Brexit = austerity squared

Craig Berry - Deputy Director at SPERI

Many leave voters, apparently, have expressed instant regret, having sought only to execute a ‘protest vote’, liberated by the mistaken belief that the leave campaign could not possibly win.

The biggest falsehood of all was that nothing much would change, that is, that the UK could simply choose what kind of economic relationship to have with the remaining EU, because it was in many EU members’ interests to keep trading with the UK. This argument was exposed as a dangerous illusion within hours of the result being announced.  For the sake of keeping the remaining 27 together, the UK must, and will, be punished for daring to depart. Angela Merkel has been cool-headed enough to advise caution in this regard, but ultimately she must, and will, act to protect Germany’s interest in maintaining what is left of the union over the interests of a handful of German industries in selling to UK consumers.

So what, essentially, is going on? I think we need to look at the political and discursive climate in the UK within which this brand of politics came to thrive during the campaign.

There are of course important issues around working class disaffection, leading many Labour ‘heartlands’ to reject the party’s recommendation to remain. Jeremy Corbyn’s hesitant leadership is an issue here (as I discuss further below): most Labour voters actually appeared not to know where the party stood on the referendum. But there are clearly much larger problems within working class communities which manifest on this occasion as anxiety about immigration.  The question is not really whether these groups knew what Labour’s position was, but rather whether they cared.

But history is seldom made by those at the bottom. The EU referendum debate was conducted largely among elites, just as the decision to hold it made by David Cameron was based solely on the hope of curbing discontent within the Conservative parliamentary party.

For the past six years, the UK’s governing elite has sought sustenance in the notion of ‘austerity’. The idea has legitimised the resurrection of the UK’s pre-crisis growth model, but also, and more importantly for our purposes, served as a narrative around which the Conservative Party – increasingly fractured as stuttering growth pits elite interests against each other – has been able to cohere.

As I argue in Austerity Politics and UK Economic Policy, however, the idea of austerity has been much misunderstood, especially by its Keynesian critics. The dogma’s prescription of fiscal conservatism is secondary to the more pressing priority of instilling personal responsibility for economic well-being among individuals.  The valorisation of personal responsibility serves to legitimise the idea of the market as the core organising principle of the economy, contrasted with the state’s inherently anti-market orientation (because state intervention, even if well-intended, undermines personal responsibility).

The champions of austerity are not anti-government spending, they are anti-government, period.  This sentiment underpins the conservative ideological tradition, and actually helps to explain both Europhilia and Europhobia within the Conservative Party.

Margaret Thatcher’s love-hate relationship with the EU demonstrates this point well. She was instrumental in securing and defending the UK’s membership of the European Community in the mid-1970s, and then more so, as Prime Minister, in the development of the single market. Yet she despised the development of pan-European governance mechanisms, arguing in her infamous Bruges speech in 1988 that:

We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level, with a European super-state exercising a new dominance from Brussels.

The same attitude was found in the pre-referendum debate. Leading conservative writer, and avowed Europhile, Fraser Nelson decided to advocate leaving the EU because ‘the behaviour of the EU itself’ had undermined his support for ‘the overall goal of unity’. He wrote ‘with sadness’ that:

Just as you can love Britain while deploring its government, it’s never hard to distinguish between Europeans and the bureaucracy in Brussels.

Boris Johnson, the Leave campaign’s key leader and almost certainly the UK’s next Prime Minister, is quite clearly as comfortable commending the ideal of European co-operation (and expansion) as he is excoriating the practice of EU governance.

The problem with anti-government ideology is that it is undermined when the private economy fails to deliver the wealth promised by its adherents. This was the dilemma faced by David Cameron and George Osborne in advance of the 2015 election.  Although the EU referendum was to some extent forced on them by Conservative backbenchers, I argued back in April that Cameron and Osborne saw it as an opportunity to move away from austerity politics.

By sharing the stage with Labour in support of the EU, they could renew their governing mission as an essentially centrist project, and marginalise the extreme austerians within their own party by silencing for a generation the totemic din around the UK’s EU membership.

But Cameron and Osborne are the authors of their own downfall. Having promised that austerity would precede a new era of prosperity that never materialised, they encouraged Labour to lurch to the left.  Labour members and supporters unwittingly selected the Eurosceptic Jeremy Corbyn as leader, having seemingly discounted the possibility that the fledgling Leave campaign (represented at that point by only Nigel Farage) could muster a winning coalition.

Corbyn accordingly played, at best, a limited role in the remain campaign, and refused to share a platform with Cameron at any point (a less favourable interpretation is that he deliberately sabotaged it). It left Cameron and Osborne dependent on a demoralised and discredited Labour ‘mainstream’, who managed to do little more than parrot the Conservative leadership’s own uninspiring rhetoric on the downsides of trade tariffs. Austerity was designed to disorient the left, and it has succeeded a little too well.

Far more importantly, however, it also allowed the Europhobes within the Conservative Party to seize the initiative. The austerity narrative has validated their main gripe against the EU, that is, that it represents a meddlesome, continental-style approach to governing the market economy.  For all the fantastical talk of ‘taking back control’, the victory for a campaign which claimed to be standing up for the principle of democracy has empowered those opposed to the very idea that citizens may act collectively and democratically via the state to shape the economy.

Many working class voters trusted them because their trust in the ideals of government has been eroded by decades of being told that government cannot help them – an attitude which the remain campaign did not challenge. People were not voting against immigration, so much as they were voting against the idea that government can do anything about it.  In the process, of course, they have helped to dismantle one of the primary means by which the UK government is able (in theory) to effectively manage migration flows.

Brexit is an amplified, hubristic version of austerity, insofar as it further weakens the role and idea of government, even as its advocates promise additional public spending in a wide range of areas. For many on the left, this is understandably the cause of much despair. But capitalism ultimately needs strong government. Brexit will backfire not simply because the UK depends on trade with the EU, but also because a Brexiteer government will neglect to seriously reform the flawed UK growth model.  If Labour can somehow find its voice, an opportunity to capitalise will come.