It has become dramatically easier to watch what people do from day to day on a very intimate level. Photograph: Getty Images
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Laurie Penny on psychology: if you live in a surveillance state for long enough, you create a censor in your head

There is a significant psychological price to being constantly aware of the variety of ways in which your activity might be tracked.

What do you do when you know nobody can stop you? Me, I like to travel. In the past three years, I’ve been lucky enough to spend time in a number of world cities, but lately when I come back home to London and ride the Underground, I am struck by a nagging sense that something is missing. It took a friend visiting from the United States to point out what it is. There’s almost no graffiti. The people of London do not habitually doodle on our public transportation system. That makes us unusual.

It’s very hard to stop people writing on their own city. In Berlin, in New York and in Chicago, buses and trains and public buildings have tags and drawings scrawled all over them, from the skilled and serious to the crudely anatomical. This winter, in the streets outside the Ittihadiya Palace in Cairo, a bold slogan was daubed over the latest attempt by state officials to whitewash over words of protest. When I asked my friend to translate the Arabic, he told me it meant: “Hey, nice paint job!” In the Athens subway, every surface that will hold colour has been annotated. But not the London Underground, which coincidentally is watched by more than 11,000 CCTV cameras.

We have murals and bits of street art, but everyday graffiti is far less common than elsewhere. What is stopping us?

It’s not that Londoners are afraid. Not quite. It’s that in the world’s most surveillance-heavy metropolis, in a city that unironically welcomed tourists to the Olympics with a mascot of a lidless panopticon eyeball dressed as a police officer, it usually doesn’t occur to us to be anything other than compliant.

After the revelations in the past few weeks that the US National Security Agency and British intelligence have had access to data from big internet and telephone providers through the Prism programme, it is worth thinking about how everyday surveillance changes our behaviour. I’m not just talking about activists. I’m also talking to you, typical New Statesman reader, you who are the picture of moderate liberalism and have only occasionally contemplated setting fire to the House of Lords. As it becomes easier and more routine for states to collect and analyse large quantities of data about their citizens, and as it becomes ever harder for those citizens to stop them, the changes are producing a gradual chilling effect.

Don’t panic: just because Google, Facebook, Skype, Verizon and other companies are routinely monitored by the CIA doesn’t mean that somebody is watching you every time you order groceries online or voice-chat your sister in Seoul. It just means that they could if you gave them a reason to do so. That means you can relax – right up until the time when you want to go to a protest, or your sister does, or you support the fact that several thousand complete strangers did.

It’s hard to talk about all of this sensibly without sounding like the proverbial streetcorner ranter, two screws short of an inflammatory sandwich board, telling everyone how the CIA has put cameras in our underpants. The problem is that the CIA probably wouldput cameras in our underpants if there were a subtle, easy and cost-effective way for it to do so, although I pity the poor surveillance grunt who might one day have to check out where my Marks & Spencer value-pack knickers have been.

As it is, it has become dramatically easier to watch what people do from day to day on a very intimate level. We knew this before the NSA leaks. We are reminded of it every time we tick the little box that says “I agree”. The big question is how it changes our everyday behaviour.

There is a significant psychological price to being constantly aware of the variety of ways in which your activity might be tracked. To be blunt, it makes you feel crazy. That is why, if you want a quiet life, you shouldn’t make friends with security analysts: they tend to get drunk and describe the ways in which your phone can be turned into a listening device until the skin on the back of your neck starts to crawl, because it’s their job to know about such things. There is a non-zero cost to this sort of awareness.

In a choice between paranoid vigilance and easy participation, few choose paranoia. It’s just easier to change your behaviour. A friend who works in computer security told me that “the most important censorship happens between your head and your keyboard”. Self-censorship is significant in a world where, increasingly, as the tech journalist Quinn Norton observes, “falling in love, going to war and filling out tax forms looks the same: it looks like typing”.

There are still ways to operate in private. If I want to have an online conversation or make a transaction that I’m absolutely sure can’t be snooped on, there are tools I can download, software I can teach myself to use. But it’s a faff, and it can protect you only so far unless you choose to go entirely off-grid, and I’ve been addicted to Facebook since 2006. It’s far less trouble to modify your behaviour so you don’t ever say anything that might give the wrong impression. It’s easier, in short, to behave.

Fighting for the basic privacy that our grandparents took for granted is exhausting, so, instead, we might change how we speak and act, subtly, without even knowing that we’re doing it. The word that Michel Foucault uses to describe this type of modified behaviour is discipline. We might not make jokes about blowing up airports on the internet any longer, because we know that if we’re caught there will be consequences. We might not make any more unauthorised searches on our work computers. We might take care what we download.

The chilling disciplinary effect taking place in the digital age affects everyone. Whether we tolerate further intrusions on our privacy or continue to self-censor as a response to surveillance is up to all of us.

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.

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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?