A Distorted Trade Pattern Isn’t An Advantage
We were treated this week, by Chris Giles of the Financial Times, no less, to an amazingly convoluted piece of logic. To support the constantly repeated refrain that Britain has no option but to stay in the EU, because there are no other viable choices available, he asserts that we derive unmatchable trade advantages by virtue of the simple fact of our geographical proximity to the European market.
He supports this assertion by pointing to two comparisons which he apparently finds convincing. New Zealand and the Czech Republic are economies of roughly the same size, but the UK does nearly four times as much trade with the latter as with the former, he says, and he goes on to make a similar point when comparing our trade with Australia and Spain.
This demonstrates, he says, that our easy physical access to the European market makes all the difference. Leave the EU, and we would lose that irreplaceable benefit.
This argument is so full of holes that it is surprising that Mr Giles thought it worthwhile to make it. First, it would be hugely surprising if the figures did not show that kind of pattern – an increase in our trade with the EU and a comparative decline with the world outside. What, after all, was the whole exercise about, if not to concentrate our trade in Europe and divert it from elsewhere?
If more than 40 years of managed (rather than free) trade, in which a customs union on the one hand and tariff barriers on the other have quite deliberately and systematically narrowed our trading opportunities, we would surely be able to sue for false pretences if something of the kind Mr Giles celebrates had not materialised.
But that entirely predictable outcome is far from settling the question as to whether it is inevitable or even desirable, or whether it renders other outcomes beyond reach. And the UK is surely the last country to be told that trade is something best done at close quarters. No other country has enjoyed more extensive trade links or has a longer or more successful experience of the great advantages of trading on a world-wide scale.
In line with the consistent pessimism that tells us we must accept the European option, since it is the best we can expect, it is often forgotten that joining the Common Market in 1972 represented for Britain a restriction of our trading opportunities and an abandonment of a rational and long-established trading pattern that was mutually beneficial for both ourselves and our partners.
That pattern had provided the British consumer with not only the cheapest and most efficiently produced food and raw materials from around the globe, but also preferential markets for British manufactured goods overseas.
That in turn allowed a cheap food policy at home (using subsidies to farmers to bridge the gap between the costs of domestic and foreign production), and cheap food in turn meant that manufacturing costs could be kept down, thereby creating a significant competitive advantage over Britain’s otherwise more competitive manufacturing rivals.
Common Market membership brought an end to these advantages. It meant, through the Common Agricultural Policy, to whose costs Britain was and remains a major contributor, a substantial increase in food prices and therefore in domestic costs, making British manufactured goods more expensive. It also meant an end to preferential markets for those goods overseas, and opened us up instead to direct competition from more efficient manufacturing rivals in a single European marketplace.
Today, in a country like New Zealand, British cars and other manufactured goods are rarely seen. They are little lamented, since the British market for New Zealand produce is also much reduced. Can we be surprised that trade with New Zealand, Australia, and other Commonwealth countries (which now include some of the world’s fastest developing economies) has languished? Didn’t we guarantee that outcome?
But what of the other side of the coin? Have we not derived great advantage from the trade we have developed with the EU?
Well, hardly. Let us put to one side the very large annual contribution we pay to the EU (a continuing burden, as it happens, on our balance of payments). We have now run a trade deficit every year since 1982, which was just as the full impact of EU membership took effect– not just a coincidence, since the greater part of that deficit is with the other members of the EU, and much it arises in the trade in manufactured goods.
The result is that our manufacturing sector has shrivelled away, and our net investment in new manufacturing capacity is virtually nil – not really the kind of success that Mr Giles wishes to celebrate and that we are told we cannot afford to lose. And, when we are solemnly warned that our EU partners will refuse to trade with us if we insist on a different and better Europe, are they really going to turn their backs on a one-sided trade relationship that has been so much to their advantage?
Mr Giles has, however, effectively made one point. The essence of what he is saying is that we cannot survive without the current lopsided arrangements, however detrimental they are to our interests. The weakness of his argument tells us that we shouldn’t believe a word of it.
Bryan Gould
26 February 2016
Which Immigrants to Get Tough On?
When Britain joined what was then the Common Market in 1972, a century-old trading pattern that had served British interests very well came to an end. Britain had enjoyed an unrivalled range of trading relationships which provided not only the cheapest and most efficiently produced food and raw materials from around the globe, but also preferential markets for British manufactured goods overseas.
That allowed a cheap food policy at home (using subsidies to farmers to bridge the gap between the costs of domestic and foreign production), and cheap food in turn meant that manufacturing costs could be kept down, thereby creating a significant competitive advantage over manufacturing competitors.
Common Market membership brought an end to these advantages. It meant, through the Common Agricultural Policy, to whose costs Britain was a major contributor, a substantial increase in food prices and therefore in costs, making British manufactured goods more expensive. It also meant an end to preferential markets for those goods overseas, and meant instead direct competition in a single marketplace from more efficient manufacturing rivals.
A country like New Zealand, which had had a symbiotic relationship with the British economy, found that food and raw materials produced over a century for the British market were denied free access, with the corollary that British manufactured goods were seen less and less in New Zealand. The countries with which Britain substantially severed links in favour of new arrangements in the Common Market are today, of course, some of the fastest growing and developing economies in the world.
But the change was not just in trade. Commonwealth citizens found themselves obliged to queue at length at immigration controls when visiting friends and family or holidaying in Britain, while those arriving from Europe walked straight through. The sacrifices jointly made in wartime seemed to count for little.
The personal and family links between Britain and Commonwealth countries nevertheless proved to be remarkably resilient. Despite the dismissal of the Commonwealth by British policymakers as being of little importance, and the obstacles placed in the way of Commonwealth visitors, the family links and social relationships between the citizens of the UK and of countries like New Zealand remained strong, and are constantly refreshed.
While Britain is, for New Zealand, less and less important as a trading partner or even as a foreign policy or military ally, the flow of people – family members, students, holidaymakers – between the two countries is as strong as ever. This is particularly significant for young New Zealanders. The “big OE” (or overseas experience) is virtually a rite of passage for young Kiwis. Although the rules about working in the UK have been tightened up considerably over the years, young graduates in particular will, almost as a matter of course, set off for the UK to “see the world” when they have completed their studies.
Some will treat their sojourn as a working holiday, financing it with short-term and usually low-paid jobs. Others – perhaps professionally qualified – will take on more permanent and skilled employment. In either case, what then often happens is that – young people being young people – friendships and relationships, often romantic relationships, are formed. Those that develop into something more permanent will require a decision to be made sooner or later as to where that development will progress. The outcome is usually that either young Kiwis will find themselves seeking permanent residence in the UK with their new partner and family while others will return to New Zealand with a British partner.
In either case, the family links between Britain and New Zealand are not only strengthened but actually extended. This is today the most significant aspect of the relationship between the two countries. How sad, therefore, that the UK’s European obligations (whatever their other merits) should once again intrude so as to blight what remains of that relationship.
A British public, apparently alarmed at the influx of migrants from Europe, demands from its political leaders that action should be taken. A British Prime Minister, anxious to placate his critics but hogtied by his commitments to his European partners, casts around for some step that will show that he is tough on immigration.
He has, it seems, found a suitably soft target. There is nothing much he can do about migrants from the EU but those young Kiwis (and other non-EU migrants) who insist on coming to the UK can be deterred by making life tougher for them. From April, the rules will be tightened yet further. Those seeking an employment visa will not only have to pay for the visa but an immigration health surcharge as well. If they earn less than £35,000, their right to stay will be shortened. If they earn more than that, those employing them must pay an annual levy of £1000 for each such employee.
The numbers of New Zealanders seeking long-term employment in the UK have already dropped from 18,000 in 2000 to 8500 in 2014. We can expect further falls as a result of these measures and a further weakening of the links between the two countries. But David Cameron is unconcerned. He knows whose interests are expendable.
Bryan Gould
16 February 2016.
Proud to be a Socialist?
An amazing thing is happening in the primary elections for the American presidency – and it’s not Donald Trump. Mr Trump, in any case, “doesn’t like losers” and, having lost in Iowa, should presumably now be “re-considering his position”.
The amazing thing is happening on the other side of the political divide. The Iowa primary ended in a virtual dead-heat between Hillary Clinton, the Democratic front-runner and assumed shoo-in, and 74 year-old Bernie Sanders, the Senator from Vermont, who started the race as a virtual no-hoper.
Hillary Clinton, by far the best-known of the Democratic candidates, carries some baggage as a consequence, and there will be those who claim to have foreseen that her less than spotless record would eventually catch up her. But the real surprise is not her relatively poor showing, but the rise to prominence of the elderly and hitherto little-known Bernie Sanders.
It has been widely assumed that Senator Sanders is to all intents and purposes unelectable. His age and relative obscurity would in any case count against him, but the real disqualification, it is believed, is that he is a self-declared socialist.
It is hard to think of a label that would more surely destroy a candidate’s chances in an American primary election. This is a country in whose politics even the term “liberal” is a dirty word and is used as an attack weapon in much of the political discourse.
A “socialist” is even further beyond the pale. The political right in the US has invested huge effort and resources in convincing American voters that socialism is akin to – even identical with – communism, and is fundamentally un-American.
No candidate in his or her right (or even left) mind would willingly allow even a whiff of such a label to taint their campaign. So how does a candidate who not only embraces it and uses it proudly as a banner manage to do so well with the voters – in Iowa and possibly elsewhere as well?
He is, after all, flying in the face of conventional wisdom, not only in the US but in much of the English-speaking world. Left-of-centre politicians in New Zealand, the UK, Australia and Canada, long ago conceded that to be labelled as a socialist is the kiss of death.
That concession is, of course, all of a piece with the loss of intellectual self-confidence that has afflicted the left in the English-speaking democracies. Not content with failing to challenge the right on their analysis of what constitutes a successful economic policy, or of how a strong and healthy society can tolerate growing inequality, or of what is the proper role of government, left politicians have conceded the language of politics as well.
The banner that was once flown proudly by those who proclaimed the virtues of greater equality, of a fair deal for all, of an inclusive economy that allows everyone to contribute and to derive the benefit from being members of society has now been fearfully disowned.
So, what explains the surprising courage that Bernie Sanders has shown, and the success that, so far at least, he has enjoyed? Even if his campaign were to stall from this point on, and he were to return to decent obscurity, how are we to account for the fact that his willingness to describe himself as a socialist did not immediately knock him out of the race?
The answer lies in listening carefully to what he says. He hasn’t used his socialism as either a sword or a shield. He has instead carefully explained what he means by it. He has assumed, rightly it seems, that people are willing to look behind the label – a label whose meaning has consistently been misrepresented to them – and to understand what it really means.
When Bernie Sanders says he wants “an economy that serves the interests of working people and not the billionaire class”, when he laments the plight of graduates who end up with low-paid jobs and deep in debt, when he commits to equal pay for women, he recognises that the natural tendency of a “free-market” economy is to concentrate wealth and power in fewer and fewer hands, leaving the majority to fight amongst themselves for what is left.
His message – that unless democratic government intervenes to regulate the “free” market and its outcomes, the rich will get richer and the poor poorer – is, it seems, well understood by a large swathe of more thoughtful voters. In describing himself as a socialist – someone who sees that we are all in this together and that there is such a thing as society – he also creates the advantage for himself of pointing up how much he differs from Donald Trump.
Trump is of course the archetypal “free” marketer. He is a cartoon version, a parody, of what the “free “market means. He is a self-obsessed “winner”, he hates “losers”, and he is used to grabbing what he can and devil take the hindmost.
Bernie Sanders shows that people will respond to his very different message, but only if they hear it – and that requires someone with the courage to deliver it to them. Some of that courage would not come amiss in other western democracies.
Bryan Gould
3 February 2016
Is Labour A Campaigning Party?
I had the pleasure of working with Deborah Mattinson during the 1987 and 1992 election campaigns when she undertook qualitative polling for the Labour Party. She was expert in interpreting what could be gleaned from focus groups, and those running the campaign, myself included, always listened attentively to what she had to say.
Politicians always listen carefully to what the pollsters tell them; indeed, it could argued that they are inclined to pay too much attention to poll findings, particularly in the middle of election campaigns when the apparent precision of the figures (if not of the facts behind them) can seem to be the only certain element in an uncertain world.
The problem for both politicians and pollsters, however, is that – even if the pollsters can accurately report what the voters are thinking (and they usually make a pretty good fist of that) – it is not at all clear what lessons should be drawn from that by the politicians.
The pollsters’ message may seem clear. They may report, for example, that the voters see the party as strong on issue X and weak on issue Y – but does that mean that the politicians should concentrate on issue X, to maximise their advantage, or should they make some effort to minimise or negate the handicap on issue Y? And if the latter, does that mean that they should change policy to align more closely with the voters’ perceptions or should they make a greater effort to persuade the voters of the merits of their policy on issue Y?
Much will depend on when, during the electoral cycle, the poll findings are reported. With a year or two to go, a change of policy or an increased effort to change public opinion on a given issue may make sense. But those are less sensible options during the campaign itself.
What all this means is that we should have no difficulty in accepting Deborah Mattinson’s assertions that Labour lost the last election because it was not trusted on the economy and did not do enough to change voter perceptions that the responsibility for the Global Financial Crisis should be laid at Labour’s door. The poll findings are all too clear.
The difficult part of the argument, however, is what should be Labour’s response to those factors? Should they concede management of the economy as territory inevitably held by their opponents, make no effort to counteract the false charge that they created the GFC, and concentrate instead on social and environmental issues that offer more promising terrain, which is roughly where the 2015 campaign ended up? Or do they face up to their problem (and the centrality of the economy as an issue in the minds of many voters) by either changing policy or the voters’ minds?
The pollsters’ answer to such questions is almost always the same; poll-driven politics seem to dictate that it is policy that must adapt to voters’ opinions, and not the other way round. That is why many in the Labour party will urge that, far from challenging Tory economic policy, the only path to electoral salvation lies in developing policy that looks more and more like current right-wing orthodoxy.
But that response is open to serious objection. A pale imitation will almost always be rejected in favour of the real thing. Why should the voters go for “Tory-lite” when it can only be seen as a reluctant and therefore unconvincing confirmation that no real alternative is available.
Even more seriously, where does that leave the whole thrust and purpose of left-of-centre politics? What would those who championed social justice, workers’ rights, full employment, public services have achieved if they had forsworn any attempt to change opinion? Is it not the role of those who believe that a better society is possible to challenge and change opinion and to do so by argument, debate and campaigning?
The pollsters’ message is in danger, in other words, of disabling any real attempt to bring about overdue change. And nowhere is this more urgently needed than in the management of the economy. If we want a healthier society and a more inclusive economy, a proper role for government, and a reversal of growing inequality, then we must argue for them and show how they can be achieved.
That is not a hopeless task. But it cannot be achieved if it is never attempted. The voters will never accept that what see today is not the best we can expect if they are never told anything different.
And it is not as though the time is not propitious. There is a growing body of expert and informed opinion that is clear that government can and should play a role other than simply imposing austerity, that inequality is the sign of a malfunctioning economy, that full employment is both desirable and achievable, that the deficit that really counts is not the government’s but the country’s.
How sad if Labour’s courage should fail it, so that it lags behind progressive opinion, just as a new mainstream is developing. A campaigning party has four years in which to persuade public opinion that their lives can be better than they are now. They should go to it.
Bryan Gould
27 January 2015
Is Roy Greenslade’s Despair Justified?
So, that’s it then – the game’s up. Roy Greenslade’s bleak analysis would have us believe that the good ship “Labour and the Left” has at last run aground and is unlikely to be re-floated.
No one doubts that the Labour Party is going through one of its periodic spasms of internecine conflict and less than promising electoral prospects. But it would be a serious mistake and an unnecessarily self-inflicted wound to throw in the towel, just because the party’s leaders – over three or more decades – have made a hash of providing Labour supporters with a coherent and convincing way forward.
It is not as though there is not a perfectly sensible path to rebirth and salvation. The question to be answered is not whether or not it exists but as to why it has not been taken.
Labour’s current difficulties are the direct and inevitable outcome of intellectual failure. That failure originated in the 1970s, with the apparent demise of Keynesianism, and gathered pace with the neo-liberal revolution that swept much of the western world in the 1980s.
Many Labour politicians and thinkers will resist the notion that their own thinking has been influenced by those developments. They will protest that they remain committed to the true faith. They will point to their continued allegiance to the great left virtues – social justice, equal treatment, solidarity, tolerance and compassion.
All well and good. But where they have failed is that, having proclaimed those values, they have signally failed to explain how they are to be achieved. And that is because they have been unable to provide an analysis of how the economy works, or of how it could be made to work, in such a way as to make those outcomes possible. The voters have accordingly remained unconvinced. How they ask, can we believe that different results will be obtained if the analysis remains the same?
The truth is, in other words, that from Denis Healey onwards, most Labour leaders have lacked the intellectual firepower to challenge the basic rules of a supposedly “free market” economy – that the market can safely be left unregulated, that the economy must be run as though it is a business, that government should not second-guess market outcomes.
This tacit acceptance of these supposed truths as to how a market economy should work has placed a powerful weapon in the hands of the left’s opponents. Any proposal from the left falls to be judged according to precepts asserted by those who benefit most from them to be objectively unchallengeable.
The left’s leaders, rather than risk being pilloried, were easily persuaded that it was safer not to stray too far from orthodoxy. Some went so far as to make a virtue of their willingness to endorse the positions prescribed by their supposed opponents. With no effective challenge to that orthodoxy, the political battlefield was successfully narrowed to comprise only the terrain most helpful to the left’s opponents.
A further tactical withdrawal was also apparently required and duly delivered. For those left politicians still ready to assert their commitment to fairness and compassion, and their concern about growing poverty and inequality, it was increasingly made clear and accepted that a choice had to be made between economic efficiency and success on the one hand and the “pie-in-the-sky” goals of social justice on the other. Those who stuck to their guns were easily portrayed as other-worldly theorists, not to be trusted with the tough business of running a real economy.
The casualties of these withdrawals from the real battlefield included, of course, any sense that the left itself had of where it was going or of how the battle was to be won. They fell back on skirmishing, on the odd guerrilla raid, waiting for their opponents to make mistakes, never daring to mount an all-out assault on the enemy’s heartland of self-serving orthodoxy. This absence of a clear sense of strategy and direction provided of course the perfect conditions for dispute and dissension in the ranks – the kind of disintegration that Roy Greenslade now laments.
How did all this happen? Left politicians did not work hard enough. They failed to develop a persuasive and credible alternative to “free-market” economics. Many even, in their heart of hearts, accepted the right-wing analysis.
The good news is that even this late hour is not too late. There is a growing body of sensible and informed opinion, until now largely ignored by the left’s supposed leaders, ready to challenge the “free market” orthodoxy, ready to assert that austerity and public spending cuts are literally counter-productive, that high unemployment makes us all poorer, that unaffordable housing widens the inequality gap, that economic efficiency is best secured by making use of everyone’s efforts, that the more unequal an economy the less successful it is, that government should use its power not just to bail out the banks but to fund productive investment and proper jobs in manufacturing and real wealth creation.
And because these are sensible policies that are readily explained, the left can get over its fear of departing from the current orthodoxy and can convincingly describe a future around which the whole party can unite. Perhaps there is a future after all.
Bryan Gould
8 December 2015