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Brexit: The Tectonic Plates


The Brexit referendum is nothing less than an earthquake. But when an earthquake happens, seismologists try to understand how and why the tectonic plates had been shifting, and the pressures that had been building to bring about the event. The causes underlying every earthquake are specific in how they come together, even if they are seen in different places.

Much attention has been given to the immediate factors giving rise to the surprise victory of ‘Leave’ (it seems to have surprised even its proponents) and some to the underlying sources of discontent. Although the Leave campaign tapped into deep and longstanding sources of unhappiness with the British place in Europe, which go back to the earliest days of British membership of the group, they were sharpened and given new life by factors in economics and in politics which are newer though also decades in the making.

Globalization:

The deindustrialization process in the United Kingdom had been taking place for more than a century, as its industry lost its status as a leader in products, technology and costs to new challengers, and as the UK relinquished its leading position at the apex of its imperial trading system. Entry to the EU was in part a belated attempt to address the inadequacy of Britain’s other prospects for maintaining export markets and one that has not adequately succeeded. In the meantime, as the globalization of trade and investment has taken place since the 1980s, Britain along with every developed country has come under pressure from lower cost competition from developing countries. The resulting difficulties of maintaining industrial export markets and employment have been compounded by changes in technology that have diminished the need for workers in industry, evinced in much lower employment per unit of industrial output worldwide. It is not a surprise that Britain’s access to the European market has not addressed these problems because it is not their ultimate source. Indeed, every European country has suffered similarly and this is one of the fundamental reasons for the weakness of the peripheral Eurozone countries, which has been compounded by the yoke of currency appreciation. Only Germany and a few other countries have maintained technological leadership in specialized areas, while putting relentless downward pressure on wages, and have thus succeeded in maintaining their position in export markets. The imbalances among Eurozone countries are the superficial form of this ultimate global source of the economic malaise in the Eurozone, and in Britain too. Leavers in Britain who have pointed the finger at dirgiste eurocrats, however sound their specific complaints, have mistaken the nature of the disease.

Global movements of labour have also played a role. Whereas the Empire has been striking back since the middle of the last century in the form of migrants from the Commonwealth coming in sizable numbers to the UK, a broader range of immigrants has arrived more recently, propelled by a congeries of factors: differences in wages, standards of living and prospects for children; reductions in the cost of transportation; the presence of migrant networks which act as a “pull” factor, in a process of cumulative causation; and not least the increasing familiarity with the English language throughout the world, which reflects the worldwide imprint of Britain and its offspring. The relative openness of the UK labor market and society as well as norms that differ from those on the continent (such as the lack of a national identity card and systematic identity checks) have also enabled the movement of people and caused the UK to become a privileged destination. In the case of EU migrants, free mobility guaranteed by law has of course been crucial. Identity concerns based on the residual but still potent ethnic basis of the nation have come together with perceived competition for low-wage employment and public services, thus drawing into its ambit recent migrants who resent other migrants(*) and working-class supporters of Labour Party. It is in this context that the general obligation of EU countries to accept free mobility of persons became a flashpoint, although due to an exaggerated notion of its magnitude and economic or even social effects. Net immigration to the UK is high by historical standards but still constitutes only around half of one percent of the UK population per year, which is considerably lower in proportional terms than for many other OECD countries.

Financialization:

The UK is the large economy in the world which is most dependent on the financial sectorfor its economic prosperity. However, the role of finance has given rise not merely to opportunity but to systematic distortion of national economic policies and choices. The negligence of the City, which has long been focused on its more speculative and global role, in providing committed financing to British industry had long been criticized. New Labour made an historical peace, embracing a model based on financial sector prosperity centred on a global role for the City of London, to be combined with enhanced support for public services. However, as a result of the bailouts of the financial sector in response to the crisis that began in 2008, public finances greatly weakened. This in turn led to an eventual call for austerity that imposed hardship on ordinary people but was presented as the consequence of spendthrift government behavior rather than of financial sector irresponsibility. Policies of quantitative easing combined with fiscal austerity created a low interest rate regime that provided continued fuel for highly leveraged investment strategies and a prop for asset prices without doing much to support the real economy. Meanwhile, steps in Europe to increase financial sector regulation to avoid a deepening or a recurrence of the crisis were met with hostility from the City. Measures such as limits on bankers’ bonuses were regarded with incredulity as based on a lack of understanding of the financial sector, while others were thought of as reactions to the Eurozone crisis that were inattentive to the interests of the UK financial sector. This is a powerful but widely overlooked reason for the timing of the Brexit referendum. The fissures within the Conservative Party reflected the existence of different interests in British society, including in the financial sector, with specific financial interests being strongly opposed to proposed new European regulation. This section of City financiers is willing to accept the loss of privileged access to a common European financial market (such as “passporting”) or to wager that they can be retained. Although public pronouncements of the Leave campaign have emphasized the need for the UK to complete trade deals with other countries (such as India, the US or Canada) that the EU has not forged, the idea that exit is a necessary condition for doing so seems grossly exaggerated. In the case of agreements such as the TTIP, which is more of an investment than a trade agreement, strengthening the hand of capital vis-a-vis governments, whether they are even desirable is also questionable. The notion that exit will permit Britain to return to a role as a liberal trading nation overlooks the fact that Britain’s lack of success in goods trade has little to do with its having been constrained by membership of the European Union while the success of the City after the ‘Big Bang’ happened while Britain was a member.

The growing resentment of migrants in a climate of austerity and the desire for cultural retrieval was opportunistically employed to serve the interest of a section of the British elite which saw an economic interest in leaving. Such a conjuncture does not require intentionality. Efforts by the Conservative government to address the concerns of the ‘left behind’ working class and lower middle class, including through the “ringfencing” of expenditures on the National Health Service during otherwise generalized austerity, and unprecedented efforts such as the gradual introduction of a national “living wage” reflected in part a desire to calm the untamed sources of discontent which led to the rise of UKIP and decreasing trust in the Conservative Party and its leadership. The referendum vote testifies to the insufficiency of such efforts. Identities are harder to “manage” than are interests.

Democracy:

The Brexit vote is a moment of democratic assertion but also a consequence of flawed democratic structures. Democracy is an incomplete idea, which can be reflected in many specific forms, each of which is individually imperfect.

The growing role of protest politics as well as of “evidence free” (or light) media driven politics reflect the diminishment of trust in and deference to traditional elites, even in the UK where they have long played a role. The rise of self-made political leaders representing ‘common sense’ conservativism (such as Thatcher) had occurred long ago, but they offered, as did the Leave campaign, both revivification through capitalist means and continuity with an imagined past. This formula hid a contradiction between new and old elites as well as the differences in their sources of political authority. Although the Leave campaign might on the surface seem to have rested on the appeal of traditionalism, because of its appeal to the cultural instincts of ‘freeborn Englishmen’, it in fact also challenged the steady hand of the traditional elites and the party establishment as well as experts, overwhelmingly in favour of Remain.

Democracy involves rule by the people but how are the people’s views to be identified? Is a majority of those who vote enough? Or is a majority of potential voters required (at least for important issues)? Do differences between different ‘peoples’ who together constitute a larger people matter, especially where there vital interests are involved, and if so are additional safeguards needed (for instance, a requirement of a supermajority or a demonstrably stable one)? Does it matter whether these people are territorially concentrated or belong to specific social groups? When are directly democratic measures such as referenda more democratically legitimate than representative government? Does the quality of the process of public deliberation leading to a decision matter? Under what conditions can or should the people revisit “their own” decision? All of these issues and others arise in regard to the UK referendum, for instance because of the stark differences between the perceptions of different groups with very different stakes in the outcome, the perceived poor quality of public deliberation leading to the decision, and the lack of a well-defined let alone definitive role for referenda in the British parliamentary tradition.

UK voters who favoured remaining may be aggrieved by what they view as a poor choice in a flawed process, by the majority of voters who might have individually or collectively acted differently on another day — if they had more time to reflect, or if more had turned out, for instance. However, those who favoured leaving might also have viewed the aspects of Europe to which they objected as being the product of poor choices in a flawed process, by citizens too deferential to institutions and to bureaucracies and given too few democratic rights. In both cases, a more subtle view of democracy, recognizing the claims of parts of the whole, and giving them fuller realization in terms of process and outcomes, was needed. For example, under the circumstances the referendum vote might have been avoided by giving the UK fuller concessions including a temporary exception from the free mobility requirement of the EU while Eastern European wages caught up sufficiently to diminish flows, but this was not acceptable to the grandees of Europe, especially as Eastern European integration had been a political as well as economic project. (It is interesting that those who view this commitment as ‘fundamental’ do not take the same view when it comes to international mobility more generally). On the other side, the referendum mechanism provided insufficient recognition of the vital interests involved, especially as they were perceived by territorial minorities such as the Scots and non-territorial minorities with vital interests, such as the young. This is a specific and unusually stark version of a more general democratic conundrum.

Of course, the need for such choices is never fated. Political decisions, such as that of the Conservatives to address the challenge from UKIP by dignifying its narrative, and the failure of Labour to provide a robust progressive case for remaining, ushered in the impossible.

Now What?

The Brexit debate, such as it was, could not straightforwardly be reduced to one between left and right, despite the preponderance of voices from the latter in its favour. A few distinguished and prominent leftist thinkers had also supported the leave campaign. They imagined that Brexit would free Britain from what they perceive as a pro-capitalist administrative superstate in Europe. Leaving, they thought, need not be a nationalistic act but could allow Britain to maintain and even extend a pluralist and cosmopolitan identity. In contrast, rightist advocates of Brexit imagined that it would free Britain from what they perceived as an anti-capitalist administrative superstate in Europe. Leaving, they though, would allow Britain to maintain a national identity that is not reduced to a pluralist and cosmopolitan mishmash. Who is right? Neither.

It seems plausible that an effective Brexit could trigger Scottish secession but that would cement the dominance of the Conservative party in the rump UK, where it is most influential. The proposed economic strategy of the Leave campaign involves closer connections with former colonies and the world at large and even a point-based immigration system. This may change the economic character of immigration but cannot plausibly end it. The lack of a written constitution in the UK makes for diverse possibilities, but these have been exploited in various directions, not all progressive. While the more state-centric constitutional structures of continental Europe have sometimes prevented radical ruptures, they have in other instances allowed progressive projects to emerge, and the same could be said of the European body of law and institutions which is implausible to interpret as being fated to cement capitalist institutions, notwithstanding its origins in the common market and its links to the historic need and desire of European capital for a more viable still larger stage. While Brexit would strengthen the dominance of German fiscal hyper-vigilance in the European Union and the link between the Eurozone, with its wage repressing dynamics and Europe at large, it could also very likely increase the internal consensus over the need for a regulated and “social” market economy. Europe can and should be (and to a rather insignificant degree, has) been a voice for a more progressive architecture for the world economy.

The “left behind” in Britain and in Europe at large cannot be saved simply by the maintenance of the European Union nor by its dissolution. They need imaginative projects of practical reconstruction, whether within or outside of it. These must focus on empowering people by bringing real investment and opportunity to them rather than on pushing ever harder on a monetary string. They must overcome bureaucratic sclerosis in favour of economic dynamism but not conflate the latter with stereotyped understandings of the market economy. They must recognize that inclusion is a source of prosperity but also provide flexible ways for the felt identities of peoples to be expressed and acknowledged, even if this means the deferral of intra-European cosmopolitanism (hardly the cosmopolitans’ own utopia). Europe, despite its tensions and anxieties, offers a privileged forum to achieve these things, distant as the prospect now seems. A major reason that this is so is the interdependency between national projects within and beyond Europe, which requires that the people of Europe to help to press simultaneously for more progressive national, continental and global institutional orders. This requires an enlightened self-interest in Europe’s dealings with the world to a larger extent than it has exhibited, but also a strong Europe. The agent of these changes must be creative, progressive, unifying and forward-looking forces which have yet to emerge. Brexit, if it indeed takes place, will neither open nor close a door, for Britain or for Europe. The real prospects, we might say, remain.

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