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.

Us, them and Europe

Britain’s membership of the European Union used to command almost universal assent from the country’s intellectuals. Just how far this has changed was made clear to me by a recent BBC Point of View talk by the philosopher Roger Scruton. He concluded a thoughtful series of talks on the nature of democracy with what amounted to a diatribe against the European Union as an “unaccountable empire”. Mr Scruton is a serious man, and his criticism of the EU needs to taken seriously by supporters of Britain’s membership like me. .

The essence of Mr Scruton’s talks is that democracy is based on a series of institutions that allow opposition and argument. He criticises Egypt’s Muslim Brotherhood for claiming that its attempted imposition of a theocratic regime was democratic, when they were undermining the very institutions on which any democracy has to be based. Mr Scruton goes on to say that these institutions can only be sustained where a country has a sense of “us”, of identity that tolerates opposition with a sense of it being all in the family. But “there is no first person plural of which the European institutions are the expression”. He goes on to suggest that this because the EU is based on an international treaty that supersedes elected legislatures, and becomes incapable of being modified. He uses the EU’s free movement of peoples as his prime example, as many Britons are unhappy with so many people from other EU countries taking up residence here. He goes on to say that “democracies need boundaries, and boundaries need the nation state”, painting a picture of nation states coming together from a bottom up sense of togetherness and neighbourliness, shaped by shared language and culture – which the EU lacks.

I have two immediate reactions to this. Firstly I am very uncomfortable with the suggestion that our feeing of “us” and “them” are simply matters of historical and geographical fact that we should adapt to – and the all Britons are “us”, while Brussels bureaucrats are “them”. To me this has a rather scary overtone of the 19th Century idealisation of the nation state, based on language and culture. This movement led to the unification of Germany and Italy, and myriad calls for self-determination which led to the breakup of the Austro-Hungarian and Ottoman Empires. It helped usher in, from 1870 to 1945, 75 of the most disastrous years of war, conflict, forced migration and genocide in our continent’s history. Unscrupulous politicians played up on peoples’ sense of “us” against “them”, and tried to impose this on the continent’s tangled patchwork of languages, cultures and nationalities.

And if we think that Britain is exempt from all these continental complexities, I wonder if a Northern Irish person of Catholic heritage really thinks that government from Westminster is by “us” rather than “them”. And Scotland’s most successful political movement is based on the idea that Westminster is not “us”, and poses a threat to the country’s coherence. The first person plural is not a matter of received fact, but has to be built patiently out of liberal principle. And in the modern, highly interconnected world we must be inclusive. It is not as if Britain’s history is that of being an isolated island nation: we have been a hub of European and world politics; the country used by a the pinnacle of an empire that covered a quarter of the world’s surface, and for two millennia it been part of a highly interconnected European history. Britain is a trading nation and an international hub; we have to accept the responsibilities that go along with that or we will not appreciate its benefits.

As it happens, since being a teenager I have felt a strong affinity with the European project, and have ever since felt that the European institutions have been a political expression of my first person plural. And neither is it true that the European treaties have been fixed and unchanging; they have been subject to democratic pressures from below.

My second reflection is that the European Union is something of a lightning conductor of political discontent – and that removing it will not actually remove the discontent. When I look at technically fully independent countries like Australia, I don’t see places at are any more at peace with themselves and the world around them than we are. True, Australia has recently benefited from a good run of economic prosperity – but at the cost of big mining corporations running riot across the countryside (for people worried about wind turbines, just look at the open-cast mines marching across the Hunter Valley in New South Wales),and  who have such political clout that they are able to overturn tax proposals that they don’t like. And the politics of immigration are just as toxic.  Australia (and I could also use those other Anglo-Saxon bastions of New Zealand or Canada) finds itself at the mercy of an interconnected world, and it is by no means clear that they are better off outside an international federation like the EU. Britain’s problems would not go away, or become any more tractable, if it left the EU.

But having got all that off my chest, I have to admit that Mr Scruton has put his finger on a real problem, which is that EU institutions have lost popularity, and often seem beyond political accountability. His use of the free movement of people as an example is very telling. This idea lies at the beating heart of the European Union, but it creates a lot of tension. And unlike many supposed EU generated problems, like over-regulation, it’s for real. In Lincolnshire, where Mr Scruton was born and where support for the anti-EU Ukip is high, there have been real impacts from the influx of east European migrants in search of work. And yet freedom of movement has had real economic and personal benefits. And it is not just in Britain that anti-EU feeling, in large part directed at free migration, has been building up. This is all hobbling areas like energy policy where EU level action is increasingly warranted.

In the long run the answer is for Europe to develop a stronger sense of “us”. This may already be better developed than Mr Scruton allows, but it remains very patchy. I believe that there is enough of a sense of common values and history to provide a basis for this. One of the best ways for a Briton to feel European is to travel to a country like U.S. or, for slightly different reasons, Australia. But it needs to be promoted by liberal politicians, and is the work of generations.

A referendum on EU membership, the policy of our Prime Minister David Cameron, remains an enticing idea. The consequences of a “no” vote would be disastrous, but the pro-EU forces need to be rallied, and the institution’s legitimacy must be reaffirmed. I am also coming round to the idea of another of Mr Cameron’s ideas: a British Bill of Rights. This would mainly give a British label to core European principles, but it could also set clear British constitutional limits to European power, much as Germany’s Basic Law does.

But the bigger truth is that we must move on from the 19th century idea of an all-powerful sovereign nation state. We have to develop the legitimacy of multinational bodies like the EU; we also need to devolve power to more localised levels, especially in bigger states like Britain. This requires fresh thinking on the institutions of democracy. Roger Scruton is right to remind us that democracy is about more than voting, and requires a sense of common identity, but in the end he is not helping us to adapt the world where humanity now finds itself.


Understanding the case for Britain leaving the EU

The British Eurosceptics are on the march again. Much of this is the usual stuff and nonsense, based on Ukip’s good electoral performance last week, though that has more to do with an anti-politics mood, and worries over immigration, than EU membership. But of the noise has a more substantial basis. Former Conservative Chancellor and Europhile Nigel Lawson joined the fray with an article in The Times, shamelessly promoted by the BBC, advocating Britan’s departure from the EU. I see today that another former Tory cabinet minister, Michael Portillo, has joined in, though I’m not sure if he was ever much in favour of the EU in its current form – though this polyglot is anything but a Little Englander. An increasing proportion of Britain’s intellectual establishment is being persuaded by the case against Britain’s membership. I am interested to understand this phenomenon, rather than simply dismiss it. While any popular referendum will be won or lost on the basis of fear and ignorance (as we learnt from the AV referendum episode in 2011), I think it is important to engage in a more considered debate.

But I do need to declare an interest. I am a visceral supporter of the European Union project, and have been since I was a teenager. I was too young to vote in the 1975 referendum, which took place on the day of my Physics practical for A-level, but I was in no doubt where I stood a that point. I’m not sure where this feeling came from: it wasn’t my parents. I was a big admirer of Ted Heath, the former Conservative Prime Minister, which may have helped. Though while I fell out of love with the grumpy and inflexible Mr Heath, my Europhilia remained undimmed… though I shared it with replacement political heroes, Roy Jenkins and Shirley Williams. For all that, I hope I am able to put my emotions to one side to try and understand the arguments.

On doing the basic Internet research for this post, however, I found one thing rather striking. The absence of decent publicly accessible information on Britain’s relationship, and especially trade. The more serious analysis tends to have been done by Eurosceptic think tanks like Civitas. This Factcheck article from last year rather illustrates the point. This may be one of the reasons that Eurosceptics are making headway in the intellectual argument: the Europhiles aren’t really engaging, and where they do it is often weak stuff.

I think the intellectual case for leaving the EU is based on two key propositions: there is a huge dead weight of EU regulation which is dragging British businesses down, to say nothing of budget contributions; and the impact on trade of leaving the EU would be marginal, and the short term economic costs small. There are further arguments around sovereignty and immigration: but these are more emotional. Lord Lawson did not make much of them, so far as I could tell (I haven’t read his article, which is behind a paywall, though I did listen his BBC radio interview). I sense that behind the intellectual arguments there is a frustration with Britain’s slow economic progress, and a hope that leaving the EU would energise the country, perhaps rather like Japan has been energised by their recent change in economic policy.

Let’s look at each of the main propositions. First is the dead weight. I think this breaks down into the following areas: product regulation; financial services regulation; labour market policies; environmental standards; and agriculture and fisheries policy. Product regulation (on cars, for example) is probably the smallest worry. As we are increasingly global in our tastes, and need to export to pay for our imports, this is just a fact of life. International standards makes sense; I read an article in The Economist a little while back suggesting that the whole world was moving towards EU standards, making Brussels the regulatory capital of the world. There are clear advantages to the country being part of the creation process; but outside the EU the country could no doubt apply them more flexibly. I don’t think this is what is winding the Eurosceptics up.

Lord Lawson made a big deal about EU regulation of financial services harming the City of London and the country’s exports of financial services. As Britain loses weight in the EU, this is becoming more of an issue. There is a balance here: inside the EU it will be easier to export services to other EU countries; but outside it may be easier to do business with non EU countries. It is possible that the balance has shifted towards the latter. Behind this there seems to be a rearguard action by the City to undermine the idea that the British economy should be “rebalanced” away from its dependence on financial services. It’s no surprise that Lord Lawson is part of this rearguard.

Environmental policy is another ideological battle masquerading as an argument over the EU. There is a clear case for regulating such a cross-border activity as pollution and carbon emissions at an international level. But EU environmental policy has gone seriously off the rails recently. The Germans are building coal-fired power stations; biomass energy is being ramped up without regard to its wider environmental impact; political fudge has undermined the EU’s carbon trading scheme to the point of making it nearly useless. A weak economy makes higher environmental standards harder to fight for.

It is probably labour market and agriculture and fisheries policies that wind up the Eurosceptics more than anything else. Even Europhiles despair over agriculture and fisheries, though it is inching towards something a bit more sensible. The Working Time Directive is a major irritation to many employers in both private and public sectors. But British labour laws remain amongst the freest in the EU.

In summary, the EU surely does impose costs on the British economy, even if the sceptics exaggerate them. What of the benefits, and the costs of leaving? These centre mainly around trade. There are no tariffs in the EU, and there is a series of rights and enforcement structures that make non-tariff barriers difficult to apply. This reduces costs to British consumers and increases opportunities for British exporters. Membership of the EU is known to be important to some industries, especially the motor industry, and helpful to inward investment. One of the few proper analytical studies I found on the Internet suggested that gains from trade within the EU had been significant. Britain has become highly integrated with the rest of the EU, and for the most part, according to these academics, this has not come through simply switching from other world markets.

But leaving the EU does not simply mean this comes to an end. The benefits flow in two directions, and the remaining EU countries simply wouldn’t cut the UK off if it left. Britain imports substantially more goods from other EU countries than it exports to them (accounting for about half Britain’s trade deficit in goods). The statistics for trade with the EU in services, where the country has a world surplus, aren’t in the regular statistical release, and I haven’t found a breakdown. But the EU market on services is notoriously less free. Eurosceptics argue that if the continuing EU want to try putting barriers in the way of the UK’s exports, the UK has plenty of scope for retaliation. It should be perfectly feasible to negotiate a free trade deal. And, indeed, this would take the relationship to something like the organisation that Britain joined back in 1973, and subjected to a referendum in 1975.

Two arguments can be made against this line of reasoning. First is that the relationship between Britain and the rest of the EU is asymmetric: the trade matters to Britain more than it does to other EU countries. That will make negotiation harder. But a more fundamental issue is the rationale for EU regulation in the first place. It is largely to prevent unfair competition through laxer labour or environmental standards. And yet this “unfair” competition is exactly what Eurosceptics have in mind as a source of growth after Britain leaves: the benefits of membership without the costs. It is hard to see that other EU countries, more sceptical about unfettered free trade than most Britons, will not impose costs. Such is the experience of the deals that Norway and Switzerland have been left with. Why would the European nations be more generous to the UK outside the EU than in it?

So much of the cost of leaving the EU is in fact unknowable. Eurosceptics are happy to make the gamble. Behind this, I think, lies a classic libertarian view of the economy. The less government regulation and tax, the better for the economy as a whole. Leaving the EU would allow the regulatory burden to be lifted, creative forces to be unleashed, and the country to storm forward. They are quite excited by the prospect, after years of grind and stagnation. Those further to the left regard this as fantasy. A society that is lightly taxed and regulated is only good for a small elite and will fail to build the infrastructure required for long term prosperity. Would you rather live in America or Denmark? It is these conflicting visions of the way our country should be run that lie behind the argument over Britain’s EU membership.

The tricky politics of an EU referendum

Last night’s drama in the UK parliament over the call for an EU referendum is over.  Will it all blow over?  For now, maybe, but the issue will come back.  Wise politicians will be thinking ahead about what they should do when it does. For David Cameron, it looks like trouble.

The starting point is that there is mounting pressure for a referendum on the European Union in the UK.  Why should this be?  We operate a representative democracy, after all, and the issues are complex – not the sort of thing that referendums are supposed to be particularly good at sorting out.  But there is a substantial body of public opinion who believe the country’s membership of the Union is an outrage to our constitution.  This has always been so – but while in the 1970s these were overwhelmingly older people, scepticism is now more widespread.  The Tory Eurosceptics who entered Parliament last year are a younger breed, and to many a focus on Europe has reached obsessive proportions.

This scepticism has been fanned by the press.  Why?  Clearly newspaper proprietors don’t like the EU for their own reasons – but surely it goes deeper than this.  The EU is an easy target for our frustrations, in much the same way as ethnic or religious minorities used to be.  They don’t answer back.  Exploiting this is one way to sell newspapers.  Add to this the growing frustration with the Union right across Europe, and the steady fading of European idealism, and you have a ready explanation for rising scepticism.

It all looks very different, of course, once you are responsible for running the government.  Here the thought of operating outside the EU, or even taking a detached stand within it, looks plain silly.  And so you have a tension between the governing elite and a substantial body of public opinion.  A referendum campaign seems to be one of the best ways of bringing this to a head.  A campaign in the right circumstances has the support of many Europhiles too.  They are sick of their steady retreat in face of the Eurosceptic onslaught, and long to turn and fight, even at seemingly hopeless odds – like the British soldiers retreating to the Marne in 1914.

So far so good.  Now it gets complicated.  Europhiles want a straight in-out referendum.  This would force pragmatic sceptics, including large parts of the Tory hierarchy, into the “in” camp.  To them, this is the basic question of principle anyway.  Trying to have referendums on carefully negotiated treaty changes is a misuse of this method of democracy.  Extreme Eurosceptics would be happy enough to go along with this, convinced as they are that the country would be much better off out, and that the public would rally to their cause.

But pragmatic Eurosceptics don’t want this, for exactly the reason that the Europhiles want it.  What they aim for is a changed relationship between the UK and the EU – and that a pre-emptive referendum on an in-out question would weaken their negotiating position.  For them the main job of a referendum is to put a spanner in the works of the EU itself, by blocking any changes they dislike to the treaties.  Pretty much everybody accepts that a UK referendum would have rejected any of the previous treaties (Maastricht or Lisbon in particular – though the former might have been quite close, in my view).  The idea of a three way referendum, with a renegotiation option, in yesterday’s motion was an attempt to win over these pragmatic sceptics.  But it didn’t really stand up to close examination – one of the bigger reasons why the motion fell so heavily.

But it is possible to see a the outlines of a deal coming out of this.  First negotiate a new deal with the EU, then have an in/out referendum on its outcome.  Sounds simple enough, but the renegotiation idea is fraught.  Is it a new deal for Britain, or a more general rebalancing of Europe?  I think the government has in mind the latter, drawing in allies from across northern and eastern Europe.  The idea would be to use the Eurozone crisis as leverage.  If the Union’s constitution needs to be changed to make the Euro work, then this can be made conditional on other changes.

The trouble is that it is difficult to understand what the shape of this deal might look like.  To the the EU core members (Germany, France, Italy and so on) the EU constitution is carefully balanced, with a free trade area on the one hand, and regulation to prevent a disorderly race to the bottom on the other.  Besides a treaty change will have to go through referendums right across the Union – a nightmare as European politicians learn that a rejection of a treaty can earn them extra goodies.

And so the risk is that the government returns from the “renegotiation” without very much to show for it, and then be forced to hold a referendum on it.  The prospects for a Britain-only renegotiation are even bleaker, as our bargaining position is so weak.  This will place the pragmatic sceptics, like David Cameron and William Hague, in an impossible position.  Yesterday’s debate has reduced their room for manoeuvre, as the Economist’s Bagehot column points out.  They will have to produce something relatively soon.

One of Mr Cameron’s main achievements has been to de-toxify the issue of Europe for the Tories.  But the issue could yet return to destroy him, his government and his party.  It will be the greatest test of his leadership.


Why we should celebrate the 200th anniversary of Waterloo

This isn’t exactly a new story, but, hey, time works in mysterious ways on the blogosphere.  I have just caught up with this Daily Mail article a month old suggesting the this country will downplay the 200th anniversary of Waterloo on 18th June 2015.  I picked up on it from the monthly Civitas update – they provided one of the rent-a-quotes.  This article appears to be a classic piece of Mail journalism, trying create a shock story from thin air.  But it does raise the very interesting question of the status of this battle in British history.

Waterloo is very important in British history.  But why?  The obvious answer is that it was the battle that finally did for Napoleon.  This is true, but it is undermined by two further observations.  Napoleon’s strategic position was hopeless, and if he had won at Waterloo it is certain that he would have been crushed later on in the year, most likely by an Austrian-led army.  The second point was that it wasn’t a particularly British battle.  Wellington’s army was mostly Dutch, Belgian and various shades of German, and he was combining with Blucher’s Prussian army, whose intervention was decisive.

In fact from the point of view of showcasing Wellington’s undoubted military skills, this battle wasn’t the man’s finest hour.  He was caught napping by Napoleon, needed the Prussians to slow him down at the Battle of Ligny, and had to accept huge casualties to the British contingent at Waterloo and its prequel, Quatre Bras.  His gamble at Waterloo nearly didn’t pay off as the Prussians were much slower than he expected to arrive.  British generals were supposed to keep British casualties down.  In 1811 an equally desperate, but much smaller, battle in Spain, Albuera, led to a remarkable British/allied victory thanks to some absolutely herioc fighting by British units (and some Spanish ones).  But British casualties were so high that this is often regarded at a bit of a defeat – and that was certainly the reaction of the British commander, Marshal Beresford.  It would not have been so bloody if Wellington had been there, the soldiers muttered.

But, of course, if you pay such a high price in blood you have to build the battle up to be of huge importance to justify it to folks back at home; and that is what British politicians did, with the army and a string of British historians acting as willing accomplices.  On top of that, it was a particularly dramatic battle, that has held a fascination for more than just the British.  One of the best modern histories is written by an Italian and translated into several languages.

So is it all overdone?  There is in fact something very important about this battle, that symbolises something of importance today.  It is an example of Britain acting as a fully paid-up European power, paying blood to make the whole continent a safer place alongside European allies.  A precursor to the great struggles of the 20th century: acting against the wrong sort of European unity.  In this it contrasts with Nelson’s victory at Trafalgar, which was a victory of Britain against Europe, resulting in British domination of the sea that was to last for over a century.

Waterloo was a European victory in which Britain a very full part.  A good reason to celebrate in these Eurosceptic times.