Drowning in debt

Today's twentysomethings were brought up to spend today and forget about tomorrow. But now the loans

Two different lives - same looming crisis. Damien Core, 20, is a student from Kent, studying biology. Lisa Rice, 22, works for a technology company in Yorkshire and has done since leaving school. Damien plays in an indie band, drinks at the student union and has a steady girlfriend. Lisa is single, likes to go clubbing and spends her Saturdays in Leeds, shopping with mates. Last month both faced the same problem: they'd been bouncing their increasing debts from one zero per cent credit card offer to the next. In April, the credit crunch hit home. No zero per cent offers came through the door. Suddenly, each had to start paying interest on debts that had been growing for years. With their income spent on rent, bills and food, neither had spare money to meet the credit card companies' demands.

Damien and Lisa are far from alone. According to a YouGov survey commissioned by the charity Rainer and published in May, 90 per cent of the 4,000 young people polled were in debt by the age of 21. Almost half of the 18- to 24-year-olds have owed more than £2,000 and one in five have owed more than £10,000. One in five young people said they were left with less than £50 per month after bills and debt repayments. One in ten were left with nothing. Some use loan sharks to fund pub crawls and new clothes.

Although student loans formed a significant part of higher debt levels, credit cards, store cards and catalogues were widely used. Unlike their parents, this generation has been borrowing heavily for the past five or six years simply to finance everyday expenses. While tabloid headlines scream about the effect the credit crunch is having on mortgage owners, many of these young people find themselves blacklisted before their lives have really begun.

"There used to be a sort of social stigma attached to being heavily in debt," explains David Chater, head of policy for Rainer. "In the past five years I've seen that stigma vanish. Young people are sold the idea of borrowing so heavily these days - on TV, online, on the high street and even by their mates - that they think nothing of it. In part, student loans are to blame. Students themselves think: 'I owe so much, what does another grand matter?' Even those who are not in higher education know someone who is, so they see the £2,000 they owe as nothing compared to their mate or cousin."

Linda Jack, youth adviser and head of the Financial Services Authority's working group on young adults, reinforces this: "I've worked with youth for over 20 years and I've seen young people's attitudes change more and more into passive consumerism - I want it, I want it now and I can get it now.

"The link between effort and reward has disturbingly been lost for a lot of young people. Trying to get through to them that if you put the effort in and save, you have that sense of achievement, as opposed to paying more for it in the long run by putting it on your credit card because you wanted it now . . . There is a cultural issue here: we have changed culturally in terms of expectations."

Rainer, which works with socially excluded young people such as those who are dependent on benefits, are homeless or are otherwise struggling to get by, warns that the hardest-hit are, inevitably, the poorest. Two-thirds of the young people it works with are in debt - rising to 83 per cent among those living in supported hostels.

"I suppose you'd call this the sub-prime market," Chater says. "They wouldn't have been able to borrow such large sums a few years ago, but now you have stores and loans with cripplingly high interest rates which are prepared to lend money with no credit checks or proof of employment. Often we find kids who've had to borrow from their mum or dad to cover loan payments, then having huge rows within their family over these supposedly friendly loans. When you think that it's family conflict that causes most teenage homelessness, this is literally driving young people on to the streets."

And yet the inability to recognise the downside of borrowing isn't restricted to any single social class. "With this age group it's almost as if a white mist descends when you start talking to them about things like APR," says Neil Almond at the youth charity Kikass. "I've even talked to kids who think that the higher the APR, the better the deal. This is the most internet-savvy, clued-in generation when it comes to online, but none of them have online bank accounts. It's as if there's a missing part of their profile where money and debt is concerned. These are smart kids. They know that they don't know, and they literally don't want to know."

The New Statesman conducted a straw poll of 18- to 24-year-olds to test Almond's thesis and found it depressingly accurate. "I despair at how much attention my dad pays to these things, because it's very dull to me," grumbles Phil Teach, a 24-year-old from London. "He keeps saying you should take your money out of here, or watch out for that. I'm like 'OK, Dad, can you sort it for me?' It's a hassle when you haven't got time."

"The thing is, if I lived on the money that I got from my job, I wouldn't even be able to go out," explains Jim Davis from Carlisle. "I'm 22 years old and I should be having fun. If someone wants to lend me money to do that, why shouldn't I?"

Sense of entitlement

The research company Synovate surveyed 18- to 24-year-olds' attitudes to debt and money at the end of 2007 and found a generation used to easily available credit, with a live-for-the-moment attitude and the belief that money is to be spent for pleasure. "The majority of 18-24s spend automatically and frequently, fuelled by a sense of entitlement to their standard of living," explains Becky Connell, who conducted the research. "The problem is that social and peer group pressure makes it harder for young people to curb spending. As well as the cheap credit and glossy lifestyles marketed to them by a celebrity-dominated culture, there is the feeling of being 'left out' if you miss even one night out. So something as simple as socialising is driven by compulsion as well as enthusiasm."

Disturbingly, Connell describes a conversation between a group of twentysomethings in Leeds who were considering taking out loans to pay for plastic surgery. One 24-year-old had borrowed to fund his wife's "boob job" and another was considering liposuction, while Amanda, 23, told the startled interviewer: "You can get plastic surgery on credit; you can pay monthly for it now. With Transform you can get liposuction for £60 a month. When I saw that I was like, 'Ooohh'."

"You have so many kids who want to look like Jordan and Peter or Posh and Becks," warns Jasmine Birtles, author of The Money Book: Control Your Money, Control Your Life. "They take store cards to buy the clothes they see in magazines, they spend on sunbeds and cosmetic surgery and they're constantly opening up new credit cards to pay off the old ones. There's simply no sense of the debt that's gradually being accrued. It's as if this is just free money."

And there is little sense of the future offering any great threat: "There was a recent survey that suggested young people aren't saving for a pension because they're relying on buying a property and hoping that the value of the property will rise," explains Andrew Oxlade, editor of the financial web-site www.thisismoney.co.uk. "Inflation paid off their parents' mortgages, but we are in a low-inflation environment. Not only do we have bigger debts, we also have this economic kick in the teeth that you have to pay off every bean yourself."

With unemployment rising for the third month in a row in April and Mervyn King, the governor of the Bank of England, warning that the full effects of banks' credit problems have yet to reach the consumer, this may prove to be the first recession that hits the young - a group that usually survives tough times because its salaries are as low as its expenditure.

Birtles has already encountered students who are considering declaring themselves bankrupt the moment they graduate. "That can mean they will be unable to get a mortgage or even a current account years later," she warns.

"The only kids from this generation who have absolutely nothing to worry about are those with very rich parents who don't mind paying off everything their children owe. For the others, I shudder to think how they're going to cope over the next 12 months. The banks are tightening things because they've lent money to the wrong people, so they're going to face very hard times indeed."

According to Chater: “There are already 1.5 million 18- to 24-year-olds in poverty in England and Wales. Initiatives such as the working tax credits have helped families and children but, by design, have had little impact on this age group. Fuel poverty measures have understandably targeted older people but rising fuel prices also appear to be having a significant impact on young adults living independently for the first time. This group falls between policy agendas: too old for initiatives targeting under-18s and unaffected by those for parents.”

Ignored by the government, seduced with cheap credit into taking on debt, and facing the same price inflation as higher-earning late-twentysomethings and thirtysomethings, an entire generation of Britons runs the real risk that bad debts could write it off – young, gifted and broke.

This article first appeared in the 02 June 2008 issue of the New Statesman, Bobby and Barack

Show Hide image

Why Jeremy Corbyn is a new leader for the New Times

In an inspired election campaign, he confounded his detractors and showed that he was – more than any other leader – in tune with the times.

There have been two great political turning points in postwar Britain. The first was in 1945 with the election of the Attlee government. Driven by a popular wave of determination that peacetime Britain would look very different from the mass unemployment of the 1930s, and built on the foundations of the solidaristic spirit of the war, the Labour government ushered in full employment, the welfare state (including the NHS) and nationalisation of the basic industries, notably coal and the railways. It was a reforming government the like of which Britain had not previously experienced in the first half of the 20th century. The popular support enjoyed by the reforms was such that the ensuing social-democratic consensus was to last until the end of the 1970s, with Tory as well as Labour governments broadly operating within its framework.

During the 1970s, however, opposition to the social-democratic consensus grew steadily, led by the rise of the radical right, which culminated in 1979 in the election of Margaret Thatcher’s first government. In the process, the Thatcherites redefined the political debate, broadening it beyond the rather institutionalised and truncated forms that it had previously taken: they conducted a highly populist campaign that was for individualism and against collectivism; for the market and against the state; for liberty and against trade unionism; for law and order and against crime.

These ideas were dismissed by the left as just an extreme version of the same old Toryism, entirely failing to recognise their novelty and therefore the kind of threat they posed. The 1979 election, followed by Ronald Reagan’s US victory in 1980, began the neoliberal era, which remained hegemonic in Britain, and more widely in the West, for three decades. Tory and Labour governments alike operated within the terms and by the logic of neoliberalism. The only thing new about New Labour was its acquiescence in neoliberalism; even in this sense, it was not new but derivative of Thatcherism.

The financial crisis of 2007-2008 marked the beginning of the end of neoliberalism. Unlike the social-democratic consensus, which was undermined by the ideological challenge posed by Thatcherism, neoliberalism was brought to its knees not by any ideological alternative – such was the hegemonic sway of neoliberalism – but by the biggest financial crisis since 1931. This was the consequence of the fragility of a financial sector left to its own devices as a result of sweeping deregulation, and the corrupt and extreme practices that this encouraged.

The origin of the crisis lay not in the Labour government – complicit though it was in the neoliberal indulgence of the financial sector – but in the deregulation of the banking sector on both sides of the Atlantic in the 1980s. Neoliberalism limped on in the period after 2007-2008 but as real wages stagnated, recovery proved a mirage, and, with the behaviour of the bankers exposed, a deep disillusionment spread across society. During 2015-16, a populist wave of opposition to the establishment engulfed much of Europe and the United States.

Except at the extremes – Greece perhaps being the most notable example – the left was not a beneficiary: on the contrary it, too, was punished by the people in the same manner as the parties of the mainstream right were. The reason was straightforward enough. The left was tarnished with the same brush as the right: almost everywhere social-democratic parties, albeit to varying degrees, had pursued neoliberal policies. Bill Clinton and Tony Blair became – and presented themselves as – leaders of neoliberalism and as enthusiastic advocates of a strategy of hyper-globalisation, which resulted in growing inequality. In this fundamental respect these parties were more or less ­indistinguishable from the right.

***

The first signs of open revolt against New Labour – the representatives and evangelists of neoliberal ideas in the Labour Party – came in the aftermath of the 2015 ­election and the entirely unpredicted and overwhelming victory of Jeremy Corbyn in the leadership election. Something was happening. Yet much of the left, along with the media, summarily dismissed it as a revival of far-left entryism; that these were for the most part no more than a bunch of Trots. There is a powerful, often overwhelming, tendency to see new phenomena in terms of the past. The new and unfamiliar is much more difficult to understand than the old and familiar: it requires serious intellectual effort and an open and inquiring mind. The left is not alone in this syndrome. The right condemned the 2017 Labour Party manifesto as a replica of Labour’s 1983 manifesto. They couldn’t have been more wrong.

That Corbyn had been a veteran of the far left for so long lent credence to the idea that he was merely a retread of a failed past: there was nothing new about him. In a brilliant election campaign, Corbyn not only gave the lie to this but also demonstrated that he, far more than any of the other party leaders, was in tune with the times, the candidate of modernity.

Crises, great turning points, new conjunctures, new forms of consciousness are by definition incubators of the new. That is one of the great sources of their fascination. We can now see the line of linkage between the thousands of young people who gave Corbyn his overwhelming victory in the leadership election in 2015 and the millions of young people who were enthused by his general election campaign in 2017. It is no accident that it was the young rather than the middle-aged or the seniors who were in the vanguard: the young are the bearers and products of the new, they are the lightning conductors of change. Their elders, by contrast, are steeped in old ways of thinking and doing, having lived through and internalised the values and norms of neoliberalism for more than 30 years.

Yet there is another, rather more important aspect to how we identify the new, namely the way we see politics and how politics is conceived. Electoral politics is a highly institutionalised and tribal activity. There have been, as I argued earlier, two great turning points in postwar politics: the social-democratic era ushered in by the 1945 Labour government and the neoliberal era launched by the Tory government in 1979.

The average Tory MP or activist, no doubt, would interpret history primarily in terms of Tory and Labour governments; Labour MPs and activists would do similarly. But this is a superficial reading of politics based on party labels which ignores the deeper forces that shape different eras, generate crises and result in new paradigms.

Alas, most political journalists and columnists are afflicted with the same inability to distinguish the wood (an understanding of the deeper historical forces at work) from the trees (the day-to-day manoeuvring of parties and politicians). In normal times, this may not be so important, because life continues for the most part as before, but at moments of great paradigmatic change it is absolutely critical.

If the political journalists, and indeed the PLP, had understood the deeper forces and profound changes now at work, they would never have failed en masse to rise above the banal and predictable in their assessment of Corbyn. Something deep, indeed, is happening. A historical era – namely, that of neoliberalism – is in its death throes. All the old assumptions can no longer be assumed. We are in new territory: we haven’t been here before. The smart suits long preferred by New Labour wannabes are no longer a symbol of success and ambition but of alienation from, and rejection of, those who have been left behind; who, from being ignored and dismissed, are in the process of moving to the centre of the political stage.

Corbyn, you may recall, was instantly rejected and ridiculed for his sartorial style, and yet we can now see that, with a little smartening, it conveys an authenticity and affinity with the times that made his style of dress more or less immune from criticism during the general election campaign. Yet fashion is only a way to illustrate a much deeper point.

The end of neoliberalism, once so hegemonic, so commanding, is turning Britain on its head. That is why – extraordinary when you think about it – all the attempts by the right to dismiss Corbyn as a far-left extremist failed miserably, even proved counterproductive, because that was not how people saw him, not how they heard him. He was speaking a language and voicing concerns that a broad cross-section of the public could understand and identify with.

***

The reason a large majority of the PLP was opposed to Corbyn, desperate to be rid of him, was because they were still living in the neoliberal era, still slaves to its ideology, still in thrall to its logic. They knew no other way of thinking or political being. They accused Corbyn of being out of time when in fact it was most of the PLP – not to mention the likes of Mandelson and Blair – who were still imprisoned in an earlier historical era. The end of neoliberalism marks the death of New Labour. In contrast, Corbyn is aligned with the world as it is rather than as it was. What a wonderful irony.

Corbyn’s success in the general election requires us to revisit some of the assumptions that have underpinned much political commentary over the past several years. The turmoil in Labour ranks and the ridiculing of Corbyn persuaded many, including on the left, that Labour stood on the edge of the abyss and that the Tories would continue to dominate for long into the future. With Corbyn having seized the political initiative, the Tories are now cast in a new light. With Labour in the process of burying its New Labour legacy and addressing a very new conjuncture, then the end of neoliberalism poses a much more serious challenge to the Tories than it does the Labour Party.

The Cameron/Osborne leadership was still very much of a neoliberal frame of mind, not least in their emphasis on austerity. It would appear that, in the light of the new popular mood, the government will now be forced to abandon austerity. Theresa May, on taking office, talked about a return to One Nation Toryism and the need to help the worst-off, but that has never moved beyond rhetoric: now she is dead in the water.

Meanwhile, the Tories are in fast retreat over Brexit. They held a referendum over the EU for narrowly party reasons which, from a national point of view, was entirely unnecessary. As a result of the Brexit vote, the Cameron leadership was forced to resign and the Brexiteers took de facto command. But now, after the election, the Tories are in headlong retreat from anything like a “hard Brexit”. In short, they have utterly lost control of the political agenda and are being driven by events. Above all, they are frightened of another election from which Corbyn is likely to emerge as leader with a political agenda that will owe nothing to neoliberalism.

Apart from Corbyn’s extraordinary emergence as a leader who understands – and is entirely comfortable with – the imperatives of the new conjuncture and the need for a new political paradigm, the key to Labour’s transformed position in the eyes of the public was its 2017 manifesto, arguably its best and most important since 1945. You may recall that for three decades the dominant themes were marketisation, privatisation, trickle-down economics, the wastefulness and inefficiencies of the state, the incontrovertible case for hyper-globalisation, and bankers and financiers as the New Gods.

Labour’s manifesto offered a very different vision: a fairer society, bearing down on inequality, a more redistributive tax system, the centrality of the social, proper funding of public services, nationalisation of the railways and water industry, and people as the priority rather than business and the City. The title captured the spirit – For the Many Not the Few. Or, to put in another way, After Neoliberalism. The vision is not yet the answer to the latter question, but it represents the beginnings of an answer.

Ever since the late 1970s, Labour has been on the defensive, struggling to deal with a world where the right has been hegemonic. We can now begin to glimpse a different possibility, one in which the left can begin to take ownership – at least in some degree – of a new, post-neoliberal political settlement. But we should not underestimate the enormous problems that lie in wait. The relative economic prospects for the country are far worse than they have been at any time since 1945. As we saw in the Brexit vote, the forces of conservatism, nativism, racism and imperial nostalgia remain hugely powerful. Not only has the country rejected continued membership of the European Union, but, along with the rest of the West, it is far from reconciled with the new world that is in the process of being created before our very eyes, in which the developing world will be paramount and in which China will be the global leader.

Nonetheless, to be able to entertain a sense of optimism about our own country is a novel experience after 30 years of being out in the cold. No wonder so many are feeling energised again.

This article first appeared in the 15 June 2017 issue of the New Statesman, Corbyn: revenge of the rebel

Martin Jacques is the former editor of Marxism Today. 

This article first appeared in the 15 June 2017 issue of the New Statesman, Corbyn: revenge of the rebel

0800 7318496