Israeli soldiers in front of the barrier between Ramallah and Jerusalem. Photo: Getty
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How we grew up: an Israeli veteran on the dehumanising power of military control

Yehuda Shaul writes of how he and his friends learned to glorify power, and lost their ability to see Palestinians as people whose lives are no less valuable. Now, he and hundreds of others are working to end the occupation.

The current round of violence in Gaza has come to an official close. In Israel we have begun to summarise the events of the past few weeks and question the future. As summaries reenter the public discourse, I am reminded of past rounds of summarisation.  I try to grasp what has changed from one summary to the next.  From Operation “Defensive Shield” (2002) in the West Bank, to “Summer Rains” (2006) in the Gaza Strip – from “Cast Lead” (2009) to “Pillar of Defense” (2012) to the most recent operation in Gaza.

In 2002 a fighter jet dropped a one-ton bomb on the home of Salah Shehade, the former head of Hamas’ military wing, in a residential neighborhood. The bomb killed him in addition to 14 other innocent people, 11 of whom were children. The incident didn’t blow over quietly. Reservist pilots heavily criticised this type of operational activity in an open letter. The Supreme Court encouraged an independent inquiry into the situation, and as a result the government appointed a committee to investigate the operation. Throughout the last month we bombed dozens of houses inhabited by Palestinians – some targeted by the Air Force and others using artillery and mortar fire. These bombs killed hundreds of men, women and children. The bombing of the homes of Hamas members, who do not pose an immediate security threat to Israel, has become an explicit Israeli policy – even when it is known that innocent civilians are inside.

When Shahade’s home was bombed, there were people who questioned the morality of the action. Throughout the last month, over a decade after the aforementioned bomb, hardly anyone in Israel and among its allies around the world criticises the policy of bombing the homes of Hamas members. The lone voices that are heard speaking out against it are hastily silenced. After a month of fighting, over 2,000 Palestinians have been killed in Gaza. According to the UN, at least 1,400 of the deceased were civilian casualties, 458 of which were children. Israeli society remains silent.

What has changed? My reply begins with a memory from the year 2004, two months after I was released from my service as a soldier and commander in the Occupied Territories. During that period, my friends and I reflected back on our years of service and understood that as soldiers in the Territories we had each gradually erased our moral red line. We understood that in order to carry out our routine activities as soldiers, whose role is to control the territories and the civilian Palestinian population – we needed to erase the humanity of Palestinians along with our own humanity. And that’s what we did. This understanding led us to produce an exhibition of photographs and video testimonies of soldiers from Hebron, the city in which we served for a year. Our goal was to share with the Israeli public the things that we did daily there, in their name.

One of the many attendees of the exhibition, was Lieutenant Colonel Chen Livni, the Deputy Commander of the Nahal Brigade. We were all veterans of the Nahal Brigade and he had come to see what all the fuss was about. After a tour of the gallery, Livni said that he agreed with the facts that we displayed regarding the process combatants undergo in the Territories. However, he noted that he disagreed with us on one point. “You call this process moral corruption, insensitivity, or intoxication of power,” he said. “I call it growing up.” In response to Livni’s statement, one of my friends replied, “You’re right. That’s how people grow up in Israel. Which is the reason why we created this exhibition and are breaking our silence.” My friend was right. Adolescents in Israel grow up when they learn to impose military control over another nation.

Livni might have been right in this sense, as I would be obliged to say that 47 years as an occupying power have taught Israeli society a similar lesson to the one learned by every soldier who serves in the Territories. We have learned to glorify power, and have lost our ability to see Palestinians as people whose lives are no less valuable than ours. We have learned to avert our gaze from the tears of the hundreds of children who were killed over the course of the past month in Gaza. In addition to the dozens of families that were erased when one-ton bombs were dropped on their homes. The destructive images give rise to feelings of pride, rather than questions about the people for whom the rubble was once a home. The abject poverty in Gaza arouses contempt, instead of questions regarding the roots of poverty in a region that remains under Israeli control.

From 2004 to this day, my activism is guided by a refusal to accept Livni’s reality. This is not “growing up”, but rather brutalisation. In order to grow up, we need to stop thinking like occupiers, and to start thinking like human beings. As human beings, we can’t avert our eyes and close our ears. Most important, we cannot stop asking questions. Questions about our moral red lines as a society; questions about the moral price that we’ve paid, and will continue to pay, for the ongoing occupation; questions that are related at their core to the recognition of the value of all human lives in this region – both Israeli and Palestinian.

Yehuda Shaul is a co-founder and member of Breaking the Silence, an organisation of almost 1,000 Israeli veterans who work toward ending the Israeli occupation

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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?