Why are the rich world’s politicians giving up on economic growth?

 Even when they say they want more prosperity, they act as if they don’t writes The Economist

Dec 14th 2022

The prospect of recession might loom over the global economy today, but the rich world’s difficulties over growth are graver still. The long-run rate of growth has dwindled alarmingly, contributing to problems including stagnant living standards and fulminating populists. Between 1980 and 2000, gdp per person grew at an annual rate of 2.25% on average. Since then the pace of growth has sunk to about 1.1%.

Although much of the slowdown reflects immutable forces such as ageing, some of it can be reversed. The problem is that reviving growth has slid perilously down politicians’ to-do lists. Their election manifestos are less focused on growth than before, and their appetite for reform has vanished.

The latter half of the 20th century was a golden age for growth. After the second world war a baby boom produced a cohort of workers who were better educated than any previous generation and who boosted average productivity as they gained experience. In the 1970s and 1980s women in many rich countries flocked into the workforce. 

The lowering of trade barriers and the integration of Asia into the world economy later led to much more efficient production. Life got better. In 1950 nearly a third of American households were without flush toilets. By 2000 most had at least two cars.

Many of those growth-boosting trends have since stalled or gone into reverse. The skills of the labour force have stopped improving as fast. Ever more workers are retiring, women’s labour-force participation has flattened off and little more is to be gained by expanding basic education. As consumers have become richer, they have spent more of their income on services, for which productivity gains are harder to come by. Sectors like transport, education and construction look much as they did two decades ago. Others, such as university education, housing and health care, are lumbered with red tape and rent-seeking.

Ageing has not just hurt growth directly, it has also made electorates less bothered about gdp. Growth most benefits workers with a career ahead of them, not pensioners on fixed incomes. Our analysis of political manifestos shows that the anti-growth sentiment they contain has surged by about 60% since the 1980s. Welfare states have become focused on providing the elderly with pensions and health care rather than investing in growth-boosting infrastructure or the development of young children. Support for growth-enhancing reforms has withered.

Moreover, even when politicians say they want growth, they act as if they don’t. The twin problems of structural change and political decay are especially apparent in Britain, which since 2007 has managed annual growth in gdp per person averaging just 0.4%. Its failure to build enough houses in its prosperous south-east has hampered productivity, and its exit from the European Union has damaged trade and scared off investment. In September Liz Truss became prime minister by promising to boost growth with deficit-financed tax cuts, but succeeded only in sparking a financial crisis.

Ms Truss fits a broader pattern of failure. President Donald Trump promised 4% annual growth but hindered long-term prosperity by undermining the global trading system. America’s government introduced 12,000 new regulations last year alone. Today’s leaders are the most statist in many decades, and seem to believe that industrial policy, protectionism and bail-outs are the route to economic success. That is partly because of a misguided belief that liberal capitalism or free trade is to blame for the growth slowdown. Sometimes this belief is exacerbated by the fallacy that growth cannot be green.

In fact, demographic decline means that liberal, growth-boosting reforms are more vital than ever. These will not restore the heady rates of the late 20th century. But embracing free trade, loosening building rules, reforming immigration regimes and making tax systems friendly to business investment may add half a percentage point or so to annual per-person growth. That will not put voters in raptures, but today’s growth is so low that every bit of progress matters—and in time will add up to much greater economic strength.

For the time being the West is being made to look good by autocratic China and Russia, which have both inflicted deep economic wounds on themselves. Yet unless they embrace growth, rich democracies will see their economic vitality ebb away and will become weaker on the world stage. Once you start thinking about growth, wrote Robert Lucas, a Nobel-prizewinning economist, “it is hard to think about anything else”. If only governments would take that first step.

Should we have a ‘truth law’?

Today’s politicians mislead with impunity – could we legislate to stop them lying? asks Sam Fowles in The Guardian



 
For months the British government has floated the idea of unilaterally breaking the so-called Northern Ireland protocol, part of the withdrawal treaty it agreed with the European Union. That would undermine the Good Friday agreement, reanimate the prospect of sectarian violence and damage the UK’s international reputation. Such action demands a weighty justification and ministers have one, with the attorney general arguing that “Northern Ireland’s economy is lagging behind the rest of the UK”.

Except it’s not. Statistics show that Northern Ireland is outstripping every part of the UK except London.

In recent years politicians have repeatedly based the case for historic changes on lies. These have ranged from the infamous “Brexit bus”, which promised £350m a week for the NHS, to government framing of recent rail strikes as “selfish” because, as Boris Johnson told one interviewer: “Train drivers are on £59,000 and some are on £70,000.” (The average wage of a striker is below £36,000.) Politicians consistently mislead about issues of national importance. I know this first-hand – I was part of the legal team that proved Johnson’s prorogation of parliament in 2019 was unlawful.

Truth is democracy’s most important moral value. We work out our direction, as a society, through public discourse. Power and wealth confer an advantage in this: the more people you can reach (by virtue of enjoying easy access to the media, or even controlling sections of it), the more likely you are to bring others round to your point of view. The rich and powerful may be able to reach more people but, if their arguments are required to conform to reality, we can at least hold them to account. Truth is a great leveller.

The problem is that our public discourse has become increasingly divorced from reality. The pollster Ipsos Mori conducts regular surveys on what the British public believes about the facts behind frequently discussed issues. In one memorable study it discovered that, in the words of one headline, “the British public is wrong about nearly everything”. Among the concerns was benefit fraud: people surveyed estimated that around £24 of every £100 of benefits was fraudulently claimed, whereas the actual figure was 70p. When asked about immigration, people estimated that 31% of the population were born outside the UK, when in truth it was 13%.

Members of parliament have played a prominent role in getting us to this point. They make and vote on laws, help set the political agenda and influence the national conversation. Of course, politicians have always had a tendentious relationship with the truth. From the Zinoviev letter to the Profumo affair, history is littered with scandals that result from lies being exposed. Profumo resigned because he misled parliament once. Today’s ministers regularly do the same with impunity.

Commentators often paint Johnson as uniquely mendacious, but he is merely the latest prime minister to embrace lying for political gain. David Cameron won two elections by misleading the country about the causes of the financial crash and the economic impacts of austerity. Theresa May built her early career in government on dubious anti-immigration rhetoric, notably the lie that one immigrant had been allowed to stay in the country because he had a pet cat.

Democracy cannot function properly in this environment and an existential problem demands a radical solution. So, MPs (and peers in the House of Lords) should be formally required to tell the truth: in the debating chamber, on TV, in print and on social media. To publish a statement that wilfully or negligently misrepresents information should be classed as misconduct in public office (a criminal offence). In other words: we need a truth law.

Ensuring the offence captures both “wilful” and “negligent” misrepresentation will obviate spurious defences such as Johnson’s claim that he thought the Downing Street parties were “work events”. With researchers and civil servants at their disposal, parliamentarians have no excuse for misrepresenting the facts. Even so, I suggest that they should not be prosecuted if they correct the record and apologise in parliament within seven days.

Radical as it may seem, we already have all the tools to make this work within established law. “Publish” has a clear legal meaning (essentially “to make public”). Tests of wilfulness or negligence are frequently applied across civil and criminal law. Determining whether someone has “misrepresented information” (ie, not told the truth) is often the core business of the courts. The penalty for misconduct can go all the way up to life imprisonment. While some may find that rather satisfying, I suggest limiting it, in this class of cases, to a fine. The courts should also have the power to refer an offender to the Standards Committee for further parliamentary sanction. 

I imagine that there will be two main objections to this idea. First, it may have a chilling effect on parliamentarians’ free expression. But parliamentarians are not ordinary citizens. They hold a special position of trust and power, which they assume voluntarily, and for which they are rewarded handsomely. It’s right that that they should be subject to stricter rules. Many professions limit the freedom of expression of their members in the public interest. As a barrister I am subject to “truth telling” rules which, if breached, could end my career (and potentially lead to a prosecution for contempt of court). Politicians’ words have more influence than barristers’, so it’s fair to subject them to more exacting standards.

Second, any truth law would breach “parliamentary privilege”. This guarantees that MPs will not be prosecuted for anything they say in parliament. That rule was developed to stop monarchs persecuting their political opponents. It was never intended to be a licence to lie. We now have an independent prosecution authority and independent courts: it’s time we addressed today’s challenges to democracy, not ones that were last relevant centuries ago.

My proposal won’t eradicate lying in public life. But it’s an important first step. Imagine, for a moment, that we could genuinely trust our elected representatives. That shouldn’t be a utopian ideal – and in the law, we have the means to make it a reality.

Lessons from British democracy for us in India

 

BREXIT - The Great Taboo in British Politics

George Parker and Chris Giles in The FT

As he battled to save his job this month, Boris Johnson warned his MPs not get into “some hellish, Groundhog Day debate about the merits of belonging to the single market”. Brexit, he warned his mutinous party in a sweaty House of Commons meeting room, was settled. 

Later that day, Johnson limped to victory in a confidence vote, but only after 41 per cent of his MPs had voted to oust him from Downing Street. He is safe for now but the defining project of his premiership — Brexit — still hangs like a cloud over Britain’s fragile economy. 

Johnson may not want his party “relitigating” Brexit but neither does Sir Keir Starmer, leader of the opposition Labour party, around a third of whose supporters voted Leave in the 2016 referendum. Nor does Andrew Bailey, governor of the Bank of England. Rishi Sunak, the chancellor, would rather talk about something else. Brexit has become the great British taboo. 

But as the sixth anniversary of the UK’s vote to leave the EU approaches, economists are starting to quantify the damage caused by the erection of trade barriers with its biggest market, separating the “Brexit effect” from the damage caused by the Covid-19 pandemic. They conclude that the damage is real and it is not over yet. 

The UK is lagging behind the rest of the G7 in terms of trade recovery after the pandemic; business investment, seen by Johnson and Sunak as the panacea to a poor growth rate, trails other industrialised countries, in spite of lavish Treasury tax breaks to try to drive it up. Next year, according to the OECD think-tank, the UK will have the lowest growth in the G20, apart from sanctioned Russia. 

The Office for Budget Responsibility, the official British forecaster, has seen no reason to change its prediction, first made in March 2020, that Brexit would ultimately reduce productivity and UK gross domestic product by 4 per cent compared with a world where the country remained inside the EU. It says that a little over half of that damage has yet to occur. 

That level of decline, worth about £100bn a year in lost output, would result in lost revenues for the Treasury of roughly £40bn a year. That is £40bn that might have been available to the beleaguered Johnson for the radical tax cuts demanded by the Tory right — the equivalent of 6p off the 20p in the pound basic rate of income tax. 

Despite these sobering figures, Johnson’s complaints about the prospect of “relitigating” Brexit was exaggerated, intended to portray himself as the victim of a putative plot by pro-Remain MPs. In fact, British politicians — and the wider country — are still traumatised by the bitter Brexit saga, and deeply unwilling to revisit it. 

Still, this month has seen the first stirrings of a debate that until now has been buried as the evidence of Brexit-induced economic self-harm starts to pile up. Few are talking about reversing Brexit altogether, but another question is being asked: should the UK start to explore with Brussels ways of softening its edges? 

Show, don’t tell 

Downing Street insisted this week it was “too early to pass judgment” on whether Brexit was having a negative impact on the economy, which could be heading into a recession. “The opportunities Brexit provides will be a boon to the UK economy in the long run,” Johnson’s spokesman said. 

Both Johnson and Sunak insist that it is hard at this stage to separate Brexit’s economic impact from the shock of Covid. In the meantime, the prime minister promotes the “benefits of Brexit”, such as new trade agreements with Australia and New Zealand and the freedom for the UK to set its own rules. 

Sunak has promised a reform of rules in the City of London, including reforming the EU’s Solvency II rules to allow insurers to spend more money on infrastructure projects. He has announced eight new freeports with special tax privileges. 

But economists have not yet been able to find any significant positive impacts of these policies. Some, including Johnson’s patriotic promise to put a “crown stamp” on pint glasses in pubs and to allow traders to sell their wares in pounds and ounces, are primarily symbolic. 

Critics of government Brexit policy are routinely derided. Suella Braverman, attorney-general, last week accused the ITV presenter Robert Peston of “Remainiac make-believe” after he challenged her over the government’s unilateral plan to rip up the Brexit treaty relating to Northern Ireland. Braverman claimed the so-called Northern Ireland protocol had left the region “lagging behind the rest of the UK”. In fact, Northern Ireland (the only area of the UK to remain in the EU’s single market for goods) is the best performing part of the country, apart from London. 

When Bailey appeared before the House of Commons treasury committee in mid May, the BoE governor acknowledged that his predecessor Mark Carney had made himself “unpopular” for saying Brexit would have a negative effect on trade, but that the bank held to that view. 

Kevin Hollinrake, a Tory member of the committee, says Bailey was trying to avoid becoming a political target and was “deliberately avoiding” talking about Brexit. “It’s a singular issue for the UK,” the MP says. “We have changed our immigration rules. It’s about non-tariff barriers. You’ve got to be willing to look at what’s happening on the ground.” 

While some gloomy predictions have failed to materialise, such as former chancellor George Osborne’s 2016 warning of a recession immediately after a Leave vote, there is growing evidence that Brexit is causing more lasting damage to UK economic prospects. 

Ministers are becoming more reluctant to proclaim the economic upsides of Brexit. Kwasi Kwarteng, business secretary, was asked last week at the FT Global Boardroom to list some Brexit benefits. He focused on the UK’s ability to respond swiftly to Russian aggression in Ukraine — “it has substantial benefits particularly in international policy” — rather than on business. Sunak’s allies say the chancellor’s approach is to “show, not tell” on Brexit, pushing through City regulatory reforms rather than giving boosterish speeches on its economic merits. 

The fallout in data 

The first and most obvious economic blow delivered by Brexit came when sterling fell almost 10 per cent after the referendum in June 2016, against currencies that match the UK’s pattern of imports. It did not recover. This sharp depreciation was not followed by a boom in exports as UK goods and services became cheaper on global markets, but it did raise the price of imports and pushed up inflation. 

By June 2018, a team of academic economists at the Centre for Economic Policy Research calculated that there had been a Brexit inflation effect, raising consumer prices by 2.9 per cent, with no corresponding increase in wages. 

Some households, such as those relying on state pensions, were compensated in higher benefits, but the CEPR team found no overall offset with higher incomes. “The Brexit vote delivered a swift negative shock to UK living standards,” they wrote. 

While the UK was still in the EU and during the Brexit “transition phase”, there were no significant effects on trade flows. But this has changed since stricter border controls were introduced at the start of 2021, imposing no tariffs, but significant checks and controls at the formerly frictionless border. 

Economists have used this point in time to contrast how the UK’s trade performance compares with those of other countries before and after the TCA’s imposition. The results have been increasingly ugly, especially for small companies trading with Europe. 

Red tape caused a “steep decline” in the number of trading relationships after January 2021, according to a study by the Centre for Economic Performance at the London School of Economics. The number of buyer-seller relationships fell by almost one-third, it found. 

The same group found food prices had risen as a result of Brexit. Comparing the prices of imported food such as pork, tomatoes and jam, which predominantly came from the EU, with those that came from further afield such as tuna and pineapples, it found a substantial Brexit effect. “Brexit increased average food prices by about 6 per cent over 2020 and 2021,” according to the research. 

Summing up the effects on trade in which imports from the EU have fallen while exports have not risen, Adam Posen, head of the Peterson Institute of International Economics, says “everybody else sees a recovery in trade following Covid and the UK sits flat”. 

The third visible effect of Brexit on the UK economy has been in discouraging business investment. In the first quarter of 2022, real business investment was 9.4 per cent lower than in the second quarter of 2016. That fall was mostly due to Covid, but it had flatlined since the referendum, ending a period of growth since 2010 and falling well short of the performance of other G7 countries. 

Weak investment is a particular worry for Sunak, who sees business investment as the route to greater prosperity. Before departing the BoE in 2020, Carney told a House of Lords Committee that Brexit uncertainty was holding back business investment. Worse, he said, business planning for various Brexit scenarios was taking up a lot of management effort. “Time spent on contingency planning is time not spent on strategic initiatives,” he said. 

Since then, negative perceptions of the UK have continued among business with the chancellor finding he had little bang for his £25bn buck of super deductions in corporation tax to encourage capital spending. As Bailey told MPs last month, the super-deductor was “not at the moment having the impact that was expected”. 

Complaints about high immigration was one of the most contentious issues of the referendum, with a central promise of the Brexit campaign being tougher controls over the number of people entering the country. While net immigration from EU countries has stopped, with effectively no change apparent in the two years to the end of June 2021, net immigration from non EU countries has remained high, with 250,000 in the latest year. 

Collateral damage 

There is, as yet, little appetite among Britain’s political leaders for a return to the EU — even if the other 27 member states were prepared to open the door. Even the pro-EU Liberal Democrats admit reversing course is a long-term aspiration, rather than an immediate goal. 

As part of his attempt to avert a coup, Johnson wrote to MPs this month that he had “created a new and friendly relationship with the EU”. The opposite is true. Brussels restarted legal action against the UK this week over the Northern Ireland protocol: relations are at rock bottom. 

The EU has warned that British scientists will be excluded from the €95bn Horizon research programme as “collateral damage” in the row about Northern Ireland. The prospect of any kind of rapprochement at the moment, at least while Johnson remains prime minister, seems remote. 

But in recent weeks, a tentative debate has started over whether the UK would be better off trying to reach accommodations with the EU to smooth trade in some areas, rather than launching a new front in the Brexit war with unilateral action over Northern Ireland. 

In an article much-discussed at Westminster, the pro-Leave Times columnist Iain Martin wrote this month: “To deny the downsides of Brexit on trade with the EU is to deny reality.” 

Tobias Ellwood, a former Tory defence minister, suggested Britain should rejoin the EU single market to soften the cost of living crisis, and said there was “an appetite” for a rethink and claimed polling indicated “this is not the Brexit most people imagined”. And Daniel Hannan, a leading Tory Brexiter, repeated his longstanding view that Britain should have stayed in the single market under a Norway-style relationship with the EU, while adding that to rejoin it now “would be madness”. 

Anna McMorrin, Labour shadow minister, was recorded telling activists: “I hope eventually that we will get back into the single market and customs union.” She was forced to apologise by Starmer: such talk remains dangerous in political circles. 

Even so, a Starmer-led future Labour government would change UK relations with the EU. The party’s mantra has become “make Brexit work”: rejoining the single market may be off the agenda, but Labour wants to find ways to improve on the bare-bones tariff-free trade agreement Johnson negotiated with the EU. 

Rachel Reeves, the shadow chancellor, told the Financial Times last year that Labour wanted to strike a deal with the EU to reduce the most onerous paperwork and checks on food exports. The party also wants an agreement with Brussels on the mutual recognition of professional qualifications. 

Even among the Eurosceptics in Johnson’s cabinet, there is now an acceptance that the UK should be seeking to rebuild economic relations with the EU, including in areas like the Horizon programme, to avoid exacerbating the looming cost of living crisis. 

“Would I like to be in a better place on Brexit?” asked one pro-Brexit cabinet member. “Yes, absolutely. But we’ve got to find a way of doing it without it looking like we’re running up the white flag and we’re compromising on sovereignty.”

Nigel Farage speaks

 

Why the panic among Boris Johnson’s allies? Because they know Brexit is unravelling

There is an air of desperation in attacks from those on the right and their supporters in the press. They fear if Johnson falls, the Brexit deception will crumble too writes Michael Heseltine in The Guardian

‘ 


Did something change this month? Having proclaimed the Brexit referendum triumph of 2016 as the unique achievement of Boris Johnson and praised his historic success in the election three years later with the slogan “get Brexit done”, did the wreckers of the European dream slowly begin to realise that if Johnson goes, it shifts the sands from beneath their feet?

I’m the president of European Movement – Andrew Adonis is chair – and between us we agreed that this link needed a public airing. Learning from the direct and simple messaging of the anti-European newspapers, we felt the phrase: “If Boris goes, Brexit goes” said it clearly enough. Adonis duly tweeted it, to the horror of the pro-Brexit press.

The past few weeks have been a torrid time for the prime minister. He designed a set of restrictions he said were of critical importance for our safety and for the ability of the NHS to cope with the pandemic. He was right to do so. But disclosures since give the clearest impression that he not only broke the rules, but that he also misled parliament.

Johnson said he would accept the findings of Sue Gray’s inquiry, in stark contrast to his treatment of Sir Alex Allan’s report into the home secretary’s behaviour in 2020.

I believe he is entitled to insist that matters are not prejudged prior to the release of the full findings of the Gray inquiry, and the completion of the Metropolitan police investigation. I do not believe in the rule of the mob.

But a great deal hangs on this. If the prime minister is found to have lied to parliament and to the people, what defence is there to the allegation that the Brexit cause – mired in similar controversy over lies and dissembling – was conducted with the same disregard for the truth?

We all have a clear memory of the Brexit campaign and what was said. That we were being run by Brussels. That European restrictions were holding back our economy and lowering our living standards. That we could keep all the benefits of the single market and customs union, while negotiating trade deals with faster-growing countries in a world that was shifting east. That we had to regain control over our borders. That there would be no new border between Northern Ireland and mainland Great Britain, and that the Good Friday agreement, having ended years of strife, would be fully honoured

Theresa May became prime minister and immediately handed important offices of state to the three leading Brexiters. Boris Johnson went to the Foreign Office. David Davis went to the Department for Exiting the European Union, and Liam Fox to the Department for International Trade. They had their hands on the levers of power for two years before Johnson and Davis resigned, claiming their jobs were impossible.

Having ousted May, they claimed that a bare-bones trade deal – without most of the benefits of the customs union and the single market – was “oven ready” and would “get Brexit done”. In a straight contest with the unelectable Jeremy Corbyn, Johnson secured his mandate.

Except their deal didn’t “get Brexit done”. Within months it had seriously frustrated trade between Northern Ireland and Great Britain, and the government threatened to tear up the very deal it had itself negotiated to safeguard the position of Northern Ireland. Lord Frost resigned from the cabinet as Brexit minister last December after less than a year, complaining of the Covid strategy but also bemoaning that, regarding Brexit, the correct agenda was not being pursued.

Characteristically, he gave no detail as to what that agenda should have been or who was holding it up, but the villains were familiar: the metropolitan elite, the civil service, the BBC, Brussels, the remoaners – more or less anybody, and now including myself and Andrew Adonis. Everyone except the actual people in positions of power.

That is why February 2022 feels so significant. The cry has been growing louder. The right wing has been circling. Letters have been landing on the chairman of the 1922 committee’s desk. Something must be done. Reshuffle the pack, create a new government department and put yet another Brexiter in charge to pluck all those low-hanging plums that proved beyond the reach of predecessors.

Anyone with experience of Whitehall knows what happens next. The nameplates will change and the same civil servants will have new titles without actually moving their offices. But they will face exactly the same questions that have now been unanswered for five years. What is Brexit all about?

Jacob Rees-Mogg, Lord Frost’s spiritual successor in his new role as minister for Brexit opportunities, has a novel approach. He told the Sun last week that he is bypassing the civil service to ask if anyone else in the country has any ideas about Brexit benefits. Sun readers are invited to write to him with suggestions and he will see what can be done. But that too is revealing. One of the first tests officials apply to new ministers is to ask if they know what they want and to assess whether they have the ability to communicate that to them. I am afraid that Rees-Mogg has not passed this test, which is all the more surprising as he had plenty of time lounging on the government frontbench, listening to suggestions from Brexit-supporting Tory MPs.

So did something happen in February 2022? Maybe it’s just a feeling, a cloud no bigger than a man’s fist, the first breath of wind before the storm when the Daily Mail and the Daily Telegraph employ two of their most renowned columnists to attack Andrew Adonis and myself, merely for making the point that their hero may have feet of clay and take the Brexit house down with him. Perhaps they have smelled the wind, just as I have.

Boris Johnson is Britain's most honest politician

Bagehot in The Economist

 

Boris Johnson lies often and easily. It is the hallmark of his career. He was fired from his first job, at the Times, for fabricating a quote. As a condition of becoming editor of the Spectator he promised not to stand as an mp, and then promptly did just that. As a shadow minister, he was fired by Michael Howard for lying about an affair. (He later divorced after a few more.) While mayor of London, he said numerous times that he would not stand in the 2015 election, only to turn up as a candidate in Uxbridge. 

Lying about attending a garden party at Downing Street in May 2020, at the height of lockdown, is just the latest in a very long list. When public anger grew, mps protested with all the sincerity of Captain Renault entering a gambling den in Casablanca. Douglas Ross, a Scottish mp who voted for the prime minister in the Conservative leadership election, labelled the prime minister’s position “untenable” and demanded he quit. Why did such defenders of truth once back a man they knew to be an enthusiastic liar? Because Mr Johnson is, in his own way, a man of his word.

When he was drumming up support for his bid for party leader, his pitch was simple: back me, keep your seat, defeat Jeremy Corbyn and do Brexit. And it all came true. Mr Corbyn was crushed and the biggest Conservative majority in three decades followed. In that election Mr Johnson promised two big things and did both. The nhs would be showered with cash, which it has been. And he would do a deal with the eu, which he did.

It was not a good deal, but it was quick and it was clear. Coming after a negotiation with the eu that lacked both speed and simplicity, it is little surprise that voters jumped at it. Mr Johnson’s predecessor, Theresa May, had obfuscated, attempting legalistic contortions to avoid Brexit’s brutal simplicities. Labour’s Brexit position was, in the words of one shadow cabinet minister, “bollocks”. Mr Johnson’s deal hobbles British business for little or no gain, beyond a point of principle. But it is, no more and no less, what he said he would do.

Political lying was not invented by Mr Johnson in the Brexit campaign, comforting though that idea might be. Indeed, the misleading claims of the Leave campaign sometimes revealed awkward truths. When it pointed out that Turkey was in the long process of joining the eu, for example, Remainers cried foul because other countries were likely to block its accession. Yet David Cameron could have promised to veto Turkish membership of the eu, and did not. Turkey joining the club was a long-standing British policy.

In politics, integrity is almost inevitably followed by hypocrisy. Politicians with firm moral centres can crack. Gordon Brown was feted as a son of the manse while hurling handsets at people’s heads. Tony Blair runs an institute dedicated to openness while accepting money from despots. Sir Keir Starmer stood for Labour leader by pitching himself as Mr Corbyn in a suit, and then ditched the leftiest proposals once he had won. Mr Johnson, by contrast, does not even pretend to be a family man, despite having a few of them. He has not pretended to be anything but a power-hungry cynic either. A lack of integrity becomes a form of integrity.

A competent administrator never lurked beneath that mop of thinning hair. Occasionally, a journalist has claimed otherwise in a breathless profile; Mr Johnson has not. Those who work closely with him cannot say they were fooled into thinking he was a loyal boss. His time as prime minister has been marked by the defenestration of aides. When trouble strikes Mr Johnson, deputy heads roll. Being a civil servant rather than a political appointee offers no protection. Those who help him out, for example by chipping in for new curtains in Number 10 to keep his new wife happy, end up enmeshed in scandal.

No one can claim they were not warned about Mr Johnson. He is in no sense a mystery. He is the subject of several biographies and for the past three decades has shared his views about the world in newspaper columns and articles. If he is ever silenced by ministerial responsibility, a high-profile relative can fill the gap with more Johnson trivia. Throughout his career he has left a trail of giggling journalistic colleagues with a cherished Boris story to be whipped out on special occasions, no matter how long ago or dull. The content of his character was known and yet people still saw fit to put him in power.

If voters are souring on Mr Johnson, they only have themselves to blame. The prime minister is not a monarch. In 2019 he won 43.6% of the vote, the biggest share since Margaret Thatcher. Mr Johnson is in Downing Street because just under half the country ticked a box next to a Conservative’s name. Voters are adults. They knew what they were voting for, and they voted for what they got.

It is common to blame the rise of Mr Johnson on “Have I Got News For You”, a bbc1 news quiz on which he was a frequent guest. Ian Hislop, one of the team captains, has a tart reply: “If we ask someone on and people like them, that is up to people.” Mr Johnson is not a boil that can be lanced, at which point Britain’s body politic will recover. British politics, its systems and culture, deteriorated to the point where an honest liar proved attractive. Mr Johnson benefited from chaos created by others.

Small lies, big truths

Those mps who helped put Mr Johnson in power must now decide whether to sack him for sins he has never hidden. Their choice will be made by calculating whether their voters still want him. Popularity was all that he promised, and he delivered it—until now. If his rise is depressing, his potential fall offers a glimmer of hope. British voters have, at last, begun to grow tired of Mr Johnson’s record of honest lies. A less cynical politics may prosper and populism become unpopular. But optimism should be tempered. mps would not hesitate to keep Mr Johnson if he, in turn, helped them keep their seats. If those who put the prime minister in power bring him down, they do so to absolve themselves.

Richard Dawkins: No, Not All Opinions Are Equal—Elitism, Lies, and the Limits of Democracy

 

Brexit, UK, Scotland....five years on

 

Hope for Britain after Brexit

Those who predict economic Armageddon ignore the reality. The status quo wasn’t working – now there’s an opportunity for change writes Larry Elliott in The Guardian

‘The mass exodus of banks and other financial institutions from the City of London, predicted since June 2016, has not materialised.’ View over the Thames to the City. Photograph: Niklas Halle’n/AFP/Getty Images

So this is it. Forty-eight years after Britain joined what was then the European Economic Community, the fasten seatbelt signs are switched on and the cabin lights have been dimmed. It is time for departure.

Many in the UK, especially on the left, are in despair that this moment has arrived. For them, this can never be the journey to somewhere better: instead it is the equivalent of the last helicopter leaving the roof of the US embassy in Saigon in 1975.

The lefties who voted for Brexit see it differently. For them (us, actually, because I am one of them), the vote to leave was historically progressive. It marked the rejection of a status quo that was only delivering for the better off by those who demanded their voice was heard. Far from being a reactionary spasm, Brexit was democracy in action. 

Now the UK has a choice. It can continue to mourn or it can take advantage of the opportunities that Brexit has provided. For a number of reasons, it makes sense to adopt the latter course.

For a start, it is clear that the UK has deep, structural economic problems despite – and in some cases because of – almost half a century of EU membership. Since 1973, the manufacturing base has shrivelled, the trade balance has been in permanent deficit, and the north-south divide has widened. Free movement of labour has helped entrench Britain’s reputation as a low-investment, low-productivity economy. Brexit means that those farmers who want their fruit harvested will now have to do things that the left ought to want: pay higher wages or invest in new machinery.

The part of the economy that has done best out of EU membership has been the bit that needed least help: the City of London. Each country in the EU has tended to specialise: the Germans do the high-quality manufactured goods; France does the food and drink; the UK does the money. Yet the mass exodus of banks and other financial institutions that has been predicted since June 2016 has not materialised, because London is a global as well as a European financial centre. The City will continue to thrive.

If there are problems with the UK economy, it is equally obvious there are big problems with the EU as well: slow growth, high levels of unemployment, a rapidly ageing population. The single currency – which Britain fortunately never joined – has failed to deliver the promised benefits. Instead of convergence between member states there has been divergence; instead of closing the gap in living standards with the US, the eurozone nations have fallen further behind.

In their heads, those predicting Armageddon for the UK imagine the EU to still be Germany’s miracle economy – the Wirtschaftswunder – of the 1960s. The reality is somewhat different. It is Italy, where living standards are no higher than they were when the single currency was introduced two decades ago. It is Greece, forced to accept ideologically motivated austerity in return for financial support. The four freedoms of the single market – no barriers to the movement of goods, services, people and capital – are actually the four pillars of neoliberalism.

The Covid-19 crisis has demonstrated the importance of nation states and the limitations of the EU. Britain’s economic response to the pandemic was speedy and coordinated: the Bank of England cut interest rates and boosted the money supply while the Treasury pumped billions into the NHS and the furlough scheme. It has taken months and months of wrangling for the eurozone to come up with the same sort of joined-up approach.

Earlier in the year, there was criticism of the government when it decided to opt out of the EU vaccine procurement programme, but this now looks to have been a smart move. Brussels has been slow to place orders for drugs that are effective, in part because it has bowed to internal political pressure to spread the budget around member states – and its regulator has been slower to give approval for treatments. Big does not always mean better.

Leaving the EU means UK governments no longer have anywhere to hide. They have economic levers they can pull – procurement, tax, ownership, regulation, investment in infrastructure, subsidies for new industries, trade policy – and they will come under pressure to use them.

Many on the remainer left accept the EU has its faults, but they fear that Brexit will be the start of something worse: slash and burn deregulation that will make Britain a nastier place to live.

This, though, assumes that Britain will have rightwing governments in perpetuity. It used to be the left who welcomed change and the right that wanted things to remain the same. The inability to envisage what a progressive government could do with Brexit represents a political role reversal and a colossal loss of nerve.

Britain out of the EU: a treasure island for rentiers

There’s no sign that ministers will use the twin shocks of the pandemic and Brexit to fix a broken system that is failing too many people opine the editors of The Guardian

‘Culturally, Brexit plays the same sort of role as the right to buy, insulating poorer leave voters from the idea that they will suffer from the resulting policies.’ Photograph: Christopher Furlong/Getty Images
 

When the UK entered the coronavirus age in March, state resources and collective commitment were mobilised on a scale not seen since the second world war. Decades ago, Britain had revealed itself, thanks in part to being able to marshal the industrial might of the empire, to be a formidable world power. Its economy was energised with breakthroughs in radar, atomic power and medicine.

Although the story of the pandemic has not yet ended, there appears to be no such transformation in sight under Boris Johnson. Rather depressingly, familiar trends of greed, incompetence and cronyism are reasserting themselves. This is bad news for an economy where there has been a collapse of socially useful innovation. Britain’s lack of hi-tech manufacturing capabilities, notably in medical diagnostic testing, was cruelly exposed by the pandemic.

This country has become more of a procurer than a producer of technology. But it is a remarkably inefficient one – despite an extraordinarily high percentage of lawyers and accountants in the working population. Connections seem to matter more than inventions. How else to explain why, in the desperate scramble to procure personal protective equipment, ventilators and coronavirus tests, billions of pounds of contracts have gone to companies either run by friends or supporters – even neighbours – of Conservative politicians, or with no prior expertise.

History is not short of examples where political insiders were successful in extracting virtually all the surplus that the economy created. Such influential interests moulded politics to enlarge their share of the pie. Greed was limited only by the need to let the producers survive. The shock of war, revolution, famine or plague provides an opportunity to fix a broken society. But if, post-pandemic, UK politicians care less about reform than the retention of power, they will fail to restrain the grasping enrichment that undermines democracy itself.

Windfall profits

Perhaps the most penetrating X-ray of this phenomenon today is by Brett Christophers in his book Rentier Capitalism. The academic makes the case that Britain has become a treasure island for those seeking excess profits from state-sanctioned control of natural resources, property, financial assets and intellectual property. Rent, paid by renters to rentiers, is tied to the ownership or control of such assets, made scarce under conditions of limited or no competition.

Mr Christophers says that the first sign of this new order was when Britain struck black gold in the North Sea. He writes that MPs on the public accounts committee noted with incredulity in 1972 that “the first huge areas of the sea were leased to the companies as generously as though Britain were a gullible Sheikhdom”. After that, public assets were sold off cheaply. The private sector ended up controlling lightly regulated monopolies in gas, water and electric supply, and public transport and telecoms. Customers lost out, overpaying for poor service. In a rentier’s paradise, windfall profits abound. Brazenly occupying the lowest moral ground was essential, as the housebuilder Persimmon proved by earning supersized state-backed help-to-buy profits long enough to hand out a £75m bonus to its boss.

The banks, which took this country to the brink of collapse a decade ago, are at the heart of a rentier state. France, Germany, Japan, the US all have banking sectors smaller than the UK. While banks earning rents have flourished, the households paying them – either directly as financial consumers, or indirectly as taxpayers of a debtor state or customers of debtor firms – have floundered.

The anger that such spivvery engenders is diffused politically by making voters complicit in the theft. The sell-off of council homes, says Mr Christophers, was a privatisation that gave many of those perhaps most inclined to kick against Thatcherism a personal stake in the project. Culturally, Brexit plays the same sort of role as the right to buy, insulating poorer leave voters from the idea that they will suffer from the resulting policies.

The prime minister understands that Covid can change Britain, but lacks modernising policies. He extols the virtues of free competition – both for itself and because such freedom, he reasons, will somehow liberate the spirit fluttering within a pre-Brexit Britain caged by coronavirus. He is no doubt betting that the disruption of leaving the EU will be lost in the roar of an economy taking off as an inoculated population returns to offices and shops.

Weakened regulations

The gap between rich and poor in the UK is at least as high today, academics calculate, as it was just before the start of the second world war. This is largely because the British state that once mediated the struggle between labour and capital has been taken over by rentiers. Weakening regulations, reducing the importance of fiscal policy and shredding social protections has corroded liberal democracy in which an increasingly influential wealthy few have been enjoying a free run. Ultimately, rentiers want to increase what the economist Michał Kalecki called the “degree of monopoly” in an economy. This allows them to limit the ability of workers, consumers and regulators to influence the markup of selling prices over costs and to defend the share of wages in output.

The EU says its labour, environment and customer protections are a floor, not a ceiling, and that they can’t be traded away for frictionless market access. If we had stayed in the club, our ability to concentrate profits for monopolists would have been stymied in future trade deals negotiated by Brussels and open to MEPs’ scrutiny. Outside the EU, Mr Johnson can barter away such regulations – without parliamentary oversight – and scrap safeguards in new technology for higher monopoly profits. Karl Marx wrote in The Eighteenth Brumaire of Louis Bonaparte in 1852 that “the Tories in England long fancied that they were in raptures about royalty, the church and the beauties of the ancient constitution, until a time of trial tore from them the confession that they were only in raptures about rent”. His assessment of early 19th-century Tories applies with unerring accuracy to today’s Conservatives.

Mr Christophers’ insight is that the Tories under Mr Johnson are a party of – and for – rentiers, much more than the interests of productive capital. This explains why, after 2016, the Tory party embraced Brexit and shrugged off productive capital’s concerns about leaving the EU. It will be to the great detriment of this country if the pandemic permitted Mr Johnson to combine present-day fears with a yearning for hopeful change to persuade the average person to vote against their interests in the future. But history often repeats itself first as tragedy, then as farce.

Throughout history Britain’s ruling class has created crisis after crisis – just like now

Boris Johnson’s run of bad decisions on Brexit and Covid have their roots in a saga of elite entitlement and superficiality writes John Harris in The Guardian

‘Then came the Brexit trade deal, and a familiar idea returned, that under the shambling exterior, the prime minister is some kind of swashbuckling genius.’ Photograph: Pippa Fowles/No10 Downing Street


When the novelist John le Carré died earlier this month, among the passages quoted by journalists was a short excerpt from The Secret Pilgrim, published in 1990. In the book, the words are spoken by Le Carré’s fondly loved character George Smiley. “The privately educated Englishman – and Englishwoman, if you will allow me – is the greatest dissembler on Earth,” he says. “Was, is now and ever shall be for as long as our disgraceful school system remains intact. Nobody will charm you so glibly, disguise his feelings from you better, cover his tracks more skilfully or find it harder to confess to you that he’s been a damned fool.”

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Brexit - An Uncivil War

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The words are a cutting summary of the far-off era of upper class treachery and cold war subterfuge, but also fit the less romantic time of Brexit, the pandemic and a Conservative party whose leadership by two public schoolboys has so pushed us into disaster. Therein lies a huge part of the national tragedy that, amid stranded lorries, a shamefully high death toll and some of the greatest peacetime blunders this country has ever made, has recently seemed to be reaching some kind of awful climax. Of late, some of the best writing about the mess we are in has focused on Boris Johnson’s character flaws, which are undoubtedly a big part of the tale. But what has been rather less examined is the fact that his shortcomings blur into a much longer story about our longstanding ruling class, and its habit of creating crisis after crisis.

The year 2021 will mark the 80th anniversary of George Orwell’s inspirational essay, The Lion and the Unicorn, his warmly patriotic text about the English national character, and his belief that this country’s efforts in the early stages of the second world war were being compromised by the fact that he was still resident in “the most class-ridden country under the sun”. Here, too, there are plenty of characterisations of the English elite that seem as pertinent now as they were then. “Probably the battle of Waterloo was won on the playing fields of Eton, but the opening battles of all subsequent wars have been lost there,” wrote Orwell, and as an Etonian himself he surely knew what he was talking about.

Of the ruling-class politicians who had overseen Britain’s domestic travails during the 1920s and 30s while pursuing the disastrous foreign policies that culminated in appeasement, he said this: “What is to be expected of them is not treachery, or physical cowardice, but stupidity, unconscious sabotage, an infallible instinct for doing the wrong thing. They are not wicked, or not altogether wicked; they are merely unteachable.” Back when Conservatives at least partly understood such criticism and successively embraced first postwar consensus politics, then the populist meritocracy most spectacularly embodied by Margaret Thatcher, they were harder to malign as chancers and stuffed shirts. But in the buildup to Christmas, as I watched Johnson deny the nightmare of a no-deal Brexit, row back on his stupid promise of a normal Christmas and then yet again offer the prospect of a return to normality (this time, he seemed to suggest, by Easter), Orwell’s words once again made perfect sense.

Since the election as party leader of David Cameron back in 2005, even if the Conservatives have stuck with a post-Thatcher view of the world, many of the inner circles of Tory politics have reverted to a way of doing things more rooted on the grouse moors of old than in the modern world. Johnson’s arrival at the top revived a familiar mixture of entitlement, superficiality and lives that most people would think impossibly opulent. We all know what those things have led to – a seemingly endless run of terrible decisions, from the calling of the 2016 referendum to the chain of stupidities that has defined Britain’s experience of Covid-19.

Just to be clear: the downsides of a certain kind of privileged leadership have flared up on all sides of politics, from the messianic arrogance that led Tony Blair into the Iraq disaster, to Nick Clegg’s virtual destruction of the Liberal Democrats. But in the main, this is a Tory story. If your Christmas presents included the horrifically readable memoir, Diary of an MP’s Wife by Sasha Swire (whose husband, Hugo, was a minister under Cameron and part of his social circle), you will have a sense of what all this looks like up close. Johnson’s biographer, Sonia Purnell, described Swire’s book as a portrait of people who are “unserious, entitled, snobbish, incestuous and curiously childish” – obsessed with the subtle distinctions of taste and status that separate the middle from the upper class, and drawn to politics and power not out of any sense of mission or duty, but a dull belief that such things are what people like them do. Under Johnson, the same culture of entitlement and mutual back-scratching has hardened into the so-called “chumocracy”. Oligarchy is rarely an efficient or sensible way to govern, but that doesn’t seem to have got in the way.

Just before Christmas, dismay about the Johnson government and its apparent distance from reality seemed to be reaching a peak. But then came the Brexit trade deal, and a familiar idea returned – not least in the rightwing press – that under the shambling exterior, the prime minister is some kind of swashbuckling genius. This is an archetype that depends on the glib charm cited by Le Carré, and draws on a deep well of deference. The reality is surely that a reckless project driven by the alumni of private schools (Johnson, Dominic Cummings, Nigel Farage, Jacob Rees-Mogg et al) has resulted in probably the only trade deal in history that puts up barriers to commerce rather than removing them, and will be rushed through parliament with a sickening disdain for any scrutiny. Combined with the economic effects of the pandemic, the result will be damage and uncertainty that is only just starting: all the talk about Brexit now being finished is further proof of the ditch we have been led into.

The disasters, then, will continue to mount up, but will they result in any change? If history teaches us anything, it is that this country’s mixture of cap-doffing and unassailable privilege tends to keep even the most rotten hierarchies in place, and the saga grinds on. This is the essence of the very British mess that we seem unable to escape.

How UK-EU trade deal will change relations between Britain and Brussels

Sam Fleming and Jim Brunsden in The FT

The future relationship deal struck between the UK and the EU (24 Dec 2020) will bring far-reaching changes, as both sides are forced to adapt to the end of Britain’s 30-year membership of the European single market

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The trade agreement between London and Brussels will offer UK and EU companies preferential access to each other’s markets, compared with basic World Trade Organization rules — ensuring imported goods will be free of tariffs and quotas. 

But economic relations between the UK and the EU from January 1, when the deal is due to take effect, will be on more restricted terms than they are now.  

“Everyone needs to get prepared for a situation next year that will be very different to today,” said an EU official. 

A trade agreement along the lines of the one negotiated between the two sides will leave Britain facing a 4 per cent loss of potential gross domestic product over 15 years compared with EU membership, according to the UK’s Office for Budget Responsibility. Failure to secure an agreement would have led to lost potential GDP of almost 6 per cent, the fiscal watchdog estimated. 

Below are some of the benefits conferred by the UK-EU future relationship deal, which also includes security co-operation — and the important areas in which Britain’s links with the bloc will fall short of existing arrangements. 

1. Trade in goods  

The EU and UK’s starting point for the future relationship talks was that they should lead to a deal with no tariffs on trade in goods between the two sides. They also wanted no quantitative restrictions on the volume of goods that could be sold free of tariffs.  

That was negotiated, meaning the deal will go beyond what the EU has done with any other advanced economy outside the European single market.  

But the agreement is still a very different state of affairs to membership of the EU single market and customs union. 

Once implemented, from January 1, a hard customs and regulatory border will exist between the EU and UK, and goods will face checks and controls that can be smoothed at the margins only by co-operation. 

The deal will include facilitations such as co-operation on trusted trader schemes, but none of these erase border checks. 

“The agreement provides for continued and sustainable air, road, rail and maritime connectivity, though market access falls below what the single market offers,” said the European Commission.

2. Fair business competition 

The EU’s offer on tariff-free trade was contingent on the UK agreeing to uphold a “level playing field” on fair business competition in areas such as environmental standards. 

Brussels was also keen to ensure the UK does not have unfettered scope to disburse state aid to prized industries, giving them a competitive advantage.  

The agreement includes common binding principles on state aid, enforceable in both sides’ courts, which would be able to recover illegal subsidies. 

It also includes a painstakingly negotiated “rebalancing mechanism” to deal with a situation where the sides’ regulations in areas such as labour rights diverge over time. 

The mechanism, which would be subject to independent arbitration, would allow the disadvantaged side to impose tariffs to restore fair competition. 

But, crucially for the UK, it will not be required to follow EU rules directly or be subject to the jurisdiction of the European Court of Justice. 

Being outside the European single market has other regulatory consequences for Britain. For example, UK businesses will no longer be able to assume that product authorisations from British watchdogs will allow their goods to be placed on the European market.  

3. Fish 

The deal creates a five-and-a-half-year transition period during which EU fishermen will have guaranteed access to UK waters. 

EU quotas in British waters will decline in the transition by 25 per cent compared with current levels, and this will have the knock-on effect of boosting how much UK fishermen can secure. EU boats currently catch about €650m of fish in British waters each year. 

Once the transition period is over, EU boats’ access to UK waters will in principle depend on annual negotiations between both sides. Those talks will also determine the overall quantities of different species that can be caught. 

Should EU boats’ access to British waters ever be revoked by the UK, the bloc will have the right to take compensatory measures. These include retaliatory closing of EU waters to UK boats, and the imposition of tariffs on British fish. 

The deal also links the UK’s access to the EU energy market to access to British fishing waters. 

The UK warded off EU demands for a cross-retaliation power to hit other parts of the British economy should a dispute over fish escalate. 

Still, the deal does provide a last-resort “safeguard” option that would allow either side to take emergency measures to protect coastal communities, subject to dispute-settlement arrangements in the agreement. 

The deal enshrines the principle that Britain is now outside the EU’s common fisheries policy: an independent coastal state with sovereignty over its waters. 

4. Financial services 

The City of London will exit the EU’s single market for financial services at the end of the Brexit transition period on December 31. 

Both sides have said that the new market access arrangements for UK and EU financial services companies should be based on unilateral decisions by Britain and the bloc, rather than be provided for in the trade agreement. 

These so-called equivalence decisions involve each side evaluating whether the other’s financial services regulations are as tough as its own. 

Banks and traders have acknowledged that the proposed system is more piecemeal than existing arrangements, and less stable. The EU did not announce any fresh equivalence decisions on UK access to the bloc’s markets alongside the trade agreement on Thursday, resulting in uncertainty in key areas including share trading and derivatives. 

The two sides plan to put in place a regulatory dialogue on financial services based on a separate memorandum of understanding. 

5. Migration 

Current British and EU expatriates have their rights safeguarded by the UK’s 2019 withdrawal agreement with the bloc, but big changes to migration arrangements take effect from January 1. 

Britons will no longer have the benefit of European freedom of movement: the right to go to any EU member state and seek to work and live there on the same basis as the country’s own citizens.  

Instead, Britons will rely on a visa-waiver programme to travel to the EU for short stays, and on member states’ national rules for the right to work.  

Ending free movement for EU nationals in the UK was identified by the British government as one of the benefits of Brexit, allowing the country to devise a new immigration system.  

6. Security 

The EU and UK have been at pains to emphasise the importance of continuing co-operation in the fight against terrorism and organised crime, although talks in this area were complicated by Britain’s determination to escape the ECJ’s jurisdiction. 

But ahead of the deal being finalised, EU chief negotiator Michel Barnier confirmed the sides had found ways to maintain “close co-operation” on crucial matters including the work of the bloc’s crime-fighting agencies Europol and Eurojust, and the sharing of criminals’ DNA data. 

Brussels said the deal “builds new operational capabilities, taking account of the fact that the UK, as a non-EU member . . . will not have the same facilities as before”.  

The deal establishes that security co-operation can be suspended if the UK breaks away from the European Convention on Human Rights.