Who is really to blame for Brexit?

Since the vote to leave the EU, 'Remainers' such as I have been told repeatedly that "we just don't get it". That the 'Leavers' are sick of "being told what to think by a metropolitan liberal elite". You cannot be serious ...

The theory goes that the Leavers in the main come from communities 'left behind' by the rapid pace of global economic change. They see changes happening around them over which they feel they have no control - their communities changing due to immigration from within and without the EU, their wages stagnating, the economic divide between London and the rest of the country widening. They feel that their elected representatives don't actually represent them at all; that they are all cut from the same cloth - a CV that reads public school, Oxbridge, Special Advisor, Member of Parliament. We are told that people are rebelling against "politics as usual" and political party manifestos with barely a cigarette paper between them, that people want a change of government to mean something. Sound familiar? Well it should do - we have heard it ad infinitum. The problem is that this has nothing to do with political correctness ("gone mad"), or the machinations of a cross-party liberal elite and everything to do with the economics we have voted for at every General Election since 1979.

Put simply, placing the blame for the current wave of discontent on a liberal elite is nonsense because for the last 40 years we have got the politicians and the politics we deserve. Since 1979 we have been subject to an economic orthodoxy which holds that small-state, low-tax economies will grow faster and create more wealth, and that this wealth will trickle down from the risk-takers to the rest of society. This neo-liberal economic agenda was combined with aggressive globalisation - barriers to trade and to movements of capital were removed to expose business to the rigours of international competition in order to drive down costs, to create efficiencies and to allow the invisible hand of the market to find the true value of any commodity - be it labour, finished goods, raw materials, or currencies. This globalisation pits workers in the UK against workers anywhere else in the world in terms of competing for work - if workers in the UK are too expensive they will very quickly find themselves out of work.

Neo-liberalism has become the de-facto 'normal' economic and political model of our times. This has forced all mainstream politicians to accept it as the basis of their manifesto for government. No UK government has challenged this orthodoxy since 1979 and whenever the Labour Party put a more interventionist, higher-tax, larger-state proposal to the country it got crucified - 1983, 1987, 1992, 2015. This is the political choice we have made. The electorate have repeatedly rejected the option of voting-in a liberal/left-wing Government that may have redistributed wealth more fairly and may have actively supported communities left behind by the pace of globalisation. The only occasions on which the Labour Party won power in the last 40 years it did so by enthusiastically embracing neo-liberalism and being "intensely relaxed" about people becoming filthy rich. When Margaret Thatcher was asked what was her greatest legacy she answered "New Labour", which perfectly sums it up - no party aspiring to govern has dared to stand on anything other than a neo-liberal platform.

The electoral playbook since 1979 has therefore been lower taxes, smaller state, emaciation of public services. We were told that any country failing to comply with the new economic order would become uncompetitive, that anything more than just basic public services were unaffordable, that any increases in taxation and state spending would weaken the economy, that privatisation of state assets would make them run more efficiently. It is this neo-liberalism that has decimated communities, created the wealth gap between north and south and between rich and poor, caused wages to stagnate and eviscerated the services on which people rely. It has nothing whatsoever to do with our membership of the EU or with immigration. The kind of state intervention that could have helped the former industrial towns in Wales, the Midlands and the North in coping with a shrinking share of world trade, eg. by investing in new industries and new skills, were not allowed to form any part of government policy - in the Tory Party due to ideological dogma, and in the Labour Party due to the fear of succumbing yet again to electoral oblivion.

The Tory-voting South of England has done very well out of neo-liberalism due to its proximity to London and the global markets it represents, but the further away from London you go the less this is the case. The split between Labour and Tory voters broadly mirrored a north/south and city/rural divide and it has largely been the South of England's Tory voters, assisted by a rabid press, that have kept the political agenda firmly set against any kind of wealth redistribution or regional aid.

So, who is to blame for the Brexit debacle? Certainly not "political correctness gone mad" or some mythical liberal elite. The people to blame are we, the electorate of the last 40 years. By consistently electing centre-right governments of all parties we have given ourselves identikit politicians with little to choose between them on policy. We, the electorate, are the authors of our own circumstances - had we ignored the siren voices in the media and instead allowed our politicians to propose more state intervention, more wealth redistribution, more public ownership of essential utilities and services instead of slavishly following the free-market doctrine pushed at us by the Tory Party we may not have seen the current wave of political unrest and we may still be in the EU. In short, we have only ourselves to blame.

The costs of Brexit are gradually becoming clear

After weeks of those gnawingly bland "Brexit means Brexit" assurances Theresa May finally caved in to the growing pressure last week and set out to clarify the Government's position. We now know that the UK will be leaving the Single Market, putting to an end to the hope that 'passporting rights' for banking services could be retained after Brexit. Since then most large banks have gone public with the worst-kept secret in the Square Mile - namely that they have been scouting various EU cities in the hunt for new locations in which to headquarter their European operations ("Citi plans Brexit job move", "Banks plan Brexit exodus", "City banks warn of Brexit job moves").

While there will not be many people shedding tears over the likelihood that tens of thousands of banking jobs may disappear from the City of London over the next decade, the loss of tax revenues should certainly concern them. The City contributes £60bn a year in tax revenues to the UK Treasury (11% of the overall tax take); the net cost to the UK of EU membership is £8-9bn annually. If HMRC were to lose only 15% of that £60bn tax revenue then the act of leaving the EU will come with a net cost attached. So much for £350m a week extra to spend on the NHS.

To look at the specifics, according to this article from the Daily Mail - "Anger over £250,000 average wage at investment bank Goldman Sachs" the average pay at Goldman Sachs is £250,000 per year. Now it's probably safe to assume that the Daily Fail has manipulated the figures somewhat for the purposes of the article, as is it's wont - so let's assume the average is closer to £200k. Someone earning 200k per year will be paying around £83000 per year in tax and national insurance contributions. By contrast, someone on the average UK salary will pay only around £5500 in tax and NI. So for every job permanently lost from the City, the UK will need to create 15 at the national average wage simply to replace the lost tax revenue. That's a lot of extra jobs to create in an as yet unspecified booming area of growth. And that does not even take into account the collective demand that the individuals occupying those new positions will place upon the national infrastructure - one taxpayer vs fifteen taxpayers, one taxpayer's children vs 15 taxpayers' children, one pensioner vs fifteen pensioners.

There is also the unanswered question of where the employees to occupy these replacement roles will come from - we are clamping down on immigration apparently, so are these roles to go unfilled, as we are already close to full employment? Will the hit to the Treasury's revenues therefore be permanent and, if so, which services will be cut as a consequence? Or is Theresa May going to have to renege on the promises made on immigration by Leavers during the campaign?

With each passing day, as more details of the post-Brexit landscape emerge, it is looking more and more as though we have taken a foolhardy gamble.

Idiocracy

So the Idiocracy has started [https://en.wikipedia.org/wiki/Idiocracy]. The worst choice in history for President of the USA has been sworn into office. The electorate set aside all the norms that should have prevented the election of a man who is a sexist, a misogynist, a racist, a fantasist, a conspiracy theorist, a liar, a bully, an utter ignoramus, and an overgrown child, and they voted him in anyway. And in the UK in March the Brexit process will be triggered - the biggest mistake the country has made in the last century, and one which will make it permanently poorer and less influential. In each case - Brexit and Trump - the 'shock' outcomes have been portrayed as a kick back against the political class and/or a metropolitan liberal elite by those 'left behind' by the march of globalisation. The warnings of the professional politicians and commentators were simply ignored and the maverick candidates were elected anyway seemingly on the basis that if your life is already crap, how much more crap can it get?

It is deeply depressing, but we are now in what has been called the post-truth era, where facts and evidence are irrelevant if they don't fit with preconceived opinions. I prefer to call it the era of wilful ignorance - rather than thinking through highly complex, nuanced issues with numerous shades of grey people choose instead to portray the same issues in simplistic black and white terms and propose blunt instruments as solutions. Professionals who spend their working lives getting to grips with these complexities are dismissed as bloated bureaucrats, experts and academics are denounced as parties to some unfeasibly wide and deep web of left-liberal conspiracists, and the entertainment of ideas is dismissed as ivory-towered elitism. The red-top electorate doesn't want to go to the effort of analysing anything longer than a headline so populist politicians gleefully offer up easy solutions rooted in misinformation.

The problem we will face in 2017 and beyond is that the 'populists' have been elected but they will be unable to deliver. The world is not black and white; it is painted in infinite shades of grey. Simple solutions inevitably fail in the real world; if the simple solutions worked they would have been tried already. Brexit will not reduce immigration, or if it does it will be at the expense of higher unemployment and a shrinking economy. Trump will not build his wall or lock up Hilary. Brexit will not result in an extra £350m a week being spent on the NHS, rather it will result in less money being available for the NHS and all other spending priorities. Trump will not be able to cut taxes and reduce borrowing and rebuild the nation's infrastructure - that circle cannot be squared. Brexit will not lead to a democratic renewal in the UK - we get the politicians and policies we vote for and for the last 40 years that has meant various shades of neo-liberalism. Trump won't quit NATO or start an arms race with China. Neither will he be able to improve the economic circumstances of the 'left-behinds' that voted for him - if he retreats into protectionism he will just make them worse off.

My concern is what happens when the populist politicians fail, which they will. Will they then swing further to the right and start another hunt for minorities to blame? Will they propose deportations as the next solution to their perceived 'problem'? Or will the electorates in the UK and the US realise they voted for a lie and that it is the system that is at fault - that neo-liberalism is to blame for the growing wealth gap and economic stagnation experienced by the majority of the population. Will they finally realise that the only way to truly address the cause of these frustrations is to continue to embrace openness and globalisation but to distribute the proceeds of the resulting national wealth more fairly - through wealth taxes, higher income tax for top earners, and the reduction or abolition of indirect taxes.

Improvements in the quality of people's lives will only come through investment in the services that the majority of us use and rely on (health, education, emergency services, childcare, social care, roads, railways, etc), through increased social housing provision, through subsidised public transport, through subsidised clean energy, through a genuine living wage or a universal basic income. It's not rocket science and I desperately hope the electorates on both sides of the Atlantic experience some sort of epiphany but I am not holding my breath - history leads me to believe we will simply double down on the collective madness that has led us to our current position.