Brexit – Where is the Logic?

Governance is an interesting problem, and since I write novels, a number of them are about this. In my Dreams Defiled, one of the characters is given responsibilities on the highest governing body, and what she finds is that while some, as expected, oppose what she wants to do, others, who are supposed to be working for her are busy undermining her. If that sounds like what is happening to Theresa May, it is of course accidental because the novel was published well before this Brexit debacle, but had she read my novel, just maybe she would have taken some of the advice I had given to my character (who ignored it, of course) and would not be in this mess. Of course she could well be in a different mess.

Why logic? Logic may seem a funny requirement to some, but it is a means of reaching conclusions from a given set of premises in an orderly fashion, and it requires you to state the complete set of required facts, which include your objectives, then clearly identify the premises to be used.

In this context, the opportunities for Britain are to remain in the EU, exit with a deal, or exit with no deal. A deal involves both parties, and the EU has stated clearly that the deal Theresa May put to parliament is the onlydeal they will accept, there are precisely three possibilities. Corbyn has voted down the deal, he has stated that no deal must be voted down, which leaves only remain. Except he has not got the courage to say so. He has now proposed that there be a second referendum, except he also refuses to say whether he believes this to be the proper way to go. Brexit has been plagued with leaders who have behaved illogically, starting with Cameron. If you are happy with where you are, it is illogical to offer change. Cameron, satisfied that the people would vote to remain, offered the referendum to silence some vocal members of his party. Risking the country’s future to address a personal deficiency is not “top of the class material”.

If you set out on a journey, logic suggests you should have decided where you are going. It helps to point you in the right direction. Accordingly, before issuing the leave notice to the EU, the British politicians should have decided what they were trying to achieve. Of course they would not get all they wanted, but they most certainly would not get what they failed to request.

The first requirement in any negotiation is you should have a line below which you say, “No deal”. Each side usually starts with a position that is most desirable from their point of view. Each side then decides what from the other’s position they can accommodate, what they cannot give up, and how badly they want the deal. This last part is important, because the more you want it, the more you have to concede. However, the final result must not be too one-sided, because if it is, the losing side will then set about doing whatever to undermine it. However, one of the more bizarre facts of this situation is that the UK politicians are finally realizing they will have to accept some of what they do not want.

For the Europeans, they have several objectives, but one of the main ones is to protect the integrity of the EU. If a leaving country were to get the same advantages as a member, the EU would disintegrate, so the UK has to realize it has to give up something. I believe the major thing the UK values is the free movement of goods and people going into the EU, but what it does not like includes the free movement of people tothe UK, the imposition of Brussels rules, and the concession of sovereignty to the European Court of Justice. There are other issues, such as the potential for a European army, and the trend towards downstream political unity. They are not ready for the United States of Europe. 

If the UK leaves, they can do nothing about the free movement of goods and people to the EU, as the EU determines these. On the other hand, the EU should see advantages in keeping an association with the UK, so reciprocal rights come into play. The fear of sales declining is probably unwarranted. The UK has a trade deficitwith the EU, so the EU has an interest in keeping trade going. The UK is Germany’s biggest market for cars, and the UK could easily purchase vehicles from elsewhere, or even go back and make them, given electric vehicles offer a great start-up opportunity. Of course there have are advantages in being in the EU and these have to be given up, but a trade deal is not imperative. New Zealand has no such deal, and we trade quite harmoniously. Yes, there are limits to how much we can sell, but that is one of the facts of life. There is the rest of the world.

We also hear statement that there will be chaos with “No Deal”. This reminds me that chaos sufficient to bring the industrial world to its knees would occur on January 1, 2000, through the so-called millennial bug. I seem to recall waking and finding things going on more or less as expected. Unless politicians do something very silly, I expect the UK citizens will wake up on March 30 and feel more or less fine.

If you ask, what do border inspections achieve, you will conclude there is no need for a hard border, or border inspections. What would they achieve? Leaving aside the fact they cannot be put in place in time, tariffs do not need to be collected at the border. Sales of all goods have a VAT tax. That can be modified to collect tariffs at the same time. If the objective is to keep out people, why? If they are simply coming to spend money, who cares? If the objective is to stop illegal immigrants from working, then you do that through the tax system. They have to register to get a tax identification number. Sure, they could break such laws, but the simplest way of stopping that is to make it very expensive for the employer. The employer now becomes your immigration officers while you sort out these border issues. The prevention of criminals entering, or agricultural pests or viruses would be dealt with the same way as now. There is no reason why March 30 should be particularly different from March 28. So the EU might block things. That you cannot help; all the UK can do is make things sane where it controls them.Just to add to the complications, the Irish backstop is claimed to be necessary because of the Good Friday accord. As I argue above, the absence of border controls is not insurmountable, butthe recent terrorist attack by the New IRA may be making that accord lose value and harden attitudes. It will be interesting to see what the Republic does about such activities. In the meantime, good luck, UK. The current efforts suggest it might be needed.

Inequality of wealth

The novels I write form a “future history”, not of course intended to be predictive, but rather to occasionally slip in a comment on previous times, i.e. our “now”. Predicting the future is not entirely practical because when the future turns up, it usually refuses to comply. But one surprise I have had is that sometimes when it does turn out that I was wrong, it was because I underestimated the problem. Even though it was recently published, my first effort at Miranda’s Demons was written in the late 1980s, and one of scenes has some characters looking back at our time and scoffing at what we call democracy. Thus the first draft had them pointing out the uneven accumulation of wealth, and too much drifting into too few hands, and then too much of that was wasted on lobbying and boosting favoured politicians, i.e. politicians who would protect their wealth. The characters scoffed at tens of millions of dollars being so wasted. Look what could have been done with it.

Well, talk about an underestimate. In the following link:
http://www.theguardian.com/business/2015/jan/19/global-wealth-oxfam-inequality-davos-economic-summit-switzerland
it is claimed that half the world’s wealth is held by 1% of the population, while the 80% least well-off currently own just 5.5% of the world’s wealth. We have to be a little careful with such comparisons, because the ownership of a house, say, in a central western city, will have an enormously greater number of dollars attached to it than a quite liveable house in many of the poorer countries of the world, but no matter how you look at it, the wealth distribution is just plain gross. Then, according to the article, the wealth sector spent $550 million lobbying policymakers in Washington and Brussels alone during 2013, and $571 million in campaign contributions during the US 2012 elections. So much for my “tens of millions”! And think what could have been done with a spare billion dollars.

An interesting question is, how did all this come about? Part of the answer would seem to be, the removal of high taxes on the wealthy. The very wealthy and the giant corporations pay very little tax because they somehow manage to file in tax havens, or conduct enough business in tax havens where somehow they manage to export very large tax losses to their home country while making extremely high profits where there is no tax. This is not so difficult when they set the prices in each place. So, why are they allowed to do this? One reason is the politicians let them. First, they do not want to lose that valuable electoral cash support, for the primary objective of any politician is to get re-elected.

Another contributing reason would seem to involve a widespread economic theory that says such wealth “trickles down”. Well, for the current inequality to be possible, anything coming down really is a trickle, while that going up approaches a flood. All of this happened at the same time that there was a burst of computer technology that has allowed a number of jobs that used to require quite large labour forces to be done by machines. This has led to a hollowing out of the middle classes, and too much control has rested in the hands of those moving money. Huge payments to corporate executives in the form of stock options have also contributed, because for the executives to make money from the option, they need the stock prices to rise. That has led to executive decisions being made for short-term profit for those executives, the classic conflict of interest. The problem is, short-term profits are frequently at the expense of long-term development. A classic example was Hewlett Packard where Fiorina cut research and development to invest in shorter-term boost to the stocks. The overall result was 30,000 people, mainly middle class, lost their jobs and the company nose-dived.

My guess is that my discussion in the book is valid, and that in a couple of hundred years, people will look back at this period and shake their heads in despair. How, they will ask, could someone like Fiorina make so much money by doing so much damage to the company she controlled? And she was far from being alone. The corporate world is littered with fairly mediocre performers who take home incredible rewards, and the tragedy here is, they go to all those extremes to get such rewards, and receive a relatively minute benefit from them.