Heathrow Airport Expansion And Decision Paralysis, A Symbol Of British Political Failure

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Government indecision and cowardice over the expansion of Heathrow Airport is just one tangible, high profile manifestation of the British political disease

There is no better analogy for the broken, dysfunctional nature of British politics and strategic government planning than the ongoing saga over whether and how to expand London’s Heathrow Airport, an undertaking which most serious people concede needs to happen yet generations of Cabinet ministers seem quite unable to make a reality.

A year after it finally appeared that the decades-long decision process had at long last produced a result, we now learn that plans for a new terminal are being scaled back and the timeline further extended.

From the Times:

Heathrow is planning to build a mini version of Terminal 5 as part of slimmed-down proposals to expand Europe’s biggest airport.

The airport is considering building a new terminal a few hundred metres west of T5 to handle 25 million passengers a year as part of updated plans for a third runway, The Times has learnt.

Heathrow is also planning to phase all building work over as many as 15 years to reduce the cost of expansion by about £2.5 billion. The plan will be one of a series of options put to public consultation in mid-January.

Heathrow says that the proposals would bring the total cost down to about £14 billion, allowing the airport to keep passenger landing charges close to current levels.

Airlines have been concerned that Heathrow’s private owners would increase charges to pay for the project, potentially pricing out many passengers. At present fees add £21.75 to the price of each ticket. Chris Grayling, the transport secretary, has indicated that keeping landing charges flat would be a condition of building a third runway. The proposals have to pass a parliamentary vote early next year and be approved by planners in the 2020s.

In other words, the original plans for a new full-size terminal located next to the planned new runway have been downgraded to plans for what amounts to little more than a satellite terminal adjacent to Terminal 5.

And even this reduced ambition has to be justified to the grey mass of naysayers who would sooner go their whole lives without ever making a consequential decision, with Heathrow Airport’s owner now deliberately emphasising what a small, puny and inadequate solution this new micro-terminal would actually be, as though mediocrity and lack of ambition were a selling point (which in today’s Britain they are):

Any comparison with T5, which cost £4.2 billion and was delayed by a four-year planning inquiry, could cause major concerns. However, Heathrow insists that the new terminal would be smaller, catering for 25 million passengers compared with 35.5 million at T5. It would be built in two blocks, creating an initial facility for 15 million.

Wait! We can make this development worse and ensure that it fails even more to keep up with capacity demand by the time it gets built! Give Heathrow Airport another year and they will be proposing little more than a wedding marquee tent and a few folding tables.

The government understandably does not want air passengers to pay an unbearably steep cost to finance the expansion, yet it does not occur to them that adequate relief could easily be provided to passengers by cutting the ludicrously high Air Passenger Duty, an exercise in environmental virtue-signalling which makes Britain one of the most expensive and unattractive countries to fly from, and which is close to being a national embarrassment.

A real Conservative government might see the ideal opportunity and justification for a tax cut in this case, but sadly we do not have a real Conservative government at present – we have Theresa May’s strong and stable government, limping from day to day by offering as many concessions to the Left as is humanly possible without changing the Tory party logo from a tree to a hammer and sickle.

Of course there are some very specific reasons why countries like China and the United Arab Emirates can complete vast civil engineering projects in the same time it takes Britain to convene a planning committee – an authoritarian government, the absence of inconvenient democracy, few planning regulations, lax health and safety standards, cheap labour and/or a tolerance for slave labour being among the chief distinguishing factors.

And indeed one of the key factors which sets Britain apart from certain other countries is the importance we place on our preserving our heritage, our built environment and taking local concerns into account when giving the green light to major new projects. Any government can quickly see to the construction of a giant, soulless mega-mall in the desert, or a dubious national ego-boosting skyscraper in a locale where there is no real need to build upward. It takes far more inspiration and resourcefulness to create and expand critical national infrastructure or important new commercial developments in sympathy with natural surroundings which have often existed for many centuries.

But still, Britain is too hesitant when it comes to authorising critical new infrastructure projects of national importance, and our failure holds us back as a country. Whether it is central government failing to bite the bullet and commit to a decision for fear of political fallout, NIMBY campaigns effectively trumping the national interest with the local or ill-considered privatisations or public-private partnerships allowing responsibility for key decisions to slip through the cracks, decisions which should be made at a local level in a healthy democracy are instead commandeered by central government, and strategic decisions which should take two years instead take twenty.

One of the very first pieces written on this blog nearly six years ago lambasted the Tory-LibDem coalition government for kicking the can down the road on Heathrow airport expansion. It is a subject I have returned to again and again in subsequent years – and yet we are no closer to striking ground on a project which is essential to maintaining the pre-eminence of Heathrow as a key European hub. At this point, even if one of the alternative schemes (such as Gatwick expansion or a new airport in the Thames estuary) is chosen instead of a third runway and new terminals at Heathrow, we are rapidly reaching the point where any decision is better than no decision.

And as it is with Heathrow Airport expansion, so it is with nearly everything else in British politics. There are an array of slow-burning, pressing issues facing this country which successive governments have either tackled half-heartedly or ignored altogether. It is wrong to call them “crises” as there will be no sudden national implosion if they are not all fixed within six months, but our continued failure to tackle the housing shortage, low worker productivity, education reform, healthcare reform and immigration leads to a slow and steady erosion of trust in politics and our democratic institutions, as well as making Britain a less attractive place to live, work or invest.

The retrenchment of British ambition and capability is not emblemised by Brexit, as many tremulous Remainers like to claim. The symptoms have been all around us for years, decades even, and we have been too lazy or calculating to subordinate the short-term political interest to the long-term strategic need. Look at the big issues facing the West and the world in general in 2017 – global migration flows, Islamist terror, globalisation, outsourcing, automation and more – and there is not one of these complex problems which we as a country have failed to comprehensively sweep under the rug or otherwise avoid meeting the challenge.

Even on those occasions when the people have recognised burning problems and the need for bold new solutions, public opinion (such as on Brexit and immigration) has been repeatedly slapped down over the years by a cohort of politicians who think it is their job to explain and defend the current status quo to the citizenry rather than change the status quo according to the demands of the citizenry.

The managerialist, consensus politics which has characterised Britain since the end of the Thatcher and Major governments is partially justifiable when the economy, society and the world are operating in something like steady-state, and governments have but to tweak a few dials here or there to keep the system running smoothly. But this brand of aloof technocracy is lethal to national prosperity and security in times of discontinuity such as the period in which we find ourselves today, when the prevailing political consensus is conspicuously broken and the worn-out old policy prescriptions no longer command sufficient confidence or support.

As this blog has been warning repeatedly, and will continue to warn – even if nobody listens – the time for denial and evasions is over. But so too is the time for cosmetic, superficial pseudo-reforms or scattergun crisis management. Rather, we need to develop a set of mutually supporting new policies based on a clear analysis and understanding of the challenges facing modern Britain and the various ways in which they are interlinked. This is what the CPS did in 1977 with their “Stepping Stones” report, paving the way for Margaret Thatcher’s transformative government, and that is what we must do again today.

And until such time as we demand political solutions and visionary government equal to the challenges of the stormy present, every aspect of future Britain will soon come to resemble the cautionary tale of Heathrow Airport – dilapidated, twenty years behind the curve, fatally stymied by strategic indecision and increasingly avoided by anyone with the means to do so.

 

UPDATE – 19 December

Based on positive reader feedback to this and other articles, I am actually now trying to do something to turn this idea (the need to respond to discontinuity with radical but coordinated new policies) from a mere blog post to an actual project or initiative in the real world. We clearly can’t leave it to the usual inhabitants of Westminster to do this on their own – new ideas and fresh faces will be needed, just as they were in 1977.

If anyone who reads this article feels called to action, please do get in touch with me, either using the “contact” menu link at the top of the page, or directly at semipartisansam@gmail.com

Thanks.

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Centrists Cling To Their Failed Dogma Even As It Tears Their Countries Apart

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In a wide-ranging essay, Michael Lind argues that the elite managerial class have broken their compact with the working classes to the detriment of the country, thus explaining the populist backlashes witnessed in Britain and America

“The New Class War”, an essay in the American Affairs Journal by writer Michael Lind, perfectly captures the intersection between trade regulation, democracy and the interests of the managerial elites which is at the heart of the current debate over sovereignty – and which fuelled the Brexit vote in the UK and Donald Trump’s ascendancy to the presidency in America.

It is necessary to quote at some length from the section entitled “The Politics of Global Arbitrage“, in which Lind discusses the ways in which corporate behaviour has influenced the contours of our democracy:

Even as they have exploited opportunities for international labor and tax-and-subsidy arbitrage, firms in the post–Cold War era of globalization have promoted selective harmonization of laws and rules, when it has been in their interest to do so. In the second half of the twentieth century, successive rounds of negotiation under the auspices of the General Agreement on Tariffs and Trade (GATT) and, more recently, the World Trade Organization (WTO) effectively reduced most traditional tariff barriers. By 2016, when the WTO effectively terminated the failed Doha Development Round of global trade talks, the United States and other leading industrial nations had shifted the emphasis from removing barriers restricting the cross-border flow of goods to harmonizing laws and regulations through “multiregional trade pacts” like the North American Free Trade Agreement (NAFTA), the Trans-Pacific Partnership (TPP), and the Transatlantic Trade and Investment Partnership (TTIP), in the interests of transnational investors and corporations reliant on transnational supply chains.

The areas chosen for arbitrage and harmonization reflect the interests not of national working-class majorities but of the managerial elites that dominate western governments. Harmonizing labor standards or wages would undercut the labor arbitrage strategy, while transnational crackdowns on tax avoidance would thwart the strategy of tax arbitrage by transnational firms. Instead, the emphasis in harmonization policy has been on common industrial standards, the liberalization of financial systems, and intellectual property rights, including pharmaceutical patents. These kinds of harmonization benefit transnational firms, investors on Wall Street or in the City of London, and the holders of intellectual property rights in Silicon Valley and the pharmaceutical industry.

In many cases, this kind of regulatory harmonization makes sense—standardizing product safety measures, for example. But the new regulatory harmonization agreements produce a “democratic deficit” in two ways.

First, they remove whole areas of regulation from the realm of ordinary legislation, replacing it with “legislation by treaty.” Favorable laws and regulations that corporate lobbyists are unable to persuade national democratic legislatures to enact can be repackaged and hidden in harmonization agreements masked as “trade” treaties. These treaties, often thousands of pages long, tend to be drafted in secret by committees involving corporate lobbyists and may be ratified by legislatures without careful scrutiny.

Worse, most of these contemporary regulatory harmonization agreements include “investor-state dispute settlement” (ISDS) provisions that allow individual corporations to sue national governments that change the rules in their countries after the passage of the treaty in private tribunals, dominated by corporate lawyers, with no appeal mechanism. If Congress enacts a statute that adversely affects the interests of Acme Inc., then Acme has few options, other than paying lobbyists and making campaign donations. But if Congress ratifies a treaty, and later changes a provision by passing a new law, Acme can sue the federal government for financial damages. The United States has yet to lose a case to ISDS, but other countries have, and some believe that the prospect of corporate lawsuits has a chilling effect on new laws and regulations of which particular corporations disapprove.

None of this is to imply that the transnational managers of the West and littoral East Asia who control the new global oligopolies are more selfish or less public-spirited than the managers of national corporations during the Second Industrial Era. On the contrary, in personal terms, today’s managerial elite is for the most part less bigoted and often quite philanthropic. The point is simply that the American, German, and Japanese corporations of half a century ago were constrained by kinds of Galbraithian countervailing power and Burnhamite/Moscian juridical defenses that have crumbled. Thanks to globalization, itself a voluntary policy choice enabled but not required by new technology, today’s transnational firms have much more bargaining power in their dealings with workers and democratic nation-states.

My emphasis in bold.

This perfectly sums up a core part of the democratic case for leaving the European Union as it relates to trade, and is very much in line with the analysis and arguments advanced by Dr. Richard North of eureferendum.com and Pete North.

Lind is quite correct to acknowledge that regulatory harmonisation can be an enormous force for good. In fact, the trouble only really comes about when there is no option for a democratic nation state to “opt out” of a certain regulatory change or edict when its imposition would harm the national interest in some way. Obviously there would be consequences for such an action, such as the non-recognition of standards relating to the product or industry in question. But the opt-out is a vital tool which nation states must possess in order to wield sensibly and with restraint on those occasions when the compromise hashed out by 27 EU member states is unacceptable to the sole outvoted dissenting country.

This is what we mean by the outsourcing of sovereignty. Remainers and assorted pro-EU apologists love to make the glib assertion that EU member states retain ultimate sovereignty at all times because they are technically free to leave the EU, but this is an asinine assertion. Sovereignty should not be a choice between having to go along with every diktat from Brussels or deploying the nuclear option and leaving the European Union. Indeed, how can you call it sovereignty when the choice is between accepting papercut after papercut (grave though the cumulative wound may be) or else enduring the disruption of severing ourselves from the union? This isn’t sovereignty, it is blackmail. Thank goodness that Britain finally called the EU’s bluff.

This section is also instructive:

To obtain social peace and mobilize national populations during World War II, the United States and its allies like Britain brokered business-labor pacts and promised welfare benefits to veterans. In the ensuing Cold War, every major industrial democracy devised some kind of “settlement” or compromise among business and labor interests within the nation.

The postwar settlements were a combination of employer-specific welfare capitalism and universal or means-tested, social-democratic welfare states. In West Germany, welfare capitalism took the form of “codetermination,” or union membership on corporate boards. Japan, following intense labor conflict after 1945, developed a system of corporate paternalism and lifetime employment for many workers. Organized labor was weak in the postwar United States, but the “Treaty of Detroit” negotiated among automobile companies and unions was a successful example of informal business-labor corporatism. Low levels of legal and illegal immigration, and social pressure on married mothers to exit the work force to become homemakers, strengthened the bargaining power of mostly male workers by creating tight labor markets.

These corporatist systems of welfare capitalism made the welfare states of the period from the 1940s to the 1970s much smaller than they would have been otherwise. Wage compression brought about by unions in the welfare-capitalist system made it easier for payroll taxes to fund entitlements like public pensions, which in turn were smaller than they might have been because of the widespread existence of private employer pensions.

The post-1945 settlements in the West and Japan demonstrate countervailing power and juridical defense in action. The result was the golden age of capitalism from the 1940s to the 1970s, combining high growth with a more equal distribution of its rewards than has ever existed before or since.

But Lind sees the end of the Cold War as a turning point when the post-war settlements established in the West and Japan began to be fatally undermined:

Following the Cold War, the global business revolution shattered these social compacts. Through the empowerment of multinational corporations and the creation of transnational supply chains, managerial elites disempowered national labor and national governments and transferred political power from national legislatures to executive agencies, transnational bureaucracies, and treaty organizations.

Freed from older constraints, the managerial minorities of Western nations have predictably run amok, using their near-monopoly of power and influence in all sectors—private, public, and nonprofit—to enact policies that advantage their members to the detriment of their fellow citizens. Derided and disempowered, large elements of the native working classes in Western democracies have turned to charismatic tribunes of anti-system populism in electoral rebellions against the selfishness and arrogance of managerial elites.

I have to say that Lind’s essay has given me pause for thought. This blog has consistently championed the Thatcherite revolution which took Britain from being the sick man of 1970s Europe, seemingly in terminal decline, to a revived and confident global power by the 1990s. I did so while acknowledging the various failures of the Thatcher government to ameliorate the decline of heavy industry outside of the wealthy Southeast and its cost in terms of suffering and wasted human potential, but I nonetheless saw (and continue to see) Thatcherism as a necessary if painful tonic for the economically sick Britain of the 1970s.

Lind, however, sees things differently. From Lind’s perspective, the post World War II settlements established between labour and the managerial classes in various Western countries were responsible for the great boost in productivity and living standards, not an anchor on these metrics (as I have always viewed the post-war settlement in Britain, partially deconstructed by Thatcher). To be fair, Lind pinpoints the start of the unravelling to the end of the Cold War when Thatcher’s premiership was nearing an end, but since many of the tenets of Thatcherism continued through the Major and Blair governments into the 21st century once can reasonably infer a criticism of Thatcher’s policies, which merely took a decade to come to full fruition.

This is food for thought for an unabashed Thatcherite like me, and I need to do more reading to decide how much of Lind’s narrative holds water. The narrative arc he constructs is persuasively argued and passes the “common sense” test, but to my mind Britain’s experience stands as an exception to Lind’s rule. In our case, the post-war settlement we constructed (based on the recommendations of the Beveridge Report) grievously held us back as a country. We did not benefit from enlightened German-style corporate governance or Japanese-style jobs for life in the post-war years, but rather sank into decades of adversarial conflict between unions and (largely state-owned) employers, with government policy repeatedly favouring the interests of the producer over those of the consumer.

Now, this could be because British government policy was particularly misguided and the British managerial class particularly useless (an argument I have some sympathy with), but it seems more likely to me that Lind’s blanket assertion that countries prosper most when there is a powerful countervailing force to push back against the elite managerial class is not always correct – or at least is only one of several other key factors determining economic growth and increases in standard of living. I would posit that Thatcher’s Methodist upbringing probably provided a great moral anchor that prevented excessive self-serving policymaking, while today’s decadent and avowedly secular elites are perhaps more prone to corruption and in greater need of the countervailing force that Lind describes (hence the populist backlashes we have witnessed).

Lind then goes on to discuss how labour arbitrage and tax & subsidy arbitrage in our more globalised world have worked to undermine the nation state and empower the corporation – a line of reasoning which would certainly be familiar to anyone on the Left.

He concludes by looking ahead to the likely geopolitical situation in the year 2050, and considers what will be the best strategy for the West to maintain power and influence:

Great-power competition, even in the form of limited cold wars, is likely to reward nations whose economic model is based on developing productive technology and raising the incomes of domestic worker-consumers, rather than engaging in labor and tax arbitrage, regulatory harmonization, and other schemes that boost profits without increasing productivity. In cold wars and trade wars, even if no blood is shed by the contenders, countries and blocs with empowered and patriotic workers are likely to do better than rival nations crippled by immiserated workforces and selfish, nepotistic, oligarchic elites.

[..]

Managerial elites are bound to dominate the economy and society of every modern nation. But if they are not checked, they will overreach and produce a populist backlash in proportion to their excess. By a misguided policy of suppressing wages and thus throttling mass consumption, unchecked managerial elites may inadvertently cripple the technology-driven productivity growth responsible for their rise and accidentally cause the replacement of managerial society itself by a kind of high-tech rentier feudalism.

Managerial society works best when there are not only concessions to national working-class economic interests—the bribes to the “losers” of neoliberalism—but also genuine economic bargaining power and political power wielded by the many. Far from undermining managerial regimes, Burnham’s “juridical check” and Galbraith’s “countervailing power” make them more legitimate and sustainable.

In other words, the policies favoured by the current dispossessed centrists in Britain and America are not as smart and self-evidently beneficial as their advocates love to claim. Status quo globalisation, which increasingly seeks to leverage labour arbitrage, tax arbitrage and selective regulatory harmonisation to benefit the managerial class while doing little to raise productivity (not to mention leaving millions of people in dead-end jobs or the unemployment scrapheap) is not only selfish on the part of the managerial class, it is also injurious to the future prosperity and security of the country.

In fact, according to Lind, it turns out that having a patriotic population and workers with a commitment to the country they live in, together with some degree of bargaining power (preferably due to their possessing valuable skills rather than the threat of withholding their labour, as deployed in the 1970s), is perhaps a net positive after all, particularly in the long term.

Again: I don’t buy everything in Michael Lind’s essay. But he spins a plausible narrative and argues his case well. And if Lind is correct, how regrettable is it, then, that the populist backlashes on both sides of the Atlantic have been held in check partly through their own incompetence (Donald Trump in America and the Tory hard Brexiteers in the UK) and partly by the fact that the resurgent centrists have effectively ground the respective movements to a halt?

Bear in mind, if and when the centrists retake power, they intend to revert to pure business as usual. They have learned nothing from the comprehensive rejection they received from voters only a short time ago, and think that the world can revert to its previous happy state where they got everything that they wanted while anyone who dissented could go jump off a bridge.

I have long contended that such an overturning of these populist movements by the elite would be poisonous, even fatal, to our democracy. But if Lind is correct, it could also be fatal to the future economic prosperity and national security of our countries.

 

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Expanding Heathrow Is A Start, But Now We Must End The War On Aviation By Cutting Air Passenger Duty

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THIS ARTICLE WAS FIRST PUBLISHED AT CONSERVATIVES FOR LIBERTY

 

With the government’s announcement that Heathrow will finally get a third runway, it is time to end the decades-old war against aviation by slashing Air Passenger Duty too

About this time every year, my Texan wife and I glance at the calendar and realise, with dread, that the time has come to book plane tickets to the States for Christmas. To be clear, the dread has nothing to do with visiting my in-laws, whom I love very much – no, what ties my stomach in knots every autumn is the nagging question of how much money the British government intends to extort from me for the privilege of flying away from this rainy island for a couple of weeks of Texas sunshine.

Every year, Air Passenger Duty – that invidious, regressive, anti-business tax – creeps ever upward. And while the government may deign to excuse certain people from this extortion (children under sixteen were made exempt this year, in a blaze of self-congratulatory glory), for the rest of us APD keeps on inching upward. At a time when falling oil prices should mean that air fares reach historic lows, in Britain at least the cost of air travel is kept artificially high thanks to this ill-conceived tax – by far the highest in the developed world.

And why? Primarily as a sloppy wet governmental kiss to environmentalists, who some time ago decided that nothing poses a greater threat to the Earth than a working class person enjoying a holiday in Florida, or taking a cheap excursion to one of the sunnier parts of Europe. Air Passenger Duty is nothing so much as the collective howl of outrage from well-heeled leftist environmentalists that poor people are forgetting their place (i.e. receiving benefits and being thankful for them) and daring to travel the world as wealthy people did before them.

Remember the leftist credo, everybody: Fashionable celebrities flying private jets to Davos to moralise about carbon emissions made by the rest of us = good. Nasty working class folk flying Ryanair for a fortnight in Lanzarote or a stag weekend in Riga = bad.

Now that the government has taken the painful and very belated decision to proceed with the expansion of London’s Heathrow Airport (something which should have happened a long time ago) there will be inevitable calls for punishing new environmental levies to offset the terrible “damage” that is supposedly wrought when the state takes its jackboot off the throat of the aviation industry. There will likely be calls to raise Air Passenger Duty even further to help pay for this crucial national investment, even though the exorbitant tax already places Britain at a huge comparative disadvantage.

The government must resist any and all calls to raise APD. In fact, there could be few clearer signs that this government is committed to championing UK aviation and supporting the economy through the uncertainty of Brexit than a bold, dramatic cut in Air Passenger Duty from the current level of £13 short haul / £ 73 long haul / £146 premium cabin rates back down to the single digits. When my wife and I connect in Houston or Dallas Fort Worth on our way from London to the Rio Grande Valley, we pay the state of Texas no more than a few dollars for the privilege of transiting through DFW or George Bush Intercontinental airport – and both of those hubs put London’s Heathrow and Gatwick to shame.

At a time when the government is considering cutting Corporation Tax as low as 10% as an incentive to firms to invest, grow and remain in the United Kingdom, we should not be discouraging business executives and holidaymakers (72% of whom come to the UK by air) from choosing Britain by mugging them before they even step off the jet bridge. Cutting Corporation Tax is great, but the government should not forget individuals, who currently labour under all manner of punitive stealth taxes and would greatly welcome the relief. Neither should the government forget the aviation industry, which is every bit as vital as shipping to an island nation, and which for too long has been stymied and suppressed by cowardly politicians who refused to take critical decisions in the national interest.

With the long-overdue decision to build a third runway at Heathrow Airport, the government has finally called an end to years of dithering and inaction and made a necessary decision in support of the economy. But the benefits of this decision could yet be killed in the crib unless Britain also signals its intention to stop being the high-tax, anti-aviation country which prioritises impractical, virtue-signalling environmentalism over necessary infrastructure investment and tax reform.

There is no earthly reason why you or I should have to pay £73 for the privilege of taking off from Heathrow Airport, whether it has two runways or three. And if Theresa May and Philip Hammond are serious about signalling that Britain is open for business then slashing this one small but immensely harmful tax would be a great place to start.

 

THIS ARTICLE WAS FIRST PUBLISHED AT CONSERVATIVES FOR LIBERTY

 

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The Economic Challenges Beyond Brexit

Bitter, swivel-eyed (and unrepentant) europhile he may be, but the FT’s Martin Wolf makes some valid points in his latest column, warning against any complacency that Britain’s persistent economic weak points will be automatically restored to health upon leaving the European Union.

Wolf writes:

British economic policymakers confront big challenges. They have to manage departure from the EU with the minimum damage. They also need to make the UK economy far more dynamic. The latter cannot be achieved if they do not abandon the myth that Britain is already an economic success, albeit one choked by the dead hand of an over-regulated European economy.

Simon Tilford of the Centre for European Reform provides a far more realistic picture in his Brexit Britain. Measured at purchasing power parity, the rise in the UK’s gross domestic product per head between 2000 and 2015 was smaller than in Germany, Spain and France. Over this period, the UK outperformed only Italy, among the EU’s largest pre-2000 members. In 2015, the UK’s GDP per head was lower relative to the average of the 15 pre-2000 EU members than in 2000: its GDP per head was a mere ninth within this group.

The UK also has the highest income inequality among these countries. Furthermore, notes Mr Tilford, UK real wages fell by 10 per cent between 2008 and 2014, before a tiny uptick in 2015, while German and French real wages rose. In 2015, only London and the South-East had higher GDP per head than the average of the EU-15 countries. Other UK regions were at or below that average. In all, it is hardly surprising so many UK voters feel left behind, as shown in the EU referendum.

True, the increase in French real wages has coincided with high unemployment. But that is not true in Germany. UK workers also work longer hours than those in other EU-15 countries. This is presumably to make up for low real wages, themselves largely due to the UK’s poor productivity. According to the Conference Board’s invaluable “total economy database”, the only EU-15 countries to have lower output per hour than the UK are Greece, Italy and Portugal, while the UK’s productivity per hour has stagnated since 2007. Again, of the biggest five EU-15 members only Italy performed worse on this measure. The UK also now runs the largest current account deficit, relative to GDP, in the EU-15.

The UK, then, has low unemployment. But it also has high inequality, mediocre real incomes, at least by the standards of its European peers, and poor external competitiveness. Above all, recent productivity growth has been truly awful.

These are hard, inescapable criticisms – particularly in terms of productivity growth and purchasing power parity, which is ultimately the only yardstick that matters in terms of whether people actually feel better off.

And concludes:

The implications of a realistic view of the UK economy is that, even without the looming shock of Brexit, the economy suffers from big weaknesses relative to the European economies that many Brexiters despise. Some argue that a real depreciation of sterling is mainly what is needed. If sustained, the post-referendum devaluation should indeed help, though it means a fall in real incomes and wealth. Yet devaluation alone will not cure UK weaknesses.

The UK has to rectify longstanding supply-side failings. The list includes: low investment, particularly in infrastructure; inadequate basic education of much of the population and the innumeracy of much of its elite; a grossly distorted housing market; over-centralisation of government; and a corporate sector whose leaders are motivated more by the share price than by the long-term health of the business. Not surprisingly, given all this, the UK economy is highly dependent on inward foreign direct investment, which Brexit would seem virtually certain to weaken.

If the UK is to thrive economically, it will not be enough for it to manage Brexit, hard though that will surely be. Its policymakers must also start from a realistic assessment of the UK’s mediocre performance. This is no world-beating economy. It is not even a Europe-beating economy, except on creating what are too often low-wage jobs. It will have to do far better if it is to deliver the higher living standards its people want in the tougher environment ahead.

The danger with Brexit was always that the sheer complexity of managing our secession from the European Union would prove too much for a mostly unremarkable generation of politicians and civil servants, nearly all of whom have never known life outside the EU and can scarcely imagine self-government. Even now, three months after the historic Brexit vote, there is little evidence that the government has started to get to grips with the challenge ahead of them.

Therefore, it is not unreasonable to ask – as Martin Wolf does – how much mental capacity will be left to tackle other burning issues like Britain’s low productivity, the low-skill / low-wage segment of the economy or decades-old weaknesses in British management, identified by Thatcher’s Conservatives in the late 1970s but still barely tackled even now.

And I’m not sure there is a quick fix to this problem. Brexit will inevitably dominate the political agenda, probably for the next decade, to the near exclusion of all else. And even if there was excess capacity, there is precious little evidence to suggest that Theresa May’s new government has a blazingly clear vision for reforming Britain anyway – as Isabel Hardman outlines in this excellent Spectator piece.

In short: many of these problems, though long-festering, are probably going to have to wait to be tackled, unless the government surprises us all with its radical zeal and far-reaching reform plans at the upcoming Conservative Party Conference, which seems unlikely at best.

If you wake up to discover your house is ablaze and smoke pouring into the bedroom, you don’t waste precious minutes ensuring that you are beautifully dressed and immaculately turned-out before evacuating the building. Likewise, in whatever shape Brexit ends up happening, Britain will likely emerge from the EU in much the same shape as before, with the same nagging issues and weaknesses clamouring to be addressed.

Inspiring? No. Ammunition for assorted bitter Remainers, EU-lovers and anti-patriots? Sadly, yes. But that is our lot. Brexit is likely to be a grinding, painstaking, lengthy process at the end of which the same Britain will be blinking back at us, largely unchanged, with all the rest of our work to realise the benefits of Brexit still ahead of us.

But does that mean the enterprise is not worth the effort? Hell no. And it is very telling to see those who are prepared to steel themselves for the work ahead, and those who seek to use it as a whinnying justification for giving up.

 

Thousands Of People Take Part In The March For Europe

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In Furious Denial Over The Failure Of Leftist Economic Policy, Owen Jones Misrepresents Conservatism

Owen Jones continues to use his Guardian column to peddle lies and misrepresentations about conservative economic policy, in a Herculean effort to save British leftists from having to come to terms with their failed economic policy dogma.

In praise of John McDonnell’s unabashedly left-wing conference speech, Jones whines:

It was a speech not lacking in concrete proposals: a tax transparency and enforcement programme; a £250bn investment programme in infrastructure and clean energy; a national investment bank, backed up by regional investment banks, to support small businesses; legislation to stop the emergence of Philip Greens by reforming companies – preventing them from “taking on excessive debt to pay out dividends” and ensuring company takeovers protect workers and pensions; the promotion of cooperative and worker ownership; protection for self-employed people; plans for a universal basic income and the reintroduction of collective bargaining to stop the levelling down of wages.

The critique writes itself: Labour lost the last election because it was not trusted with the nation’s finances. How on earth do these speeches address those concerns? There are two points to make. Firstly, Labour’s failure to defend Blair and Brown’s spending record – with the Tories revising history to claim that the investment they backed was at the root of Britain’s economic woes – is critical to understanding the party’s election loss. That’s why the Tories’ line – “why hand the keys back to the driver who crashed the car?” – was so devastatingly effectively.

My emphasis in bold.

Sorry, but this is complete balderdash from Owen Jones. The conservative / small government criticism of New Labour economic policy is not that runaway government spending *caused* the economic crisis – that is clearly false, when we know that the crisis was precipitated by a bad credit-fuelled housing bubble which undermined a grasping and improperly regulated banking sector. The conservative position is that by spending money like it was going out of fashion and running budget deficits even in the good years, there was absolutely no “rainy day” fund or financial buffer available when the bottom fell out of the economy and tax revenues dried up.

That is the real reason for today’s so-called “austerity” (meaning slightly reduced increases in government spending compared to earlier baselines). Jones later goes on to charge the Tories with “the failure to eliminate the deficit as promised, a rising national debt” – well, what would his preferred spendthrift policies have done? If Owen Jones is seriously suggesting that the forsaken economic recovery resulting from continued or increased government spending from 2010-15 was so great that it would have paid for itself, eliminated the deficit and taken a chunk out of the national debt then he is treating his readers like they are stupid. And he is holding the Tories to a standard of economic miracle-working which he would never expect of his own beloved Labour Party.

The reason that nobody trust the Labour Party on the economy – the reason that Labour MPs are laughed out of town whenever they even make a claim to economic competence – is that New Labour’s remorseless cranking up of the size of the state, together with their endless expansion of government spending and determination to hook more and more people on government welfare, meant that Britain was uniquely badly positioned among advanced nations to weather the global financial crisis.

The charge is not that idiotic PPI contract-delivered hospitals and shiny new school buildings in Britain actively caused a global credit crunch and recession. The charge is that this ignorant spendthriftery weakened Britain’s financial position, meant that the slightest cuts in government spending would immediately impact public sector workers or those encouraged to be dependent on various benefits, and made our subsequent economic pain that much more brutal – the cost of which can be counted today in lost and stunted lives. This is what Labour “compassion” hath wrought.

So no, the Tories do not suggest that electing a Labour government would be akin to “handing the keys back to the driver who crashed the car.” For all their faults, Labour did not deliberately crash the vehicle. But they did set out on treacherously icy roads having previously cut the brake cables, and that is just as bad, however desperately Owen Jones tries to spin it.

 

owen-jones-labour-party

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