Winner of the New Statesman SPERI Prize in Political Economy 2016

Monday, 16 July 2018

Trump and Brexit

As Trump makes clear, the UK can choose US rules or EU rules. Brexit is about having no say in either.

Of course every Leave voter is an individual with their own motives. But if you had to broadly characterise the two big issues that gave the Leave side victory in 2016, it was fears about immigration and a wish for greater sovereignty. Both were based on lies.


You would not know it from the media, but people in the UK have been developing a more favourable view of immigration over the last six years. Here is a table from the latest National Centre for Social Research Social Attitudes survey on Europe.

In 2017, for those who expressed an opinion one way or the other, nearly three quarters thought immigration had a positive impact on the economy, and 65% thought immigrants enriched our culture.

Given this trend in attitudes, how did we vote to Leave? I keep going back this poll on EU immigration published in June 2016 which I wrote about shortly after it came out.

You can see it is consistent with the numbers above: people on balance think EU immigration is good for the economy and for British culture, and even for themselves personally. So why would they want to reduce EU immigration? Because they overwhelmingly thought EU immigration was bad for the NHS (and by implication all public services).

This, after all, is the line that Conservative and even some Labour politicians have consistently pushed, as have parts of the media with no comeback from most broadcasters. Before the referendum there were few stories about EU doctors and nurses, but plenty about migrants using the NHS. This concern was emphasised by the Leave campaign with the combination of the £350 million more for NHS claim and the prospect of being ‘overrun’ by Turkish immigrants.

The only problem with these claims that immigration reduces access to public services is that we know, with almost certainty, that the opposite is true: immigration creates net additional resources for public services. This is not complicated: they pay more in taxes than they take out because they tend to be of working age. But the myth that politicians and the media promulgate is that immigrants are somehow the reason access to public services has become more difficult, and they do this in large party to cover up the impact of austerity.

There was a final issue during the referendum that may have encouraged people to vote Leave. Even if they were positive about the EU immigrants that were already here, it just seemed sensible that the government should control their number. After all the government had set a target for net migration, and were having great difficulty meeting it. Yet the media never talked about the positive aspect of freedom of movement - the ability of UK citizens to live and work anywhere in the EU - and how that would end if we left.

Sovereignty and trade

I still talk to Leavers on both right or left who are convinced that the EU has taken away major elements of the UK’s sovereignty. One talked about “accountable democracy, sovereignty, independence, autonomy and freedom”. Yet when I ask for specific instances of a law or somesuch where the EU has compromised all these things, answer comes there none. There is a simply reason for this, beyond the propaganda, and that is that the EU is about harmonising regulations, and this harmonisation has brought benefits rather than pain to UK citizens.

International trade involves a form of cooperation with other countries, and international trade is good for both sides because it allows more efficient production as well as consumption of a greater variety of goods. The more we cooperate on rules and regulations, the more trade will happen. This harmonisation of regulations is like marriage: each side loses a degree of individual autonomy but we gain much more in return.

The thing about regulations governing networks of trade is that there cannot be too many of them, just as there cannot be many operating systems for computers. The whole point about harmonising regulations is to reduce their number of regulations, so firms do not have to produce lots of different goods which differ only in the different national regulations they meet. Which means that, if the UK wants to really benefit from the gains to trade, it has to choose one standard to match UK regulations with. And given existing patterns of trade, the UK only really has a choice between two: the EU and North America (NAFTA). Neither is likely to abandon their regulations in favour of what the UK may happen to do. (Equally third countries will never choose to harmonise on UK regulations rather than EU or the US.)

Translate this into Brexit, taking back control is like divorce, except in this case divorce from a partner you are still happy to be with (we happily trade with). To be honest, however, I’m not sure many Leave voters needed convincing of all this. As this poll shows, only 22% of Leave voters thought we would lose full access to the single market. Instead they believed the propaganda they were fed, that somehow their lives were being influenced in a negative way by the EU, and that they would therefore be better off after Brexit

Brexiters and Trump

While most voters were not very interested in regulations, many Brexiters certainly were. Most Brexiters are not very interested in immigration, but are interested in removing us from EU regulations and adopting much looser US standards. Of course they talked about ‘global Britain’, but it never made sense for the UK to set its own regulations for trade independently of both the EU and US. What they wanted was to get rid of EU regulations on labour or the environment which did not fit into their ideological framework.

To say, as I did here, that the Brexiters hijacked the EU negotiations, to make them about their own concerns rather than the people who voted, is not quite right. I think it is another example of deceit: getting what they want indirectly because what they want is not in itself popular. EU labour and environmental regulations are popular with most people. So the Brexiters could only achieve their goals through deceiving Leavers, and once more through our partisan or pathetic media they succeeded. After all, the first significant deceit, which was reducing the size of the state by making a fuss about the deficit, had been a big political success.

Normal US politics would want none of this. The US traditionally values the UK as part of the EU, and a jumping off point for their own corporations. Trump is of course not a normal POTUS. He is part of a right wing plutocratic elite that has captured the Republican party, and a good part of the Conservative party. Their aim is to spread his kind of authoritarian right wing politics as far as they can. Trump’s retweeting of Britain First islamophobic materials was no accident. One of his ambassadors has lobbied on behalf of former English Defence League leader Tommy Robinson!

I remember writing sometime back that Trump’s election was a big blow to Brexit. I thought, perhaps naively, that at least some Brexiters would think twice before becoming cheerleaders for Trump. I thought some might be concerned that far from doing trade deals, they would be concerned that Trump seemed more interested in destroying trade by placing tariffs on imported goods. If any have showed any concern I have not noticed. It seems instead that the Brexiters, along with the right wing press, really are the Republican party in the UK.

Theresa May

Stage one of the Brexit endgame that we saw less than two weeks ago was Theresa May at last standing up to the Brexiters in her party. I think she could and should have done this from the very beginning. That she didn’t do so reflects naivety about Brexit rather than strategy on her part. There are many clues that this was so, some of which are spelt out by Jonathan Lis here: getting rid of Sir Ivan Rogers was a huge unforced error that conclusively shows that she and her immediate advisors did not understand the task they had taken on. But it would be suicide for her to turn back from her new path now..

Trump’s attacks on her are another sign of how important her Chequers document is. Of course it is not a plan the EU can accept, but it represents her choice to finally stop the Brexiters turning Brexit into their ideological, Republican orientated plaything. She must know that her new opponents will not be appeased, and do not do compromise. I hope that Trump’s humiliation of her will help her see that global Britain was always a myth, and that the UK has to choose the EU rather than the US. She will need resolve as she is forced to compromise further to get a deal, although she will try to push at least some of that into transition.

Perhaps I am wrong about the final situation being BINO plus face saving for the UK: perhaps the EU will offer serious concessions for the first time in these negotiations. But it is foolish to believe that these concessions will in any way be advantageous to the UK, and somehow make Brexit worthwhile. What gain is there to be outside the single market for services, when exports of products from financial and creative industries to the EU is one of the UK strengths? What gain in there in restricting EU immigration, when most people now agree that immigration enhances our economy and culture, and economists know also enhance our public services. Yes, we would have more sovereignty: the sovereignty to make our lives worse with no compensations.

Whatever deal May finally does with the EU, and at whatever time, it remains the case that Brexit will do for UK sovereignty the opposite of what it claimed. It is better to follow EU rules than US rules, but with Brexit we will be following, with no say in how these rules are changed. It is a huge indictment of our political system that our Prime Minister and a majority of our MPs feel incapable of saying to people you were lied to, and following this course gives you less sovereignty than you had before June 2016. All we can hope for is that the Brexiters, in their new found position of Brexit rebels, will vote against the deal and let parliament, directly or indirectly, kill the whole thing off. The Brexiters will have caused enormous damage, but it would be poetic justice if they helped bring an end to Brexit.

Friday, 13 July 2018

The micro incompetence of UK austerity

I have, for obvious reasons, talked a great deal about the macroeconomic incompetence of austerity, and how it probably cost each UK household around £10,000 in lost resources on average. I have also talked about how it was based, at least after 2012, on political deceit: a pretense that cuts were necessary to reduce government debt when in reality the aim was to reduce the size of the state. (If the priority really was the deficit, why all the tax cuts?) What I have talked less about is the microeconomic incompetence in the way this reduction in the size of the state was achieved.

To many that may seem an odd thing to discuss. After all, isn’t how government spending is allocated between health, education, defence etc inevitably a political decision. But that is not how an economist would think about it. People have preferences between spending on the various goods that are allocated by the state, and so it is perfectly reasonable to ask how good a job the state does in getting the right allocation i.e. in reflecting society’s needs and preferences. If it wasn’t doing this to the first approximation (and allowing for slightly different preferences depending on political orientation) you could legitimately question whether the state was doing a good job. One of the pieces of academic research that has always stuck in my mind is a 1984 paper by Ron Smith and colleagues, who found that allocation did reflect needs and costs once you allowed for bureaucratic inertia.

As a result, it is perfectly legitimate to ask whether an attempt to shrink the state has preserved broadly the correct allocation or distorted it. After all, if a Labour government substantially increased government spending in random ways with no coherent plan everyone would be quite right to complain. So exactly the same should be true in reverse: if you are going to shrink the state you should do so in a planned way.

There was of course no public plan set out in 2010 discussing what parts of the state should be smaller and why. Was there a secret plan that guided Osborne and the Treasury’s decisions? Perhaps he had to keep his plan secret because if it had ever been made public it would have been very unpopular. As I have noted many times, there has never been in the UK more than 10% of the population that wanted a smaller state. That is why state reduction had to be done by deceit, as a few journalists have been prepared to acknowledge in public. But if you are going to do something by deceit, and have kept your master plan of where the state should be shrunk secret, you probably deserve people like me making the assumption that there is no plan beyond political expediency. So I will assume that the only plan was to make the cuts in areas that they could get away with.

Under certain assumptions, that idea of cutting until the pips squeak is in itself not a bad method. In particular, if you think that there is a lot of waste and inefficiency in public spending (because of lack of competition etc), then this mechanism may be one way of getting rid of that waste and inefficiency. However some of the assumptions required for that method to work show clearly why it is in fact a very bad method. One assumption is that each part of public spending has an equal political voice, and will shout only as loud as the real pain of cuts. The real world is just not like that.

Take pensions and social care as two examples. The state pension has been austerity free, probably for the simple reason that pensioners tend to vote Conservative. So why has social care, which is used by the same people, been subject to savage cuts that are highly likely to have led to many premature deaths? The answer is in part that people do not have full information: the papers they read do not talk about cuts to social care very much. It is also because social care is the responsibility of local government, and so cuts can be blamed on local councillors rather than central government.

I started thinking about this again after reading an article by John Harris, who discusses the perilous state of UK local government. As he says, political “journalists who work themselves into a lather about this or that item of Westminster gossip hear the dread phrase “local government” and glaze over.” Do you know who the minister for local government is? I had to look it up. So the feedback mechanism that tells the Chancellor and the Treasury that cuts in local government have gone too far is largely absent and can be neutralised. As a result, that is one place where further cuts are still in the pipeline.

Groups that have been particularly badly hit by cuts, the disabled and poor, also happen to be those with little political voice. In some other areas the extent to which cuts took place depended on simple spin. Because of the spin that the NHS budget had been protected, it suffered sharp cuts because it normally grows substantially for various good reasons. Is this all part of a master plan, or just what was politically convenient?

Economists go on about the efficient allocation of resources, and that should apply just as much to public goods as private goods. The fact that this allocation is achieved through political decisions rather than responses to price signals makes it easier to get things wrong, but it should not mean allocations are random. So any departures from a reasonable allocation due to a programme of cuts which has been and is being allocated based on essentially arbitrary factors should be a major cause of concern. In simple english, not only was the Conservatives’ attempt to shrink the state done at the worst possible time for the economy as a whole, it has also been done in an incompetent way in terms of how spending is allocated.

Tuesday, 10 July 2018

Brexit Endgame: Stage 1

A characteristic of many endgames in chess where the result is clear is that pieces leave the board quickly to make the eventual win obvious. What we have seen with the resignations of some (Davis, Baker and Johnson at the time of writing) is but the first stage in that process. As I had anticipated, the Brexiters have split, probably for two reasons. The first may involve calculating what the best way of becoming May’s successor is (remember any calculation does not need to be correct). The second is about whether trying to bring May down is more dangerous to Brexit than accepting defeat and playing a very long game. Let me expand on this last point.

BINO (Brexit in name only, or something very close to it) is not a stable position in the long run for a large country like the UK. The very long game for Brexiters sees BINO as a first stage in a gradual distancing of the UK from the EU. The big problem with this strategy is demographic: Brexit was a vote of the old against the not so old. For that reason the instability of BINO is more likely to lead to rejoining, although when that happens depends in part on the EU. But bringing May down could simply backfire and halt or even end Brexit, as it can only be done by enough Brexiters joining Labour in voting against May’s Autumn deal with the EU. If the deal is voted down by parliament we are in ‘anything can happen’ territory, and that anything includes leaving with no deal, no Brexit at all, a new Prime Minister or even a new government. Remember also that it is easy for Brexiters to make threats now, but actually voting against a deal is something else. [1]

A vote of no confidence in May among Conservative MPs, although it will probably be talked about endlessly by the media, is also the least important event in all this. May will win, because Remainers do not want to risk a Brexiter Prime Minister. If Brexiters have any sense they will leave any vote until later anyway, for the reasons I will now explain. 

We have seen the first stage of the Brexit endgame, the first set of pieces to come off. The plan hammered out at Chequers, as Chris Grey explains, is the basis for negotiation that I said May needed to get on the table, but it also cannot be accepted by the EU for many reasons. In terms of pieces still to go, the elaborate attempt in the Chequers plan to give Fox the appearance of still having a job will not stand. But having to concede in effect staying in the Customs Union, and seeing Fox (and others) go? is the least of the three changes the EU will probably require compared to that plan. The EU is unlikely to accept a goods only Single Market deal for the whole of the UK, and is even more unlikely to accept the UK staying in the Single Market without also having freedom of movement.

How the endgame is played by the EU now becomes important, because it will determine when (not how) this all ends. The end result for Brexit if it happens - some form of BINO - is not in question unless something very surprising happens within the EU. But May will be desperate to avoid that becoming clear for as long as possible, and it is up to the EU the extent to which they let her play that game. To continue the chess analogy (my apologies for those who do not play), May wants an endgame that allows her to postpone the inevitable (i.e. to avoid agreeing to BINO) until the time control period of 40 moves comes to an end (we leave in March 2019, and enter transition). That requires a withdrawal/future framework deal that is vague enough that it is not obvious that freedom of movement will continue. Even that may not be enough for May to get any deal through parliament, but that is all she has to play for.

The calculation the EU now has to do involves working out what outcome is most likely in ‘anything can happen’ territory. If they think there is any risk of no deal they might play along with May’s attempts at fudge (although the Irish backstop cannot be fudged). But if they see as the most likely outcome that Brexit comes crashing to an end, then maybe they will play for that form of endgame. That calculation will have a strong influence on how this all ends. Which is not surprising. By triggering Article 50 the UK government gave up control and put our fate in the EU’s hands, like a novice playing a grandmaster.

[1] Actually ending a government is much harder than most imagine after the Fixed Term Parliaments Act. Would Brexiters really join the opposition parties in a vote of No Confidence in the government and become responsible for a possible/likely Corbyn led government? At the moment a vote against any deal with the EU would lead to a No Deal Brexit, but I suspect May has enough leeway to stop that (and the EU would always accept a request for more time to avoid that outcome). She could even threaten the Brexiters with ending Brexit if any deal falls: unlikely I know but it would put various cats among pigeons.

Friday, 6 July 2018

Islamophobia and Antisemitism: a case study in BBC bias

In March and April, there was constant BBC coverage of Labour’s problems with antisemitism. One piece, in March, talked about a ‘saga’. I have no general problem with this coverage. Labour does have a problem, so it should be covered by the BBC. However there has been far less coverage of the problems the Conservative party has with Islamophobia. Is there an objective reason to justify this?

The antisemitism story was notable for two important reasons. First religious organisations had publicly complained. Second these complaints had been supported by prominent Labour figures. However exactly the same applies to Islamophobia. The Muslim Council of Britain (MCB) have called for an inquiry, as have other leaders and groups. Sayeeda Warsi, former co-chairman of the Conservative party, has repeatedly called for more action (the latest here).

But to suggest equivalence between the two stories is misleading. The Conservatives’ Islamophobia problem is a much bigger issue for two reasons. First, the senior Conservative Sajid Javid has attacked the MCB for harbouring members with unacceptable views on extremism and not representing Muslims. In contrast Labour leaders have not attacked the Jewish organisations in the same way (by saying, for example, that their views come from a pro-Israel stance), and have met directly with them. Whatever the truth of Javid’s claim about extremism, the charge that they are unrepresentative is rather undermined by an organisation affiliated to the Conservative party, the Conservative Muslim Forum, also calling for an inquiry. (Letter to Theresa May here.)

Second, while Labour has never to my knowledge run an anti-Jewish campaign to win a general or mayoral election, the Conservatives did exactly that against Sadiq Khan who is now mayor of London. David Cameron even libeled an ex-Imam in his attempts to link Khan to Muslim terrorism.

Thus on any objective criteria, the Conservative Islamophobia problem has been a more serious story than Labour antisemistism. Yet the balance on the BBC has been the other way around, with far more coverage of the latter than the former.

What is the source of the bias? One may be that BBC News tends to ‘follow the story’, which invariably means following stories in the press. Corbyn has few friends in the major press titles, whereas the Conservatives are openly supported be much of the press. Another, I’m afraid to say, is that the BBC is very reluctant to criticise the government on its own account, something that goes back many years.

Case studies such as these are critical in establishing that the media has a clear bias against the current Labour leadership. (There are others: this is rather fun, and also academic research: here for example) The BBC itself, which is deluged with criticism from all quarters, seems to find it difficult to sort the wheat from the chaff. The classic line that because they get criticism from both sides they must be doing something right is nonsense. The political right in particular, because they know the BBC is sensitive to criticism, puts a lot of resources into criticising the BBC, and it will continue to do so whatever the BBC’s output.

All this presumes that Islamophobia and Antisemtism are viewed as equally bad. I personally think they should be, but unfortunately terrorism and Western wars in Islamic countries may have confused many people. Here is Sajid Javid again:
“All communities can do more to try and help deal with terrorists, try and help track them down. But I think it is absolutely fair to say that there is a special burden on Muslim communities because whether we like it or not these terrorists call themselves Muslims. It is no good for people to say they are not Muslims, that is what they call themselves. They do try to take what is a great peaceful religion and warp it for their own means.”

The idea that Muslims bear a ‘special burden’ has been the excuse used by the right wing press for consistent Islamophobia. When a member of the ‘non-Muslim community’ kills Muslims outside of a mosque, and says when arrested that he wanted to kill all Muslims, he is described by the Times as a mentally troubled lone-wolf, as if to emphasise that there is no special burden there. As in so many things, the irresponsibility of the right wing press has influenced sections of society for the worse. Perhaps it has also influenced the BBC.

Tuesday, 3 July 2018

Brexit: The Endgame

The logic of the Brexit project’s demise has been there for all to see as soon as it was clear the EU would stand by Ireland’s wish for no border. The need to avoid a hard border in Ireland, now accepted by the UK government, dictates that we stay in the Customs Union (CU) and at least part of the Single Market (SM). That is what the UK government signed up to in December, without apparently realising what it had done. The only alternative, which is to take the deal offered by the EU for Northern Ireland and have a border in the Irish Sea, is not politically acceptable to the Prime Minister and many in parliament.

The EU have now made it clear that the deal offered to Northern Ireland (staying in the SM for goods without Freedom of Movement (FoM)) is not available to the UK as a whole. It is a special deal recognising the unique problems of Northern Ireland, and cannot be something offered to any member state that decides to leave. The political reason is obvious, as such a deal might become attractive to populist politicians in other EU states.

That is the EU’s position, but the UK has not even tried to test it in negotiations, because it has spent all the time since the December agreement arguing with itself. The Brexiters, who include our chief negotiator, have with the help of their Legatum helpers spent their time making various proposals each more fantastic than the last. Their final argument is that we should leave everything to the last minute because only at the last minute will the EU cave and offer us complete access to the Single Market on whatever terms we like.. Perhaps some really believe that, but there is an alternative interpretation of what the Brexiters are doing. They are trying to delay because that way they may get their own favoured outcome of no deal by default. In short, by intent or not, they are trying to sabotage a Brexit deal.

That is not the only reason why Theresa May has to finally stop appeasing the Brexiters and formally make the proposal to the EU of extending the N.I. deal to the rest of the UK. She needs to impress on the EU, face to face, that a border in the Irish Sea is not possible, and that therefore the UK is also special in that particular sense. She also needs to argue that she needs to be able to go back to the people with something better than BINO, because BINO was not what most Leavers voted for. It might lead to, for example, the UK having something like the Swiss option of favouring (in a very small way) local markets for certain types of jobs. The EU of course may not be in any mood to be kind to a government and Prime Minister that has for so long been out of touch with reality, but just in case they are she needs to give them time to be generously creative on her behalf.

To do all this she has to finally break with the Brexiters. I have seen it said that this will bring her down - it will not. As the Brexiters are a minority she would win any vote of no confidence among her party. Would they take the ultimate step of supporting in parliament a vote of no confidence in the government? With many of the Brexiter leaders having ambitions to succeed May, I doubt it. Partly as a result, I suspect all most will do is register their dissent, and say forever more that if only the UK had hung on a bit longer the EU would have caved. It will also be difficult for some Brexiters in the cabinet to stay there, but somehow I don’t think that will worry May too much. The people who will go for her in a big way will be the Brexit press, but right now as far as Brexit is concerned they are paper tigers.

The reason why May needs to dress the deal up as something it is not (or persuade the EU to leave the door open to non-BINO options until after we leave the EU) is that otherwise everyone will ask what is the point of BINO: Brexit in name only. Like transition, it will be pay, obey but no say, and to all intents and purposes freedom of movement will remain. The Brexiters will be the first to make that point until perhaps they realise it might jeopardise Brexit itself. So May has to pretend we got something worth leaving for. As I wrote in January, Brexit will end not with a bang but a whimper.

If she does manage to do all this, Labour will find themselves in a very difficult position. In the days when they were triangulating, I said it was crucial that they always stayed the Remain side of the Conservatives to keep their members and voters on board. But now they have nailed their colours to the wall: stay in the Customs Union but leave the Single Market because of its position on state aid and maybe to avoid freedom of movement. It is a position that they can get away with so long as the Conservatives are still negotiating with themselves. But if May has to agree to stay in the single market to get a deal two problems with Labour’s position become clear.

First, how does Labour’s position prevent a hard border in Ireland? If the EU will not allow the UK to be in a single market for goods only, that means the Irish border dictates BINO. If May has finally recognised reality, why haven’t Labour. An argument that Corbyn could somehow achieve a settlement that May could not is not completely stupid, but I doubt it will play well. Second, they will now be arguing for a harder Brexit than May, which the majority of their members and voters will not like. You could even see the Brexiters joining with Labour in voting against what is essentially a BINO final deal. So if May is forced to accept staying in the complete Single Market as part of the deal, expect Labour to change their position or suffer some serious political damage.

If things go as I outline here, there will be a short period where people who are not Remainers will rightly ask why are we doing this if the only substantial thing we have achieved is to have no say on how the budget we pay into is spent, and how the rules and regulations we have to obey are changed. But our political class will not draw the obvious implications of that. A true statesman of a Prime Minister would say I did the best I could, but for the sake of peace in Ireland and the unity of the UK Brexit cannot happen, and so the best thing for the UK to do is to remain in the EU. And if I then ask why that does not happen in the UK, my best answer is because of an ideologically driven right wing press. Their great achievement will have been to campaign for a Brexit that gives sovereignty back to the people which ends up doing the opposite.

Saturday, 30 June 2018

Could the US become a democratic dictatorship?

China calls itself a democratic dictatorship, so it looks like the title’s question is a very odd one to ask. You can find various indices that measure countries on a line with dictatorship at one end and democracy at the other. So how can a country actually be (rather than call itself) a democratic dictatorship?

Consider Hungary. Its Prime Minister Viktor Orbán has pledged to create an illiberal state like Russia or China. Perhaps as a result, European Commission President Jean-Claude Juncker at a 2015 EU summit dispensed with diplomatic protocol to greet Orbán with a "Hello, dictator." To further this aim he has gone about controlling the media and courts either directly or through placement of allies, with complete success. Yet he and his party remain popular in part because of the lethal combination of extreme nationalism, scaremongering about migrants and antagonism against Muslims and Jews. In addition NGOs have been attacked, which has led to legal proceedings by the European Commission. A host of public bodies like its fiscal council, the central bank, and the national elections commission, have been abolished or their independence limited.

Yet Hungary is still a democracy in the sense of having reasonably genuine elections. As the opposition is fragmented there is little need to resort to the kind of tactics used in other democracies, such as Turkey. When occasionally the opposition does win a local election, Orbán unleashes the full might of his nationalist, enemies at the door, enemies within narrative at them. With almost total control of the media and civil institutions, he can make life very difficult for the opposition. He won his last election with ease. It is an effective model that could survive for many years.

So would it be reasonable to call Hungary a democratic dictatorship [1], or is that just a contradiction in terms? Hungary is no longer a pluralist democracy, by which I mean there are no independent centres of power. But there are still elections, which are not a complete fiction. But you cannot call elections where one side completely controls the media fair. The acid test would be if a unified opposition under a credible leader ever did appear whether he would ever be allowed to win.


“American media should study Hungary’s record,” Newt Gingrich declared after a visit to Hungary. He was talking about the 13ft-high razor-wire border fence that Orban erected against the influx of “foreigners”, but few can doubt that Trump would like to emulate Orbán in other ways. He already has what is effectively a state TV station, the widely watched Fox News. His attacks on the independent press are relentless. He does not yet control the media in the same way as Orbán does, but he gets his apologists on CNN and other stations as these stations try and keep ‘balanced’.

Having Fox on his side is crucial in his ability to control the Republicans in Congress. Speak out and you risk losing your seat in a primary election against a Trump loyalist. The few who do speak out tend to be retiring from politics. The democratic norms of politics that have stood for decades in the US have gone out of the window. He breaks the norms because he knows no one will stop him. Other countries that are able to have long recognised that the way to get foreign policy favours is to grant some business perk to him or his family. (We see similar corruption in Hungary.)

He may not control the courts to the extent that Orban does, but he is not miles away. Soon he, or at least his party, will get a majority on the supreme court. He has pardoned whoever he likes at his whim. The Republican party have retained a majority in the House in part because of gerrymandering, and the supreme court allows this to continue. Orbán fights a long but successful battle to close down a university in Budapest, while Trump’s climate change denying appointees try to close down scientific research in the US. (On the latter, see this excellent essay from Carl Zimmer HT Tim Harford.)

Trump makes no secret of his admiration for dictators. In a way it does not really matter if Putin has ‘something on him’ in the form of a tape of whatever, as Trump admires Putin anyway as a strong man leading his nation. His natural enemy is Europe: hence his attack on Merkel and his constant and incorrect references to rising crime as a cost of immigration in Europe.


Another way of looking at this is to consider human rights and their suppression. Hungary has just passed a law making it illegal to provide legal help to undocumented immigrants seeking asylum, as part of a set of bills incredibly called ‘Stop Soros’. George Soros has become Orbán’s bogeyman. Trump separates the children of illegal immigrants from their families. As Fintan O’Toole says, this has not been a ‘mistake’ by Trump, but a trial run
“to undermine moral boundaries, inure people to the acceptance of acts of extreme cruelty. Like hounds, people have to be blooded. They have to be given the taste for savagery. Fascism does this by building up the sense of threat from a despised out-group”

Or to deal with an infestation of immigrants, as Trump said recently. And O’Toole thinks the experiment was a success: the base were happy, and Fox news talked about child actors pretending to cry. Italy’s new interior minister calls for a “mass cleansing” of migrants from “entire parts” of the country, street by street.


Arguments that democracy is still safe in the US seem rather naive. A Washington Post piece from just a year ago says there are four barriers to the US becoming a ‘populist’ state. The four are the independence of congress and the judiciary, being restrained by the Republican party, limited patronage powers, and the absence of any crisis. The first two have not done too well and the last two do not seem to matter. Tyler Cowan thinks the US government is just too large and complex for one man or group to take control. He is correct insofar as Mueller has been allowed to continue. But there is little chance of Trump being impeached by this Republican party. Whether Mueller is allowed to continue depends a lot on whether he goes after Trump family members, and Mueller probably understands that. The important point is that Trump does not need to control every part of government to control what happens.

Trump certainly acts like a dictator would act. The barriers to Trump becoming an Orbán type figure are that his supporters do not control most of the media, and he faces a single and organised opposition party. These are the two threads by which this pluralist democracy hangs. You might think it an exaggeration to call these two only threads, and I hope we will see that it is in the midterms, but there are worrying signs in the US and elsewhere that popular support for democracy is falling, as documented by Yascha Mounk in a book reviewed here. The fact that Trump could be elected and then supported in the first place by one of the two main political parties in the US is a clear sign that all is not well with US democracy. Those, like Paul Krugman, who have for a long time appeared ‘shrill’ about what was happening to the Republican party have been fully justified in their fears.

The rise of the far right and democratic dictatorships in the West have happen before, of course. It is no coincidence that in the 1930s and now economies were scarred by deep recessions followed by bad policy. That may be important in part because it fosters intolerance of ‘outsiders’, particularly immigrants, which parties of both the far right and unfortunately the centre right have exploited. (In the UK, and also in Hungary and Poland, the EU has also become an outsider.) Since perhaps Nixon, the Republicans have exploited race: more explicitly and vigorously as time has gone on. Parties of the right do this in part because their backers want to avoid redistribution being used as a way of mitigating the impact of bad economic times, and focusing on social conservatism can capture voters who would otherwise vote left on economic issues. I have described both the bad policies (austerity and fears about immigration) as forms of deceit (using debt as a cover for reducing the state and setting targets for immigration without intending to meet them), and collectively as neoliberal overreach.


If the demonisation of immigrants is the common thread in these moves towards democratic dictatorships, then it becomes important to resist the early stages of this process. One lesson of the experience across countries is that popular concern is not primarily about numbers. It is not the reaction of citizens worried about being overwhelmed by immigrants. Less than 5% of the population in Hungary are immigrants: 3% if you count only immigrants from outside the EU. Nor is it true that attitudes to immigration are always going to be hostile. This year for the first time in a decade more people in the US think legal immigration should be increased rather than decreased.

But this idea is difficult to get across. In the UK for example it is true that rising concern about immigration follows rising numbers, but it follows increased newspaper coverage even more closely, and which newspapers people read is the best explainer of immigration concern. [2] With a few important exceptions the concern is generally about immigration ‘in the country’ rather than locally. In the UK stoking fear about immigration may not as yet have created the conditions for a democratic dictatorship, but it has spawned a ‘hostile environment’ policy that led people to be locked up and deported illegally, and of course it was critical in forcing the country make one of its biggest policy errors for a generation.

I have heard people say that we have to have Brexit because otherwise half the country will feel betrayed (as opposed to the other half already feeling that). But in reality the opposite is true. Xenophobia becomes strong when economic conditions are bad, and Brexit will make them worse. Brexiters are going to feel betrayed anyway when they realised they have been sold snake oil. If we are to avoid a self reinforcing cycle of economic and political decline, we must give priority to the economy and stop scapegoating immigrants for each policy failure.

[1] Whether the term dictatorship is more accurate than one party state or the term plutocracy that I have used before is interesting, but not I think critical for the discussion here.

[2] Let me try and be clear what I mean by immigration concern not being about numbers. Of course large numbers of immigrants make it easier for newspapers to talk about ‘floods’ and ‘being overwhelmed’. The mistake is to think that if only the numbers could be reduced somewhat, the concern would disappear. It will not because it is not in the interests of those whipping up concern for that to happen. Any attempt to appease the concern by, for example, vetting patients in A&E only gives credibility to the idea that immigrants are responsible for reduced access to the NHS: in reality the opposite is true.

Wednesday, 27 June 2018

Business Brexit Blues

Project Fear was the device that allowed those arguing for independence for Scotland to ignore the short term fiscal realities [1], and it was the device used by Leave to discount the countless warnings that Brexit could make the UK significantly poorer. The device was indulged by the broadcast media, who now duly quote it back at businesses who warn that jobs are at stake with any kind of hard Brexit.

There are good reasons why so many businesses have finally decided to make their concerns public. They have lost all faith that the government knows what it is doing, and they have recently lost faith in parliament restoring any kind of sanity. Hence the warnings from Airbus, BMW, and the society of Motor Manufacturers. This is no posturing, as figures for car industry investment show. These numbers will only jump back up once Brexit uncertainty ends if the final deal is a positive one as far as car makers are concerned. A UBS survey suggests that car makers are not unusual in this respect. 

So why are firms not excited by the opportunities a Tory Brexit will bring in terms of less regulation and ‘global Britain’? They know global Britain is a myth: they can export perfectly well outside the EU as it is, and they are more likely to get a good trade deal with third countries by being in the EU than outside it. Those who say that a post-Brexit UK could do trade deals tailor made to UK business misunderstand what trade deals are mainly about nowadays. They are about harmonisation of regulations. And if a country is going to harmonise its regulations, it will do this with the EU rather than the UK because the EU is a much larger market.

Which is why the prospect of a regulation free post-Brexit UK has little appeal to businesses that trade. What business wants is harmonised regulations, giving them less costs and a large market. The EU is really all about harmonisation of regulations. These include regulation on working hours or the environment because all these things are required to get a level playing field for business and therefore a true single and very large market.

As Anthony Barnett in a very interesting essay argues, the sovereignty argument for Brexit involves a huge misconception. What the EU does (human rights aside) is harmonise regulations. Most people, including Leavers, have little problem with that. What Brexiters did was relabel this as giving away sovereignty, which sounds bad. I often ask Leavers if they can name any EU law ‘imposed’ on the UK that they do not like, and I have yet to get anyone to respond with one. It is the principle, one said. But their inability to quote an example of loss of sovereignty reveals an underlying truth. The EU is about harmonisation of regulations, regulations that most people have no problem with.

I do not think this was just a deliberate bit of Leave deceit, although there was plenty of that. I suspect this was also a genuine lack of understanding among our out of touch, privileged elite. Partly as a result, when businesses ask for harmonised regulations in the form of the single market they are nonplused. Hence the response of the government to these warnings. They include the “fuck business” of Boris Johnson and Jeremy Hunt saying the warnings were “completely inappropriate” because it could undermine the prospects for a good deal! These replies reflect the bewildered fumbling of an elite that thought they were pro-business and suddenly finding that they are doing it considerable harm.

The irony is that any deal that is done will involve the UK still being subject to EU regulations, only without the UK having any effective say in how those regulations evolve. For the leavers who equated regulations with sovereignty, we will be less sovereign as a result of Brexit than we were before. Brexit as a project has failed. We continue with it simply because of a flawed referendum and because politicians cannot admit the truth to save their own reputations and for fear of the reaction of the Brexiter press.. 

It should also be the end of Project Fear, for those at least who still have an open mind and who do not believe everything they read in the Brexit press (which I admit may rule out around a third of the UK population). Project Fear, in the two main contexts that it has been used, is equivalent to the claim that we don’t need experts. Just as Faisal Islam reacted to Gove when he first talked about having enough of experts, so other journalists should react when Project Fear is used to bat away major expected costs based on expert analysis. Otherwise we just normalise a kind of Republican anti-science attitude that is now official US policy.

[1] although, to save a lot of comments, the term itself was invented by those arguing against independence.