Brexit remains inevitable, and the right’s hold on power is secure (for now)
But the British economy will have to transform itself.
[Photo by GETTY published on the Daily Express, Oct. 4, 2017).
By Joshua Tartakovsky, 6 August 2017
Theresa May erred twice in the Brexit-related unraveling.
First, she opposed Brexit, only to support it later after her opinion was defeated by the public in the booths.
Secondly, she did not have the nerve to actually carry out negotiations representing the slim majority and bearing responsibility for the results. Rather than leading, and lacking a vision on what Brexit actually means, she went to early elections in her search for confidence and legitimacy. The public punished her for her cowardice. The Conservatives lost 12 seats. May’s arrogant gamble resulted in her loss of majority in parliament and in her forming a coalition agreement with DUP, a Northern Irish party of 10 seats.
A genuine opportunist, but a clever survivor, Prime Minister May promised that she will deliver on Brexit.
While the Financial Times, the Economist, Tony Blair, Nick Clegg, and countless others, were all trying to convince themselves that Brexit can be reversed and that a hard Brexit is far from being inevitable, this is wishful thinking.
May has nothing to lose, and must deliver. Corbyn is breathing down her neck. She may be an opportunist, but once in power, she has shown she has the stamina and craftiness needed to survive.
The pound stands now at about 1.1 euro. Before the Brexit referendum it stood at 1.30 euro. As the Guardian puts it:
Holidaymakers buying €1,000 can now expect to pay around £879 after sterling dropped as markets reacted to the result of the snap general election.
May promised to deliver “stability and certainty” but the obscure future has been bad for new business investments.
Many Londoners I spoke to were uncannily confused and nervous about the future. The pound has lost its value significantly and salaries have not increased. Wages are expected to remain frozen for quite sometime, i.e. at least two years. There has been a rush to buy homes in London as people realize the future may be worse. At the same time many have realized the dream of buying a home is unattainable and have opted for rental instead. This would mean London will transform itself into a rent-economy, much as New York.
On the other side of the canal, Brits living in EU countries are rushing against the clock to obtain an EU passport even if they have lived in the given country for only two or three years and not five as mandated. Two English women I met who are living in Spain, told me in desperation how they are seeking a Spanish passport. Will the EU be wise enough to change its long-held inflexible habits and give out passports to new converts if only to strengthen its position in negotiations with the UK or will it close the door on future citizens due to ironclad regulations? It’s a fifty-fifty chance.
Following the tragic Grenfell Tower fire, Labour’s Jeremy Corbyn recommended the policy of occupying homes in Kensington, left vacant by the owners, and housing survivors there. If Corbyn will indeed get elected at some point in two years time for example (there will not be elections any time soon, so the fact that Corbyn is now leading in the polls does not have any real ramifications), such a policy, if enacted, will drive out foreign investment. On the other hand, if May continues with her business-as-usual approach, the cost of living is expecting to rise, and life will become increasingly burdensome for a growing number of citizens. At the same time, if May manages to revive the Herculean task of reviving the economy post-Brexit, she can win again. Both May and Corbyn need the vote of the British people, not EU citizens. Which is why May has understandably called for a hard-Brexit and the end of free movement and Corbyn has jumped into the same wagon belatedly, bemoaning the lower salaries inflicted on British workers due to the availability of cheaper workers from Eastern Europe. Internationalism is nice, but it does not get one elected when the economy is tough.
In the mean time, as negotiations unfold, we are likely to see a hard Brexit and the UK will probably be forced to pay the “divorce-settlement” as Chancellor Philip Hammond admitted. The reason for this is simple. The UK may strongly dislike paying a 100 billion euro, but if it does not wish to see all trade with the EU halted, and endless lines of lories stuck in Calais as the EU decided it does not recognize British standards as valid, it better reach a solution that the EU is happy with. Roughly 45% of UK exports go to the EU.
Can the UK economy resume growth after Brexit?
Assuming the UK will become more isolationist, and the flow of cheap labour will be minimized significantly, minimum salaries will need to be raised to quell popular anger, and taxes will be raised therefore driving out large businesses. The low value of the pound and UK’s safety as a financial haven mean UK could work out new deals with China and India, even surpassing EU regulations and threats.
However, the task ahead is immense, and the UK will have to reinvent itself on multiple grounds, forming a better and more competitive economic model, one that will provide better salaries. At the same time, faced with the fear of the prospects of communism, many British people may find Corbyn’s policies to be too radical. After all, socialism was rejected by the Poles, Lithuanians, Estonians, Russians, Vietnamese and the Chinese, why would the British want to embrace it? But can May provide higher salaries without running the risk of inflation? Quite unlikely. At the same time, her seat is secure, at least until the moment when following the actual break-up in two year’s time, the economy really gets bad for most people, and she concomitantly runs out of diversionary tactics. It would take a genuine paradigm shift following a major collapse for Corbyn’s policies to appear less radical for the majority.
May will have to work hard to provide a new model. At the same time, the British have always been good in reinventing themselves. This time they may come up with an isolationist model that is half-self-sustaining and half-globalism-dependent and that could be imitated by other nationalist governments. Will the British work with the Poles for example, or other discontented nations, on formulating new trade outside the EU? Interesting times lie ahead.
