Tactics Without Strategy: Brexit And The Politics Of Conceit

With two million Conservative voters seemingly ‘undecided’ last week and Labour voters preponderantly pro-Remain but susceptible to no-shows at the ballot booth, it was tempting to presume before the vote that an event of this magnitude might be decided by something so quintessentially British as the weather. Come Friday morning, it was abundantly clear that was not the case. The gap between Leave and Remain was just under 1.3 million votes, far greater than can be explained by a June downpour. The outcome is humbling.

In due course the referendum defeat will become the textbook reference for political hubris. Cameron’s referendum campaign showed a fundamental underestimation of public mistrust with the political establishment when it committed taxpayers’ money to the production of Remain leaflets. Similarly an appeal to the eminence of its leading voices on the risks of Brexit – prescient though they were – might work when it comes to winning over fearful middle class swing voters in marginal seats, but alienated a large and sceptical cohort who had not done particularly well since the 1990s. This played to Leave’s strengths who were only ever going to run a populist campaign with immigration as the issue ‘the establishment wouldn’t touch’. The more establishment figures Remain wheeled on, the more remote they seemed.  

The referendum loss symbolises Conservative leaders obsession with tactics at the expense of strategy. They built a machine to be elected not govern, perfecting the art of winning small political skirmishes which embrangled them in increasingly intractable commitments. Eventually one intractable position was not going to hold.

So where does the referendum result leave things? Economically, we are in a difficult place. The EU will push for an early exit to reduce uncertainty in other EU countries. The longer negotiations are drawn out, the more turmoil will be inflicted on our major trading partners within the EU - there is a good chance they may move into recession, as seems unavoidable for the UK. It is sadly true that they also must make an example of us or risk giving hope to Leave movements elsewhere. Investment, already weak, will retreat until some certainty returns. This is happening in real time, with huge swathes of construction now put on hold. Financial markets are not as robust as we are led to believe and the £250bn injection promised by the Bank of England - presumably a bid to stave off a prospective wholesale run as bank stocks fell 30% – would seem to support that. We have yet to see the effects of a ratings downgrade and sterling devaluation on the economy. It is doubtful that the devaluation will benefit the export sector radically: in four of the last six major periods of devaluation there has been no impact at all. These are not the conditions under which the politics of optimism thrive.

This takes us to the Leave campaign. The campaign was built on an anti-establishment/anti-intellectual ticket led by an old Etonian and another Oxford graduate. It traded on the conceit that many of the UK’s problems could be solved by ‘taking back control’ – an organising metaphor abstract enough to galvanise a body of voters with quite different perceptions about what this meant. The usual accusations about Leave being ‘old, uneducated people in the North’ have already surfaced but the reality is much more complicated: 43% of ABs voted Leave, for example – that’s a lot of skilled workers and professionals. Similarly, the geography of the Leave vote is split between cosmopolitan centres like London, Bristol, Manchester and Liverpool on the one hand and smaller towns and rural areas on the other. The most important indicator of a Leave voter is value-based according to Ashcroft’s polling data: in other words, we are witnessing the reawakening of a particularly cynical, conservative English authoritarian personality which cuts across class and geography. ‘Taking back control’ in this context signalled a variety of things: release from the EU’s institutional sclerosis and immured power bases; rejection of the neo-liberal grip on policy formation; devolution and an improvement in accountability and sovereignty. But for many it primarily meant control of immigration. And the Leave campaign was happy to let people believe that this was precisely what we were voting for.

The problem now is that this puts Johnson and Gove in precisely the predicament of Cameron and Osborne.  The latter were outmanoeuvred tactically, but it is Johnson and Gove who have the larger strategic quandary. The flipside of the Leave campaign’s amorphousness is that all of its voting tribes will expect their vision of Brexit to be delivered: that is the risk with summonsing ‘end-of-truth-and-reason’ politics. Putting aside the inconceivability of honouring the £350m per week to the NHS pledge, they have a much larger problem regarding immigration. If they opt out of the pledge to stop free movement, as pro-Leave campaigner Daniel Hannan has already indicated, those who voted Leave believing it was a vote to control immigration will feel betrayed.

This is ultimately why I am pessimistic. If you lead a populist, anti-immigrant campaign on an anti-establishment platform, and then support an EFTA model that retains free movement, you will discredit yourself and the democratic process. Add to that a rapidly deteriorating economic climate and the resurgent nationalism you were complicit in stoking, and voters will begin to embrace the extreme right. It will take considerable political skill for Johnson and Gove to manage this next phase should they replace Cameron and Osborne. I am not sure it is within their capabilities. Both have a facility with the blunt instrument of populism, but they do not possess the political guile and sophistication to deal with the subtle intricacies of a perceived volte face in such a febrile climate. Farage, however, does have the necessary nous and aggression to point out their deceit.

Can the Left stop this? They are in a difficult position, not least because we are seeing the working out of the legacy of New Labour - its mishandling of the financial crisis and intransigence towards its heartlands. This instilled a sense of injustice, of powerlessness, of being cut adrift. Atavism fills the space left by the dismantled social and economic institutions that build solidarity and community. The Labour Party were correct to move to the left to reconnect with those communities as voters began to defect to UKIP, but they have the wrong leader to deal with the fight to come. The Labour Party needs a brawler, not a history teacher.

Whoever that might be, they will need to address some of the profoundly reactionary sentiments of their ex ‘core vote’. Anti-immigration is now a deeply ingrained and increasingly animating ideology that will be difficult to reverse. A politics of trust, tolerance and understanding to support vibrant communities of difference is needed. This requires a redistributive politics to fund the rebuilding of the economic and social institutions that embed harmony: better jobs, better public services, better social housing. That may grate with the business elites of London and other cosmopolitan centres, but social dislocation is not good for trade and growth either. As Duncan Weldon has pointed out: capitalism needs social democracy to function. The state now has a duty to stabilise capitalism by acting against the interests of its most vocal proponents and greatest beneficiaries. This is the challenge for Labour.

Stanley

On Central Banks

One of the most remarkable (but so far least remarked upon) features of the ongoing financial crisis is the role which has been played by central banks. With governments either unwilling or unable to address the problems of the financial system through regulation and the problems of the wider economy through fiscal measures, responsibility for both mitigating the crisis and engineering the recovery has been quietly seized by central banks. 

The ECB has been credited with (if only temporarily) pulling the European banking system from the edge of collapse through the injection of over a billion of Euros of liquidity via the Long Term Refinancing Operation (LTRO). The Bank of England and U.S. Federal reserve have similarly been cast as heroes for their quantitative easing (QE) programmes – the Bank of England’s, which began in March 2009, has involved a commitment to £325 billion worth of asset purchases in an effort to ease credit creation in the banking system. The Fed’s successive QE programmes took the value of its holding s of Treasury Notes up from $800 billion pre-crisis to over $2 trillion in less than two years. Central bank balance sheets have grown explosively.

Via Financial Times

These actions are remarkable not simply because of the sums of money involved, but because of the divergence it marks from the script which central banks are supposed to follow in modern capitalism.

The script, written during the 1980s and implemented in the 1990s, in heavily truncated form goes roughly as follows: central banks operate primarily to safeguard monetary stability, targeting price inflation via control over short term interest rates. The economic importance of monetary stability is such that the central banks should be granted independence from political interference, and allowed to function as politically neutral technocracies acting in the general interest.

Central banks time honoured role in disaster control as a lender of last resort to commercial banks and a guardian of overall financial stability was considered to be obsolete given the advances in risk-reducing financial innovation. New institutions such as the Financial Services Authority in the UK were formed to unburden central banks of this regulatory duty. These new institutions addressed risk on the micro level of governance in individual firms, while both the Fed and the BoE drastically cut back on the attention devoted to systemic financial stability issues. Mervyn King’s disdain for the Financial Stability Committee made it a “running joke” within the BoE according to one insider quoted by the FT.

Events of the past four years have meant that the script has been thoroughly torn up: in an era of LTRO and QE central banks have a far wider range of duties and a wider range of tools with which to carry them out. By keeping a terminally ill banking system on life support and in the UK and EU providing backing for controversial austerity measures, they have become unaccountable political actors rather than neutral technocrats.

In a conjuncture which could be described as central bank led capitalism, ambiguity surrounds the issue of what central banks have become and what they should be, and a number of questions present themselves.

1)      Firstly, what function do central banks now perform? There is a need to address this simplest of questions on both a technical and a political-strategic level; the former because the operations of central banks, or at least the discourses used to articulate them, are esoteric, and the latter because in both the long and the short term, the end goals of recent central bank actions could be interpreted in a variety of ways.

2)       Secondly, how effective have the recent actions taken by central banks been? Or rather, if this is now a central bank led capitalism, how well are they able to lead? Popular representations of the central banks and central bankers of late have tended to present them as reluctant hero figures (e.g. Ben Bernanke as Time Magazine person of the year 2009) capable, to borrow David Cameron’s phrase, of wielding ‘the big bazooka’ and breaking the negative feedback loop of financial collapse once other measures have failed. Does this all powerful image fit reality?

3)      Thirdly, was ‘the script’ ever that useful a way of understanding central banks, or does the common historical account of their role and capabilities need a revision in light of recent events?

Over the coming weeks, this blog will make an attempt to address some of these questions by way of a dialogue.