Wednesday 25 July 2018

Rees-Mogg's little helper

I can think of no good reason in principle for opposing Corbyn’s call for a return to ‘making things’ in the UK rather than depending on cheap labour elsewhere.  He’s not alone in believing that the UK economy has become over-dependent on what are loosely called financial services.  But linking it to Brexit rather than to under-regulated capitalism is playing into the hands of those who want to use Brexit for a completely different vision of the future.  And some of his proposals fly in the face of reason.
There is nothing that prevents EU members from having a healthy manufacturing sector.  As a percentage of national output, Germany, for instance, manages 23% compared to only 10% in the UK (UK Parliamentary research briefing).  The chart on page 7 of the same source shows how the UK has declined from being in the top 20 in terms of manufacturing output as a proportion of GDP in 1970 to the 118th position by 2015.  The cause of the decline in manufacturing in the UK has more to do with a long-term productivity issue (largely down to a lack of investment) and the economic policies pursued by successive governments – Labour and Tory alike.  The capitalist mechanisms which led to globalisation and the ‘offshoring’ of manufacturing don’t operate in a vacuum, they operate in the context of policies followed by governments. Being a member of the EU is no obstacle to a successful manufacturing economy, and it follows that ceasing to be a member isn’t the solution. 
There are many on ‘the left’ who believe that part of the solution to the decline in manufacturing is to give more state aid to industry, and that membership of the EU prevents that.  The idea that the EU ‘prevents’ state aid is not new, despite having been debunked many times over.  (Here’s an example of one response on that issue.)   What EU state rules do prevent is ‘unfair’ state aid; the sort of state aid to industry which distorts the market and gives companies or countries an unfair advantage.  There are plenty of examples of nationalised companies and state-aided companies within the EU; there’s nothing that prevents the UK from following the same route as long as it’s done in a way which does not tilt the playing field.
Of course, that may be exactly what Corbyn and his acolytes want to do – provide state aid in ways which enable UK companies to gain a competitive advantage over those in countries like Germany - and to the extent that those companies can find an adequate domestic market in the UK, it’s an approach which can work.  It would be naïve, however, to believe that companies receiving such aid would be able to trade freely with countries whose companies do not receive such aid.  Any trade agreement with the EU will inevitable make it clear that subsidised companies in the UK will not have access to the EU market; and any other country entering a trade agreement with the UK will almost certainly impose similar conditions – it would be economic suicide for them to do otherwise.  Corbyn’s policy is a recipe for the sort of economic isolationism which Trump is pursuing in the US.
Perhaps most alarming of all was Corbyn’s suggestion (reported by the BBC) that Labour ‘would opt out of parts of world trade rules if necessary’ to ensure jobs went to local people.  I can see how the promise might be attractive to those whose votes he wants to win but given that we already know that a trading relationship based on WTO rules is the worst possible outcome of Brexit, suggesting unilaterally opting out even of those rules is taking things to a whole new level, and is in danger of making Corbyn look even more like an extreme Brexiteer than Rees-Mogg.
There is much about the trend to globalisation which I dislike.  On that I’m with Corbyn but where we part company is when the proposed solution is to try and pretend that it all never happened, turn back the clock, and go back to where we were before.  That really is Brexitism writ large and, as we are in serious danger of discovering, the past was not the nirvana as which some seem to see it.  Any viable solution has to come from working with others, not pretending that the UK can simply go it alone.  It’s not only the Tories who are suffering from Anglo-British nationalism and exceptionalism, and an idealised memory of the past.

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