July 11, 2016
Don’t underestimate chavs carrying polling cards – or the chance of Brexit IIPosted in Sunday Business Post · 111 comments ·
So now, two weeks after the British vote that shook the world, where are we? I would like, if you’ll allow me, to take altitude from the entire process and try to see what Brexit tells us about our world. I’d also like to link the Brexit vote with the next two big elections, in the US and France in November and May, and offer it as the reason why Fine Gael “lost” the election here.
At its most basic, the Brexit vote is a victory of the citizen over the technocrats, the ordinary over the expert, the outsider over the insider. In economic terms, it was a victory of the victims of globalisation over the beneficiaries of globalisation. In fact, nothing better illustrates the chasm between the victims and the beneficiaries of globalisation as the north/south divide in England.
The southern English economy is inflated by the cosmopolitan service economy of banks, advertising, professional services and foreign money driving up property prices. There was never any heavy industry there.
There was never any industry that would migrate once competition from the outside intensified.
Vulnerable heavy industry was in the West Midlands, the north and in the Valleys in Wales. All these areas voted heavily in favour of Brexit. As too did the old smokestack that is east Belfast. Although there are clear historical and industrial legacies that bond all the Brexit regions together, for the sake of neatness, let us just focus on England.
Globalisation involves the migration of industry to cheaper locations like Asia and in certain European cases, to central Europe. It also encapsulates rapid use of automation, which also destroys jobs. Industry has been, thus far, more susceptible to these two trends than services. That will change too – but for now let’s deal with industry.
Once these jobs migrate or are replaced, two things happen. Wages in the areas that lose industry fall as unemployment rises and once-solid, unionised jobs in old industry are replaced by less secure jobs, typically contract work in services and retailing. Also, property prices and, thus, personal wealth fall because people move out in search of work and local demand is also diminished.
Typically, social welfare will cushion some of these economic traumas, but social welfare in Britain is quite modest, certainly compared to Ireland.
Thus the region, if nothing else was happening, would fall back relative to the rest. But the very process that impoverishes the north actually enriches the south.
While industry might migrate from the north of England to China and while automation might destroy jobs, the ownership doesn’t migrate, and ultimately automation and the migration of industries makes capital more profitable for owners.
So the firms become more vibrant after their move to the East, after all they have replaced expensive labour for cheap labour, however, the returns to new vibrancy accrue to profits. And profits accrue to the people who own the companies and the people who own companies are already rich.
In addition, the migration of northern industry to the East has been matched by the reverse migration of money from the East to pockets of financial security in the West. The most bulging of these pockets is the City of London.
The fall of British industry has been matched by the rise in financial services as a wall of cash made in places like China, Russia and the oil-rich Middle-East heads to London to be invested in hard assets that are safe from the hands of governments which might ask questions about where the money was going.
Thus London’s banks and London’s property became a massive insurance policy for the wealthy, just in case.
All this money flowing into London drives activity and wages in London.
In addition, a booming London attracted immigrants who, unlike southerners (who wouldn’t be seen dead in Skegness when they can go to Tuscany), migrated increasingly northwards looking for more work and affordable rents. This movement of immigrants north of Watford put them into conflict with already stretched northerners and people of the Midlands.
London’s boom pushed up house prices, which drove personal wealth in London, exacerbating the gap between the south and north of England. In fairness to the Tony Blair governments, the Labour Party at the time did pump a lot of the new tax money into the education and health system, but this stalled under successive Brown/Cameron administrations.
Instead of responding to the 2008 crash with more government spending, the outgoing Labour government of Gordon Brown and the incoming Conservative/Lib Dem governments relied on the Bank of England to cut interest rates and print money to revive the economy.
But this money didn’t go into the ordinary economy directly. The chosen path by which printing money would kick-start the economy was via pushing up asset prices – stocks and property – which would, in theory, lead to trickle down to the real economy eventually. But in practice, it didn’t trickle down, it trickled up!
Asset prices rose for sure, but who owns assets, the rich or the poor? The rich, of course. So the south was being enriched by globalisation – the very process that was undermining the north. These big trends affect not just the economy but the culture too. For example, have you noticed in recent years in Britain that the only minority that comedians could mock with impunity on the BBC, weren’t the Blacks, Asian or Irish, the staple of the 1970s comedy, but a new target, the chavs?
The chavs are the former white English working class, cut adrift by globalisation, unrepresented and alienated. They were fair game to be mocked, humiliated and laughed at. What could possibly go wrong?
Well, the other day, they turned up to vote. There is an essential aspect of democracy that the rich forget at their peril.
For one day, every few years, in the ballot box, even in profoundly unequal societies, the rich guy and the poor guy are, for one moment, equal. The poor don’t need a plan; they just need a mandate. They already have reason enough.
And every now and then, the poor guy galvanises around a simple message or “feeling” and casts his vote with monumental consequences for the status quo that ignored him up to now. The message or feeling may be flag, nation, race, security, home, or all of these things in different measures. It may seem primitive, atavistic or irresponsible, but don’t underestimate it, don’t besmirch it; it is real and it is the politics of the early 21st century.
This is the nexus of Trump and Le Pen who appeal to the ones who have been left behind. It is the trap into which metropolitan Fine Gael election strategists fell. The overwhelming response to “keep the recovery going” was what recovery, whose prosperity, not mine!
As race riots kick off in the US and migration is the only issue in France, don’t be surprised if Brexit is not the last unexpected electoral shock delivered in the period of massive political transformation.