A grim warning from Martin Wolf of the FT: what future for Britain and our politics?
Today’s (15 June 2016) Financial Times publishes a column by their top economics commentator, the internationally respected Martin Wolf, who conveys the grimmest and most cogent warning of the likely effects of Britain leaving the European Union that I have seen so far. It’s essential reading: a fully documented forecast that Brexit, which seems increasingly likely to win on 23 June, will have even more horrendous economic and political consequences than the Bank of England and other pundits have been forecasting. Wolf makes a rarely debated point about the political implications:
A crucial source of fragility, on which the Treasury naturally says nothing, is political. After the referendum, the UK would cease to have a government in any meaningful sense. The Conservative party, with a tiny majority, would be deeply divided between its pro and anti-European wings. The opposition Labour party is already deeply divided on this and many other issues.
“Out of this morass would have to come a competent government with a view of what it wants to achieve in complex negotiations with the rest of the EU and the world. It would then have to undertake these negotiations with partners that have many other concerns and would regard the UK with a poisonous blend of hostility and contempt. It would have to decide whether to keep or modify the laws created by more than four decades of EU membership and, if the latter, how to do so. It would have to manage the impact of Brexit on the coherence of the UK and its relations with Ireland. While doing all this, it would have to manage the economy, the fiscal position and the minutiae of political life. Anybody who believes the leaders of the Brexit campaign could manage all this is surely taking illegal drugs.
I strongly urge anyone who doesn’t subscribe to the FT online or in print to go out and buy a copy today, if only for the full text of the Wolf article. It seems to me too important a contribution to the debate to miss. The political section of the article quoted above conjures up the totally plausible picture of a government led by Boris Johnson as prime minister (he is by a long chalk the public’s first choice to succeed Cameron and it’s hard to see how he could be deprived of the succession if Cameron chooses or is forced to go) and the ideologically driven Gove as Chancellor, with John Redwood and Iain Duncan Smith in key departments, and — if there’s a general election soon after the referendum, as seems increasingly likely — Farage with a newly elected contingent of UKIP MPs either supporting or in coalition with the Johnson government. To try to imagine such a government attempting to grapple with the fearsome agenda described by Martin Wolf is to bring tears to the eyes, and they are not tears of laughter. I’m not at all convinced that a Corbyn government would do any better, in the now looming possibility that either Cameron or B Johnson might call a general election in the aftermath of a Brexit win, and that Corbyn might just conceivably win it with the reluctant support of the SNP and any surviving LibDems, in the chaotic post-referendum mayhem.
However that pans out, and whatever the result of the referendum, it looks as if there is no future for the Conservative party or the Labour party as they have been constituted since the end of the second world war, the Tories irrevocably divided over Europe and austerity, and Labour’s leadership and membership in the south-east equally irrevocably divided from the grass-roots membership in the midlands and the north of England and Scotland which used to be the bed-rock of the party’s support. It seems unlikely that either party will be able to put Humpty, or Dumpty, together again. We face a fundamental re-alignment of British politics, in the most dangerous and confused situation for the country since WW2, with totally unpredictable consequences.
I’m very apprehensive indeed about the referendum result. I suppose this is the most scary prospect for our country since the end of the second world war. That’s how it looks to me, anyway.
Brian
I agree with all that. I would merely add that the negotiations would be handled from the British side by people with no experience of the practicalities of negotiating with or within the EU, while the EU itself would have every reason and incentive to act with the greatest hostility against the UK, at the very least to discourage such adventures elsewhere.
I think the divisions in the Labour Party, and particularly among Labour supporters, are overstated; I don’t think we’re losing the white working class, or not at anything like the rate that some people have suggested. It’s true that, if you look at the council election results for Manchester wards, there are some parts of the city where the Greens are in second place and some where UKIP are – and the two types of area are very different. But it’s also true that we’re talking about very distant second places – typically no more than a third of the (winning) Labour vote. Remember what happened in Oldham West, where UKIP were widely expected to run Labour a very close second or even win. In the event Labour’s vote share increased from 55% to 65%.
I don’t think a Corbynite Labour/SNP/Lib Dem coalition would be the worst thing in the world; it could work rather well, as long as the PLP could rein in its current ‘circular firing squad’ tendency. But I agree that Corbyn & McDonnell would need to round up some European expertise pronto.
Thanks, Brian. A first class post. I’ve had too many depressing conversations with ill-informed Brexiters. I thought the FT editorial today was excellent.
Thank you for drawing my attention to this. I have now got the full FT. Martin Wolfe’s predictions are only too likely to prove accurate, I am afraid. One of the really worrying points he makes, which I had not properly thought about before, is what happens to the balance of payments. The BoP on current account for the UK has never been so much in deficit as now and it has been made good for a number of years by foreigners investing here – buying houses and businesses – something I don’t much like. But if the pound falls after Brexit and they all take fright, they will withdraw money rather than investing it here. That could result in a panic and the value of the pound collapsing. The Brexit people would not be able to deal with that but extreme measures of some kind would have to be introduced, making the recession following 2008 look mild by comparison. In that situation I expect there would be demands in Scotland for another referendum to get out of the UK, although that would not help either. The SNP would, quite rightly, blame the chaos on the Tory party in England. Even the Scottish Tories seem solidly for Remain. Incidentally there are other disturbing pieces in the FT. The Short View on the markets supplement is also pretty dire.
Like you, I am extremely gloomy about the prospect. And if Brexit does win, it will largely be because of the ineffectiveness of Corbyn, because Labour voters in the north of England seem to be moving to UKIP. The Tories will be split whatever happens, but defections among Labour voters could decide the outcome.
[Note by Brian: Professor Gavin McCrone CB FRSE, now retired, was Chief Economic Advisor to the Scottish Office, Professor, Management School, Edinburgh University, and General Secretary, Royal Society of Edinburgh. He is currently Hon. Fellow, Europa Institute, University of Edinburgh.]