Winner of the New Statesman SPERI Prize in Political Economy 2016

Saturday, 2 July 2016

The inadequacy of left and right

Chris Dillow writes:
“If we can ditch tribalism about left and right and think about how some good economic policies can fit in with people’s demands for control over their lives, the Labour party might just have a bright future.”

His conclusion follows from a very simple point, which is that Brexit has almost nothing to do with the traditional left/right metric.

The economic arguments would always be for Remain, because making it easier to trade is beneficial. While it is true in general that more trade can harm some even though it benefits the aggregate, it is unclear that there are any economic winners as a result of Brexit.

Some on the left try to argue that Brexit will be a fatal blow to a neoliberal EU. I have never been a great fan of making people’s lives worse just so that you can strike a blow at some evil empire.

In the EU, the single market goes together with free movement. It is tempting to present that as a political obstacle imposed by the EU, and it is indeed the case that there are very strong reasons why the EU will not compromise on this linkage. But there are good economic reasons why, if we focus on trade in services rather than just goods, the two should go together, and indeed that it is in the UK’s economic interests more than most that free movement is maintained.

So if the straight economics said Remain, it was counterbalanced mainly by the issue of immigration for Leave. Once again, it is difficult to see this as a left-right issue. Some have tried to explain the result as a consequence of the disenchantment that follows stagnation in wages and austerity, and I’m sure there is some truth in that. But while people have focused on the Leave vote in Labour’s heartlands, most Labour voters voted to Remain. In contrast most Conservative voters did the opposite. I suspect they are not talked about so much because to do so takes people away from the familiar territory of inequality and class, of left and right. [1]

Perhaps both the Corbynistas and their opposite numbers are stuck in a similar mindset that just prevents them seeing what is really going on. I have argued in the past that the election of Corbyn was not mainly the result of a ‘shift to the left’ among party members, but a rejection of a form of politics that had lost Labour two elections. That form of politics was based on a left/right frame: victory could be achieved by placing the party just to the left of the Conservatives, and thereby capturing the middle ground. It led to a disastrous drift on austerity and immigration. Yet it failed to deliver these imagined middle ground voters. The basic model was wrong, or at least hopelessly incomplete.

So yes it was the parliamentary party moving to the right rather than party members moving to the left that led to Corbyn’s victory. But perhaps more fundamentally it was the model of how to win elections that failed, based on focus groups and triangulation. Anti-Corbynistas are convinced that party members no longer want to win elections because they voted for Corbyn. I doubt that is true for most. It only appears to be obviously true if you imagine you know the true model of how to win elections. Given past failures and policy drift, it is understandable if party members did not share that belief.

The Corbynistas in turn may be in danger of making the same mistake: to assume that winning elections is not a priority for members, and that as Corbyn has not changed, his support will not change either. Of course most party members want desperately to win elections, as I suspect we shall see if Corbyn faces the right opponent. [2] But selecting the right opponent is not just about finding some sweet spot on a left-right scale, but about recognising the failures of focus group politics and triangulation, particularly when it comes to responding to the referendum result. [3]

[1] And there is also the rule in some circles that any bad news must be Jeremy Corbyn’s fault, plus the fact that journalists tend to dislike talking about the role of their own industry in influencing events.

[2] In saying this I am not suggesting that holding what will in effect be a referendum on Corbyn’s leadership is a good way out of the current impasse. As we have just learnt, referenda with a binary choice are far from ideal. One way forward would be to recognise that Corbyn has failed to convince most of the PLP and perhaps many of the membership that he can win any forthcoming election, but that someone from his group should be guaranteed to be on the ballot for the next leader. Of course the anti-Corbynistas will not want this because they do not trust and fear the membership, but perhaps there are some wiser heads that can prevail.

[3] As I have argued recently, Labour’s true heartlands are the very people who are devastated by Brexit. That does not mean giving up on the traditional heartlands, but instead it means convincing as many as possible there that their situation is not the result of higher immigration. As Sadiq Khan said, a successful Labour party has to “reach out and engage with all voters”.        

38 comments:

  1. Sometimes in politics myths are repeated so often that they become treated as established truth without ever being examined. I have never spoken to any supporter of Jeremy Corbyn who does not want to win elections, yet the myth is asserted that we do not see this as a priority. Indeed, one of the reasons for his victory last summer was wide appreciation that his opponents in the campaign had nothing to offer except the same old policies that had lost Labour 5 million votes during the Brown/Blair years and brought about electoral disaster in Scotland. Since becoming leader, the party under Corbyn has had a respectable record in Welsh, local and by-elections, despite unremitting hostility from the media and sabotage from some of his own MPs, even if we have not yet won back those lost under New Labour. It seems as if in the face of this, the PLP 172 now want to make “Corbyn cannot win” a self-fulfilling prophecy by destroying the party if they cannot get their own way.

    You are right to note the inadequacy of focus group politics. I would also point to the effect of first-past-the-post in focusing attention on swing voters in marginal seats, taking for granted the support of those in ‘heartland’ seats and failing to notice how this has been eaten away behind apparent success. Eventually, the hollowness is exposed, as it has been by both the Scottish and Brexit referenda. Once safe seats in Wales and the north can no longer be treated as such. Labour has to win back its core vote if it is ever to become a party of government again.

    Achieving that requires both reflective and creative policy discussions (along the lines of those John McDonnell has initiated on economics) and re-engagement with working-class communities. Together with challenging austerity and defending the rights threatened by Brexit, these should have set Labour’s agenda. Instead, rather than uniting against a weakened government, we have been thrown into a destructive internal struggle by self-indulgent MPs who never reconciled themselves to the members’ choice of leader and are now attempting a Westminster coup.

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    1. Two points. There is a danger of 'knowing' the motivations of MPs in the same way that anti-Corbynistas 'know' what party members think. It is possible that at least some have concluded that Corbyn in particular has not and will not be inclusive in the way you suggest should happen. Second, whatever their motivations, what is done is done. A party where most MPs have expressed no confidence in their leader cannot function. It may be very unfair, but we need routes out of here that allow a single, functioning party.

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  2. I think you are absolutely right on this. I have found Labour political strategy very odd. Most of their mistakes seem to come from looking at polls which they think are dictating how they should then behave. To take the question of austerity polls 'told' them they should support austerity when any number of other things should have sent alarm bells ringing at that decision.

    To begin with 'validating your opponents policies' is a pretty stupid strategy as the Tories have found out with immigration much to the delight of UKIP. Then there is there is the little question of what the role of the an opposition party is in a functioning democracy (hint perhaps critiquing government policies). A lot on the Labour Right neither understand or value this role but to me being a successful opposition actually improves your chances of being the next government. The most damning thing is that a lot of political advisors and politicians seem to see policies as just sweeties for the electorate, enablers to get you in power. They do not see through the lens of how they effect the real world. Bad policies are bad because they effect the real world in a bad way. If people understand that what is happening to them is the result of a bad policy they will vote against. Sadly people could not do this with austerity because they perceived that all the main political parties were supporting it so in their mind (not holding degrees in economics) it must be right. Labour duly lost the 2015 election and its a fair bet that the Tories dump austerity before the Labour Right do.

    When it comes to leadership it is worth remembering that it was Corbyn who went out on a limb by saying what rubbish Osborne's policies were. This is a bit of the leadership skill set 'follow me, this is the right way' that others in the party seem not to have. When the Labour Right talk about 'leadership' I would guess the first thing they write down is 'media skills' whereas I think the first think the average Corbyn supporter might be writing down would be something like 'integrity'. You can see how this isn't going to help the anti-Corbyniites in a leadership election.

    The other interesting thing about the situation is that the media have run an increasingly vitriolic campaign against Corbyn including in the Guardian which a lot of Corbyn supporters read. We all know that this isn't working and I wonder which smart bit of 'political reasoning' suggested that 'demonising your own electorate' was a winning strategy.

    So your absolutely right, Labour need to 'do things differently' and I think Corbyn has made a good start on that. On the other hand I do not see much sign of fresh thinking in the rest of the party and I think that is why we are where we are.

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    1. Not all the MPs who voted no confidence in Corbyn are what I call anti-Corbynistas i.e. MPs who would even give Corbyn a chance. But as you say, and I have pointed out many times, the tactics of the anti-Corbynistas have made it much more difficult for these MPs in between these two groups to convince party members.

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  3. Next week's publication of the Chilcot Report will not make this process easier for Labour.

    It would be nice to think, if the Report comes down heavily against the government of the day, that those in the Tory and Labour parties who voted for war would stand down in the upcoming general election.

    I typed 'Iraq war media' into Amazon and stopped on the fourth page as the number of UK and US studies of media involvement in fomenting that war by academics and other journalists just kept coming.

    I then typed 'Economics media' into Amazon, and you can imagine what happens next...

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  4. "The economic arguments would always be for Remain, because making it easier to trade is beneficial".
    That's untrue. Economic arguments do are forecasts xor are predictions?
    I frankly don't believe they are prediction, unless economists have gutted a lot of pigeons. And I know economists are too delicate persons to do so.
    So, they are forecasts. Forecasts – unless predictions – depends very strongly on hypotheses. Like in a theorem, you make assumptions, and you get (demonstrate) theses.
    So, economic arguments strongly depends on assumptions.
    The first thing to do is thus to carefully check if assumptions are reasonable. Then you have to check in which way conclusions depends, and how, and from what assumption, they depends on. Because relationships between assumptions and conclusions can be complex, and showing different susceptibility on assumptions. All this is what amid the scientific community is called “thinking”.
    Now, the assumptions on which these economic arguments are based – an important decline in trade with UE – are not an economics' topics, rather political topics. From this point of view, from elementary knowledge, and from common sense – these assumptions are highly unlikely – even if conceivable.
    Ask to the Volkswagen management and you will understand. Be quite, I know, I know: this is microeconomics, not macroeconomics!
    If you are nevertheless telling to the world that economics is a closed discipline (like physics do is, because of the specific features of its own subject, i.e. abstraction), advocating that its thinking doesn't must take into account this kind of arguments, you are actually telling that economics is a completely useless discipline. Not only from a practical point of view, but also – and mainly - from a scientific point of view.
    In this case, economists would have to blame themselves for the lack of credibility not only amid the common, illiterate men, but also amid highly literate, cultivated, ingenious men.
    And please stops disemboweling pigeons!
    And sorry, I don't agreed the problem is the greater or lesser inadequacy of “left” and “right”. The problem – if with “left” you mean “Labour” - is that “left” is actually “right”, and of the worse type because unconscious - from political, philosophical, cultural, social point of view.
    And this is typical of all the remains of the so-called “socialists” all around Europe.

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  5. I don't understand the obsession with free trade and the "single market." Why would the EU negotiate a lose-lose deal? Disparate regulations are actually the sand in the wheels of global corporate power.

    The Left has no answer to Brexit because they simply refuse to address the issue at the heart of it - mass immigration.

    To create a positive social differential to the rest of the world, you have to have flow control.

    If you refuse to put in place flow control, then you have effectively abandoned any hope of creating a social differential above the rest of the world.

    And that has been the position of the left for decades - complicit in the race to the bottom because they don't want to address The Tough Question and form a philosophy around it that works.

    There is no possibility of world government any time soon, and the people don't want it. So you have to work with what you have - borders and nations.

    The poor in the UK want a social differential. They don't want 'market forces' to drag them down.

    So how long are you prepared to dodge The Question for? Long enough for Nigel Farage to answer it first?

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    1. Your apparent assumption that mass immigration is a major factor in the “race to the bottom” is incorrect. Other factors have played a much larger role. In my home area of South Wales, it is the loss of well-paid secure industrial jobs that has driven down living standards – and those jobs were lost in the 80s and 90s, before the rise in net migration.

      Migration may have a significant effect in certain sectors such as building trades or hospitality but that occurs because those sectors are notoriously prone to casualization and poorly organised. With better regulated labour and housing markets, the impact of migration would be much reduced.

      In recent years, austerity has had a much bigger impact than net migration, which has never exceeded about 0.5% per annum of the population and includes a high number of students. Migration is simply not large enough to have the effects which you attribute to it.

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    2. «mass immigration is a major factor in the “race to the bottom” is incorrect»

      It is not "mass immigration" per se, it is two distinct factors: immigration from very low income countries, where the immigrants are easily biddable down, and immigration that gives rights to immigrants.

      «the loss of well-paid secure industrial jobs that has driven down living standards – and those jobs were lost in the 80s and 90s, before the rise in net migration»

      The decline of the industries in the "periphery" (northern areas, celtic areas) began arguably already in the 1920s.

      But immigration from low income countries has impacted that too: because the workers made unemployed by decline in the "periphery" are then put into competition for jobs with immigrants in areas in which decline has been countered by massive government subsidies, like the South East.

      J Hutton, the New Labour minister of work and pensions, put it very clearly in a speech:

      «He said that benefit claimants needed to compete for jobs with migrant workers, many from Eastern Europe.»

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    3. «immigration is a major factor in the “race to the bottom” is incorrect»
      «net migration, which has never exceeded about 0.5% per annum of the population»

      There are two mistakes here that minimize the apparent impact:

      * What matters to the "race to the bottom" is the net external immigration of *workers* only, and in particular of low-wage workers to southern England, that being what competes with internal immigration.

      * What matters as to the "race to the bottom" is the comparison not with the "population", but with the *workforce*.

      In the case of external immigration to the south competing with internal immigration from the north, most external immigration has been of young workers from low income countries, while most emigration from the UK has been of older pensioners out of the workforce.

      The majority of the 4-5 million people of the total population of the UK that is foreign-born and arrived after 2000 are workers from low income countries (the only major exception is germans, who are not from a low income country and don't thus usually compete with northern immigrants to the south).

      Some numbers:

      * The total UK workforce is around 34 million workers;
      * UK gross earnings are around £25,000 for *full time* employees and £10,000 for part time ones;
      * so there are 17 million workers earning less than median (the bottom 20%, or 7 millions, earn on average around £5,000);
      * of which most likely 3-4 million are from low-income third-world and EU countries.

      So probably 25% of low income workers (and much more than that in London I guess) are external immigrants desperate to get a job at any conditions, plenty enough to give employers a lot of leverage in setting low-end wages.

      Note: I use "external" and "internal" above somewhat improperly: in the EU all worker movements are "internal", in the sense that moving to work in a coffee shop in St Albans from Middlesbrough, Cork, Krakow or Timisoara is equivalent.

      Note: workers in low income northern/periphery areas with few "external" immigrants are regardless in competition with them for the jobs in southern areas.

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    4. “Wages in rich countries are determined more by immigration control than anything else, including any minimum wage legislation. How is the immigration maximum determined? Not by the ‘free’ labour market, which, if left alone, will end up replacing 80–90 per cent of native workers with cheaper, and often more productive, immigrants. Immigration is largely settled by politics. So, if you have any residual doubt about the massive role that the government plays in the economy’s free market, then pause to reflect that all our wages are, at root, politically determined.”

      Chang, Ha-Joon. 2011. 23 Things they Don’t Tell you about Capitalism, Thing 1: There is no such thing as a free market

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    5. I am not proposing the complete abolition of controls on migration. To my knowledge, only some tiny far-left groups and a few well-intentioned but naïve idealists do so. Free movement within the EU is a much more limited proposition, as the EU population (including the UK) is only 7% of the global total. Apart from its close connection with free trade, it offers benefits to UK citizens as well as others. Indeed, the UK has the highest number of citizens living in other EU countries. The debate should not be about hypothetical propositions but about the facts, even if some people find that inconvenient.

      Net migration to the UK is not ‘out of control’ as was hysterically alleged during the campaign. Indeed, immigration appears to be stable, as far as the ONS can determine: “The most recent increase in net migration (not statistically significant) has been driven by a decrease in emigration (not statistically significant) coupled with a similar level of immigration compared with the previous year. The decrease in emigration has been driven by a fall in the number of British citizens emigrating (down 14,000; not statistically significant).” [Migration Statistics, May 2016]

      As regards the EU, net migration from those countries joining in 2004 is now 47,000, unchanged from the previous year and lower than in 2007. Net migration from Romania and Bulgaria has risen since 2012 and is now 58,000 a year; if the Polish experience is repeated this will not rise indefinitely and could soon peak. Net migration from other EU countries has also risen since 2012 but appears to have stabilised at around 79,000 a year. At 184,000, total net EU migration is about 0.3% of the UK population. The vast majority of EU migrants are active workers, adding to total GDP. Economists disagree over the impact of migration on per capita GDP on non-migrant residents but if there is any loss it must clearly only be a very small proportion of the 0.3% population change. Compare this with the 5% of GDP that Simon conservatively estimates has been permanently lost through austerity and it is obvious that fixating on migration is misplaced.

      Migration does add to competition for jobs in some sectors of the economy, particularly in poorly regulated sectors with high turnover, geographically fixed in the UK (e.g. building trades, hospitality). This is a significant issue for workers in those sectors and needs to be addressed through improved regulation, higher and enforced minimum wages, union organisation, etc., plus expanded and managed housing. Austerity is relevant here too, as it both reduces demand for labour in the UK and increases the supply of those searching for work that is not available in their own country (Spain with 50% youth unemployment is a good example). But looking across the whole labour market, migration has had a much smaller and much more recent impact than globalisation, deindustrialisation, neoliberalism, privatisation, technology, etc. The big rise in inequality in the UK occurred under Thatcher. Migrant workers are visible but it is the task of economists to look below the surface at the underlying processes.

      The depressing thing about this discussion is how the lies of a far-right conman have shifted the debate, even on a blog like this one, to an obsession with migration. Dividing workers by race, nationality or religion is the oldest trick in the book. Not that long ago, we were debating austerity, debt, monetary theory and policy, or central bank independence. Migration was hardly ever mentioned before the EU referendum allowed Farage to shift the terms of the debate. Can we get back to those discussions?

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  6. I think left/right is helpful in understanding the Brexit vote. Since the EU is left of Britain, it's natural for the British Right to dislike it more than the Left. (In left-of-EU countries like Sweden, it's the opposite - the Left dislikes the EU more than the Right).

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  7. SW-L’s para starting “In the EU…” links to two articles which argue for free movement of people and/or argue that free movement of goods is inseparable from the free movement of people. I found both unconvincing.

    At the extreme, I see no problem in our agreeing to free movement of goods while halving immigration from the EU (e.g. because we regard the UK as over-populated).

    I’m baffled as to why those two freedoms are inseparable. And what is so “sacrosanct” (to use the fashionable word) about free movement of people?

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    1. The problem with “our agreeing to free movement of goods while halving immigration from the EU” is simply that an agreement needs two sides. The EU will not agree to UK free access to its goods, services and capital markets unless there is also free movement of people. This is the EEA arrangement. If we want anything else, we shall have to negotiate trade-offs.

      We no longer live in the days of Palmerston and we cannot send gun boats to Brussels to impose a deal.

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    2. Freedom of Movement is in the interest of the EU's people. So if the EU is able to enforce that freedom, it should do so. People support the EU because it ensures it. The EU is not a country, it has few virtues every single inhabitant can take advantage of directly. I think the Freedom of Movement issue is much more a political thing, than an economical one. And of course if there are any deviations from the status quo, the status quo is in danger. FoM is the EU's version of The Pursuit of Happiness (mild exaggeration included). In my opinion the EU should do everything in its power to uphold it, for itself and for its people. There will always be problems in the details, but as a general, hard principle it's simply a good thing. The EU's composition and terms of admission guarantee that no stampede enters the front garden. If you regard the UK as over-populated, how do you regard the nile river delta ?

      JH

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    3. «The EU will not agree to UK free access to its goods, services and capital markets unless there is also free movement of people. This is the EEA arrangement. If we want anything else, we shall have to negotiate trade-offs.»

      Yes and no. As a very special case the EU has negotiated a deal (DCFTA) with the Ukraine which gives free trade but no free movement of people either way. But that was a big exception created as gift to Ukraine to please the USA and the UK governments in their anti-russian campaign, plus it has been rejected by Dutch voters.

      The difficulty with EU-UK deals is that there are already large numbers of UK pensioners in France and Spain, and of polish and german workers in the UK. In the current regime the UK pensioners get free health care, like the polish and german workers, under reciprocal arrangements, but the UK pensioners cost a lot more than the young polish and german workers.

      The EU will never agree to a non-reciprocal deal, or one that costs Spain and France more than the UK; and if the deal is reciprocal there will not be free movement *from* the UK (no more pensioners going to France or Spain), or free health care for UK citizens in Spain or France.

      Plus even the DCFTA with Ukraine involves the Ukraine having to adopt all EU legislation unilaterally.

      A quote on how special the deal is:

      «The EU chose to lift many of its tariffs on Ukrainian products in April in an effort to support Ukraine through its military, economic and political crises. The EU’s unilateral trade offer – described officially as ‘autonomous trade measures’ – has, however, since become entangled with the now deeply geopolitical issue of the DCFTA.»

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    4. «This is the EEA arrangement. If we want anything else, we shall have to negotiate trade-offs.»

      Apart from the DCFTA with the Ukraine, there are other "special-case" arrangements:

      http://www.instituteforgovernment.org.uk/blog/14011/can-scotland-avoid-brexit/>
      «Currently 25 Overseas Countries and Territories are recognised under EU law. For instance, the Isle of Man and Channel Islands are within the EU Customs Union (EUCU) but not the Single Market. Gibraltar is inside the Single Market but not the EUCU. Greenland left the European Communities in 1985 (the only previous territory to do this), but Greenlanders are still EU citizens since they remain part of the Danish Kingdom.»

      All these deals, including the DCFTA, were not really unilateral concessions by the EU; they were part of bigger-picture deals in which the EU countries got something back.

      Of course there is the problem of persuading the EU27 to offer such deals to the UK, without the UK offering any real concessions back, which was D Cameron's negotiating position in the pre-referendum talks (because the UK strategy has always been to undermine the EU from within, also by asking for unilateral concessions, as "Yes Prime Minister" has satirized a while ago).

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  8. "The economic arguments would always be for Remain, because making it easier to trade is beneficial."

    The above statement is contentious on two counts.

    Point 1: if the economic arguments are always for Remain, then how come most Post-Keynesians supported Brexit? The answer is that they did so because they recognised that both the euro and the Single Market are incompatible with Keynesian economic policies. You can't have state interventionism to steer and manage an economy through boom and bust while operating a policy of laissez-faire non-interventionism.

    Point 2: free trade is not the panacea you appear to believe. This obsession with free trade (as exemplified by TTIP) is misplaced for two reasons as I see it. The first is that most trade is already pretty free. Most tariffs are low and reducing them further will not make any massive difference to future UK growth. If a system is already 99% efficient it is unlikely it is going to improve much with additional tampering, particularly given that the 2nd law of thermodynamics tells us that systems with 100% efficiency are impossible to achieve anyway.

    Secondly, tariff barriers serve a useful function in stabilising economies. They act to dampen oscillatory behaviour in markets (that is why a Tobin tax would be beneficial) and help bring markets back to equilibrium. If there is no cost to the movement of goods or capital then markets can be easily destabilised by speculation and national economies will be destabilised by external shocks (have you forgotten about the current plight of the UK steel industry?)

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    1. 1) How does the EU prevent effective countercyclical policies?
      2) I did not say trade is a panacea, but it is almost always beneficial for the countries that undertake it. To imply that leaving the single market would have little effect suggests you do not understand how trade in services works.
      3) FOM allows those unemployed in the Eurozone to find jobs in the UK. Why is it beneficial to prevent them doing that?

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    2. You say, "So if the straight economics said Remain, it was counterbalanced mainly by the issue of immigration for Leave. Once again, it is difficult to see this as a left-right issue."

      I'm puzzled by this statement. This sounds left-right to me. The left, in the US for example, is open to immigration; the right is opposed to it, as it always has been. Dislike of immigrants is the hallmark of the right, of conservatives, in a broad sense. And then you say, "most Labour voters voted to Remain. In contrast most Conservative voters did the opposite." That just sounds typically left-right, so I just don't get your argument. And when you say, "I suspect they are not talked about so much because to do so takes people away from the familiar territory of inequality and class, of left and right." I'm not sure what "they" refers to. The vote? This again would explain the reason why the left/right metric fails, but because it's unclear (to me), I don't follow.

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    3. 1) By means of Maastricht parameters, and by the conception itself of European (dis)Union. Don't you wonder why in every Eu country austerity is the mainstream fiscal policy?
      2) Leaving EU doesn't imply leaving single market. Wait and you will see. Non one want that. Nor France, nor mainly Germany. Because UK is a net buyer, non merely a net contributor to EU funds.
      3) Don't you have any unemployment in UK? Oh, fortunate Country! And why do you believe that something will prevent eurozone people to reach UK in order to get a job? Or some english unemployed to reach any EU country to look for a Job? Switzerland is plenty of former unemployed Italians who have now their jobs in Switzerland, even continuing to live in Italy.

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    4. 1) Where are all these countercyclical policies in the eurozone? Not in Greece that is for sure. Anything that is done is done at the supranational level. So this only works if the entire eurozone in in recession at the same time. You also fail to acknowledge that EU single market policy prevents state aid (even temporary aid) for key sectors or regions. Also FOM is incompatible with national economic decision-making - see below.

      2) Over 80% of our economy is services, but about half of this is down to the state. Over 80% of services in our economy are internal to our economy and always will be. That means the services that we "export" are, and always will be, a small fraction of a fraction of our economy. Liberalising that will make precious little different in the grand scheme of things. It is purely ideological (like all free trade) and generally involves privatising key services like health.

      3) You can't have full employment and FOM. The two are mutually incompatible. It is like trying to bail out a ship with a hole in the bottom. The faster you bail the faster the water comes back in. An economy that tries to attain full employment through Keynesian policies (i.e. Minsky) will inevitably act as a magnet for the unemployed in the rest of Europe. So the UK would end up doing the heavy lifting that other EU countries should be doing and refuse to do. That would totally undermine national sovereignty and democracy as national electorates would effectively be unable to institute local economic policies independent of the rest of the EU.

      But there is a more fundamental point against FOM. Why is it always the people who have to move to where the jobs and the money are? This is inefficient because it leads to higher costs in the prosperous areas and under-utilisation of resources in the poorer ones. Thus it represents a failure of markets to function efficiently and apply effective optimisation. It is in effect a hidden subsidy for business and is only favoured by the establishment because it transfers business costs to the workers. When politicians talk about being "business-friendly" that is what they mean.

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    5. It's also worth noting that FOM allows British people to live, work, study or retire in other EU countries. This is often neglected but is a valuable freedom to many.

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    6. «unemployed in the Eurozone to find jobs in the UK.»

      Strictly speaking, the unemployed from the whole EEA+EU, a pretty significant number of which are not in the Eurozone.

      Also it is not just the "unemployed": the second largest immigrant group to the UK is germans (after the polish), which surely don't have an unemployment issue in Germany.

      Plus it also allows 1.5 million UK older people and pensioners, encouraged by the UK government to save money on the NHS, to scrounge shamelessly free healthcare in the expensive last 20-30 years of their life from other EU governments, mostly the Spanish and French ones.

      «Why is it beneficial to prevent them doing that?»

      Ah the usual story about "the economy". The distributional impact of course can be pretty significant. For example allowing unlimited immigration from the EU means in effect lower immigration from third world countries that offer much cheaper workers; that lower immigration is something that impoverishes deserving, high productivity "wealth creators" who own businesses and properties :-).

      I'll let a member of the Migration Advisory Committee speak on skilled middle class migration from outside the EU, a very funny topic:

      «Skilled migrant workers make important contributions to boosting productivity and public finances, but this should be balanced against their potential impact on the welfare of existing UK residents. Raising the cost of employing skilled migrants should lead to greater investment in UK employees and reduce the use of migrant labour.»
      «Indian IT workers most commonly use the route into the country. “They work with a consultancy then get farmed out to other companies on third-party contracts,” Prof Metcalf said. “What you get is lower IT costs for the clients. That’s a benefit for British companies but there’s less upskilling of British workers. British computer science graduates have the highest unemployment rates of any graduates.”»
      «Business leaders reacted angrily to the report, saying it sent out a message that the UK is “not an attractive place to invest and do business”.»

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    7. You are confusing access to a global workforce with migration into the UK, which, particularly in an industry like IT, is a small part of the overall picture. IT work done offshore for UK or multinational companies is far more extensive than bringing workers to the UK, for simple reasons of cost.

      In my last job, over many years I worked with and led teams of designers and developers that were typically mixtures of UK and offshore based workers. When colleagues from offshore were brought to the UK it was typically for short periods of familiarisation with particular projects or teams. Long-term migration to the UK is unusual in this sector.

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    8. The question "why is it always the people who have to move to where the jobs and the money are?" is based on a misapprehension of what has actually happened in recent years. Far more jobs have moved offshore, notably in manufacturing, than people have moved to the UK.

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    9. I am not sure most post-Keynesians did favour Brexit. Who specifically did? Post Keynesians have long been supportive of collective labour bargaining systems in Europe and other facets of "Social Europe". Many would be emphasise the EU's importance for social and environmental and human rights safeguards. These are very much the socialist values that post-Keynesians support. People are worried about having these laws being replaced under a Conservative government. Post-Keynesians are also not necessarily opposed to a single currency - providing redistributive fiscal and institutional mechanisms are put in place - but anyway the single currency and the Eurozone is not directly related to Brexit)
      Many would favour the use of fiscal policy over monetary policy as a stabilisation mechanism. The breakup of the EU greatly increases the possibility of a race to the bottom among European countries (already begun with Osborne's corporate tax cuts) - something no Post-Keynesian would want to see.

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  9. I know of a couple of pieces of research into those who voted Leave / Remain and they both suggest that social conservatism / liberalism is a significant predictor - US style culture war.

    The Fabian Society looked at British Election Study data (pre referendum) and found that authoritarianism predicted Brexit position, and that for those with a given level of authoritarianism class was not a predictor. Annoyingly they don't link to the original data set.

    source

    Lord Ashcroft Polls (referendum day) found a class difference, but also a marked difference in social values, e.g. attitude towards feminism. They did not look at whether class was still relevant given a level of favourability towards feminism, and their published data isn't fine grained enough to allow this kind of analysis.

    source

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  10. EU budget payment of £8.5bn is 3.7% equivalent tariff on UK exports of £229bn to EU vs France and Germany WTO average of 2.2%. If all Britain can negotiate is the so called "Norway option" it is doing very poorly.
    Total UK exports to EU £229bn p.a.
    https://fullfact.org/europe/do-half-uks-exports-go-europe/
    UK contribution to EU Budget £8.5bn p.a.
    https://fullfact.org/euro…/our-eu-membership-fee-55-million/
    Net equivalent tariff on exports 3.7%
    Average MFN tariff rate for WTO Germany & France (2010) is 2.2%
    http://data.worldbank.org/indicator/TM.TAX.MRCH.WM.FN.ZS…

    So even if UK did not impose any tariffs on EU exports to UK it would still appear to be better off than with the budget contribution.
    NB: This ignores net cost of treating EU citizens on NHS & British citizens living on continent, reciprocity of EU tariffs on UK with UK tariffs on German cars, French wine, Spanish food and Italian textiles and any savings on CAP reform.
    UK has exports of financial services including insurance to EU of £19bn. German and French banks need to be part of London to be part of the global capital market of which London is arguably the capital.
    Turkey has a customs union with Europe. Free movement of goods but no free movement of people.

    The US has a trade agreement on the floor of Congress and Britain is one of the few countries with which it has a trade surplus. New Zealand, Australia Canada have all offered FTA.

    So please advise why ALL of the economic arguments are in favour of Remain?

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  11. Prof Wren-Lewis,

    Regarding your statement:

    "The economic arguments would always be for Remain, because making it easier to trade is beneficial"

    I would like to say the following:

    Brexit makes it more difficult to trade with the EU. Ceteris paribus, i.e. given all other trade arrangements between Britain and the rest of the world and given the current regulatory framework in the UK (which is, to a large extent, determined by the EU), this makes Britain worse off.

    But why would everything else stay equal?

    By leaving the EU, Britain will be free to adopt a unilateral free trade policy. Many Brexiteers favour this approach and I see a realistic chance that they will prevail.

    Furthermore, Brexit makes it possible for Britain to embark on a new approach to, say, financial regulation. In the UK, there was virtually no government regulation of banking until 1979. Instead, the behavior of banks was subject to tight private regulation. The private regulatory framework for banking was then substituted by government regulation in the 1980s. This approach has not been a success. Brexit gives Britain the opportunity to return to the principles that served financial markets so well before the 1980s.

    Will Britain use the opportunities presented by Brexit – or will Britain’s approach to trade and regulations be worse/more inefficient than before?

    Nobody knows for sure.

    But I would not subscribe to the position that the economic argument is clear-cut in favour of Remain. On the contrary, I am rather optimistic that post-Brexit Britain will be governed better than now because, in general, smaller, locally autonomous political entities tend to have better governance than larger ones.

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  12. “Some on the left try to argue that Brexit will be a fatal blow to a neoliberal EU. I have never been a great fan of making people’s lives worse just so that you can strike a blow at some evil empire. “

    Not that I disagree, but this did get me to wondering what the circumstances might be where you thought this consideration would not apply? What level of inequality, youth unemployment, cronyism, corporate capture etc. might be appropriate for us to stop worrying about the short-to-medium term risks. How too, might these conditions look when compared to contemporay Greece?

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  13. I think it is easy to frame the left as 'giving up on winning elections'- albeit untrue- because actually that accusation is largely about the man in particular, rather than a conspiracy against the left per se.

    I personally believe the party (of which I am a member) lacks pragmatism about JC just as much as it does Blairism.

    The party needs to ask some hard questions about what it really wants to achieve. The Blair/brown years featured unprecedented improvement (yes, through spending and some decidedly iffy stuff like PFI) in public services such as the NHS. The effects of some of that improvement are being wound down by austerity and this government. Why is there now a kind of denialism of any of the benefits the country saw as a result of those years? All I hear now is an analysis which boils the last labour government down to a war criminal (perhaps) and an economy destroyer (perhaps not).

    As for JC- it is not dissonant to believe that his ideas, and his economics have huge potential to energise a vote for labour, whilst believing that the man himself lacks the lustre needed to really deliver on a) he policies, and b) a general election win. Disastrously, he has ridden through the PLP revolt not because of his own strength and resolve, but because it sounds as though he has been almost bullied into staying put by his closest allies and advisors; for me this looks incredibly weak.

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  14. What is the EU definition of free movement (particularly of people) ? I think everyone accepts movement of tourists and if then extended to job seekers they should not expect financial help. Are EU residents deemed a special case to other visitors on what basis of reciprocal arrangements between Europeans?

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  15. I think you are right here as well. The kind of peace deals that are being talked about in the press are the kind that a lot of Corbyn supporters might prefer to a party split, say. This suggests that someone on the PLP side has realised that trying to 'force' Corbyn out is self-defeating.

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  16. «So yes it was the parliamentary party moving to the right rather than party members moving to the left that led to Corbyn’s victory.»

    Definitely so, because the parliamentary party moved to the right with swing voters in southern marginal seats, which tend to be older/richer property rentiers.

    «But perhaps more fundamentally it was the model of how to win elections that failed, based on focus groups and triangulation. Anti-Corbynistas are convinced that party members no longer want to win elections because they voted for Corbyn. I doubt that is true for most.»

    Sure, but it is a difficult balance, as to this my usual quote from the younger (1987) Anthony Blair, which is excellent:

    «The difficulty was that though the theory of greater democracy and increased accountability of MPs was fine, the practical context in which the theory was operating was fraught with danger. What was missing from the theory was any appreciation of the vital necessity of ensuring that, as well as MPs or leaders being accountable to the Party, the Party was accountable to the electorate.
    The one without the other was a recipe for disaster.
    Because the Party was small and did not encourage participation, it became prey to sectarian groups from the Ultra-Left. Moreover, the new situation allowed the Party to engage in the worst delusion of resolutionary socialism – the notion that resolutions passed at Conference have meaning or effect without real support in the wider community.»

    «Post-war Britain has seen two big changes. First, and partly as a result of reforming Labour governments, there are many more healthy, wealthy and well-educated people than before. In addition, employment has switched from traditional manufacturing industries to a more white-collar, service-based economy. The inevitable result has been that class identity has fragmented. Only about a third of the population now regard themselves as ‘working-class’. Of course it is possible still to analyse Britain in terms of a strict Marxist definition of class: but it is not very helpful to our understanding of how the country thinks and votes. In fact, of that third, many are likely not to be ‘working’ at all: these are the unemployed, pensioners, single parents – in other words, the poor.
    A party that restricts its appeal to the traditional working class will not win an election. That doesn’t entail a rejection of socialism’s traditional values: but it does mean that its appeal, and hence its policies, must address a much wider range of interests.»

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  17. «almost always beneficial for the countries that undertake it»

    Ah still using "countries" (as an alias for "the economy") as an euphemism for "the interests of property and business owners".

    Because also "trade" itself is not just a well defined concept; there are most definitely very many different ways to "trade" with significant differences in distributional impact.

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  18. Thanks for an interesting post. One thing you omit - if the Tory party choose one of the three Brexiters this creates an enormous opportunity for Labour, as any economic difficulties will be very easy to lay at their door. (this may be possible with the remainers too, but a little harder). Black Wednesday showed that the Tory party has nothing without a reputation for economic competance.

    If I recall correctly, part of the reason that the Labour membership chose Corbyn was because they felt that none of the previous candidates had a chance of winning in 2020. If the Tory party look vulnerable, then this might present an opportunity for the right candidate to win both the membership and the 2020 General Election.

    One question, however: you seem very skeptical of the "median voter" way of thinking about the world (people have fixed preferences, parties need to position themselves to appeal to as many people as possible). What would be your alternative? I believe there's a lot of political science evidence that it's really hard to change people's views on things.

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