Winner of the New Statesman SPERI Prize in Political Economy 2016

Monday, 7 November 2016

Freedom of Movement, Austerity, Labour and MPs votes on Brexit

In three important ways Labour’s current attitude to Freedom of Movement reminds me of their pre-Corbyn attitude to austerity. First, Labour while in government encouraged immigration from the EU, and the UK economy was probably a lot better off for it. But they now tend to say that was a mistake. To his credit Miliband never conceded that Labour while in government borrowed too much, but he deliberately chose not to strongly contest Conservative and media claims that they had.

Second, their policy for the future is now to call on some controls on Freedom of Movement as part of the Brexit negotiations. That is rather different from May’s view that ending Freedom of Movement is a red line, but I doubt many voters will notice the difference. The fiscal policy Labour campaigned on in 2015 was significantly more sensible than Osborne’s policy, but they chose not to campaign very much on the difference, insisting that they too ‘were tough on the deficit’. Immediately after 2015 a number of MPs argued that Labour should accept the need for austerity.

Third, in both cases - austerity and restricting Freedom of Movement - the policies as enacted or proposed by the Conservatives did and will damage the economy. Austerity cost every household at least £4,000 (it could easily be £10,000), and reducing immigration from the EU is likely to have a large negative impact on the public finances, both directly and because we will have to leave the single market. Yet because Labour in effect conceded the issue (on austerity) and concedes the issue (on FoM) they find it difficult to say this in public. That in turn means that the public hardly hear these economic arguments.

In both cases Labour is not assessing what policies best enable them to achieve their principles, but instead what they need to do to avoid losing votes. [0] With austerity Labour became convinced that voters could not see beyond simple ‘government like a household’ analogies. After Brexit (and in some cases before that) Labour is convinced that they will lose votes heavily in their traditional heartlands if they fail to argue for controls on European migration.

You might think this is just normal politics. If voters want something strongly enough, it is self-defeating to fight that. Better to move your policies towards what voters want. But that ignores my third point of similarity between austerity and Freedom of Movement. In the case of austerity, and for a significant number with Freedom of Movement, voters’ views are based on misunderstandings involving economics. As I argued in this post, many voters think restricting immigration will improve their own access to public services, whereas in reality it will do exactly the opposite.

If you think it just seems wrong for politicians to support (or not actively oppose) policies that would make people worse off just because people erroneously believe the opposite, I would agree. [1] But it is important to understand one important reason why they do this. It reflects an environment which gives virtually no time to economic expertise, by which I mean treating it as knowledge rather than just one opinion to be balanced against another. The BBC refuses to treat economics, unlike climate change, as knowledge whenever it is politically contested, and it is deliberately excluded from most of the tabloid press.

If you think that account is reasonable, now think about Brexit, and the vote which (hopefully) MPs will have on whether to trigger Article 50. The referendum was advisory (as even Nigel Farage admits), and won by only a tiny majority. They could say that on a matter of such importance that is too slim a majority on which to leave, but they will not. They could insist that given the closeness of the vote the government should try and again negotiate with the EU, but they will not. Labour MPs in particular might reason that because they opposed offering a referendum in the first place*, the argument that they have to respect the ‘will of the people’ makes no logical sense. [2]

Even if they do not vote against invoking Article 50, they could say that while a majority voted to leave the EU, that is not equivalent to leaving the single market, and therefore any negotiation that did involve leaving the single market would require a separate referendum. Probably a majority of MPs would like to vote that way, because they know the extent of the harm leaving the single market will cause. But the majority will not, because they will be branded by the tabloid press as denying the will of the people. They fear that will lose them votes, and perhaps even threaten their physical safety. Once again, as with austerity and EU migration, the media will prevent many MPs doing what they believe is right. [3]

[0] As Wolfgang Münchau correctly argues here, what centre-left parties around the world were actually chasing were short term votes, or worse still focus groups. Supporting austerity was a disaster for the centre-left in the medium term, just as alllowing Brexit will be for Labour. (One very minor but annoying point on Münchau's piece: we wrote our Brexit letter all by ourselves. No one 'got us' to do it.) 

[1] The alternative is that MPs like voters do not understand the economics. I’m not sure if this is better or worse.

[2] You do not want to hold a referendum because there are no grounds for doing so, and therefore it is not something a referendum should decide. Or because you want to stay in even if a majority said they didn’t. Actually holding a referendum does not change these views..

[3] The situation is of course much worse because of the stance taken by either leader. May’s statement that the headlines in the Mail and Sun after the court decisions were reasonable is quite extraordinary. Corbyn’s position is hopelessly compromised by his own antagonism for the single market, and it was naive if Labour party members who voted for him ever thought otherwise.

*Postscript (7/11/16) Although this was true under Miliband, in their shell shocked state after the election they actually voted in favour (thanks Sunder Katwala @sundersays for reminding me).

19 comments:

  1. 'Gordon Brown has no regrets over using the phrase "British jobs for British workers", Downing Street insisted today as a series of unofficial strikes broke out over UK construction jobs awarded to European workers.

    As anger intensified over plans by oil companies to employ Portuguese and Italian workers, the prime minister said that he understood people's concerns.

    Asked whether the prime minister regretted using the controversial phrase, branded illegal and racist by critics, his spokesman in London said: "I don't see any reason for regret. The action that we have taken has meant that we are now putting in place measures that ensure British workers can have access to the vacancies in the system."

    Some of the workers who walked out at refineries and power stations in various parts of the UK held placards quoting the prime minister's words. The wildcat strikes mark the latest in a series of protests over the use of foreign rather than domestic labour by large companies.'

    (Guardian website, Deborah Summers, Friday 30 January 2009).

    In January 1969 in a BBC interview, Sir Keith Joseph supported Enoch Powell’s views by stating the Tories had let in “a flood of immigrants” (Denham and Garnett, Sir Keith Joseph, 2002).

    I can only guess that in these two quotes somewhere there is the difference between the 'liberal elite' and the 'meritocracy'.

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  2. I wish people stopped saying that the referendum was not about leaving the single market. The Remain side said it was (Cameron, Osborne, etc). The leave side said it was (Gove and Boris among others). It was clear that by voting to leave people wanted to (1) have the control of immigration (2) be able to negotiate new trade deals and (3) assert the supremacy of Uk law in relationship to the ECJ. Staying in the single market would not allow for any of this. A EEA/EFTA/Norway solution was not in the cards. This was the main reason why I reluctantly voted remain. What I find amazing is the will of the "Remoaners" to play with fire like this. Nick Clegg and his mates are going to try to filibuster BREXIT as much as they can. This is throwing gasoline to the fire. Yes. There will be an economical impact (very overstated as Paul Krugman argues) but we cannot go back ! Let's just move on and look at the rest of the world !

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  3. Still flailing around in the long grass, I see ....

    A post on political matters bemoaning 2 incontrovertible truisms of political life;

    1. Politicians fail to adhere to their party principles in the desperate search for popularity. This will always happen because their prime directive is popularity (winning elections) not principle.

    2. The general mass of politicians defer to any tabloid agenda rather than ploughing their own furrow. They will normally do this as tabloids and their owners are powerful.

    Take the next step, sir, propose what should be done to solve these issues; everyone here knows this already.

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    1. I'm afraid there are wide sections of people out there who believe nothing of the sort, who believe the media is just a mirror. (Some are in the media of course, but most are not.) If I said outside this blog that the media played a large role in the result of the 2015 General Election, most people will dismiss this out of hand.

      I will at some point write about what you do about the media (and I have already written at length about what the BBC should do), but it will not matter one ounce if people deny the problem. i think with Brexit we have a chance to change minds, and I want to take that chance.

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  4. I am sure I saw that the UK now has the lowest % unemployment rate since records began. I guess that's what happens when you import lots of workers.

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  5. The Single Market is based on the free movement of goods, services and labour.

    As these are all grouped under the Single Market banner there is a temptation to regard them as equivalent. They are not. The free movement of goods and services has to be based on contractual arrangements freely arrived at ( if I want a BMW I freely contract to buy one; it is my choice).

    Freedom of movement is quite different. It is a right within the context of the single market and does not require an invitation or any sort of contractual arrangement;people within the EU can move where they want. In effect it is forced integration.

    Now I am sure you are right in that it may have been economically good for the UK but clearly the fact that it is forced integration is a political matter. You may complain that economics is not given sufficient weighting in these discussions and I may agree but you are close to saying that the economic argument should have primacy which I think is quite wrong.

    You are clearly in favour of the EU and the single market but there is another perspective. Our gain in manpower is someone else's loss; some of the countries of Eastern Europe have been denuded of some of their best people and this will have a substantial effect on their own situation. We gain; they lose.

    However, as the EU is presently constituted, there is no fiscal union or any way of rebalancing these issues so the difficulties are compounded. Even if there were fiscal union you would, nevertheless, be left with the political issue which is forced integration and, as you can see from what is happening in large parts of the EU, this is not exclusively a UK issue.

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  6. " The alternative is that MPs like voters do not understand the economics. ". I often wonder how David Cameron got a first in PPE, given his waffling about "no magic money trees" and "the nation's credit card". Did he simply regurgitate in exams what he had been taught in his economics course, while not believing a word of it ?

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  7. Your footnote [1] rather succinctly captures a huge dilemma at heart of parliamentary democracy. David Attenborough was quoted in Radio Times interview and more widely, summarising parliamentary democracy, to paraphrase electing people wiser than ourselves to make decisions beyond our capabilities.
    If those elected are not, or choose not to be, sufficiently wise (when did you last hear a politician described as wise?), then elective democracy inevitably fails, as we are seeing around the western world.
    The question might morph into whether the elected politicians are less capable than their predecessors, quite possibly for Ali sorts of reasons but not necessarily so, or whether the democratic decisions are more complex and harder to understand, even for modern educated people.

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  8. Actually Simon, I think there is a worse interpretation. The voters currently believe themselves willing to accept economic loss to get out the EU, I met many on the doorstep who told me this. "even if cost me 30 quid a week, I want out and I to kick out ****".
    The problem is they believe (because humans often do) they will defy the odds, their personal loss will be smaller (or zero) than average (they believe themselves the most deserving so any 'fair' system benefits them). Whlst an average number is big they are convinced it will be those above them in the income distribution will lose more (more 'equality', my experience on doorstep is that no one is very keen on those lower paid than themsleves getting a raise) or some other undeserving other (hello immigrants) will lose the most. In fact quite wrongly some believe they will actually do better, the lump of work fallacy, still persists less foreigners more opportunity.
    Secondly they ignore or refuse to believe is that when the chips go down, people do not band together like the mythical good old days (all us white (wo)men together is the subtext). This might just about have been true during the Blitz but in other times of hardship whats happens is quite the opposite; what happens is civil society collapses. Examples Venezulea, Argentina, Hungry, Poland (work in progress) and Greece. Opponents are totally deligitimised (traitors), the executive disfunctional, independent centres of power (Civil service, Courts, Universitites) come under the 'peoples' control and the legislature operates majoritarianism. With voting this leads to crazy see-saws, as people group around opposite poles (Northern Ireland is a great example of this). The USA needs a leftwing version of Trump (Bernie is a decent left wing guy, not an authoritarian) and it will slide into chaos.

    It does not take a genius to see this is what the enemies of the people headlines portend for us in the UK. My view is the true mess of Brexit will be two to four years after we leave. At that stage, we will be ready for our very own strongwoman, left or right, who will line up the appropriate scapegoat (right wing strongwoman foreigners; left wing strongman the undeserving well off) for the failure. Of course people will buy into this, after all the alternative would be for them to admit they as individuals made the wrong decision to vote out. This will never ever happen. I see all this as inevitable, because the hatred of the other and the desire to return to an imagined past are not reasoned arguments they transcend mere facts.

    Is there a way out, Ireland holds out hope (although Brexit might break it again). Ireland for years after the turmoil of its civl war, was a place the young fled from to a better life. It eventually hit rock bottom. Joining the EU was the start of sustained modernisation, challenging outdated nationalist myths that incompetents sheltered behind and confronting ingrained prejudice. Whilst not nirvana Ireland is a great place to live. The only drawback is that it took a generational shift and 50 years. (I know the bloody history of British repression in Ireland, my point is only that a traumatized society can right itself).

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  9. I admire Corbyn for his courage and resiliency, but not for his economics. On the main issue the UK must act on, deciding to leave the EU (I don't agree that an advisory referendum vote deprives an elected Parliament of its powers), he is compromised. He just doesn't understand the value of a single European market. That makes him a "Little Englander". How can he lead Labour against a party of Little Englanders?

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  10. IMHO a commenter on another site (to which you have a link - www.irisheconomy.ie) has hit the nail on the head:
    "The path to destructive populism (or “revolution” of any sort) seems to me to be to be paved with persistently ignoring “the interests of ordinary people”."

    The Brexit vote was an example of destructive populism - as is a vote for Trump in the US. But Brexit will prove a long-lived, costly economic and strategic blunder; even if Trump wins it will be but a short blip in the life-time of the Republic.

    But it is particularly futile blaming either particular politicial parties or noisy, self-important parts of the media. The major parties are focused, or should be focused (though one has grave doubts about Labour) on shoring up their core support and to reach out to middle/centre/swing voters to generate a Commonns majority. (It appears that a majority of voters quite like to have these two competing blocs capable of providing governance competing for their affections - and, thereby, imposing some scrutiny, restraint and accounatbility on each other. There are rarely major and irreconcilable policy differences between the two blocs - remember the late Richard Neville's apohorism about the one inch gap between Labour and the Tories. And that is how compromises are reached which ensures the provision of some effective sensible governance that will secure broad popular consent.)

    The Tories were forced to offer the Brexit referendum because its core support snaffled by UKIP at a rate of knots. The Labour High Command had their heads so far up their fundaments that they didn't notice they were losing their core vote as well. Labour, apparently, has decided that it is no longer committed to playing this game. Sir Keir Starmer's efforts are laudable but pathetic because they reveal the total lack of support of the Corbyn-McDonnell dumb (not duum) virate.

    While the support for Brexit rhymes with a vaguely perverse (and backward-looking) sense of English exceptionalism and the justified "we've nothing to lose, let's give 'em hell" sentiments of so many marginalied and excluded citizens, it took particular genius by the Tories and Labour and their cheerleaders to convert these factions in to a majority against the EU.

    And it's even more futile to blame parts of the media. If what they publish doesn't resonate with the hopes, aspirations, concerns and fears of their readers they will die. It might be more appropriate to ask why much of the nonsense they publish appears to resonate much more effectively with so many voters than the self-serving bullshit spouted by the establishment elites and their cheerleaders.



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  11. This is a good post. As I have said before, I think restricting unskilled freedom of movement of people who would not get a work visa is a good thing and I disagree with the studies. So the sensible thing to do is that. Of course we need skilled workers at the moment but we can gradually train more people and it will cost, but it prevents brain drain. Romanian and Bulgarian workers would still be able to get jobs in France, Germany etc.... to equalise wages as SWL has said in the past. I don't see limiting the UK immigration as terrible or racist to those poor people.

    Labour *are* trying to manage flow by restricting job numbers - leaving residents firmly on the unemployment queue. That is a less principled and reasonable idea than yours. It won't work:

    http://labourlist.org/2016/11/len-mccluskey-workers-need-safeguards-and-strong-unions-to-make-migration-work/

    As to leaving the Single Market, what's always missing from these discussions on 'pass through' is the effect of competition on suppliers. It's not as if the world is brimming with demand and the French can sell their surplus beef elsewhere.

    Which means that if british buyers in the supermarkets, etc. stand their ground and shop around then the currency change will have to be absorbed by the supplier, not the customer.

    If foreign supply chains *can* pass on their costs so easily, then we clearly don't have sufficient diversity of supply or we have a monopoly situation that *ought to be addressed*.

    I think the sensible thing to do would be for Labour MPs and Jeremy would be to accept Brexit and work with it. Once outside the EU we can introduce a Job Guarantee and then reopen the borders once the EU has a fiscal union etc and equivalent scheme and will help equalise wages etc more than inviting such workers to the UK...

    I accept there are costs to this and many Brexit voters may not accept costs but I feel it is a sensible way to proceed. Labour will not win an election so blocking Brexit just means a May landslide. I can't see why pro EU people support it. Better to work with the decision and wait for a recession to win an election.

    - frequent commentator Random (can't log into google for some reason)

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  12. I really think it would be very sensible for the people concerned about leaving the Single Market to introduce policies to minimise any damage.

    "they could say that while a majority voted to leave the EU, that is not equivalent to leaving the single market, and therefore any negotiation that did involve leaving the single market would require a separate referendum"

    Owen Smith has suugested something similar. The other thing is I don't know how to achieve a 'Soft Brexit' given EU statements. I don't see how that is possible. May would probably call an election and replace anti-EU MPs and reject amendments to legislation.

    - Random

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  13. The latest YouGov poll says that there are (by slim majority) more Remain voters who will almost surely vote (83% likelihood 8, 9, and 10) compared to Leave voters (81% likelihood 8, 9, and 10), while also Leave voters are more likely not to vote (7% likelihood 0, 1, 2) compared to Remain voters (3% likelihood 0, 1, 2):

    https://d25d2506sfb94s.cloudfront.net/cumulus_uploads/document/kmy5c2fzq9/TimesResults_161101_VI_W.pdf

    This is good for Labour considering how they split by parties:
    Remain: 28% Con, 41% Lab, 16% Lib Dems, 0% UKIP, 15% Others
    Leave: 55% Con, 14% Lab, 5% Lib Dems, 22% UKIP, 5% Others

    It also shows that Labour should focus on Leave voters to make gains in polls.

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  14. The three judges that were trashed by Friday's headlines: have they had their personal security increased ? More bodyguards ?

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  15. Don't think you're quite right about Corbyn, Simon. Pretty sure the current approach is being driven by Keir Starmer and vulnerable MP's as much as the leadership. I suspect that, unsatisfactory as the position may appear, it is the only one that can unite the party at present. Which doesn't mean that Corbyn isn't hostile, but that he could be persuaded if there was the will within the party.

    Couldn't agree more with the rest of your argument.

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  16. It has indeed started to look like Labour are applying the same Tory-lite approach that failed so completely with austerity in the 2015 GE. And we will fail again trying to penetrate the Tory/UKIP leave base with a Labour leave message, and even more so with a Labour remain message.

    I really can't see how Labour could make a convincing case for remain without negative economic effects hitting hard and soon, but of course no-one wants that. Even if we could make an about turn and press some policies to address the underlying leave issues - and I would hope McDonnell has taken the advice of EAC on such policies - I worry that the only message the electorate would hear would be that of Labour trying to 'kill brexit', 'undemocratic' etc. And its not like the leadership contest helped raise Labour's profile as effective opposition in the aftermath of the referendum...

    The perfect no win scenario for everyone.

    Mal

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  17. If MPs want to show the tabloid press they are respecting 'the will of the people', they could say they cannot approve the triggering of Article 50 before the government undertake to increase NHS spending by £350m a week.

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  18. Caution please about what you assert to be Labour’s policy. You link to an article on Keir Starmer’s views as evidence that Labour wants controls on FoM but as that article states, that’s not Jeremy Corbyn’s view, and Corbyn is the elected leader.

    Like Aesop’s reed, Labour might well have to bend on defending FoM to avoid being broken by the gale. But I hope we can keep that to a minimum to limit the economic (and social) costs. Keep making the case for FoM.

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