Kostas Vaxevanis: "The only way for the Greek people to know about their own country is through the foreign press"

The Greek journalist, who was instrumental in the publication of the "Lagarde list" of major tax evaders in October 2012, talks to the NS's Daniel Trilling.

Kostas Vaxevanis is a Greek journalist. As editor of the investigative magazine HotDoc, in October 2012 he published the leaked “Lagarde list” of major tax evaders – an act for which he has been pursued by the Greek authorities, raising questions about a crackdown on independent journalism. The New Statesman caught up with Vaxevanis during a recent trip to London to receive Index on Censorship’s Freedom of Expression Award.

New Statesman: In your acceptance speech for the Index award, you raised the spectre of Greece’s dictatorship years. Is there any danger of a return to that kind of period?

Vaxevanis: It is worrying what is happening in Greece as I said in my speech. It is the first time since the last dictatorship that people can’t rely on the press to see what is happening in their own country. The Greek media for example didn’t cover the case while I was being prosecuted a few months ago.

Every day in Greece, we face the effects of the crisis and there are new measures that are being taken that goes against every right of the public. These new regulations don’t even go through parliament – there is actually a law where you can have a new decision signed by the president under emergency clauses and then rectify it later by the prime minister so they are basically governing the country under presidential decrees and statutes.

They basically pass new laws in whatever way possible to serve certain interests and parts of society and political systems. For example when the agricultural bank of Greece, was supposed to pay millions [in tax], a new law was passed that said they didn’t have to pay anything.

Many TV channels and newspapers are owned by business interests that might benefit from such laws. Has political interference in the media become more common as the crisis gets worse?

In Greece, like in many countries, there is a relationship where the media tries to hold government to account and government will try to hide things. It is ultimately a conflict of interest. Any kind of independent journalism is seen as a threat.

For many years they managed to manipulate the media: for example, you would have a journalist working in the government’s press office and public PR offices and for big businesses. Often these are big businesses that have links and dealings with the government.

During the crisis there has been a greater need for journalists to speak out, but then they automatically become an enemy of the government. I have just received a message from a friend and colleague where he congratulates me for my [Index ] award, but apologises that he can’t say anything about it this evening in his television programme.

The cross-over between journalism and politics is common in Britain and other countries, to a certain extent. What is different about Greece right now?

Of course this is happening everywhere, it’s of course not just a Greek problem, but it has gone to the next level where ministers have complete impunity and they have methods of acting really fast to serve their own interests. And of course this is amplified by the crisis.

For example one of the biggest scandals was with Proton Bank, where the owner bought ten to twenty per cent of twenty-two different media outlets, to make sure no one would write anything against him. And there is no law to prevent a business from spreading in such a way.

The existence of privately-owned, unregulated television channels goes back well before the financial crisis. What sort of long-term effect has this had on Greek society? The TV channels have been blamed for encouraging anti-immigration attitudes, for example.

They have a huge part of the responsibility for that culture of the last ten or twenty years; consumerism and people not being engaged in what is happening, and not caring about the impact of their political action.

With immigration, in the last few years since the bailout, the role of the media has been to create fear among the people. And the most obvious way of creating fear would be to amplify the danger of immigration in Greece. And we would often hear about [the far-right party] Golden Dawn in the news. They would try to create the view: “yes all of us who are in power might be corrupt, but if we stopped being in power and being in control then there is always that danger. So it is basically better to have this corrupt system than any government at all.”

So the media were exaggerating the threat of Golden Dawn?

Yes but it was a two-way thing. By exaggerating the threat of Golden Dawn they are giving them a voice and then it becomes bigger by appearing as a threat and it gives them a new way of communicating with the public.

What they are trying to do is presenting the “two opposites” view where Golden Dawn is one extreme and [the left-wing] Syriza is the other. They are trying to do what they are doing in Italy where they say “well you have these two polar opposites, all you have to do is come somewhere in the middle, where we are. We might be corrupt but you sure don’t want any of those two.”

What happens in the media outside of Greece can have quite a big effect on Greek politics. So for journalists and people outside of Greece what is the most important thing they could be doing?

The only way for the Greek people to know about their own country is through the foreign press. They played a significant role in my case. While this was going on, during the prosecution, we had BBC, Al-Jazeera, CNN treating it as breaking news while Greek media was being quiet about it. Ten days ago I was given another award in Spain, a Journalism Award and a Press Award – no one in Greece will ever hear anything about either those things.

This is really the place to fight that control, in this day and age the Greek people are not limited by the national boundaries and they just look on the internet and find other sources of information. And that kind of potential foreign media can have is very significant. The role of social media is very important, I tweeted something in a press conference earlier and that reached 300,000 people.

The risk of foreign media coverage is that you want to highlight the problems but you might end up making Greece look like a unique case. Is there anything journalists abroad should be wary of?

Obviously there are some very specific issues with journalism and freedom of expression in Greece, but it is potentially a problem in every country and it is something journalists have to deal with every day.

If there was a similar case like mine in the UK the rights of democracy would be raised by every media outlet instead of just one newspaper. In Greece that would never happen. We have to do something about it, demand answers. Every time someone tries to go against what has happened or try to write something about it they will be accused of all sort of horrible things, for example when I talked about the Greek banks there were all types of blogs that mentioned my name and claimed my involvement with the secret services.

When Reuters investigated the Greek banks, they were threatened with being sued, and so was the Guardian [when it reported on the police torture of protesters] . So it’s a multilevel issue where people need to know what is happening and what has happened. Journalists need to speak up and their voices have to be heard.

Kostas Vaxevanis (L) being escorted to the public prosecutor in Athens by plain-clothed police officers in October 2012. Photograph: Getty Images

Daniel Trilling is the Editor of New Humanist magazine. He was formerly an Assistant Editor at the New Statesman.

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?