficking Foundation. “If they can’t do that, there’s very little they can do to challenge any mistreatment, which can worsen until it reaches the point of exploitation – including slavery.”

***

At UK immigration control, Amara saw her passport for the last time. Her boss handed it to her in the customs queue, and then confiscated it again shortly afterwards. From the airport, she travelled with the family to the house in Ascot. No one told her where she was going, so she became disorientated. Madam’s ten-year-old asked Amara where she thought she was and then laughed when Amara replied: “London.” “We’re not in London, stupid. We’re in England,” the girl said.

In Ascot, Amara shared a bedroom with the other maid. The room, which had two single beds and an en suite shower, doubled as a laundry room and extra storage space for the family. Despite the slight improvement in her sleeping arrangements, Amara’s working conditions deteriorated. The family preferred staying in a central London hotel to being at their Ascot residence, so Amara would often clean the house in the morning before being driven to the hotel to wash and iron her bosses’ clothes, returning late at night. She was not paid, and still could not contact her family.

Madam’s behaviour became more menacing. She became convinced that Amara was a witch. “She says she got ill just because I looked at her food. She said, ‘You will pay for this. You will pay for everything you’ve done to me when we get back to Dubai,’” Amara told me. Afraid that Madam might seriously hurt, or even kill, her, she began planning her escape. She had been working for the family in England for 15 days and knew she had a week until they were due to return to the UAE.

Amara was able to run away thanks to a few bits of luck. The first was that before her household colleague in Dubai was sent home, she gave Amara her tablet computer and instructed her to hide it. The second was that Amara decided to risk asking one of Madam’s daughters for the wifi password at the Ascot house, even though she was “99.9 per cent certain” the teenager would not give it to her. The gamble paid off.

When her employers were staying in London it was not hard for Amara to leave the house, but with no money, no passport and no idea of where to go next she knew she couldn’t get far on her own. Her final stroke of good fortune was that she knew one person in the UK, an old friend from her home country who was working as an undocumented domestic worker in London and whom she contacted on Facebook. As Amara was still not sure where she lived, the friend instructed her to memorise the road signs when she was driven from London to her employer’s house, which she did.

After picking her up early that summer morning in 2014, the friend let Amara stay with her for a month, lent her clothes and helped her find part-time, casual work, often covering for other people’s sick leave or holidays.

Amara’s former employers appear not to have tried to track her down. A few months after leaving, she managed to get in touch with the maid who had worked with her in Ascot. She was surprised to hear from Amara, because she had been told by Madam that she was in prison. That woman is still working for the family in Dubai.

For over two years, Amara managed to scrape a living in London. As cleaning work was poorly paid and the hours unpredictable, she taught herself cake-making and sugarcraft by watching YouTube videos and began supplementing her income by selling cakes. She showed me pictures on her phone of some of her past creations: a Thomas the Tank Engine birthday cake; a sponge expertly decorated with an icing baby for a new arrival; another cake draped in a sweet Australian flag for a leaving party. Now that she is able to, she calls her husband and children daily and although, at ten, her youngest is too old for lullabies, Amara sings to her every night before she goes to bed. In her absence, her husband and her in-laws have been raising her children. She has not seen them since they waved goodbye to her at the airport, three and a half years ago.

Amara imposed a strict budget on herself, spending no more than £10 to £20 a week on food, toiletries and clothes, which allowed her to send roughly £200 a month back home. Her family had no idea how dearly Amara paid for these monthly remittances. To avoid upsetting or worrying them, she has never told them that she was abused, that she ran away from her employer, or that she is now undocumented.

Amara might have continued living underground in London indefinitely, ­devoting herself wholly to her family and hoping that with enough hard work she could distract herself from the gnawing fear of being caught and expelled from the UK. But a few weeks before we met, a shock event toppled her precarious new equilibrium. The boarding house in which her rescuer and friend was living was raided by the UK Border Agency, and her closest confidante was deported. Heartbroken and shaken, Amara realised she needed to address her legal status before she suffered the same misfortune.

***

Abused domestic servants do not fit the popular image of slavery. They sometimes arrive in the UK in private jets, and are chauffeured to elegant townhouses in Mayfair, diplomatic residences, sprawling country piles or five-star hotels. The domestic worker and campaigner Marissa Begonia described some of her experiences to me as being “caged in paradise”.

Domestic workers are often hidden in plain sight. Many of them gather every Sunday morning at the union offices of Unite in central London for a meeting of Justice for Domestic Workers, or J4DW – a campaign group that often starts its sessions with a singing and aerobics class to shake off another exhausting week’s work.

On the morning I attended, the first arrivals pushed the chairs and tables against the walls of a conference room, muttering about the bad habits of “corporates” as they efficiently cleared the dance floor of sugar sachets and scraps of notepaper. One woman rushed to change out of her uniform, having just finished an early-morning shift, and the others began stretching to upbeat pop music. The mood lifted quickly, rising to defiance when the group practised a song that I initially mistook as a straight rendition of Gloria Gaynor’s “I Will Survive”, until I caught the lyrics:

 

At first I was afraid, I was petrified

Hiding and running from it all, justice not on my side

But then I spent so many nights, thinking how they did me wrong

So I grew strong,

I learned how to move along.

Then I found you, a group of hope . . .

 

J4DW was founded in 2009 and is run by domestic workers, many of whom spend their only day off volunteering for the group. It is lobbying the government to change British visa regulations and offers its membership of more than 1,200 workers a range of support services, pointing them towards legal advice, providing courses in IT, English and employment rights, and occasionally organising rescue missions for those held captive by abusive employers.

Its weekly gatherings offer an opportunity for people living far from home, in a country whose language they might barely speak, to make friends. Even for those who are treated well by their employers, life is tough. Women spoke to me about unfaithful husbands and marriages strained by years spent apart, or their feelings of guilt and sadness at raising other people’s babies while their own children grew up without them.

Even so, the atmosphere at the meetings is warm, friendly and stubbornly optimistic. One woman cried as she shared the news of her recent cancer diagnosis, and a group closed around her to urge her to stay positive, to keep praying and to speak to another member who had proudly described herself to me earlier as a “Stage IV cancer survivor”. Amara first visited J4DW days after her friend was deported. “They gave me my confidence back,” she said.

Marissa Begonia, the 46-year-old mother-of-three who is also J4DW’s co-ordinator, seemed subdued when we first met. “I Will Survive” rehearsals could be heard ­taking place in the neighbouring room as she coached Sarah (not her real name) for a job interview. Together, they hunched over ­Begonia’s smartphone to plan the journey to the interview, then she instructed Sarah on how to negotiate reasonable working conditions by demanding holidays and days off, overtime pay, a daily rest period and a wage of at least £8 an hour.

Sarah, a Filipina, was staying temporarily with Begonia, having been rescued by a group of J4DW members from a house in Kensington, central London, a few weeks earlier. She is 36 years old but looks and sounds much younger, with a high, hesitant voice and a permanent uncertain smile. At a playground in Hyde Park she had met and befriended a J4DW member, who put her in touch with the group on Facebook after Sarah confided that she was earning just $400 (about £320) a month and working around the clock, with no days off. She had no winter clothes and because her employers rarely provided her with food, she subsisted mainly on coffee and the occasional biscuit. She described her travel to the UK from Dubai as a “suicide run”: her salary was too low to support her family, but what else could she do?

Despite her ordeal, Sarah believed that she was unlikely to be recognised as a victim of trafficking and did not want to be referred to the NRM in case her claim was rejected and she was deported. Her six-month visa would expire in two months, but she did not feel she could go back to the Philippines yet. She still needed to save enough capital for her siblings to start their own small business and for their children to go to college. As she saw it, her only option was to work in the UK illegally.

After Sarah left for her interview, Begonia sighed and told me that she was unlikely to heed her advice. She thought that Sarah, like many other ODWs, would be desperate to accept any work offered, and employers often realise that undocumented workers are unlikely to complain if they are exploited. Begonia was right. In the end, Sarah was offered £350 a week to work 15-hour days cooking, cleaning and looking after two children. She would have Sundays off, but would not receive holiday pay. Even if the employers, a Pakistani family living in London, stuck to the agreement and did not extend her working hours, she would in effect be paid £3.88 an hour (the minimum wage is £7.20). “I hope they don’t treat me like a robot,” Sarah said to me, when we met again a few hours after her interview.

J4DW’s members are almost all women, but they follow many different religions and are ethnically diverse. A large number are from the Philippines, but some are from other countries in south-east Asia, or sub-Saharan Africa. Some have been in the UK for years and now have British citizenship; others are working illegally. Many have harrowing stories to tell of abuse and ill-treatment, and although the details vary they are linked by a common thread: every woman had torn herself away from her loved ones in the hope of giving them a better life, and no amount of hardship had persuaded them to abandon that goal.

Begonia was no exception. She was exhausted. Sundays were her only full day off, and because her employers had a new baby she had started working 12-hour days. She would normally have contested this change, but her father had heart problems and while she had to worry about his medical bills she could not afford to risk her job.

She was used to having to pick her battles, even if that wasn’t something that came easily to her. She described herself as a “natural fighter”. She told me the story of how an employer in Hong Kong had attempted to sexually assault her. Begonia managed to escape to her room and barricaded herself in while she packed her belongings and wrote her resignation letter. Then she crept outside to hide all the kitchen knives bar one. “He’s big, and I’m so tiny. I give the resignation letter and my knife is like this,” she said, holding up an imaginary weapon. “I said, ‘Sir, I’m resigning with effect today because you’re a sex maniac.’”

Begonia first arrived in the UK in 2004, and five years later, having escaped from an abusive employer, she helped found J4DW. Her children now live with her in the UK and she has acquired British citizenship. She has been the group’s co-ordinator since 2012, and some of its members call her “auntie” as a mark of respect. She spends much of her time offering practical help for other workers, arranging donations of clothes for women in need, liaising with the police and angry ex-employers and, sometimes, hammering on strangers’ doors to extract servants trapped inside. She has also represented the group in parliament and at party conferences, and often speaks at forums for international workers. Begonia wants domestic workers to appreciate the bigger picture and to join her in seeking greater social and political recognition for those who are in their situation.

“We look after families, the building blocks of society,” she said, but people “don’t value domestic work as work and they don’t really respect domestic workers as workers”. She urges J4DW members to view their struggle as part of a broader fight against low pay and poverty in the UK. At one meeting she encouraged the women to see the recent Ken Loach film I, Daniel Blake to help them understand the problems faced by “vulnerable British workers”. “We are affected if British workers are affected,” she told the group.

As Begonia described her mission to me she grew more animated, her tiredness ­temporarily displaced by anger and frustration. Abused domestic workers have so few avenues for legal redress that J4DW can rarely offer much more than emergency ­assistance, moral support and help with finding new work.

She wants to give members of J4DW the confidence to join demonstrations and speak out in public, and many of them do – if they can. Yet domestic workers who have overstayed their visa, or who are stuck in exploitative jobs, cannot campaign for their own rights.

Begonia says that when she speaks in public she often reminds her audience of this, telling them: “I am a perfect example of how slavery could end. It has to end; it will end. But domestic workers need these rights. That’s what I had.”

***

The day after her friend’s boarding house was raided and she was deported, Amara visited Kalayaan. The charity determined that her trafficking case was sufficiently strong to refer her to the National Referral Mechanism. She is now waiting for a “conclusive grounds decision”, which would determine whether she can be formally recognised as a victim of trafficking and might thereby be eligible for a two-year visa. If her trafficking claim is rejected, she will have to leave the UK.

Amara does not know how long she will have to wait: according to Kate Roberts of the Human Trafficking Foundation, those referred to the NRM can be left waiting for anything between 45 days and several years for a decision. Nor does Amara know how good her chance of success is. The government does not publish data on the number of overseas domestic workers who are referred to the NRM and are formally recognised as victims of trafficking.

Amara has little grounds for hope that her former employers will ever be brought to justice. As diplomats, they are immune from criminal jurisdiction. In February 2015 a Filipina national identified in court documents as Ms C Reyes, who had been trafficked to the UK by Saudi diplomats, took her former employers to a tribunal, claiming racial discrimination, harassment and payment of less than the minimum wage. She lost the case. The Court of Appeal judgment acknowledged that “this may seem unfair to Ms Reyes”, but, it argued, “sometimes the apparent unfairness to an individual is outweighed by the harm that would be caused by a failure to give effect to diplomatic immunity in circumstances such as those that have arisen in this case”. (The case is under appeal at the Supreme Court, and will be heard in May.)

While she is under the NRM, Amara cannot be deported, which she considers a small relief. To distract herself from the agonising wait, she is spending as much time as possible at J4DW. She often participates in the singing and dancing sessions, and takes English and IT classes – anything to keep busy. When she speaks to her family on FaceTime every evening, her ten-year-old daughter becomes tearful and asks when she is going to come home. Amara warns her that it could be a little while yet.

“I’m praying the Home Office will give a positive conclusion so I can apply for a two-year visa,” she said. “I don’t want to stay here for ten years. What I want is to be here for two years, just so I can save. So at least I can have something when I get back to my house.”

Sophie McBain is an NS contributing writer

Sophie McBain is a freelance writer based in Cairo. She was previously an assistant editor at the New Statesman.

This article first appeared in the 09 February 2016 issue of the New Statesman, The May Doctrine