Winner of the New Statesman SPERI Prize in Political Economy 2016

Tuesday, 21 June 2016

Brexit and the Left

There seem to be two strands of opinion which encourages people on the left to vote Leave. The first is an intense dislike of what has happened in the the Eurozone: see Larry Elliott for example. The second is a wish to take seriously working class concerns over immigration.

I share the intense dislike over what has happened in the Eurozone (EZ). You only need to read, for example, what I have written about Greece to see that. Yet I cannot see how UK exit from the EU will change for the good how the EZ works. Crucially why should it change the current politics of Germany that has been so important in many of the bad decisions the EZ has made. As we are not part of the EZ, it is difficult to see how UK exit will help its demise, if that is what you want.

As we will be leaving the EU and not the EZ, the message Brexit sends to Europe is not that the EZ is fundamentally flawed but rather that the UK is incapable of being part of any cooperative agreement among European countries. I am internationalist by nature so I do not want that. The idea that Brexit will shock the EZ into mending its ways, then thank us for showing them the light and invite us to rejoin whatever is left is pure fantasy.

There is one way the EZ crisis has impacted on the UK, and that is migration. It seems reasonable to assume that one reason immigration into the UK from the EU is currently high is because of considerable youth unemployment in many EZ countries. Which brings us to immigration concerns.

Take this from Kate Hoey for example. She seems to be arguing that free movement in the EU is a means of keeping down the wages of the low paid. The first point to make is if labour mobility keeps wages down in the destination country, it should increase wages and/or reduce unemployment in the country the migrant came from. As migrants move from lower to higher wage countries, then migration tends to equalise incomes. This should normally count as a plus from a left wing perspective.

But does migration have this effect on the receiving country? There are many reasons why it might not, and the evidence does not point to strong negative effects on wages. But I think the case for migration is stronger than that. A pretty robust finding is that migration at the kind of levels we are now seeing does not do any harm to GDP per head, and could improve it. Another robust finding is that current migration benefits the public finances. This is both important and pretty obvious..

Migrants tend to be young, healthy and working. They provide more in terms of resources than they take out by using public services. I remember having a conversation about this with someone who lived in Spain. He said if anyone should be angry about free movement it is Spain, in having to take lots non-productive British pensioners who will be a burden on Spain’s health service. This was also one reason why Merkel could be so open to refugees: Germany is really worried about the implications of their aging population. [1]

If migration falls following Brexit (a big if), and if we add in the other negative effects of Brexit, we will have a large increase in the government’s budget deficit even at full employment. Given government policy on how holes in the deficit are to be filled, this NIESR analysis suggests you are talking about large hits to the lower paid.

None of this is to deny real grievances about reduced public services and lower pay. Once again I do not think I and many others could be accused of keeping quiet about the stupidity of current austerity. But just as the grievances are real, it is also important to understand the real causes.

A consistent result in polls is that migration is a concern mainly in areas where there is little of it. In this poll only 19% of people say they believe immigration has had a negative effect on them personally. (More believe they have experienced positive effects.) Yet over 50% say it has had a negative impact on the NHS. In reality the NHS is in crisis because of government policy, not because of immigration. But to know that you need to talk to the experts and look at the figures. Instead most people will just have read the newspapers, many of which have taken every opportunity to play up the ‘threat’ of migration. As Paul Mason nicely puts it, you can tell this is a fake working class revolt from looking at those leading it.

This is part of a more general point on migration. Migration appears to be at worst neutral and probably beneficial for medium term UK prosperity, so if there are problems for some groups that can be fixed. At which point those on the left say that is naive because it will not happen. That is a reasonable point, but the same point applies in spades to the immediate aftermath of Brexit, which will amount to yet another shift to the right. The regulations that those running the Leave campaign want to ‘free’ us from are those protecting workers and the environment.

To make this clear, think of two realities (economists would call them states of the world). One (the status quo) involves those currently in charge remaining in charge. The second (left renaissance) involves left wing governments coming to power in the UK and elsewhere. It seems to me that if you stay in either one of these two realities, Brexit is clearly bad. (For a similar argument, see this by Alex Andreou.)

Under the status quo, the EU is currently a moderating influence on this right wing UK government. A post-Brexit Boris Johnson government would take away worker rights that the EU currently ensures and, as the deficit deteriorates, cut welfare benefits including tax credits. This alone will dwarf any benefit working people might get from less immigration. Under a left renaissance migration benefits the economy as a whole as well as those who migrate, and these gains could be fairly distributed. My feeling is that some Brexit supporters on the left move freely between these two realities in order to justify a vote for Brexit.

[1] One fair point made in comments on earlier posts is that migrants need to be housed, so resources are used to provide additional housing. (More generally new labour needs new capital of various kinds.) But housing also represents why migration can be beneficial to everyone. We need to build more houses anyway, but according to the industry we have an acute shortage of skilled construction workers. Of course this is an indictment of UK training programmes, but that cannot be turned around quickly. For those with construction skills, it is surely better to be building houses where they are really needed than being unemployed in places they are not.




34 comments:

  1. "This should normally count as a plus from a left wing perspective."
    Really? The poor here should become poorer to equalise with the Bulgarian and Romanian economies?

    A race to the bottom.

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  2. You equate leaving the EU with less cooperation with other countries. I think the opposite is true.
    What do they know of England they that only England know?

    Likewise, once we can properly define a British citizen, we have no need to fear the arrival of Jonny Foreigner. We can welcome migrants into our country without fear.

    A joyous future awaits!

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  3. A 'left renaissance' is totally fantasy land. If, as seems likely, a majority of voters will opt for remain - even if it will be a closer run thing than many envisaged initially - Labour will be eviscerated (and it will be an envisceration more savage than it has already experienced in Scotland).

    A lot of its support in its traditional strongholds deserted in 2015. Not only will there be disgust leading to increased desertion at Labour supporting a Tory PM to overcome the local difficulty in his own party, but many traditional supporters who did well in the Blair years (and haven't done that badly since) will desert in even greater numbers with Corbyn as leader. Those traditional supporters who haven't done well are justifiably angry and, even if much of their anger is misdirected, Labour MPs and public representatives are not viewed as responding effectively to their discontents - and they're failing to vote or supporting UKIP.

    The Stupid Party will overcome its current divisions and looks set to reign supreme for some time.

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  4. I sort of disagree with your claim that "The idea that Brexit will shock the EZ into mending its ways" is pure fantasy.

    The thing is if, say, Spain openly defies the EZ it will already be much harder for Schäuble to threaten them with exit (from the Eurozone) than it was for Greece because of the size of Spain; but in case of Brexit it will also be clear that if one eurozone country were to leave it would start a disintegration process that could potentially end not just the single currency but the European project as a whole.

    In fact I am convinced that if Greece had been forced out of the EZ it would also have started such a process. And that's, by the way, where you understand the fundamental difference in thinking between "us" and the German right. They thought that detonating the economic equivalent of a nuclear bomb in Greece (they would have seeked to maximize the damage of course not to mitigate it) it would scare everybody off and the rest of Europe would remain obedient forever. "We" thought that civilized Europe would have woken up and would have finally understood how dangerous those people are.

    In any case you see that the Eurogroup and commission have already postponed their plans to fine Spain and Portugal and that is of course the result of the looming threat of Podemos… and Brexit.

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    1. Podemos maybe, but not Brexit. They look at our Europhobic tabloid press and think there is nothing we could do to change that - and they would be right.

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  5. I love the way you’re almost candid. You say “…current migration benefits the public finances..”. Very Jesuitical. More precisely, what you mean is “current migration currently benefits the public finances”. You’re not dishonest enough to avoid entirely the obvious truth that, unless EU migrants are (as a colleague puts it) “bionic” they’ll live out lives much like those of the indigenous population, and so – in all probability – will be net recipients. If social policy stays as it is, and if migrants suffer deficits due to language difficulties and soft-skill problems (reasonable assumptions), then the deficit will explode in the future. Present social policy will become impossible. You come close to admitting this – or admitting enough to compel you to admit it – when you say, “Migration appears to be at worst neutral and probably beneficial for medium term UK prosperity…”. So this entire debate, you all but concede, has been conducted on the basis of claims about migration being “good for the economy” which you and I know are ill-founded, tendentious and (when presented by those who know better) dishonest.

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    1. Much of the analysis about why Brexit will hurt the medium term economy ignores migration - its about trade. Who is being dishonest?

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    2. Er, I have a feeling that Craig will not find your answer here entirely satisfactory. His argument, if I have understood it correctly, is this. Most UK workers (call them group A) produce very little value. A small proportion of UK workers (call them group B), however, are highly productive. At present, through various transfers, group B are supporting group A. As it is, group B's ability to support group A is being pressed to breaking point. Indeed, incontinent public borrowing is the only reason that that breaking point has not already been reached. Plainly, present levels of public borrowing cannot continue indefinitely and it follows from this that group A's dependence on the largesse of group B is already unsustainable. Migrants will be, disproportionately, members of group A as opposed to group B and so their arrival in ever greater numbers can only hasten the social catastrophe that is implicit already in our hopelessly incontinent social welfare model. Apologies, Craig, if I've misunderstood you.

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    3. "Much of the analysis about why Brexit will hurt the medium term economy ignores migration - its about trade." Indeed. And if you read the Treasury document - there's time I'll never get back - it's all about the supposed impossibility of free trade and economic efficiency through any arrangements other than the present ones. Yeah - I'm sure. I also love the claim that it's these macro things which drive productivity and workers' wages. So unskilled monoglots will be highly paid as strangers in a strange land because their labour - however routine - will be expended on first world machines. I think you'll find that when the machines can move anywhere, and so can the people, the privileged scarce-labour status of the western worker until 1950 can't exist, and "high productivity" handle turning and bolt tightening results in returns to capital. But hey ho - if you need to see it played out in real time let's do it.

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  6. I'm staggered by this level of perception failure;
    "Yet I cannot see how UK exit from the EU will change for the good how the EZ works."
    Are you really failing to understand that the prime motivation for leaving is to reduce as far as possible the influence on UK residents that the EU has rather than improving the calibre of EU thinking and decisions? I cannot believe you are blind to this point. So it must be deliberate spin ... Shame.

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    1. On the right sure, but I'm talking about the left here, which worries about what happens in Europe.

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  7. I do think there is a better left wing argument for Brexit than a right wing one to be honest. The EU is mainly a free trade area and free trade is mostly a right wing policy (or at the very least a capitalist policy). If you are suspicious of competition, the EU is definitely not your best friend.

    I happen to believe that left wing policies are not incompatible with a liberal market based economy (see Scandinavia as an example), but lots of left wing supporter don't really believe that. Investing in all children and taking care of the unfortunate.

    It seems a lot more absurd seeing Gove (the supporter of free school and a privatised NHS) argue that a bunch of bureaucrats could successful determine which skills are needed in the economy at any point in time. He is either lying and he would open borders even more to Eu and Commonwealth immigrants or he is just utterly inconsistent.

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  8. It appears implicit in this article that there is a beneficial level of immigration in general and I am willing to concede the economic evidence for it.
    But is there an upper limit to immigration beyond which it is no longer beneficial? Would, taking the example of England as the destination country, 10 million Syrian refugees or 30 million Egyptian or 100 million Bangladeshis still be beneficial? Does this depend on the composition of the immigrants in terms of age or skills or other qualities? I say this with the example of wonderful people of my acquaintance who are Syrian and Egyptian and Bangladeshi in mind. It would be very likely beneficial to the immigrants and perhaps free up resources in the countries of origin.
    My guess would be that immigration is beneficial to the destination country at the margin but there are substantial diminishing returns for countries which are not underpopulated in terms of land and natural resources. Adding several million people to Samoa would not seem to be an improvement. Compensating any disadvantaged groups seems like the 'pie in the sky' which has been promised to those (possibly the same) groups disadvantaged by the free trade agreements and never actually delivered.
    I personally favor immigration but am uncertain about what the limits are and sympathetic to those who are fearful and talk about control.
    It would seem to me that determining the optimum level of immigration and the necessary planning for infrastructure would be practical problem for economists to solve. Is this actually being done or is the assumption that the levels of immigration are optimal and that the market will provide any required infrastructure?

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  9. " The first point to make is if labour mobility keeps wages down in the destination country, it should increase wages and/or reduce unemployment in the country the migrant came from. As migrants move from lower to higher wage countries, then migration tends to equalise incomes. This should normally count as a plus from a left wing perspective."

    This is according to neo-classical theory. Labour (as well as capital and good) flows have this equalising effect you mention which raises incomes, jobs and wages in both countries.

    The problem is that it is increasingly clear that this has not happened. Even mainstream economists are realising this (clearly from Borjas, David Card - the latter a supporter of immigration, but cautious).

    Marxian theory tells us that such flows on a very large scale are likely to lead to divergence and inequality, both within and between countries - not convergence. This prediction and increased awareness of inequality is probably the central reason why such theory has gained traction in recent years in certain quarters. Ultimately the potential labour supply is so large (highly elastic supply of labour if you prefer) that wages are continually driven down. Increased demand from new labour entrants where it does exist continues to bring in more labour from outside, not inside the country as it is more elastic.

    It is also a question of the short and long run. In the long run, sure those equalising outcomes should happen. But such a long run historically does not exist (which is why many historians do not like things like steady state and natural rate assumptions in neo-classical models). Put another way in the long run ....

    Anyway a few commentors have been trying to make this point to you - and very well in a few cases. If they do not convince you that there is a valid argument that very large immigration has not had the convergence effects in recent years that neo-classical theory asserts, I suggest you start reading even what mainstream economists are saying now about immigration (as well as more generally about the consequences of globalisation). It's important.

    NK.

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    1. As I do read what mainstream economists are saying about immigration, I think you need to point me to those who back up your argument.

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    2. Immigration has redistributive effects that lead to inequality:

      "In the 1980s, the wages and employment rates of less-skilled Americans fell relative to those of more-skilled workers. This paper examines the contribution of the continuing inflow of less-skilled immigrants and the increasing importance of imports in the U.S. economy to these trends. Our empirical evidence indicates that both trade and immigration augmented the nation's supply of less-skilled workers, particularly workers with less than a high school education. By 1988, trade and immigration increased the effective supply of high school dropouts by 28 percent for men and 31 percent for women. We estimate that from thirty to fifty percent of the approximately 10 percentage point decline in the relative weekly wage of high school dropouts between 1980 and 1988 can be attributed to the trade and immigration flows. In addition, our analysis suggests that from 15 to 25 percent of the 11 percentage point rise in the earnings of college graduates relative to high school graduates from 1980 to 1985 can be attributed to the massive increase in the trade deficit over the same period, but that the effects of trade on the college/high school wage differential diminished with improvements in the trade balance during the late 1980s."

      http://www.nber.org/papers/w3761

      That we need to be careful with having a standardised theory about what 'should happen' and ultimately what is important is context:

      David Card

      "In the aforementioned Mariel Boatlift study, for example, he emphasized that the observations could not be generalized. Specifically, Miami’s labor market is not typical in its track record of successfully absorbing immigrants, not least thanks to the city’s myriad opportunities for low-skilled workers and its vast Spanish-speaking population.­

      In a 2001 paper he acknowledged that increases in unskilled immigration—if massive—could actually reduce employment rates for younger and less-educated natives by 1 to 3 percentage points in traditional gateway cities such as Los Angeles.­"

      http://www.imf.org/external/pubs/ft/fandd/2016/03/people.htm

      In Britain I do not think anyone has said that immigration has massively contributed to increased GNP per capita (Although the establishment were making that case that it would early on before it was basically demolished by the Lords Report. Portes now says that there has been little effect on the economy although there has been a small effect, he says, on the very low income end of the labour market.)

      The literature on global inequality is huge - start with Branco Milanovic. Outside the mainstream economics profession people were making these warnings much earlier, as the IMF and World Bank were still pedalling the statement above that you make.

      For a broader and more balanced perspective I would encourage you to read outside the mainstream (neo-classical economics) literature. This issue requires multidisciplinary analysis. People with some real insights are people who go out to the communities affected and do the field work. Anthropologists, sociologists and political scientists. My own view is that very large scale immigration can be both good and bad, as David Card points out - it is entirely contextual. For sure Britain's social problems which relate to inequality are deeply entrenched historically and cannot be blamed on migrants. But I am not sure that a high immigration policy skewed towards low income labour flows is helping and I am wary of the win-win outcomes that neo-classical theory asserts. Priority I believe should be placed on assisting refugees, as our numbers admitted are lamentably low.

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  10. Suppose it is the case that the wages of low paid workers are undercut by migrants from within the EU - what do you think is the best way to fix the problem?

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  11. "A post-Brexit Boris Johnson government would take away worker rights that the EU currently ensures and, as the deficit deteriorates, cut welfare benefits including tax credits."

    The deficit nonsense is indeed moronic, but it is going to happen anyhow.

    It will take a good three years to get the 'divorce' from the EU, which means the treaty stays in place. 1st July 2019 is being pencilled in as the date - because that is when the new EU commission and new EU parliament convene.

    And in less than a year after that the UK government faces a general election.

    Please explain how Boris is going to implement his hard right agenda with that lot going on and a working majority in Parliament of 12.

    In six years of Tory rule 'workers rights' have not been brought down to EU minimums, and they likely won't be.

    Things like the Working Time directive, like the late payment directive, is ignored everywhere. Because there is no law without enforcement. In the UK it is routinely opted out by default and is useless.

    As usual you are impressed by words on a page rather than the reality of the situation - which is the persistent lack of jobs and income across the continent imposed by the neoliberal Stability and Growth Pact which systematically prevents sovereign governments from protecting their citizens against the ravages of business.

    Outside the EU we set our own protections by electing governments to represent us who are then free to make the changes necessary.

    If you want better protections, then campaign for a free Labour government that can implement a full Job Guarantee, working for the state at the living wage for 35 hours a week. Then simple competition eliminates any worse job from the private sector. No stupid unenforceable rules required.

    I see no benefit to your system of Very Clever People and higher law. Because it fails the Platonic test - who watches the watchers.

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    1. Boris a market internationalist. He wants a globalized capital market to replace the nation state one. That has been the goal of liberals since the end of the cold war.

      If you want to really stop immigration, you nationalize capital markets. Pure and simple. That would undermine capitalism as a global construct............and a socialist chuckles when he says without the global construct, capitalism is impossible to survive long term. Indeed, that is very very right.

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  12. "If migration falls following Brexit (a big if), and if we add in the other negative effects of Brexit, we will have a large increase in the government’s budget deficit"

    Not necessarily any more than otherwise. Nobody has any idea what it will be. Deficits depend on private decisions to spend and save. Which is why the government's *impossible* surplus obsession is insane, especially with a large trade deficit and corporate surplus.

    If Osborne makes spending cuts of £xbn, then people receive less income by £xbn and there is less spending in the economy and therefore less tax and saving to the tune of ... £xbn. So the hole (people saving) is not filled no matter how many people on benefits Osborne kills. It is incredibly sad and idiotic. They may well cause a recession for no good reason (not that there is a good reason.)

    "The first point to make is if labour mobility keeps wages down in the destination country, it should increase wages and/or reduce unemployment in the country the migrant came from. "

    Then the right wing government in the country pushes up unemployment and down wages.

    The simple solution to this conundrum is as part of implementing the Job Guarantee you restrict the open borders to other parts of the world that have an equivalent Job Guarantee programme and social infrastructure. If you don't come from such country then you have to apply for a visa and be assessed.

    It's quite difficult for a foreign leader to argue against that position, because if they do then they are essentially saying they want to dump their unemployment in the UK rather than deal with it themselves. The push back would be: Implement a Job Guarantee and we'll gladly remove the restrictions for your country.

    I don't agree with the internationalist left position but it would be better than what we have at the moment. Unfortunately Labour will never govern the nation until it gets back to believing in nations and what they can do to improve the lot of the ordinary resident of these Isles.

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    1. Well, there really isn't any "real" internationalist left position. Calling them 'left' shows how bad political dialect has been molested.

      The problem is private contracts which create immigration in the first place. There is not law in the EU itself or in the members own legal system, to stop it.

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  13. "It seems reasonable to assume that one reason immigration into the UK from the EU is currently high is because of considerable youth unemployment in many EZ countries. "

    This is an argument of the remain campaign which is little to do with the facts. It is true that very recently EZ immigration has shot up because of high youth unemployment and this is likely to be transitory.

    But overwhelmingly the source of EU immigration is Eastern Europe, by far the biggest source is Poland, but Romania and Bulgaria are also not insignificant. There is no chance that this is likely to subside any time soon, wage differential between Eastern Europe and the UK are too wide. It would take a generation to close the gap to a level where we would get some relief.

    EU labour flows were never really an issue before expansion.

    Applying the same rules to Eastern European immigration to all immigrants from other countries will not get immigration to the 10s of 1000s. But it will make a substantial difference to numbers.

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    1. You've overlooked that better economic conditions in the EZ would encourage more Eastern Europeans to go there rather than come to the UK.

      S

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  14. And the new ISDS-based legal order https://twitter.com/SurelySmMistake/status/738795177368784896

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  15. Brexit is DOA. Not happening. There are no plans afterwards and the recession it would cause, pretty much means new elections asap. Interesting when this dies tomorrow, if people sorta act like dumb sheep to the market.

    Immigration has little to do with the EU. It goes into the private sector trade patterns which the EU does not enforce. In otherwards, this type of situation existed well well before the EU.

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  16. Repeating far right arguments against migration is not a left position. It reminds me of those who in pre-war Europe thought attacking Jewish business was somehow anti-capitalist. Many on the left who support Leave will rightly have no truck with this.

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  17. The serious left opposition to the EU does not repeat right-wing arguments on migration. Instead it sees the EU as irremediably neoliberal (seeing events in the Eurozone as confirming this) and anti-democratic, limiting opportunities for any future left government. More immediately it hopes Leave might bring down the Tory government. I have some sympathies with these views but on balance I see a Leave victory boosting the right across Europe more than it would create opportunities for the left, particularly after a campaign dominated by xenophobia.

    Anyone interested in a longer explanation of this, please see http://welshlabourgrassroots.blogspot.co.uk/2016/06/reluctant-remain-by-lyn-eynon.html.

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  18. Somewhat odd that you can write about the left and Brexit and not mention

    (1) TTIP

    and

    (2) the barriers in place to stop member state preference for particular businesses

    Also a somewhat short term perspective, as the reasons John McDonnell and Jeremy Corbyn have had for leaving the EEC/EC/EU were and are nothing to do with migration.

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  19. "... the evidence does not point to strong negative effects [of migration] on wages…"

    Oh really!!! So why have living standards in most developed countries stagnated for the bottom 50% over the last 30 years? Migration is just another manifestation of globalisation policy. And both have been exploited and abused to suppress wages because that is how western governments have managed to deliver economies that simultaneously have low inflation and low interest rates. The adverse side effect is of course wage inequality, excess savings by the rich, low investment and asset price booms. You need to read your Hyman Minsky (as do most other left leaning economists and politicians).

    As I pointed out on your last post, UK growth declined when we joined the EEC and it declined again when we joined the single market. The reasons for this are obvious: at each level of integration we have effectively exported an increased amount of our economic growth to other countries (c.f. Germany after reunification).

    "Migrants tend to be young, healthy and working. They provide more in terms of resources than they take out by using public services."

    The first part of this may be true but the second is most definitely not. What you have conveniently omitted from your analysis is that most migrants pay no tax because they are seasonal, and under EU rules, if you work in a country for less than 6 months you are exempt from income taxes. Secondly, most migrants are net savers and they spend those savings in their country of origin, not here. So there is no multiplier effect. The best migration is permanent migration because it is more likely to involve people with tradable skills, in high income professions who invest all their earnings in this country thereby creating as many, if not more, jobs than they take away.

    "The first point to make is if labour mobility keeps wages down in the destination country, it should increase wages and/or reduce unemployment in the country the migrant came from. As migrants move from lower to higher wage countries, then migration tends to equalise incomes. This should normally count as a plus from a left wing perspective."

    In the long run, yes, but what did Keynes say about the long run? So only if we are all immortal can we all expect to benefit from migration. The reality is that most will not benefit in their lifetime. Moreover, if is only beneficial and equitable if those that sacrifice the most in the short term benefit the most in the long term. But if migration hurts the poor in the UK and benefits the rich, how is this "a plus from a left wing perspective"?

    "The idea that Brexit will shock the EZ into mending its ways, then thank us for showing them the light and invite us to rejoin whatever is left is pure fantasy."

    On the contrary. If we leave then the whole project will almost certainly fall apart. A domino effect is almost inevitable. At least then we can start again and get it right. What is abundantly clear is that if we remain the EU will press on with its failed policies regardless. They will interpret a vote to stay as vindication of the current zeitgeist, not a criticism of it and a need for change.

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  20. I agree the main problems identified as being caused by immigration (problems with services, housing, etc.) are caused by tory austerity.

    But "A pretty robust finding is that migration at the kind of levels we are now seeing does not do any harm to GDP per head, and could improve it" is a Bill-Gates-walks-into-a-bar type of argument. Considering Britain's problem with inequality why should someone who has received a smaller and smaller share of the national income care if GDP per head goes up? They may see none of those gains in their personal income. Immigration could cause a rise in GDP per capita even if 100% of the gains go to the top 1%. It's another case of asking the poor to take on the burden of measures designed to increase the value of the economy as a whole.

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  21. The craziest response to the bailout of the banks in the US was the accusation from the right/which developed into the "tea party" that this was because "Obama" was a socialist and wanted the govt. to take over the economy. To my way of thinking it was a "capitalist crisis" and an example of capitalist taking over/from the government so that it could address the crisis.

    They should have directed their energy at the people who set the stage for the failure.

    Interestingly, the between the lines point of your post is that the austerity response to the 2008 Depression/Recession, counter to Keynesian approaches and not a particularly sound response in other schools of thought, has generated stronger support for Brexit, when the austerity response was a choice selected by the Conservatives, not imposed upon them by the ECB/Germany as it was for countries like Greece.

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  22. "If migration falls following Brexit (a big if), and if we add in the other negative effects of Brexit, we will have a large increase in the government’s budget deficit even at full employment. Given government policy on how holes in the deficit are to be filled, this NIESR analysis suggests you are talking about large hits to the lower paid."

    This I would content is indeed the crux of the matter: the failure of successive governments and economists to protect the national finances. Why is there a budget deficit anyway when the economy is now larger than before the Great Recession began? It is for three reasons. (i) We borrowed from the wrong people (i.e. the Bond Market) during the recession. (ii) We have failed to identify new taxes on the rich to fill the tax gap that has arisen from the growing inequality of our society. (iii) We have pursued policies that increase inequality, and favour asset prices at the expense of consumption.

    In answer to point (i) I give you MMT. If we had borrowed from the Central Bank, then we wouldn't be paying huge interest payments overseas. As a result our balance of payments would be close to zero, our currency would be trading at its true rate, exports would be up, inflation would be high enough to drive spending and consumption (instead of leading us into a depression as it is currently), AND our budget deficit would be virtually zero by now.

    In answer to (ii), we need establish where the money in our economy has gone and then use new taxes to recoup some of it. This means doing things like taxing royalties at source, taxing UK ex-pats abroad, and shutting down tax avoidance routes. Unfortunately the main thing stopping us doing all of this is the EU and its rules for the Single Market.

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  23. Perhaps the strongest leftist argument for exiting is the EU's institutional commitment to neoliberalism. See the European Commission and to a lesser degree the ECB. Their agenda is to reduce wages, reduce worker protections, weaken unions, and reduce public benefits to the poor and middle class. Last week the EC proposed a law to prohibit any country from regulating what it calls the new "flexible" economy. This includes businesses like Uber which pay less without worker protections and without unions.

    Many if not most of the Brexit supporters favor austerity and neoliberalism hence the absence of this issue from the campaign. Of course getting out from under the EU does not get the UK out from under the austerity/neoliberal current ruling party. Still it would be easier to jettison the Tories then to also get rid of the neoliberal EU institutions.

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  24. "A post-Brexit Boris Johnson government....". Would the Parliamentary Conservative Party (who are in the majority for Remain) really elect as their leader someone with no ministerial experience, a reputation for idleness while Mayor as London, with a record of contradicting himself on numerous issues, and, to put it politely, being guilty of the occasional misrepresentation of the facts ? Following an unpleasant campaign in which Johnson has been a divisive figure? Surely a Teresa May administration is a more realistic prospect ?

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