Brexit is upon us, well it will be once the UK Government submits article 50 and a torturous series of negotiations are resolved.
What is most concerning for me is the prevalent talk of a “Norway plus” deal, where the UK (or what is left of it) will pay into the EU coffers to access the European Economic Area (EEA) or the common market, as well as maintaining its highly valued “passporting” rights for the banks. At this moment, what appears to be non-negotiable, is not the amount of payment, but the free movement of labour as well as goods – one of the central pillars of the leave campaign.
Now I am all for immigration, numerous studies have shown that in the long-run immigration is the source of a positive influence on economic growth, and many of my best friends were not born within the shores of these fair isles. But this was a central pillar of the leave campaign – with people decrying that much like Schrodinger’s cat, immigrants were simultaneously stealing their jobs and on benefits.
A Norway-plus deal will leave us in a limbo of “EU-lite” politics, restricted by European Laws that we are unable to influence or veto. Norway currently has to enact around two-thirds of European law, including all those relating to the internal market including the working-time directive.
But is it cheaper? Yes, but not by much, it is estimated the UK would have to pay around 95% of what it currently does to remain in the EEA.
The reason for this is the neo-liberal-lite economics of the twentieth century have failed us/ Politicians have tried to walk a path that moderates markets and economies with tariffs and monetary policy while being largely unwilling to let failing institutions fail (remember the bank bailouts of 2008?).
Despite growth being present, the weak application of Milton Friedmen’s economic theory has led to a vastly wealthy 1% and increasing wage inequality. In the UK, while the rich have got richer, median wages have stagnated for decades – FTSE 100 CEOs now earn around 150x the average salary of their employees. This problem has been most prevalent in those areas where subsidies and development funds have provided the most support and the greatest dependence on government handouts. Interestingly, this is where the vote to leave was strongest.
For us to benefit outside the protection of the EU and create a “Great” future, I believe that rather than bumble along within a Euro-lite option, our best bet is to adopt a unilateral free trade approach like that adopted by Hong Kong and submit ourselves to a market-led re-balancing of the economy – much like the teachings of F.A. Hayek [see the video below for a light-hearted overview].
Now don’t get me wrong, this re-balancing will be painful, it will be bumpy. It will be all the more painful because we have allowed inefficiencies to thrive behind the walled protection of the EU trade tariffs and the regulation of big business.
Outside of that flawed, but comfortable walled garden, big business will become more powerful and the impacts of increased competition would have a negative effect on the UK’s agriculture and manufacturing sectors as subsidies and tariffs would no longer protect inefficient operating models.
Globalisation and flight of capital have led to government spending and stimulus no longer having the same multiplier effects that they used to and simply appear to postpone and enlarge the problems.
I write this at a time when the Bank of England is yet again printing more money in the form of quantitative easing to ensure the banks don’t run out of liquidity. While in the short term this will help stabilise the markets, in the medium term this will merely lead to a further decrease in the value of sterling and increased inflation as the extra cash works its way through the economy.
“[Beware] the danger of tyranny that inevitably results from government control of economic decision-making through central planning,” F. A. Hayek.
This may sound like a push for full adoption of neo-liberal economic theory, and perhaps it is in some ways – but with one important caveat. We need to build a new model, one that doesn’t treat humans as perfectly rational (i.e. Homo Economicus] on either micro or macro scales.
Homo Economicus is a myth, humans are not rational and small moves can create big panics. We are currently seeing unprecedented drops in the value of sterling and the markets as investors grow fearful of the outcomes of this referendum, and then significant upswings as they fear they have overreacted.
We can no longer to look to the past if we wish to build a future worth fighting for – we need base that future on new economic theories based on the insights provided by Behavioral Economics and our understanding of how markets and people behave, especially in respect to the disproportionate aggregation of wealth.
These factors have to be considered carefully by policy makers and the impact that wealth inequality and a lessening of social mobility have on an economy need to be taken incredibly seriously.
Now I am not proposing a “big government” approach to this, but rather what we need is to create a vision of how future wealth will be created and what skills will be needed – and then provide training in those for free.
The implementation of increased tuition fees has been an unmitigated social disaster, and while the economic value of some courses is debatable, we need to ensure this country’s future is based on the generation of knowledge and high-value inimitable advantage.
We need to realise the advantages that new technologies can bring to even our most conservative sectors, and stop looking backwards to the good old days. We desperately need to plug any holes in funding for science and technology, and then add to that funding to preserve the futures of the next generations.
We need to create the next Silicon Valley, not just in one area of the country, but across the entirety of it, and create an environment in which wealth creation is perceived as the norm and not preserve of the few.
Sadly, this is a country yearning for its glory days, when we raped and pillaged the world in the name of Empire. As I look around me at my fellow countrymen, I seriously doubt whether they have the stomach for the fight that will be needed – hence why I have felt that remaining within a flawed walled garden served my countrymen best.
Whatever the outcome of the next few years, I am more concerned for the future of others, than for myself. I have reinvented myself on numerous occasions and am confident I can continue to do so if the need arises – but whether those that are rooted in the past would ever dream of doing so is doubtful and so the queues at the job centre are likely to get longer in the short and medium term.
Of course, in the long run, none of this matters.” In the long run, we are all dead”*.
* J M Keynes