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.
Re-run the vote? The referendum was contested without clear policy options, so the implications of the ‘Leave’ result are opaque. There is some evidence of ‘Bregret’, but only enough to sharpen the knife-edge balance between the two sides without changing the outcome decisively. Over 4m people signed a petition to hold another referendum. But weighed against 17m for ‘Leave’ in a highly divisive campaign, we’re unlikely to see this ‘once in a generation’ referendum being re-run anytime soon.
Ignore the vote? Might it be possible to avoid having to do anything decisive about the result at all? After all, the result is not necessarily binding at law in Britain, with its doctrine of parliamentary sovereignty. One commentator even suggested doing what Tsipras did in Greece – once you realize how economically costly it would be to follow through on it, shelve the plebiscite and go with the safer option. This is not an improbable scenario. No-one is keen to start the two-year count-down toward the exit door. The Conservatives are in the throes of a change of leadership; Labour can’t shape the debate while it’s tearing itself apart. The Treasury had no contingency plans for leaving the EU. Formal negotiations can’t start until someone invokes Article 50 of the Lisbon Treaty, but there will be much informal sounding-out going on before then (whatever Juncker may think).
One of the considerations that stopped Greece from acting on its 2015 referendum mandate to reject the proffered bailout terms was that the economic consequences were likely to be more damaging to Greece than to their European partners. The economic effects of the Brexit vote have indeed been negative – sterling is on the slide, the value of stocks and of property is falling, fewer jobs are advertised; uncertainty is widespread. But these are not the catastrophic effects conjured up by ‘Project Fear’. Stock markets in Germany, France, Spain, and Italy are more jittery, it seems, than Britain’s. There is no immediate incentive to back away from Brexit to save the economy.
Nevertheless, this can’t last indefinitely, not least because Leave voters want their vote to have some visible effects. What the market commentators too easily overlook is that for many of these voters, an economic hit of some sort was only to be expected – and was a price worth paying. Theirs was a campaign about ‘taking back control’ of their country. Never mind that Britain never was an ‘island nation’ – not since the union with Scotland in 1707, not during the expansion of Empire. Even until 1981, British citizenship extended to the populations of the UK and all of its former colonies alike.
But ‘control’ over what, located where, on what terms, to whose benefit? These will be the key questions. ‘Taking back control’ can mean many different things. Everyone acknowledges that immigration loomed large in the dissatisfaction that mobilized behind the Leave vote. Oddly enough, areas with low immigration seem to have voted more strongly for Brexit, and some of this reflects an instinctive insularity among the relatively comfortable middle classes in the shires.
What stood out more strikingly was the strength of the Leave vote in areas that had previously been Labour strongholds but that been leaning increasingly toward UKIP. These were generally areas that had suffered long-term decline in manufacturing, job losses and income insecurity, and under-investment in social services. Indeed, 37 percent of those who voted Labour in 2015 voted Leave in the referendum. But it isn’t just the level but the relative change in the share of migrants between 1991 and 2011 that seems to have been important here. These voters were not persuadable by arguments about economic costs of leaving the EU. As one Yorkshire woman told political scientist Anand Menon, ‘I don’t mind if we take an economic hit. Our lives have never been easy, after all. But it will be nice to see the rich folk down south suffer.’
This is rightly seen as a protest vote by people who feel the system of political representation has let them down. Right across Europe, social democracy made extensive accommodations with economic liberalization and globalization during the 1990s and 2000s, and this not only increased aggregate wealth but made the left more electable. But there was too little corresponding political commitment to redistributive social justice and social protection for those who were not going to benefit from the harsher and more exposed economic climate. Brexit voters are among ‘the world’s financial losers’.
The global financial crisis may have added a cruel ratchet to economic decline in many areas of Britain, but the austerity that was imposed from 2010 onward – its extent, severity, duration, and especially its social distribution – was wholly home-grown and in the circumstances, in the view of most macroeconomic commentators, it was wholly unnecessary. Britain decided all by itself to allow East Europeans full access to its labour market after 2004 (one of only three EU member states not to impose some restrictions, along with Ireland and Sweden, all similarly keen to avail of ready supplies of cheap skilled labour). The evidence shows that the people who moved were net contributors to the British economy – overwhelmingly young, of working age, in reasonably good health, often single, they paid more into the welfare system than they drew out of it. It was primarily the political failure to invest adequately in education, health services, and housing supply, that made people feel that immigrants were unfairly soaking up scarce resources. But the tabloid press and the political right offered an age-old and easy scapegoat for welfare state failures in the form of the newly-arrived East European foreigners, and the ‘foreign’ rules of the Single Market that made it possible for them to come.
So what next? It won’t be easy to build consent across the divide that opened up in the course of the referendum debates, let alone to create the conditions for a new phase of prosperity and security.
There are very different views involved about what it means to ‘take back control’ of their own fate into British hands. Theresa May is the Conservatives’ ‘stability’ candidate, not a convinced ‘Leaver’. But she has form on immigration, and she has promised to prioritize border control over British prosperity in EU negotiations. Future negotiations with the EU will centre on some kind of trade-off between immigration controls and Single Market access. But this will be difficult. A Norwegian-type EEA arrangement will not count as ‘taking back control’ on immigration. Besides, the other EU27 will not be keen to compromise on freedom of movement. Too many of them are worried about the ferment of populist sentiment of both right and left within their own borders (les extrèmes se touchent). The Italian stock exchange, for example, took a hard knock in the wake of the British vote, and their banks looked increasingly vulnerable, just as the 5-Star Movement won the mayoral contests in both Rome and Turin. If there is no room for EEA-minus, neither do the prospects of a Canadian-type free trade deal, proposals for which are causing huge problems across the EU, look at all promising.
More fundamentally perhaps, the problem still remains within British politics as to what it might mean to ‘take back control’. Pro-globalization liberals in the Conservative party want more deregulation and full integration into the low-tariff trading world. Ne need is yet seen for a more fundamental review of Britain’s institutional and constitutional arrangements that might help to bridge the enormous divisions in the country. Apart from anything else, Britain’s co-responsibility for the peace process in Northern Ireland hasn’t gone away, you know.
Scotland is not at all happy about the prospect of being ejected from the EU over its head, and this has raised a whole other set of issues about what it means to ‘take back control’. Nicola Sturgeon has already been in Brussels to explore how its ‘Remain’ majority might play there. This time there would be not be any question but that EU membership would require adoption of the Euro, and existing UK opt-outs would surely not be available. If a referendum were required (and it’s hard to imagine that it would not be), and in the context of weakening sterling, the risks of economic uncertainty may well weigh less heavily with the Scottish electorate this time. A possible break-up of the UK is back on the cards.
‘Taking back control’ over the priorities that govern everyday life is also highly problematic. Those who voted in protest at the unresponsiveness of the political system to the costs of globalization, and disgust with the distributive consequences of unfettered financialization, are unlikely to find any champion of their interests amongst the Conservatives, notwithstanding some symbolic gestures to curb top executives’ pay and so on. (And no-one should have been deceived by Gove’s proclaimed interest in helping ‘the dispossessed’, any more than by Iain Duncan-Smith’s resignation in protest at the damage to the disabled caused by the disability cuts he introduced). In any case, the shrinking economy after Brexit means the government not only won’t have a fiscal dividend to share out (even if it wanted to), but will face a new funding shortfall, perhaps up to £40bn, justifying a continued squeeze on spending just to stand still.
The Labour Party has proved itself quite incapable of capturing the demand for a new kind of politics that was reflected in grassroots support for Corbyn, and harnessing it to a strategy that would prioritize investment in productive and social infrastructure, greatly improved social supports, and a strategy for ensuring shared access to the benefits of growth. There are lots of intellectual resources available to build such a strategy. Some but not all of these measures are made more difficult by EU rules on state aid, fiscal disciplines and so on. It would certainly help if, as Aidan Regan pointed out, the EU were to recognize the need for stronger state activism and more robust policies of social compensation to complement the Single Market. On present indications though, Labour could do very badly in any foreseeable elections, and could find itself excluded from power for quite a long time. ‘Taking back control’, it turns out, is a far from simple matter.
A version of this post is also at The Irish Economy
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