"For me, it’s got nothing to do with flags, or 300 years of history": the Greens' Patrick Harvie. Photo: James Glossop
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Leader of the Scottish Greens: "You don’t need to like Alex Salmond to vote Yes"

The co-convenor of the Scottish Greens, Patrick Harvie, on why his party supports Scottish independence, and how it's not all about the SNP.

Patrick Harvie MSP is the co-convenor of the Scottish Green Party, and, perhaps more memorably, the “voice of the irresponsible left-led anti-family anti-Christian gay whales against the bomb coalition”, according to the Daily Mail.

“My mum was very proud of that, yes,” grins Harvie when I mention this description. “It was hysterical. More or less as soon as I got elected [to the Scottish Parliament] in 2003, I got involved in the issue of civil partnership – we felt very clearly, family law being devolved, that the Scottish Parliament should at least debate the issue... And I think that the Daily Mail fairly quickly decided, ‘ok, that’s the gay one, we’ll have a go at him every few months.’”

One of the reasons Harvie entered politics was the campaign to repeal Section 28, and he had worked as an LGBT youth worker before becoming a politician. He is visibly proud of Scotland, 15 years after devolution, for passing equal marriage legislation with the third biggest majority of any parliament in the world. “That was a real moment of unity,” he smiles.

In a year when Scottish-American actor John Barrowman’s “Glasgow kiss” in the opening ceremony defined Glasgow’s Commonwealth Games, a Scottish politician with concerns like Harvie’s has much to be optimistic about. However, Harvie has a whole other political struggle on his hands, which despite the odds, he seems really rather cheery about: Scottish independence.

The Greens are in favour of an independent Scotland, a stance which continues to surprise some people, being from a leftwing party perhaps thought to be less enthusiastic about borders than the mainstream parties are. Harvie himself admits that support for the break-up of the Union is “not universal” in the party.

The general idea is that such a change would sufficiently shake up Britain’s political and constitutional establishment, which the party believes is wedded far too closely to Westminster’s whims. “Given that our political framework hasn’t significantly changed in nearly a century, since women got the vote”, Green party leader Natalie Bennett explained recently, “this is an opportunity to push for a written constitution with rights for citizens enshrined within it.”

In a similar vein, the Greens also support an EU referendum – although they would campaign for an “In” vote were it to come about. Their reasoning here is similar; an opportunity to rethink Brussels’ influence and the vested interests operating within the EU.

Harvie, who began leading the Scottish Greens in 2008 (his co-convener is Maggie Chapman), is up-front about the fact that the Greens’ pro-independence stance comes from a need for “dramatic change in our politics, our economy and our society”.

He says: “For me, it’s got nothing to do with flags, or 300 years of history; it’s about the future. And I think that the best way, not only of changing Scotland, but actually challenging the nature of UK politics and the way that it works at present, throughout these islands, is Scottish independence. It doesn’t give a guarantee of a utopian future, but it offers up possibilities that are closed to us at the moment.”

Harvie’s refusal to play on patriotism is a markedly different approach from his partner-in-cause, Scotland’s First Minister and notorious Saltire-huckster Alex Salmond. And although they are both fighting for the same outcome in the upcoming referendum, Harvie is quite clear about steering his campaigning and politics away from the combative mainstream debate:

“I think one of the things I’m happiest about with the way we’ve [the Green party] conducted ourselves is that we’ve shown it’s possible to disagree about independence in a spirit of respect and friendship, and I think that’s the tone of debate that Scotland deserves.”

Harvie is clear that Salmond has “won a really impressive mandate”, and is keen to acknowledge his “right to put forward his own view on the monarchy, or on retaining a shared currency – I’d rather see an independent Scottish pound – on a whole host of issues.”

However, he also argues that the Scottish independence debate on the “Yes” side shouldn’t be all about Salmond.

“The referendum is on one question only: should Scotland be an independent country? It’s not a referendum on everything on his [Salmond's] white paper on independence. It doesn’t endorse every SNP policy. But I think the smart folk in the SNP also understand that the Yes cause needs to reach beyond the people who have only ever voted SNP, or who like Alex Salmond as First Minister.”

Harvie, who is smartly dressed in a floral tie and waistcoat, down in London to deliver a speech alongside Bennett in the evening, decries the way the debate has been playing out in the media.

“These kind of, slightly artificial, mano-a-mano, one-on-one TV debates, I think, fail to capture the breadth of either argument. Alistair Darling wasn’t able to capture the breadth of the various flavours of devolution that the three UK parties are putting forward... And Alex Salmond didn’t capture the breadth of the arguments, the possible visions for Scotland’s future. These sterile, one-on-one debates – middle-aged man shouting at middle-aged man – are not the kind of debate that is happening throughout the country, in every town hall, church hall, school, or doorstep.”

Harvie doesn’t accept that the devolution offers from the main three parties in Westminster are enough for Scotland. His argument mainly stems from the Greens’ anti-austerity stance. “We don’t have budget control over Scotland’s finances,” he says, “so when the UK government cuts funding on higher education, or housing, or any of the services we call devolved, our budget goes down as well. And we can’t do anything to really fundamentally get away from that austerity agenda.” He champions what he claims would see a “demonstrable shift away from the political centre, ie not just the southeast, but the City of London, and the vested interests that are at the heart of the finance capital model.”

One challenge for Harvie and the Greens in the build-up to 18 September, other than achieving their desired outcome in the referendum, is to have their distinctive arguments heard above the louder voices in the SNP. Harvie is emphatic about this, conceding, “I don’t think there’s any great secret that I’m not a personal fan of Alex Salmond. It’s really important to remind people that you don’t need to like Alex Salmond to vote yes. Because this isn’t about him. This is about the country.”

Anoosh Chakelian is senior writer at the New Statesman.

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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?