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Think Jeremy Corbyn's not a leader? You don't understand what leadership is

What it means to be a leader has changed, argues Hilary Wainwright. 

 'He's a decent principled man, with great integrity. But he's not a real leader' is the constant refrain from Jeremy Corbyn's critics.  At the same time, 52 per cent of the population have railed -in the Brexit vote - against the establishment, jam-packed with would-be and retired leaders of the kind that critics want to put in Jeremy's place. Isn’t it time we asked what kind of leader we need for today's circumstances and therefore put the conventional parliamentary idea of leadership under scrutiny?

Let's start by distinguishing Corbyn's electability from his credibility as Prime Minister on the model required by our present unwritten constitution by which immense and mostly invisible powers are concentrated in the hands of a single individual.

First, then, the conditions for his electability. A starting point must be that the general election he will face will not be taking place in a functioning political system with a high turnout and strong levels of trust in the main political parties. Rather, he will face a general election after a decade of growing disengagement from politics especially by the young and the poor and insecure, to a point where the present government was voted for by only 24 per cent of the eligible electorate and many constituency Labour parties were struggling to ensure a quorum at their meetings.

For a leader to be electable in today's mood of anti establishment politics, a leader and his party has to be able to reach out beyond the political system and to give a voice to those who have no vested interest in the system. Neither left nor right in the Labour Party have been good at this, preferring to assume that the party’s links with the unions provide it with an inbuilt communication with the wider public.

Corbyn, aided by the one person one vote system for electing the leader has not taken union membership support for granted, and has shown himself able to reach out and demonstrate that he would open spaces in politics for the disenfranchised and ensure they had a voice. As a result, he has re-engaged hundreds of thousands of young people.

Typically the young don't just engage with institutions as they are, they bring new ideas and they shake things up, producing new political configurations with the potential of attracting more of their generation.

Moreover, this is the generation whose culture, including political culture has been shaped by using the tools of the new information and communication technology to share, collaborate and network, aiming to emancipate themselves from overbearing authority, hierarchy and other forms of centralised, commanding domination. A collaborative, facilitating kind of leadership and political organisation is the only one with which they can engage. They are mystified why the parliamentarians who have resigned cannot work together, with the division of labour and mutual support that they take for granted.

On the other hand, as the Brexit result demonstrates there are distinct problems to be addressed amongst the white working class with strong feelings of abandonment and powerlessness leading, with the aid of Boris porkies, to a scapegoating of immigrants and of the EU. Again, I'd argue that the current Labour leadership, with their commitment to fight austerity, are well placed to reach out to those whose lives and communities have been all but being destroyed by cuts, low pay (and no pay), privatisation and casualisation of Tory and Labour governments of recent years and before that the decimation of industry by the Thatcher government.

Corbyn can commit himself to putting money where his mouth is when he says that immigration is not the cause of people's social and economic desperation.

But the Leave vote also indicates that the problems are not simply economic. What also surfaced was the problem of power and powerlessness. Here there is a confluence with the aspirations of the young, to achieve some control over their future.

But while the urban young use new technologies to create forms of daily collaborative control over their lives; people without easy resources of mobility and communication need increases in control that they can feel, today. Here the role of the unions is vital. And not just as campaigning foot soldiers for the general election but for their initiatives in seeking to bargain not only for better wages but for greater control the organisation and purpose of their work, especially in the public sector, also for their growing organisation of part-time and casual workers and their suppor for co-operatives as a way in which precarious workers can develop collective strength.

Greater control of our working lives however is limited if our wider political environment is controlled by a remote, over centralised political system by which there is little or no chance of a voice in decisions about housing , the environment or the national and international decisions of war and peace, trade and investment which shaper our lives.

This bring me to the second understanding of leadership: that judged according to the criteria drawn from the nature of Prime Ministerial power in the British state, a position shaped by decades of adaption – but not transformation – of the job description of the headquarters of a global empire.

The 'strong man' notion of leadership by which Corbyn appears all to often to be judged is not therefore just a matter of a macho style. It is embedded in the nature of the UK's unwritten constitution and the immense but opaque power that it gives to the executive: extensive powers of patronage, powers to go to war be ready to press the nuclear button, negotiate treaties of various kinds and in many ways preserve the continuity of the British state.

Here I want to argue that the conditions for his electability are entirely within our grasp, especially if his critics in the PLP showed some of the respect for party unity that the left have shown throughout the party's history. However his credibility as Prime Minister, a different kind of prime minister from the current model, would require an effective challenge to the centralised nature of power in our political system. A challenge that would need to be made now, while in opposition, with extensive popular participation. This project of democracy has been Corbyn's  declared goal but he and the shadow minister responsible ,Jon Trickett, have been demoralisingly slow, probably due to the paralysis imposed by the constant attacks to which he has been subject from day one. Yet the new politics that Corbyn proclaims surely needs an explicit agenda of institutional change not simply a change of style at the front bench dispatch box.

Questions of institution and of policy are closely allied. JC's critics are rarely explicit about how far their criticisms of Corbyn are of his capacities – to match up with the responsibilities of highly concentrated power - or whether in fact the implicit issue at the heart of the rebellion – maybe not shared or recognised by all the resignees – is a disagreement on policy: on nuclear power, on war, on security , on respect for the continuity of executive power (a disagreement over which will surface on Wednesday with Corbyn's statement on Chilcot)  And possibly a belief, reflecting the influence of shadowy pressures coming from 'the permanent state' who quite simply will not allow a socialist who means what he says, to be Prime Minister .

Either way, it would be perverse in the face of the strength of anti-establishment feeling from young and old, to replace a leader committed to breaking establishment power, with one who is committed and ready to preserve it. 

Hilary Wainwright is the editor of Red Pepper.

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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?