Showing posts with label Brexit. Show all posts
Showing posts with label Brexit. Show all posts

Wednesday, 20 January 2021

The UK’s Singapore-on-Thames Delusion


I will not spend much time on this topic because it is so ridiculous. But the notion that the UK can become a ‘Singapore-on-Thames’ seems to underlie some Brexit fantasies. Do these have any foundation?

First, here are some basic facts. The UK’s GDP is roughly 8 times bigger than Singapore’s; its population is more than 10 times bigger. Singapore used to be a British colony, and developed from being a key Asian trading hub for the East India Company. The UK is a declining imperialist power. It once had a go-between role for the US in Europe, and still remains a major backer of imperial oppression around the world, but now has its pretensions at diplomatic expertise seen as very irritating.

Singapore sling

In the field of finance, the UK was already a multiple of Singapore’s weight in the world economy before it finally left the European Union: 6 times bigger in international banking, 5 times bigger in FX trading and 30 times bigger in financial derivatives turnover. Whereas Singapore has a regional niche in global finance, the UK has been a leading global player.

It will be difficult, not to say impossible, to further extend the UK’s financial position outside the EU. Any belief that messing up links with the major trading bloc in Europe is a good economic decision – while remaining outside USMCA, RCEP and other trading blocs – would also need to undergo a sanity check.

Some reports have suggested that City of London financial companies contributed a great deal to the Vote Leave campaign in the 2016 UK Brexit referendum. Quite likely some did, though these seem mainly to have been hedge funds and so-called venture capitalists. By contrast, the overwhelming majority of City business, from banks, to life insurance companies, to pension funds and other asset managers, to legal and accounting firms, were clearly pro-Remain.

All City business has benefited from the existing UK tax laws developed over decades. But the hedge funds and so on would have been far less dependent upon EU-related business relationships, or will have dealt more directly with ‘offshore’ centres and Switzerland. That will account for the divided opinion. In the broader corporate arena, with one or two exceptions, businesses were pro-Remain, with only a section of small businesses being pro-Leave. Nevertheless, big companies did little to voice that opinion before the 2016 vote because they did not want to annoy half of their customers.

The end result was that, for reasons explained elsewhere on this blog (see here and here), despite capitalist opinion being greatly against it, the British working class helped enable Brexit, by 52% versus 48% in 2016. A more up-to-date measure of that political outlook can be seen in maps showing the large December 2019 Conservative election majority vote in England.

Where does this leave Singapore-on-Thames?

Singapore has exports that are some 90% bigger than its GDP, whereas UK exports are ‘only’ around 30% of GDP. So, onwards and upwards to Singapore-on-Thames? As you might expect, there are a few problems with this perspective.

Singapore is a small country and an entrepôt centre, with lots of re-exports. This produces a total exports number that is much higher than GDP because it is not based on the value-added measure that goes into a GDP calculation. In theory, the UK could also become an entrepôt centre, but the economic benefits of such a move are very limited.

More than that, any such move implies enforcing a low labour cost economic strategy. Evidently, that implies cutting labour costs. This is at the heart of capitalist economics, and has been explicitly embraced by Conservative pundits.

To use the UK political cliché, the EU would also be very clear in protesting against this kind of policy for being in breach of the ‘level playing field’ of fair competition between the UK and the EU post-Brexit. The EU was once grateful to the UK for proposing policies to cut labour costs, but now that is seen both as destabilising an already shaky EU economic system and as an unwelcome, aggressive trade policy from an ex-member of the club.

One could imagine some benefits of a Singapore-on-Thames – for example, free wifi and a good transport system, like in the real Singapore. But stupidity is its own reward, and the reality is going to be much harsher.

Tony Norfield, 20 January 2021

Monday, 3 February 2020

Brexit & the British Working Class *


Much has been written on Brexit, stage 1 of which occurred on 31 January. But a key point has been ignored: the UK’s departure from the European Union is due to a reactionary revolt by the British (mainly English) working class. This went against the established policy of the political elites, bourgeoisie, ruling class – call them what you want – and will lead to many problems. As such, it represents the first time in very many decades that the ‘popular will’ of a vote has contradicted capitalist business interests. However, this is no reason for socialists to be happy.
In the UK parliament, most MPs were in favour of remaining in the EU. Yet they had to watch their backs and worry about the people who had elected them: 52% of the UK electorate had voted for Brexit in the 2016 referendum and, more importantly, 64% of Parliamentary constituencies had done so. The biggest bloc of ‘Leave’ voters was in England. To show this was not a one-off decision, English voters rallied to the Conservatives and their ‘Get Brexit Done!’ slogan in December’s General Election. A survey showed that more than half of working class votes in Britain were for the Conservatives or the Brexit Party. As a result, the Conservatives now have the largest majority in Parliament since 1987.
It was no surprise that the Brexit issue dominated the General Election, since it has featured in all UK political discussion for years. Pro-Brexit sentiment grew in the aftermath of the 2008 financial crisis, when British workers complained about the squeeze on their living standards. They did not blame capitalism, or even UK government policies. For many, the culprit was the EU, and especially the migration of workers from the EU that was seen as putting pressure on jobs, housing and social services.[1] In 2016, when Brexiters chanted ‘Take Back Control’, what they meant was control of EU immigration. This could be done only by leaving the EU.
This factor helped build a successful political alliance between a large section of the British working class and other longstanding critics of the EU. The latter were a disparate group. They included Conservative ideologues, those nostalgic for the days of Empire and who wanted to see ‘Great Britain’ operating more freely in the world, some business people who were annoyed at EU market regulations, and even some on the left who saw the EU as an evil capitalist plot and dreamed of a more British-inspired (!) set of international relations. These diverse forces only gained political momentum once the British (English) working class joined them.[2]

The Social Contract

Working class support for Brexit was a protest. But it was a protest against how they thought the British state was not doing enough to protect them – against immigration and the pressure on living standards. So, economic arguments in favour of staying in the EU had little effect, because they thought that getting out of the EU would encourage the state to help them. The British working class has long had a loyal commitment to the British state. As long as that state offered some economic and social protection, it would not cause too much trouble. It was a kind of ‘social contract’. The immigration question became important in this context because it helps to identify the national, British-based working class as the legitimate recipient of state assistance versus the immigrants (or even refugees) from other countries. In this political outlook, the issue of inadequate housing, jobs and services delivered by capitalism becomes a moan about the supply of housing, jobs and services taken by migrants. In earlier decades, the moan was about blacks and Asians. In the past decade it has been more about white (East) Europeans who had rights to move to the UK under EU labour market rules.
By contrast, business opinion in Britain was consistently against Brexit. However, companies had to be careful in their public comments because they did not want to annoy half their customers. It was only in the past year that they warned how Brexit would disrupt supply chains, put important trading relationships at risk and damage investment, but this had little effect on popular opinion. The capitalist enthusiasts for Brexit were few, usually small companies wanting to avoid EU regulations. They, and others, overlooked an inconvenient point that world trade is already divided up among major trading blocs, especially in North America, Europe and Asia. There is no big, free world market to join outside the EU, and the UK will be stepping out of the deals that the EU has already negotiated with other countries.
After Brexit Day on 31 January, at first nothing much will seem to change for the UK. It will be excluded from EU decision-making, and a number of EU-related outlets for British citizens will begin to close down, such as employment and education opportunities. Otherwise, Brits will see most EU-related things going on as normal, probably up to the end of 2020. Even trade with the EU will not change abruptly before then.
Nevertheless, the Brits will still feel able to blame their woes on the EU. The Conservative Government’s objective is to do what it likes after leaving EU membership, but to still have trade access to the EU market as it was before. The remaining 27 countries of the EU cannot agree to this, so there will be many disputes and plenty of room for EU bashing in the forthcoming negotiations. There also remains a ‘divorce bill’ to settle, whereby the UK is liable to pay the EU tens of billions after it cancelled its previous membership commitments.
It is doubtful that the British working class will turn against the Conservative Government as the dream of a bright future outside the EU fades away. It may not take long before their promise of more investment in poor areas of the country is exposed as a fraud, but that does not mean there will be any progressive resistance. Instead, the greater likelihood is that the working class will double down on aggressive nationalism.

Tony Norfield, 3 February 2020

Note: * This is the English version of an article published on 2 February in the Spanish language journal Ideas de Izquierda, together with an article by Michael Roberts, here.


[1] See here for a fuller discussion of the data on EU immigration and the working class response to it.
[2] Just ahead of the 2016 EU referendum, I explained the politics of Brexit, the imperialist 'social contract' and the working class Brexit vote in more detail here.

Friday, 13 December 2019

All Quiet on the Western Front


The British elected, by a big majority, a Conservative government run by certified liars and incompetents in order to ‘Get Brexit Done’.[1] What a contrast to the countries that have recently seen widespread protests about a lack of democracy, corruption in government and attacks on the living standards of the mass of people. Mass action has worried the ruling elites from France to Georgia, from Hong Kong and South Korea to Iran, Iraq and Lebanon, from Chile and Brazil to Algeria and Sudan. In the UK, the electorate has endorsed the ruling elite.
The lack of a pulse in the British ‘labour movement’ – unless moaning can be seen as a sign of political life – confirms my longstanding scepticism about the potential for anything progressive happening in Britain. The British working class will likely learn nothing positive from the outcome, and may well become even more conservative and reactionary when it suffers the consequences.

In the map below, from the BBC, the dominant Conservative vote in England is shown in blue, while the Labour Party constituencies are in red, the Liberal Democrats in orange and the Scottish National Party in yellow.


Tony Norfield, 13 December 2019


[1] The Conservative Party message was ‘Get Brexit Done’ and this gained them a large majority of seats in Parliament. The irony was that, according to a BBC report, only 48% of UK votes were for Brexit-supporting parties! But this potential anomaly was widely known, leading to many advocating tactical voting in the ‘first past the post’ UK electoral system. In Scotland, the Scottish National Party won 48 of 59 seats and was strongly against Brexit. It is worth noting the relative population and seat numbers for the UK: England 56 million people and 533 seats; Scotland 5.4m and 59 seats, Wales 3.1m and 40 seats, Northern Ireland 1.9m and 18 seats. The General Election results are principally determined by the English vote, which this time supplied 345 of the Conservatives’ 365 seats in the 650-seat Parliament.

Tuesday, 22 October 2019

British Workers


As we wait impatiently while the Brits go through the interminable travail of Brexit, let us have a look at who they are. Not directly in a social, cultural or political sense, but by reviewing the data on UK employment. Work gives a foundation for people’s daily lives and will, in turn, have an impact on society, culture and politics. The employment numbers challenge the conceptions of many, especially those with a narrow ‘industrial’ view of the British working class. They also highlight that a surprising number of people, for various reasons, are not working at all, and that UK residents originally from other European Union countries are more likely to be employed than indigenous Brits.

Swamped?

According to the UK Office for National Statistics, the total UK population was 65.6 million people in 2018, with a couple of percent more women than men. Roughly 86% of these were born in the UK. Poland and India were the countries of origin for the largest number of others, each with 832,000. Pakistan (535k), Romania (392k) and the Irish Republic (369k) were next in line as other countries of origin. Even for Poland and India, their share of the total population was just under 1.3% each. Calculations of people by their claimed nationality give only slightly different data, and the overall picture is not simply that most people in the UK were born in the UK, as one would expect, but also that there has been no great influx of people from any one other country.
Even if the EU were taken as a whole, UK residents born in the 27 other EU countries amounted to only 3.6 million people, just 5.5% of the UK population. That figure was a slightly higher 5.8% in England, the major Brexit-voting country. Although this share is about three times higher than in 2004, a rapid increase, the still low percentage leads one to suspect that the anti-EU sentiment revealed in the dominant English Brexit vote (53.4% for Leave) has been based on something more than simply the scale of the EU immigration numbers.
A number of commentators have argued that it was the rapid influx of EU migrants after the accession to the EU of Poland and other countries in 2004 that led to worries on the part of British people about their domestic culture and ‘way of life’ being undermined by this development.[1] A look at the UK’s employment data will suggest a different perspective.

What about the workers?

In mid-2019, there were about 41.3 million people in the UK aged 16-64, the prime age group for employment. Of these, 31.5 million, or 76%, were employed, 1.3 million were unemployed and 8.6 million were ‘economically inactive’. Employed and unemployed are reasonably straightforward terms – although with changing definitions – but the latter one is worth examining further.
The ‘economically inactive’ category includes those who are students, those who are looking after the family or home, the temporarily sick, the long-term sick, ‘discouraged workers’ and the retired. It also includes some other reasons for inactivity, but basically means those who have not been seeking work in the past four weeks and who are not available for work in the next two weeks. It does not include those registered as unemployed.
At 8.6 million people, the number of the ‘inactives’ is surprisingly high: 21% of the population aged 16 to 64. Nevertheless, the inactivity rate has fallen over the past five decades, largely because of more women working. Over 40% of women were ‘inactive’ in the 1970s, but this has fallen to around 25-26% today. By comparison, the inactivity rate of males aged 16-64 has risen a lot – from around 6% in the 1970s to 16% in 2001, and it was 16.4% in the latest period. This is one way that the capitalist labour market, in its usual perverse manner, has tackled gender inequality. It is also linked to how female earnings can still remain below male earnings doing the same job, despite laws against such discrimination.[2]
The surprise at the high number is reduced when one takes account of 2.2 million students and another 2 million people looking after the family or home included in the total. But that still leaves another two big categories: 1.1 million who have retired before the age of 65, and 2.1 million who are long-term sick. Only 1.9 million of the 8.6 million inactives are recorded as wanting to have a job.
In addition to the inactive numbers, in mid-2019 there were also 333,000 people who had been unemployed for over a year but were still looking for a job. They are counted in the unemployment figures, which totalled 1.3 million, 3.9% of the workforce.

Economic activity divergence

There is a big divergence between the proportion of UK-born people who are economically ‘active’ and those who were born in other EU countries. In mid-2019, 76.3% of the UK-born population aged 16-64 was economically active, a rate which has slowly increased from a recession-hit 71% in 2010. By comparison, for those born in the original group of EU member states, named the EU-14,[3] the activity rate was higher, at 80.2% in 2019.
Much higher again was the economic activity rate of those born in the EU-A8 countries, among the group that joined the EU in 2004,[4] and which contains the famous ‘Polish plumber’: it was 85.2%. For Romania and Bulgaria, who joined the EU in 2007, the economic activity rate was highest of all, at 86.2%.
Recent migrants will tend to be the more economically mobile and more likely to be in the active workforce. They will also include fewer students, fewer people who have retired before the age of 65 and fewer long-term sick. These factors will tend to push the economically active rate of that population group higher. However, at the same time, there are other things, some less amenable to coverage in official statistics, yet clear in numerous anecdotal reports, which also account for the higher employment rate of the newer EU members.
For the EU countries that joined from 2004, a BBC report last year showed that these workers had hourly pay rates around 25% less than for UK nationals. This was despite them having average skill levels higher than for UK nationals. The skill-pay relationship only seemed to apply for workers from the EU-14 countries: their skill levels were much higher than for UK nationals, although they had pay rates only around 10% higher.
Many of those from the newer EU members included in the British working class have done low-paid jobs that British-born workers were reluctant to do, such as food processing and picking fruit and vegetables in fields. However, they are also in more skilled occupations, and not simply the skilled manual ones that led to the ‘Polish plumber’ term.

Workforce breakdown

Turning back to the British workforce, the following table gives a breakdown of the number of jobs in the UK by sector in June 2019. These sectors are based on standard classifications and are a bit broad. They can also be impacted by changes in the labour market over time. For example, if I recall correctly, it used to be the case that canteen workers in a workplace used to be counted in the total of people in that particular workplace sector. But with the outsourcing of most canteen services to outside companies, they would mostly be included instead under ‘accommodation and food services’. Nevertheless, the breakdown of the types of jobs done in the UK does a lot to question the common ideas people have about the relative importance of different jobs.
For example, while Britain may not be a ‘nation of shopkeepers’, it turns out that the biggest sector of UK employment has five million people in the wholesale and retail trades. The large numbers in health, professional, education and administration will not be a surprise to many, but each of these areas employs more people than the whole of manufacturing industry, which itself is not that far ahead of accommodation and food services. The much-maligned financial and insurance services sector employs over a million people, not all of whom are in the City of London. Another million have jobs in the arts, entertainment and recreation sector, and there are ten times more people employed in estate agencies than in mining and quarrying. A further detail is that more than 150,000 have ‘jobs’ in the armed forces.

Table: UK Employment Breakdown, June 2019

Employment in sector
Number (000)
Percent
Wholesale, retail trade, incl repair of vehicles
4,997
14.0%
Human health & social work activities
4,538
12.7%
Professional, scientific, technical activities
3,156
8.8%
Education
2,970
8.3%
Administration, support services
2,968
8.3%
Manufacturing
2,729
7.7%
Accommodation & food services
2,470
6.9%
Construction
2,369
6.6%
Transport & storage
1,789
5.0%
Information & communication
1,620
4.5%
Public administration, defence, etc
1,510
4.2%
   of which, HM armed forces
152
0.4%
Financial & insurance services
1,113
3.1%
Arts, entertainment, recreation
1,053
3.0%
Real estate activities
572
1.6%
Agriculture, forestry & fishing
366
1.0%
Water supply, sewerage, etc
239
0.7%
Electricity, gas, etc
141
0.4%
Mining & quarrying
57
0.2%
Other sectors
1,010
2.8%
Total jobs in all sectors
35,667
100%
Note: Services sector total
29,766
83.5%

Note: The data count the number of jobs in each sector and not the number of different people. The total of jobs exceeds the total number of people in the workforce.
Source: ONS, Labour Market Overview, UK: October 2019
Overall, services sector jobs make up nearly 84% of the total number of jobs in the UK. This makes the common refrain from the British left about ‘industry’ – let alone ‘manufacturing’, which got a special mention in Jeremy Corbyn’s Brexit policy statement in Parliament on Saturday 19 October – seem more than a little out of touch with the reality of contemporary employment.

Conclusion

Many British workers voted for Brexit in June 2016, and many were enticed by the ‘take back control’ argument of the Leave campaign – a phrase that was a poorly disguised attack on migration from the EU. The data show that although the number of EU migrants into the British workforce rose fairly rapidly after 2004, it remained a relatively small proportion of the total. The data also indicate that an underlying problem for British-born workers was the much higher employability of the more recent EU migrants, whether that was due to their higher levels of skill or to their lower wage rates, or both.
Workers often react to labour market competition in a reactionary way. The irony is that they usually support the capitalist system and the capitalist labour market, but then complain if how these operate does not turn out well for them. The result is that they call upon the state to stop or control immigration. Far from any notion of ‘workers of the world unite’, the sentiment instead has been ‘British jobs for British workers’, something supported by the Labour Party and, implicitly, by sections of the useless left.
A basic minimum demand for anyone with a sense of justice is that all workers should get the same rights and protections, ‘immigrant’ or not. That might be the most justice one can get from a labour market based upon a capitalist system that oppresses workers and destroys society.

Tony Norfield, 22 October 2019


[1] A comprehensive assertion of this view is from academic authors Roger Eatwell and Matthew Goodwin in their National Populism: The Revolt Against Liberal Democracy, Pelican 2018, which I critique here.
[2] This point excludes the other feature of the labour market, that many occupations are dominated by one gender, and those with a preponderance of women often have lower wage rates.
[3] The EU-14 is made up from those countries who joined the EU before 2004, but excluding the UK in these UK statistics of other countries. The 14 are: Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Austria, Finland and Sweden. The latter three joined the EU in 1995.
[4] In 2004, 10 countries joined an expanded EU, but the EU-A8 definition excludes Malta and Cyprus who also joined then, presumably because they were formerly British colonies. The EU-A8 countries are: Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia.

Thursday, 21 March 2019

No Empty Seats: Brexit & World Trade


Just in case you were still thinking that there was some economic logic to the madness of Brexit, let me enlighten those of you who might give some credence to an open vista of exciting trade opportunities outside the EU. After all, there are many things most British politicians (and journalists), even those who are against Brexit, do not generally understand.
One is that a so-called ‘customs union’ deal with the EU would not involve services – not simply financial services, but also legal, accounting, software, design and general business services. Just ask Turkey, which has such a customs union deal.
Another major point is that the great world outside the stagnating, troublesome EU is already, how shall I put it, divided up. This is something that Liam Fox, the airmile-hogging chancer who is currently the UK’s Secretary of State for International Trade, has been finding out. After two years or so, he has done post-Brexit trade deals with … Switzerland, Chile, the Faroe Islands, Papua New Guinea and Fiji.
The following table highlights this latter point. It shows the top 20 countries by nominal GDP in 2018, on IMF data measured in terms of how many billions of US dollars, and also the major trade deals that each one has with other countries. (Also note that the EU bloc of 28 countries is the second largest economic area, having a single market among members and trade agreements with 36 non-member countries.) The focus here is on economic deals relating to trade, rather than other more purely political or military cooperation agreements.

In the table, the following abbreviations apply:

APEC: Asia Pacific Economic Cooperation group of 21 Pacific Rim economies
ASEAN: Association of South East Asian Nations, including 10 countries in South East Asia
CPTPP: Comprehensive and Progressive Agreement for Trans-Pacific Partnership of 11 countries, including Mexico, Canada and Japan. This is something the UK could join post-Brexit, but there has been no news on any such developments. The US pulled out of the previous TPP, but the remaining members went ahead with this CPTPP excluding the US, after suspending 22 provisions the US favoured that the others opposed.
Gulf Cooperation Council: a grouping of six Arab states, the main members being Saudi Arabia and the UAE (with Qatar now under an embargo).
Mercosur: a changing membership of around six countries, due to political disagreements. Principal members are Argentina and Brazil.
NAFTA/USMCA: The US pulled out of the North American Free Trade Agreement with Canada and Mexico under Trump, but will replace it with the US-Mexico-Canada Agreement (USMCA).
SCO: Shanghai Cooperation Organisation, key members of which are China, Russia, India and Pakistan, plus four East European ex-Soviet states and many observer and ‘dialogue’ states.
For other details, of which there are many, look up Wikipedia!



Tony Norfield, 21 March 2019

Wednesday, 19 December 2018

Liberals, the Populist Right & the Politics of Imperialism


Roger Eatwell and Matthew Goodwin, National Populism: The Revolt Against Liberal Democracy, Pelican Books, October 2018

How to respond to the rise of national populism? The phenomenon is evident not only in Trump’s US but throughout Europe, as shown in this book’s comprehensive review of changes in mass opinion. The book also attempts to provide a solution to the problem, one that will defend democracy, but in doing so it inadvertently highlights the bankruptcy of the liberal outlook. They detail how, over the past two decades and more, new political forces have undermined support for the traditional political parties in the West, and especially for the social democratic parties of western Europe. Yet their ‘solution’ is to make concessions to reactionary views in order to ‘engage with’ the concerns people express in opinion polls. Like many liberal commentators, on the face of it they will have no truck with racism. But they seem to be fine with the nationalist mentality and an anti-immigration stance, and they persistently raise the question of ethnicity in national politics.
The book’s real value is in documenting how pervasive are reactionary opinions in the West. They show how the success of Trump, et al, cannot be put down to ‘angry old white men’, who will all die soon anyway, or simply to those who have lost out economically with ‘globalisation’, and who may then be attracted to a left-wing party’s plans for economic reform. The political problem in the West is far deeper, and more depressing. As they put it: ‘people who support national populism are not merely protesting: they are choosing to endorse views that appeal to them’ (p 39).

Four D national populism

Eatwell and Goodwin organise their work along the lines of what they call the Four Ds. This is how the ‘elitist nature of liberal democracy has promoted distrust of politicians and institutions’, how ‘immigration and hyper ethnic change are cultivating strong fears about the possible destruction of the national group’s historic identity and established ways of life’, how ‘neoliberal globalised economics has stoked strong feelings of what psychologists call relative deprivation as a result of rising inequalities of income and wealth in the west and a loss of faith in a better future’, and finally, the ‘weakening bonds between the traditional mainstream parties and the people, or what we refer to as de-alignment’ (pp xxi-xxiii).
If you are already finding your blood beginning to boil with a phrase like ‘immigration and hyper ethnic change’, then I recommend taking a few deep breaths because things get worse. Worse because of the reality they describe, not because the authors are closet racists hiding behind academic language – although in some of the things they write, they will come close to readers interpreting them that way. Towards the end of the book, they sum up the argument as follows:
“The ‘Four Ds’ have left large numbers of people in the West instinctively receptive to the claims being made by national populism: that politicians do not listen to them, even treat them with contempt, that immigrants and ethnic minorities benefit at the expense of ‘natives’, and that hyper ethnic change and in particular Islam pose a new and major threat to the national group, its culture and way of life.” (p 272)
I will deal with these D issues a little later, but first it is worth covering some of the characteristics of voters that the authors set out. In the end, these are the decisive people in a democracy.
Having paid a lot of attention to the social dimensions of voting, they note that the unemployed and those very dependent on welfare payments tend to vote less than average, that the youth vote also tends to be below par and that, at least in the past, white workers without degrees were under-represented in samples taken of popular opinion, which helped lead to the poll surprises of Trump and Brexit. In their view, it is the ‘middle educated’ who are most open to national populism – those who are not uneducated, but who do not have university degrees.
This middle group also tends to feel more vulnerable than others, being above the unemployed but below the middle class economically. In the UK, it was the group focused upon in the Conservative Party’s term ‘just-about-managing families’. However, this is not to say that better off workers did not vote for Trump or Brexit, or for populist causes in general, or that support only came from white (male) workers. They show that national populism also gets significant, if usually minority support from younger people, women and ethnic minorities.
One reason is that the national populists also address welfare issues. This helps undercut the traditional capitalist state-dependent approaches to national politics of more left-wing parties and groups. For example, the leader of the conservative, populist Sweden Democrats argued that ‘The election is a choice between mass immigration and welfare. You choose’ (p71).

Immigration, racism and nationalism

The authors are clear about their perspectives, which should help readers also to clarify what they think about these issues. Take the question of racism. I raise this question, because, when the authors do talk about racism, they appear to cross the line into endorsing what a United Nations Convention would call ‘racial discrimination’.[1] The UN defines such discrimination as being on the basis of ‘race, colour, descent, or national or ethnic origin’ and, in discussing popular political views, the authors write:
“We do not think that the term ‘racism’ should be applied solely because people seek to retain the broad parameters of the ethnic base of a country and its national identity, even though this can involve discriminating against outside groups” (p 75).
Unless the word ‘broad’ somehow lets them off, ‘retaining the broad parameters of the ethnic base of a country’ would indeed be racial discrimination according to the UN!
Are they only describing how such views exist, rather than endorsing or advocating them? I found the focus on ethnicity to be a strange one for these UK academics to spend much time on since, in the Brexit debate, for example, it was clear that race and ethnicity had little or nothing to do with the anti-EU case. Instead, popular views were much more concerned about competition in the jobs market from low wage, white East European workers – the ‘Polish plumber’. Of course, the coverage in this book is not just of the UK, and not just of Brexit. But the authors are not just describing how there is opposition to other ethnic groups. While they do not explicitly share these concerns themselves, they go out of their way to say that these are valid. For example:
“Too often the left view this immigration angst solely as a byproduct of objective economic grievances when it is in fact a legitimate concern in its own right and … is rooted in broader subjective worries about loss and relative deprivation.” (p 222)
and, on popular anxiety about immigration and ethnic change:
“While many of these fears are exaggerated – especially in the case of Muslims, who as a group are often damned for the sins of a very small minority of Islamists – we need to appreciate how people feel. Given ongoing immigration and rapidly rising rates of ethnic, cultural and religious change, it seems to us unlikely that these anxieties will fade.”
“It is important to try to engage with their concerns, particularly for those on the centre-left who, to avoid further losses, will need to make short-term concessions. Meeting the demand for tighter borders or modifying the type of immigration … is compatible with progressive politics.” (pp 281-2)
Basing their stand on the evidence from numerous opinion polls, they can correctly dismiss as mistaken the views of the established political parties and of the left that if workers can be given ‘more jobs, more growth and less austerity, then their support will return’. Yet that leads them to argue that policies should be adopted to address and deal with ‘people’s concerns about immigration and rapid ethnic change’ (p 261).
If the authors escape the charge of endorsing racism, they still remain guilty of accepting and working within a framework of nationalistic politics. The irony running throughout this book is that they have set up national populism as a political challenge to liberal democracy and then have taken on board the concerns of the national populists.

Imperial politics

The authors do not ignore capitalism in their analysis, or the wider political trends. They cover quite a lot of ground in a summary historical review of how capitalism has developed, the different forms of politics that emerged in the West that helped to endorse the system in the eyes of the population, and of earlier forms of populism. They also note the different phases of immigration into the US and the UK over the past hundred years or so, and the more recent trends in a wide range of European countries.
I was pleasantly surprised to find some brief mentions of the term ‘social imperialism’, describing how capitalist parties and governments in the late 19th and early 20th century countered the appeal of socialism and attracted support from workers by ‘a combination of welfare measures to help poorer people, such as the introduction of old-age pensions, and the celebration of national greatness and expanding Empire’ (p 228). But this remained only part of their historical review and did not seem to have much implication for their discussion of more contemporary trends.
It would have been more consistent for them to spell out how masses of people in the richer countries remain wedded to the social imperialist outlook. Welfare provision by governments in rich countries has grown far beyond what it was in the early 20th century, and it has been a key pillar of what is effectively a ‘social contract’ between the national working class and the capitalist state. In other words, workers will remain loyal to the capitalist system and the national state, including support in wars, as long as the state provides some basic economic security.
That deal has now been undermined by two important developments. Firstly, the growth of the global market, aside from its dysfunction and destructive tendencies, has also shown for capitalist business that there are cheaper ways to get things produced than depending upon welfare-supported workers in the richer countries. Employment conditions have been undermined by outsourcing, supply chains and worse labour contracts, with only some privileged areas remaining relatively unscathed, in high level engineering, technology and some other monopolistic sectors. Secondly, more stagnant economies over the past decade or so have thrown into sharper relief the accumulation of debts, and state spending deficits in particular. Accentuated by problems of an ageing population in many countries and capitalist pandemics like obesity, welfare provision is under pressure.
But these developments have not led the mass of people in richer countries to realise that the game is up and capitalism no longer works for them. Instead, they have turned towards reactionary politics. This can hardly be much of a surprise, since, as the authors themselves note, there have been longstanding racist and nationalist opinions. Liberal views were often more supported by the social strata that were made comfortable by the system, while the remainder kept relatively quiet as long as things were ticking over for them. Now that the capitalist markets supported by the working class have come back to bite them, they have spoken out.
This is the relevant background to the authors’ focus on ‘hyper ethnic change’. The popular reaction to a rapid influx of immigrants seen over the past few decades, and especially in the past 10-20 years (after 2004 in the case of the EU, following the accession of several new Eastern European members), reflects the worry of the ‘native’ masses about their social and economic welfare. They don’t stop for a moment to consider the many fires that their governments have started in and the destruction they have brought upon countries in the Middle East, Africa and Latin America, nor of the collapse of living standards in many East European countries when they were incorporated into the western capitalist markets.

Culture and privilege

Privileges enjoyed by the mass of people in the rich countries are being taken away, so they blame Mexican or East European workers, Chinese and Asian goods, and they wrap that up in moans about the threat to their ‘way of life’ and culture, especially from the Muslim community. As the authors put it, using apologetic brackets to distance themselves: ‘most national populists see the quest for lower immigration and slower ethnic change as an attempt to stem the dwindling size of their group, to advance its interests and (in their eyes) avoid the destruction of their culture and identity’ (p 162). Let us consider this culture question for a moment.
I do not know whether any of the myriads of opinion polls cited by the authors have ever asked the question of whether Muslims, or other groups considered unwelcome in these polls, are believed to have a stronger sense of community than the anti-immigration respondent. The ‘native’ reaction is to a different group, whether that distinction is made visible by them using a different language, religion or something else. But it raises the question of what they are really protesting about.
‘Native’ working class culture has been disintegrating for the past 40 years or more in many western countries. Even before, it was nothing to brag about, and the latest decline has nothing to do with immigration, ‘hyper’ or otherwise. The protracted crises of the 1970s and 1980s dealt a blow to many traditional industries and forms of employment that were the centre of settled working class communities, from mining to manufacturing, from steel making to shipyards and transport, and the hollowing out of jobs in many areas. There have also been changes in technology and work practices, a reduction of trade union membership and the creation of many new service sector jobs less covered by trade unions. These and other, more recent developments, sometimes labelled the ‘gig economy’, did not come from immigration. Popular sentiment has nevertheless found immigration as something to focus on, since it was never far from a nationalistic and sometimes racist mindset in any case.
What is it about ‘culture and identity’ that popular sentiment wishes to save from ‘destruction’? The population has done little or nothing done to combat the capitalist market trends that have undermined them, and instead it has been absorbed by mass consumer culture. It is only now, when the economic foundations of an acceptable life are being taken away, that the pro-imperialist working class protests. It fights back by demanding that the capitalist state cuts or stops immigration. The authors say that even if more ‘jobs and growth’ were created then ‘tensions over perceived differences in culture and values will remain’ (p 152). But that is because a large section of the working class has chosen to try and defend itself by relying on ‘its’ state to take action against foreigners. The truth is that it is in no position to hold up anything in its own culture worthy of respect.

Political climate

This book gives a systematic overview of contemporary political opinion, especially that underlying the support for national populism. It helps to clarify the depth of the political problems faced by those who do not like what is going on, but the solutions offered by the authors end up endorsing the concerns of the reactionary populists! When the capitalist system is pissing down on everyone from a great height, they join in the argument about the distribution of umbrellas and raincoats, and wonder if immigrants should be given any if that risks the ‘native’ workers going without.

Tony Norfield, 19 December 2018


[1] The United Nations International Convention on the Elimination of All Forms of Racial Discrimination in 1966, of which Article 1 of the Convention defines racial discrimination as: ‘... any distinction, exclusion, restriction or preference based on race, colour, descent, or national or ethnic origin which has the purpose or effect of nullifying or impairing the recognition, enjoyment or exercise, on an equal footing, of human rights and fundamental freedoms in the political, economic, social, cultural or any other field of public life’.

Monday, 8 October 2018

Finance, Power & Brexit


Here is an interview I did recently with Esteban Mercatante for the Argentine-based Spanish language journal Ideas de Izquierda and which I believe will also be published in the near future at leftvoice.org. His questions centred on my book, The City. My answers give some background to the analysis and comments on recent developments, including Brexit.
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Q1       You show in your book that the City of London is the pre-eminent international financial centre for the world economy, despite the fact that the UK's own currency, sterling, is not so important on a global scale as it used to be before WWII. What are the main global transformations in the flows of capital that London could take advantage of to maintain its international status? And in what way has it been favored by geopolitical processes?
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A1       The financial business of the City of London was damaged by WWII and the disruption to international trading and investment in the immediate years afterwards, in addition to the weaker economic position of the UK. However, the City had many established international links, arguably more than New York, despite the very powerful position of the US in the world economy. These links evolved in the 1950s to use the US dollar rather than sterling as a financing mechanism, and this was helped by the restrictions the US government placed on the domestic US financial system at the time.
Big corporations demanded access to funds on a scale that was not easily available in the domestic banking markets, and by the end of the 1950s a ‘eurodollar’ market had evolved to supply this new form of credit. It was mainly located in London, but it could draw upon US dollar funds from around the world. A ‘eurobond’ market was also established in the early 1960s. Both types of euromarket grew very rapidly and the City of London benefited most from this. So the business of the City changed from the pre-war forms of dealing and it also became less directly dependent upon dealing with the British Empire/Commonwealth countries. Britain’s close political links with the US undoubtedly helped this process, limiting the risk that there would be any constraint on US companies and banks dealing in the London euromarkets.


By the early 1970s, the operation of global financial markets was in turmoil, as international imbalances and the changing positions of the major powers were no longer compatible with the previous Bretton Woods exchange rate system. The City of London’s position benefited further from these disruptions and from the later removal of nearly all restrictions on international financial dealing.

Q2       You have elaborated a power index that includes five measures to define the relative status of each country (GDP, FDI, Banks, FX, Military). As expected, US is at the top of the list, followed among others by Germany, China, and Japan. But it is surprising to see Great Britain in second place. To what extent does this index reflect the effective global power of the UK today?
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A2       My Index of Power is a summary measure that brings out significant features of the distribution of power in the world economy. It is a very simple tool based upon publicly available data. While it cannot capture everything, especially the relationships between countries, it throws an interesting light on where each country stands in the global system. I was also a little surprised to see that the UK ended up in second position, and you will have to take my word that the index was not planned to give this result! The UK’s position reflects the international investment, trade and finance components of the Index, but these are also very important in the world system. I think it is also an endorsement of the value of the Index that the highest ranking countries benefit from other aspects of international power that are not directly measured. For example, the UK is a key political partner of the US and is also a permanent member of the UN Security Council.
Relative positions in the Index of Power have changed over time and will change further, for example with the rise of China. The UK remains in a prominent position now, but its status will be damaged by Brexit. Brexit’s impact is likely show up in at least one of the Index components, that for the volume of international banking conducted from the UK base.


Q3       In your book you criticize the notion of ‘finance capital’ as developed by Hilferding because it misrepresents how the rule of capital is expressed. What are the risks you see in this notion that the banks are in control of the whole national capital as it was assumed in Finance Capital?
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A3       While Hilferding’s Finance Capital was an important work, ironically, it showed a poor understanding of the relationship of finance to the power of capital. It discussed new forms of finance in the capitalist economy, and was far ahead of other Marxist work in this respect. Yet when Hilferding examined aspects of the financial system, especially the role of banks in Germany, he drew the conclusion that these could be taken over – by a progressive government, of course – for the benefit of the mass of people. In this respect, Hilferding’s ideas continue to have resonance today, when we see some leftists call for banks to be nationalised, or for there to be a ‘radical’ national economic policy that would take more control of the credit system and investment.

There are several big problems with these views. First, they all operate in the framework of national capitalism and pay little attention to how the international system works. Second, they assume that controlling banks is the same as controlling finance, when actually the banks play only a limited role. Third, they ignore how the financial system necessarily pervades all capitalist market relationships. The financial system is not something external to ‘good’ capitalist production or a mechanism that could be managed by a progressive government to produce better economic results.

It is true that capitalist policy makes mistakes and there have been many stupidities. However, it is not the job of socialists to offer less stupid capitalist policies. Those who get into this game end up betraying the people they claim to represent and endorsing capitalist solutions.

Q4       You say that Marx’s analysis in Capital described interest-bearing capital as being parasitic, while other aspects related to the financial sector (like money-dealing) are not. However, your argument is that “All forms of financial operation can potentially assist in the transfer of surplus value from one country to another and so contribute to increasing the power of the dominant countries”, and are then a form of parasitism. Which are today the main mechanisms of this parasitism and how do they benefit London and other financial centers of the world?
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A4         My discussion of parasitism in The City showed the different ways in which this term was used by Marx and Lenin and related this to the forms of finance that we have today. I would not see ‘finance’ as being something narrowly defined and to include only banks or other financial institutions. I think that it is best to understand finance as an important aspect of what Marx called the ‘form of value’ and to analyse how it has evolved. To understand the forms of capitalism today, one has to go well beyond the notions of commodity production, buying and selling. For example, many large corporations use their equity as a means of payment when they take over other companies in a ‘share swap’. They do not necessarily use a bank loan or pay in cash, and they may not even use a financial institution to broker the deal.

If a country has an internationally important financial centre, then it can get revenues from dealing with capitalists from all over the world, not just in its national sphere. It can provide all capitalists with short-term or long-term funding, or with a market for their financial securities (bonds, equities). These may often look like specialist financial operations, but they are also closely tied in with the commercial and productive power of big companies, as reflected in trade relationships, investment deals, control of intellectual property and patents, and so forth. 

New York has the world’s biggest bond and equity market, but much of it is US-based. London has the world’s most internationally-linked financial centre. These and other centres generate big revenues for the country concerned – through dealing profits, high paying jobs, government tax revenues, etc. However, it is difficult to pin down where this money originally comes from! A French bank in London might gain commissions from dealing with a German company. But the German company’s transaction might be related to revenues from goods supplied by factories in Asia and sold in North America.

Q5       In March 2019 Brexit is supposed to conclude. But the negotiations with EU are at a deadpoint and May's government is in crisis. What perspective do you see for the process?
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A5        The Brexit process has been a complete mess, and I have been astonished at how stupid the British ruling class has been. It is amazing how the current political establishment does not seem to understand the EU political mechanisms, ones that British advisers had played such a big part in developing over the previous 45 years.

What makes this an unresolvable problem is also what makes it interesting politically, although it can be tedious to follow all the details. Brexit is clearly bad from the point of view of British business and it is also damaging for the UK’s political status. That should have made it avoidable, but the Conservative government made an unusual mistake and put a major decision of foreign policy up for a popular vote in the 2016 referendum. A narrow majority Leave vote resulted. This was made up of many working people who blamed the EU for their economic problems, especially those who were against the immigration of workers from other EU countries. Leave voters also included the more traditional anti-European British nationalists, and some misguided leftists who thought that reactionary popular sentiment could somehow be given a positive, anti-capitalist gloss.

Both major political parties in the UK, the Conservatives and Labour, probably have a majority of Members of Parliament who think Brexit is a mistake. But they cannot easily turn their back on the referendum result and snub the electorate without risking a big drop in support at the next election. It would even be difficult for them to try and organise another referendum to get the result overturned, by arguing that the circumstances have changed since 2016 and there is now a clearer idea of what Brexit will actually entail.

There is a different problem for big business. Despite growing signs of concern now that there will be trouble if the UK’s access to the EU single market is not maintained, companies had been reluctant to get involved in the political debate much earlier. They have now probably left it too late to have much influence. Previously, the British business elites were confident that their interests would be secured by the major parties, and they could keep aside from taking any public positions and just have a quiet word with the relevant minister. That view has now been shattered, but it is not clear what they can do about it.

Britain’s political idiocy is shown by those pro-Brexit UK politicians who imagine a marvellous world outside the EU, one that will more than make up for the losses borne by having less access to the European market. Political leaders in Europe and elsewhere cannot believe they are witnessing this unprecedented act of self-harm from what had previously been considered as the most sophisticated ruling class in the world!

Q6       So far, has the Brexit vote had any impact on the business of the City of London?
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A6      There has been little impact on the City of London so far, but many banks and other financial institutions have made plans for relocating some of their business operations to elsewhere in the EU. I cover this question in the Afterword to the paperback edition of my book, The City. Apart from Brexit, the City’s business has in any case been impacted by a general downturn in European financial dealing over recent years, a result of the broader economic crisis. Brexit will make this worse, especially if British-based banks do not get a ‘passport’ to deal with other banks in the EU. However, the City of London has a range of skills that is not easy to replicate elsewhere, at least not for some years. There are also less visible items, such as the English commercial law that underpins many financial contracts, which make leaving the City of London more complicated than it might at first seem.

In the pre-Brexit years, London had rivals elsewhere in Europe, and some were bigger in certain areas of finance, such as Luxembourg in fund management. But London has been the biggest, or one of the biggest, in a very wide range of operations, from banking, to venture capital funds, to financial derivatives and foreign exchange dealing. If, post-Brexit, London’s position is greatly reduced, then no one centre elsewhere in Europe really stands out as a likely winner to take on London’s former role. Paris and Frankfurt each have some advantages, but so do Dublin and Amsterdam.

Q7       Besides Brexit, what are the most important challenges for the preeminent position of London and how is British imperialism responding to them? In your book you consider Islamic finance and China as the most important avenues of parasitism to pursue. Are there any others worth mentioning?
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A7       There has been little new of significance reported on the City and Islamic finance in the past year, but developments continue. In early September this year, there was an ‘Islamic Finance Week’ held in the City, while in late September the Lord Mayor of London visited Istanbul to boost Turkey’s business links with the City, in particular on Islamic finance. Regarding China, City foreign exchange dealing in the renminbi has grown by some 30% in the year to September and it remains the biggest hub outside Asia, while there are plans to develop links between the London Stock Exchange and Shanghai. I am not aware of anything important outside of these developments.

Q8       In your book you point out that the development of financial assets and derivatives is closely related to what happens in profitability. Ten years after Lehman's bankruptcy, we can observe that global debt is much higher than it was in 2008, and there are several stress factors (rising rates by Fed, the trade war instigated by Trump). What do you consider is the outlook for world economy? May we be heading another global slump?
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A8        Yes, debt levels are higher now than they were in 2008, not just in absolute terms but also as a share of GDP. This is the clearest sign of a continuing structural problem for the global economy that has not been overcome. Whereas 10 years ago the debt was very much concentrated in the major economies, now it is far more widespread, having risen sharply in ‘emerging’ economies too.

While this indicates a vulnerability of the world economy, for the major economies the outcome may be stagnation or slow growth rather than a dramatic slump. The banking system is less over-extended now and there is probably a smaller number of high-risk debtors, so that there is less chance of a wave of defaults causing a credit crunch. Debts in the major countries are more concentrated in the government sector, which means there is less risk of a series of defaults and the related panic, although this means there will be continued pressure to curb government spending.

For the emerging economies, there is far more risk of a serious economic setback, which is already occurring in several. The level of foreign currency-denominated debt can be a high proportion of GDP for some countries, notably Argentina, while the tightening of US monetary policy is both raising interest rate levels and boosting the value of the US dollar versus their domestic currencies. At the end of September, the US Federal Reserve raised the Fed funds rate to 2.00-2.25%, the first time it had been above US consumer price inflation for 10 years, and five-year US Treasury yields had also risen to just under 3% from less than 2% 18 months ago. These are low levels still, but they remain a big problem given the high level of debt.

Tony Norfield, 8 October 2018