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Scottish nationalism isn't racist - but Sadiq Khan has a point

Not being racist is quite a low bar, actually, when you're part of a mainstream political movement. 

“It has never been hard to tell the difference between a Scotsman with a grievance and a ray of sunshine.” quipped PG Wodehouse. Well, it appears Scottish politics experienced something of a solar eclipse following Sadiq Khan’s intervention at the Scottish Labour Conference. The history of the Union of Scotland and England is littered with artless interventions by English politicians on Scottish affairs. London Mayor Sadiq Khan stood in this proud tradition, “There’s no difference between those who try to divide us on the basis of whether we’re English or Scottish and those who try to divide us on the basis of our background, race or religion,” he said. Only after the Twitter skies began to darken, did he add: “Now of course I’m not saying that nationalists are somehow racist or bigoted."

To be fair to Khan, his analysis seems to be a far more general one based on global trends. As an abstract criticism of reactionary forces against globalisation, it is true that nationalism is aimed at breaking the world into ever smaller associations of power and identity. But to lump Scottish nationalism in with British nationalism is to lack precisely the kind of rigour which is essential to combat “narrow nationalist parties” – and I say that as former Better Together campaigner, who faced many a nationalist across the debate table – including Nicola Sturgeon herself.

I’ve found modern Scottish nationalism does not always spring from an insecure dominant culture challenged by outsiders, but like the “sub-national” movements of Catalonia or Quebec defines itself as an insurgency against a sclerotic oppressor – “Westmonster” in the lingua franca of the cybernats. Sturgeon leads a “civic” nationalism, which aims to break from an aloof British state, and in doing so emphasises that it’s not of that sort of ideology that promotes ethno-centric ideas. All this makes it more palatable to progressives who associate with the movement, but would not describe themselves as nationalists. Its enemy is not a mythical immigrant stereotype created to bully a fearful electorate, but the British state. Pretending otherwise will do Unionists no good.

But not being a shower of racists is a low bar indeed. There is no need to strawman Scottish nationalism to observe that still at its core, as all nationalisms do, it requires an “other”. Nationalism, even under a very big tent, exaggerates a difference which tracks culture and borders. In this case the SNP claim there is something fundamentally, morally different about Scotland.

Never mind that Scottish Social Attitudes survey say Scots are pretty much in line with rUK voters on tax, austerity, and just about all issues with the exception of immigration (Scotland has a declining population so this is unsurprising), or that the character of the UK state been hugely influenced by Scots filling every known position in government - true Scottish nationalists would rather exploit the emotional differences.

This kind of nationalism often manifests in a virulent anti-traitor sentiment when confronted. Former First Minister Alex Salmond’s close adviser Joan McAlpine has questioned the “Scottishness” of Unionists. Cybernats mugged late Charles Kennedy and continue to hound JK Rowling (with added misogyny, because of course). If you are not party to the civic project then you are not merely disagreeable, your very nationality is questionable.

The leadership may not endorse the foaming rage of its supporters, but it has on occasion found it useful cover when targeting the media. The BBC’s Nick Robinson found himself at the end of a pre-Trumpian attack during the Scottish referendum, when Salmond accused him of "heckling". Fast forward two and a half years, and Claire Heuchan, a black Scottish student researching critical race theory quit Twitter after daring to back Khan in a Guardian column. In this worldview, scrutiny is too often viewed as malign treachery and not reasoned difference.

This is still not "racism" – such a rhetorical claymore is of no use to Labour in unpicking the complex coalition of identities which compose the Yes movement, many of which only have a loose affiliation with Scottish nationalism. Those who attack the petty tribalism of intolerant, trueborn nationalists should be careful not to dismiss the many progressive Scots who simply see independence as a lifeboat for a more just society, in a UK intent on drifting into an irrelevant Atlantic Ocean. 

Sadiq Khan leads London (home to thousands of Scots), another major UK region to back Remain. He was elected against a tide of bile and cynicism unseen in the UK since the 1980s. He was elected because against a campaign of fear he stood in the image of a forward-thinking politician who looked like the future of a cosmopolitan, tolerant society. This is an image which also strikes a chord in Scotland. Even Stugeon prefaced her tweets with “I'm a big admirer of @SadiqKhan”. If the Union is to be preserved, it will only happen because Scotland sees a UK which shares its idea of itself. To that end, Khan should offer sunshine and leave grievance to nationalists.

John McKee worked on the pro-union Better Together campaign during the 2014 Scottish referendum and is a freelance journalist.

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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?