Jeremy Corbyn cannot end Brexit

There is a cheap jibe that responds to the title of this piece by saying that Corbyn does not want to end Brexit. It is cheap because what Corbyn wants above all else is power. It is difficult to imagine this government surviving the collapse of Brexit, so ending Brexit is a means to that power. 

Another idea that some Remainers have is that if only Corbyn had campaigned against Brexit from the moment the vote to stay in the EU was lost, the Labour party could have somehow swung enough public opinion such that support for Brexit would by now be collapsing, and the resultant pressure on Remain-at-heart Tories would be so great that they would have been prepared to bring down their government just to stop Brexit.

To see why this makes little sense start with the 2017 election. May wanted this campaign to be about Brexit. She would have wanted nothing more than Corbyn to oblige by supporting Remain. The reason is straightforward. The Brexit vote divided the electorate on social conservative/liberal lines, with social conservative (anti-immigration) Labour voters supporting Leave. May knew that in a general election right wing social liberals would return to the Conservative fold, but left wing social conservatives could have been persuaded to vote Conservative, or at least not vote for an anti-Brexit Labour party. As a result of all this, the only choice Corbyn had before the election was to triangulate over Brexit, and it is only because of this that May did not get her landslide.

The only possibility is therefore if Corbyn had campaigned for Remain from the moment Remain lost the vote, and that as a result he had been sufficiently stronger in the polls by the following spring to dissuade May from holding an election. This seems very improbable for two reasons. First, immediately after the poll many who voted Remain believed the referendum result should be respected. Second, the Brexit vote has stayed pretty firm despite a fall in real wages. Once you recognise that, Corbyn had no choice but to triangulate over Brexit. That may have been an easy choice for him to make, but it was also the wise political choice. Had he not done so, May would have got her landslide in 2017. If Owen Smith had become Labour leader he might have made an anti-Brexit campaign work, but that is now irrelevant speculation.

That is why wishing Corbyn had not triangulated is in effect wishing May had got her landslide. Triangulation is why Corbyn has endorsed staying part of a customs union (although he could have done so sooner). As one of the reasons Labour gave for doing that is to avoid any infrastructure on the Irish border they have effectively endorsed staying within the EU’s Single Market for goods: the so-called Jersey option.

But triangulation is a dangerous game, particularly if your core support is not clear that is what you are doing. You have to convince socially conservative Leave voting Labour supporters that you will respect the vote, but at the same time convince your Remain voting core supporters that you will always push for a softer Brexit and take any realistic chance you are given to stop Brexit.

That was why sacking Owen Smith was foolish. The general belief of most Remainers is that they only way Brexit can be stopped is a referendum on the final deal. Sacking Smith because he advocates this just weakens Labour’s support among Remainers for the forthcoming local elections. Maintaining shadow cabinet discipline gains him nothing, while appearing to cast aside the hopes of many loyal Labour party members is a big deal. You do not win votes by shattering dreams.

However Remainers also need to realise another important political fact. The remaining slim chance that Brexit can be stopped requires Corbyn to remain passive. The only people who can stop Brexit happening will be the handful of Conservative MPs that have in the past voted against May’s wishes. They need to support moves that initiate the circumstances that lead to a popular vote on the final deal. Those Conservative MPs will only support such moves if they come ‘from parliament’, and not if they come from Jeremy Corbyn directly. Anything that comes from Corbyn is too toxic, as George Eaton notes here. All that Corbyn can do is leave it to others to do what they can to facilitate that moment, and then go with it if it comes. And he will go with it, because it increases the chances that the government will fall.

Whether that moment will come depends not so much on Corbyn or Labour, but more on the EU. So far the EU have allowed May to pretend that there is another solution to the Irish border question than the Jersey option. They have even gone as far as to set out what any free trade agreement (FTA) between the UK and EU would look like. They must know that the only way that FTA could ever happen is if there was a border in the Irish Sea, and they must also know by now that this is politically impossible for May. To go down the FTA route when May will have to concede something like the Jersey option for the whole of the UK is a waste of their time.

The EU therefore has two options. It could force the issue, and make May choose between the DUP and Liam Fox, or it could allow her to continue to fudge the issue until after we leave in 2019. Remainers should stop using Corbyn as a punchbag for their frustrations as time runs out to stop Brexit, and focus that frustration where it may belong, which is in the EU’s apparent willingness to indulge May’s desire to keep her party together.

Here is why the EU should not allow this charade to continue. Brexit is and will always be a right wing fantasy project. It is an attempt by a small group of newspaper owners and politicians with Little Englander fantasies to persuade the country that by leaving the EU the UK could become more wealthy in economic terms and more powerful in political terms. In reality precisely the opposite is true. In order to keep the fantasy in tact the Brexiters have tried to vilify experts, take power from parliament and intimidate judges, and have called any dissent they face unpatriotic. In other words the attempt to make this fantasy work has required its opponents to threaten almost every aspect of our parliamentary democracy.

If such tactics are seen to be successful they will only be repeated elsewhere. It is therefore not in the EU’s interest to allow May to keep her party in one piece. Brexit has to be seen as a failure, just as it is essential that Trump is seen as a failure. That has to mean that the Brexiters lose what matters to them most: political power. [1] It is not in the EU’s interests to allow May to appease her Brexiters. The possibility that by not indulging May the EU risks a No Deal outcome is now non-existent.

One thing above all else Remainers need to see. Even if Brexit cannot be prevented in 2019, it is essential that those who masterminded it suffer for the harm they will inflict on the UK. The only way they will suffer is if they lose power, and Conservative party members come to see the Brexiters as the source of their subsequent misfortune. To imagine, as some Remainers seem to do, that this can come about in first past the post UK by some kind of centrist revolution is as mad a fantasy as Brexit itself. [2] Whether they like it or not, the Brexit project will only be seen as a political failure if it leaves its leaders hollow, and the Conservatives out of power for a decade, and that can only happen one way.

[1] The idea that Brexit needs to be seen to fail in economic terms with the Conservatives in power is misguided. Economic failure will be gradual, and as with Brexit itself the government will deflect economic problems by finding scapegoats that play well with social conservatives, and by ramping up nationalism. As Simon Tilford argues, Brexit poses a real threat to pluralistic democracy. This is the strategy that Republicans have followed in the US, and right wing governments in Hungary and Poland are also following with some success.

[2] If centrists are uncomfortable with what Labour has become, think instead about what the Conservatives will become once May finally goes. The top three favourites to succeed may are all Brexiters, and for a good reason.

The politics of ignoring knowledge

Simon Tilford has a post where he explores the roots of Brexit in a kind of UK exceptionalism. He argues that “the underlying reason [for the Brexit vote] is the hubris and ignorance of much of the British elite, not just the eurosceptics among it”. I want to expand on that. I do not think this ignorance and hubris is confined to the UK’s role in the world. It also extends to an attitude to knowledge of all kinds, and I suspect it is possible to date when this began to the revolutionary zeal of the right under Thatcher.

The Thatcher government that gained power in 1979 were going to do away with what they saw as Keynesian nonsense, and run the economy using money supply targets. Treasury civil servants produced a forecast that said their policy would lead to a recession, and this turned out to be what happened. The forecast when it was made was dismissed by the politicians in government as the product of outdated civil service advice reflecting a failed consensus.**

It is of course the prerogative of politicians to reject a consensus, particularly if there is a reasonable minority of experts who think the consensus is wrong. It is what happened next that was the problem. Monetarism was a monumental and predictable failure, but Conservative politicians and their supporters spent considerable effort and resources turning this failure into a triumph of Thatcher over an establishment civil service and academic economists. One example is the letter from 364 economists objecting to a deflationary fiscal policy in the 1981 budget. The right, and in particular the IEA, have successfully cultivated a belief that this letter was wrong when in fact it was right. The recovery (using the term as it should be used) was delayed by over a year by the 1981 budget. More generally the view was that social scientists or civil servants were probably antagonistic to the neoliberal project and could safely be ignored. They were, in Thatcher’s words, not one of us. [1]

The reality was that the Thatcher and later Major governments did subsequently often take note of what experts were saying, but the myth on the right prevailed. Before the Conservatives regained power in 2010, they thought very little of going against the advice of the majority of economists over austerity, although to be fair they were later supported in this by senior civil servants and the governor of the Bank of England. Policy based evidence replaced evidenced based policy. But this was the relatively sane wing of the party, as we discovered during the referendum campaign.

We know the EU referendum campaign largely ignored experts, whether they were economists, lawyers or experts in international relations. What I think surprised many is that the Leavers fantasy was not just a device to obtain votes, but actually reflected what the Brexiteers believed. Since the referendum the government has clung to the fantasy, and ignored or dismissed all the advice it was getting from its civil servants. (In two cases dismissed meant sacking or resignation.) As Steven Bullock says, the EU side are in despair that the UK has yet to work out a realistic position on many issues. Because large parts of the UK public, relying on the right wing press for their news, still believe in the fantasy, some in the main opposition party think their best strategy is to ape their opponents.

As a result, we are in a strange bifurcated world. One part consists of pretty well anyone who knows anything about the economics, politics or legal aspects of Brexit. They realise how hard Brexit will be, know how much damage it could do, and by and large think it will be disastrous for the UK. (Experts tend to recognise and respect knowledge in other areas.) The other part lives in a different world, the world of the media and politicians, where everyone still lives the fantasy.

In this respect, we are no different from what is happening across the Atlantic. Angus Deaton notes the tragic irony that in the year the great nobel prize winning US economist Ken Arrow dies, the Republican administration is ignoring one of his great achievements, which was to show why a simple market in healthcare will not work. The only ‘expert’ this Republican administration seems to recognise is Ayn Rand. If it is successful in replacing or sabotaging Obamacare, millions will lose coverage and thousands will die as a result. The experts (such as the CBO) who predict this are accused of inaccuracy by a White House that cannot even be bothered to check its spelling of 'inaccurately'.

May holding Trump's hand shortly after he became president was indeed symbolic. Those who justify ignoring experts often talk about them as ‘unaccountable elites’ who have ulterior motives in giving the advice they do. In reality ignoring expertise means dismissing evidence, ignoring history and experience, and eventually denying straightforward facts. It leads to the politics of barefaced lying, such as asserting that a new trade agreement can be negotiated in little over a year. [2] This disdain for knowledge is not a prerogative of the right: you can find it on the left among those who say, for example, that all social science is inherently value laden and therefore political. (Ironically often dismissing mainstream economics as a buttress of neoliberalism, the same economics that the right are so keen to discredit.) The difference is that that the knowledge dismissing right have power in the UK and US, and so we are suffering the consequences of their evidence-free politics.

[1] Sir Keith Joseph tried to abolish the Social Science Research Council.

[2] It seems finally that the government has accepted a reality that was obvious months ago to those who listened to experts. 

**Postscript 21/07/17 As Sasha Clarkson reminds me, one of that group now spends his time denying climate change.

Growth will be lower if the Conservatives win

The Conservatives want Brexit to be the central issue in this election. Partly as a result, the relative macroeconomic outlook under the different parties has not been discussed as much as it should, or as much as it was in 2015. The other reason it has not been discussed very much is that the economic record of the last seven years has been dire, but prospects under either Labour or the LibDems would be distinctly better. [1]

The last seven years have seen an extraordinary decline in real wages. To quote Rui Costa and Stephen Machin:

“Since the global financial crisis of 2007/08, workers’ real wages and family living standards in the UK have suffered to an extent unprecedented in modern history. Real wages of the typical (median) worker have fallen by almost 5% since 2008, while real family incomes for families of working age have just about recovered to pre-crisis levels.”

This stagnation in real wages is greater than any other advanced economy bar Greece. [2] In addition, as Laura Gardiner from the Resolution Foundation points out, current government policies imply the “biggest increase in inequality since Thatcher”. The less you earn, the more this government plans to take income away from you.

The Conservative response is to point to record levels of employment, and to keep saying ‘strong economy’. But these two apparently diverse developments, high employment and falling real wages, may be related in a very simple way: workers may have been forced to price themselves into jobs by keeping real wages low, or workers who might otherwise have retired are continuing to work to earn enough for their old age. When high employment is a symptom of no growth in living standards, it is nothing to cheer about. They both reflect a weak rather than a strong economy.

The different party manifestos have been discussed at length, but one aspect that has been almost totally ignored by the media has been their different macroeconomic implications. A lot of the responsibility for this lies with the IFS. As I wrote in a recent tweet, the “problem with IFS analysis of manifestos is not just the absence of macro dimension, but their failure to acknowledge it even exists.” **

Both the Labour and LibDem manifestos amount to an increase in public investment, and an increase in public spending financed by higher taxes, compared to current government plans. Standard macroeconomics implies that both higher investment and spending will lead to an increase in GDP, unless the Bank of England raises interest rates to exactly offset this effect. With interest rates currently stuck at their lower bound, and with public investment helping aggregate supply, that last possibility is extremely unlikely. The conclusion therefore has to be that GDP over the next few years would be higher under a Labour or LibDem government than under the Conservatives.

This is why, according to Larry Elliott, Oxford Economics estimate that “the economy would be 1.9% bigger under the Lib Dem plans and 1% bigger under Labour’s plans than under Conservative plans.” The argument that this cannot be done because it would involve some more borrowing is rightly dismissed as pre-Keynesian nonsense. It is for this reason that the IFS approach of ignoring macro is so helpful for the Conservatives. I understand that the IFS does not do macro, but its failure to even mention this gap in their analysis not only encourages mediamacro, but in the current situation represents a clear bias towards the Conservatives.

This is not the only reason why living standards would be significantly higher under a Labour/Lib Dem government. Just as the IFS ignores macro, I fear Theresa May ignores economics. In this post I noted her obstinate refusal to take foreign students out of their net migration target (causing considerable damage to one of our leading export industries), but more generally her obsession with reducing immigration is likely to do further damage not just to the public finances, but output and living standards too. It is increasingly clear that while the the coalition government (and in particular George Osborne) had no intention of meeting their immigration target, May regards it as an unfulfilled commitment despite the economic damage this would do. This marks a big difference between the Conservatives and Labour.

Finally, in comparing the economic outlook under a Conservative or alternative government, we should not ignore Brexit. After my previous post outlining why May is in many ways unsuited to the forthcoming EU negotiations, some comments were along the lines that surely Corbyn would be worse. I think not, for two reasons. You have to put out of your mind the government’s and media’s framing of these negotiations as some kind of poker game or battle of wills. They are much more like a cooperative exercise involving give and take. I see clear reasons for thinking that May/Davis will be worse at this than Corbyn/Starmer. Last but not least, I think there is no chance of a No Deal outcome under Labour, but a significant chance that the Conservatives would walk away. As Ben Chu points out, what is best for the UK economy might well be rather different from what Theresa May sees as best for Theresa May.

If the last 10 days of the campaign seem to ignore the outlook for the economy, there will be a very simple reason why. As a result of the manifestos, attitudes to immigration and Brexit, the UK economy will be better off and subject to less risk if Theresa May is no longer the Prime Minister after 8th June.

[1] Implicit in these two sentences is that the Conservatives tend to dictate the issues discussed by the media during an election, as was clearly the case in 2015.

[2] See also this New York Times piece from Simon Tilford, which presents a rounded picture of our performance relative to other European countries, rather than the carefully chosen snippets beloved by the government's spin machine.

** In the original version of this post I said that the IFS analysis assumes GDP would be fixed. This is incorrect: what I had missed is that they do allow a short term impact from additional public investment on GDP (see slide headed 'Impact on the Economy' here). However this slide illustrates exactly the concern I have.
(1) It makes no sense to allow a short term impact from public investment, but no short term impact from a balanced budget increase in public spending.
(2) The slide says that the long term positive impact of this public investment on GDP will be exactly offset by the macro impact of a higher minimum wage and additional public holidays. Is this a result of detailed macro analysis, or just a convenient assumption?
(3) The slide also says that the Conservative commitment to reduce immigration would weaken growth and public finances, but despite this they assume no impact of lower immigration on growth. This makes no sense whatsoever, unless we are working backwards from the fixed long run GDP assumption.