In this week’s New Statesman: After Chávez – Despot or Democrat?

PLUS: Jane Shilling on our obsession with raising the perfect child, Mehdi Hasan on Abraham Lincoln, and Rafael Behr’s new series on the "dividing lines" of British politics.

Hugo Chávez: Man against the world

In our cover story this week, we debate the legacy of Venezuelan president Hugo Chávez’s - a socialist hero to some and a bullying despot to others. Richard Gott, the author of Hugo Chávez and the Bolivarian Revolution, argues that el comandante has brought hope to Latin America and that his death will ignite our appreciation of his achievements. Rory Carroll – who was the Guardian’s correspondent in Caracas for six years – disagrees, and wonders if the price of change was too high.

Gott writes:

What is not yet understood is that Chávez . . . has been the most significant ruler in Latin America since Fidel Castro seized power in Cuba in January 1959, more than half a century ago. Such extraordinary and charismatic people emerge rarely in history; they leave an imprint that lasts for decades . . .

Chávez had great ambitions to improve conditions for Venezuela’s poor and to include them in the national debate . . . His single most significant political initiative, announced on day one, was to call for a progressive constitution, ratified by referendum . . .

This has been Chávez’s lasting legacy, and is the basis of his project to promote “21st-century socialism” in Venezuela and more widely on the continent . . .

Journalistic NGOs and human rights groups complain about what they see as attacks on freedom of the press in Venezuela . . . Nor do we hear much from western journalists about the changing nature of life in the shanty towns, with the spread of health programmes and education opportunities, or the recent construction of housing projects, or the experiments with co-operatives and community councils. Why has Chávez had such a bad press?

Part of the image problem lies with long-surviving caricatures of Latin America in the popular memory that have little relevance to the continent today . . . Yet outside observers have consistently declared Venezuela’s elections to be fair, and Chávez is no Pinochet.

Carroll argues that the case of Maria Lourdes Afiuni – a judge whom Chávez jailed for 30 years, on special orders, after she released a high-profile banker accused of fraud – exposed the president’s tendency to “bully” the state into suppressing those who anger him.

Afiuni’s plight was not typical of Hugo Chávez’s rule. There were no gulags, no mass arrests, no fear of the midnight knock on the door. Chávez did not rule through terror. But when it suited him he bullied the courts into jailing those who challenged or angered him.

He was neither a tyrant nor a democratic liberator but a hybrid, an elected autocrat, and the nuances of that category often escaped his friends and critics abroad . . .

He relied on the ballot box for legitimacy while concentrating power and eroding freedoms, shunting Venezuela into a twilight zone where you could do what you wanted – until the president said you couldn’t . . .

He cemented his rule by rewarding allies. Opportunists, notably senior military officers and the tycoons known as “boligarchs”, got rich manipulating government contracts. Civilian ideologues and Cuba got power and influence. Hundreds of thousands of ordinary people got jobs in a bloated bureaucracy. And millions of the poor got social services, scholarships and handouts, notably fridges, tumble dryers and washing machines.

Other Latin American governments knew of the abuses, that elections were free though not fair, but stayed silent.

 

Jane Shilling: Parenting Wars

In the NS Essay this week, author and journalist Jane Shilling examines the multimillion-pound industry devoted to telling you how to raise your child. Peppered with probing recollections of raising her own son as a single working mother, Shilling queries both the “personal” and the “political” crisis of modern parenting.

Even 20 years ago, my unprofessional attitude to bringing up a child was anachronistic; these days I suspect it would be regarded as borderline negligent. Mine was certainly the last generation in which one could allow oneself to muddle along without the assistance of the experts, treating parenthood as though it were analogous to friendship – a relationship that would grow and flourish of
its own accord.

I might have done my best to ignore the fact, but as a single parent I was a fragmentary factor in what has grown into an urgent social crisis around the issues of childhood and family. If ever there was a time when one could raise children unselfconsciously, it is long past. Now every aspect of parenthood, from conception and birth to the forming of intellect and character, is the subject of anxious and often agonised scrutiny.

The crisis is both personal and political. On the one hand, as engaged parents, we
feel that we are in some sense our children: their successes and failures represent us almost more vividly than our own achievements. And as the condition of youth becomes ever more extended, lasting in attenuated form until middle age and beyond, our children can help to feed our vision of ourselves as perennially young.

 

Rafael Behr: Dividing Lines

This week the NS launches a new series – Dividing Lines – in which our political editor, Rafael Behr, will discuss the issues polarising British politics. “The distinction between left and right in Britain looks starker now than at any time in the past 20 years,” he writes.

Over coming weeks, I will look at some of the problems facing Britain and try to decode what the different sides might have to offer by the next election. Sometimes the divergence is stark; often there is more agreement than anyone likes to admit.

Westminster is obsessed with the delineation of dividing lines – the tactical approach to an issue that seeks to define it in crude, binary terms, with the enemy caricatured as holding a view inimical to mainstream opinion. “They” destroy public services; “we” invest. “They” want to spend your money on feckless scroungers; “we” reward hard-working strivers. It is the very substance of modern politics, and the rhetorical dishonesty, that make politics dangerously insubstantial.

The most corrosive force in democracy is the assumption that none of the mainstream candidates deserves endorsement because “they are all the same”. In the weeks to come, we will consider whether that lament is justified in Britain today. Given the scale of the challenge, we must hope it is not.

 

Mehdi Hasan: Today we remember Lincoln as a great redeemer – and that should give Obama hope

In Lines of Dissent, Mehdi Hasan writes on Steven Spielberg’s Lincoln. Though he admits that “I cried” at a preview of the film in Soho, Hasan wonders if we have seen “the whole story”, and makes unavoidable comparisons with today’s “talk, skinny” president, in the week of Obama’s inauguration.

There is nothing new in Spielberg’s depiction of “Honest Abe”. Lincoln has long been considered the greatest ever leader of the United States . . . Spielberg, however, glosses over Lincoln’s earlier, more odious views . . .

Last November, Obama held a screening of Lincoln at the White House and told Time: “Part of what Lincoln teaches us is that to pursue the highest ideals and a deeply moral cause requires you . . . get your hands dirty.”

The problem with Obama has been that, on a host of first-term issues, ranging from the deficit and financial reform to climate change and gun control, he didn’t merely fail to fight dirty – he didn’t put up a fight at all.

As Lincoln showed with the Thirteenth Amendment, it takes only a matter of months to wipe the slate clean and earn a place in the pantheon of great American leaders. America – and the world – are waiting, Mr President.

 

Laurie Penny: What’s the point of smashing the glass ceiling for a few women, when so many live in poverty?

For In the Red this week, Laurie Penny interviews Selma James – the writer and 82-year-old feminist activist – who explains why “class, money and family still matter” in feminist discourse.

Feminism has become identified with breaking the glass ceiling as the central perspective,” she [James] says, “but the speed at which women are entering boardrooms is not half as fast [as that of] women entering prisons for crimes of poverty...”

Conventional wisdom has declared the question of women and money resolved, because they now have the legal right to enter historically male jobs and make a decent wage . . . Today, with austerity hitting women harder than men across all sectors of society, from low-waged workers to mothers receiving child benefit, activists of all stripes are beginning to question, once again, how work and class fit into feminism.

 

In The Critics

  • Our critic at large is poet Julia Copus, writing on the link between physical illness and the creative life.
  • John Gray, writes about The World Until Yesterday: What Can We Learn from Traditional Societies? by the American polymath Jared Diamond.
  • In the Books Interview, Jonathan Derbyshire talks to the Canadian writer Sheila Heti.
  • Simon Heffer reviews Sorry!, Henry Hitchings’s study of the English and their manners.
  • Alexandra Coghlan reads Alan Rusbridger’s memoir Play It Again.
  • Sarah Churchwell ponders Alone in America, a study of loneliness in American literature.
  • novelist Linda Grant reviews Landscapes of the Metropolis of Death by the Holocaust survivor and historian Otto Dov Kulka.
  • Ryan Gilbey reviews Zero Dark Thirty.
  • Kate Mossman reviews new albums by Nick Cave and Johnny Marr.
  • PLUS: Will Self’s Madness of Crowds column.

Click here to read more from “In the Critics this week”

To purchase a copy of this week's New Statesman online visit: subscribe.newstatesman.com

Charlotte Simmonds is a writer and blogger living in London. She was formerly an editorial assistant at the New Statesman. You can follow her on Twitter @thesmallgalleon.

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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?