It seems pretty clear that “Leave” ran a much better
campaign than “Remain”, starting off with just having a better and more
productive name. Strategically Leave had
three prongs, (i) Sovereignty, (ii) Immigration, and (iii) Anti-status quo (and
with the major parties both on the Remain side, status-quo has a wider scope
than normal, i.e. politics/politicians/bureaucrats/etc); while immigration got
all the attention (especially from the press and Remain campaign), sovereignty was much more important. On the other hand, the Remain campaign’s
strategy was primarily driven by the economic cost of leaving the EU (with a
nod to apparent strategic benefits of being a member, which were never fully articulated). The
largest flaw in this being that using economic fear (even if justified) has a diminished impact, when the same population (if not electorate) have
been exposed to it as the primary weapon in votes in 2014 (in the Scottish referendum)
and 2015 (in the General Election). People
don’t have to be economic experts to figure out either (i) the world can only
end so many times, or (ii) if the economy is so fragile that Scotland leaving/Labour getting into power/Brexit can each individually crash it, then there will be something else soon enough is Brexit is avoided. Finally, on a tactical basis “Leave” had better
leadership (say what you want about Boris/Gove and their behavior, but everyone
knew who to listen to as opposed to Cameron/Osbourne’s the world is ending
again, and Corbyn’s errr…errr…exactly) and a simple effective slogan (“Take
Back Control”) that meant different things to different people (like Obama’s “Yes,
We Can”, and Trump’s “Make America Great Again” – it’s hard to take the opposite
side of a good slogan!).
While the campaign matters, the structural setting for a
Leave vote was in place; it is readily apparent (to OM, at least) that there is the
widespread popular discontent (be it in Greece, Spain, France, the UK and US)
with the range of political choice offered and their policy prescriptions. The widespread nature of this discontent is I think better understood
by the population than by the political (and elite) class, and the attempts to
ascribe it solely to immigration (more of a symptom) is reflective of
this. The lack of willingness to
investigate and understand this discontent has helped create the opportunity for the populist characters on the left and right like Jeremy Corbyn,
Nigel Farage, Bernie Saunders and Donald Trump.
Furthermore, the complacency shown by the major parties as these characters rose
(due to their low quality and general incoherence), and still being shown towards
Mr. Trump, reflects how badly the political class are underestimating the
underlying message. Finally, the
distorting impact of QE on inequality and corporate incentives, has only added
fuel to the fire of that dissatisfaction.
That this manifested itself in a vote for Brexit,
seemingly aided by stalwart Labour areas in England, should not come as a
surprise. For the last generation, as
globalization and with it free trade and free movement of capital (with its
negative impact on tax bases) have swept across the globe, the policy
prescription has been to increase welfare to deal with the uneven impact. Now however, the costs of welfare are
becoming prohibitive both financially (on government budgets) and in terms of
lost productivity. While welfare is
necessary, and one can easily understand how data and economic models suggest
it is the best approach, Our Man suspects that likely reveals more about the models, and their over-valuation of the short-term
than anything. The extremes of the
welfare state help foster a culture of dependency and while transfer payments help people live
their lives, it constrains them to ones that are harder to develop meaning and
self-respect. Furthermore, on an
economy-wide basis, it helps undermine productivity through the lost skills
(and lack of development of new ones) limiting the economy’s potential. In the fullness of time and with the repeated
prescriptions of the same solution, these micro and macro factors swamp the
easy fix of a cash transfer.
Finally, it is said that history rhymes, rather than
repeats, and to that end Our Man has been surprised at the lack of mention of
Britain’s exit from the gold standard in 1931.
After all, following 6yrs of austerity back then, Britain was the first
country to come off the gold standard and its departure came after a naval mutiny
(Invergordon revolt), which caused market panic and the Pound fell 25% in the
aftermath! Inevitably, it was deemed at the time to be sacrilege to
leave the Gold standard, a tragic mistake from which the country would never
recover and one that would doom London's financial centre. Of course, it proved not to be in part due to
the huge stimulus from that devaluation and within 2 years (1933) most other
countries had followed Britain’s lead and left the Gold standard.
Now of course, we’ve just had 6yrs of austerity
(Chancellor Osborne's first austerity budget was July 2010), and Britain voted
to become the first country to leave the EU delivered by a different mutiny (the 2.8mn non-voters who delivered Brexit). It too has caused market panic (albeit
briefly), and (so far) the Pound has fallen 15% in the aftermath!
It’s also being called a tragic mistake, against the perceived wisdom of the
day and London's financial centre is doomed.
Time will tell how different ending the UK will have this time…
Our Man, will return shortly, with some things he thinks
in the aftermath of Brexit…
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