Four years on

It is four years to the day since the British (or more specifically, the English and Welsh) electorate voted in favour of leaving the EU. I look back to the spring of 2016 with bemusement. An angry electorate, struggling to cope with the economic fallout of the 2008 crash, was told that Britain would enjoy a better future outside the EU. Many of them needed something to believe in, so why not wipe the slate clean and start again? As a marketing campaign, it was brilliant. As a true representation of the future facing the UK outside the EU it was a pack of lies. As with all lies, it starts to catch up you eventually. We are not quite at that point yet, but we are getting there.

Whilst Brexit has technically happened, in the sense that the UK is no longer a member of the EU, the UK has not finalised the nature of its long-term trading relationship with the EU. This despite the fact that former Trade Secretary Liam Fox told the BBC three years ago that reaching a Free Trade Agreement with the EU should be "one of the easiest in human history.” Fox is not alone in making grandiose claims that do not stand up to scrutiny and one of the least edifying experiences of the last four years has been hearing frontline politicians, including the man who is now prime minister, lying through their teeth about the benefits of leaving the EU. Many of those who suggest that leaving the EU will not be a problem for the UK are unfit for office for one of two reasons. Either they know that what they are saying is untrue, in which case their conduct makes them unfit for office, or they truly believe it in which case their competence is in question. As the Covid-19 crisis has made plain, if governments fail to prepare we should prepare ourselves for failure.

I have argued at length why the UK’s policy on immigration is misguided, and how prior to the referendum the data were wilfully misinterpreted to generate a false narrative. I have pointed out on numerous occasions how growth will be adversely affected, particularly since the government chose to interpret the result as a vote for leaving the single market, despite being assured that “absolutely nobody is talking about threatening our place in the single market.” I have also expressed concerns about how the suspension of democratic accountability to deliver Brexit sets a worrying precedent. At root, I have never understood the logic of those who want to give up the power to write EU regulations because it somehow makes the UK stronger. At least Boris Johnson can look back at the last four years with some satisfaction, for his dissembling and willingness to subvert constitutional norms has propelled him from backbench MP to the position of prime minister. He clearly backed the right horse.

Whilst the litany of errors and government overreach is now water under the bridge, there is a price to pay. It comes in the form of erosion of trust in government. Perhaps most voters take the view that governments routinely lie anyway and that Brexit was just another in a constant stream of untruths. However, the basis of a strong democratic system is an open accountable government, which is held to account by the media. Not only has the government not been open about Brexit but cheerleaders in the press have stirred the pot still further (remember this headline?) So low has the reputation of parts of the UK media fallen that it currently stands 35^th in the RSF index of press freedom, behind 19 EU countries and a miscellany of countries including South Africa. Ten years ago it could claim a place in the top 20.

Whilst my objections to Brexit have been set out on this blog in detail, I hope I have made it clear that my concerns relate primarily to the economic consequences and the lengths to which the government will go to deliver an ideologically driven policy that flies in the face of the economics. Simply put, I do not like being lied to by those whose salary I pay to represent me. I have never been a great fan of a second referendum and I can live with leaving the EU if many of the economic advantages of membership are maintained. Had the UK approached the process of leaving differently, by setting out a clear plan of what it wanted and not engaging with the EU in an antagonistic manner, the process of leaving could have been so much easier. As it is, the British government has officially ruled out any extension of the transition period beyond the end of the year, in line with its previous promises, which means that either it must form a trade deal with the EU by the autumn or leave without one, which implies relying on WTO rules.

Any agreement that is likely to be reached in the course of the next few months will be at best a “goods lite” deal. It will be far less comprehensive than membership of the single market and will not cover services. The government’s preoccupation with fishing over financial services does not sound like very credible economics. As for trading on WTO rules, it was a bad idea in 2016 and it is an even worse one today, now that Donald Trump has effectively neutered the WTO’s ability to arbitrate on trade disputes.

This brings me to my biggest current concern. Whilst it was misguided, not to mention undeliverable, a policy based on making trade deals with countries outside the EU could just about be sold as a bold step forward. But the election of Donald Trump has changed all that. The global institutional order has been badly damaged by his actions and the process of globalisation upon which Brexit was based is crumbling. The UK now finds itself caught between a nationalist US, whose policy towards China is unlikely to change whoever occupies the White House following the election, and China, which the UK no longer sees as a reliable business partner. As I warned in 2016, China will set the international trading rules to suit itself, and without the heft of the EU behind it the UK is about to set sail into the teeth of a global trade storm. All this, of course, is happening at a time when the economic impact of Covid-19 will make its presence felt.

The bottom line is that Brexit is no longer a policy fit for purpose (in my view it never was). It now represents the wrong policy at the wrong time. If the Conservative government feels compelled to deliver on the will of the people expressed four years ago, then so be it. But having consumed two prime ministers and requiring two general elections to get this far, the political costs of delivering Brexit are proving very high. In 2017, Boris Johnson wrote an article for his favourite daily newspaper arguing that “we will be able to get on and do free-trade deals, to campaign for free trade … We will be able to intensify old friendships around the world, not least with fast-growing Commonwealth economies, and to build a truly Global Britain.” He has to start delivering on his promises if Brexit is not to be seen as a self-indulgent policy which appeals to a small section of a dwindling part of the electorate - the Conservative party.

Labour pains (revisited)

I have been very critical of the UK Conservative government over the years – and with good reason – but just to show my even-handedness, I thought it worthwhile to reflect on the performance of the opposition Labour Party following the recent publication of its 2019 election review. According to the authors of the report, Labour suffered a heavy election defeat because Jeremy Corbyn was a deeply unpopular leader amongst the wider electorate and its policy on Brexit was confused. The authors also referenced deeper seated issues, as the party increasingly lost touch with its core support – a problem which was masked by the relative outperformance relative to expectations in 2017 – with the result that “Labour has a mountain to climb to get back into power in the next five years.” 

But cast your mind back five years, and three elections, ago and Labour had just lost a general election in which they were expected to run the Conservatives very close, running neck-and-neck in the opinion polls right up until election day. Although it was anticipated they would win the most seats, the Tories were expected to fall short of a majority and would be forced to form another coalition with the Lib Dems. In the event, they won a majority of 12 seats. Whilst the Tories then unleashed Brexit on an unsuspecting British public, Labour went into full introspective mode and decided that the key reasons for their defeat were: (i) the fact that they remained tarnished by the myth the previous Labour government was responsible for crashing the economy; (ii) an inability to deal with “issues of connection” like immigration and benefits and (iii) Ed Miliband was judged to be not as strong a leader as David Cameron. 

Quite how the election of Jeremy Corbyn as leader following Miliband’s resignation was meant to address any of those issues was lost on me – and indeed most voters. In the words of The Economist “Mr Corbyn has been the party’s most disastrous leader ever – not just useless … but positively malign.” That he was unelectable as prime minister was obvious from day one. In a client note I put out in September 2015 just after he was elected leader, I wrote “Simply put, Mr Corbyn is an old-fashioned socialist and is a throwback (at least in British terms) to a political group which was believed to have become extinct in the 1980s … Mr Corbyn is unelectable. None of the analysis performed in the wake of the May general election suggests that Labour failed to win a majority because it was not sufficiently socialist – indeed, quite the opposite.” I take no pleasure in being right. 

Worse still, Corbyn was one of the facilitators of the breakdown in current British politics.  To quote The Economist again, “his failure to throw his party’s weight behind the Remain campaign contributed significantly to Britain’s decision to leave the EU, which most of the membership opposed. His refusal to meet Theresa May half-way during the dying days of her administration killed off any chance of a soft Brexit. His extreme politics and sanctimonious style drove traditional Labour voters into Boris Johnson’s arms.”

It is hard to disagree with any of this. Indeed, a lot of the blame for the fact that Boris Johnson’s inept government can theoretically continue in office for another four years can be laid at Corbyn’s door. But bygones are bygones and the big question for Labour is whether the party can recover. For my money, it can. For one thing, the election of Keir Starmer as party leader has put a centrist politician in charge. I have noted previously that Labour performs badly when it tacks too far to the left and Starmer will drag them way from some of the positions supported by Corbyn which were guaranteed vote losers. For the record, I am a university contemporary of Starmer and remember him standing as a student politician on a moderate Labour platform at a time when the party was run by left-wing zealots.

Whilst I maintain no party political affiliation it is important for the health of democracy that a strong opposition is able to put pressure on the government to act in the interests of all the people and not just its supporters. The abject performance of Johnson and his government is a reminder what happens when the opposition enables a poorly organised government and fails to hold it to account. But as bad a prime minister as Johnson is proving to be, few people believe that Corbyn would have been any better. Aside from having to deal with the Covid-19 crisis, which would try any leader, Labour’s position on Brexit was extremely muddled and it is far from clear how they would have handled it. Politicians on all sides are to blame for the disjointed position in which the UK finds itself. Naturally the government has to carry the can. But Jeremy Corbyn’s failure to provide leadership when it was most needed should neither be forgiven nor forgotten.

Get a grip

I received a text yesterday from an old friend who was incensed at the conduct of Boris Johnson’s government over the provision of free school meals to the children of poor families during the Covid-19 crisis. For those not following the story, the Man United footballer Marcus Rashford issued a plea to the government to continue the practice during the summer but the government announced on Monday that it would not do so. Following a host of bad publicity on social media, the government yesterday reversed its stance. In the words of my buddy, “The PM, no. 10 and the whole government have been made to look useless by a 22 year old footballer.” He went on to make the point that the government’s inability to make decisions on key policy matters is increasingly harming the electorate be it health, the economy or Brexit.

He speaks for many. Indeed, the United Kingdom could not be a less appropriately named country at the present time. For one thing the fact that the monarch is a woman makes it a Queendom, but perhaps more importantly it is far from united. It is fighting what appears to be a culture war in which the respective factions see only the righteousness of their arguments whilst dismissing those of their opponents. What passes for public debate takes place in an echo chamber in which the volume is being cranked ever higher (viz. the demonstrations in the streets last weekend) and matters have come to a stage where people appear to identify more with what they oppose than what they support. As an economist who still believes in rational evidence-based policy, this is all very disheartening. 

The origins of (culture) war 

Like many wars, the origins of the present conflict lie deep in the past and people may differ as to the proximate causes. For my money, a key turning point occurred around 1979-80 with the election of neo-liberal governments in the US and UK which subsequently gave primacy to the markets over the state and heralded the breakup of the post-1945 consensus. It unleashed a conflict between traditionalists and progressives, conservatives and liberals, hawks and doves etc. The shared values which had characterised the reconstruction of the post-war global economic order began to fray, particularly following the collapse of the Soviet Union. 

This was particularly apparent on the right of the US political spectrum, the lessons of which were absorbed by many in the UK. Remember the efforts by US Leader of the House Newt Gingrich to shut down Congress in 1995-96 purely for political reasons? Or the attempts to impeach President Clinton in 1998-99 as the political right became desperate to deliver a political knockout? This was followed by the rise of the Tea Party movement which subverted the Republican Party and propelled Donald Trump into the White House.

On this side of the Atlantic, the culture war has been fought less aggressively but it has been bubbling away nonetheless with some of the tricks from the US playbook having been adopted in the UK. The rise of the Tea Party is mirrored in the emergence of UKIP and the Brexit Party whilst the politically motivated Congressional shutdowns found expression in Boris Johnson’s attempt to prorogue parliament. The leitmotif of the UK culture war was Euroscepticism. Many Conservatives who never quite got over the deposition of Margaret Thatcher in 1990 rallied behind this cause, culminating in the Brexit referendum of 2016 and lighting the touchpaper of division which had been simmering for some time. For many on the right, Brexit represents the Trumpian equivalent of draining the swamp: It was the culture war writ large as Brexiteers made out that this was an opportunity for the politically disenfranchised to take back control. This was hogwash in 2016 and as the events of the past four years have shown, it still is.

Far from resolving anything, the divisions sown by Brexit have widened. The referendum was won by a narrow majority and the government has done nothing to assuage the concerns of those who voted Remain. And whilst it is true that in the December general election the party which promised to “get Brexit done” won the biggest parliamentary majority since 2001, much of the evidence suggests this was less due to the fact that people had a favourable image of the Conservatives than they had a negative view of the Labour Party under Jeremy Corbyn. 

Boris Johnson’s problems are piling up

Whatever else we may think of Boris Johnson he is a brilliant political salesman – he is, in short, a populist. He is also a product of the culture war in which his set of political values is rooted in a vision of a glorious imperial past. But this is where he may run into difficulty. The tectonic plates of the culture war have shifted – maybe temporarily but perhaps sufficiently to cause more permanent damage. This finds expression in the current strength of the Black Lives Matter movement, which runs contrary to the Johnson view of the UK’s imperial past and threatens to heap more trouble on a government which is now feeling the pressure (for German speakers interested in a Swiss perspective, I liked this article in the NZZ). 

His government’s handling of the Covid-19 crisis has been less than sure-footed and it has scored a number of own goals, most notably by failing to sanction Dominic Cummings, Johnson’s chief adviser, for breaking lockdown rules. It is also hard to imagine that the electorate will easily forgive the highest number of Covid deaths in Europe. We are only six months into what is scheduled to be a five year term for Johnson’s government. But the weaknesses inherent in his character mean that he has got off to a rocky start. As a populist, Johnson wants to keep as many people happy as he can but this is inconsistent with the credo of good governance which requires setting out a number of objectives and working out a plan how to achieve them.

These problems will be compounded by the fact the government will have to cope with the deepest recession in living memory. To turn things around from here requires discipline and hard work, neither of which the prime minister is noted for. I am reminded of the Conservative government of 1992-97 which was faced with an economic crisis early in its term (expulsion from the ERM) and which spent almost five years trying to get ahead of the agenda. It failed and was eventually swept aside by a Labour Party led by a moderate leader in the form of Tony Blair which condemned the Tories to 13 years in opposition.

This is not to say that we will necessarily see a rerun of the 1990s. But aside from getting Brexit done, it is not at all clear what Johnson’s government stands for. This makes it incredibly important that it gets Brexit right, by which we mean not compounding the economic damage. Failure to deliver on the signature policy at a time of mounting economic difficulties and the shifting sands of cultural change would end the career of most politicians. Boris Johnson is no ordinary politician but he has a lot of work to do to pull things around. Demonstrating leadership and running government to manage the country, rather than operating permanently in campaign mode, would be a good start.

Who needs experts?

During the Brexit referendum campaign, Michael Gove, who at the time went by the Orwellian job title of Secretary of State for Justice, said in a TV interview with Sky News that “I think the people in this country have had enough of experts.” When quizzed on this, he went further and suggested that “these people are the same ones who got consistently wrong what was happening.” It was a somewhat off the cuff remark but it instantly caught the mood of the times. Recall the summer of 2016 was the time when British politicians exaggerated the benefits of Brexit. It was also the first time that the world became aware of just how little regard Donald Trump has for the truth – those inconvenient pieces of evidence that suggest that one’s prejudices may not always be right. But this attitude has had a hugely damaging effect on the quality of policy debate, and nowhere is this more important than in the debate over Covid-19.

As an economist who does not always get every forecast right, this argument is sometimes thrown in my direction. After all, what use are experts if they are not infallible? I have explained on numerous occasions that economics is not a predictive discipline – economists cannot foretell the future – but in the public mind that is what we do. When it comes to matters scientific, the public holds the view that there is a single body of evidence which represents the truth and anything that is not inside this envelope of perceived wisdom must be false. But just as with economics, the public perception of science is not wholly true. Scientific conclusions on issues such as epidemiology depend on a host of input assumptions, which if changed can result in very different outcomes.

There has been much debate in recent weeks about the size of the R (or reproductive) number associated with Covid-19. As we are all now aware, an R number in excess of one implies the rate of infection is rising. It is extremely difficult to measure R in real time and estimates for the UK in the range 0.7 to 0.9 imply a margin for error that puts it dangerously close to one. It also varies by geography so if it is higher than one in some places, this runs the risk of a second wave of Covid-19 cases. The R value is calculated using data such as hospital admissions, intensive care unit admissions and deaths. However if the cause of death is wrongly attributed, this will impact on estimates of R. Since age is also a factor in deaths from Covid-19, the overall R value may be biased upwards if we do not take sufficient account of this.

Those responsible for making these calculations are acknowledged experts in their field, and are aware that their estimates are subject to a margin of uncertainty. The problem then becomes one of deciding whether the estimates form a sufficiently strong basis for the decisions made by policymakers, who ultimately have to carry the can. Or to put it another way, is the science sufficiently robust to support some of the recent policy actions? 

With the UK having suffered the second highest recorded death rate from Covid-19, questions are increasingly being asked of the policies adopted over recent months. Quite how an island has significantly more deaths than other European countries which share land borders suggests that there have been policy mistakes. The government has consistently stated that it is “following the science,” therefore either the advice was flawed or the policy implementation was. 

The most obvious question is why the UK did not impose some form of border controls – after all, they were employed by nearly all other European countries? As it happens, the minutes of the Scientific Advisory Group for Emergencies (SAGE) for 23 March suggested that “closing borders would have a negligible impact on spread.” Yet on Monday the UK introduced a quarantine regime in which people entering from overseas are now expected to self-isolate for 14 days. This appears to be somewhat self-defeating since the rates of infection are now lower in other European countries than the UK, and it would have made more sense to implement these restrictions in March. Nor is it clear how the policy is enforceable since there is no guarantee that the address people give on the form which they are legally required to fill in is necessarily where they intend to stay. 

The policy on schools closure has been similarly muddled. The SAGE view on 16 March was that “school closures constitutes one of the less effective single measure to reduce the epidemic peak.” Two days later, “SAGE reviewed available evidence and modelling on the potential impact of school closures. The evidence indicates that school closures, combined with other measures, could help to bring the R₀ number below 1.” On the basis that the government believed the epidemic to be under control, it announced that primary school pupils would return to school at the start of June. But many local authorities, and indeed parents, questioned whether the policy was safe and many children simply did not show up at school. With attendance rates last week running at just 7% the government this week conceded that its plan was not workable and backtracked on its school reopening policy. 

Then there is the vexed question of the lockdown. On 18 March, SAGE concluded that there was a case for a lockdown in London but “measures such as restricting public transport … would have minimal impact.”  Five days later, there was a stronger case for “reducing contact with friends and family outside the household, and contact in shops and other areas.” One of the attendees at this meeting was the epidemiologist Professor Neil Ferguson, who yesterday told a committee of MPs that “had we introduced lockdown measures a week earlier, we would have reduced the final death toll by at least a half.” Yet the SAGE minutes do not suggest that the scientific consensus was pushing for an earlier lockdown. Nor is there much evidence during the early stages of the debate that they paid much attention to the problem of shielding the older, more vulnerable members of society despite the fact that some estimates suggest “more than half of England’s coronavirus-related deaths will be people from care homes.”

It is easy to be critical of a government which has presided over the highest number of Covid-19 deaths in Europe, and its communication strategy has been muddled and inconsistent (viz. the Dominic Cummings affair). However, its claim to be following the science does appear to stand up to scrutiny – at least to some degree – as a cursory glance of the SAGE minutes suggests. The government has made errors and will ultimately be held accountable for them (we hope). But the scientific advice has also flip-flopped. This is not to say that the SAGE committee was wrong – it was acting on the best information available at the time, and like all good scientists members changed their views in the face of new evidence.

Whilst the experts may not get everything right, they do get more right than they do wrong. Deductive failures do not mean that we can do without experts – Michael Gove was wrong about that. But next time you hear the media calls suggesting that economists’ forecasts are always wrong remember that the so-called hard science disciplines do not always get it right either