Thoughts on Brexit

I am devastated by Brexit: I’m a UK expat, of mixed Celtic and Anglo-Saxon heritage, my wife is Swedish, one of my children was born in Romania, the other in America. I have lived in seven countries on four continents. I lived through WWII as a child, and the Suez crisis, which made it clear that Britain was neither very liked nor very powerful, as a teenager.  The Phoenix-like rise of Nationalism is anathema to me, but so is rise of the Gini coefficient everywhere in the world and the purchase of elections by special interests. Many would regard me as a member of the international elite that I discuss below: I went to good schools and universities on scholarships.  I certainly find that my views on just about everything are diametrically opposed to those of the average Texan.  But I have never been involved in politics (I was unable to vote until I was 40), and I am not wealthy.

Neither am I a political scientist or an economist:  my views are formed by my life experiences (see above), including my summer-long cycle rides in the UK and twenty other European countries in the last half-dozen years.

Below are my (preliminary) thoughts on why the Brexit campaign was successful.  There are three major conclusions. First, the world is facing the second stage of a period of major, and possibly unstoppable population movements.   The first stage began in the 1960s, when over a billion people in the second and third worlds moved from rural areas to cities, drawn by the promise of better lives in the money economy.  The second stage is the movement, probably almost 50 million strong now, of people from poor countries to richer ones to avoid civil war, persecution, vicious governments, and grinding poverty.  The second conclusion is that globalization of the world economy has made the less-educated in developed countries poorer and less secure, and therefore resentful of unresponsive governments run by members of the GEE, or global educated elite.  The more remote the government from the people (the federal government in the US, the EU in Great Britain) the greater the resentment.   Thirdly, the combination of this resentment and the opportunity that large-scale immigration gives to scapegoating gives rise to a potentially dangerous populism.  These problems are all exacerbated in the UK because of its retreat from the socialist ideals of the welfare state, its historical separateness from Europe, its huge population of immigrants, and its long, slow slide down the league table of great powers from the top to near the bottom over the last 75 years.

  1.  Immigration:    The developed world is facing a massive migration of peoples on the scale of the destruction of Bronze Age civilization by the Sea People in 1200 BC or the Volkerwanderung of 400-800 AD. In general they are fleeing from disfunctional countries in the third world to countries that they see as offering safety, freedom, and better economic opportunities.  However, in the destination countries they are regarded as threats to the jobs of the natives, threats to the culture of the host country, or potential terrorist threats – sometimes as all three.

Many of these migrants are refugees fleeing for their lives from civil wars (Syria and Libya), violent organised crime (Mexico, Guatemala and Honduras), religious or ethnic oppression (Nigeria, Myanmar, Kenya), or political repression (Algeria and many African countries).  Many others, perhaps a majority, are seeking to escape desperate poverty.

Governments in the past then were unable to stop similar waves of immigration because the cost was way too high, and we are in the same boat. How much would it cost to keep all the European navies on eternal patrol in the Mediterranean (or the Royal Navy on patrol in the English Channel)? How much will it cost for the USA to build Trump’s wall? How much will it cost to build the massive reception facilities for these people, to man them and supply them? Where will they be put? How do we tell the difference between refugees and economic migrants?  Then there are the moral costs:  what will be the human suffering of the repatriated refugees/immigrants? Here in the USA people are being sent back to almost certain death in central America every day. Liberal or Conservative, idealogue or realist, there are no humanely (Liberal) or affordable (Conservative) answers that I can see.

Not only that, but we ourselves are dependent on the immigrants’ native countries, and on the immigrants’ cheap labour when they arrive in our countries. Our economies are dependent on access to Middle Eastern and North and West African oil, and will probably become even more dependent for at least a few decades. Our dependence on the cheap labor provided by immigrants was highlighted when the state of Alabama banned illegal immigrant agricultural laborers  only to find its harvests rotting in the fields.

However, some of the fears that ordinary working people have are real. Immigrants do take certain kinds of jobs away from the locals particularly the low-paid, nasty ones. It is not, that the locals are lazy, as is often said, but they have high fixed costs (accommodation, transport) which make it impossible for them to take the lowest-paid jobs: it is not acceptable in developed countries for five or ten families to live in one small house, or to live in concrete shacks in the fields with no sanitation and no access to schools or shops – immigrants will tolerate these conditions.  But the lack of availability of these jobs tends to create an underclass among the local population: an under-employed underclass of the least-educated and the least resourceful.  In order to eliminate this underclass, countries would have to institute a very high minimum wage, which would cause inflation and loss of international competitivity.

Immigrant groups tend also to have higher birthrates than the natives, and so they gradually become larger in numbers than the natives.  Texas, for instance, still is majority white American, but its schools are now majority Hispanic.  This really threatens any native population that values its culture, regardless of other less laudable issues such as race or religious differences:  thus in Britain there seems to be more resentment of Polish immigrants than of African ones.  Resentment of large groups of immigrants is nothing new: in the USA the Irish, Italians, Chinese and Jews (I actually remember this) were all actively discriminated against and their immigration restricted. In Britain it was the Irish; Australia and New Zealand both had “Whites only” policies.

Finally, I think that the ordinary native populations of the developed countries realize that the second and third generations of immigrants are much more of a threat than the first generation:  it is clear from what has happened in France, Britain, and the United States (Boston Marathon massacre) that there is a real threat of radicalisation  of the culturally confused, not well-integrated, children and grandchildren of the original immigrants.

All of these problems are acerbated by the fact that most developed countries are now Meritocracies based on access to, and the ability to take advantage of, a certain kind of education. And the Meritocrats not only are digging themselves in, seeking to make themselves hereditary “rulers”, but they have an entirely different world view from the less fortunate. They are digging themselves in by reinforcing the educational advantages of their children (in America by moving to richer school districts; in the UK by sending their children to public schools) and by demanding, and getting, much higher levels of remuneration.  Their world-view is that of international capitalism. I take this up in the next sections.

There are no easy answers:  the Romans resettled the Ostrogoths in Dacia, but when the Goths were threatened by their neighbors and began to move into the Empire, there was no affordable way to stop them.  The northern Germanic tribes infiltrated the Roman frontier first as mercenaries – but they brought in their families and their numbers increased until their fellow-tribesmen outside the empire realized that they could walk into the empire almost unopposed (this is a particular reading of history which depends on the idea that the countryside of the western Roman Empire was largely depopulated by the fourth century as a result of the Latifundia system of very large aristocratically-held landholdings, which left many “gaps” where Germanic peasant farmers could settle and multiply).  Our societies are vulnerable to a similar phenomenon: immigrants come in to do the jobs others can’t afford to do. If they live in the shadows, they are largely unseen until their numbers become a threat.  Thus Texas is, in this respect, a third world country:  the average middle class Anglo Texan sees very relatively few immigrants unless she goes into the kitchen of a restaurant, or stays in his office until the cleaning crew arrive, or really looks at the workmen on a building site, or goes to the park on a holiday. We don’t know, and generally don’t care, where these people live or how they live.

But the anti-immigration component of Brexit is one sign that the less-fortunate of the  hitherto dominant groups of developed nations have their backs up, and the rise of Donald Trump, Marine Le Pen, the Sweden democrats and so on are other signs

2.  Working-class economic losses:

All of the above, of course, ignores the other obvious causes of Brexit:  wage stagnation and loss of job security, as well as (European) government regulation. These are all tied to Global Capitalism and the fact that the elites now worship Adam Smith rather than God. What the worship of Adam Smith’s “Open Markets” has led to is a mindset among the commercial elite that there should be no regulation, and on this side of the Atlantic, at least, they have managed to convince a large section of the public of this theory.

2.1 Wage Stagnation:

What globalization has led to is a race to the bottom in wages: a company that doesn’t like paying Union wages in Michigan ($26/hr, with benefits) can easily move to Texas, where it can pay $9/hour with no benefits for a year.  When that becomes burdensome the firm is off to China or Bangladesh.

What the increase in middle class wealth during the late 20th century has led to is the unrestrained domination of management, to the detriment of owners (most older people, through pension funds and their mutual fund holdings, etc.) and labor. Management has used its dominance to enrich itself beyond all relationship to the value added that it provides: ownership can do nothing, since it is so widely dispersed, and its interests are also managed by professional fund managers, who are not at all interested in restraining the remuneration of the management of the firms they invest in – they have a conflict of interest. Labor can do little as the power of trade unions (and the membership) has been whittled away by management. Over here, the courts and the government have been bought by management. The Civil Service is also management, and has managed to feather its nest very well in the last four decades, by demanding remuneration equal to that in the commercial world.

This domination of management is reinforced by the lack of ethics in the business world (in this country, many Wall Streeters and lawyers are the children and grandchildren of Mafiosi and drug kings (I know, because they were my fellow students at the Uni to which the Wharton School belongs)).   It is hard for me to believe that some of them do not carry some of that baggage with them for at least a couple of generations. Again, I see no practical solution short of a revolution – not against capitalism, but against the managerial class in both government and industry. I strongly suspect that Brexit was a first shot in this revolution.

Furthermore, the increasing share of wealth that goes to management has also led to there being less money available to pay labor.

2.2: Loss of Job Security:

Since management has succeeded in emasculating the trade Unions, the protection of job security they provided has gone away.  This effect is much magnified by the export of jobs, not just to foreign countries, but to contractors and sub-contractors in an effort to lower costs even more.  Since contracts are short term, these contractors cannot afford to offer job security.  Furthermore, it has become a pillar of management’s belief system that job security is a bad thing, locking them into high fixed costs that reduce their ability both to make huge profits and to deal with adverse business circumstances.  In most countries government support for the unemployed has been reduced for budgetary reasons, making things much worse.

3.  Downsides of Meritocracy:

Since entrance to the Meritocracy is based on level of education, those who go to poor schools, or have little access to stimulation at home, have a much harder time achieving enough education to advance economically.  Furthermore, in some quarters the belief has taken hold that it is the fault of the poor that that they do not do well:  this ignores the fact that environment has a huge effect on people’s education. It also ignores the fact that the traditional Western education requires a very specific set of mental and motor skills that not everyone has, in spite of the fact that they may in other ways be outstandingly bright and capable.  The smartest person I ever knew always did poorly in intelligence tests because he saw connections between objects and thoughts that other people, including the people who set the tests, did not see.  Most education systems are also highly competitive, so that those who value cooperation under-perform, in spite of the fact that the ability to cooperate might be a much more important attribute in the long run.

Entrance into the elite of the Meritocracy also develops, deliberately, a much different world view than that of typical workers. This worldview values travel and international co-operation. It values cosmopolitanism – bright young people go to study abroad, and companies post them abroad. It values economic competition and individual freedom from the constraints of religious edicts, social customs, and political hierarchies, and values sexual matters much differently from traditional societies.  It values open markets, including that for labor, even when large numbers of people are adversely affected, in the knowledge that even larger numbers are beneficially affected: these beneficiaries may, however, be in a far distant country. The  elite talk almost entirely to each other: they read the same economic journals, read the same books and newspapers, value the same art works, classical music, and go to the same plays. Thus the world elites differ ever more widely over time from their less-educated compatriots, even though their parents and siblings are often members of those classes that are suffering from the global economy.

4.  Loss of National Power:

Ever since the French Revolution the European idea of a country has become identified ever more closely with the idea of an ethnic group, often determined by its language.  This identification reached its apotheosis at the end of the First World War, with the break-up of the multilingual, multi-ethnic empires of central Europe and the dominance of the “Melting Pot” idea in the countries of settlement (the USA, Australia, Canada).  Multi-ethnic, and even more so, multi-national states are associated in peoples’ minds with the economic injustices and decadence of the late Habsburg Empire and pre-Revolutionary Russia: perhaps for younger people with the cruel, aggressive dictatorships of Nazi Germany, Soviet Russia, and communist China.

Thus the sacrifice of national power to a larger entity is anathema to many non-elite people, both in Europe and beyond.  I think that this feeling is particularly strong among older British people because the country has historically stood apart from Europe, only interfering there in  a major way to prevent the emergence of a large power that could threaten the country’s interests.

Furthermore, the creation of a supra-national entity of necessity includes the creation of a large bureaucracy.  When the supra-national entity is not a true union, and has not grown from democratic foundations, but from the pressures of a small elite intent on preventing international conflicts this bureaucracy is not responsive to, or accessible to, individuals in the component nations – it is a level above that which they can influence or complain to.  When the supra-national entity is a multilingual association of equals, the bureaucracy becomes multiplied to represent the interests and pride of the component nations, and even less responsive.  When it sets standards and makes regulations that are in conflict with those that people are used to, they appear as unwarranted interference from a distant and unstoppable overlord.  We even see this effect in the United States, where many people resent Federal legislation and regulation, even though they directly elect their representatives at that level.

In many ways the older generations of British people have had to make more cultural adjustments than the people of any other member: the breakdown of the vote by age reflects this.  The majority of all people who were younger than 7 years old when Britain joined Europe voted to stay. The majority of those who were older (i.e. over 50 years old now) voted to leave. These generations have lived through the decimalization of the currency, the partially EU-forced abandonment of the Imperial system of weights and measures (the trauma of this abandonment can be judged by the fact that peole in USA still refuse to use the metric system in spite of decades of pressure), and the necessity to change their inherited opinions of Europeans (when I was young there was a pejorative name for every nation in Europe and beyond), not to mention the loss of jobs and stagnation of wages.

In addition, their lives, especially the lives of those over 65 (who voted 61% to leave) have been overshadowed by an almost continuous loss of British power and influence: loss of empire, reduction in standard of living compared with European countries, domination by the USA. Those who voted labor and worked in industry have, in addition, seen the loss of the industries they worked in, the loss of trade union power, and abandonment by the labor party of its class identification. Most of them have many relatives in Commonwealth countries, and they lost most of the official ties that bound them to these relatives when Britain abandoned the Commonwealth in order to join Europe.  It is no wonder that they rebelled against the elites!

However, most of the factors I have discussed are present in all of the industrialized world, and will give rise to a very dangerous period of history in which a resurgence of fascism, ultranationalism, and class warfare is much more likely than a continuation of the status quo.

In this week’s “Economist” (The Economist, July 2nd, 2016, p.67) there is a very pertinent note on the views of Dani Rodrik, an economist at Harvard University.  Mr. Rodrik thinks that globalization and the growth of supra-national trade blocs pose a “trilemma”:  “societies cannot be globally integrated, completely sovereign, and democratic – they can opt for only two of the three (for the details, see the Economist article).  In the late 1990s Mr. Rodrik speculated that the sovereignty of nation states would be the item societies chose to discard. Yet it now seems that economic integration may be more vulnerable.”

Since most economist now believe that an abrupt decline in the volume of international trade due to the rise of protectionism was the proximate cause of the great Depression of the 1930s, it would seem that we are in for a rough ride.