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John Pilger: Britain, America and the war on democracy

From the Chagos Islands to Pakistan, innocent civilians are pawns to America, backed by Britain. In our compliant political culture, this deadly game seldom speaks its name.

Lisette Talate died the other day. I remember a wiry, fiercely intelligent woman who masked her grief with a determination that was a presence. She was the embodiment of people's resistance to the war on democracy. I first glimpsed her in a 1950s Colonial Office film about the Chagos Islanders, a tiny creole nation living midway between Africa and Asia in the Indian Ocean. The camera panned across thriving villages, a church, a school, a hospital, set in phenomenal natural beauty and peace. Lisette remembers the producer saying to her and her teenage friends, "Keep smiling, girls!"

Sitting in her kitchen in Mauritius many years later, she said: "I didn't have to be told to smile. I was a happy child, because my roots were deep in the islands, my paradise. My great-grandmother was born there; I made six children there. That's why they couldn't legally throw us out of our own homes; they had to terrify us into leaving or force us out. At first, they tried to starve us. The food ships stopped arriving, [then] they spread rumours we would be bombed, then they turned on our dogs."

In the early 1960s, the Labour government of Harold Wilson secretly agreed to a demand from Washington that the Chagos archipelago, a British colony, be "swept" and "sanitised" of its 2,500 inhabitants so that a military base could be built on the principal island, Diego Garcia. "They knew we were inseparable from our pets," said Lisette. "When the American soldiers arrived to build the base, they backed their big trucks against the brick shed where we prepared the coconuts; hundreds of our dogs had been rounded up and imprisoned there. Then they gassed them through tubes from the trucks' exhausts. You could hear them crying."

Lisette, her family and hundreds of the other islanders were forced on to a rusting steamer bound for Mauritius, a journey of a thousand miles. They were made to sleep in the hold on a cargo of fertiliser - bird shit. The weather was rough; everyone was ill; two of the women on board miscarried.

Dumped on the docks at Port Louis, Lisette's youngest children, Jollice and Regis, died within a week of each other. "They died of sadness," she said. "They had heard all the talk and seen the horror of what had happened to the dogs. They knew they were leaving their home for ever. The doctor in Mauritius said he could not treat sadness."

This act of mass kidnapping was carried out in high secrecy. In one official file, under the heading "Maintaining the Fiction", the Foreign Office legal adviser exhorts his colleagues to cover their actions by "reclassifying" the population as "floating" and to "make up the rules as we go along". Article 7 of the Rome Statute of the International Criminal Court says the "deportation or forcible transfer of population" is a crime against humanity. That Britain had committed such a crime - in exchange for a $14m discount off a US Polaris nuclear submarine - was not on the agenda of a group of British "defence" correspondents flown to the Chagos by the Ministry of Defence when the US base was completed. "There is nothing in our files," said the MoD, "about inhabitants or an evacuation."

Today, Diego Garcia is crucial to America's and Britain's war on democracy. The heaviest bombing of Iraq and Afghanistan was launched from its vast airstrips, beyond which the islanders' abandoned cemetery and church stand like archaeological ruins. The terraced garden where Lisette laughed for the camera is now a fortress housing the "bunker-busting" bombs carried by bat-shaped B-2 aircraft to targets on two continents; an attack on Iran will start here. As if to complete the emblem of rampant, criminal power, the CIA added a Guantanamo-style prison for its "rendition" victims and called it Camp Justice.

Wipe-out

What was done to Lisette's paradise has an urgent and universal meaning, for it represents the violent, ruthless nature of a whole political culture behind its democratic façade, and the scale of our own indoctrination in its messianic assumptions, described by Harold Pinter as a "brilliant, even witty, highly successful act of hypnosis". Longer and bloodier than any other war since 1945, waged with demonic weapons and a gangsterism dressed as economic policy and sometimes known as globalisation, the war on democracy is unmentionable in western elite circles. As Pinter wrote, "It never happened . . . Even while it was happening it wasn't happening." Last July, the American historian William Blum published his updated "summary of the charming record of US foreign policy". Since the Second World War, the United States has:

1) Attempted to overthrow more than 50 governments, most of them democratically elected.
2) Attempted to suppress a populist or national movement in 20 countries.
3) Grossly interfered in democratic elections in at least 30 countries.
4) Dropped bombs on the people of more than 30 countries.
5) Attempted to assassinate more than 50 foreign leaders.

In total, the United States has carried out one or more of these actions in 69 countries. In almost all cases, Britain has been a collaborator. The "enemy" changes in name - from communism to Islamism - but mostly it is the rise of democracy independent of western power, or a society occupying strategically useful territory and deemed expendable, like the Chagos Islands.

The sheer scale of suffering, let alone criminality, is little known in the west, despite the presence of the world's most advanced communications, nominally freest journalism and most admired academy. That the most numerous victims of terrorism - western terrorism - are Muslims is unsayable, if it is known. That half a million Iraqi infants died in the 1990s as a result of the embargo imposed by Britain and America is of no interest. That extreme jihadism, which led to the 11 September 2001 attacks, was nurtured as a weapon of western policy (in "Operation Cyclone") is known to specialists, but otherwise suppressed.

While popular culture in Britain and America immerses the Second World War in an ethical bath for the victors, the holocausts arising from Anglo-American dominance of resource-rich regions are consigned to oblivion. Under the Indonesian tyrant Suharto, anointed "our man" by Margaret Thatcher, more than a million people were slaughtered in what the CIA described as "the worst mass murder of the second half of the 20th century". This estimate does not include the third of the population of East Timor who were starved or murdered with western connivance, British fighter-bombers and machine-guns.

These true stories are told in declassified files in the Public Record Office, yet represent an entire dimension of politics and the exercise of power excluded from public consideration. This has been achieved by a regime of uncoercive information control, from the evangelical mantra of advertising to soundbites on BBC news and now the ephemera of social media.

It is as if writers as watchdogs are extinct, or in thrall to a sociopathic zeitgeist, convinced they are too clever to be duped. Witness the stampede of sycophants eager to deify Christopher Hitchens, a war lover who longed to be allowed to justify the crimes of rapacious power. "For almost the first time in two centuries," wrote Terry Eagleton, "there is no eminent British poet, playwright or novelist prepared to question the foundations of the western way of life." No Orwell warns that we do not need to live in a totalitarian society to be corrupted by totalitarianism. No Shelley speaks for the poor, no Blake proffers a vision, no Wilde reminds us that "disobedience, in the eyes of anyone who has read history, is man's original virtue". And grievously no Pinter rages at the war machine, as in "American Football":

Hallelujah.
Praise the Lord for all good things . . .
We blew their balls into shards of dust,
Into shards of fucking dust . . .

Into shards of fucking dust go all the lives blown there by Barack Obama, the Hopey Changey of western violence. Whenever one of Obama's drones wipes out an entire family in a faraway tribal region of Pakistan, or Somalia, or Yemen, the American controllers sitting in front of their computer-game screens type in "Bugsplat". Obama likes drones and has joked about them with journalists. One of his first actions as president was to order a wave of Pre­dator drone attacks on Pakistan that killed 74 people. He has since killed thousands, mostly civilians; drones fire Hellfire missiles that suck the air out of the lungs of children and leave body parts festooned across scrubland.

Remember the tear-stained headlines as Brand Obama was elected: "Momentous, spine-tingling" (the Guardian). "The American future," Simon Schama wrote, "is all vision, numinous, unformed, light-headed with anticipation." The San Francisco Chronicle saw a spiritual "Lightworker . . . who can . . . usher in a new way of being on the planet". Beyond the drivel, as the great whistleblower Daniel Ellsberg had predicted, a military coup was taking place in Washington, and Obama was their man. Having seduced the anti-war movement into virtual silence, he has given America's corrupt military officer class unprecedented powers of state and engagement. These include the prospect of wars in Africa and opportunities for provocations against China, America's largest creditor and the new "enemy" in Asia. Under Obama, the old source of official paranoia, Russia, has been encircled with ballistic missiles and the Russian opposition infiltrated. Military and CIA assassination teams have been assigned to 120 countries; long-planned attacks on Syria and Iran beckon a world war. Israel, the exemplar of US violence and lawlessness by proxy, has just received its annual pocket money of $3bn together with Obama's permission to steal more Palestinian land.

Surveillance state

Obama's most "historic" achievement is to bring the war on democracy home to America. On New Year's Eve, he signed the National Defence Authorisation Act, a law that grants the Pentagon the legal right to kidnap both foreigners and US citizens secretly and indefinitely detain, interrogate and torture, or even kill them. They need only "associate" with those "belligerent" to the US. There will be no protection of law, no trial, no legal representation. This is the first explicit legislation to abolish habeas corpus (the right to due process of law) and, in effect, repeal the Bill of Rights of 1789.

On 5 January, in an extraordinary speech at the Pentagon, Obama said the military would not only be ready to "secure territory and populations" overseas but to fight in the "homeland" and "support [the] civil authorities". In other words, US troops are to be deployed on the streets of American cities when the inev­itable civil unrest takes hold.

America is now a land of epidemic poverty and barbaric prisons - the consequence of a "market" extremism that, under Obama, has prompted the transfer of $14trn in public money to criminal enterprises in Wall Street. The victims are mostly young, jobless, homeless, incarcerated African Americans, betrayed by the first black president. The historic corollary of a perpetual war state, this is not fascism, not yet, but neither is it democracy in any recognisable form, regardless of the placebo politics that will consume the news until November. The presidential campaign, says the Washington Post, will feature "a clash of phil­osophies rooted in distinctly different views of the economy". This is patently false. The circumscribed task of journalism on both sides of the Atlantic is to create the pretence of political choice where there is none.

The same shadow is across Britain and much of Europe, where social democracy, an article of faith two generations ago, has fallen to the central bank dictators. In David Cameron's "big society", the theft of £84bn in jobs and services exceeds even the amount of tax "legally" avoided by piratical corporations. Blame rests not with the far right, but with a cowardly liberal political culture that has allowed this to happen and which, as Hywel Williams wrote following the 9/11 attacks, "can itself be a form of self-righteous fanaticism". Tony Blair is one such fanatic. In its managerial indifference to the freedoms that it claimed to hold dear, bourgeois Blairite Britain created a surveillance state with 3,000 new criminal offences and laws: more than for the whole of the previous century. The police clearly believe they have an impunity to kill. At the demand of the CIA, cases like that of Binyam Mohamed, an innocent British resident tortured and then held for five years in Guantanamo Bay, will be dealt with in secret courts in Britain in order to "protect the intelligence agencies" - the torturers.

This invisible state allowed the Blair government to fight the Chagos Islanders as they rose from their despair in exile and demanded justice in the streets of Port Louis and London. "Only when you take direct action, face to face, even break laws, are you ever noticed," Lisette said. "And the smaller you are, the greater your example to others." Such is the eloquent answer to those who still ask, "What can I do?"

I last saw Lisette's tiny figure standing in driving rain next to her comrades outside the Houses of Parliament. What struck me was the enduring courage of their resistance. It is this refusal to give up that rotten power fears, above all, knowing it is the seed beneath the snow.

John Pilger, renowned investigative journalist and documentary film-maker, is one of only two to have twice won British journalism's top award; his documentaries have won academy awards in both the UK and the US. In a New Statesman survey of the 50 heroes of our time, Pilger came fourth behind Aung San Suu Kyi and Nelson Mandela. "John Pilger," wrote Harold Pinter, "unearths, with steely attention facts, the filthy truth. I salute him."

This article first appeared in the 23 January 2012 issue of the New Statesman, Has the Arab Spring been hijacked?

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The optimism error

We are told that austerity has triumphed and that the British economy is running full steam ahead. The reality is more alarming.

In Cardiff last Thursday, 7 January, George Osborne warned of a “dangerous cocktail of new threats” to Britain’s prosperity. These include collapsing global stock-market and commodity prices, weak growth in China and Latin America, stagnation in Europe and turbulence in the Middle East. Osborne was right to prepare us for “headwinds”. What he could not admit was that the fragility of the British recovery he now discerns – just two months after his triumphal Autumn Statement – is due, in no small measure, to his own austerity policies.

The unpalatable truth is that austerity in the face of the private-sector collapse of 2008-2009 has weakened our ability to produce output. Britain has been left overfinancialised, overborrowed and underinvested. It is not surprising that it is exceptionally exposed to any global downturn.

Before John Maynard Keynes it was believed, by economists at least, that a competitive market would normally produce full employment. As the facts of experience appeared to indicate otherwise, economists, prompted by Keynes, sharpened up their theory. A market economy would ­always lead to full employment provided wages and prices were flexible. Workers, if facing unemployment, had only to accept wage reductions to “price themselves back into work”.

However, as it seemed unrealistic to suppose that workers would do this – or do it quickly enough – government policy could short-circuit the painful process of adjustment. When a slump threatened or occurred, a government could stimulate spending by cutting interest rates and by incurring budget deficits. This was the main point of the Keynesian revolution.

This policy ran from the 1950s to the 1970s. It was overthrown in the 1980s, when unemployment prevention became confined to interest-rate policy, eventually run by the central bank, not the government. By keeping the rate of inflation constant, the monetary authority could keep unemployment at its “natural rate”. This worked quite well for a time, but then, following the widespread failure of the banking system, the world economy collapsed in 2008.

In a panic, the politicians, from Barack Obama to Gordon Brown, took Keynes out of the cupboard, dusted him down, and “stimulated” the economy like mad. When this produced some useful recovery they got cold feet. “Keynes,” they said, “you’ve done your job. Back in the cupboard you go.” I wrote a book at the time called The Return of the Master. A reviewer pointed out that the Master had returned for six months only.

Why had the politicians’ nerve failed and what were the consequences?

The answer is that in bailing out leading banks and allowing budget deficits to soar, governments had incurred huge debts that threatened their financial credibility. It was claimed that bond yields would rise sharply, adding to the cost of borrowing. This was never plausible in Britain, but bond yield spikes threatened default in Greece and other eurozone countries early in 2010. Long before the stimulus had been allowed to work its magic in restoring economic activity and government revenues, the fiscal engine was put into reverse, and the politics of austerity took over.

Yet austerity did not hasten recovery; it delayed it and rendered it limp when it came. Enter “quantitative easing” (QE). The central bank would flood the banks and
pension funds with cash. This, it was expected, would cause the banks to lower their interest rates, lend more and, by way of a so-called wealth effect, cause companies and high-net-worth individuals to consume and invest more. But it didn’t happen. There was a small initial impact, but it soon petered out. Bank lending, an important index of recovery, in fact went down as the institutions sat on piles of cash and the wealthy speculated in property.

So we reach the present impasse. Events have confirmed that a competitive market economy is subject to severe collapses, and the effects of these linger in the form of elevated unemployment, lower output, lower productivity and increased poverty. At the same time, however, counter-cyclical policy is disabled. Monetary expansion is much less potent than people believed; and using the budget deficit to fight unemployment is ruled out by the bond markets and the ­Financial Times. The levers either don’t work, or we are not allowed to pull them. Where do we go from here?

 

The present situation

The first thing is to establish where we now are. How much recovery has there been in Britain? Economists try to answer this question with reference to the output gap – the difference between what an economy is actually producing and what it can produce. The OECD’s most recent estimate of this gap in the UK stands at a negligible -0.017 per cent. We might conclude from this that the British economy is running full steam ahead and that we have, at last, successfully recovered from the crash. This is the basis of George Osborne’s triumphalism. His critics, including myself, have been proved wrong. His austerity policies have worked. Or so we are told.

But such a conclusion would be premature. Although we are producing as much output as we can, our capacity to produce output has fallen. This can be shown by comparing the current economic situation to where we would expect to be, according to the historic trend.

From this perspective, championed by the Oxford economist Simon Wren-Lewis, the position is far less rosy. Growth in output per person in Britain (roughly “living standards”) averaged 2.25 per cent per year for the half-century before 2008. Recessions in the past have caused deviations downward from this path, but recoveries had delivered above-trend growth, lifting us back up to the previous path. One can say that the “business cycle” oscillates between errors of pessimism and errors of optimism. In other words, the loss of output is temporary.

This time it was different. The recovery from the financial crisis was the weakest on record, and the result of this is a yawning gap between where we are and where we should have been. Output per head is between 10 and 15 per cent below trend.

We are faced with a puzzle. If the output gap is as small as the OECD believes, then the British economy appears to have lost much of its productive potential. It is no longer a case of demand falling short of supply, leaving a surplus of workers and capital equipment. The supply is no longer available: we have lost eight years’ growth of productivity. Between 1971 and 2007 productivity growth averaged 2-3 per cent a year. Since the recession started it has been close to zero. Why is it that the recession turned spare capacity into lost capacity? One answer lies in the ugly word “hysteresis”.

 

Hysteresis

This is an idea borrowed from physics. If an insulated wire is wrapped around an iron bar, and an electric current is then passed along the wire, the iron bar becomes magnetised. Some of this magnetism remains even after the current has been switched off. A shock has a long-lasting effect. This is labelled hysteresis.

An economy experiences hysteresis not when output falls relative to potential output, but when potential output itself falls as a result of a recession. What happens is that the recession itself shrinks productive capacity: the economy’s ability to produce output is impaired.

The intuition behind it is simple enough: if you let a recession last long enough for capital and labour to rust away you will lose growth potential, on account of discouraged workers, lost skills, broken banks and missing investment in future productivity. By not taking steps to offset the negative shock of the recession with the positive shock of a stimulus, the coalition government cost the country 10 per cent or more of potential output.

The phenomenon of hysteresis is not ­necessarily captured by high levels of “headline” unemployment. In fact, low levels of unemployment may reflect low productivity growth, as employers prefer to use cheap workers to investing in machines: unemployed workers may be re-employed in part-time or minimum-wage or zero-hour contract jobs. Much of the new private-sector job creation lauded by the Chancellor is exactly in such low-productivity sectors. The collapse of investment is particularly serious, because investment is the main source of productivity.

The challenge for policy is to liquidate the hysteresis – to restore supply. How is this to be done?

 

Blockage of policy

An economic recession is precipitated by a fall in private spending, be it investment or consumption. It can be countered by monetary and fiscal policy, aiming either to stimulate private spending or to replace it temporarily by public spending. On the monetary front, the bank rate was dropped to near zero; this not being enough, the Bank of England pumped out hundreds of billions of pounds between 2009 and 2012, but too little of the money went into the real economy. As Keynes recognised, it is the spending of money, not the printing of it, which stimulates productive activity, and he warned: “If . . . we are tempted to assert that money is the drink which stimulates the system to activity, we must remind ourselves that there may be several slips ­between the cup and the lip.”

That left fiscal policy. Fiscal policy can fight recession by cutting taxes or increasing public spending. Both involve deliberately budgeting for a deficit. In Britain, any possible tolerance for a deficit larger than the one automatically caused by a recession was destroyed by fearmongering about unsustainable debt. From 2009 onwards, the difference between Labour and ­Conservative was about the speed of deficit reduction. The contribution that deliberate deficit budgeting might make to recovery was never mentioned, except by unreconstructed Keynesians.

So we now have a situation in which the main tools available to government to bring about a robust recovery are out of action. In addition, sole reliance on monetary policy for stimulus creates a highly unbalanced recovery. The money the government pours into the economy either sits idle or simply pumps up house prices, threatening to re-create the asset bubble that produced the crisis in the first place. We already have the highest rate of post-crash increase in house prices of all OECD countries. This suggests that the next crash may not be far off.

 

The public accounts trap

From 2009 onwards the main obstacle to a sensible recovery policy has been the obsession with balancing the national budget. A government can finance its spending in one of three ways: it can raise taxes, borrow from the private sector, or borrow from the Bank of England (that is, “print money”). Each has advantages and disadvantages, but public opinion has decided that the first of these – covering all spending by taxes – is the only “honest” way. In popular discourse, borrowing signifies a “deficit”, and a particular horror attaches to deficits, because they suggest the government is not “paying its way”. “We must get the deficit down” has been the refrain of all the parties.

Printing money to finance public investment has been suggested by both the Labour leader and the shadow chancellor as a way to get round the borrowing constraint. Its advantage is that it wouldn’t directly increase the national debt, because the government would only owe the money to itself. On the other hand, it might destroy confidence in the state’s ability to control its spending, and it would jeopardise the independence of the central bank. So, printing money to pay for public spending should only be a remedy of the last resort.

It is right to be concerned about a rising national debt (now roughly £1.6trn). But the way to reverse it is not to cut down the economy, but to cause it to grow in a sustainable way. In many circumstances, that involves deliberately increasing the deficit. This is a paradox too far for most people to grasp. But it makes perfect sense if the increased deficit causes the economy, and thus the government’s revenues, to grow faster than the deficit. If the economy is in the doldrums, practically all forms of government expenditure should be welcomed, as they utilise idle resources.

In our present situation, with little spare capacity, the government needs to think much more carefully about what it should be borrowing for. Public finance theory makes a clear distinction between current and capital spending. A sound rule is that governments should cover their current or recurrent spending by taxation, but should borrow for capital spending, that is, investment. This is because current spending gives rise to no government-owned assets, whereas capital spending does.

If these assets are productive, they pay for themselves by increasing government earnings, either through user charges or through increased tax revenues. If I pay for all my groceries “on tick” my debt will just go on rising. But if I borrow to invest in, say, my education, my increased earnings will be available to discharge my debt.

Covering current account spending by taxation is at the heart of the balanced budget rule. But as Thomas J Sargent, certainly no Keynesian, wrote in 1981 (Federal Reserve Bank of Minneapolis, Research Department Working Paper W): “The principles of classical economic theory condone deficits on capital account.”

Now is an ideal time for the government to be investing in the economy, because it can borrow at such low interest rates. But surely this means increasing the deficit? Yes, it does, but in the same unobjectionable way as a business borrows money to build a plant in the expectation that the investment will pay off. It is because the distinction between current and capital spending has become fuzzy through years of misuse and obfuscation that we have slipped into the state of thinking that all government spending must be balanced by taxes – in the jargon, that net public-sector borrowing should normally be zero. George Osborne has now promised to “balance the budget” – by 2019-20. But within this fiscal straitjacket the only way he can create room for more public investment is to reduce current spending, which in practice means cutting the welfare state.

 

A British Investment Bank

How can we break this block on capital spending? Several of us have been advocating a publicly owned British Investment Bank. The need for such institutions has long been widely acknowledged in continental Europe and east Asia, partly because they fill a gap in the private investment market, partly because they create an institutional division between investment and current spending. This British Investment Bank, as I envisage it, would be owned by the government, but would be able to borrow a multiple of its subscribed capital to finance investment projects within an approved range. Its remit would include not only energy-saving projects but also others that can contribute to rebalancing the economy – particularly transport infrastructure, social housing and export-oriented small and medium-sized enterprises (SMEs).

Unfortunately, the conventional view in Britain is that a government-backed bank would be bound, for one reason or another, to “pick losers”, and thereby pile up non-performing loans. Like all fundamentalist beliefs, this has little empirical backing. Two relevant comparators – the European Investment Bank and Germany’s KfW (Kreditanstalt für Wiederaufbau) – show that, in well-regulated financial systems, such banks pay for themselves. Neither bank has had to go back to its shareholder(s) to raise fresh money to cover losses. The EU is setting up a European Fund for Strategic Investments, which, with a capitalisation of €21bn, is expected to lever at least €315bn of investment over the first three years.

George Osborne has rejected this route to modernisation. Instead of borrowing to renovate our infrastructure, the Chancellor is trying to get foreign, especially Chinese, companies to do it, even if they are state-owned. Looking at British energy companies and rail franchises, we can see that this is merely the latest in a long history of handing over our national assets to foreign states. Public enterprise is apparently good if it is not British.

Britain already has two small state investment banks – the Green Investment Bank (GIB) and the British Business Bank. But the Treasury is so obsessed with avoiding any increase in the deficit that, up to this point, it has deprived these newly formed institutions of any power to borrow. This has restricted their investment potential. The Green Investment Bank was capitalised with £3.8bn of public funds in 2012; it has so far invested £2bn. Now the government proposes to privatise the GIB, because “it is necessary to move the bank off the public balance sheet if it is to arrange additional funding through borrowing”. The same fate no doubt awaits the British Business Bank, set up to channel money to SMEs.

Apart from exposing its unjustified belief that public investment must be loss-making, the Treasury’s stance is an artefact of its insistence that there should be no net borrowing. It was to avoid this grave effect on public investment that Gordon Brown, as chancellor, was drawn into the large-scale Private Finance Initiative, when there were cheaper financing mechanisms available.

Setting up a British Investment Bank with enough borrowing power to make it an effective investment vehicle is the essential first step towards rebuilding supply. Distancing it from politics by giving it a proper remit would create confidence that its ­projects would be selected on commercial, not political criteria. But this step would not be possible without a different accounting system. The solution would be to make use of comprehensive accounting that appropriately scores increases in net worth of the bank’s assets. The British Investment Bank I envisage would only finance investment in productive assets: although its borrowing would show up in the public accounts, it would be financed by revenue from its own activities. This is fundamentally different from tax-financed debt, and fully in line with the conventional theory of public finance outlined above.

Has the Chancellor the courage to grasp the opportunity?

He can justifiably congratulate himself on having avoided the worst disasters to which Treasury accounting rules and narrow ideology could have led him. But in the non-political recesses of his mind he must understand that the recovery over which he has presided is incomplete, fragile and, above all, unfair.

The first necessary step is to reform the way we do our national accounts, in order to dispel the deficit and debt phobia that blights sensible policy.

Robert Skidelsky is a cross-bench peer and a leading biographer of J M Keynes. His most recent book is “Britain Since 1900: a Success Story?” (Vintage)

This article first appeared in the 14 January 2016 issue of the New Statesman, David Bowie