The importance of appearing in control and how not to do it (when in opposition)

I started out this particular blog post to try and suggest some answers as to why we have ended up in such a mess over the Brexit process (because the road to the decision is a strange and dark one, and I have talked about it enough. In particular to look at the behaviours of the two main political party leaders in the UK. They have, in my opinion, both shown a lack of leadership and this is at the heart of the situation we currently find ourselves in.

            I have already spent a lot of time on the first part of this blog considering how Theresa May has fared against a relatively common set of leadership characteristics:

• ·      Integrity – not just being honest, but being seen to be honest, and doing the right thing even when you can get away with doing the wrong thing
• ·      Courage – in making decisions, even unpopular ones, with limited information, and willing to address difficult points
• ·      Impartiality and fairness – not pandering to special or favourite causes, identifying the fairest outcome for everyone from a situation
• ·      Good communication – in both directions, able to explain their message so others get it with clarity and conviction, and able to listen to others and hear their points
• ·      Flexibility and responsiveness – able to alter not only their plans and direction, but their style to achieve their outcome, and able to listen to other people’s ideas and use the best one, not simply their own

Against which time and again she has been found wanting, and badly ( https://unexpectedsocialist.blogspot.com/2019/01/the-importance-of-appearing-in-control.html ). But surely it is only fair to consider Jeremy Corbyn by the same yardstick? The great man of principle who is very much beloved of party members (if not entirely by his parliamentary labour party) must hold these qualities in spades?

Its much harder to cover the entire process for the opposition leader. Firstly he has had very little (i.e. nothing) to do with the formal process. I will therefore focus on a few key points in the process where he had opportunity to show leadership. Specifically: in the immediate aftermath of the referendum result; the vote on Theresa May’s deal and calling and holding the vote of no confidence.

I remember after the vote itself being completely shocked, saddened and well, scared the following few days. This was a fundamental shift for our country. I had always been European as well as British and English, with family, friends and work colleagues across Europe and here from Europe. I’ve worked as an accountant and seen the millions of pounds of EU money coming in to areas of the North East desperate for regeneration. I’ve studied Economics and understood the absolute logic of being part of trade blocs.

This was a body blow to me and many others. We were dismayed and confused. What we needed was calm, a chance to re-group and get used to this. Instead we got a Prime Minister running away from the problem he had created and a leader of the opposition calling for an immediate invocation of article 50. There were two massive problems with this immediate approach.

Firstly, Corbyn had a long history of concerns over being members of the EU and expressing a desire to leave. He belatedly became an advocate for staying. Throughout the campaign he had stayed away from the main campaign to avoid standing with David Cameron (his reason). Calling for this so quickly immediately left his integrity open to question. It doesn’t matter whether he was being genuinely honest or not. Its whether people see you as being honest. This approach damaged his integrity. Coupled with repeated questions on which way he voted that he refused to answer, he was opened up by his detractors and across the press as lacking integrity.

Secondly, what we needed was calm and a chance to come back together as a nation after a referendum campaign that had been divisive and nasty. But it appeared that this opportunity to make political capital, and to put pressure on the conservative party was more important. It is really hard to see the fairness in that – putting party politics ahead of doing the right thing. Both of these issues stemmed from a man who was no longer listening to the pulse of the country, and a man who had failed to get out his message.

Of course many Corbyn supporters (and I class myself as a supporter) will point out that it is hard to communicate when you have large parts of the press against you. This hasn’t happened over night. There has always been an image of him portrayed by his detractors. It didn’t suddenly appear. The narrative he has been wrapped in is made to measure. But the reason it fits so well is that decisions he makes and how he communicates absolutely lend themselves to it. It sometimes feels like there is a conspiracy to ruin his credentials – and that conspiracy is made up of the Conservative party, right wing media interests and Jeremy Corbyn.

I absolutely get that Jeremy has painted his life as a man of integrity, and a man of principle. There can be no question that he has made difficult and unpopular decisions based on a strong moral sense of right and wrong. Once he has decided what he feels is the morally right thing then he sees it through.*

I absolutely get that Jeremy Corbyn is unwilling to change. He’s made a career out of purposefully choosing the other view – almost for fun. He makes a snap decision on evidence at the time and sticks with it come hell or high water. This “man of principle” is so addicted to being morally right that he can’t accept when he is wrong or things change.*

(*Delete as appropriate)

And therein lay the problem. Because his behaviour and the way he acts and delivers his message can be played both of those ways. In order to be an effective leader you must be able to communicate and be flexible. You have to be responsive and aware. Sometimes sticking to your guns and your tried and trusted methods because you have always been that person is actually the counter to integrity – not the embodiment of it. Jumping into the trap laid for you over and over again shows a lack of flexibility, responsiveness and communication skills.

We’ve seen this behaviour in the House of Commons over the last few weeks. In fact both Corbyn and May have been guilty of the title of this blog – wanting to appear in control rather than wanting to be in control.

When Theresa May lost, as she knew she must, the vote on her badly-won, self-serving, ill-communicated, cowardly deal she immediately challenged Corbyn to bring forward a motion of no confidence in the government. Everyone knew he had to. But to her mind this was her showing the world she was still in charge. If anybody other than May and Hammond believe she is still in control of events then please send them my way – I have a second-hand bridge over the Thames I would like to sell them. However it gave her a chance to remove the initiative from him.

When that motion failed, as he knew it must, Jeremy Corbyn immediately rebuffed May’s offer of talks without his pre-conditions were met. Again, this was an attempt to show he was now in control and would only meet on his terms. Whilst this has now proven to be correct, and that the talks were merely Mrs. May trying to sell her original deal, only in smaller groups and with coffee and biscuits, this was immediately played in the press as Mr. Corbyn refusing the outstretched hand. It could not have been more clearly a trap if the prime minister had read it from a card marked ACME on the back. Because it is how he is expected to react and unfortunately no flexibility or learning is allowed.

I do worry for Brexit and our immediate future. We have days left now until we crash out without a deal. The leaders of our political parties, whilst having very different policies, views and desired outcomes, appear very similar in their approaches. Once the referendum result came in, any opportunity for coming together as a country was lost. Both leaders have allowed their own personal views and animosity along with political calculations to stop them from doing what we need most. Which is actually lead.

All we need now is Spandau Ballet

              I am sat writing this the evening before the first full budget of our 2nd Tory chancellor of the last 20 years, Philip Hammond MP. We have now had a full 6 years of Tory chancellors - even if for 5 of those they were supported in Parliament by a weak and ineffective coalition partner in the Lib Dems. So, it is probably worth looking at how well those Tory chancellors and governments have done for us. By us, I mean the great British working classes. I include in that those of us lucky enough to be working, and those of us who for whatever reason can't or aren't working at the moment. It is also right and fair to measure those chancellors against what they set out as their own priorities. After all, it is not fair to only measure them against things they never promised to do.

              Like most economists (and other political writers) it would be really easy for me to fall into jargon and measures that most people don't understand. Who really feels GDP, deficit, debt ratios? Whilst I want to steer clear of these as much as possible - they are necessary to consider. Mainly because these were the measures which George Osborne and then Philip Hammond have measured themselves against. But there are other measures that they feed into - and these do matter. These are how well-off we as individuals feel, and the future prospects for the economy. As well as these, there are other factors that matter - how well funded and effective our public services are; how much tax we pay and how many of us are in gainful employment.

              Coming into power in 2010 was never going to be easy for any government. The world was still reeling from a financial crisis, caused by global banks, that was as severe as The Great Depression. This was impacting pretty much every country - though some worse than others. In the UK because we had bailed out the banks here we had a massive public sector debt (the amount the government owes) that had risen from under 40% to around 65% a the time of the General Election. This was the worst of all worlds - it was driven by an increasing amount of debt from bailing out the banks, a shrinking economy and a growing deficit. The deficit or surplus is the difference between how much the government is earning (basically through taxation) compared to how much it spends (on services for the people). 

             So whichever Chancellor came in had to do one (or all) of 3 things - grow the economy, reduce the deficit and / or reduce the overall debt the government had. The prevailing idea from George Osborne (and presumably supported at that point by the public) was to reduce the deficit, within 5 years, and thereby start to pay down the debt levels. Surely we could return to surplus? After all, we had run a surplus for the overwhelming majority of the Blair years, after the deficit laden years of the Thatcher government. This therefore gave rise to the austerity agenda - the aim being to reduce how much the government spent to get in line with what they earned. 

             But the Tories also inherited a number of other problems and benefits at that time. For example, we had an NHS that was the best in the world, as proven by a number of international comparative studies. This was not only in terms of the service provided, but also how much it cost to provide. Gone were the days of waiting on trolleys in corridors. We had improved standards across schools. Whilst not all of the policies used were particularly popular, they were, mostly, working. Sure Start and EMA were supported by all parties as right and necessary because of the benefits to social well-being. The unemployment rate however had taken a marked increase - meaning fewer people were working - whilst this had stayed stable around the 5% mark for the majority of the Blair years this shot up as a result of the global banking crisis to 7.5%. This had been a massive improvement - during the Thatcher years it had been between 7.5% and 10% for almost the entire period. 

            So across those areas, how have the Tories done? Well, let's look at deficit and debt reduction, unemployment, amount we pay in tax, and those services mentioned above one at a time. 

Debt & Deficit

Since 2010, the debt as a share of GDP (the most reliable measure) has increased from 65% to 85%. In money terms, these 6 years have added £1trillion of debt. That is debt which our government must now pay back. More worryingly, the deficit is still at 3%. We were meant to be rid of both of those things by now. In fact, neither has been delivered on. We are worse off than we were. 

Unemployment

Here, it appears, we have good news. The unemployment rate has seen a steady downward trend. It has moved from a recent high of 8.5% to 4.8%. We should all be celebrating, shouldn't we? Well, it isn't quite so rosy. 700,000 of those new jobs are zero hours contracts. That is 700,000 people who don't know if they will have work from one day to the next. We may as well go back to the days of the Labour exchange. Workers earnings have not increased - which you would expect from high employment. More people can say they have a job, but more than ever don't have enough money coming in to actually survive. So we must remain cautious if we want to say this is good news.

Taxation

The level of government taxation - ie how much they take out of the economy each year to pay for public services has now increased back to levels last seen in 1986. So whilst they have spectacularly failed to reduce the deficit, they have done that whilst taking more of your money from you. Not only that, but the source of that tax has become far less friendly for you. Much less is being taken from big businesses and wealthy individuals. Instead, more tax is being taken from your wallet, by way of increases in VAT and Insurance Premium Tax. They have openly and actively taken from the poor to give to the rich. A true reverse Robin Hood. 

Public services

Well, Sure Start and EMA didn't survive the first year under the Tories. Our health service is once again falling apart. This winter we had the worst performance during the winter since we started measuring such things. Junior doctors went out on strike - previously unheard of. In education there are experts, councillors (of all parties), headteachers and MPs screaming at the government to address the lack of funding. What it the response of the current government? To instead set aside money for their pet project of grammar schools and free schools. Just consider that, any extra money they find is not going to your child's school - but to open a new one that you have no say over. Teachers are leaving the profession in droves, and recruitment of new ones is drying up. We are back to poor services where only the wealthy will be okay. 

                  So, it is amazing that we find ourselves here again. A government that can't get spending under control, where services are so poor they are a laughing stock, where only the wealthy are benefitting. Things haven't been this bad across so many measures since the early 1980s. Some would argue that there are other similarities - for example a Labour leader who is painted as a dangerous leftie by the media and who doesn't seem either willing or able to shake off the tag. What is worrying is that against this backdrop the Tories are still enjoying electoral success. This really should be a wake up call and warning to the Labour Party. The question is whether they are listening - or repeating the internal fights of the 1980s. Only time will tell. The problem is, how much of a country will we have left at the end of it?

WARNING! This post contains SPOILERS about what happens after a leave vote

              Or, then again it might not. I say that because nobody actually knows what will happen to the economy if we leave. Nobody can. David Cameron and George Osborne don't. Nigel Farage and Boris Johnson don't either. Nor do Economists for Brexit, the IFS, the WTO or The Economist magazine. Neither do I. But given that the economy is one of the main areas of discussion in the EU referendum debate we can't possibly ignore it. So, before you read any further, there is a massive health warning - any projections which are made OR referenced might be completely wrong. This has been part of the issue that has been turning so many people off from this referendum. The repetition that as soon as one side trot out an indisputable fact, the other side dispute it with their own fact.
              So what can we say about the economy and the impact of leave or remain? Well a really good place to start is to understand some basic ideas which are directly relevant to the question at hand. Let's set out then what the EU is (from a purely economic point of view), where it came from (again from an economic point of view) and what are trade deals, tariffs and the regulations that are often discussed by various commentators on both sides. This might take a while and bore the shit out of you - so if you want to go and get a drink now is the time to do it (I'm certainly having one). This is the explanation nobody else will do - because it is incredibly long and boring. But I think worth getting to the end of. One thing I will try NOT to do is to address any claims or counter claims - there is enough of that round already.
               The EU was originally set up very much as a trading block. The underlying theory of many politicians at the time was simple (and actually pretty true) - that most wars, when you get down to it, are really about access to resources. Those resources might be money, land, water, access or a million others. Given that Europe had spent the best part of a thousand plus years at war, then wouldn't it be better to settle disputes over a negotiation table instead of a bayonet? Therefore a "trading block" was set up relating to Coal and Steel - at the time the 2 key resources you needed to fight a war and also the 2 resources you would be likely to fight over. To avoid using an EU reference, you can find all of that information on wikipedia ( https://en.wikipedia.org/wiki/History_of_the_European_Union ). How would that trading block work? Well, they would work together to decide how much to produce, who to sell it to, at what price and what would be the rules for producing it. The last point is really important. They would also allow the countries in the block to sell to each other without "tariffs" - that is the governments wouldn't add costs to goods coming in from the other countries. To make this fair and achievable, what was very important to the countries involved was that the produce was created in the same way. So, same workers rights, same standards of outputs etc. This was so that no individual country could make more profit by undercutting the others unfairly.
               These are the regulations that are often held up by leave as blockers to British dominance of markets. These hated "regulations" that are thrown around as such a terrible thing include measures to ensure that:

1. What you are buying is actually what you are trying to buy
2. You are not paying too much for products and services
3. When you buy something it wont kill or injure you and your family
4. The people producing goods are not being abused / have employment protections
5. Producing these goods doesn't damage the environment more than it has to
6. There is a standard level of quality for goods that you buy
7. No single organisation or country can run the entire market and abuse a leading market position.

              As a general rule of thumb then, regulations are good for consumers, good for the market, good for workers and costly for businesses, and if it is costly for businesses that increases prices for consumers too. So whenever you hear the term "regulations" - run through that as a checklist and decide if they are things you want or not. Of course part of the problem identified by some on the Leave side is that these regulations attach to all companies whether they trade across Europe of not. I personally quite like the idea of regulations to stop all companies abusing workers and damaging the environment - irrespective of where they trade.

              In very basic economic terms then, the EU has now become a single market where lots of products and services are sold across Europe - with common regulations, but without tariffs being added if they come from within the EU. Tariffs go hand in hand with international trade - so let's look at what they are. Say your country and it's economy is very reliant on the production of "thingies" as an example. You as a government want to make sure that the "thingie" industry is protected. Therefore, what you do is add an import tariff to any "thingies"made overseas being imported - with the aim of making foreign "thingies" more expensive. It is called protectionism. It has existed since the start of international trade. Why wouldn't you do it?

              There are a couple of big problems with protectionism. The first one is quite simple - that protectionism breeds protectionism. Therefore whilst we are trying to protect our engineering industry, France is trying to protect their wine industry. Italy and Germany are trying to protect their car industries. And it goes on, and on, and on. What that means is that we all pay more for our products and services, but also because people don't want to pay higher prices they don't buy, so economies are held back. Secondly, protectionism favours rich countries. After all, if you have more to protect and trade, then you can afford to be tough to other countries with your tariffs ( https://en.wikipedia.org/wiki/Protectionism ). So as part of a global world we screw other people, our own consumers and ultimately our own economy. Again, as a rule of thumb then, tariffs are bad for consumers, bad for the overall economy but potentially good for individual companies in an economy.

                There are other ways of course as well as tariffs that countries can protect their own industries. Nationalised companies obviously have government support so can (generally) borrow money more cheaply. Or Labour costs can be controlled by government to help companies. Or grants, or a variety of other measures and methods that can be used. For example, the recent furore over the death of Tata Steel in the UK is often blamed on cheap imports of Chinese Steel "flooding the market". There is a huge lack of transparency around why the EU didn't stop this. The arguments (depending on which side you are on) are that the EU rules stopped the UK from intervening to help our steel industry OR the EU tried to block the chinese steel (by increasing tariffs) and the UK government stopped them from doing that. Whilst it is unclear what happened in this instance, the EU rules on this are quite clear - we could have increased tariffs at a European level to counter the protectionist measures of the Chinese. What is worth considering is whether the whole EU standing up to China would have more impact than the UK standing up to them on it's own.

             So, a single market, with common regulations and no tariffs, across a regional trading block, with an end consumer base of 500 million people. That is great because it gives companies (particularly international companies that trade across borders) certainty. Set up in Britain and access that market. Sounds pretty sweet. The main problem raised though is that in order to access that market we have to be (currently) a member of the EU. That in itself comes with a few costs. Firstly, the cost of complying with regulations as discussed above. Secondly, we have to pay to be a member of the EU. This is not a small amount of money, and the budget is set in Europe - we don't decide ourselves how much to pay. After rebate (which we do control) we pay £14 billion a year to the EU.                 That sounds like we might just be better off paying the tariffs in the first place. To put it into perspective - that is out of total UK government expenditure of £772 billion. Our payments to the EU (before looking at what they give us back in other ways) equate to 0.5% of the cost of government ( https://en.wikipedia.org/wiki/Government_spending_in_the_United_Kingdom ). So less than half a penny in every pound paid in tax goes to the EU. Finally, there is a cost of being part of the EU when we try to trade with non-EU countries. Because we are members when we trade with other countries without a trade deal the EU makes us apply tariffs. This is why the EU is currently trying to agree trade deals with a range of countries - Canada, the US, China as examples. However, overall tariffs are coming down across the world - in some cases slowly, but in other cases more quickly.
              There do seem to be some other major costs too economically. One of the obvious key ones is that if you are running a business in the UK then because of the close integration of the markets you are potentially not just competing with the business next door - but also the business in Paris, Madrid and Berlin. Is this a bad thing or a good thing? Well, first of all it means that the businesses in Europe are also competing with you - you can enter and sell to their local customers. Competition should also (according to prevailing economic theory) lead to better prices for consumers and a more efficient market, innovation and better products and services. The impact of this will depend on your business - common sense would suggest it is much easier to sell "knowledge" services over a phone line or internet connection. It might be much harder to sell fresh cream cakes.
            Finally then, there is also the concern over free movement of Labour - one of the central tenets of the European model of tariffs and regulations. Now, I have already written a blog about immigration generally ( http://unexpectedsocialist.blogspot.co.uk/2016/06/if-immigration-is-your-answer-someone.html ) and I don't want to revisit a lot of those points. But being part of Europe also requires us to allow workers to seek employment in any other part of the EU without barriers to that. Is this a cost to our economy? At a very basic level it would seem intuitive that having a greater Labour pool would help companies make money. They can drive down wages and salaries by hiring people from lower paid countries to work for them. This could therefore be good for companies (and earn more money for an economy) but bad for employees. It could also transfer funds from wealthier economies to poorer economies - by individuals remitting wages back to their home country. At the same time though, we have more individuals in the country spending their money here, paying taxes here and generally because they are of working age using less public services (remember, we are only talking about working migrants). Unfortunately, I do need to refer to a study here ( http://cep.lse.ac.uk/pubs/download/brexit05.pdf ) that shows that immigrants have NOT reduced wages for the UK population. It is simply a not true assertion. BUT TAKE THAT WITH A PINCH OF SALT.
           Economically then, what is the EU? Well a single trading block that increased potential customers but also potential rivals. A law making body that creates a lot of regulations that apply to all companies irrespective of whether they trade internationally. A body that tries to reduce protectionism and tariffs for the good of the global economy, not just ours. A bloc that negotiates on our behalf with other large economies that sometimes doesn't get the results that we would want. A larger, more competitive market that companies either thrive in or fail in. And one where the free flow of Labour allows people to work across a different range of countries depending on their skills, abilities and needs. This of course sounds rosy, but then again I am for remaining in. The problem is that whether we vote to stay in or vote to leave we are picking winners and losers. Some businesses will benefit from staying in. Some will benefit from losing. What we have to do is decide is whether getting rid of or replacing the things above will benefit US as individuals / companies AND what will be the impact on the overall economy.