Thursday, August 04, 2016

Responding to Brexit

It is far, far too early to judge what the actual medium-term and long-term impacts of Britain's vote to leave the European Union will be.

As we have not even left yet, and the process of sorting out an exit strategy and negotiating it will almost certainly take another two to three years before we actually do leave, much of the commentary from both sides about this is highly premature.

It is clear, as all serious economic commentators (including the minority of economists who supported leave) argued or admitted would probably happen, that the predictions of some short term disruption to the British economy and damage caused by loss of confidence are coming true.

There is enough evidence of a fall in confidence and demand that the Bank of England is absolutely right to try to offset it by putting some more liquidity into the system. This is not sabotaging Brexit - it's trying to make sure it works.

There was a coruscating valedictory article this week by John Van Reenen, a distinguished economist who is about to step down as  Director of the London School of Economics' Centre for Economic Performance. In his final post as holder of that position he took aim at how just about everyone handled the EU referendum and the debate.

You can read his article here.

Some parts of this article are very good indeed, although there are other opinions within it with which I disagree. To be precise, nearly everything he writes about economics is dead right but some of his political views are, in my opinion, either elitist, na├»ve or demonstrate a short memory.

The particular strengths of this article include the analysis of how people who had suffered as a result of the 2007 crash, including people who were not necessarily racist, came to believe that immigration was out of control and had played a major part in causing the hardships they were suffering.

He is also right to highlight the anti-intellectual contempt for the truth shown by too many people on both sides during the campaign. In fairness it should be noted that Michael Gove's "had enough of experts" comment was almost invariably quoted out of context during the campaign, and Gove has apologised for the comment which particularly upset Van Reenan, but if is fair to recognise it as the nadir of the campaign.

Van Reenen wrote:

"For me, the nadir came a few days before the vote when one of Leave’s leaders, Michael Gove the Justice Secretary, compared me and my colleagues to paid Nazi scientists persecuting Einstein. This was apparently in response to a statement we signed (including 12 Nobel laureates) warning of the economic damage from Brexit. At least one of these derided experts had grandparents murdered in the concentration camps, so one can imagine how Gove’s statement – supported by Boris Johnson – made them feel."
"Although this is a particularly nauseating episode, it simply capped off a frankly disgusting campaign, one where the Leave side simply impugned the motives of ‘the experts’ rather than seriously engaging with the substance of the economic debate."

Michael Gove's apology for comparing distinguished economists to Nazi collaborators came a few hours before the referendum, when he said

“Yesterday I was asked a question by Iain Dale about the predictions of doom for the economy. I answered, as I often do, with a historical analogy. It was clumsy and inappropriate.

“Obviously I did not mean to imply anything about the motives of those who have spoken out in favour of staying in the EU.

For example, despite having supported "Remain" myself I do not agree with Van Reenen's elitist view that the EU referendum was "unnecessary." Ever since the promise to hold a referendum on the Lisbon treaty was broken by the last Labour government, the proportion of the political class which was determined to get a referendum on EU membership had been growing inexorably and the 2014 European election result clearly demonstrated that support for such a referendum had reached the critical mass at which it was almost certain to happen sooner or later.

And his description of the current generation of politicians as "surely the worst in living memory" suggests that he doesn't remember the seventies as well as I do, hasn't bothered to read the Chilcot report, or both.

I on the other hand remember the seventies only too clearly, particularly the day during the "Winter of Discontent" when my father was rung on the day he was due to go into Guys for heart surgery and told that shop stewards representing porters and cleaners had decided they knew better than doctors whether the surgery was an emergency or not, and blocked it. The reason for the anger of those shop stewards, which provides some explanation for their behaviour if no excuse, is that the 74-79 Labour government has so mismanaged the country's finances that they had been forced to go cap in hand to the International Monetary Fund (IMF) for a loan, and as a condition of that loan the IMF had required them to impose the most savage cuts in public spending (including the NHS) in British history.

That period also saw the dead unburied, piles of rubbish uncollected in our streets and Britain spoken of everywhere as "the sick man of Europe." So perhaps you will understand why I regard the idea that the present generation of politicians are worse than those of the 1970's as mistaken.

Given the Iraq debacle and the mismanagement of the circumstances leading to the 2007 crash I don't regard our present leaders as worse than the 1997-2010 Labour government either.

Every generation of politicians makes mistakes. The important thing is to learn from them. It is obvious that we all have a lot of learning to do.

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