Trieste, Italy
Britain’s current decline is relative rather than absolute. The average citizen of today’s Britain is far richer than was the average citizen at the time of the British Empire. Other advanced economies have suffered from years of slow growth while Britain’s science and medical research boom. But the evidence of decline is too evident to ignore. Britain’s core political institutions are in a state of decay. In the past, big crises have produced great leaders, such as Lloyd George during World War I and Winston Churchill during World War II, but today’s politicians range among the mediocre. In a recent survey a quarter of Britons say they would vote for a far-right party because the mainstream parties have let them down. Economic growth has been slow since 2015 despite low interest rates and a fall in the value of the pound. Productivity growth has been marginal and real wages have been falling for a decade. A growing proportion of the population is trapped in a cut-throat economy, in which the young fear to be much worse off in future than their baby-boomer parents.
This is not the first time Britons have been gripped by fears about decline. In the 1890s they worried that America and Germany were replacing Britain as the workshop of the world. In the 1950s they worried that an old-fashioned establishment was strangling the forces of progress. The 1970s saw a particularly fierce debate, as the country was plagued by strikes and three-day weeks. But three aspects make today’s worries especially troublesome. The first is disappointment. For the past 40 years Britain felt that it had put decline behind it. Margret Thatcher, John Major, Tony Blair and David Cameron cemented the new consensus that economic growth, deregulation and privatisation were the key to permanent wealth increase. This was a huge benefit to the new elite that could pride itself that it was more progressive than the old one while stuffing its pockets with gold. But this new consensus also suffered from mounting problems. There was the problem of one-off windfalls: selling off council houses was wonderful for the tenants and the Treasury, but left Britain short of social housing. There was the problem of regional imbalance. The boom in financial services poured money into the south-east while the north remained in economic trouble. This Thatcher-Blair consensus finally ended with the financial crisis of 2008 and the Brexit vote of 2016.
The second problem Britain is facing is the lack of collective agreement in deciding to leave the European Union. Brexit was driven by a particular combination of despair about the way the old consensus had left so many people behind and of optimism that by freeing itself from the EU Britain would be able to reignite its growth engine. The despair was probably justified, but the optimism definitely not because most of Britain’s problems are internally generated. There is nothing about membership in the EU that prevents British entrepreneurs from trading with the rest of the world. Indeed the EU has just signed a trade deal with Japan and is negotiating with the USA about lowering trade barriers. Most economists predict that any version of Brexit – hard or soft – will depress Britain’s growth rate. If Britain leaves without a deal, the consequences will be dramatic. The Brexit secretariat is already drawing up contingency plans to stockpile medicine and food and put electricity generators on barges in the Irish Sea. The third problem is that of compounded error. Irresponsible politicians may well feed the people’s appetites for populist and nationalistic decisions. The Brexit debacle has already injected the poisonous charge of betrayal into the heart of politics. Tony Blair said that politics at the moment is about either riding the anger of finding the answer. The trouble is that fresh answers are hard to find and the anger is mounting daily.
Britain has for centuries regarded the European continent, of which it is a part, mostly as a threat or a distraction, but it is learning that its own identity apart from Europe is far more fragile than it ever realised. In the four centuries up to 1914, when Europe was the dynamic centre of the world and when Europeans fanned out over the globe to trade and conquer, they defined themselves by their religion, by their language, by their nationality, which they saw increasingly in racial terms. After 1945 there was a new determination to achieve a robust and enduring peace. This was the vision of a small European elite, but they were responding to a wide-spread sense of exhaustion and disgust. This sensation evolved into the European Union, which was blessed from the side lines by Great Britain, but Britain only belatedly and never wholeheartedly joined this union. Indeed, nowadays the case for Europe is almost never argued in terms of a European identity. In Britain, even the pro-Europeans argue not on the basis of common values and cultural identity, but on the basis of commerce, from the benefits of the single market and the advantage of critical mass in international trade negotiations and economies of scale. Today there is more existential angst than ever about Europe’s place in the world and about its whole future and British commercial pragmatists have never really committed themselves to the concept of Europe as an identity at all. But in a 21st century world of globalisation and great powers, a century that is in some ways not so different from the 19th century of globalisation and great powers, Europe needs to define and discover its common identity to survive. The 21st century is not going to be Europe’s age. Europe is now in long-term relative decline, both politically and economically, despite the comparable wealth of its populations. Europe has retreated from being the self-defined centre of the world to being what it had been before the 15th century, a corner of the Eurasian landmass. And whether Britain likes it or not, it is part of that.
The first break-up of the single nation state on the British Isles culminated in the Easter rising of 1916 and the bitter fight for independence of the Irish, ending in partition and civil war. It is doubtful whether the British have fully confronted the implications of this shameful colonial experience, which began under Henry VIII by settling thousands of English and Scottish Protestants, displacing and dispossessing the majority of Irish Catholics, suppressing their language and culture. Meanwhile the British have woken up to the seriousness of the Scottish claim to on independence based on their own distinctive culture. But it is not clear whether the country has properly comprehended the real causes of this existential threat. The problem lies in a fragile identity that was forged in the 18th and 19th century as a monolithic identity centred on London and focussed on its empire rather than being inextricably involved with the continent of which the British Isles are a part. Meanwhile, the Irish have found their identity in the wider context of the new Europe. If ever there was a country whose experience proves the value of the EU, it is Ireland. During its membership the country has modernised and transformed itself, the young are well educated, digitally connected and cosmopolitan. In one generation it has seen an extraordinarily fast secularisation. All in all, Ireland has acquired a new self-esteem and confidence on the international stage within the framework of the EU. Britain was and still would be widely welcome by many states in Europe, not just Germany, the Netherlands and Scandinavian countries, as a force for reform and openness that the EU needs. But the tragedy is that from the start Britain has been too ambivalent about its European commitment to take on this role effectively and the fragility of its own identity means that the separatism within the country now constitutes an existential threat to itself. The geographical facts, which all Europeans share, determine our geopolitical interests and the European identity is formed through the distinctive history, which we are all part of. Eurosceptics overlook the full force of these two points. What Europe has to offer to the 21st century is a commitment to rationalism, democracy, individual rights and responsibilities, the rule of law, social compassion and an understanding of history as dynamic, open and progressive. These are European values that are worth fighting for and this can be done best within a union and not from outside.
In the Brexit vote on 23 June 2016 52 per cent voted for leaving the EU and 48 per cent for remaining. It soon became clear that the advocates of “Leave” had no plan for what to do if they proved victorious and that there had been wild exaggerations, if not outright lies, by those arguing for Brexit. Economically Britain and Europe are so intimately interlinked that keeping trade flowing freely between Europe and Britain should be in the interest of both sides. Yet some wanted a “hard “ Brexit, a clear break with the past; others a “soft” Brexit, the closest possible union with Europe, consistent with Britain not being in the EU. In Scotland, which had overwhelmingly voted “Remain”, there was a strong opposition to a hard Brexit. Many in Europe wanted a quick divorce because uncertainty is costly and might deter investment, but some in Europe want a settlement so painful that no one should think about leaving again. The exit proceedings were started under article 50 of the Lisbon Treaty and a two-year limit is set from that date to the conclusion, which is 29 March 2019. Yet the union should be bound together by solidarity and common interest and not by fear of the unknown or by retribution that would be brought down upon exiting members.
Neoliberalism and the perspectives of corporate elites formed the policies of the EU for the last decades and if the union is to succeed after Brexit it will have to disengage itself from this economic ideology and the interests of the elites that it serves. Large portions of populations have not been doing well in recent years. The neoliberal agenda of the last four decades might have been good for one per cent, but not for the rest and this stagnation in wealth distribution has eventually brought about drastic political consequences from the rise of nationalist and populist parties to Brexit. The promises were that globalisation, financialisation, economic integration, the lowering of tax rates on corporations and the well-to-do, liberalisation in general, would all create a new economic order. This would lead to a burst of economic energy from which all would benefit. There might be some inequality, but if everyone was doing better because the economic pie was bigger overall, who would complain? In reality there was much more inequality in Europe and worldwide; growth, in fact, slowed down and the result was economic stagnation and increased insecurity. Britain could pride itself on having lower unemployment than the rest of Europe, 4.4 per cent in 2017 as compared to 7.7. for the rest of Europe. Yet those having jobs were not doing particularly well because wages and productivity was stagnating and the threat of government cuts to the social security net upon so many depended as a last resort made Britons feel vulnerable. In Europe many social democratic politicians bought into neoliberal ideas, as for example Tony Blair in Britain or Gerhard Schröder in Germany, so that it became increasingly difficult to distinguish between “Compassionate Conservatives” and the “New Left or Third Way”. They introduced reforms that the Conservatives had struggled to make for decades. In Britain Blair and Gordon Brown talked about “light” regulation, almost as a synonym of “self-regulation” that resulted in a regulatory race to the bottom with the banks and corporations the big winners and the societies the big losers. Political elites, conservatives as well as social democrats seemed to have reached a broad consensus about the goals of the economic order in Europe. This agenda included liberalisation, deregulation and lower taxes for corporations and the rich. In macroeconomics this new consensus entailed fighting inflation and maintaining budget balance. The financial crisis of 2008 might have precipitated the current political crisis in Europe. Many European citizens felt that the system was unfair and rigged, but after the crisis and the lopsided recovery they regarded it as even more unfair and more rigged and lost trust in the political process. They voted for politicians who promised to rectify this situation. But the new politicians in Britain and in most of Europe were to a large extent dedicated to the same ideology, accountable to the same special interest elites as those before.
An upsetting of the balance among the social partners – labour, employers and government – changed economic, social and political dynamics. Weakening bargaining positions of workers meant a declining share of labour and greater insecurity and no counter-balance to corporate political influence. Financialisation, accompanied by short-termism, led to lower growth, so that workers were getting a smaller slice of a small pie. The Conservatives in Britain and elsewhere responded that more of the same would do the trick, namely more austerity, more budget cuts, more liberalisation, more integration, even lower taxes for corporations. Britain could not blame the Euro for its plight because it was not part of the Euro zone. Britain had imposed austerity on itself as it was under the spell of the same ideology that prevailed in Germany and in Brussels, namely that the deficit was the source of Britain’s economic weakness and therefore curing the deficit was necessary and sufficient for a return to robust growth. The Conservatives believed, too, that through trickle-down economics this growth would benefit all. But they could not deliver and thereby lost their credibility. This left an opening for the extreme right political spectrum. The right-wing populists focused on two topics: trade and immigration. These themes offered them the chance to blame others for the economic weakness at home. Changes in technology for example have been far more important causes of both job losses and wage stagnation in Britain. The fact that the working classes have fared better in some other European countries like Sweden and Denmark suggests that different economic policies do matter.
The liberal trade agreements of the EU with the rest of the world were negotiated in secret with corporate interests in mind, but not those of ordinary citizens and workers. If trade liberalisation destroys jobs in textiles and creates jobs in high-tech, the textile workers do not have the skills to get jobs in the expanding sectors. Besides, the new jobs are often created at a distance of the old ones, which means communities are disrupted, families torn apart. Without generous compensation and active training policies, liberalised trade has hurt many people. Ordinary citizens feel they were lied to and get angrier as they have to accept cuts in wages and job protection and social programmes and a substantial lowering of their standards of living in order to “compete”.
The subject of migration has become even more tinged with emotion than trade. As with trade, the advocates of immigration liberalisation underestimated the distributive consequences and did little, if anything, to mitigate them. Britain together with Ireland were the only two countries in the EU that allowed immediate unlimited immigration from the new accession countries because they wanted to compensate the lack of skilled workers and saw the chance to reduce labour costs. So the millions of Polish migrant workers that “Leave” voters protested against were specially invited by Britain at a time when in the rest of the EU governments had introduced regulations to keep out cheap labour from the new accession countries for several years. Nevertheless the perceptions of migration may be worse than reality. The refugee crisis that hit Europe in 2015, triggered by the war in Syria, did not affect Britain because the refugees did not make it to the island. As Britain is not part of the Schengen agreement there is no free movement of persons without border controls between the EU and Britain, so the refugees got stuck in migrant camps in French Calais. Again, as with trade, immigration is blamed for economic weakness regardless of the magnitude of its effects. The leaders of Europe were working at the behest of corporate interests, for whom the stress on workers was precisely what they wanted, in order to have a more pliant labour market and one where the power of trade unions could finally be broken.
It is also fairly clear that the EU has imposed more regulatory harmonisation than necessary, complying with the wishes of special corporate interest groups and this excessive enthusiasm for regulatory harmonisation got the EU into trouble with European citizens and especially with the British. The costs of this excessive zeal are obvious, the benefits less so. It might seem unfair competition if English ice cream is not required to contain cream and is pumped up with air to increase the volume, while Italian ice cream is qualitatively much better and contains cream, an absurd issue of regulation that angered lots of British. But the easy way out is: provide the relevant information and let the consumers make the choice for themselves. If the English prefer tasteless ice cream filled with air to Italian ice cream, they should be allowed to enjoy it without regrets. Only where the lack of harmonisation has significant cross border effects, then there may be a need for harmonisation, but the EU should strive to allow countries as much freedom as possible in this respect. The best outcome of the Brexit vote would be if it acted as a wake-up call to Europe’s leaders: unless they make the EU more efficient, more democratically accountable and more economically fair, disintegration will be the result. But so far no policy changes are visible. The European project was intended to bring the peoples and the countries of Europe closer together and in some ways this has worked out. Many more young people all over Europe now identify as Europeans and even in Britain some three quarters of the young voted for “Remain” in the Brexit vote. They were hopeful about the future of Europe and hopeful that the EU could be reformed.
Literature:
Stephen Green, The European Identity. Historical and Cultural Realities We Cannot Deny, 2015
Joseph E. Stiglitz, The Euro and its Threat to the Future of Europe, 2016
Downhill all the Way. Britain has fretted about decline, but never like this, The Economist July 18th 2018