Economics and politics - comment and analysis
7. August 2017 I Will Denayer I Economic Policy, Europe, General, General Politics

The Labour Party must do better than this. It must ditch the Brexit

What happens when the elite is too stupid to serve its interests, its political personnel too incompetent? This question inevitably arises when looking at the David Davis and Boris Johnson’s spectacle, their abortive attempts of ‘negotiating’. These people are so utterly uninformed, so incomprehensibly incompetent and so predictably arrogant that it causes discomfort, even anxiety, on the other side: surely, it must be a clown-act! The British have a master plan (see here, here and here). Not at all. More than a year after the referendum, the UK government has no clue on how to proceed (see here). Behind doors, the damned result of a referendum no one wanted is being deplored (see here). Not by everybody, of course not. That is why the government is busier negotiating with itself than with the EU (see here).

DF5Nw_aXsAUbaCx

Picture 1: The Tories are criminally incompetent, written by a Tory member (Source: Matthew Parris). 

How is this possible? Part 1 of this article deals with the political situation in the UK at the moment. The Brexit has become a losing proposition, blatantly clear for everyone to see who is not willfully blind. This does not defer both main parties to stubbornly plow ahead. Part 2 deals with a much broader question. It tries to answer the question posed. What is the plan behind the Brexit? Ultimately, the Brexit has little to do with the EU at all. Look at the connections of the main players on the transatlantic scale and, frightenedly, the Brexit begins to makes sense (see part 2).

Two parties adrift

Popular opposition against the Brexit is growing day by day. Millions of Britons will endure hardship because of the political stalemate between the two parties, none of which has the interests of the population at large at heart, a lot of preaching notwithstanding. The political system in the UK is stalemated in a game of chicken. The show goes on – for now – for the simple reason that it impossible to turn back. The first party that makes a U-turn will lose the election, whenever it will come. That is the expectation anyway.

Labour speculates that it will win the next election. The strategy is to support some so-called “soft” Brexit, hoping that it keeps or brings remainers to the party, while not alienating leavers. For the rest, Labour concentrates on other matters, inequality, housing, wages, work. But this strategy will not work.

To begin with, it is doomed to fail over time. Research shows that practically 80% of Labour party members oppose the Brexit. Will Corbyn win an election promoting policies that 79% of his members oppose? YouGov and other pollsters show that 79% of Labour wants to remain. Of all 18-24 years olds, 85% want to keep EU citizenship, the right to live, work and travel in Europe without visas and permits. In fact – this is not a joke – nearly 60% of Leave voters is now willing to pay to retain EU citizenship!

Research shows that the great electoral leap that Labour made last June was due to remainers flocking to Labour in the hope it would either ditch the Brexit or propose a ‘soft’ Brexit or, even better, a symbolic one (see here). Will this part of the electorate vote Labour after it becomes clear that the leadership is just as adamant as the Tories to mess up the country in the name of “sovereignty” and “restrictions to immigration”, so that, it too, can live in some little England fantasy land, this time with “nationalisations”?

On which planet lives the leadership when it turns out that – to the credit of the English people – a large majority of Britons (over 70%) oppose restrictions to EU immigrants, although Corbyn, against his earlier promises (“assurances”), fantasises about floods of immigrants who lower wages for British workers? If the Mirror, which has, as an exception in the British media, been reasonably supportive of Corbyn, writes “that the party of economic success and of self-improvement turned into a party that pooped on itself,” the game is up. This is not the mainstream attacking Corbyn, it is not the Daily Mail, the Sun or the Telegraph, it is not even the Guardian. These are Corbyn’s allies.

DFbpTPMXYAAoXRc

Picture 2: Corbyn’s statement on the 27th of July  (Source: Google Images). 

People do not believe in Corbyn’s Brexit policies, because there is nothing to believe. It is not only that there are no advantages to the Brexit for society at large, it is much worse than just that. Mary Beard, Professor of Classic History in Cambridge, is now being abused by racists and idiots because she had the temerity to produce a television series on the Roman empire, explaining that what is now England was an ethnically diverse region 2.000 years ago. The English plumber next door knows, in his English bones, that this is not true and he has the right to say so. When the professor did not learn her lesson, she was abused and got threatened. Labour MP Joe Cox was assassinated in broad daylight by a man shouting “patriotic” diatribes. Some UK regions have seen more than a 120% increase in hate crimes: assaults on women wearing hijabs, insults and sometimes a fist on the face for Polish workers, who are afraid to open their mouth in public, verbal abuse on the streets to everybody who does not look “English”. The Daily Mail and the other tabloids blissfully propagate this social cancer on a strictly daily basis. It seems that no politician has the courage to stand up to them, as she or he risks losing the votes of the canaille who swear by their idiotic indoctrination and hatred of the “other.” When UN observers conclude in a report that the English tabloids are reminiscent of anti-Semitism resentment in the 1920s, no one acts. The electorate, you know.

DC6Fk9rWAAA4qw1

Picture 3: xenophobic and racist disinformation that never stops (Source: Google Images). 

A study from the London School of Economics analysed the results of the Brexit referendum. They paired electoral results with geographical and socio-economic data. The authors find that many of the deprived, de-industrialised, regions in the UK voted for the Brexit because of the ‘Chinese import shock.’ Some of the industrial infrastructure in the UK is simply not competitive. This is, for example, the reason why Swedish steel will be bought for the construction of eight new navy ships – cost will be around £8 billion. UK steel is both more expensive and inferior (see here). This is the net result of decades of failed industrial and macroeconomic policies. It has, of course, absolutely nothing to do with EU or any other immigrants, except that immigrants are the visible part of globalization – not neoliberalism, de-industrialisation, ‘free’ trade with no concerns for the social consequences, lack of investment, the attack on the welfare state, financialisation, but the Polish plumber, the Romanian cleaning woman, the Czech fruit picker, the immigrant who dares to speak a foreign language on a bus. It is absolutely beyond shameful that Corbyn says that the flood of EU immigrants lowered wages for UK-workers. Not one single study can be found that support this statement.

Me too, I want a Labour government. But if the price is playing the national card, forget it. I can say what I want, of course, but how many voters are going to make the same or a similar evaluation? After all, we are not voting for a social democratic party to support xenophobic nonsense. More than that, we vote for a social democratic party because we are of the opinion that its policies make sense, that they are just, social, redistributive, that there is vision. Where is it? Corbyn can say a thousand times that he wants to save the NHS, his Brexit, if it ever comes to it (which I continue to disbelieve) will make the NHS into a terminal case. So make sense. Social democracy is not a nationalist movement. Social democracy should be a party of people who base policies on valid insights, not a party of discriminatory demagoguery in the cloth of some outdated ideology. Some economic sectors in the UK simple cannot function without immigrants. Your restrictions will make your poorer. Your Brexit is making you poorer.

The contours of the disaster that the Brexit will create are now clear:  growth is revised down, the sterling is down, real wages are falling and investment, already weak, is slowing (see here). Last Friday, the Sterling stood at €1.10 – this is close to 25% depreciation since the Brexit (see here and here on the effects on trading). None one is taking about advantages. Nobody is even pretending that there will be benefits. The Brexit is all about damage limitation. Is this how Corbyn wants to restore social services and serve ‘the many’? While Corbyn is turning his back to the immigrants – breaking former promises – the UK super rich pay less tax than their cleaners (here). Imagine there would be an illegal one among them, according to Corbyn, she (I assume) would have to go, because its her who puts “pressure on wages.”

Heaven’s thank, the opposition within Labour – just as outside Labour – against the Brexit is growing by the day (see here and here and here on how extremely “progressive” the Liberal Democrats suddenly are). And here is a request of Corbyn’s allies to change his position (see also here). These people are not Blairites. They are not neo-cons. They are his friends.

Yet another reason why Labour should not support the Brexit is that, apart from the fact that public opinion is shifting and that the negotiators have no idea what they are doing, the Brexit will turn out to be undeliverable. There will never be a hard Brexit, because it is impossible (see here). It just cannot be done (see here for an explanation and see my previous articles).

Economically speaking, the UK has done poorly since the referendum. GDP growth is down, it is the lowest of the whole EU. The Sterling has depreciated, but the country failed to take advantage of it. Imports became more expensive, inflation is rising, real wages are falling and household savings are at their lowest level since 1963. To these figures could be added a plethora of other negative effects. As Wren-Lewis says, there are no major economic pros that need to be compared with the cons. Instead there are just economic costs, and the debate is about how large these will be (see here and also here – truly excellent).

Wren-Lewis said a couple of other things, when he was commenting on a piece in the Guardian by Elliott. Let me quote his final paragraph:

“Larry says that freedom of movement has not benefited workers. (…) (H)e would find plenty of EU workers in the UK who would disagree (at least before Brexit). Just as the movement of goods across borders benefits all, so can the movement of people. Most of the analysis I have seen has shown that recent immigration into the UK has been beneficial to UK workers once you take everything into account. Ignoring all that by talking about the ‘lived experience of ordinary people’ (here) suggests an attitude to knowledge and evidence worthy of UKIP. Which brings me full circle” (see here and also here).

Wren-Lewis is absolutely right. There is no evidence that the inflow of immigrants, including those from the accession countries, contributed to a fall in wages or a rise in claimant unemployment in the UK. The net economic balance of migration is positive. And if it is about their schooling, the Britons should pay attention.

DGQnxeCU0AAAPmk

Figure 1: Educational Attainment of A8 country immigrants (Source: London School of Economics). 

Some economists continue talking about the need for restriction, so that “a flood of non-unionised workers who would work below minimum wages” will not end up in local labour markets (see here). Stiglitz said the same, again without citing a single study.  In the US, The National Bureau of Economic Research just published a study that claims that “refugees pay $21,000 more in taxes than they receive in benefits over their first 20 years in the U.S.” (see here). So, it is not even refugees which are the problem. And IF immigrant workers ‘depress’ the lowest wages, there remains the childish, obvious, truism that behind every such immigrant stand an employer that breaks the law.

But so what? We now live in the new Gilded Age, the days of Charles Dickens have come back. If immigrant workers dare to complain about wages or working conditions, employers retaliate by contacting Immigration which obliges by organising a raid and a round-up. It’s all for the common good. Where are the socialists opposing such fundamental injustice? It is all fine to support Chavez in Venezuela. It is far away enough. Chasing down poor immigrants with no voice and no political influence is easier than upholding the law, treating people with human dignity and punishing the real culprits, the far from voiceless, politically connected employers of the right race, colour, culture and religion. There is, of course, the electorate.

Another reason for Labour to oppose the Brexit is the generational divide. The cruelty of the Brexit is that the elderly, with safe pensions, are voting away some young people’s futures – people losing jobs is a price worth paying! (see here) – so they can live out their final years in some Little England fantasy (see here). If you want to read an article which absolutely nails Britain’s obsession with immigration, read this one  (here). Apart from the glaring injustice in this, Labour must understand that old people die faster than young people.

DGIyZvgXYAAtD4r

Figure 2: YouGov polls showing the generational divide (Source: YouGov). 

Another reason for Labour to oppose the Brexit is incompetence. Are we sure the leadership knows what it is talking about? If not, shouldn’t we be worried? Corbyn has been challenged on his claim that being part of the Single Market is ‘dependent on EU membership’. This was something completely new in, for example, Iceland. Several mishaps have created the impression that the leadership is not an expert in EU matters. This is a problem, also because it is difficult to accuse the Tories of incompetence if your own party leader messes up elementary facts (as Richard Corbett (Labour MEP) wrote this weekend in the Independent) (see also here).

What is more, Corbyn’s main argument pro Brexit is fallacious. This time it is not a mishap. It is not a honest mistake, for if it was, it would have been corrected many months ago. It is not true that the EU stands in the way of “nationalisations”. This thesis was first put forward, I believe, by Tariq Ali and has been repeated by everyone and his dog, although it is incorrect (as I wrote two times in the last year). Finally, the TUC is also putting the myth to rest (here). Okay, Corbyn, then what is your big argument pro Brexit? Corbyn should also know that EU agencies are created by the Council and the EP legislation, not the Commission (see here).

I am far from alone with these concerns. As Owen Jones tweeted some days ago, “Unless labour will say we will keep UK in the single market and protect jobs, no one will see a reason to vote labour because there is no choice.” The Irish, true to their nature, have called the Brexit a heap of ideological crap (see here). The/a hard Brexit cannot be accomplished without finding a solution to the Irish question. But no solution to the Irish problem exists (here and here). The Irish, on either side of the border, do not want a hard border. The hard border, which existed on the island until 1998, has always been a thorn, a trauma for either side (see here). A new border would make no economic sense. Therefore, says Dublin, if you want a hard border, it will be sea border.

Another reason for Labour to oppose the Brexit lies in the extremely likely possibility that the final Brexit deal will be opposed by a majority of voters. Is Labour going to win the election after having being defeated by the population on the Brexit or by finally voting against the result of a process the party supported for years? There is no middle way. The electorate is not interested in a course in hermeneutics to make sense of Labour’s position – the maybe’s, the “tests” – what people want is a clear position, what the members want is for Corbyn to ditch the Brexit (see here).

In the meantime, the slandering goes on: there is £36 billion for the Brexit divorce bill that Britain is now ‘ready’ to pay (see here); first it was £78 million, now more than £500 million will have to be paid to move the European Medicine Association from London to Dublin (see here). Without foreign pickers, Brexit opponents predicted, fruit will rot in the fields. It has already become reality (see here). According to the Independent, London may lose up to 40.000 financial jobs due to the Brexit (see here and here). Contrary to her promises and an article she wrote on it, May announced a rise in gas prices with 12.5%, beginning next September. While the chief of gas “earns” (sic) £11.369 a day, thousands of families will be unable to pay their bills (see here). You can read here what this has to do with the Brexit.

DGN0l6UXsAQOglq

Picture 4: Another Theresa May promise (Source: The Sun). 

The UK faces a housing crisis, which is the reason why the Tories build affordable starter homes. These starter houses cost up to £450.000 (see here). This is on the expensive side, even Tories admit, so, Reeve said, why not lend money from parents or grandparents. It should be easy. How many houses is Corbyn going to build? With what? According to MMT fans, it should be easy. They read an article or two that claims that every sovereign nation can print as much money as it wants. So Corbyn will print the Pounds. The madness is bottomless. A potential US trade deal will see chlorinated chickens enter the UK market. In fact, the real problem goes much deeper. The US limits allow, for example, up to 20 times more poisonous aflatoxins in dairy products than the EU (see here). It is not about chickens or dairy, the issue is the complete corporate take-over of the global food-industry (see part 2).

DGi7iCbXoAYkso7

Figure 2: the drop of household savings and the rise of consumer credit (Source: ONS and Bank of England). 

DF9kFRzXgAApO1C

Figure 3: Fall of real wages in the UK (Source Atlas, ONS data). 

Britain loses its clout in the aerospace industry. Airbus alone employs 12.000 people in the UK. It is good for £90 billion. Due to the Brexit, the Franco-German-led Airbus shakes its UK management (see here). Together with the jobs go the technical know-how, the research, the niche and the stake in the company. Markit’s chief economist Williamson said that business activity is now slumping at the fastest rate since the height of the global financial crisis in early-2009. “The downturn, whether manifesting itself in order book cancellations, a lack of new orders or the postponement or halting of projects, was most commonly attributed in one way or another to ‘Brexit'” (see here and here). Etc. Etc. Etc.

DGj-mFKXsAArxN9

Figure 4: the cost of the Brexit according to Labour Against Brexit  (Source: Labour against Brexit). 

For now, both parties plow on. You are, in my view, mistaken if you think that, in these hard times, we need to be ‘pragmatic’ and that if Corbyn is wrong about Brexit and migration, so be it and we need to live with it. I am tired of the Tsiprases, the Macrons, the Iglesiases and, yes the Corbyns, although Corbyn might have his place. If only he took the decision which stares him in the face. These people never achieve anything for the simple reason that their strategy is wrong.

Once again, second class people are being created. People who are being tolerated, but not accepted, people who are singled out as a scapegoat for failed policies of whoever is in power or wants to be (see here), people who are getting discriminated against (see here). No, Le Pen did not win in France. Wilders did not win in the Netherlands. The extreme right will not win in Germany. But look at our friends! I imagine that Nigel Farage is the happiest man in the UK. He does not have to do anything. The parties that opposed him for years are now competing against one another to implement his policies. Have we gone mad? Surely, this cannot be the way to beat the Tories.