Hail Britannia, Farewell Globe. Will the Next Political Generation Succeed Where the Present are Failing?

If you can bear it, listen to a phone-in on the LBC radio station on the topic of Brexit. If you are (un)lucky you may catch a call from a Brexiter celebrating that Britain is leaving the EU because it means the country is to regain its mantle of a wealthy, sovereign, global trading nation.

Never mind that Britain was known as the “sick man of Europe” in the 1960s and 1970s. The real irony of this clarion call is that it ignores the obvious truth that it was anger about the perceived negative impacts of globalisation that was a driving force behind people’s Leave vote.

We can never get into the heads of voters on 23 June 2016, but a poll of 2,040 of them by ComRes in December 2016 found that more than half (51 per cent) agreed globalisation had led to “more inequality between rich and poor” while just 21 per cent backed the opposing statement. Almost half (49 per cent) believed it had pushed British wages lower.

Globalisation may be a buzzword for economists, politicians and activists, but down on Boston High Street, Lincolnshire, and other main roads in other Leave towns, it means some concrete things: an increase in immigration; collapse of industry; depression of wages; fewer quality jobs; diminishing quality of state services; widening in inequality — particularly compared with London.

Of course, membership of the European single market is an important part of that rapid shift towards open markets and greater immigration, but it is only a sub-set. The invasion of the internet into homes and businesses, the setting up of North American Free Trade Agreement, the deregulation of the City of London, and the entry of China into the World Trade Organisation in the early 2000s all helped changed the UK economy dramatically within two decades.

For example, according to calculations from Deutsche Bank, while GDP per person in Britain is now almost six times the national average, in France, Germany and Italy it is just double, and in Ireland there is hardly any gap - meaning the UK was by some way the most regionally unequal country in the EU.

Globalisation was accepted in the past because the impact on the losers was offset by public investment in key services

British politicians of both stripes embraced globalisation but never put the proposition to the electorate. For voters who for years had angrily shouted: “You never asked us!”, the Brexit vote gave a rare opportunity to “stick one” to the ruling elites. And swathes of people across the Midlands, North and South West did exactly that.

Assuming Brexit happens on or after 29 March next year, this interpretation of what the voters from a Britain that has turned its back on globalisation holds significant clues as to what the UK will look in a post-Brexit world (other than the obvious ones about being out of the Single Market and Customs Union.)

The first is that the idea that Britain will become a minimally regulated, free trade zone just offshore of Europe is highly unlikely. The idea of Singapore-on-Thames appears to have receded, but it is clear that an electorate that wanted some drawbridges raised and some portcullis gates closed will not tolerate such a blatant opening up of the economy to all comers.

The second follows from that. People will want to see higher spending. Globalisation was accepted in the past because the impact on the losers was offset by public investment in key services. The austerity programme launched onto an unwitting public in 2010 by then Chancellor George Osborne was a breach of that deal, which is why it too contributed to the Leave vote.

Leave voters can now see that with their (sadly, untrue) claim that Brexit would see £350 million siphoned out of Brussels into the EU was a complete fabrication. Some doughty anti-Brexit campaigners have got their own bus with the claim that Brexit will cost £2 billion a week.

The Labour party has also cottoned on with its 2017 general election manifesto promises of a £250bn “national transformation fund” and the nationalisation of key public services.

Any increased public spending budget will at least offset a fall in foreign direct investment as the UK becomes less attractive particularly for investment in financial services, and the government is likely to become more interventionist. Watch the bid by business turnaround specialist Melrose for “national treasure” GKN, the defence and aerospace company, for a weather check on that.

The challenge for the next generation of post-Brexit politicians is how to balance the benefits that comes from globalisation with the challenges that it brings

The silver lining to this cloud is a drought of money coming into the City could see a rebalancing of the UK’s regional economies. However, decades of policies aimed at neutering local government may have left the regions powerless and under-resourced to do the necessary marketing. There could be a rebalancing but only because London declines faster than the provinces. A gradual trend towards the bottom, in other words.

The question now is whether the breakneck pace at which Britain embraced globalisation combined with the starvation of public services has ruled out a return to a politics that embraces weaker borders, lower tariffs, and an acceptance of the movement of goods, services, capital and labour.

Decades of economic research has show that economies that do adopt that doctrine tends to enjoy more efficient markets, increased competition, fewer military conflicts, and wealth spread more equally around the world.

Handled badly, however, it can lead to widening inequality and greater pressures on public services within a country. Britain is not alone in suffering the kickback - look at Trump’s America and many countries in eastern and northern Europe.

The challenge for the next generation of post-Brexit politicians is how to balance the benefits that comes from globalisation with the challenges that it brings. The current crop does not look up to the job, at least judging by their inability to agree on what Brexit means or how to oppose it. The need for a British Macron has never been greater.

More about the author

About the author

Phil has run Clarity Economics, a London-based consultancy, since 2007 and, before that, was Economics Correspondent at The Independent.

Phil won feature writer of the year Work Foundation Work World media awards in 2009, and was commended by the Royal Statistical Society in 2007.

He is the author of Brilliant Economics and The Great Economists.

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