A post-imperial army

Commonwealth soldiers willing to die for Britain aren't rewarded with citizenship.

In the capital this year Armistice Day will be marked by the scarlet illumination of the London Eye, with laser beams marking 11am like the hands of a clock. Yet despite attempts to keep the anniversary modern and meaningful to younger generations, the actual conditions of militarywork remain obscured by this type of patriotic symbolism.

It is a little known fact that the British Army currently employs more than 8,000 personnel from Commonwealth countries, not including former Gurkhas from Nepal. In 1998 the New Labour government removed the residency requirement for Commonwealth citizens and individual regiments
began to recruit from countries as far away as Fiji and Jamaica. Numbers increased over the decade, and in 2009 a cap of 15 per cent was placed
on those trades where levels threatened to rise above a level deemed appropriate for a “British” army.
Today there are approximately 2200 from Fiji, 890 from South Africa, 800 from Ghana and hundreds from Jamaica and the eastern Caribbean.
Ostensibly recruited to meet shortfalls in voluntary recruitment through the 1990s, this ready source of “manpower” has meant that the armed forces
have been able to sustain adequate levels of recruitment throughout wars in Iraq and Afghanistan. The numbers of non UK nationals has also had a
significant impact on levels of ethnic minorities in the army, currently hovering around 9.9 per cent. Ten years ago this figure was likely to be
near 2 per cent, although statistics were not comprehensively collected at that time.
In November 2009 I interviewed four young recruits from the Caribbean who had flown over that week to complete the final selection process.
They had passed the basic tests in their home countries of Belize and St Lucia the previous year when the army’s “overseas pre-selection team”
was in residence. They had then waited many months before receiving the invitation to fly to London. We had watched the remembrance service in
Westminster Abbey on a large TV screen and discussed the impact of Britain’s imperial history on their countries and their families.
We observed the most celebrated Commonwealth soldier to date, then Lance Corporal Johnson Beharry, VC, handing the wreath of poppies to the
Queen to place on the tomb of the unknown soldier. Originally a citizen of Grenada, Beharry would have passed through the same selection centre
in 2001 shortly before being sent to the infantry training centre in Yorkshire where these young recruits were bound as well. While on deployment in Al-Amarah, Iraq, in 2004 he distinguished himself by driving members of his unit to safety on two occasions when they came under heavy fire. He was awarded the Victoria Cross the following year, becoming the first living person to receive it since 1965 and certainly one of the youngest. He was 24 at the time.
Soldiers such as Beharry and the recruits I interviewed, who might otherwise be cast as ineligible skilled and unskilled migrants from outside the EU, are not automatically rewarded with citizenship as a condition of employment in the armed forces. Nor is their path to citizenship, should they wish to apply, significantly expedited by their readiness to kill and to die for Britain.
This past year has been an escalation in the number of cases where Commonwealth soldiers have been refused UK citizenship. The UK Borders
Authority maintain that criminal convictions and sentences imposed under military law affect immigration and nationality decisions, regardless of
the severity (or not) of the alleged offences. The Home Office is currently reviewing the criteria as a result of publicity gathered by the organisation Veterans’ Aid which deals with veterans in crisis.
As the Royal British Legion asks people to "stand shoulder to shoulder with those who serve”, it is worth recalling that the soldiers who are not UK citizens would, out of uniform, be regarded as unwelcome immigrants. However, this is not to argue the case that military work should be considered exceptional and that soldiers’ claims for settlement should be expedited.
The employment of migrant-soldiers with strong postcolonial ties to Britain challenges the “common sense” racism that delineates the boundaries of our political community by colour and concepts of indigeneity. The ratcheting up of anti-migrant policies by successive governments in order to earn the approval of the electorate reveals the hypocrisy, double standards and racism that are inherent in framing the war these military migrants are sent off to fight.
Vron Ware is a research fellow in the centre for citizenship, identities and governance (CCIG) and the centre for research in socio- cultural change (CReSC) at the Open University. Her book “Military Migrants: Fighting for YOUR country” has just been published by Palgrave.
Lance Corporal Johnson Beharry meets the Queen in November 2010 (Photo: Getty Images)
Show Hide image

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?