In a little over 70 pages, Theresa May has confirmed the worst nightmare for Remainers. Not only is Britain leaving the EU, we are leaving the single market and the customs union too. This may mean immigration controls are being placed before economic growth. The political is being put before the economic. This is what she meant when she engaged in such sloganeering as “red, white and blue Brexit”.
Speaking at Lancaster House, May deployed the language of internationalism, Theresa May laid out the contours of the plan for Britain to leave the EU and become a “great, global trading nation”. She was careful to talk about diversity, multiculturalism and fairness. It was not a speech at a UKIP rally. Instead, May has tried to rearticulate the centre ground as a nationalist space.
In the aftermath of the June referendum, Britain was left in a state of shock. Even the Leave voters could not believe they had won, for many the vote was an opportunity to register their distaste with the establishment. Not many people expected Brexit to go ahead, certainly not in the Remain camp where people felt they had fallen into a parallel universe.
Nearly eight months on, the unknown is still here. It haunts us all every day. We voted for it, and we don’t know what will happen next. The pound has been degraded, and some people have lost thousands from their pension pots. Inflation and instability are on the rise. And this is just the beginning. The process has not even started yet.
Electoral strategy has trumped economic stability. Withdrawing from the EU will allow the Conservatives to ward off the threat of UKIP and satisfy their own Eurosceptic backbenchers. The question of European integration has been a crucial question for Conservative administrations going back to Ted Heath. Those were the days when the Tories were passionate Europhiles.
Since then Euroscepticism moved across the aisle and became embodied by right-wing mavericks on the Tory backbenches. Despite her reputation as ‘anti-European’, Margaret Thatcher signed Britain up for the Single European act and took the country into the ERM before her resignation. Yet it would be John Major, whose government would be lacerated by infighting over Europe. David Cameron would offset the issue until 2016 when he finally held the referendum.
Unlike her predecessors, Theresa May wants to resolve the European problem once and for all. She hopes she can save face by taking Britain out of the single market and the customs union. May promises she can do this with minimal pain. This is akin to David Cameron’s promise to cut spending without hurting public services. It was wrong in 2010, and it’s wrong in 2017. But this is not May’s consideration.
Freedom of movement with the EU will come to an end, but it’s unclear what this may mean. Contrary to popular misreading, the end of free movement with the EU does not necessarily mean immigration will cease. May has already gestured towards a deal on EU nationals living in the UK, and for UK nationals living in the EU. The real issue is the economy’s need for more and more cheap labour as the population age and approach retirement.
One scenario is that the UK will continue to accept migrant labour and use the tax receipts to prop up its pension system. The government could still introduce new penalties to squeeze migration, turn away more refugees and continue to suppress wages. In another scenario, the UK restricts its border thereby reducing its own labour market and creating the pre-conditions to privatise the pensions system. In either scenario, the working class stands to lose out.
A Not-So-New Economy
One of the reasons why I doubted Brexit was possible was the loss of British manufacturing. If we’re going to weather the storm ahead we will need an industrial base as part of a viable economic strategy, yet this economic base was destroyed by four decades of Thatcherism. So, the industrial option no longer exists, the Conservatives are left in a tricky position.
There are few options on the table for any government right now. Before the Conservatives were simply trying to reflate the housing bubble – that flourished under New Labour, only to go pop in 2008 – as they tried to stripped the state down to the buff. The Cameron era is over, and the May government must chart a new course.
Unfortunately, the Tories have destroyed the other options, it looks like they are going to give supply-side economics another try. Thus, Chancellor Philip Hammond has suggested the UK should slash taxes for the rich and take a hatchet to what little regulation is left. Who will pay for this? Everyone who depends on benefits, state schools, the NHS and state pensions. It’s all up for grabs now. The profits must be extracted from somewhere.
More important than growth, the system needs to facilitate the accumulation of capital. It’s a mistake to think the capitalist buzzword is ‘growth’. The neoliberal period is marked by low growth rates in many cases. The average rate of growth in the 1970s was 2.2%, and under Thatcher it was 2.2%. All that changed was the distribution of growth. Profitability was restored by the defeat of organised labour, whose demands for high wages were eating into revenue.
At the same time, Trump says he wants to cut a deal with the UK once in office. Expect the free trade deal to mean a “bonfire of regulations” presided over by the Treasury. It could be worse than TTIP. You can imagine an unprecedented pig-out by the rich, in which the NHS, state pensions and education, are all eviscerated and served up on a silver platter. This isn’t to say the Tory government wasn’t going to do this anyway.
All of this as the country is hit by the consequences of a falling pound and little to export. The trade deficit is already massively bloated, whereas financial capital is the only thing going for the economy. This is likely just the beginning of a very bumpy ride.