Saturday, 25 June 2016

Brexit won’t shield Britain from the horror of a disintegrating EU

Yannis Varoufakis in The Guardian

Leave won because too many British voters identified the EU with authoritarianism, irrationality and contempt for parliamentary democracy while too few believed those of us who claimed that another EU was possible.

I campaigned for a radical remain vote reflecting the values of our pan-European Democracy in Europe Movement (DiEM25). I visited towns in England, Wales, Scotland and Northern Ireland, seeking to convince progressives that dissolving the EU was not the solution. I argued that its disintegration would unleash deflationary forces of the type that predictably tighten the screws of austerity everywhere and end up favouring the establishment and its xenophobic sidekicks. Alongside John McDonnell, Caroline Lucas, Owen Jones, Paul Mason and others, I argued for a strategy of remaining in but against Europe’s established order and institutions. 

Against us was an alliance of David Cameron (whose Brussels’ fudge reminded Britons of what they despise about the EU), the Treasury (and its ludicrous pseudo-econometric scare-mongering), the City (whose insufferable self-absorbed arrogance put millions of voters off the EU), Brussels (busily applying its latest treatment of fiscal waterboarding to the European periphery), Germany’s finance minister Wolfgang Schäuble (whose threats against British voters galvanised anti-German sentiment), France’s pitiable socialist government, Hillary Clinton and her merry Atlanticists (portraying the EU as part of another dangerous “coalition of the willing") and the Greek government (whose permanent surrender to punitive EU austerity made it so hard to convince the British working class that their rights were protected by Brussels).
The repercussions of the vote will be dire, albeit not the ones Cameron and Brussels had warned of. The markets will soon settle down, and negotiations will probably lead to something like a Norwegian solution that allows the next British parliament to carve out a path toward some mutually agreed arrangement. Schäuble and Brussels will huff and puff but they will, inevitably, seek such a settlement with London. The Tories will hang together, as they always do, guided by their powerful instinct of class interest. However, despite the relative tranquillity that will follow on from the current shock, insidious forces will be activated under the surface with a terrible capacity for inflicting damage on Europe and on Britain.

Italy, Finland, Spain, France, and certainly Greece, are unsustainable under the present arrangements. The architecture of the euro is a guarantee of stagnation and is deepening the debt-deflationary spiral that strengthens the xenophobic right. Populists in Italy and Finland, possibly in France, will demand referendums or other ways to disengage.

‘The markets will soon settle down, and negotiations will probably lead to something like a Norwegian solution that allows the next British parliament to carve out a path toward some mutually agreed arrangement.’ Photograph: Leon Neal/AFP/Getty Images

The only man with a plan is Germany’s finance minister. Schäuble recognises in the post-Brexit fear his great opportunity to implement a permanent austerity union. Under his plan, eurozone states will be offered some carrots and a huge stick. The carrots will come in the form of a small eurozone budget to cover, in some part, unemployment benefits and bank deposit insurance. The stick will be a veto over national budgets.

If I am right, and Brexit leads to the construction of a permanent austerian iron cage for the remaining EU member states, there are two possible outcomes: One is that the cage will hold, in which case the institutionalised austerity will export deflation to Britain but also to China (whose further destabilisation will have secondary negative effects on Britain and the EU).

Another possibility is that the cage will be breached (by Italy or Finland leaving, for instance), the result being Germany’s own departure from the collapsing eurozone. But this will turn the new Deutschmark zone, which will probably end at the Ukrainian border, into a huge engine of deflation (as the new currency goes through the roof and German factories lose international markets). Britain and China had better brace themselves for an even greater deflation shock wave under this scenario.

The horror of these developments, from which Britain cannot be shielded by Brexit, is the main reason why I, and other members of DiEM25, tried to save the EU from the establishment that is driving Europeanism into the ground. I very much doubt that, despite their panic in Brexit’s aftermath, EU leaders will learn their lesson. They will continue to throttle voices calling for the EU’s democratisation and they will continue to rule through fear. Is it any wonder that many progressive Britons turned their back on this EU?

EU referendum full results – find out how your area voted

While I remain convinced that leave was the wrong choice, I welcome the British people’s determination to tackle the diminution of democratic sovereignty caused by the democratic deficit in the EU. And I refuse to be downcast, even though I count myself on the losing side of the referendum.

As of today, British and European democrats must seize on this vote to confront the establishment in London and Brussels more powerfully than before. The EU’s disintegration is now running at full speed. Building bridges across Europe, bringing democrats together across borders and political parties, is what Europe needs more than ever to avoid a slide into a xenophobic, deflationary, 1930s-like abyss.

Likely Scenarios after the Brexit vote?

By Girish Menon

Now that a majority of Britons have voted to leave the EU, Nigel Farage has denied his claim to fund the NHS, David Cameron has resigned and the markets have fallen; so what happens next?

Scenario 1: The Status Quo

The Conservative party will elect a leader who will try to develop a national consensus on the EU. . S/he will then embark on negotiations with the EU and this time the spooked EU leaders will concede enough to make a difference. S/he will conduct another referendum in 1-2 years time and the UK will continue to be a part of the EU.

Scenario 2: The Nightmare

True Eurosceptics with strong neoliberal leanings will come to power. They will fan xenophobic forces to mask the budget cuts to public services. They will negotiate trade deals from a weak position, dilute workers' rights and help their rich funders convert England into another Russia.

Scenario 3: The Ideal

There will be intense and honest soul searching across the EU. A realisation will dawn that inequality is the major cause for the rise of fissiparous forces. The EU will become a transparent organisation with accountability. It will ensure a Universal and Unconditional Basic Income, Free Education, Free Health and subsidised Housing for all its citizens.

There could be many more scenarios which will be variations on the above themes. I hope the EU will choose scenario 3 but as a betting man I think it will choose scenario 1. The case for scenario 1 becomes stronger as the government is in no hurry to invoke Clause 50 which is the next step to start the Brexit negotiation and Boris Johnson appears subdued after the victory.

Friday, 24 June 2016

Cameron has lost his job – his Teflon cockiness has finally worn off

Aditya Chakrabortty in The Guardian
As the pound plunges and markets slide, remember that this referendum was called by David Cameron to fend off Nigel Farage and his own Tory ultras. He has lost his gamble – and the country will pay the price

Friday 24 June 2016

Financial chaos, economic crisis, the likely breakaway of Scotland and possibly Northern Ireland: quite a morning’s work for the Bullingdon Club.

Remember as the pound plunges and the markets slide that this entire referendum was called by David Cameron to fend off Nigel Farage and his own Tory ultras. There was no public outcry for a ballot – but for the sake of a bit of internal party management, he called one anyway. He gambled Britain and Europe’s future to shore up his own position. With all the confidence of a member of the Etonian officer class, he thought he’d win. Instead he has bungled so badly that the fallout will drag on for years, disrupting tens of millions of lives across Europe.

All this from a man who sauntered into the job of prime minister “because I thought I’d be good at it”. He rarely showed any reason for such self-confidence. His plans to modernise the Conservative party crumbled upon first touch with the banking crisis, which forced him and Osborne to reheat the Thatcherite economics they’d imbibed as students. The “big society” turned almost immediately back into the “small state”. At No 10, he launched an austerity drive that was meant to be over within five years, but is now scheduled to go on for double that. Other prime ministers handed power for a long stretch come up with ideas, policies, a style of governing that defines them: Thatcherism, Blairism. What was Cameronism, apart from a hectoring manner at PMQs and an inability to keep on top of detail?

You’ll be reminded endlessly over the next few days how tight this referendum was – that half the country didn’t vote for this. Quite right – and also serious evidence of the weakness of the prime minister. At the last referendum over Britain’s future in Europe, in 1975, Harold Wilson secured a whopping majority. Never a man to ask a question of whose answer he wasn’t absolutely certain, he got a landslide. But when Cameron was handed the full resources of the British state to run this campaign, he still couldn’t count on anything more than a small lead in the polls. A born member of the governing class, he simply wasn’t able to govern.

Not all of this was his creation; much of it is his political inheritance. For the past 40 years, prime minister after prime minister has embraced a regime that has allowed a massive wealth gap to open up between those at the top and the rest of us, that has fattened up central London even while starving other regions of the country – and that has offered the rest of the country elected police chiefs and city mayors instead of an actual voice.

This morning’s results reflect those decades of calculated callousness and the distrust of the political elites they have produced. Thatcher, Blair, Cameron: all pursued an economic inequality – which in turn bred a political and regional polarisation that marked out this referendum campaign. No wonder inner London voted so strongly for the status quo – it’s one of the few places that is doing well out of it. Likewise, it’s no wonder south Wales mutinied, when all the status quo has offered people there for the past four decades is broken promises and rolling immiseration. The shame of it is that all these justified resentments were mobilised by the racists and the hard-rightists. You know things are upside down when the “big merchant banks” are attacked by a former City trader called Nigel Farage.

As prime minister, Cameron had the chance to tackle this toxic mix of inequality and distrust – instead, he made it worse. Leading the remain campaign, he had the chance to address those who had been cut out of the national settlement – instead, he and George Osborne waved around a threat to house prices, even though housing is now this country’s biggest divide between the haves and the have-nots.

In tacit acceptance of his own lack of popular legitimacy, the prime minister invoked the authority of others: the Bank of England governor, Mark Carney; Christine Lagarde at the IMF; the civil servants at the Treasury. Nothing showed up this politician’s own smallness as the technocrats he sheltered behind.

Now he has lost his big gamble and he has lost his job – but it will be the rest of the country that pays the price. He was never that good, he was just cocky. It was never luck, it was just Teflon. And now it’s worn off.

A basic income could be the best way to tackle inequality

Robert Skidelsky in The Guardian

Britain isn’t the only European country to hold a referendum this month. On 5 June, Swiss voters overwhelmingly rejected, by 77% to 23%, the proposition that every citizen should be guaranteed an unconditional basic income (UBI). But that lopsided outcome doesn’t mean the issue is going away anytime soon.

The idea of a UBI has made recurrent appearances in history – starting with Thomas Paine in the 18th century. This time, though, it is likely to have greater staying power, as the prospect of sufficient income from jobs grows bleaker for the poor and less educated. Experiments with unconditional cash transfers have been taking place in poor as well as wealthy countries.

Swiss voters reject proposal to give basic income to every adult and child

UBI is a somewhat uneasy mix of two objectives: poverty relief and the rejection of work as the defining purpose of life. The first is political and practical; the second is philosophical or ethical.

The main argument for UBI as poverty relief is, as it has always been, the inability of available paid work to guarantee a secure and decent existence for all. In the industrial age, factory work became the only source of income for most people – a source that was interrupted by bouts of unemployment as the industrial machine periodically seized up. The labour movement responded by demanding “work or maintenance”. Acceptance of maintenance in lieu of work was reflected in the creation of a system of social security, “welfare capitalism”.

The aim of welfare capitalism was explicitly to provide people an income – typically through pooled compulsory insurance – during enforced interruptions of work. In no sense was income maintenance seen as an alternative to work. As the idea of interruption from work was extended to include the disabled and women bringing up children, so entitlements to income maintenance increased beyond the capacity of social insurance, with benefits paid to eligible individuals from general taxation.

In the 1980s, Ronald Reagan and Margaret Thatcher unwittingly extended the scope of welfare further, as they dismantled institutions and legislation designed to protect wages and jobs in their respective countries. With both left to the market, “in work” benefits, or tax credits, were introduced to enable employed workers to earn a “living wage”. At the same time, conservative governments, alarmed at the growing cost of social security, started to cut back on welfare entitlements.

In this newly precarious environment of work and welfare, UBI is seen as guaranteeing the basic income previously promised by work and welfare, but no longer reliably secured by either. (A leading advocate, Guy Standing at Soas, University of London, has written a book called The Precariat.) An additional argument, always resonant in this tradition, but particularly so today in poorer countries, is UBI’s emancipatory potential for women.

The ethical case for UBI is different. Its source is the idea, found both in the Bible and in classical economics, that work is a curse (or, as economists put it, a “cost”), undertaken only for the sake of making a living. As technological innovation causes per capita income to rise, people will need to work less to satisfy their needs.

Both John Stuart Mill and John Maynard Keynes looked forward to a horizon of growing leisure: the reorientation of life away from the merely useful toward the beautiful and the true. UBI provides a practical path to navigate this transition.

Most of the hostility to UBI has come when it stated in this second form. A poster during the Swiss referendum campaign asked: “What would you do if your income were taken care of?” The objection of most UBI opponents is that a majority of people would respond: “Nothing at all.”

But to argue that an income independent of the job market is bound to be demoralising is as morally obtuse as it is historically inaccurate. If it were true, we would want to abolish all inherited income. The 19th-century European bourgeoisie were largely a rentier class, and few questioned their work effort. Virginia Woolf wrote that a woman who wanted to write fiction “must have money and a room of her own”.

The explosion of robotics has given the demand for UBI renewed currency. Credible estimates suggest that it will be technically possible to automate between a quarter and a third of all current jobs in the western world within 20 years. At the very least, this will accelerate the trend toward the precariousness of jobs and income. At worst, it will make a sizeable share of the population redundant. A standard objection to UBI as a way to replace earnings from vanishing jobs is that it is unaffordable. This partly depends on what parameters are set: the UBI’s level; which benefits (if any) it replaces; whether only citizens or all residents are eligible; and so on.

But this is not the main point. The overwhelming evidence is that the lion’s share of productivity gains in the last 30 years has gone to the very wealthy. And that’s not all: 40% of the gains of quantitative easing in the UK have gone to the wealthiest 5% of households, not because they were more productive, but because the Bank of England directed its cash toward them. Even a partial reversal of this long regressive trend for wealth and income would fund a modest initial basic income.

Beyond this, a UBI scheme can be designed to grow in line with the wealth of the economy. Automation is bound to increase profits, because machines that make human labour redundant require no wages and only minimal investment in maintenance.

Unless we change our system of income generation, there will be no way to check the concentration of wealth in the hands of the rich and exceptionally entrepreneurial. A UBI that grows in line with capital productivity would ensure that the benefits of automation go to the many, not just to the few.