‘Taking back control’? Britain after Brexit

A fortnight after the British referendum on EU membership, Britain is still in turmoil. Some of the negative lessons are all too clear: don’t try to solve party political problems by invoking existential issues; referendums are volatile and uncertain; if you must have one, get a crack team together first. But, as weary politicians are fond of saying, we are where we are.
So what is likely to happen now?
There are different views about what course of action the referendum requires; but there are also very different views about what it might mean to ‘take back control’, which was the core theme of the campaign.

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Danish lessons for the UK, and in particular Northern Ireland?

Reading this article by Fintan O’Toole got me thinking about my other country, Denmark. The Kingdom of Denmark isn’t just Denmark proper, it includes two other autonomous countries as well. Only Denmark is in the EU.

Just saying.

Update: a researcher in Aalborg who actually knows something about Greenland had much the same thought as I. And they are practical people up in northern Jutland.

Markets and states are complements

The main point of my 1999 book with Jeff Williamson was that globalisation produces both winners and losers, and that this can lead to an anti-globalisation backlash. We argued this based on late 19th century evidence, but opinion poll evidence (citations here) suggested that something similar was at work in the late 20th century as well, a hunch confirmed in the early 21st century by the 2005 and 2008 French and Irish referenda.

What was missing from all this was an analysis of what, if anything, governments can do about this. Which is where Dani Rodrik’s finding that more open states had bigger governments in the late 20th century comes in. Dani’s interpretation is that markets expose workers to risk, and that government expenditure of various sorts can help protect them from those risks. In a series of articles, and an important book, Michael Huberman showed that this correlation between states and markets was present before 1914 as well: countries with more liberal trade policies tended to have more advanced social protections of various sorts, and this helped maintain political support for openness.

Anti-immigration sentiment was clearly crucial in delivering an anti-EU vote in England. And if you talk to ordinary people, it seems clear that competition for scarce public housing and other public services was one important factor behind this. If the Tories had really wanted to maintain support for the EU, investment in public services and public housing would have been the way to do it: if these had been elastically supplied, that would have muted the impression that there was a zero-sum competition between natives and immigrants. It wouldn’t have satisfied the xenophobes, but not all anti-immigrant voters are xenophobes. But of course the Tories were never going to do that, at least not with Osborne at the helm.

If the English want continued Single Market access, they will have to swallow continued labor mobility. There are complementary domestic policies that could help in making that politically feasible. We will have to wait and see what the English decide. But there are also lessons for the 27 remaining EU states. Too much market and too little state invites a backlash. Take the politics into account, and it becomes clear (as Dani has often argued) that markets and states are complements, not substitutes.

 

Brexit and the Idea of European Disintegration

Britain has voted to leave the European Union (EU), or more accurately, England has voted to leave. The majority in Scotland, Northern Ireland and Gibraltar voted to remain. The opinion polls, the bookies and the markets did not predict this outcome. The mood of the nation, it would seem, is becoming increasingly difficult to measure. Or is it?

There is a lot of data suggesting that ‘immigration’ was the dominant concern for those who voted to leave the EU. This should not be too surprising. In the latest Eurobarometer data, immigration was cited as the main concern of UK citizens, alongside Germany and Denmark.

According to YouGov data, which is more revealing, income was the best predictor as to whether someone intended to vote to leave or remain. Basically, the lower your income, the more inclined you were to vote leave. Some have referred to this category as ‘those with lower education’. But let’s be honest, it’s called social class.

Another predictor as to whether someone was more inclined to vote leave was age. Younger, more liberal voters, were much more supportive of remaining in the EU. The only problem with this category of voter, is that they failed to turn out en masse to vote at all. According to the data, electoral turnout among 18-25 year olds was pitiful. Older workers were much more inclined to vote.

The precise data on how particular communities and constituencies across England voted is perhaps most revealing. The poorest twenty districts in England overwhelmingly voted to leave the EU. Or to get at it another way, according to this report, those areas with the most stagnant wages are the same communities with the most anti-EU attitudes.

What can we infer from all of this? What should EU policymakers infer from all of this?

The core inference is that England is a deeply class divided society, and that the poorest in England are increasingly venting their anger at immigrants and the EU. Further, and what is not captured in the above data, is that right-wing political parties are now mobilising working class England.

Those same electoral constituencies most likely to vote leave, and with the most stagnant wages, are the same constituencies most likely to vote for the far-right populist UKIP party. In addition, they are the same people most likely to be discursively conscripted into the anti-immigrant lies of the red-top tabloid press.

Class politics in England increasingly overlaps with enthno-nationalism, whereby identity and immigration, rather than economic self-interest takes precedence in shaping electoral behaviour.

In political science, there is a large literature on economic voting. One of the core findings of this literature is that in times of crisis and economic austerity, voters punish incumbent governments. This is partially what happened in the UK. Disenfranchised working class voters punished the Tories, liberal elites, the EU and the city of London.

However, the economic voting literature, whilst useful in describing why voters punish government, tells us very little about who these voters turn to, when expressing their social grievances.

In theory, those voters most affected by austerity, unemployment, underemployment and precarious work, would turn to parties on the left and those parties committed to reducing economic inequality. Most research, particularly within Europe, however, suggests, working class voters are turning to the ethno-nationalist far-right.

To put it simply, those affected by austerity and right-wing economic policies don’t necessarily vote in their class interest, they increasingly vote in their ethno-nationalist interest. UKIP’s economic policies are aggressively libertarian, not social democratic.

Economic liberalisation, rising inequality, and the complete free movement of peoples has social and electoral consequences. Societies will react to this disruption in different ways. Nationalism provides a sense of meaning, community and belonging, to those most affected by liberalisation. Far-right parties, such as UKIP, know this.

This realisation, however, does not seem to have seeped through to policymakers in the EU or  Germany, who, despite a near complete destabilisation of the parliamentary party system in Southern, Eastern and Central Europe, remain committed to their failed neoliberal economic adjustment of austerity induced cost competitiveness.

Most political science research in the aftermath of the great recession increasingly suggests that not only are electorates losing trust in the EU, but that the support for national democracy, in general, is in decline. When the politicians change, and the policy remains the same, voters lose faith in the institutions of liberal democracy.

The question for national leaders in the European Council, and policymakers in the European Commission, is whether they need to wait for the election of Trump in the US, Le Penn in France, or the Five Star Movement in Italy, to realise that their economic policy response to the crisis has failed, and must fundamentally change?

Polities disintegrate when they begin to loose control of their external boundaries and their internal legitimacy. Or, as W.B Yeats poignantly wrote in 1919, “things fall apart; the centre cannot hold; mere anarchy is loosed upon the world“.  The UK and the EU are now faced with the potential for disorderly disintegration. Political scientists are accustomed to thinking that ‘more EU integration’ is inevitable. This is wrong.

Yeats wrote this after WW1, which coincided with the end of the first wave of free-market globalisation, when economic inequality peaked, much like today. In many ways Brexit can be interpreted as Europe’s Polanyi moment. It was a counter-reaction to a political economic system that is perceived to be designed in the interest of the comfortable elite.

It would be naive to assume that the popular reaction to rising inequality, precarious work, economic uncertainty, liberal elites and fear of immigration will lead to something politically progressive. The wave of anti-immigrant, nationalist sentiment, sweeping England, clearly shows that it won’t. France could be next. The EU should not wait to find out.

Ireland’s Negotiation Game Strategy for Brexit

Ireland needs to play its hand deftly and aggressively during the EU-wide Brexit negotiations. Irish interests in the Brexit process, post-vote, differ from those of other EU states. For EU enthusiasts in states with limited UK trade, a tempting strategy for preventing a NEXT-IT (Netherlands, Austria, Denmark, etc.) is to punish the UK via a spiteful exit deal. That would be a disaster for Ireland due to spillovers. Ireland needs to fight hard to let the UK be allowed a smooth and minimally-disruptive exit, not face a mini trade war. Ireland would be hit very badly in the crossfire.

This really is a slow train wreck

I see that everyone is now arguing that globalisation has distributional consequences, and that losers may eventually decide they have had enough. Which is something that I and others have been writing about since at least the 1990s.

I don’t expect anyone to take much notice of a bunch of academics, but how can we be surprised at the Brexit vote when we have had practical, political experience of the class divides surrounding European integration (viewed and experienced as a regional manifestation of globalisation) since at least 2005, when the French rejected the so-called Constitutional Treaty? And here is my very first ever Vox.Eu column, on the Irish Lisbon 1 vote.

And so my question is: when this has been so obvious for so long, how come nobody has done anything about it? Where are the enhanced safety nets, or the more elastic provision of public housing and other services that would surely have made a difference in the English debate? It really is quite extraordinary.

Some thoughts on Brexit

Although I was a member of the Centre for European Reform’s Commission on the UK and the Single Market, I declined to sign a resultant letter to the newspapers on what the UK ought to do, as well as similar subsequent efforts. There were two reasons for this. First, I’m not British, and I know how irritating it is to have foreigners tell you what to do at times like this. Second, it wasn’t at all clear to me that economists’ letters were particularly helpful. On that score at least, I think I was right.  But Thursday’s vote is going to have implications for all of us, and especially for Ireland, so we all need to start thinking about what happens next.

Oxford vote 70% to 30% in favour of remaining in the EU, and I have lots of colleague who are absolutely devastated this weekend. It’s hard for people outside Britain to understand just how sad so many people are at what has happened. This isn’t just about economics, or even mainly about economics: it’s about identity, and a great many English people feel, profoundly and sincerely, that they are both European and British. Both identities are under threat today.

Of course, a healthy majority of English people are happy with the outcome, including some friends of mine, and I’m pleased for them. And presumably we all wish England well. But it’s also true that the English voted without paying the slightest heed to what was in the interests of Ireland, including that part of the island which remains part of the United Kingdom.  It was ever thus, for perfectly understandable reasons having to do with the relative sizes of the two countries, which is why Irish independence was always both inevitable and desirable. But that is another matter.

One of the truly extraordinary features of the British political landscape today is that neither the Leave campaign, nor apparently the British government, knows what it wants to happen next. But it is perfectly obvious what we in Ireland should want to happen next. England and Wales have voted to leave the European Union, and hence the Single Market. The reality therefore is that, as things stand, the UK is headed out of the Single Market that it was always such a keen supporter of. And that would be bad for Ireland in a whole host of ways that are by now well understood.

Of course, the British may decide to reapply for Single Market membership, as part of the process of negotiation which now has to take place on the terms of their exit from the European Union. They are perfectly entitled to do so.  If they do reapply, they should be granted membership of the European Economic Area on the usual terms: Ireland, and Britain’s many other friends in the European Union, should insist on this, and indeed it would be in everyone’s best interests. But only the British can decide if this is what they want. Given that labour mobility will be part of the deal, I would have thought that such a decision would require another referendum on both moral and political grounds. I don’t view that as an insuperable obstacle, since I don’t see why such a referendum could not be won — especially since this may well be the key to avoiding a hard border with Scotland. And if the English don’t want to join the EEA, we need to know that too.

The rest of Europe should resist the temptation of a “fuite en avant”, attempting to move full speed ahead towards a fiscal and political union that nobody wants. (Yes, that has implications for the survival of the euro, at least in the long run. So what? The single currency was always a terrible idea.) Far better to accept the reality of a multispeed Europe, which better reflects the diverse opinions of its many citizens.  If the United Kingdom, or England and Wales, were to become firmly embedded in the European Economic Area, while remaining outside the European Union, not only would economic disruption be kept to a minimum, and Ireland’s best interests be protected; this would be an important move towards a looser and more shock-resistant economic architecture for Europe as a whole. And there would actually be a certain upside to that.  Too much rigidity, and the entire European project risks implosion. This is not so much a case of “reculer pour mieux avancer”. It is a case of “reculer pour survivre.”