Thursday, 15 December 2016

Brexit and the Kindness of Strangers

Once again we have civil servants and politicians telling us we need ten years to negotiate trade deals with the EU before we can have Brexit. This is what Hitler called the big lie, something obviously untrue, but if you keep saying it then people will begin to believe it.
The reality is that we do not need trade deals, as we have our biggest and most profitable trading area right here on our doorstep. It is called the UK.
And the same civil servants and politicians, who oppose Brexit, have spent thirty years actively undermining the UK economy in the name of "free trade". As a result we have an unsustainable trade deficit, which is the biggest challenge facing the UK, not our lack of trade deals.
Earlier in 2016, the Governor of the Bank of England, Mark Carney, called it "the kindness of strangers". This is the willingness of foreign banks and institutions to finance the UK's massive trade deficit .
A dangerous and insecure foundation for any economy.
Yet throughout the debates about Brexit and the UK's position in the world, the trade deficit has not been something that any of the political parties or civil servants discussed. Not even the Green Party, despite the fact that it is a major factor in the sustainability of the UK economy.
Greens should be asking: are EU economic policies sustainable, or should we be striving for a more self-sufficient society? This is the big question that I believe the Green Party leadership failed to ask itself before the EU referendum. Will we get a more sustainable society inside or outside the European Union?
If it is about anything, Brexit is about the long term future of the UK economy. We should be thinking about what sort of society we want to be living in for the remainder of the 21st century. The Green Party in particular should be campaigning for a society that is sustainable in the long term.
This is not just an issue of phasing out fossil fuels, to try to avoid the Armageddon of global warming. It is about whether we want to continue consuming the world's resources at the current rate; a rate not sustainable by two earths, not just the one we inhabit. We are constantly being told that we are consumers, but should we not be striving to become conservers?
The EU has and always will be an advocate for big business. The number one goal of the current EU trade commissioner is to expand international trade by taking the EU into TTIP.
Indeed it was written into her remit by the President of the EU commission himself. The biggest and most effective lobbyists in Brussels come from the multinationals. But most of all, the very essence of the EU is about economic growth, no matter what the cost.
This is why, despite the relative ease of doing so, the EU or any one of its member states have never taken effective measures to curb wholesale tax avoidance by multinationals. Indeed, some countries actually style themselves as tax avoidance facilitators, like Ireland as it struggled to get out of its debt crisis and Luxembourg (championed by a Prime Minister who was later to become the President of the EU Commission).
That is why the UK Chancellor's stated big ambition is to have the lowest corporation tax in the EU. It should be to build a sustainable country, with a priority of protecting and serving its citizens.
The EU cares little about the balance of trade between EU countries; its priority is the furtherance of trade for the EU as a whole. This is why we have the desperate economy of Greece co-existing with the massive wealth of Germany. It is also why the unsustainable trade deficit of the UK is entirely down to the imports from the rest of the EU being far more than our exports to the EU.
In the first quarter of 2016, the trade deficit of the UK with the EU reached £24bn (the equivalent of £96bn a year ). If the UK economy is to survive, then any responsible government must plug this trade gap, before the "kindness of strangers" runs out, as it did in Greece.
In 1957, the then prime minister Harold Macmillan ordered the first big post war economic re-appraisal of the UK economy and, after the shock of the Suez crisis, of the UK's role in the world. The conclusions were clear, a post imperial Britain had to have a trade surplus to survive. So Macmillan and his immediate successors focused on supporting British industry, to replace the trade lost as the empire disappeared.
This "export or die" support for British business continued until Thatcher and her acolytes (Major, Blair, Brown, Cameron, and Clegg) broke the post-Suez consensus around economic sustainability. Blinded by the pseudo-science of the neo-liberal economics sponsored by the multi-nationals, they allowed our domestic economy to stagnate.
Indeed, since Thatcher there has been little economic growth per capita. That means that what economic growth there has been was largely the result of an increased population due to net immigration and price inflation. (Between 2008 and 2014 the economy declined by 0.2% per individual officially resident in the UK).
What there has been is a steadily increasing trade deficit, as UK industries were either deliberately destroyed (like locomotive manufacture, when the Tories refused to buy any new trains for three years before they privatised the railways) or by their transfer to cheaper parts of the world, including other parts of Europe. Thus we had the unedifying sight of British workers (as in Phillips and Cadburys) training their successors before being put out of work.
With the UK part of the EU, economists thought on an EU level. It did not seem to matter that the UK had a massive trade deficit with the rest of the EU. But when the UK voted for Brexit, the economists suddenly had to view the UK as a stand-alone economy. This slap in the face with the reality of the UK's terrible trade deficit is what caused the drop in the pound, not the democratic decision of the British people to leave the EU.
The biggest challenge of Brexit is how to reduce this trade deficit and re-establish the UK as a sustainable economy. What we need is a healthy dose of Keynesian economics, with public and private investment in manufacturing and much needed public services. The Tory and pseudo-Tory government policies of laissez faire of the last thirty years have failed and is time for a UK Government to manage our economy once again, as even the arch-Tory Macmillan realised sixty years ago.
We need a Government that invests in our future, a sustainable future. This means doing away with tax breaks for oil producers and fracking and replacing them with investment in renewable energy, in home and business insulation and community energy schemes. It means public investment in our NHS, cancelling PFI contracts and stopping the leeching of money to private sector providers in the name of market economics.
It means cancelling the dodgy deals to build obsolete nuclear power stations with money supplied by a communist dictatorship and investing instead in reducing our energy consumption.
It means taxing multi-national businesses in the UK on their profits made in the UK and properly policing by HMRC to eliminate fake management, service and commodity charges charged by holding companies in off-shore tax havens.
It means using quantitative easing to invest in our country, instead of increasing the value of bonds held by the richest 5%.
The problem has always been that much of this direct Government involvement in developing UK industries directly contravenes EU directives. Even the purchase of local produce by local authorities has been shown to fall foul of EU competition rules.
But most of all we need to recognise that with 65 million "consumers" the UK is a massive single market on its own. Because every country in the rest of the EU exports far more into the UK than the UK exports into those countries, the UK market is far more valuable to them than the EU market is to the UK. As mentioned £24bn more in the first quarter of 2016 alone.
With Brexit we have two main opportunities, currently not even being discussed by this failed Tory administration nor indeed by the official opposition.
First to reduce our trade deficit by investing in our own economy to reduce and replace the goods and services purchased from the other countries in the EU.
Secondly, to actively engineer our economy away from a throw-away society towards a society based on providing the goods and services that people actually need, like renewable energy and good health and social care. In Sweden for instance, they are giving tax breaks to people who repair goods rather than throw them away.
It is no coincidence that we have not seen a sustainable economy since we abandoned Keynesian economics and replaced it with 'the world's dumbest idea': the economics of Milton Friedman. So I ask everyone who has the best interests of the UK at heart, please stop looking back to challenge Brexit and instead look forward to a resurgent UK investing in itself and its people once again.