The Conservatives are Economically Illiterate Part 2: Brexit Harder
This is the second article in a series examining how poor the Conservatives are at their raison d’etre. The first, on austerity, is here.
On 23rd of June, 2016, a slightly larger quarter of the public voted to leave the European Union than a slightly smaller quarter who voted against it. Handed this gift to conduct Brexit in any fashion they wish, that meant there would be no more democracy on the matter, the Conservatives were solely responsible for whether we leave the European Union, our goals in negotiations and the quality of the negotiations themselves. It is little wonder that now, as Brexit turns to disaster and the public turn to Remain Brexit politicians must blame the EU, the will of the British public and people who wish to remain in the EU for the declining conditions they have themselves inflicted on British industry, British sovereignty, and the average Briton.
As with austerity, complete Conservative dominance has resulted in policy and action that is an unmitigated disaster with absolutely no positives for the British or Britain. Unless you’re an arms manufacturer.
Bleakonomics
The first and most predictable economic shock, which indicated businesses and foreign governments were betting against Brexit, was the overnight collapse in the value of the pound against other big trading currencies, particularly the dollar and the Euro. As a result two of the big three credit ratings agencies, Fitch and Standard and Poor’s, immediately downgraded the UK’s credit rating. They have been followed since by the last of the three, Moody’s, who oddly weren’t swayed by May’s Florence speech, and downgraded the UK’s credit rating to the worst it has been in history. The eye-watering debt that austerity has accumulated onto the shoulders of British families is now much costlier to pay, directly because of Brexit. All three of the main international credit ratings agencies are in agreement that voting Conservative is to threaten the ability of Britain to pay its debts. The Hell of any politically-interested Briton is to watch Conservative politicians alternate between the same dull, visionless and redundant speeches that accomplish nothing and then stab each other in the back while saying daft and untrue things every week for the next decade or more.
Since then the tabloid press, and even some news organisations which should know better, have been declaring every twitch in value, completely negligible in the context of this collapse, to be the sign of some resurgence or positive outlook. There is no positive economic outlook.
This has had a large number of eminently predictable knock-on effects that have resulted in Brexiters sulking that the results of Brexit, which are negative, are being blamed on Brexit. Bafflingly ignorant mainstream opinion in the press and broadcast media initially declared that economists were proven wrong by the strength of the economy following the referendum. This is untrue.
The most maligned opinion given before the referendum is that of the Bank of England’s Governor, Mark Carney, who evinced his fear that a vote to leave the EU could result in a technical recession. Yet he was only slightly wide of the mark — the first two quarters of 2017 saw growth of 0.2% and 0.3% respectively, showing just how accurate his worst concerns were — while his office’s forecast that growth and the value of the pound would nosedive were ignored but proven completely correct. Economists, and HM Treasury in a study that was widely misunderstood and misquoted, predicted a strong shock followed by a long, severe, and implacable decline. They have been proven accurate beyond all doubt. The outlook is not pleasant. Prognoses that were called Project Fear by the Leave campaign are confirmed to be Project Reality Obvious to Everyone Except Brexit Politicians who have no Excuse for Selling out their Country to an Academically Moribund and Empirically Falsified Pseudo-Ideology. Which is, granted, less catchy.
Economists predicted, rightly, that the fall of the pound against the dollar would lead to inflation because of the vastly increased cost of imports; this will continue as businesses have sought to suppress the effect on retail prices (through, e.g., shrinkflation) that are already wearing thin, resulting in skyrocketing prices of staples such as energy and food and making Brexit a regressive tax that disproportionally burdens ordinary people. 2017 is witnessing British income enduring its worst decline in two centuries, and because it is driven by large rates of inflation, public sector workers under their nominal pay cap actually face a real pay cut of about 2% this year alone. Brexit is making the average Briton poorer.
After a recession it is typical for headline unemployment — that is, the figures the government uses — to look much lower than the rates of unemployed people who still want to work. This consistently happens because headline employment rates only look at those individuals still looking for work, but there is little point in doing so when there are no jobs available, no matter how desperate one may be for a job. Thus those unemployed due to a weak labour market but still eager to work pop out of unemployment rates during a protracted downturn. Similarly, part time workers and those now employed by the gig economy — zero hour contracts have quadrupled since 2005 — are counted as employed, and the rates of underemployed people have still not returned to pre-recession levels a decade on. All of these trends have been felt most acutely by the young: 17% of those aged between 16–25 are even now not in training, education or employment, inflicting long lasting wounds on their career prospects and ultimately on the broader British economy. The structural weaknesses that have been intensified by deep cuts in spending means that middle income jobs have been comprehensively wiped out — and this is reflected in vastly reduced wages since the recession.
While Tories boast about low unemployment they are referring to the transformation into the gig economy — unsecure, labour-intensive, low income jobs are available. But due to austerity the job market has not recovered even a decade later, placing Britain in a profoundly fragile position. Wages and incomes are now lower than they have been since 2009 and a tenth of us are out of work but want to work.
The Brexit referendum has intensified these problems. British industries are already amidst an appalling slump and it is common knowledge how poorly Brexit is going to comprehensively affect every sector, because CEOs don’t get their understanding of finance from The Daily Mail. The only consistent positive, the sole reason GDP growth is remaining positive, is that household consumption remained relatively high in the immediate wake of the referendum.
This was driven by debt and credit to feed it is fast disappearing as the Bank of England tightens lending rules to avoid another debt crash so soon after the last. Boasts about the supposed ‘resilience’ of the economy in the wake of the referendum were made presumably in the hope of conjuring some mystical gestalt psychic resistance to economic fact. For a brief period of time consumers — who understood the meaning of the collapsing pound more readily than newspapers would have you believe — have front-loaded their spending with enormous borrowing, in amounts that dwarf the last debt bubble. The last enormous debt bubble which popped in 2008 and that you may, unlike our Government, remember.
With inflation soaring, every non-service industry collapsing and a decade of dramatically falling income the mendacity of banks in supplying credit — secretly lifting debt limits, for instance — is the only thing maintaining razor thin GDP growth. Record levels of debt, record household bankruptcy and household savings at their lowest level in over a decade temporarily stave off yet another recession and make our glorious Brexit revolution possible. Calling the people burdened with such debt irresponsible is a salve for the conscience and patriotically hardens the heart against feeling anything for the British people. Praise be to the malfeasance of the banking sector.
Economists rightly predicted that the fall against the dollar and the nature of Britain’s trade deficit meant that any growth in exports would be largely offset by the spiralling costs of imported raw resources. Additionally, as EU negotiations have so publicly fallen apart due to chronic Tory incompetence businesses have been preparing for the obvious crash out of the EU without a deal — keeping wages stagnant and cutting hopes of an export boom balancing the fall in consumption in the domestic market off at the knees. What is the point of investing profits in expanding operations when your buyers are about to drop behind a huge tariff wall? What is the point of raising wages or hiring people when the decision is merely going to be reversed in a year’s time? Britain specialises in high quality, high value goods and services: it cannot suddenly switch markets or exploit its customer base by fiddling with prices. Economists told us all of this would happen, and it is happening. So businesses have been hoarding profits. For the same reasons investment, in general, has plateaued. Immigrants don’t depress wages: employers do, and Government mismanagement does. Brexit and austerity, demonstrably, have.
In a rather sad repeat of the Leave campaign’s pitiful attempt to get firms to sign up to bankrupting themselves Theresa May sent around a letter asking British businesses to give their support to her Brexit. They have refused because no one seriously believes Brexit will be good for business. As the EU position has remained relatively unchanged in the face of British Government posturing the triumphant cries of ‘Brexit means Brexit’ have increasingly become sobs that ‘Brexit means Brexit’. We lost the prestigious EMA and EBA immediately — after Davis said this was would not happen — and Brexiters cried this was punishment, evidently annoyed about what their choices have cost the UK but puerilely unwilling to accept responsibility. A broad range of our financial services and manufacturers were exceptionally honest before the referendum about the fact that they would be forced to move operations to the EU-proper, given that a great deal of their trade — the taxes on which the British public currently enjoys — comes directly from the UK being able to trade currency, services and goods as a part of the EU. Insurance greats Chubb, AIG, Hiscox and XL Group and banks Barclays, Citigroup, Standard Chartered, Nomura, JPMorgan, Goldman Sachs, and Morgan Stanley are all in the initial stages of moving operations abroad and job losses from this first Brexit exodus are expected to top 10,000: these can no longer be dismissed as empty threats as serious money is now being spent on the migration. Much of this damage is avoidable were we to stay in the EU: the harder the Brexit, the more job losses, the more financial losses, the greater the losses in tax revenue.
Infamously the Brexit campaign lied that leaving the EU would mean the UK recovering £350m a week from the EU’s coffers for use by the NHS, which instead has seen spending relative to GDP in its longest sustained fall in all of history as part of deliberate and unnecessary Conservative policy. Further Brexit is costing Britain £300m a week according to the Office for Budget Responsibility: a Conservative organisation originally created to embarrass Labour’s spending habits which instead is in the unenviable position of explicitly spelling out the follies of austerity and Brexit every interminable and pointless year of its existence. Its prediction that the referendum result will lead to a 2.4% fall in growth over the next five years compared to the counterfactual of remaining in the EU looks eminently like it is too optimistic despite being so damning. Did Leave not explain that their intent was to hurl British money on a bonfire and dismantle our public institutions?
The fact that the right wing press and politicians are still pushing a lot of these myths — Boris Johnson shamed himself by repeating the £350m a week for the NHS malarkey — shows how morally bankrupt and dishonest they are. Journalists for The Spectator, Times, and the tabloid morass know that there is absolutely no hope for Brexit Britain to come out of the next decade with any facet of the economy or our personal finances improved. They are now in the asinine business of trying to convince everyone that it is actually good we are witnessing mass penury. Why aren’t the ideologically conservative, foreign-owned subsidiaries of multinational businesses that write such articles more interested in fighting for or improving Britain? It is a mystery.
But surely, Brexiters argue, with the rest of the world to trade with, it does not matter if we do not even get a trade deal with the EU. We can make even more money with the rest of the world.
We Cannot Make Even More Money with the Rest of the World
A number of news media outlets have weirdly claimed that a group of economists led by Professor Minford have produced a study that suggests the UK will be better off after Brexit, despite, and this is not a joke, the study not having been written. The study you have heard of does not yet exist: such is the standard of evidence for a pro-Brexit opinion to receive a disproportionate platform on every news broadcaster and major national newspaper. In the absence of any analysis there is not even a case to be made that the economists in question have mainstream support, are authoritative voices or are anything less than perpetually wrong goofs: it’s Minford, who wrongly stated the minimum wage would result in job losses, and wrongly argued a poll tax would be fair. All we know is that pre-Brexit he was calling for the UK to deliberately eliminate its own manufacturing sector, subject most of its citizenry to poverty and to not bother pursuing new trade agreements, plans so daft even the Conservatives balk at the suggestions, making them an irrelevancy anyway. Again, this is not a joke or exaggeration. It’s Minford.
Meanwhile, every independent and Government study (let’s face it, even the dozens the Government is suppressing because they are massively embarrassing) has demonstrated that Brexit will make the UK poorer (see, eg., here, here, here, here, here and so on) no matter what trade deals are struck internationally, no matter what trade arrangement is made with the EU if it is anything short of being part of the single market and customs union. Their predictions for the short term have been appallingly accurate, the mid-term assessments are looking increasingly unavoidable and the long term is looking increasingly unpleasant for the UK.
A hard Brexit, where we accomplish no trade deal with the EU — which is what is unfolding under the Conservative Party’s failed negotiations — is nothing short of fiscally disastrous.
Hard Brexit followed by the UK joining trade agreements with all countries in the world except EU members
But of course, a best case scenario is not going to happen. The EU is the pre-eminent force for reducing non-tariff trade barriers in the modern era and tariffs with our main potential partners are already at historic lows. Via the EU the UK currently has preferential trade agreements with 53 other, non-EU nations. To prevent an even worse crisis from unfolding Theresa May has called on all non-EU countries to simply adopt EU trade law with the UK in order to avoid disruption.
For Brexiters treading water and replicating small parts of the EU’s success are treated as an astonishing victory: they do not even really pretend to be able to improve life for the British. Canada and Japan have both made overtures of wishing to replicate EU deals once we have left the EU. But such overtures — including a much trumpeted facsimile agreement with Japan — find themselves contingent on the success of negotiations with the EU that we already know are going to fail, and are only treated as a success because they potentially suspend a tiny facet of a comprehensive international backward slump. 759 treaties will need to be renegotiated just to maintain the position we are in now and no headway has been made on any of them. Absolutely no attempt was made to prepare for the scale of the task. Given the very public fashion in which everyone from Boris Johnson to Michael Gove to Liam Fox to David Davis to Theresa May — intellectual heavyweights all, we must admit — have evinced factually untrue beliefs about the EU, such as openly believing trade agreements could be made with individual EU countries, trenchantly and wrongly asserting that British access to radioactive isotopes used in medical treatments and research are not subject to Euratom oversight, completely forgetting about the Irish border, simply not knowing how much our agriculture relies on EU migrant workers and our NHS on EU medical specialists leading to staggering staffing crises, not realising that flights to the EU are dependent on EU treaties that will stop existing once we leave — there is absolutely no indication that any of these issues will be solved because the politicians we pay to govern us simply did not know they existed and now hope they can just be muddled through. But there is nothing to muddle. Once we leave the EU treaties will stop existing that allow us preferential and prestigious trade with almost a hundred countries. The hope is that the cost to our greatest allies and neighbours of our apathetic ineptitude will be punitive enough that they will rescue Brexit for us. As they have pointed out time and again, they will not. It is the job of our Government, which is feckless, directionless and incompetent.
As the Government has repeatedly shown itself ignorant of the structures of the EU, common market, ECJ and customs union themselves it has also failed to understand what negotiations are: why would every country on the planet hand away their bargaining chips? The United Kingdom finds itself leaving the EU and literally every single trade deal that it has, putting it in a uniquely weak position in every individual trade deal it must now negotiate: the Conservative Brexit places the United Kingdom at the nadir of her power in all of modern history. Every nation wishing to make a trade deal with the UK has the advantage of time as the article 50 clock ticks down, and strength, as they have the buffer of all other trade they have access to, and competence, as our civil service is overwhelmed by two new Government departments and the cyclopean task of Brexit itself: we simply do not have the manpower to negotiate new trade deals and treaties and Conservative attempts to generate that manpower have been feeble. According to the promises of the Leave campaigns the job of securing trade deals should be halfway complete as of last month. Yet we have no trade deals assured at all.
And our allies and trading partners tell us this to our faces. Australia informed Britain it was prioritising a free trade agreement with the EU over one with the UK, as did New Zealand. Both were the heart of promises of new FTAs and the utterly bizarre fantasies of a renewed commonwealth that the rest of the commonwealth finds embarrassing: both are about to enter into formal FTA talks with the EU just in time for us to miss out on them. India allowed trade negotiations to lapse after we failed to agree in principle to relaxed visa controls for Indians wishing to work and study in the UK and, given this is politically impossible — Theresa May was opposing such a deal even as home secretary — instead India’s industries believe Brexit will cost trade between our two nations. It goes on and on.
To sidestep the allegation that Brexit is nothing more than Britain taking an extensive financial hit purely because of the racism of a fraction of its population its defenders have instead mewled that it was in the desperate hopes of taking back control.
Brexit Cedes British Control to Foreign Dictators, Foreign Markets and Foreign Courts
In the EU the UK finds itself one of the biggest fish in the biggest pond in the world: we enjoy overwhelming influence to write and guide the legislation that governs the greatest market on the planet. Now Brexiters prattle of weakening our labour laws and regulations to reduce our quality of lives even more than they already have, to reduce the quality and healthiness of our food, to privatise our NHS, all in order to surrender to the demands of America and China and try hopelessly to arrest the downward fiscal spiral their idiotic policy is causing. There is no longer talk of imposing our vision or enforcing what the British public want for our laws and regulations: even Brexiters do not take the public to be that gullible.
As with austerity Brexit represents the Government spending appalling amounts of British money on making British lives worse. The blustering of ‘taking back control’ has given birth to the waffling of suborning ourselves to other large markets and courts over which we have no control at all, of acquiescing British choice in its trade entirely to foreign forces. All talk of ridding ourselves of the supposed shackles of the ECJ, of free trade and of building bespoke deals has been replaced by simpering pleading to accept punishing WTO rules. In the EU we have elected MEPs, Council representation, a veto on legislation, EU Commissioners: we are a vital, pre-eminent and guiding voice in the most democratic trade bloc that has ever existed. In the WTO our unelected Government can present its case to a sprawling bureaucratic trade court and hope the large markets accept its rulings. Our sovereignty and choices are reduced to vapour through Brexit, and as Brexiters weirdly, publicly said, we become like any other nation. The fools who are stripping us of power and privilege are the same ones pretending to be advocates of British exceptionalism, writing silly articles about being the heirs of colonialism. Their ignorance is staggering: the British Empire gleefully went to war with foreign nations impudent enough to impose trade restrictions on it in the manner Brexiters wish to impose on the UK now; the heads of such bumbling insurrectionists would line the spikes of London Bridge. What passes for intellect amongst the Brexit politician is as alien to the ruthlessly calculated cruelty of the British Empire as it is to the liberal social democracy of modern civilisation.
After the EU our single biggest trading partner is the US, the authorities of which vacillate between calling for a swiftly negotiated free trade agreement and putting us to the back of the queue, after the EU: such is the state of the special relationship. People who proclaim themselves patriots and say they want us to be sovereign are instead reducing us from the leader of the largest market and democratic political union the world has ever seen into America’s frequently kicked terrier.
In 2003 American President George Bush enacted tariffs on steel imports that the WTO ruled were illegal: Bush simply ignored the ruling and carried on levying tariffs on foreign steel, deeply wounding British exports. Courts are limited in their capacity to enforce their rulings by the resolution and strength of the states from which they draw their authority. Only when the world’s largest market intervened — the EU threatened a beautifully surgical trade war that would have been costly specifically to Bush by targeting key states and industries that were necessary for his electoral victory — was America forced to capitulate. The EU is the greatest force multiplier for the UK that we have ever built; as a part of it, we are mighty. Similarly the potency of the EU is reinforced by having the fifth largest economy as a constituent member: it is to our mutual benefit that we share such clout and vision.
Now not only does Trump intend to do this again, but a few days ago he enacted a 219% levy on Bombardier, a Canadian aeronautical and engineering giant that employs thousands in Northern Ireland. The Brexit position is that our own courts, or the WTO, are sufficient international arbitrators to resolve such disputes, despite the fact that we know they are not. Without being part of the shared voice of the EU we may only yap if our new master treats us unkindly. We could not unilaterally force the US to accept WTO court rulings before. There is no magic inherent in letting bigots dictate our foreign policy that means we can do it now. None amongst the whole Brexit team should not be allowed to own a cat, much less run The World’s Greatest Nation.
The deep financial and political wound of Brexit renders us wretched. May’s first foreign tours in the wake of her appointment as Conservative leader were to plead to Gulf dictators to sell British honour and prestige in exchange for pitifully tiny trade arrangements. Such is our frailty in the wake of the referendum we sponsored Saudi Arabia to the UN Human Rights Council and sell weapons to them despite two separate Parliamentary committees finding that these are being used to commit war crimes that we are now liable for, morally and legally, in Yemen. We sell fighter jets to Erdoğan of Turkey even as he dismantles the country’s democratic institutions. At least Rolls-Royce and BAE systems have gained succour at the teat of war, even if the peoples of Britain and Turkey must endure hardship: that is the main function of government, after all. We must feebly hold the hand of Donald Trump, despite his open support of literal Nazis and white supremacy. Publicly Brexiters accept that we must slither on our bellies and accept the rules and regulations America forces upon us, sending our health secretary on tours of the States so he can seek out the corporations the Government will be forced to sell our NHS to.
Economically much weaker, much less sovereign, and globally a huge loss of prestige, so what do Brexiters have to gloat about? Well, they are successfully driving away foreign people, who have no wish to live in a country that is poorer, lagging behind the rest of the EU and more openly hostile to people with skin tones slightly warmer than the pallor of a corpse anyway. Bitter, lonely racism is the only victory left to them.
Our Government simultaneously declares Brexit will be a success predicated on the hopes of a free trade agreement with the United States while threatening a trade war with the United States. No longer do we guide the markets we are a part of, no longer do we speak with the clarity, force and resolution to matter, but are motes subject to the buffeting tides of global markets. There is no alternative to the single market: Brexit Britain is Britain diminished.
It is not the fault of Remain voters or the EU that inflation is outpacing wages, that the pound has collapsed, that credit is drying up, that we are on the verge of another debt collapse or that GDP growth is now at near-recession. It is horrifying how much prestige, influence, attractiveness to migrants and wealth that the Brexit referendum has already cost Britain. Brexit is completely failing to deliver any of the promises of the Leave campaigns and is reducing Britain and the British.
It is on Leave voters to look at themselves and question why they are not outraged by this enormous failure by Brexiters to deliver what they promised to Britain.
