Brexit: How the Elite Lost a Country

The Brexit could lead to economic renewal for the UK, but only if the country stops taking neoliberal economic opinions from Financial Times, The Economist and others of their kind.

Shoppers walk in a market in the Upton Park neighborhood in east London. Credit: Reuters/Paul Hackett

Shoppers walk in a market in the Upton Park neighborhood in east London. Credit: Reuters/Paul Hackett

In the morning hours of June 24, the seismic moment the financial elites of the world had repeatedly warned against finally transpired. Britain, with an unusually large turnout of 71.8%, voted to leave the EU. This vote morally obliges its leadership to trigger article 50 of the Lisbon Treaty and begin talks on a separation from the EU, which is likely to be messy and generate a good amount of uncertainty.

The turnout and a four-point lead for the Leave vote made it evident that the British have made their minds up on the EU. However, the conventional wisdom across newspapers and intellectuals the world over was diametrically opposed to the popular mood in Britain. Most pundits couldn’t view Britain without Europe, and it seemed odd that in the world soon to be dominated only by giants like India, China and the US, Britain would want to go without the continent the world presumed to be its natural home.

The short-term consequences of extreme market volatility were inevitable. In today’s age of deregulated finance, a handful of ill-conceived utterances from politicians is enough to send markets into a frizzy. And predictably so, when the people refused to heed the well-to-do advice of the hectoring financial, journalistic and political elite of London, the pound’s value collapsed to a 30-year old low, Dow Jones dropped 500 points in the first minute of the markets opening on June 24 and equity, currencies and commodities across exchanges over the world faced extreme fluctuations.

The essential pitch of the Remain campaign – backed by the mainstream elite and ‘serious’ newspapers – was the possibility of an economic catastrophe at worst or the inevitability of a shrivelled and poorer Britain at best in the event of a British departure from the EU. They quoted countless “groups of economists” noting that the consequences of Brexit would be unforeseen, “generate uncertainty” and essentially ensure “Britain punches beneath its weight”.

Yet the people who were supposed to get hurt the most by such forewarning voted to leave the EU. Besides the traditional middle-class vote of the prosperous south and southeast England, the additional bedrock of the Leave vote proved to be the (former) working classes of north England. The latter comprise the customary base of supporters of the Labour party, which for the past two decades has been decidedly pro-EU. Indeed, the most impressive aspect of the anti-EU sentiment in the UK is its support across party lines. The United Kingdom Independence Party (UKIP), led by Nigel Farage, which backed exiting the EU, ate into the Conservative and the Labour vote-base in the 2015 election to become the third largest party in the UK in terms of popular vote.

The trials of immigration

A few years ago, as an international student in London looking to make a few extra bucks, I worked as a receptionist at a small three-star hotel in central London. My shifts would mostly be the overnight ones – the days being taken up by classes and my constant trysts with student Conservative politics. This would mean frequent discussions with commuters booking a room because they missed their train or helping intoxicated young couples find their way to their rooms.

But as my interaction grew with the rest of the hotel’s management, I noticed a fact that would have been immeasurably odd in any other city. Out of the over 30 permanent staff at the hotel, less than six could speak with what would conventionally be described as a British accent. The general manager of the hotel was a Kenyan, his key assistant was a Lithuanian middle-aged woman. The others who sat at the reception desk the rest of the week were either Pakistani, Indian, Chinese or Ethiopian, and most of the caretaker and janitorial staff had an east European upbringing.

To most Londoners today, this diversity is a fact of life and they largely rejoice in it. A British investment banker could trade commodities and stocks with recent Indian and Chinese business graduates in his office in Canary Wharf, go for a beer at the local pub where almost all waitresses are from Poland, pass by a café where most people are speaking French, party in a club full of sons of rich Arab royals and retire in his posh apartment building looked after by staff from Greece or Bulgaria, and be absolutely fine with it.

Yet, to an English family from Sheffield or the countless beautiful small towns and villages that dot the English countryside, the experience of such multiculturalism is surreal and overbearing. The increased immigration of the past decade has led to neighbourhoods across England being populated by cultures very unfamiliar to the local population. The inevitable cultural clash would mean phrases such as “it’s like we are being overtaken”, “my brother’s lost his job to an immigrant” or “it feels like it’s not our country anymore” can be heard all around.

In our world of coerced cosmopolitanism, the expected reaction would be to dismiss such sentiments as uncouth, unlearnt and racist. But is it really fair to enforce multiculturalism or mass immigration on a population, the majority of whom have never chosen it or are visibly uncomfortable with it? Doesn’t the meaning of popular sovereignty comprise the right to have a say on who can or cannot join one’s community?

When the British last had a referendum on Europe in 1975, they voted for the common market and the customs union of the European Economic Community (EEC). What they did not vote for was the 1992 Treaty of Maastricht that inaugurated the EU and allowed for free movement of people within the EU. Nor was the subsequent enlargement of the EU to poorer eastern European states – which bears key responsibility behind the spike in EU immigration to the UK – ever taken with the consent of the British people or their repercussions clearly laid out in public. When Tony Blair’s Labour government acquiesced to the enlargement of the EU in 2004, the actual immigration numbers from within the EU that followed – numbering at least 130,000 a year – were more than ten times the projected 13,000.

Since 2004, Britain has seen more than 2.8 million net immigrants, at least half of whom are from within the EU. In a country with a population of 64 million, this is bound to lead to some serious social repercussions. In public polls in the last few years, profound “concern over immigration” has repeatedly secured the assent of the majority of the British public, who wanted immigration levels drastically reduced. The current Conservative government came to power in 2010 promising to reduce the net immigration levels to below 100,000. With over 330,000 net immigrants in 2015, the Conservative Party is nowhere close to reaching its real target. In retrospect, it is clear that achieving this target is impossible without putting some restrictions on free movement of people, which forms the essence of the EU.

In India, when migrants from Bihar or Uttar Pradesh go to Maharashtra to work, it often provokes sections of the local population (and their right-wing political sponsors) to stir up allegations of cultural invasion – more so if they see their housing, security and livelihoods threatened. However, these tensions are quickly managed because there is a larger “imagined community”, to use Benedict Anderson’s famous phrase, of an ‘Indian’ nationhood that has been created over the past three centuries of the political union of the subcontinent. The persistence of the Indian nation is what has allowed India – like other stable multi-ethnic countries – to subsume and manage regional fissures that the free movement between people of various cultures inevitably prop up.

Therefore, the only way the European project, which has free movement of people at its core, can succeed is if people are able to drop their primordial allegiance to the nation for the broader idea of the European civilisation or cultural commonality. And if they don’t wish to do so – as the British have clearly stated – then the project is unlikely to take-off with any democratic legitimacy.

Those blaming David Cameron for allowing the referendum for political gain miss the fact that had the status quo been allowed to continue, someday the tensions would have come to boil with a party like the UKIP winning enough votes to force a referendum anyway.

The roots of working class alienation

The strongest card that the proponents of the EU, both within and outside Britain, have is to note that Britain would be richer inside the EU than out of it. Indeed, the argument often made is that Britain came into the EEC, the precursor to the EU, for the cause of economic renewal.

The post-WWII period saw the dwindling British Empire struggle to catch up economically with its dynamic continental neighbours. In 1973, when Britain joined the EEC, its per capita income was approximately 75% of that of West Germany and France. While the current crop of neoclassical economists – who overwhelmingly dominate present day the financial institutions and financial newspapers – would lay blame for this relatively sclerotic performance at the door of the nationalisation and interventionist agenda of post-war Labour governments, revisionist literature on the economic history of continental Europe suggests a different story. The German and French dynamism had much to do with state dirigisme, with the state intervening to ensure a competitive and ever-upgrading industrial structure. But British state intervention, as Eric Hobsbawm noted in Industry and Empire, his masterpiece on British economic history, was more concerned with wealth redistribution and full employment than the industrial sector.

Has Britain progressed since 1973? Britain’s trade deficit in the 1960s was low, despite a relatively unimpressive industrial performance; there existed a working class that enjoyed stability that came from widespread employment in manufacturing and a regular rise in incomes. However, today’s Britain is visibly different. Not only has manufacturing and manufacturing employment collapsed to a level unseen in other developed countries, the semi-urban England – outside the Greater London Area – consists of unstable and ‘post-industrial’ jobs in the service sector with declining wages. ‘Growth’ has been limited to the deregulated financial sector, which while making the financial industry and London rich has manifestly left the rest of the country behind.

The essence of such decline has largely to do with the British political class’s obsession with globalisation, laissez faire and free trade that gripped the mood of the nation’s political elite following the election of Margaret Thatcher. In the effort to dispense with the legacy of sub-standard state intervention in the economy during the post-war period, Thatcher got rid of the actuality of state intervention. In the process, she pursued, in Hobsbawm’s words, “a programme of virtually uninterrupted institutional upheaval that was without parallel” in 20th century British history. Rapid privatisation, radical de-unionisation of the labouring class and smothering of welfare benefits reduced the condition of Britain’s industrial base (and hence, its labour class) from relatively weak to disastrous.

British economic history since then is a story of an unnatural decline in its industrial base, an unprecedented worsening of its current account deficit, stagnation of wages for the majority and an extreme increase in the insecurity of livelihoods. The latest crisis with Tata Steel is one of the many death nails on British manufacturing. One needs to only wonder how a country that once led the world in shipbuilding, steel and coal production is now the fifth largest producer of steel within Europe, produces fewer cars than Thailand and has all but lost its shipbuilding industry – not to countries with cheap labour, as the votaries of globalisation thought, but to South Korea and Japan.

The economically healthier Germany still makes its state intervene to rationalise its industries and ensures finance allows for ‘patient capital’ that is sorely needed for manufacturing, while decisions of German corporations on wages, upgradation of technology and investment are taken with consent of representatives of labour unions. This is unheard of in today’s laissez faire Britain.

In essence, the British working classes have been left behind throughout the globalist experiment of the past three decades. Neoliberal policies left them atomised and broken with insecure jobs and stagnant wages, while mass immigration called to threaten their sharp sense of identity and accentuated the uncertainty of globalisation.

It is tough for such segments of population to believe the elites when they say that Britain staying in the EU shall help them. Especially since each cornerstone of the elite consensus over the past three decades has only proved more detrimental to their lives. This ranges from ruthless neoliberalism of the Tories and the Iraq War of New Labour to the Treaty of Maastricht, enlargement of the EU to include east European states and austerity policies propagated by European elites in general.

Thus, the movement to leave the EU is similar to the sentiment that drives Donald Trump in a similarly neoliberal US, in that it is the reaction of a segment of people – the white working class generally – who feel with good reason to have been dealt a blow by the conventional wisdom of the past three decades. But, in spite of some tabloids regularly simmering racist tendencies, it is unequivocally less demagogic. Farage is not Trump, nor is Boris Johnson – despite his regular gaffes – a racist loose-cannon. This truly needs to be appreciated.

Will Britain prosper? By exiting the EU, the Conservatives can keep their promise on reducing immigration, thereby rapidly soothing the anxieties of the British working class whose neighbourhoods and jobs are directly impacted by such migration. But it can also lead to economic renewal. But for that, Britain would have to dispense with editorial opinions of the Financial Times, Wall Street Journal and The Economist that has served her so badly. An interventionist state devoted to investment, trade that is geared towards helping British industry, a financial industry that allows for patient capital for manufacturing and nurturing industries of the future, as proposed by economists like Mariana Mazucatto, than simply coddling to the City of London, seems to be the key.

As for the elites’ disappointment, they have only themselves to blame. The haughty proponents of more immigration, liberalisation and further integration with Europe never really had to live with the consequences of their proposals. Their houses would be in the poshest neighbourhoods, their kids would go to independent schools (meaning expensive private schools in Britain) and their jobs as columnists, financiers, lawyers, politicians and corporate executives would almost never face the wage stagnation, outsourcing or competition from immigrants that jobs of construction or factory workers do.

The leaders of both the Labour and Conservative parties largely supported to remain in the EU. Yet, their voting blocs, outside London, decisively voted against the EU in a record turnout. It is clear that Britain needs new elites that are more in touch with her people.

Akshat Khandelwal’s Twitter handle is @akshat_khan. He can be contacted at 124.akshat@gmail.com.