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The Progressive Economics Forum

Brexit and Neoliberalism

In the end, what was meant to be a referendum about the economic benefits of remaining in the European Union, was about everything but. There will be countless analyses of the results and of the reasons that motivated the British people to vote to leave the European Union. But in the end, I fear that very few of these analyses will even come close to addressing the true underlying forces at work.

As an economist, I see in Brexit the revolt of the working class, lashing out at the institutions that have imposed unfair economic policies. In the end, this was a referendum on a failed economic regime that has been unable and unwilling to provide for all its citizens as opposed to the very few. Voting to remain in the EU was seen as a tacit approval of the institutional status quo. This was captured perfectly by one voter who said: “if you’ve got money, you vote in. If you haven’t got money, you vote out.”

Indeed, in the last 3 decades, economic policies have been largely designed to benefit the economic and financial elites. In this age of financialization and of neoliberal economics, the rich has become richer and more powerful, thereby extracting a greater share of the proverbial economic pie. They have influenced policies in ways that have become all too familiar.

Since the early 1980s, the focus of policy has been privatization, deregulation and liberalization. As a result, profits have soared, but wages have remained stagnant, at best. Income inequality has increased to levels not seen since the 1920s.

In Europe, institutions like the European Union were carefully designed to encourage and protect the mantra of free market economics. The overwhelming preoccupation of the EU has been to protect the interests of finance. This was on full display during its negotiations with Greece. In this instance, Greece was brought down to its knees for daring to talk back to the Great and Powerful Oz.

During all this, workers have remained largely silent. Following the crisis of 2007-8, they have tried to express their frustration through such movements as Occupy Wall Street, only to be silenced. Those in power have refused to listen to the complaints of the working class, and continued to impose austerity in the name of sound finance.

Then came Brexit.

I must confess, the result was predictable. Yes, there was some xenophobia involved, but this too was the result of failed economic models. There is increasing research on the relationship between income inequality and poverty, and the rise of far right political parties. As inequality rises (along with poverty), voters are more willing to listen to rhetoric that lays blame on ‘others’. Populist movements all over Europe are reaping the benefits of such anger.

The same phenomenon is playing out in the US with Donald Trump, as well as in France, Italy, the Netherlands, Belgium, Sweden, Denmark, Greece, and Germany. In many of these European countries, there are now cries for their own referenda.

Europe will not be the same. And we must lay blame where blame is deserved. In essence, the lesson of neoliberalism is simple: when you kick around the working class for 3 decades, the working class eventually kicks back. And now, the revenge of the working class has begun.

Yet, the political left must bear some responsibility as well, for its failure to clearly articulate a legitimate and credible alternative to the dominant view. Instead, it has largely accepted to play within the rules of the game written by the right: it continued austerity policies, furthered the deregulation and financial liberalization agenda, paid lip service to income inequality, to name but a few policies (we have fared a bit better in Canada under this new government … so far).

In the end, I predict that most forthcoming analysis will miss the mark completely. It will seek to blame xenophobes (see Doug Saunder’s simplistic analysis in the Globe), and will not come close to questioning the very economic policies that have marginalized and alienated voters.

In the end, the rise of the far-right is the working classes’ way of telling us they are not happy with the economic status quo. The real questions have also been ignored, because to ask the right answers will required some tough self-examination, and once you pull on that thread, who knows what will come loose.

Who will be brave enough to pull on that thread?

Enjoy and share:

Comments

Comment from Paul Tulloch
Time: June 27, 2016, 12:08 pm

The rise of Trump- the success of Harper, Bush and many other policies such as Brexit are continuing proof of the ultimate failure of the left and its actors as a legitimate force for resistance. Instead- it is now the right wing that the wealthy elites must fear. We have seen the Brexit vote hijack the financiers in London- we have witnessed the rise of Trump, and his tea party- extremism. History shows that when the economy breaks and the inequality grows- the social instabilty reaches for a new equilabrium. So it to me is merely predictable history that we are making. Nobody should be surprised- we have seen it occur for the last thousands of years. The surpise for me has been the utter failure of the left. And after being quite involved in the left – from a mainly critical perspective and also quite involved in the labour movement it is not difficult to make such conclusions. I do not want to leave most with such negative space- but we must look in the mirror and see what the left has become across many advanced capitalism economies.

The issue for me is how organized labour and left politics has failed to bring in such voices of workers- somehow in all the political correctness and cultural manifestations of the left- workers have been left to the ravages of the right, austerity and lowering job quality and have been neglected. I recall last summer trying as many tried to convince a certain party that worker declines, job losses and economic failings were what the left should devote its campaign to- instead another route was chosen. As much as many in the left continue to tell me they represent workers of all permutations and combinations of hardship and inequality- I see a merely a black whole within the labour movement that grows day after day of avoiding a class based fight back. Hence outlets of the right like Trump, tea party, Brexit voting subsume the working class. I would argue in Canada we have sufferred the fate of Harper because of this disconnect between workers and the organizations apparently representing worker interests. Sorry labour friends- you know this is the truth and last summer was a masssive display of that failure. The distance between the politics of organization and the actually existing connections of hardship of workers is sadly in a space that is spiralling the left into the abyss. To see a great organization like the Worker Action Center in Toronto struggle to survive on shoe string budgets and campaigns such as $15 an hour operate with limited resources are signs to me- just how badly this disconnect has become. From union decline and polarization of wages- to working conditions and job quality loss on a massive scale- as shown by the Bank of Canada- CIBC, and my own Good Jobs Index- proves to me that precarious work and now the new drive to Uber and a lack of organized response sets up a future for labour- that under current beaucratic corporatists structures must change- or labour will become a spent force- representing the selected interests of high wage priviledged workers- which in the end become perks and for continuing divisive and cultural dead end for a slowly declining group of high waged workers.

One day soon- without a change- unions as they are set up will be despised and hated by most lower waged workers- as the inorganic experience organized worker struggles becomes completely alien to most of the precariate and the new Gig economy expands.

There forces and now historical outcomes are the proof that the complete annilation of organized resistance to the corporate wealth accumulation process is mainly completed

Comment from Murray Reiss
Time: June 27, 2016, 5:22 pm

I’m not so sure about “If you’ve got money, vote in …” Wasn’t the youth vote overwhelmingly for Remain? Are the youth in (the former?) UK all that affluent? And I wouldn’t be so quick to dismiss/diminish the role of bigotry. Certainly, everything I’ve read by British people of colour place a huge weight on its role. Nor is the “lesson of neoliberalism” quite that simple — yes, kick around the working class for 3 decades & it may well kick back — but only in the direction and at the targets its been told to by its rulers.

Comment from Larry Kazdan
Time: June 27, 2016, 10:50 pm

William Mitchell is Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), University of Newcastle, NSW, Australia

http://bilbo.economicoutlook.net/blog/?p=33894

“When I tweeted it was a ‘great outcome’ I didn’t say that good would come out of it. I also didn’t suggest that it would be a short-term recovery of prosperity or that the workers would benefit.

I was referring to the fact that class struggle now has a clearer focus within the British political debate. There is now a dynamic for a truly progressive leadership to emerge and bring the disenfranchised along with them and wipe out the neo-liberal hydra once and for all.

That is why the Brexit vote is excellent. British politics is now in chaos. How it sorts itself out will determine what the outcome leads to.

But progressive leadership now has space to challenge the orthodoxy. That is a great outcome.”

Comment from Giovanni Covi
Time: June 28, 2016, 7:18 am

I think the British vote means ‘independence’… they voted ‘OUT’ NOT because they don’t like EU, but because they like being independent whatever it means and implies.

People most of the times follow a dream or an idea of dream, and this dream was not an EU united, it is something else.. likely they don’t even know.

The political power should have a long term perspective and being able to shape people’s dream instead of manipulating them to look after their own interests.

To this respect LPR’s article is completely right, the political class all over the globe has lost the capability (or interest) of understanding people’s REAL needs; contrary they became since the 80s really good in understanding MNCs’ needs, serving the interests of few and not of many, thinking wrongly that their ‘good’ is good for everything and everyone. Politicians look at the economy as a black box without thinking that the black box is full of people with basic needs.

We need in EU a revolutionary approach/mechanism with the primary goal of restoring: NOT economic growth, NOR profits, but employment and culture.

We won’t bring back UK, but maybe having this dream in mind like it was in 1992 – convergence and not divergence (inclusion vs exclusion) – we will save the EU and accidentally set the basis of a new Era – the Post-Neoliberalism.

To summarize the concept for EU politicians: the primary aim is a humane economy as a first step toward a humane society.

Comment from Thomas Bergbusch
Time: June 28, 2016, 2:40 pm

Deutsche Bank has called this a class war!

President Of The European Parliament:

“It Is Not The EU Philosophy That The Crowd Can Decide Its Fate”

see http://www.zerohedge.com/news/2016-06-27/president-european-parliament-it-not-eu-philosophy-crowd-can-decide-its-fate

Comment from Louis-Philippe Rochon
Time: July 5, 2016, 12:27 pm

This may be of interest. http://www.independent.co.uk/voices/brexit-eu-referendum-ignorant-educated-cosmopolitan-modern-britain-a7116836.html

Comment from Harry Wilkinson
Time: July 15, 2016, 2:45 pm

There can be no doubt that people around the world are awakening to the massive unfair distribution of the benefits produced by the economies of all nations, and it is even more apparent to them because of the proliferation of information now available on the internet. We may think that the wars being played out now in the Middle East are religious based, but the truth is that they probably began because of the inability of the masses to be able find opportunities to enjoy any kind of decent life in their homelands.[

As well,all free trade deals have been structured for the benefit of the business interests, with little if any attention paid to how those agreements would affect the sociology of the nations that signed on signed on. In Canada as an example, we have seen how these treaties decimated the manufacturing sector with the loss of well paying jobs and benefits. No national economy or civil society, can hope to be successful when having to compete with those offshore companies that are based in a countries which do not have a similar civil society.

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