Repost: Brexistential Crisis – what would Cassandra say?

Colin Hay - Director of SPERI

Put slightly differently, if the future is, indeed, genuinely political, it is still to be made – by us. And, if it is made in real time by political actors and thus not given by fate or some divine ordinance, then, strictly speaking, it does not yet exist to be predicted. It is politically contingent or open-ended and, as such, not amenable to the predictive powers of any science.

But the temptation of prediction nonetheless persists. It would seem irresistible. After all, what is the point of political analysis if it cannot offer us some warnings as to credible future scenarios which we might strive to avoid? Indeed, put like that, prediction retains a certain value. It is precisely because the future is yet to be made that there is a much to be gained in seeking to anticipate the most likely course events might take – if only to seek to minimise the chances that the prediction be realised. The following remarks should be set in this context. They constitute less a series of related predictions than a warning. Needless to say, as a series of predictions I only hope they prove wrong.

Prediction 1: Britain will vote to leave the European Union in 2016

I never thought I would write, type or say these words (and I have now done all three). But the brutal reality, at least for the sooth-saying political economist, is that Cameron’s Conservative administration may prove to be the last of a Britain in Europe. Until recently, that did not seem very likely. When the spectre of an in/out referendum on EU membership was first unveiled, there seemed little prospect of Brexit. Indeed, it was presumably precisely because there was so little prospect of Brexit that such a referendum could be contemplated as a means of lancing the simmering boil on the question of Europe in the Conservative Party.

But things have changed quite a bit since then. The strategy of seeking to achieve a renegotiation of Britain’s membership on the hoof – and of making the position of the government in the referendum campaign-to-come conditional upon that renegotiation – has proved to be the most disastrous piece of political brinkmanship, whether domestically or on a European stage. And, if the strategy was daft from the start, the execution has been if anything even more ineptly handled. To stake, in effect, Britain’s future in Europe on a series of exemptions (most notably on the free mobility of labour) that would require treaty reform and hence subsequent ratification across the EU (by referendum in a number of cases) was to commit to a strategy that was always going to be seen to fail – even if it succeeded. For the best that could be hoped for was that Cameron might present to his baying Eurosceptic fraternity the vague semblance of a deal that was never likely to impressed and which was itself conditional on the outcome of campaigns and votes in other countries that wouldn’t even start before the Brexit vote took place. ‘Why trust to European political contingency what could be delivered decisively and immediately through a vote for exit’ was always going to be the retort of the ‘Brexiteers’.

It is perhaps then not so surprising (though it still seems staggering, given what is at stake) that the latest opinion polls now show majority support for Brexit. It is clear that, for now at least, this is the direction of travel. This, of course, is before the campaign begins in earnest and there is much that can still change. But, and herein lies so much of my pessimism, rather like the Scottish independence referendum, it is difficult not to see the Brexit campaign, led, as it will be, by a collection of non-establishment figures and a decidedly non-Westminster party (UKIP) untainted by office, winning the campaign. Britain, all of a sudden, seems rather further from Continental European shores.

Prediction 2: Brexit will lead to break-up

But that, of course, would not be the end of it. Far from it. For, as we all know, Brexit would be, and is, simply unacceptable to Scotland. It is in fact quite difficult to imagine how Brexit would not lead to a second Scottish independence referendum; and scarcely less difficult to imagine how a second Scottish independence referendum under such conditions would not lead to a massive majority, in effect, for the break-up of Britain.

Of course, it might well be argued that the break-up of Britain is on the cards with or without Brexit. It is certainly true that the British polity is more fractured and fractious than perhaps ever before. 2015 was the first British general election in which a different party triumphed in each of its constituent nations and the political dynamic north of the border could scarcely be more different than that to the south. But in the absence of Brexit I would not predict break-up. The reason is simple – timing. For, in the absence of Brexit, there is no credible immediate factor likely to precipitate a second independence referendum. Although the issue would be unlikely to drift far from the epicentre of Scottish politics, the process would evolve more slowly. Crucially, a series of economic considerations (notably, the value of Scotland’s diminishing oil and gas reserves in a global market saturated by the oversupply of oil) would come to play a more significant role in determining Scotland’s fate – and hence that of Britain too. The point is that Brexit is a drastic accelerant. If the break-up of Britain is to occur in the next decade, it can, I think, only be as a consequence of Brexit. The thought, however, offers little consolation.

Prediction 3: The second crisis is on its way

A final prediction is certainly no less bleak. In a sense, it is independent of the others in that it takes neither Brexit nor break-up for it to come true – though either and certainly both together could well be precipitating factors or accelerants. The brutal reality, once again, is that the British economy is more fragile today than it was in 2007 on the eve of the crisis. A second crisis looks extremely likely, if not perhaps immanent. Despite the rhetoric of deficit reduction and rebalancing, the economy is more polarised and distorted than ever before; Britain is more reliant than it has ever been on consumption-driven growth; private debt is at near-record levels and even more responsible than in 2007 for the modest growth Britain now enjoys; Britain’s balance of trade position has deteriorated further since the crisis and there is essentially no productive investment in the economy; Britain’s infrastructure is dilapidated and decaying, with austerity in effect committing the government to an indefinite public investment strike; and, above all, the housing market (which has been primed, pumped and stoked more vigorously and frenetically since 2011 than ever before) is now massively over-valued and exhibits all the signs of a bubble on the verge of bursting. What makes this worse is that any such second crisis would take place in a context of massive public debt, interest rates already at an historically unprecedented low and with the world economy on the verge of a deflationary stagnation. It is not at all clear what could or would be done.

At times like these, it is good to know who one’s friends are and to hold them close. The narcissistic politics of Brexit are not what we need.