Britain after Brexit: Singapore, Switzerland or Japan?

What would Britain become if it left the EU after the Referendum on 23 June? To most campaigners for Leave this may seem an unfair question: they are not a government in waiting. To them EU membership is inherently bad, and we should sort out what the country is to become one democratic step at a time once we have decided to leave. But to many Remainers it is the lack of a coherent and convincing alternative vision for Britain that is one of the strongest reasons for staying in the EU. So it helps to think it through. One way of doing that is to look at the example of other countries.

One of the early alternative visions put forward by Leave advocates was Singapore. This is especially popular amongst businessmen. Singapore broke free from the Malaysian Federation in 1965 (it was expelled) and has prospered as an independent state. It now counts itself as part of the developed world, unlike the continuing Malaysia, which has advanced not nearly so quickly. Singapore made itself an easy country to do business in, and developed as a trading entrepot through, for example, very efficient port facilities. Meanwhile Malaysia became bogged down with the politics and corruption of a larger state, notably engaging in the politics of ethnicity.

Likewise Leavers say that Britain is bogged down with the politics and inefficient regulation of an entity that is too big and complicated to be efficient. Why can’t we be something nimbler and more entrepreneurial, like Singapore? There are many problems with this idea, of course, which is no doubt we don’t hear so much of it now. First is that in size and complexity Britain looks more like Malaysia itself, rather than Singapore, while the EU looks nothing like the Malaysian Federation, with its autocratic leadership. The second is that Singapore is run very autocratically itself: a firmly-led one-party leadership forces through its pro-business agenda in a way that Britain’s government can only dream about. What stops Britain from being like Singapore is less the restrictions of the EU, and more its own raucous and vibrant democracy. A common complaint of Leave campaigners is that the EU is not democratic; following the example of Singapore suggests that it is in fact too democratic.

Enter a second possible exemplar: Switzerland. Switzerland is prosperous and European; it is also probably the most democratic country in the world. Referendums are a very regular occurrence; Swiss people are constantly consulted. And they rejected joining the EU (and the EEA, a diluted version that includes Norway) exactly because it threatened its democratic standards. But the Swiss example throws up a couple of interesting problems. First, the country has found that the only way to make a proper democracy work is through a level of local devolution that is alien to Britain’s freewheeling ways. The central government is weak; most of the action occurs at cantonal level. This level of local government is actually quite intrusive; woe betide anybody that runs their washing machine late at night. A number of years ago many London firms threatened to migrate to Geneva in reaction to intrusive financial regulation; they did not follow through as their staff found the city a difficult place in which to live.

Well that is more interesting than a decisive argument over Britain’s choices. It may show that many Brexit campaigners have mixed feelings about democracy, but Britain can still choose to runs its affairs differently. The second problem is more difficult: in order to prosper, Switzerland has found it necessary to participate in EU structures to secure its part in the single European market. It must comply with many EU regulations, allow the free movement of EU citizens and even pay into the EU budget. There is a tension between these things and Switzerland’s democracy (especially over allowing EU nationals in to work), but Switzerland has been forced to compromise. The Leave case to the voters is based heavily on stopping the free movement of people and on stopping EU budget contributions; it follows that the country could not follow the Swiss compromise, and would sacrifice much of its prosperity as a result.  Indeed the Swiss compromise makes little sense – why not accept the EU structures and participate in their management in a way the Swiss are unable to? it is not as if we have such democratic traditions to protect. Indeed we might find some of the European structures useful to protect our citizens from our own government, elected with very unconvincing democratic mandates.

I think a third exemplar fits much more closely with where Britain would head if it left the EU: Japan. Japan is an island nation positioned just off a continent with which it has difficult political relationships. It values social cohesion beyond economic prosperity, which means that it maintains strict controls against immigration, even though its aging population is creating a crying need for younger workers. It would rather seek solutions in robotics. It is democratic, though not in the free-wheeling way that Britain has become used to.  But a post-Brexit Conservative Party could establish the dominance that Japan’s Liberal Democratic Party has achieved. The result would not be the business-friendly wonder of Singapore, but an even denser thicket of regulations and bureaucratic meddling than Britain has now, which helps to preserve social cohesion and stability, and protect the interests of established major businesses. In principle I think most of Britain’s voters would settle for this, even as they might moan (the Japanese do that too).

The problem for Britain is that Japan’s economy is based on a strong industrial base. This is a historical oddity that would be very hard for Britain to replicate starting from where it does now (though would perhaps have been feasible starting from where it was in the 1950s). The businesses at the core of Japan’s success are mature ones, like Toyota, which has become the world’s leading motor manufacturer, alongside Germany’s Volkswagen. These businesses are not growing – indeed Japan’s economy has been in the doldrums since the 1990s, but they nevertheless provide Japan with financial security. Japan’s government is not dependent on foreign investors as Britain’s is. To replicate Japan’s success would require a rebalancing of Britain’s economy, led by a substantial devaluation of the pound, and several years of pain as living standards were squeezed.

Are Britons really up for this? The country has already advanced far further down the road of multiculturalism than Japan could conceive of – a legacy of its Imperial history rather than of EU membership. Britons have got used to their holidays in the sun, and the country’s relationship with its continental neighbours has always been more integrated than that of Japan’s with China and (to a lesser degree) Korea.

But if Britain votes for Leave – which is having the better of the referendum campaign so far – they may find themselves following the Japan road, with much less benign results than Japan has been able to achieve. That is a good reason to vote Remain.

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Cuba: a lesson in the successes and failures of socialism

Australia CubaA week ago I returned from a two week holiday in Cuba. As always, there is a limit to what you can learn from a holiday, which tends to focus on the positive, and where deeper analysis is not the point. But there is nothing like seeing a place to get a clearer picture of it. So, what did I learn?

Cuba is a socialist country, following a Soviet economic model shortly after its revolution in 1959. The state dominates all activity; private businesses are allowed, but only in highly restricted contexts, such as tourist services. The state places a huge emphasis on universal services: health care, education, and a system of basic rations intended to ensure that everybody has the bare necessities. The government claims that homelessness and unemployment are rare – though overcrowding and underemployment is another matter. There is no commercial advertising; instead the are political slogans everyway, often featuring the revolutionary icon Ché Guevara, and also Fidel Castro and the late Venezuelan president Hugo Chavez. These slogans generally claim that socialism is eternally victorious. It is not just the paintwork that is looking tired.

For jaded westerners, it is easy to see the positive aspects of this. Social welfare looks a lot better than for most poor countries. The universal services are certainly popular, and confer legitimacy for the regime. When comparing the country to its Caribbean or Central American neighbours, it is easy to see the bright side. The worst effects of poverty are ameliorated, including with very low levels of crime (compare that to Jamaica or Guatemala), though policing does not seem heavy handed (underemployment does not mean hordes of armed men everywhere, like in Egypt, for example). Health services are reputed to be better than many richer countries.

But a second reaction leaves you confronting the fact that the country remains very poor. The sight of people occupying crumbling buildings in Havana is quite shocking. Most rural dwellings have hardly moved on from shanty-towns. And the flip side to that is that productivity is woeful. We saw ploughs still being pulled by oxen, and horses were a common means of transport in rural areas. Every toilet has its attendant to hand out meagre supplies of toilet paper (and expecting a tip); workmen always came in groups; guards, often scarcely awake, watched over things that hardly needed guarding.

And the productivity is much worse than the use of too many people to do simple jobs. Whole businesses have collapsed, most visibly in agriculture. Perfectly viable land is untilled; factories are derelict. We visited a sugar plantation (called Australia) that has ceased to function as anything other than a tourist spot, offering short rides on steam trains. (That’s where the picture is from, of people sitting outside a derelict factory building – quite a good metaphor for the Cuban economy, I thought). Those trains were the only functioning ones we saw – yet there were plenty of railways.

Agriculture, infrastructure and industry are not the only places where work is not being done. Many apartment blocks in Havana look close to collapse – though many were clearly once magnificent. And new homes are not being built. A country that has a vaunted system of education, that can turn out good quality medical staff in quantity, can surely do much, much better than this?

The official blame is heaped on America, and its extensive system of sanctions that make it very hard for any western business to trade with it. That excuse is not without merit. Doubtless many critical bits of equipment or services became unobtainable directly, and indirectly through lack of foreign currency from exports. For a couple of decades the Soviet Union was able to partially make up for this – but its products were sub-standard, except for weaponry. When the Soviet Union collapsed, Cuba nearly followed it. It says much for the strength of the Cuban regime that it has survived.

Survival in the 21st Century, in the face of US sanctions (which remain as the Congress must approve their lifting) has become much easier, however. China has developed an economy which is not beholden to the US, and Cuba has taken advantage. Our perfectly functional and modern tourist buses were Chinese made. China has also enabled many other parts of the world economy become less beholden to the US – and the influence of other countries (notably Spain) is visible.  There is a viable non US eco-system.

But Cuba clearly wrestles with a much deeper problem: the complete failure of a non-capitalist system to be able to do more than a very few things at a time well. It is to Cuba’s leaders’ credit that, unlike the Soviet Union, they chose universal health care over weaponry as the state’s top priority, but that only gets you so far.

The Cuban state must embrace capitalism if it is to improve its citizens’ lot. There are already role models out there: China and Vietnam, which show that you don’t have to scrap the socialist planned economy at the same time, contrary to western conventional wisdom of the 1990s. (Experts used to say that an economy couldn’t be half capitalist like a woman could not be half pregnant; Russia followed that advice with catastrophic consequences; China ignored it). And Cuba has started to do it, allowing the tourist industry, in particular, to grow. Private bed and breakfasts, restaurants and tourist shops abound, and show that Cubans have plenty of commercial flair. Less than vibrant, but successful enough, the Cuban government has set up joint ventures with commercial companies to build and run large hotels (though it must be added that individual members of hotel staff were generally very helpful, even if the system as whole never quite worked as it was supposed to).

But these developments need to go much, much further. They must embrace large enterprises, in the building industry, and export industries, including agriculture. Of course, Cuba needs to be careful here. Big multinationals can hollow countries out with soulless plantations that add very little human value while syphoning away most of the cash. But the country still needs commercial efficiency on a large scale. Which means less government interference. The government seems divided on how to go forward.

Would an embrace of capitalism lead to a political opening? China and Vietnam seem to show that this not necessarily the case. My guess is that the success of universal services (surely at least as good as China’s?)  will leave the communist regime with enough political legitimacy to survive, so long as these do not fall into decline.  That will be a challenge, of course, as rates of pay in public services will have to rise as the private sector competes for jobs. Medical professionals are paid pathetically little. Cuba’s populace, like China’s, may have grown out of the communists’ political rhetoric, but neither would they see a compelling need to rock the boat if the economy was successful.

It would, of course, be much better if Cuba could embrace political reform too. While they have much to learn from China, no doubt, they should also cast a glance to Costa Rica, much closer in size and geography. That country has shown the virtue of keeping the Yankees at arms’ length, while adopting many of their ways.

And as a holiday destination? Thoroughly recommended. It is a beautiful country, much of it unspoilt; its people know how to make you welcome; notwithstanding the dead hand of government, it is a cheerful and vibrant place. But think about the time of year. In May it was already getting a bit hot and sticky. February is probably best, but that is also peak tourist time.

 

 

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Brexit is winning the referendum campaign: what should Remain do?

I have been following British politics remotely for the last two weeks from Cuba, where I was on holiday, and where internet access is limited, even in international hotels. The EU referendum campaign seemed to be going well for Remain. A rash of polls after a bit of a famine showed them winning by about a 10% margin. But as I arrived home yesterday I was in for a bit of a shock.

First (hat-tip to politicalbetting.com – an excellent source of news on polling) any swing to remain shown by those polls was illusory. It came from the fact that most of the new polls were phone polls while those before them (showing a neck-and-neck result) were online polls; the online polls hadn’t budged. One of the curiosities of the campaign from the start is that phone polls have shown a distinct bias to remain (or online polls to Brexit, if you prefer). Then came yesterday’s shocker from ICM/The Guardian, which showed a 10% lead for remain being morphed into one for Brexit for 4%. And that was a phone poll.

Interestingly the evidence from ICM’s online polls (and a new online poll today) suggests that this movement is more to do with the phone bias disappearing than with a wider swing in sentiment. But since optimists like me had assumed that phone polls were more reliable, that is no comfort whatsoever. My best guess is that Brexit now have a lead. That is more than worrying.

Why? Well it’s nothing to do with my social circles, including those on social media, who continue to convince themselves that Remain is the only intellectually viable option, and pour scorn on the antics of the Brexit campaign. Unfortunately this is not the decisive battleground, and all the that sneering is probably not helping to convince the small numbers of Leave sympathisers and don’t knows that lurk in those circles. Brexit seems to have a decisive lead among the working classes, especially its ethnically white members, and in places outside London and its hinterland, and Scotland.

The Leave campaign seems to be well targeted here. Its early appeals to the intellect, around parliamentary sovereignty and an appeal to British history, have fallen flat – but the campaign has majored on two undeniable facts. First is that the taxpayer makes cash contributions to the EU; the £350 million a week repeated relentlessly by the campaign is a lie, but how much of a lie remains arguable – it is before an agreed discount (the “rebate”), and spending by the EU within Britain on farm subsidies and the like, which it is said could or should be spent on different things. This enables the campaign to suggest many alternative ways this money could be spent, with the NHS top of the bill, to appeal to working class voters. It makes no difference that most Brexit politicians are enthusiastic supporters of austerity cuts, or that they assure farmers that the spending by the EU would be replaced by similar spending by the UK government. The first rule of political argument is that you never have time to explain.

The second undeniable fact used by Leave is that membership of the EU includes freedom of movement, which allows people from other EU countries the right to live and work in Britain. That implies that leaving the EU would allow Britain to restrict immigration from other EU countries. Since immigration is popularly blamed for a wide variety of social ills, including stagnant wages and job insecurity, as well as high property prices and rents, and stretched public services, this is a powerful argument indeed. Cleverly today Leave campaigners proposed an “Australian style” points system to limit immigration. This moves the campaign from histrionic hand-waving to a seemingly sensible policy proposal from a government-in-waiting – just what Remain campaigners say that Leave couldn’t do. Even more cleverly, Leave campaigners are able to weave in fears about illegal immigration (some Albanians were caught trying to cross the Channel this week) and the refugee crisis in south Europe, even though these have nothing to do with Brexit, and might even be made worse by it. That libertarian Tories are signing up to an immigration policy based on bureaucratic central planning is one of the many paradoxes in the campaign.

So what should the Remain side do to neutralise this effective campaign? I can see two possible approaches. One is “no more Mr Nice Guy”, and the other is “keep calm and carry on” – in other words by copying Leave’s tactics or playing their opposite. Playing both strategies at once is possible too, but risky.

How might Remain copy Leave’s tactics? They need to start with some undeniable facts. What might these be? The most powerful is that all Britain’s trading relationships will have to be renegotiated by politicians and civil servants that have largely forgotten how to do it, and who would be overwhelmed by the task. This is bound to disrupt trade and investment for the short term, and it would surely create permanent damage too. Remain have tried to use this fact by way of warnings from authoritative figures and financial estimates of the impact on working families from economists. This has to be taken down market with visual images of redundancy notices and pay cuts – as well has trying to create more direct images of the scale of disruption involved (the number of treaties that would have to be negotiated, how long it would take, by how many negotiators, etc.). Remain have been accused of running a negative scare campaign – this strategy would mean living up to that description.

But would that be playing into Leave’s hands? The alternative is to keep pumping out the vaguely positive and reassuring images, to try and show that all sensible people support Remain, and let the sheer wildness of the Leave campaign sow the seeds of doubt, and allow them to play on the minds of Brexit inclined voters, so they then fail to turn out, or even change their minds.

This blog does not presume to advise on this choice. I am not in close to or in sympathy with the decisive group of voters; my advice on Lib Dem electoral strategy, notably in the European elections of 2014, was well received but wide of the mark.  These are scary times for those of us who feel that a British vote for Brexit would be a catastrophic result for the country, and a betrayal for what it has stood for since so many of our ancestors died on European fields 100 years ago.

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