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Real Existing Brexit

2017 September 15
by Mandos

(MANDOS POST, YOU HAVE BEEN INFORMED)

I know that on the left-wing side of the aisle, there are some people who support the idea in itself of the UK leaving the European Union and agree with Corbyn-Labour’s original pro-Brexit stand. There are some theoretical arguments in its favour that boil down to how you interpret EU law on nationalizations — I have heard arguments both for and against the idea that the EU is a practical barrier to re-nationalizing privatized British public enterprises.

But whatever the case may be, Real Existing Brexit is another story, and there’s currently every reason to believe that Theresa May’s version of Brexit is going to be an epic mess. There are ways to do Brexit “well,” and all of them start from a clear-eyed view of what it means to leave the EU and the groundwork that needs to be done to prepare for departure. That groundwork involves, among other things, ending austerity (which the UK can mostly do as it is not a Eurozone country) to make the investments in infrastructure and human capital to create greater within-border self-sufficiency and leverage for making favorable future trade deals, if desired. This preparation would have needed to start a few years before any kind of referendum.

But what the UK is getting is Tory-Brexit, the Brexit of right-wing fantasists dreaming of tax arbitrage and empire. Tory-Brexit may, in the worst case scenario, kick off with a hellish traffic jam at Dover and Calais. And the mess it may create may well propel a Corbyn-led Labour party to a Parliamentary majority. But if that happens, Corbyn will be left with not only a mess on his hands, but a lot of constraints.

Because, you see, without having done the necessary groundwork, Britain will be very much a trade-dependent country. Corbyn would not have a big “honeymoon” and may not have much time before the public would expect him to “turn things around.” And unfortunately, that will involve establishing new trade relations, but under highly unfavorable conditions.

If you catch my drift, I’m saying that what a potential Corbyn government might have to go through in the future is the sort of dilemma that plagued Syriza and Alexis Tsipras in Greece. And you probably remember how popular that was around these parts. No bargaining chips, but a desperate need to create relations.

Note that I am not arguing that Brexit shouldn’t happen — it should, in some form, because that is the only way to resolve one of the problems that lead to, well, Brexit-scenarios. That problem is that people don’t really get what they voted in favour of. They need to start experiencing the outcomes of their collective choices. It’s too bad for the many UK residents voted against Brexit, but that’s how representative democracy works. The best-case scenario for Britain would probably be some kind of Norway-style solution, but, again, that is not easy to organize, and it requires crossing what appear to be many red lines for Tory-Brexit hardliners.

22 Responses
  1. Synoia permalink
    September 15, 2017

    Theresa May’s version of Brexit is going to be an epic mess.

    Not for Theresa May.

    The working class can kiss my arse
    I’ve get the foreman’s job a last.

  2. relstprof permalink
    September 16, 2017

    No reference at all to the Labour Manifesto. Let’s get down into the weeds here. Critique the political programme as its been formulated. This, I think, is most helpful for those articulating a way forward for the progressive left.

    What would you change in the Labour perspective in re Brexit given their goals? Or, in the American context, the way forward in renegotiating NAFTA?

  3. September 16, 2017

    Oh dear, Mandos, you have become a practitioner of Project Fear!

    Just concentrating on the trade issue, which is just one of many reasons to leave the EU; mass uncontrolled immigration into a tiny island in the North Sea being the main one in most voters’ minds, the UK currently has a trade deficit with the rest of the EU of around 4% GDP. Simple mathematics informs us that if you build a balanced trade deal on top of that you will only increase the deficit along with the exports and imports. Industry focuses only on the export side of the equation, but it is the balance that matters not the volume. Any shortfall in demand can easily be made up from a combination of import substitution (probably sufficient in itself) and fiscal and monetary policies.

    Another point that is frequently overlooked is the extra import tariff revenues a no deal Brexit would bring. Assuming an average of 4% on all imports, not forgetting that the rest of the world already pays these tariffs to Brussels but which would then divert to London, that comes to around £25bn a year. Add the £10bn a year saving on budget payments and that is a total extra contribution of 2% GDP to the fiscal deficit (also around 4%, and UKIP has a range of policies to close the remaining gap and then some).

    Then there is the issue of non-tariff barriers such as inspections and so on. But we face exactly these self same ‘barriers’ in our trade with the rest of the world now, with whom we have a slight surplus!

    I am not a unilateral protectionist like Donald Trump, but the UK would be in a strong position either doing no new deals at all or negotiating selected increases in tariffs in order to get our trade back into balance overall. Even better, the WTO could set maximum import tariff levels for each country proportionate to their trade deficits. Until we can eliminate our trade deficit we cannot end quantitative easing and get interest rates up to reasonable levels again. Balanced trade and balanced migration are both essential if we are to create a platform for sustainable economic growth.

    Finally on the Irish border, all we need to avoid reinstating the hard border between North and South is an agreement with the Irish government to share information on trade and migration across their own external and EU borders. We would be happy to pay for any additional costs. Once we have that information we can take it from there. This does not require any agreement with the EU.

  4. atcooper permalink
    September 16, 2017

    If the past is a reliable indicator as to what the future holds, Mandos is correct. Thankfully, people are deeply stupid and wander outside the lines all the time.

  5. bruce wilder permalink
    September 16, 2017

    The “four freedoms” are a bargain with the neoliberal devil. It is NOT possible to have that freedom cake, and eat it democratically at the same time.

    If it were possible politically to negotiate a more decentralized EU, in which both the Center and the nation-states were more powerful, and the nation-states could manage their economies effectively in response to democratic demands, Brexit would have a straight path to trod.

    But, human affairs are seldom simple.

    The Tories will make a terrible mess of it. With any luck, they will blow up some vital part of the financial sector that dominates England’s economy.

    The contempt of the soi disant left for the suffering of “the stupid” will be useless at all times.

  6. atcooper permalink
    September 16, 2017

    My comment was meant a touch sarcastically. But even worse, I’ve got nothing of substance to add to the subject at hand, and really shoulda stepped aside from commenting entirely.

  7. September 16, 2017

    No reference at all to the Labour Manifesto. Let’s get down into the weeds here. Critique the political programme as its been formulated.

    Why? It’s a bit like critiquing the Syriza program. The details don’t matter if you don’t have negotiating leverage. Unless the May government falls and there is an election that Corbyn wins, before Brexit, there’s no point in getting into any “weeds”. Right now (this could change) there’s no election on the horizon and no good news on a favorable or even orderly Brexit deal front. It could happen. It just won’t happen in a way that makes it easier to do what any left-winger with any corresponding program would want to do. That’s Tory-Brexit for you.

  8. September 16, 2017

    Oh dear, Mandos, you have become a practitioner of Project Fear!

    I have never not believed, if you’ll forgive the double negative, that Brexit under Tory rule would be a total disaster. The epithet “Project Fear” is simply one that is applied to those who ask the uncomfortable questions about the UK’s preparedness for the reality of Brexit

    Unprepared “hard” Brexit can only succeed, in the sense of providing an economic outcome as good or better than the status quo, if there is a wall-to-wall social consensus, including among the managerial classes, that Brexit is a good idea and must be made to work no matter what. Anything less than that, and the degree of voluntary coordination required to make it work will not exist, and the project will fail. The moment a large portion of the UK population decides to devote its political energies to rejoining the EU or restoring significant parts of UK’s EU involvement, a coordinated “good hard Brexit” becomes a pipe dream. It is clear to me that the bulk of the UK managerial class would rather rejoin the EU, or some approximation thereof. There are nontrivial numbers of EU federalists in the UK, but even a few percent is enough to “dis-coordinate” the response.

    All other “good Brexits” either involve substantial retention of EU involvements on EU terms, or they require a great deal of advance preparation.

    None of these conditions are met.

    Just concentrating on the trade issue, which is just one of many reasons to leave the EU; mass uncontrolled immigration into a tiny island in the North Sea being the main one in most voters’ minds,

    This focus is part of the delusion.

    the UK currently has a trade deficit with the rest of the EU of around 4% GDP. Simple mathematics informs us that if you build a balanced trade deal on top of that you will only increase the deficit along with the exports and imports. Industry focuses only on the export side of the equation, but it is the balance that matters not the volume. Any shortfall in demand can easily be made up from a combination of import substitution (probably sufficient in itself) and fiscal and monetary policies.

    Unfortunately, simple mathematics is, to put it Britishly (?), bollocks in this case. It’s a matter of incentives and preparation. The UK is not ready for import substitution at short notice — it’s just spent decades turning itself into a finance hole. The next government will be under pressure to produce a trade deal that allows consumers to consume as they have before in the short term. And so on. No word comes to mind to express how much of a fantasy this is.

    Then there is the issue of non-tariff barriers such as inspections and so on. But we face exactly these self same ‘barriers’ in our trade with the rest of the world now, with whom we have a slight surplus!

    Again, I really have no words. This is a matter of putting barriers where there weren’t barriers before. You cannot compare it to a situation where barriers already exist. There is a mix of inputs and outputs to the UK, some of which are more impeded than others. And Brexit proposes to further impede the ones that are less impeded. This will hurt, without due preparation — which, as I said, there isn’t any.

    I am not a unilateral protectionist like Donald Trump, but the UK would be in a strong position either doing no new deals at all or negotiating selected increases in tariffs in order to get our trade back into balance overall.

    The UK is not in a strong position. The UK could have been in a strong position, but it isn’t.

    Even better, the WTO could set maximum import tariff levels for each country proportionate to their trade deficits. Until we can eliminate our trade deficit we cannot end quantitative easing and get interest rates up to reasonable levels again. Balanced trade and balanced migration are both essential if we are to create a platform for sustainable economic growth.

    The UK does not need to leave the EU to eliminate its trade deficit, nor restrict migration. It needs to commit to public investment, which it could always have done, and which Theresa May and her cronies are, as far as I can tell, not planning to do in any real way. That’s how you know that Tory-Brexit is about arbitrage and insider trading, sugar-coated in a nationalistic fantasy.

    Finally on the Irish border, all we need to avoid reinstating the hard border between North and South is an agreement with the Irish government to share information on trade and migration across their own external and EU borders. We would be happy to pay for any additional costs. Once we have that information we can take it from there. This does not require any agreement with the EU.

    No. Ireland will be forced, under EU law, to reinstate the hard border — unless Britain agrees to subordinate its agricultural, safety, etc standards to Brussels as before, pay dues, and accept the jurisdiction of the ECJ. Otherwise, the soft border with Ireland, and EU member with free movement of goods and people with the rest of the EU, will become a back door for goods and products that do not fall under common regulation — which is, in my opinion, one of the best parts of EU-style free trade. This is obviously not acceptable and Britain cannot propose it without making it transparently obvious that Brexit for some Tories is partly about destroying the EU project as a whole.

  9. September 16, 2017

    The “four freedoms” are a bargain with the neoliberal devil. It is NOT possible to have that freedom cake, and eat it democratically at the same time.

    This is unfortunately true of any economic arrangement between sovereigns. Full democratic control can only be achieved in autarky or by global democracy. The four freedoms are better than the 1.5 freedoms (capital, and some goods) envisioned by other trade deals.

    If it were possible politically to negotiate a more decentralized EU, in which both the Center and the nation-states were more powerful, and the nation-states could manage their economies effectively in response to democratic demands, Brexit would have a straight path to trod.

    A better division of authorities is definitely to be desired in the EU, and that involves among other things empowering the European parliament. I don’t see what Brexit would have to do with that.

    The Tories will make a terrible mess of it. With any luck, they will blow up some vital part of the financial sector that dominates England’s economy.

    Agreed on the desirability of this, except for the immediate misery it may cause, often to people peripheral to the problem itself.

    The contempt of the soi disant left for the suffering of “the stupid” will be useless at all times.

    The contempt of those who have contempt for the suffering of the “stupid” will also be useless, and those who have contempt for *them* will also be useless, in an infinite and pointless regression of mutual contempt. Brexit opponents in the UK believe that something has been taken from them, for nothing that they recognize as a benefit to any but a few.

  10. September 16, 2017

    If the past is a reliable indicator as to what the future holds, Mandos is correct. Thankfully, people are deeply stupid and wander outside the lines all the time.

    Yes, there are lots of things that could happen slightly differently. For example, the UK could have another election in the next few months. The story would be different, then — for example, if the UK attitude is seen as more constructive in Brussels under a Labour government, more time leeway could be introduced, for a better Brexit.

  11. Some Guy permalink
    September 17, 2017

    In the long run, a people who have what it takes to look after themselves and make sensible, ethical, economic decisions will prosper. The Japanese did fine with no trade, with lots of trade, with a growing population, with a shrinking population, winning wars, losing wars, etc.

    The real impact of Brexit will be the extent to which it helps or hurts the ability of the British/English to make sensible decisions for themselves.

    It may be that the Murdoch-addled masses of England were better off protected by the EU from the impacts of their own delusions and it may (almost certainly will) be that Brexit turns into a chaotic mess, but I do think that in the long run, it will be seen to be for the best.

    On a semi-related note, I am amused by the media silence with respect to the behaviour of the Spanish government towards Catalonian. Imagine if Spain was on the list of villains de jour what sort of media spectacle we would be treated to caterwauling about the crushing of democracy by an evil authoritarian regime…

  12. relstprof permalink
    September 17, 2017

    Huh?

    You write: “If you catch my drift, I’m saying that what a potential Corbyn government might have to go through in the future is the sort of dilemma that plagued Syriza and Alexis Tsipras in Greece. And you probably remember how popular that was around these parts. No bargaining chips, but a desperate need to create relations.”

    You’re hiding behind speculative fiction — Corbyn will be Syriza. Maybe? But that’s the point of my questions.

    You ignored my questions: “What would you change in the Labour perspective in re Brexit given their goals? Or, in the American context, the way forward in renegotiating NAFTA?”

    Stop hand-waving and address the questions. Frankly, this line of rhetoric seems like the “this isn’t the best time for a left to gain power — it’ll hurt the left” rigmarole.

    It’s tiresome. And stale.

  13. September 17, 2017

    You’re hiding behind speculative fiction — Corbyn will be Syriza. Maybe? But that’s the point of my questions.

    I think you’re missing the point of my post. It’s not intended as an attack or criticism of Corbyn. It’s intended to raise a more general point about the expectations of a certain sort of left-winger (who populate this part of the internet) for the outcomes of electoral politics.

    You ignored my questions: “What would you change in the Labour perspective in re Brexit given their goals? Or, in the American context, the way forward in renegotiating NAFTA?”

    The way forward in negotiating NAFTA is first to achieve enough power for this question to matter. The reasons to reform NAFTA and the direction in which to reform NAFTA are mostly in this context tangential. More protections for environment, labour, less ability to override national regulation, clear regulatory harmonization where necessary, less threat to public services, etc, etc.

    Stop hand-waving and address the questions. Frankly, this line of rhetoric seems like the “this isn’t the best time for a left to gain power — it’ll hurt the left” rigmarole.

    It’s tiresome. And stale.

    Oh, nonono. You misunderstand me completely. I was entirely in favour of Syriza gaining office, and remain firm in my position (my post and comments on this go way back and very much against the grain of the majority of people here, Ian included) long after the original showdown. Really, if you can’t obtain power when the opportunity presents itself and continue to govern when your initial assumptions prove to be 90% wrong, you have no business trying in the first place.

    I do definitely want Corbyn to win, hard Tory Brexit or not. I just want people here to realize that the world after Tory Brexit will determine Corbyn’s political choices (hypothetically as PM) far more than any policy document you could write at this time, no matter how clever or well-intentioned.

  14. September 17, 2017

    Nice try Mandos, but assertions are not arguments. And how do you account for the UK’s now booming economy following the devaluation the Brexit vote put in train? We are told, though I suspect much of it is the usual Tory window dressing and ignores the plight of the self-employed, that unemployment is now at it’s lowest level for 20 years.

    It is not for government to make investments as governments pay no regard to potential rates of return. Have we all forgotten the lessons of the 1970’s. It seems every generation has to relearn the hard way what is already known.

  15. September 17, 2017

    Nice try Mandos, but assertions are not arguments.

    Nonsense. Assertions are arguments. The question is, are they good arguments?

    And how do you account for the UK’s now booming economy following the devaluation the Brexit vote put in train? We are told, though I suspect much of it is the usual Tory window dressing and ignores the plight of the self-employed, that unemployment is now at it’s lowest level for 20 years.

    If it is true (and I have my doubts), you are getting the “front-loaded” benefits of Brexit devaluation without the actual Brexit, which hasn’t happened yet. Of course, it could be the case that the Brexit they ultimately generate is a soft Brexit. This would happen if the UK agrees to pay the EU umpty-billion euros, accepts ECJ jurisdiction, etc, etc. Then you might get a soft landing.

    It is not for government to make investments as governments pay no regard to potential rates of return. Have we all forgotten the lessons of the 1970’s. It seems every generation has to relearn the hard way what is already known.

    You on the wrong blog if you think that anyone around here believes that the lessons of the 70s should forever lead us to reject public investment and industrial policy.

  16. bruce wilder permalink
    September 17, 2017

    Mandos: “Full democratic control can only be achieved in autarky or by global democracy.”

    Thank you for responding to my earlier comment. Exchanges with you are often . . . almost mystifying for me, but I must enjoy it, because I come back for more. If I were making sweeping generalizations, I would say exactly the opposite: that (local) autarky and a global state are opposite poles, both practically incompatible with democracy. Of course, phrases like “full democracy” are often a clue that one’s interlocutor is using a private dictionary, with his own super special definitions for ideal types. That may well be the case here, which is boring.

    My point, not elaborated, about “the four freedoms” is that they disable the state. Democracy and a weak state is no effect for democracy. You cite the problem of political leverage. That is recasting the problem of having no mechanisms of policy action in the hands of the democratic state. A state, without control of its borders or currency, unable to impose its will on business enterprise, (unable to own business enterprise!), unable to break the budget constraint on its own fiscal structure — such a state is no sovereign. No sovereignty, no democracy.

    It is the central irony of the evolution of democracy in British history that Parliament is a theoretical dictatorship. But, that is what democracy requires: residual power. The reactionary right theorizes something else in groping blindly for a neo-feudal order of unbridled private power under the mirage of the self-regulating Market God. But, much of the left can not be bothered to theorize at all; Marx is still dead and (not-libertarian) liberalism and socialism are spent forces.

    Instead, we have the narcissism of those who feel they have lost something, as you say, in Brexit, but have little consciousness and no sense of social responsibility for the discontent and economic devastation which the state can not answer. What has been done to Greece is of little concern — they brought it on themselves and Europe has “rescued” them repeatedly. That England is the most densely populated major country in Europe and has many of the poorest cities in northwest Europe are circumstances to be denied, while complaining of racism and stupidity among the lower orders.

    The EU constitutional order reproduces not Westminster, but rather Bismarck’s North German Confederation with its powerful independent bureaucracy and ceremonial legislature, but without the hereditary aristocracy (unless you think giant business enterprise and cartels are quietly filling in?) Of course, the pious insist, as Weber’s Liberals did before WWI and the Empire’s collapse, that the legislature should be strengthened. But, of course, the obstructions to that hopeful evolution are in the very foundation stones of the system. Never will happen. And would be anti-democratic in every step it takes in that nominal direction.

  17. marku52 permalink
    September 17, 2017

    This:
    ” A state, without control of its borders or currency, unable to impose its will on business enterprise, (unable to own business enterprise!), unable to break the budget constraint on its own fiscal structure — such a state is no sovereign. No sovereignty, no democracy.”

    Or, a democracy without power, or meaning.

    “You can vote all you want…It won’t change anything”

    Sort of like the US right now.

  18. bob mcmanus permalink
    September 17, 2017

    No sovereignty, no democracy.

    As always, we radically disagree, because you look at the top and I choose to wallow in the mud.

    The people are sovereign, and we are in a democracy (no longer a liberalism). You just want a different people. The ones we have are the designer-products/producers of a completing global capitalism, competitive and predatory, tribal and anarchistic…but they rule. What they rule or fight over appears to be not what you care about.

    Twasn’t the oligarchs that kicked Coun/terpunch and Stormfro/nt to the Coventry of social media, it was by popular demand.

  19. bob mcmanus permalink
    September 17, 2017

    My sentence of the week at LGM comment section, about Obama’s half million speech.

    “But Obama has to make a living.”

    That is not an oppressed peasant battling his overlords.

  20. stephen permalink
    September 17, 2017

    Real leadership would be needed to create a different future, of the “we will fight them on the beachs” and “blood, toil, tears and sweat” kind. But they won’t get it it.

  21. Synoia permalink
    September 17, 2017

    “You on the wrong blog if you think that anyone around here believes that the lessons of the 70s should forever lead us to reject public investment and industrial policy.”

    Thank you. That response has made my day.

    The lessons of the ’70s, as one who lived through it and remembers it well, was that a tripling of energy prices caused years of dislocation as the costs worked their way through the economies of the world, deflated the value of Government spending, which caused a massive drop in demand and hence jobs.

    It wan not until labor, almost always a victim, after recovering from the US Fed’s huge interest rates, and Regan’s deficits that thing changed.

    The question is was it Volcker or was it Deficits which improved economies? MMT would have one believe it was Deficits – that is more money pursuing more goods, and paying less of one’s earning to banks, so boosting demand.

  22. September 18, 2017

    bruce wilder:

    I will get to the rest of your comment a little later since I’m a bit out of time but,

    Thank you for responding to my earlier comment. Exchanges with you are often . . . almost mystifying for me, but I must enjoy it, because I come back for more.

    I think it’s because we use similar starting premises but a different reasoning framework so come to somewhat different conclusions, but we’ve not managed to make the differences explicit.

    If I were making sweeping generalizations, I would say exactly the opposite: that (local) autarky and a global state are opposite poles, both practically incompatible with democracy. Of course, phrases like “full democracy” are often a clue that one’s interlocutor is using a private dictionary, with his own super special definitions for ideal types. That may well be the case here, which is boring.

    By democracy, I mean narrowly in this context, that the legitimacy of authority over what happens inside an economy is conferred to a state through some process that gives, at some point, equal weight to the opinion of every citizen. That’s as concise as I can make it.

    Any time two states/polities interact economically, the decisions made in one have an effect on the other that is not under the purview of the democratically legitimated authorities of thus affected state. So democracy is not “full” in the sense I mean it, because the authority in the other party/polity/state cannot be reviewed by citizens of the first.

    The only way to avoid this situation is complete economic separation with no interaction at all, or by the establishment of democratic legitimacy that encompasses the both of them. In the limit, this implies a global state. So “full democracy” can only be achieved in an autarky or a global state with some democratic governance form. That doesn’t mean that autarkies and global states are necessarily democratic, just that democracy with any form of large-scale economic interaction across states attenuates democratic legitimacy, until the polities are fused.

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