2012 in review: The New Statesman on... the media

From Leveson to the scandals at the BBC, no-one in the media has escaped this year unscathed.

Welcome to the fourth instalment of the New Statesman's 12 Days of Blog-mas. (Christmas Eve's round up, of our best writing on religion, is here.)

At the beginning of the year, it looked like it would unfold much like the one before. Phone hacking, and the fallout from it, were still very much in the headlines, and the Leveson inquiry looked like it would keep the focus on the tabloid press. But by December, it appeared that last year's hunted were this year's hunters, as the BBC came under fire for a series of journalistic failings. Here are a selection of our best pieces - click the headlines to open them in a new window.

Alan Rusbridger: the quiet evangelist

Alan Rusbridger can claim to be the Guardian’s greatest editor. But Peter Wilby asked whether he will also be its last, in this in-depth examination of the paper and the man.

“It’s better journalism,” Rusbridger says, “if, as well as Michael Billington [the Guardian’s theatre critic], you can harness the views and judgements of 800 other people in the audience at the same time. Is the same true of science, foreign, investigative reporting? The answer, I think, is always yes.
Mutuality, he suggests, could be the model for journalism’s future. “If you build a complete paywall around your content, you’re saying you’re not interested in that sort of journalism . . . When you’ve been to a digital conference in New York, you come away thinking that newspapers are lucky to be in this game at all.”

BBC Television Centre: the fairness was what made the magic

The sell-off of TV Centre was confirmed this year, and the majority of staff have already left for different offices. Alan White looks back at the continued attraction the building had for generations of viewers.

As a child growing up in the sticks, I remember the opening credits of Wogan's chat show, "Live from Shepherd's Bush"; the opening picture of TVC, perhaps illuminated by searchlights, as if The Shepherd's Bush was a huge donut-shaped slab, there simply to accommodate Terry and his immaculately-coiffured hair. I remember the mischievous insurgent Kenny Everett attempting to scale the side of Terry's fortress, though I can't remember the context for this sketch. I remember all those intriguing little occasions when the shroud would be ripped away - Children In Need skits where the cameras would pan out of the studio and follow our stars down the corridors. And I remember, of course, the Blue Peter garden.

O Mother, where art thou?

Mother Jones, a small bimonthly American news magazine, shows that public-service journalism can survive even in the 21st century USA. You may not have heard of it, but you'll have heard the fall-out from one of its scoops, when Mitt Romney was secretly recorded telling reporters that 47 per cent of the country was "dependent" on Obama. Helen Lewis looks at what other publications can learn from its model.

So what is Mother Jones? Founded in 1976 and named after a trade unionist and opponent of child labour, it is a bimonthly title dedicated to unfashionable causes and undercover investigations. In March this year, its reporter Mac McClelland wrote “I was a warehouse wage slave”, about an online-shipping company that sounded suspiciously like Amazon (it was not identified in her piece). The conditions experienced by the temporary workers were brutal: 12-hour stretches running around a cold, cavernous warehouse, with every trip meticulously timed through a hand-held scanner; lunch breaks of “29 minutes and 59 seconds”; limited access to the overcrowded toilets and constant reminders that “there’s 16 other people who want your job”.

The silence of Jimmy Savile’s lambs

As news of Savile's crimes surfaced, the writer and former England rugby international Brian Moore wrote that he wasn’t at all surprised the DJ’s victims didn’t speak up earlier. He argued that as long as victims live in fear of not being listened to, they won’t talk.

I and many of Savile’s victims did not tell because we did not think we would be believed. What we victims need is not just an immediate person being sympathetic and taking a statement. We need to know that a proper investigation will be made if we make a complaint; to know that the Crown Prosecution Service will be robust and that every effort will be made to secure a conviction. So harrowing is the telling of our stories that we have to have utmost faith that as much as possible will be done to rectify the wrong and to help us bear the extra stress of an investigation and trial.

A sense of perspective on the BBC

In the midst of the crisis at the BBC, following the Savile revelations and false accusations of Lord McAlpine, Joan Bakewell wrote to defend the corporation as a flawed, human institution, like any other.

The BBC now needs a large dose of courage that enables it to look boldly on its structural failings and put some hefty remedies in place. It has a decades-long history of fine programmes that have made legends of its stars, educated the public, spawned heaps of imitators and won a unique reputation throughout the broadcasting world. It now needs to be left alone to regret, to mourn and to repair itself.

Leader: Leveson, the press and transparency

Before the Leveson inquiry reported, the press was largely united in supporting a stronger system of regulation - but one put together internally, without the interference of government. How strange, then, that after Lord Leveson made his pronouncements, many of that same group attended a private meeting with the Prime Minister to decide on a united response. We smelled a rat.

The explicit purpose of the discussions is to give newspapers an opportunity to devise some new form of self-regulation that will come close enough to what Lord Justice Leveson proposes without requiring a bill in parliament. Another way of describing the same goal is that the editors (and/or their paymasters) have been invited to come up with something lenient enough for their own satisfaction, yet that looks sufficiently rigorous to give Mr Cameron political cover to say that the spirit of Leveson is preserved. In other words, it has all the makings of the kind of cosy establishment stitch-up that has allowed journalistic malpractice to flourish for so long.

 

Alan Rusbriger, editor of the Guardian. Photo: Muir Vidler/New Statesman

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?