Friday, 28 October 2016

Brexit is a sign of Britain adapting to a new world


The words "industrial strategy" have been kicked around quite a lot this week. The chatterati seem to think that Brexit marks a departure from the economic liberalism of the last two decades. This is why you can't really rely on London news sources for information.

If anything stimulates demand in the regions it is engineering. Underpinning most of the regional economies is large government mandated engineering projects. Here in the South West just about every job going is in some way connected to Trident renewal, Hinkley Point, wind turbines, our two new aircraft carriers, Airbus A400M and the likes.

From Gloucester to Gosport, just about every small business park is host to a start-up company that provides anything from project management services to engineering consultancy. In one way or another their income is largely dependent on government spending or state mandated spending whereby foreign investors effectively buy a licence to fleece UK energy consumers at a later date. Indirect subsidies like guaranteed strike prices effectively cut the government middleman out but it is still state mandated.

Hinkley Point is a massive waste of money and virtually nobody thinks it is a good idea and the same can be said of HS2 but that will probably go ahead. The fact is that we never departed from central economic planning and the only way the government headcount has declined is through mass outsourcing. The underlying assumption being that corporate profiteering is probably cheaper than unionised government incompetence.

Though there is a certain amount of economic dynamism by way of many now being self-employed contractors, where engineering, legal and software professionals no longer have permanent contracts, it is merely a market efficiency at the bottom end. It is marketised procurement of government workers. What we are seeing is the uberfication of the middle classes where jobs are only guaranteed on an hourly basis and every employee is expendable.

What I see in this is an economy that is just as dependent on state spending and government borrowing as ever it was but through creative tinkering and loophole chasing we have effectively abolished workers rights. Nobody gets sick pay, nobody gets statutory leave.

What this means in real terms is that people get paid more for the same job since they are left to manage their own money according to their own needs. After all, holiday pay is merely your own money held back on your behalf. In theory this means people can take the holiday they want. In practice though it increasingly means nobody takes a holiday at all.

The reason people have allowed this to happen is because people are increasingly short termist, preferring the preferable rates of pay to long term security. It adds value by way of increasing flexibility and creates labour market dynamism. The problem being that it only works so long as that fluidity is maintained.

Here we get the cultural conflict between younger workers who like to keep their options open, and older more experienced workers with mortgages and commitments. We need the economy to be a shared space that can accommodate both. The problem being is that if the option is there for companies to push employees into less stable arrangements they will take it.

If we follow this to the natural conclusion it means that corporates will increasingly shave pay rates to maintain the same profits where workers rights exist only on paper and exploitation and insecurity becomes the new norm.

Depending on which prism you look through it means you have a dynamic labour force and a fluid economy, but when you follow the money chain it all leads back to massive government infrastructure projects, many of which are purely decorative and cannot be considered investment. The truth is that Britain never really departed from being state directed economy. All we did was privatise the management of it.

This is where I see Brexit marking a big change. I say "marking" because it is not necessarily causal. Today's ruling that Uber drivers are employees is yet another signal that casual workers are starting to organise and reassert themselves. We have seen similar collective action from Deliveroo drivers.

What I think we are seeing is a cyclic reversion back to more secure means of employment and a more structured work force. After ten years of liberal insecurity, the generation that thought "more pay" was a better idea are starting to think twice as they themselves now look to obtain mortgages.

In this I expect the next decade to be marked by more muscular union action and those "liberal" middle classes joining entirely new unions which will replace the dinosaurs like Unison. The economic impacts of this social change will be blamed on Brexit but I really rather think we were headed in this direction anyway.

The government likes to boast that more of us are in work than ever before with a marked increase in self employed people but this is largely a result of casual labour being classified as self-employment. This is distorting a great many economic metrics and though zero hours contracts are barely an issue, insecure employment is and the figures don't tell the whole story. If anything, Brexit will expose those hidden trends as the cosmic game of musical chairs reorders the economy.

In most respects Brexit will be marked as the cause of industrial turmoil but I rather suspect Brexit is merely an x-ray beam that shows us that the UK economy has been a fragile house of cards for some time. I think we have reached the limits of state directed spending.

The government can keep pumping money into the economy but foreign investment obtained by state efforts is a net drain on the economy when you take into account the means by which it licences profiteering. As to direct state spending were one to don my tinfoil hat I would say that the sabre rattling to stoke up a new cold war is merely a means of stimulating demand for more defence spending, the type that underpins the middle classes throughout Europe.

If anything I would say that history is repeating. The Common Agricultural Policy was a means of preventing masses of redundant males converging on French cities after the war. Redundant males create political turmoil so agriculture was subsidised specifically so that it would not mechanise.

In this era though, what keeps spreadsheet pushers and project engineers like me from converging on London in our masses is the fact that we have cushy jobs that pay enough to flatter our egos but not enough to slack off. It means we can buy the Nissan off-roaders that never go off road, keeping the North East in engineering and logistics jobs. In some way, most of us are dependent on massive state spending.

Which way it goes from here nobody can say. If we have a hard Brexit then that necessarily means that state spending will have to be slashed and white elephant infrastructure projects will face the axe. That probably would see a major social and economic revolution the likes we have not seen since the miners strikes and poll tax riots. I suspect this is why the Tory right push for hard Brexit no matter the cost. A major economic blow would mean real government austerity that permanently cripples the NHS and shitcans a number of meddling social programmes.

This though is very much an extremist approach. I take the view that evolution is better than revolution and inflicting economic self harm as a shortcut to winning various political debates is no way to go about politics. If bad ideas are bad ideas then let us present better ones. Throwing the entire UK economy into turmoil on a gamble seems a bit excessive to me - and unnecessary.

Reading the runes we are starting to see that the UK does have allies in Eastern Europe among those nations who joined for what they could get out of the EU rather than subscribing to the federalist ideals. Poland and Hungary are increasingly eurosceptic and are beginning to resist the brain drain of their brightest and best to the UK. The opinions of the European Commission on how they should run their domestic affairs are increasingly unwelcome. There has been a sea change in attitudes to the EU.

The federalism built into the DNA of the EU is what makes the EU dysfunctional. The stagnant ideology is what prevents it from being a dynamic and useful organisation and its functions are increasingly being replaced by global bodies like the WCO, WTO and UNECE. Europe is beginning to fragment while constituent groups within are beginning to assert their own identities. Europe is reordering and adapting to globalisation while the EU remains an inflexible dinosaur that prevents economic and political restructuring. The EU stands against the tide of change.

Brexit is just one among many political artefacts that spells the death of the EU. The CETA debacle is really the EUs last hurrah. The last grasp for relevance. TTIP is most likely dead in the water, expansion has stalled and the European single market in services/digital single market is being leap frogged by global initiatives.

The EU is fast approaching an existential crisis where the inherent flaws in the design of it will lead to its disintegration unless there is a serious departure from EU federalism. Some might argue that EU federalism was already dead, and I would not disagree but it lingers on through the treaties of the EU which act as a brake parachute to reform. The EU must mutate to survive.

What this all suggests to me is that a revolution is already under way and we have enough change to be getting on with. Brexit is not a hammer blow to the EU but it is a change of tides. We would be well advised to watch and see which way it goes. It may be that radical moves are not required as the EU surrenders to the forces of nature.

In this we can only really look upon the efforts of Tony Blair to stall Brexit as pitiful. Blair calls Brexit a catastrophe that should be resisted at all costs. What we are looking at here is guardians of the old order who have been swept aside along with their bankrupt top-down economic model. They are dinosaurs clinging on to the past, unable to comprehend that their fantasy EU utopia will not come to fruition and in reality never existed.

In a way I sort of understand it. If the EU really was what it pretends to be - a confederation of politically converging modern progressive states acting as one then I too would be heartbroken to see it go. But I never drank the EU kool aid. I have only ever known it for what it is; a dysfunctional and creaking mess based on a flawed and obsolete concept. Being a pragmatist and a modernist I am happy to see Europe reordering along natural lines rather than those imposed by a tiny corps of elite politicians.

The fact is that the EU was a political construct for the last century. It was flawed in its design, dishonest in intent and ultimately swimming against the tide. People define their own political orders. The ebb and flow of history shows us that borders and nations are fluid. Wars and unrest happen when rulers stand in the way of change. The EU is no different. If peoples cannot define themselves and their own societies then disintegration is the norm. Yugoslavia and Iraq show us that forced unions are marriages of convenience whose perpetuation only ever really serves the superpowers holding the purse strings.

Presently we stand at a crossroads. The old order is dying. The media of yore is losing influence, our populations becoming more connected and more educated. Trade is changing in ways we have yet to comprehend. Old models of moving goods and exchanging services are collapsing. There are unprecedented movements of people. We are far beyond that world our grandparents knew yet we cling on to their political structures. This cannot be sustained. Change is coming.

In this I see Brexit not so much as a retrenchment. Rather I see the UK once again leading and being at the forefront of change. In global politics terms we are always the early adopters. At one time iPhones seemed faddish toys. Now the smartphone is ubiquitous. That is what Brexit is. We will be the first to wake up to the revolution in global trade and global rule making and we will be pioneers of it while little Europe is still wedded to yesteryears idea. The EU is a Nokia 3210 in an iPhone world.

For the time being Brexit will look shambolic, like we have shot ourselves in the foot for no good reason, but the Brexiteers are already marginalised. It is the remainers who will inherit the EU free Britain. It is their to make good of and theirs to shape. The Brexiteers have served their function and will go quietly when the job is done. When the Brexit dogmatists have gone the way of the dinosaur we have blank slate to forge a new relationship with Europe and the world, but also a chance to reorder the UK economy so that everyone gets a shot.

In this I don't deny that we have a long road to travel and a big mess to sort out but the signs were already there that a reordering was overdue. The model we have was ideal for the debt fuelled superheated economy of 2007 but the post crash world needs fresh ideas.

Our economy is a house built on sand. It is a money-go-round of diminishing returns where gradually our rights and freedoms are being sacrificed on the altar of supposed economic dynamism when in reality we are still perpetuating the same stagnant model that underpinned pre-Thatcher socialism.

Whether our political elites realise it or not, a major realignment is happening. We are entering a new age. The last century was the century of aviation, containerisation and mutually assured destruction. This new century is a digital age and a blank canvas. It can be what we make of it. Before we can progress though, we need new institutions and new structures of governance. We can either build competing rival blocs or we can build a global community of equals. I favour the latter. The age of empires is dead. Now its up to us to shape globalisation and make it work for the many and not the privileged few.

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