Saturday, June 25, 2016

More Notes on Brexit

The New York Times has dedicated eight pages to Brexit coverage. The story is of historical significance and deserves that much space. Credit to the New York Times.

For my part, I have collected some salient and incisive commentaries from various places. I present them as a service, the better to provide useful information.

We begin  with the question of who is responsible. Writing in Slate Reihan Salam names the primary culprit: Tony Blair. It tells us why Blair was so crestfallen at the results of the referendum.

The former Labor Party prime minister began the process by opening Britain to more immigration. He was a great purveyor of a cosmopolitan worldview that has now been repudiated… often by Labour voters.

Salam wrote:

One gets the sense Blair understands, on a gut level, that Britain’s rejection of the EU is a rejection of his worldview….

As prime minister during the 1990s, he often made the case for deeper European integration. More broadly, Blair proved himself to be among the most emphatically cosmopolitan world leaders in recent history.

For the past twenty years Britain has been living under the Blair government’s policy:

Since 1997, when the Labour Party, under his leadership, swept into office in a landslide, British society has been transformed by a wave of immigration unprecedented in its history. Over the following years, roughly twice as many immigrants arrived in the United Kingdom as had arrived in the previous half-century. Many who arrived during that earlier era hailed from the Caribbean and South Asia, and by the early 1990s, 7 percent of England and Wales’ population belonged to ethnic minorities. By now, that share has grown to over 14 percent.

The EU compounded the problem by opening its doors to relatively impoverished Eastern and central European states.

Salam explains:

When a number of countries in Eastern and central Europe joined the EU, most existing member states put temporary limits in place on the freedom of movement to ensure they wouldn’t experience a large and potentially disruptive influx of new arrivals. Blair’s government decided not to do so on the assumption that immigration from the new member states would be relatively modest. In fact, immigration from the new member states far surpassed the government’s projections.

It was not just the immigrants. To be more welcoming  the Blair government’s decision offered many of the benefits of citizenship, especially welfare payments, to people who had just arrived:

Under Tony Blair, Britain greatly expanded the use of refundable tax credits as a tool for poverty reduction, and this strategy has been wildly successful. But under EU rules, Hungarian newcomers are just as entitled to these benefits as, say, a poor Welshman. Regardless of whether this is a good idea, it is easy to see why some Britons find it frustrating. The only way Britain can make itself less attractive to less-skilled European immigrants is by imposing labor market regulations and welfare reforms that would apply to everyone, including less-skilled British workers. If we’re going to curb welfare spending, some British voters are asking, why not start with European immigrants who’ve just showed up on our doorstep? If the European Union requires Britons and other EU citizens be treated the same, why not leave the EU and be done with it?

In The Atlantic David Frum offers more details about the immigration problem, with a special nod to Angela Merkel:

The force that turned Britain away from the European Union was the greatest mass migration since perhaps the Anglo-Saxon invasion. 630,000 foreign nationals settled in Britain in the single year 2015. Britain’s population has grown from 57 million in 1990 to 65 million in 2015, despite a native birth rate that’s now below replacement. On Britain’s present course, the population would top 70 million within another decade, half of that growth immigration-driven….

If any one person drove the United Kingdom out of the European Union, it was Angela Merkel, and her impulsive solo decision in the summer of 2015 to throw open Germany—and then all Europe—to 1.1 million Middle Eastern and North African migrants, with uncountable millions more to come. Merkel’s catastrophically negative example is one that perhaps should be avoided by U.S. politicians who seek to avert Trump-style populism in the United States. Instead, the politician who most directly opposes Donald Trump—presumptive Democratic nominee Hillary Clinton—is doubling down on Merkelism.

A nice phrase that: Hillary Clinton is “doubling down on Merkelism.”

For the economics of Brexit we turn to George Friedman—no relation to Thomas. Formerly of Stratfor, George Friedman is one Friedman who is well worth reading.

Even though all of the world’s great economists and bankers backed Remain, Friedman points out that, for Great Britain, the EU was a mixed economic blessing:

Supporters of remaining in the EU made the case that there would be substantial economic costs. Opponents of the EU noted the obvious, which is that the EU is a dysfunctional economic entity that has been unable to address the economic problems that have developed since 2008. It has not addressed the condition of southern Europe, where unemployment has remained at more than 20 percent for years, nor the high unemployment in France. The profound difference between the lives of southern Europeans, including the middle class, and Germans, who enjoy 4.2 percent unemployment, is profound. Europe as a whole has stagnated economically.

Those who supported Remain—the Remainders—threated the public with the dire consequences, beginning with the end of London’s central role in the world banking system.

Friedman debunks the notion:

In the end, the Europeans need the financial services London provides. They will not lock it out. The European Union did not create the financial relationships that exist. Britain’s financial role goes back almost two centuries. The EU is a system that aligns with financial reality. It does not create it. The threat of consequences was not persuasive.

And of course, there was a class angle. Everyone knows that voters were repudiating the governing elites, the guardian class that had been ruling Europe by bureaucratic diktat. The British people were voting these unelected bureaucrats out of office:

The degree to which this was a vote that was directed against the British elite is vital to understand. Politicians, business leaders and intellectuals were all seen as having lost their right to control the system. The elites had contempt for their values – for their nationalism and their interests. This is not a new phenomenon in Europe, but it is one that the EU had thought it had banished.

Writing in the Wall Street Journal Fraser Nelson explains the influence of the bureaucrats:

The Brexit campaign started as a cry for liberty, perhaps articulated most clearly by Michael Gove, the British justice secretary (and, on this issue, the most prominent dissenter in Mr. Cameron’s cabinet). Mr. Gove offered practical examples of the problems of EU membership. As a minister, he said, he deals constantly with edicts and regulations framed at the European level—rules that he doesn’t want and can’t change. These were rules that no one in Britain asked for, rules promulgated by officials whose names Brits don’t know, people whom they never elected and cannot remove from office. Yet they become the law of the land. Much of what we think of as British democracy, Mr. Gove argued, is now no such thing.

Others are bemoaning the vote because they say that it has set off a grand financial crisis. David Goldman does the math and explains that, even if Britain suffers, Italy is a far greater danger to the global economy than a Great Britain that functioning outside of the EU.

Goldman writes:

This is NOT a global financial crisis. The hissing sound you hear is the air leaving various financial bubbles, but this is not 2008 all over again.

The British corporate sector has a strong balance sheet. Among the companies in the FTSE 100 equity index, net debt is only twice earnings before interest and taxes, slightly more than the S&P 500. Italian companies by contrast have net debt at nearly 8 times earnings before interest and taxes. The record fall in the pound sterling brings its exchange rate against the Euro to precisely where it was in 2014, before the pound rose against the European unit along with the US dollar. It’s a long-need correction that will benefit the British economy, which has suffered from an overvalued currency.

Financial authorities around the world warned of dire consequences were Britain to leave the Euro, but it’s hard to see what these might be. Britain’s auto industry is mostly owned by German companies, who will not stop producing or buying cars made in their British plants. The 2008 collapse had already cleaned most of the fluff out of the City of London, which shed more than 130,000 jobs in the years after the crisis. The global ambitions of European banks are long since gone and it is unlikely that a great deal of financial business will leave the already-shrunken City.

Britain contributes half a percent of its GDP to the rest of Europe each year, mostly to Eastern Europe; this drain on the British taxpayer will end. Most important, the ambitions of the European Commission to install a supranational government dictating fiscal and regulatory policy to its members have collapsed. Europe’s ambitions to field a common foreign policy also are in ruins after today’s vote.


AesopFan said...

I took a look at all the articles you linked, most of which I hadn't seen before.
Thanks for putting them together.

I'm for Brexit - the EU idea had some useful underpinnings, but the superstructure built on top of them by the Unaccountable Elites gave it the appearance of a pyramid balanced on it's point.

Ares Olympus said...

David Frum: The force that turned Britain away from the European Union was the greatest mass migration since perhaps the Anglo-Saxon invasion. 630,000 foreign nationals settled in Britain in the single year 2015. Britain’s population has grown from 57 million in 1990 to 65 million in 2015, despite a native birth rate that’s now below replacement. On Britain’s present course, the population would top 70 million within another decade, half of that growth immigration-driven.

An 8 million rise in 25 years looks like about 0.5% growth rate. In contrast America grew from 250 to 320 million in those same 25 years, or about 1.0%, and half of that due to legal immigration, so if native Britain were holding steady, their immigration rate equals ours. Of course we have a lot more elbow room left.

It makes sense that societies may have periods of higher immigration rates, and then negative reactions by natives shut down that flow, while retain those who came during the open window. So the UK perhaps have said "enough" while Germany is not yet so sure. And Germany also faced large integration issues when East and West Germany united after the cold war ended, and that perhaps prepared them for the challenge, while Great Britain has always been more whole, except for the Northern Ireland challenges.

Anyway, I'm reflecting on a near future where most major countries raise their borders against refugees and those who don't "fit" their own vision for the future. And then the immigrants who have arrived, like the Muslims specifically will find themselves a greater pressure to conform to local culture?

And if you play this out for another 50 years, perhaps what will finally help pull the extremist Muslims back into the human fold, out of their fantasy religious wars, will be moderate Muslims who found entry to western countries and made the necessary adjustments for cooperation. And these moderates perhaps will be the voices that can counter the victim narratives in their countries of origin, and some might return with a different view of the world.

At least that's the best positive view I can find of the chaos of mass migrations and the forces of reasonable fear that halt that.

It's a hard lesson to accept that where you're born matters, and if you're the wrong sort of person, by ethnicity or religion or country of birth, you will be disadvantaged and see the world differently. And people who never have to become refugees will never really understand what it would be like to not have anywhere safe to live.

And I accept that "Liberal socialism" alone is probably too generous, and can't save all the starving children of Africa or whatever war zone, and so whatever limits are set, they will always be unfair, unequal. Hard decisions must be made and yet no one wants to make those middle choices between "absolutely yes" and "absolutely no". And the "no" vote will always win in the end because there always has to be limits, and "none" is the only safe bet.

Ignatius Acton Chesterton OCD said...

Again, I would suggest that the key word this year is SOVEREIGNTY.

Sovereignty shows up in a lot of ways, but it is especially tied to our Revolution and Founding.

What was that all about? That we are citizens, not subjects. A constitutionally-limited federal republic, not a social democracy or parliamentary democracy, etc. Liberty resides with the individual citizen and his right to form political bonds by choice. It is a balance between majority and minority's, the individual and government, worked out within a political structure that is unique in the history of the world: one where there is a separation of powers on a whole host of levels.

Today, with Brexit and so many other political and social trends, we are seeing this isn't a contest between a private citizen striving against a state-endorsed aristocracy based in heredity. Today's struggle is the private citizen striving against state-subsidized economic activity that is being guided in a union of the political class and cognitive elite that now forms a Ruling Class based in standards determined by cognitive performance in rational/logical education... academic pedigree. It is not practical or creative, it is instead systemic. Once you understand the system, you manipulate it to your advantage by any means necessary, but Thisnis all justified because you are smart (at the expense of the good or virtuous). Not wise, but smart. It is the tyranny of the clever. This Ruling Class is just as smug, just as cosmopolitan, and just as detached from the reality of their fellow citizens as those in the salons of late-18th century France.

What is so striking about Brexit is the sheer disbelief at the result by so many of the elites and the rapid translation of this disbelief into anger, contempt and derision... always along the lines of how "stupid" the Leave people are. Education and cognitive stratification has replaced hereditary status in a way that is so preposterous and embarrassing that it cannot be believed by the Ruling Class. They don't look in the mirror because they don't need to. They don't have to check their premises because they're always right. They fight against bias, racism and bigotry as though they are exempt from these very human characteristics. They are walking embodiments of the need for limited government in the first place.

The Ruling Class represent the true believers in their intellectual, emotional and moral magnificence. Their constant self-congratulation and phony posturing around "causes" they don't understand would be laughable if it were not such a disgrace. Just listen to them prattle on... they'll tell you everything you want to know about how they feel about the people they claim to fight for, represent and take care of. Patriarchy? Ha! There's not greater example of patronizing condescension. They take us for fools!

Sovereignty is a threat to the Ruling Class. It is truly terrifying to them because it is offered in an absolute and decisive way rgst matches the Ruling Class' boldness and posturing about their own morality and value system over the last 50 years. Look at that silly stunt in the House of Representatives this past week. Shamelessness on parade! They have imposed their value system by political hardball, judicial activism, legal absolutism, academic indoctrination, executive overreach, and a medley of non-negotiable moral declarations and demands. Well, now people are pushing back.

Sovereignty says they can push back. And they will. You ain't seen nothin' yet!

Ignatius Acton Chesterton OCD said...

All this madness is based on this THEORETICAL construct of centralization to create convenience and efficiency. It doesn't deliver. And then we're shocked! -- SHOCKED!! -- that no efficiencies are delivered, and voters (gasp!) are not happy. Curious how these promises mirror our own: "If you like your doctor, you can keep your doctor..." and other nonsense. If you're a net taker, it's great. If you're a net giver, it sucks. The givers are telling the globalist theorists: "Your ideas don't work." Given the insane, long-term sacrifices at the hands of unelected bureaucrats, "Your #$&%inck ideas don't work... my paycheck sucks!" Do the math... looomat your paycheck in 1996 and 2016. It's bad. Really bad. Wait until they raid that 401(k) you've got...