by Frank Schnittger
Sat Jan 2nd, 2021 at 06:17:13 PM EST
The Cummings/Wakefield family pile: Chillingham Castle and Gardens, Northumberland. Just what establishment is Dominic Cummings trying to overthrow, or to re-establish?
One of the more puzzling aspects of the Trade and cooperation agreement just signed by the UK and EU is that its focus is almost exclusively on trade in goods, an area where the EU (excluding Ireland) enjoys a massive trade surplus with the UK. Services make up 80% of the UK economy and the City of London has been the financial powerhouse of the EU. Yet curiously the trade deal does not provide for free access for UK service companies to EU markets, does not provide for mutual recognition of professional qualifications (again, excluding Ireland), and even the Erasmus student exchange programme no longer applies to the UK.
Quite why Boris Johnson, a former Mayor of London, and surely aware of the City's importance to the UK economy and the government's tax base, should have avoided making services a priority for the UK negotiating team is beyond my understanding. Perhaps he felt that the EU simply couldn't manage without the City's financial and legal expertise and would come begging for those services to continue soon enough. If so, he is likely to be disappointed.
Services, unlike high tech manufacturing, do not require the investment of huge amount of capital in fixed plant, machinery, and associated skills which are difficult to move from one country to another. Banks, fund managers, insurance companies and associated companies can do business anywhere which has good internet connectivity, and since the Covid Pandemic that has often been online, from employees' homes.
What matters, from an economic point of view, is where those activities are taxed and where the proceeds are invested, and what self-respecting economic power would not wish to keep those high value activities and revenues to themselves, and subject to its laws and regulations? If Johnson thinks those activities will naturally remain in London, he can, as his own phraseology puts it, "go whistle".
But the bigger issue is not just where existing business will locate their key activities, but where new foreign and other direct investment will gravitate to. Given a choice between a market of 450 Million people or 65 Million people, a stable global currency like the Euro, or a smaller regional one prone to devaluation like Sterling, and a broadly consistent and favourable political culture and one prone to instability, weird gyrations in policy, social divisions, and a Conservative Prime Minister whose many memorable quotes include "f*ck business"; which entity will likely attract the lion's share of future investment, the EU or UK?
Hard-line doctrinaire Brexiteers have often spoken about creating a "Singapore-on-Thames" in London with a bonfire of the regulations and lower tax rates. Anyone who thinks Singapore doesn't have many regulations obviously hasn't lived there, and London has always been able to attract dodgy money from Russian Oligarchs and Arab Sheiks. Corporate tax rates aren't an EU competency in any case and as the Irish financial crisis and Deutsche Bank scandals have demonstrated, EU financial regulation is often barely up to the task of maintaining minimal stability.
Much of what remains of British industry is now foreign owned and even most promising UK high tech companies have been sold off to foreign investors. Where do you think those investors will direct future investment given the complete disregard for their concerns by a Tory government, never mind the prospect of a Labour "socialist" led one? Even with existing investments it seems clear that when overcapacity issues require the closure of a car plant, for example, it is the UK plant which will be closed.
Left wing commentators are prone to regard democratically elected governments as merely fronts for the capitalist class forced to do their bidding, and yet it seems there has been a spectacular disconnect between the UK Tory government and the vast majority of those who actually run the UK service and manufacturing sectors. Even the famed Whitehall civil service seems to have been largely ineffectual in the face of a Dominic Cummings led attack on "the establishment" (despite his marriage into an imperial and aristocratic family) and a David Frost (aka Baron Frost, of Allenton) led Brexit negotiating team.
The British aristocracy have always been somewhat disdainful of those who earn their living in trade, and manufacturing was never a suitable activity for the truly ambition public school and Oxbridge graduate. Most aristocratic wealth came from the plundering of colonies or the professions of Law, Medicine and High Finance, at worst. Although there is a lot of rhetoric about free enterprise and trade, this is mostly about preventing the workers getting any share of the loot or externalising environmental costs, and has little to do with how progressive global corporations actually operate.
But the one thing a British public-school education teaches you is how to bluff. Boundless self-confidence is the abiding characteristic. These people get onto major boards without ever having done anything or learned much. The respect for money and position in society is all embracing. Many have argued that the UK will come back looking for the benefits of EU membership within 10 years, but that is not their style, even if there are people starving in the streets. Admitting defeat or having been wrong about something is just not done. Brexit will be a success, come what may, and Britain will be leading the world even if no one is following.
It's their birth right. The aristocracy are born to rule, and only a revolution will ever change that. Keir Starmer didn't take long to snuff out any pretensions to radical social change in Labour policies, hitching Labour's fortunes to the Brexit band wagon,and taking ownership of the consequences. The revolution won't come from Labour's increasingly middle class base and it won't come from an increasingly demoralised working class either. My guess is it won't come at all. Britain is simply destained for a long, slow, and painful decline, but at least the Lords will be safe in their castles and tax exiles abroad.