Sandu and his son Antonio, in Channel 4's The Romanians Are Coming. Photo: Channel 4
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For many Romanian migrants, the phrase "freedom to move" is contradictory

The director of Channel 4's The Romanians Are Coming describes the choices and the journey faced by Romanians who move to the UK to work.

I spent a year filming Romanians in the process of leaving their country to come and live in ours. I was with them as they wrestled with the idea of leaving their homes; I was with them when they said tearful goodbyes to their wives, their children and their elderly parents; I was with them when they arrived in the "new country"; and I was there as they began to look for work and attempted to build some sort of a life here.

The decision to leave your family and move to another country cannot be an easy one to make. It’s something you would do only if you really needed to. Sandu really needed to. Of all the situations that I encountered on my various trips across Romania, Sandu’s was the worst. He lives in Baia Mare, an old mining city in the north of Romania, situated in a valley and encircled on all sides by hills and mountains. There hasn’t been much mining here since the Romanian Revolution of 1989. Although in recent years the city’s economy has improved, any trickle-down effect fails to reach a 52-year-old Roma gypsy like Sandu.

Sixteen years ago, the mayor of Baia Mare moved Sandu, his wife, their nine children and the rest of their community to social housing on the edge of the city. Over a thousand Roma families were forced to live in one-room apartments, some without running water or electricity. Controversially, a six-foot wall was then built around the site, which was designed, according to the mayor, to prevent traffic accidents. Human rights organisations say this amounts to institutional racism.

It’s impossible not to be a little overwhelmed on your first visit to the site where Sandu lives. This seven-storey shell of an apartment block – half-finished, with bricks missing and gaping holes without glass for windows, and with walls blackened by smoke from wood fires – rises out of a sea of rubbish which completely covers the muddy ground around it. In the middle of the site, a single tap provides fresh water. On my first visit, some young children were playing with a dead dog; they have no toys, someone explained.

If you live here, your options for earning money are few. Some, including the children, collect scrap metal from the numerous derelict buildings, remnants of the old copper-mining industry. Others beg in the city centre. Some of the women travel to Germany or England to work as prostitutes, while their husbands stay behind with the children. Some have given up and now walk around zombie-like, breathing in the fumes of the paint-thinner that they inhale from plastic bags. Every day, Sandu tours the city’s communal dustbins, looking for food. His son is ashamed, but for Sandu there is nothing shameful in providing for your family.

I met Sandu because he was planning to leave Romania to try to improve his life by seeking work abroad. He speaks no English, has no qualifications, and has no special skills that will make him employable, but he is happy to do any job, no matter how monotonous, back-breaking or dirty. According to Sandu you can only die in Romania, and he needs to go to a place where, in his words, "people will welcome and help you". For Sandu that place is England, a land he believes to be populated by gentlemen and ruled by a caring Queen who preaches fairness and equality.

This image of Britain is sadly not one I recognise, especially in relation to immigrants from Romania. The popular perception of people like Sandu is that they come to claim our benefits, steal our jobs and cheat us out of our money. Ukip’s unrelentingly negative politics focusing on Romanian immigration are perhaps one reason why. The press, too, is to blame, as coverage of immigration is often unequivocally negative.

Never once did Sandu profess to be attracted to Britain for any benefits he might receive. He needs a job, his children need him to have a job, and he is willing to go searching for one. Throughout my time filming this series, I found that people wanting to make the move to the new country have usually set their sights on something more than just hand-outs.

The need to move to another country in order to find work is not specific to Sandu’s situation. Although the poverty he lives in is extreme, in the process of making this series I met many people, from many different backgrounds, all hoping to work abroad. When you consider that the average wage in Romania is just under £4,000 a year, and take into account that things cost pretty much the same over there as they do here, perhaps you can understand why.

Mihaila. Photo: Channel 4

Mihaila is a middle-aged, middle class nurse living in the Black Sea coastal city of Constanta, with her husband, her teenage daughter and her elderly mother. Her house is comfortable, she can afford to eat out occasionally, she makes wine from the vines that grow in her garden. Her life is good. The trouble is, her life can’t get any better. She can’t afford to extend her house, or buy her daughter a car, or take her family on a foreign holiday, all those things that it is natural to want.

For Mihaila, and many others like her, Romania is a trap where it’s possible to live, and even live comfortably, but perhaps it’s not possible to do more. Britain offers an opportunity to do the job she is doing now in Romania but for much more money. In this way she shares the thoughts of all those who have ever considered working abroad for a few years in order to be paid more for their efforts. This tends to be more common for those who are young, relatively free, and embarking on their fledgeling careers, but Mihaila is facing this decision as a 50-year-old woman. That takes guts.

Making this series I was struck by the sacrifices people are willing to make to find work. There’s Stefan, who earns pennies as a human statue in Piccadilly Circus, trying to raise enough money for an operation to fix his daughter’s leg. There’s Adi, who works in a car wash for £30 a day and sends so much of his money back to his wife and child that he has had to sleep rough under a bridge for the past six years. That level of commitment and determination is impressive. British people moan that foreigners are taking British jobs, but I wonder how many Brits would be willing to endure what Adi does in order to support their family.

The fundamental right to free movement for EU citizens is important, correct and valuable, but let’s not be blasé. Leaving your family and friends behind as you move 2,000 miles across Europe in the hope of finding a job is not a decision that anyone takes lightly. It’s a scary and painful thing to do. It rips families apart and it destroys communities. It is not something that should have to happen. For many of the Romanians I met, the phrase "freedom to move" is contradictory, as where is the freedom in having no choice but to leave your country to search for work? It’s important and correct that we have that right to free movement, but let’s not confuse the life of a migrant worker with freedom.

James Bluemel is the director of Channel 4's three-part series, The Romanians Are Coming. The programme is produced by KEO films. The first episode airs at 9pm, 17 February

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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?