Sunday, 14 October 2018

A left case for Brexit?

A new book by Philip B. Whyman, Professor of Economics at the University of Central Lancashire, makes the case for the potential benefits of a left (or alternatively ‘progressive’) Brexit. Yet The Left Case for Brexit (2018), published by the think tank Civitas, only makes the deep quandary of Brexit clearer. Whyman is a former researcher and European officer for the USDAW union as well as author of copious studies of UK-EU relations. He is the advocate of the kind of beefy, corporatist Keynesianism favoured by the Nordic economies – one that tends towards euroscepticism of the patriotic, democratic, and socially egalitarian kind. 

Perhaps unsurprisingly, Whyman begins from broadly Keynesian premises. It is, he argues, government’s job to ensure socially progressive outcomes from seismic events like Brexit. He makes a good point: it is hard to disagree with the view that much of the conversation around Brexit – both on the left and right of politics – has been deeply counterproductive. Whyman defines a left Brexit as one which would be of benefit to ‘all’ – that is, ‘for the many and not just the few’, as the phrase goes. The argument about state policy will be uncontroversial in Keynesian circles: the UK economy is afflicted by deep woes. A productivity crisis means that UK workers are on average 30 percent less efficient than their German counterparts. Chronic underinvestment combines with dampened demand to produce an economy that favours income to capital, rent extraction, social inequality, and stressed living standards. Employment may be high, but the share of income that goes to the working class is stagnating. Insecure, low-paid jobs in the ‘casualised’ or ‘precarious’ sector are the result of decades of economic policy that has favoured ‘supply-side’ reforms (tax cuts and so on) while failing to encourage real productive investment, innovation, productivity growth, and wage increases. Whyman argues that a progressive government should spur domestic consumption by using fiscal policy to boost demand, while avoiding the perils of inflation by boosting productivity and improving the competitiveness of the economy overall. So far, so conventional. 

Whyman believes the UK can easily afford to end austerity – whether it is in the EU or out. The UK is not a member of the eurozone and has its own central bank. Therefore, it has greater room for manoeuvre on fiscal matters than other eurozone states. But he also wants to see a thoroughgoing ‘transformation’ of the UK economy. A strategic industrial policy would target investment projects through a beefed up investment bank, thus incentivising innovation and productivity growth. New decentralised public procurement policies would localise the provision of services and boost spending in crisis-stricken regions.

It is in this area that Whyman’s policy proposals come into conflict with the thrust of EU integration since Maastricht: EU competition laws limit the scope for local authority action on public procurement; its state aid laws make ‘picking winners’ more difficult; the so-called ‘four freedoms’ of capital, goods, labour and services proscribe policies that aim at domestic development and enhancing competitiveness. Controversially, for the ‘progressive’ side of UK politics, Whyman would also like to see an ‘independent’ UK free to levy its own tariffs on imported goods as well as to set its own parameters for inward migration. Naturally, if the UK is to have such ‘independence’ it will need quite a sharp break from the EU. Whyman’s solution is for the UK to seek a Free Trade Agreement (FTA) along the lines of the deal negotiated between Canada and the EU (CETA). 

What precludes closer integration of the UK and the EU? Whyman offers brief but insightful explanations of the various options the UK could pursue. Membership of the European Economic Area (the so-called Norway option) is rejected for familiar reasons: the UK would become a de facto member of the European Free Trade Associationcustoms union and single market, subjecto its rules without a say in determining them. On the other hand, signing up to a new customs union (advocated by the Labour Party) would mean that the UK could not negotiate its own bilateral trade deals, would still have to make a financial contribution to the EU, and would probably have to impose a common external tariff on all non-EU member states in order to avoid ‘tariff-jumping’ (whereby third countries would export to the lower-tariff UK in order to re-export to the EU, thus avoiding the latter’s common external tariffs). A customs partnership or indeed the deal proposed by the current Tory government is unappealing to the EU negotiators precisely because it relies on technical border fixes to the question of external tariffs, mandating that the UK conform to EU goods regulations whilst maintaining the freedom to set its own rules for external trading partners. 

Whyman settles on what he calls a ‘shallow’ free trade deal, one which would cover only goods and some services in its initial negotiations but could be extended in future. Whereas a single market and customs union membershipimply regulatory identity, a free trade deal only stretches to regulatory equivalence (achieving the same outcomes by different means). What this means in practice is that the UK could significantly diverge from EU rules on state aid, competition, procurement, and industrial policy whilst still benefiting from a high degree of access to the EU Single Market. 

The glaring problem with such an arrangement is that it would create a customs border between the Republic of Ireland and Northern Ireland. The May government has rejected a Canada style deal precisely because it would make a hard border unavoidable. The hated Chequers Deal proposed by May executed all kinds of verbal acrobatics to muffle the border issue.  In essence it proposes a ‘common rulebook’ for goods travelling between the EU and UK that would avoid any need for a so-called ‘hard border’ in Ireland. Under May’s Chequers plan the UK would be free to diverge from the EU in some areas while conforming on anything that can cross a physical border. The EU has rejected May’s proposals on the basis that it would undermine the EU Single MarketWhat is presumably meant by this is that the arrangement could lead to ‘tariff jumping’ by third parties seeking to exploit the regulatory alignment between the UK and the Single Market by exporting to a lower-tariff UK before exporting into the EU.Michel Barnier, the EU’s chief negotiator, has long suggested that a Canada style trade deal is the only option if the UK wishes to diverge significantly from the EU. But Barnier knows full well how unpalatable such a deal would be for any government that wishes to preserve the Good Friday Agreement. He has recently suggested that the EU would come forward in talks in October with a new proposal on the border question. Thus far the EU has suggested that Northern Ireland remain within the Customs Union in order to provide a so-called ‘backstop’ to the border question. For the Unionist government in Westminster, such an idea threatens the integrity of the UK itself, imposing a border in the sea between Ireland and the UK. 

Whyman’s own proposal accepts that a de facto border would appear in Ireland, but that so-called ‘smart’ border technology could reduce disruption. The tech-utopian overtones of such a proposal aside, it fails to take account of the complex political economy of Brexit – that is, the balance of interests among the various actors in the negotiations. Even if a technical fix to the border question is theoretically possible, in practice the entrenched positions around the negotiations make such an outcome highly improbable. If a government were to announce its intention to seek a free trade deal, it would immediately raise the spectre of a hard border. While hardline Brexiters and some members of May’s cabinet rally in support of Boris Johnson’s Super Canada’ deal, the Tories’ Parliamentary lifeline, the DUP, have rejected a ‘vague’ sounding free trade dealIt is not clear that there is any kind of Parliamentary majority support for such a distant relationship and it would also seem that large sections of Britain’s capitalist class prefer a softer rather than harder Brexit. Whatever the merits of a free trade deal (and there are obvious reasons why the left should not put its faith in a Tory-government negotiated deal), it remains politically a non-starter.

The central weakness of Whyman’s book – as with so many of the idealist ‘plans for Brexit’ that have circulated since 2016 – is its failure to confront these intractable political obstacles. Without a proper confrontation with the Irish border question, such proposals remain simply utopianAs a Keynesian, Whyman has a tendency to treat the UK economy in isolation – as a single economic unit which must improve its performance relative to the rest of the world. Such propositions will be familiar to anyone who has read Keynes or expended much thought on the nature of Keynesian economic policy. Along with Costas Lapavitsas on the Marxist left, he is a contributor to the revival of national-popular economic sovereignty on the left. There are certainly virtues to such a revival, which provide a corrective to overused and simplistic formulations of ‘globlaisation’. Yet it also has weaknesses. Whyman has a questionable commitment to the view that ending free movement of people will be good for the UK labour market (which he advocates ahead of ending ‘flexible’ working conditions) as it means we can specify the skill sets required. The revival of industrial policy to build about the UK’s economic capacity after Brexit would, if anything, require greater immigration not less. Whyman wants a Brexit that will work for ‘all’ - indeed, this is what his claim to advance a ‘left’ Brexit vision rests on. But there is no such thing as a Brexit that works for all: some classes will benefit more than others. Some groups – the oppressed, the poor, the excluded – are more likely to suffer from one form of Brexit than another. While any left economic policy should focus on the revival of state capacity at the national level, we shouldn’t think this means we need to be more ‘nationalist’ in our thinking. By failing to take account of the diverging political interests at stake in the Brexit negotiations, Whyman risks painting too simplistic a picture of the kind of Brexit that could benefit ‘all’.

Lest Remainers take undue heart at the failure of the Brexit project, there is still no majority either in Parliament or in the country to reverse it. Amid the endless arguments about the vote to leave and its consequences, there are very few voices on the left seriously grappling with the realities of actually leaving. If the likely outcome of the October negotiations is a fudge (on the question of the border and on the degree of future regulatory alignment), then there will be much to argue about even after March 2019. Although no one can predict exactly what is coming, it seems the any government will want to avoid a so-called ‘no deal’ exit. If this remains the case, then a long, protracted war of attrition seems likely. The exact balance of the outcome remains to be determined. Whyman’s book is a first attempt to outline how the UK’s post-Brexit economy could be shaped to left-wing ends. It is inevitably flawed, but it should be taken as a spur to further work.  

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