One week on from the vote and we have fully and truly moved into phoney war territory. Are we really going to trigger article 50 and leave the EU? Are the other 27 states going to drive us out quickly or find a way to keep us in? Are the Conservatives going to work out the leader and policies to hold them together? Is Labour going to do the same? And is the financial sector going to really adjust to its post-Brexit equilibrium or keep defying gravity?
The problem in each case is a true sense of existential crisis that goes to the heart of all these institutions. Moving one way or another demands the kind of paradigm shift from one side or the other that seems almost impossible. With division and destruction on offer either way so we are floating in limbo. No-one wants to make that first move.
The Conservative Party
For decades there have been a number of contradictory elements eating away at the Party. A large majority of the Parliamentary Party and membership have been long-term Eurosceptics. In 2016, prior to Cameron’s membership negotiations being completed, 87% of Labour MPs wanted to remain regardless. Only 11% of Conservative MPs did and only 25% of them thought the UK had benefitted from the EU. The desire to take back control – not for ordinary citizens and UK Democracy but the Tory establishment – has gnawed away.
However, the party’s traditional financial and business powerbase will be fundamentally damaged by Brexit. Over half the Party’s funding comes from big City backers. Much of the rest from wealthy corporate individuals who did well out of globalisation and the EU’s market. The largest single professional background of Conservative MPs and Peers is from business and the City. It’s now big financial firms that are leading the relocation exodus from London to Europe, with big multinationals looking at their options. It’s now clear that Brexit isn’t just going to screw the UK economy, it’s going to do untold damage to the Tory Party.
And, of course, in playing the referendum game, the break-up of the UK looks more likely now. One nation Tories are now members of a party that has done more to break up the country than any before. The Daily Mail and Daily Express, the vociferous voices of little England and one nation (or distant empire) didn’t think through this outcome.
‘What have we done’, many Eurosceptics included, must be asking, and who do we blame? But, they can’t just blame bumbling Boris. Whoever takes over, there is going to be real anxiety about pushing that article 50 button. Not even Gove will be quick on that buzzer.
The Labour Party
At this current time, the crisis of the Labour Party is clearer than most. Will Corbyn step down or does their exist an MP who can beat him, both in a Parliamentary Party vote and amongst the membership? The crisis now is so acute that limbo cannot be maintained for much longer. But, it was a crisis a long time in the making and no quick decision will fix that now.
As many have noted, following the voting data, the split between middle income/professional, public sector, London-based Labour and working class, precariously employed, regional Labour, is stark. But, on another level, it’s also a split between professional campaigning, media-savvy and pragmatic Labour versus ideals and heartlands policy-oriented Labour.
Blairism trod a strange path between the two. Professional, media-savvy and embracing the professional and financial sector economy of the South East, yet supporting the regions and working classes with dispersed public sector money for local institutions and tax credits. But, all the while, inequality and community erosion continued to grow. Post 2010 and austerity has hit hardest those Labour compensating structures, as local councils and welfare support has been cut so harshly. The two recent referendums and austerity have shown the severe limits of Labour’s economic policies for the wider UK economy.
Corbyn, while speaking to traditional Labour values and concerns – from Trident and Syria to poverty and inequalty – still appears to say little about the real economy outside London and the South East. He looks just another London-based MP more interested in multi-culturalism and the geopolitics and, quite obviously, he has none of New Labour’s professional campaigning and media savvy.
The Parliamentary Party are not just moderates or Blairites they are also professional politicians. The membership may be clearly traditional Labour but many are not heartlands Labour – they are the educated, middle classes with a metropolitan bias.
Arguably, Labour’s split seems far worse and it’s existential crisis deeper than the Conservatives. But, in some ways, there is more light too. A party can be both left wing and idealistic, on the one hand, and a professional, media-savvy campaigning force on the other. Fixing the split between working and middle class occupations and regions is much harder but, again, there are plenty of alternatives out there beyond the trendy think tank policy world of Westminster.
The Technocrats (European and UK)
I was in Holland at a politics conference the day the results came out. Academic and media responses at the time sum up the catch 22 the EU project finds itself in now. One immediate response is deterrent. Kick the UK out as soon as possible and give no favours. If it’s made really tough on Britain then others won’t follow. If the rest of Europe sees the terrible consequences of leaving, then the voices of Frexiteers and Nexiteers will soon die down. Nigel Farage’s speech encouraged such a reaction.
On the other hand, Brexit could also be devastating to the EU project – financially, economically, socially, culturally and, eventually, politically. Denying the rise of nationalist parties and their anti-free movement lines, as well as the various driving factors of their success, puts it all at risk too. Regardless of how the UK fares on its own, the EU will suffer. More suffering means more extreme political responses, thus more Frexiteers and Nexiteers. So, EU technocrats also muse over being kind to the UK, putting breaks on, making radical changes and walking through age old red lines. The prize being that the UK might be able to find a politically legitimate means of staying (officially or unofficially).
And, of course, the civil services of the UK and other EU nations are so tightly joined at the hip. They have spent so many years fusing their various body parts, not just around trade but in so many areas, that separation now seems beyond the kin of diplomatic science. How could it possibly be done and how can it be done without enacting life-threatening amputations of the self?
The Financial Sector
On Thursday, the pound hit a recent high. On Friday Shares and the pound plummeted. Within hours leaders of industry began declaring their intent to relocate, shelved new plans or despaired about immediate threats to cut international investment. A steady trickle of stories about the end of the property boom, job losses, credit rating downgrades and unbalanced budgets have followed.
Yet, we have also had a turnaround. The outward-facing FTSE 100 index is now trading higher than ever. The pound has edged upward (although still down). Osborne’s threat of an emergency budget has been withdrawn. It isn’t exactly cautious optimism but there is a sense of being caught in no-financier’s land. Why?
Once again, the reality is too difficult to contemplate. The City is one of the dominant hubs of the global financial machine. It has also become central to the UK’s economy, tax take and balance of trade. Successive UK governments have declared for years that they don’t ‘pick winners’ on intervene in markets, but that’s not the case with either the military or financial sectors. The financial sector has also kept the property and other bubbles inflated, facilitated QE, and brought up all that UK debt.
If the UK leaves the EU, the financial sector will split, and much of it will relocate elsewhere. But, then again, so much international financial infrastructure is wired through the UK. Finance will want to leap from the sinking UK ship but, they also know the other ships are still connected to the sinking one.
And so the system remains frozen, at least until another major trigger is pulled. The rational financiers will then morph into the self-serving irrational herds we have seen so much of but they won’t know which direction to run in.
Ultimately, all these institutions have fundamental fault lines that have built up over decades. An insistence that democracy would always pull through, the financial sector would find its equilibrium, and stability always trump anarchy, got them all through. Nothing could penetrate the iron belief in these paradigms. But, just as the financial crisis was constructed over decades, so it is the same on the institutional and political sides. Real paradigm shifts are needed before positive progress can be made. World War Two’s phoney war lasted 8 months. How long will these ones last?