The Brexit Referendum. Its context and consequences.

Madoc Batcup says Wales must be given more powers & resources to deal with the challenges ahead.


The decision by the British people to vote to leave the European Union in the referendum of 23rd June 2016 has caused shock in the U.K., Europe and around the world, throwing into turmoil and adding huge uncertainty to political structures, the financial markets and the business community.

However the result must be seen in a wider, indeed a global, context.  The situation raises many questions for the UK, but also for Europe where the sustainability of the European project is being called into question.  The UK may have catalysed not only its own disintegration but that of the European Union in its current form.  The referendum acted as a lightning rod for a storm of discontent that is ongoing with even more far ranging consequences.  It reflects the impact of a number of factors, including:

  1. Globalisation.  While this trend has lifted many out of poverty on a global level it has reduced the competitive advantage of workforces in the developed world.  The upside has been the continued downward pressure on prices, the downside has been the continued downward pressure on wages.
  2. Austerity and inequality.  Huge sacrifices in terms of employment, salaries and living standards have been required across the world to deal with the problems caused by the crash of 2007/8, but these have not been shared equally.  As Joe Stiglitz the Nobel Prize winning economist has repeatedly pointed out the vast majority of wealth creation since that time has gone to the top 1% of society in the US.
  3. Financialisation (the rise of the financial sector, particularly in the UK, but more widely), the increasing power of international corporations, which are profoundly undemocratic, urbanisation trends and continuing centralism of the UK state (economically London is increasingly a different and inaccessible country) have all played their part.

Mark Twain said that history does not repeat itself, but it does rhyme.  The current age is unfortunately rhyming with the 1930s.  Boom followed by bust, and the have nots feeling abandoned by the politicians.  Democracy shading into demagoguery.  Fear of ‘the other’ is heightened.

These trends have affected many countries, and not just those in the European Union.  The phenomenon of Trump, as well as the Tea Party movement in the US is indicative of a wider malaise.


The Immediate strategies for Westminster

It is precisely at times like this that Parliamentary (as opposed to governmental) authority should come to the fore.  Whether triggering Article 50 is a matter for the Prime Minister’s use of the royal prerogative or an Act of Parliament in these uncharted constitutional waters Parliament should be clear as to the basis on which the UK government should negotiate, or it will be faced with Hobson’s choice after the negotiation.

MPs who were in favour of remaining should make clear that the House of Commons will not pass any legislation to implement a negotiation result that does not allow access to the Single Market, whether this means a Norway style arrangement or something even closer.  This is consistent with the referendum result, since the Leave campaign did not have a negotiation manifesto, and indeed still do not seem to have one.

It is not possible to have access to the Single Market while having control of immigration.  This deal is not now, has never been and will never be on the table; freedom of movement of people, like that of goods, services and of capital is fundamental to the EU construct.  The EU does have a migration crisis, but it is in respect of refugees from outside the EU, not movement within.  It is ironic that Theresa May, the new PM is not only a ‘Remainer’ albeit a very lukewarm one with apparently no strong wish to campaign on the most important issue to face the UK in generations, but the very person who was incapable of controlling the immigration of non-EU citizens into the UK during her six years of office as Home Secretary.

The UK is currently running a balance of payments deficit of 7% of GDP, (as well as a budget deficit of 3.8%).  It has not run a balance of payments surplus since 1982.  Whatever the UK government negotiates, large international companies will decide many of the consequences.


The Welsh context

The Welsh result, with some nuances, was virtually indistinguishable from that of England and in stark contrast to the result in Scotland and to a lesser extent to that of Northern Ireland.

Given the importance of international companies, such as Airbus, Ford and Toyota etc. to Wales, the Welsh economy is likely to be very hard hit as it becomes an unattractive place to access the Single Market, without a significant devaluation of sterling which will bring its own problems.

The Brexit vote was an anti-Establishment vote.  In Wales Labour is the Establishment, and it saw its share of the vote slide in the last Assembly election.  The party is in turmoil but it appears that many Labour Party activists consider the MPs who want to get rid of Corbyn are themselves the problem, not the solution. The constituencies they represent, and not just in a geographical sense, feel betrayed by a system which is overwhelmingly London centric, and where the differences of wealth between the south-east of England and the rest of the UK continues to grow. The people who voted for Leave believe, quite rightly, that the system is not working for them. Perhaps the surprise is that so many parts of the south-east of England voted to leave as well.

It cannot be a position of business as usual. The distribution of wealth and opportunity in the UK is clearly unacceptable.  While the power of forces pulling in the other direction is undeniable it is precisely the role of government to ameliorate them.  It is not enough to try to protect the status quo ante – if the referendum vote showed anything it was that this was inadequate.  There must be a renewed call for a massive investment by government in infrastructure to improve the viability of the communities left behind, rather than the viability of London.

Notwithstanding the Brexit vote it seems unlikely that that Westminster’s focus will change. Wales must be given far more powers and resources to improve its opportunities and to deal with the massive challenges ahead. Merely compensating people for their poverty is not and never has been an adequate response to these issues.

Wales needs to understand much better how to provide opportunity itself and to generate structures that enable it to price itself into the world market, as well as putting in programmes to assist pathways into work, and enhancing the value added of the jobs created.

The role of the media should not go unremarked.  The BBC has failed to report Wales adequately to itself or the rest of the UK, and it is also clear, although less remarked, that it failed to report the EU to Wales or the UK, with mention of the work of the EU being almost non-existent, and not providing any counterbalance to the hostility of the written media.

In summary the current situation provides a unique opportunity to give vent to the frustration of many communities left behind by a combination of toxic factors, which the Westminster system has exacerbated rather than moderated.  There must be a willingness to contemplate radical solutions to the current economic malaise and the understanding that Westminster rather than the EU is, and will continue to be, responsible for decades of neglect that have adversely affected the life chances of the people of Wales.  Indeed it is time for the people of Wales to ‘take back control’, but in these circumstances economic independence must precede political independence to be credible.

The referendum vote was a shout of despair and a call for help.  With a vacuum at the heart of the Westminster Establishment, the English political structures in disarray and the constitution in flux Wales must seize this unique opportunity to provide itself with the tools and policies that are required to re-invigorate its economy for the challenges that lie ahead.

Madoc Batcup is an independent business consultant based in London

One thought on “The Brexit Referendum. Its context and consequences.

  1. Madoc Batcup is, mostly, quite right. We cannot rely on Westminster’s good intentions. We’ve heard them before. And there won’t be such a change in their economic policies that wealth will trickledown (!) to Wales, especially Mid and North Wales, any faster or more effectively.

    Wales will remain peripheral to the London imperial project unless we make ourselves the centre. Our own country, our own identity and our own culture.

    Where I disagree with Madoc is where he says “economic independence must precede political independence”. It is a modern and artificial construct to separate the economy from the political.

    Only where there is a determination to integrate both in the service of the people of Wales would there be sufficient momentum to achieve change.

    We need to return to the idea of ‘economy’ – doing more with less, rather than the objectives of economics – unsustainable growth based on monetising non-renewable resources, people and ideas.

    Nor is it a matter of ‘work’. Mechanisation, automation, computerisation, robotisation have and will continue to undermine the earning power of people, and deskilling their undoubted abilities to make a better widget, poorer quality food, polluted air and all the other elements of the modern malaise.

    We need to adopt creative approaches to spreading the available work around, with the aim of higher productivity and job satisfaction. Let’s start with 35h pay for 30h work. But more radical changes will be required if we are to have an economy which works for us, rather than us for it. A Universal Basic Income is overdue.

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