Today we remember Lincoln as a great redeemer – and that should give Obama hope

Time for the 44th president to prove he can be the heir to the 16th.

Steven Spielberg’s Lincoln is a spectacular movie – “less a biopic than a political thriller, a civics lesson . . . alive with moral energy”, in the words of the New York Times review. Sitting in a preview screening in Soho Square, I cried. I couldn’t help it: the story of how Lincoln pushed the Thirteenth Amendment through a divided House of Representatives in the space of just four months, thereby abolishing the institution of slavery for ever, only to be assassinated, was too moving and melodramatic for even this cynical writer to bear.

The film presents Lincoln as an eloquent and noble commander-in-chief, an intensely moral man and a champion of black America. In this sense, there is nothing new in Spielberg’s depiction of “Honest Abe”. Lincoln has long been considered the greatest ever leader of the United States; he is the Great Emancipator, Preserver of the Union, Redeemer President.

Spielberg joins a long line of Lincoln sanctifiers such as Leo Tolstoy, who breathlessly declared that “the greatness of Napoleon, Caesar or Washington is only moonlight by the sun of Lincoln”. His film is based in part on the historian Doris Kearns Goodwin’s biography (or hagiography?) Team of Rivals: the Political Genius of Abraham Lincoln.

But is the Hollywood take on Lincoln – emancipator of the slaves, assuager of America’s racist past – the whole story? In a scathing letter to the Daily Telegraph on 12 January, the LSE historian Alan Sked wrote: “Abraham Lincoln was a racist who . . . had no intention of freeing slaves who freed themselves by fleeing to Unionist lines . . . Until the day he died, Lincoln’s ideal solution to the problem of blacks was to ‘colonise’ them back to Africa or the tropics.”

Back in 1978, the late left-wing historian Howard Zinn published his bestselling People’s History of the United States, which claimed that Lincoln “set out to fight the slave states in 1861, not to end slavery, but to retain [their] enormous national territory and market and resources”. Zinn quotes Lincoln at a debate in 1858, before he became president: “I am not, nor ever have been, in favour of bringing about in any way the social and political equality of the white and black races . . . nor ever have been in favour of making voters or jurors of Negroes.” In the same year, Lincoln referred to “the superior position assigned to the white race”. (Zinn, incidentally, was building on the work of the African-American writer Lerone Bennet, who wrote a seminal article for Ebony magazine in 1968 entitled: “Was Abraham Lincoln a white supremacist?”.)

To be fair, the film makes clear that Lincoln was not an abolitionist; that role goes to the radical Pennsylvania congressman Thaddeus Stevens – played beautifully by a bombastic and bewigged Tommy Lee Jones. (Dear 20th Century Fox, please can we have a sequel to Lincoln called Thaddeus?)

Spielberg, however, glosses over Lincoln’s earlier, more odious views; the moist-eyed viewer comes away with an image of him as only a lifelong foe of racists and bigots.

So how do you square these two Lincolns, the Great Racist v the Great Emancipator? First, to hold Lincoln to the standards of the 20th or 21st centuries is absurd and unjust; indeed, the slave-turned-statesman Frederick Douglass, speaking only a decade after Lincoln’s death, conceded that the president may have “seemed tardy, cold, dull and indifferent” on abolishing slavery but, “measuring him by the sentiment of his country, a sentiment he was bound as a statesman to consult, he was swift, zealous, radical”.

Second, as the progressive Columbia University historian Eric Foner has argued, over the course of the civil war Lincoln “displayed a remarkable capacity for moral and political growth”. He may not have begun the conflict as an abolitionist but he ended it as one.

Indeed, as Lincoln wrote in April 1864, “If slavery is not wrong, nothing is wrong.” And in his last public speech, in April 1865, he called publicly for (limited) black suffrage – the first time, in Foner’s words, “an American president had endorsed any political rights for blacks”.

On the subject of “moral and political growth”, it is difficult in this, the week of Barack Obama’s inauguration, to avoid comparisons between these two presidents. Obama, like Lincoln, is a tall, skinny lawyer who served in the Illinois state legislature and ended up in the White House in part thanks to his awe-inspiring oratory. The 44th president of the United States sees himself as the heir to the 16th: Obama kicked off his first presidential campaign in 2007 in Lincoln’s home town of Springfield, Illinois, on the weekend of Lincoln’s birthday.

Last November, Obama held a screening of Lincoln at the White House and told Time: “Part of what Lincoln teaches us is that to pursue the highest ideals and a deeply moral cause requires you . . . get your hands dirty.”

The problem with Obama has been that, on a host of first-term issues, ranging from the deficit and financial reform to climate change and gun control, he didn’t merely fail to fight dirty – he didn’t put up a fight at all. Yet the president has kicked off his second term with a much more aggressive stance on gun control after the Newtown massacre, and refusing, on the economy, to be blackmailed by Republicans over the “fiscal cliff”. Obama has also nominated the arch-realist and Iran dove Chuck Hagel to be his defence secretary in the teeth of strong opposition from the pro-Israel lobby.

“We are still capable of great things, big things,” his senior adviser Valerie Jarrett told CNN on the day of the inauguration. As Lincoln showed with the Thirteenth Amendment, it takes only a matter of months to wipe the slate clean and earn a place in the pantheon of great American leaders. America – and the world – are waiting, Mr President.

Mehdi Hasan is a contributing writer to the New Statesman and political director at the Huffington Post, where this article is crossposted.

Daniel Day-Lewis as Abraham Lincoln.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

This article first appeared in the 28 January 2013 issue of the New Statesman, After Chavez

Getty
Show Hide image

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?