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Welcome to reality: EU wasn’t serving least well-off

Evidence proves increasing poverty and immigrant economic threat meant Brexit made sense for the UK’s working class

Last month, the UK referendum on membership of the European Union posited a seemingly simple question and delivered an obviously complex outcome. The vote on June 23 came in with a massive turnout of 71.8 percent, the highest for any UK-wide vote since the 1992 general election. In the end, England voted by a strong margin of 6.8 percentage points in favour of Leave, while Wales voted by 5 percentage points in favour. Scotland opted by a 24-point margin for Remain, and Northern Ireland voted Remain by 11.6 percentage points. Gibraltar voted 95.9 percent in favour of Remain, best in the class, pro-EU.

Based on voter turnout-adjusted figures, eight out of the ten largest voting area across the UK posted majority Leave vote, with London (ranked number two in the total number of voters participating) and Scotland (ranked number eight) being two exceptions.

The results were divisive. Widely reported results from Lord Ashcroft’s Polls show that only 27 percent of voters age 18-24 were in favour of leaving the EU, with 38 percent and 48 percent Leave support for 25-24 year olds and 35-44 year olds, respectively.

In contrast, 56 percent of 45-54 year olds and 57 percent of 55-64 year olds were pro-Leave. 60 percent of those aged 65+ voted against the EU membership.

The problem with interpreting the above results is that they are unadjusted for turnout figures. Based on the analysis of voting data, voter turnout strongly increased with age. According to the Financial Times (FT):“The generational divide on Brexit has been common knowledge throughout the campaign, and is apparent in the demographic data, even if only weakly”.

The main factors driving voter decisions were socio-economic: education and occupation (with higher educational attainment and occupational position being the two statistically strongest determinants of propensity to vote ’Remain’); followed by the share of people holding a passport. The fourth factor was labour earnings. As the FT put it: “Before the vote several polls identified a common finding: people intending to vote Leave were much more likely than Remain voters to say they felt Britain’s economy was either stagnant or in decline”.

Eurocrats must start relating to ordinary people
Eurocrats must start relating to ordinary people
In simple terms, the Brexit vote reflects the relatively more complex socio-economic divisions of the modern UK as opposed to the commonly-touted Leave voters’ age-determined anti-immigration sentiments, xenophobia and nationalism. The key forces shaping the anti-EU sentiment in the UK, as much as in other member states of the EU, are rooted in the realities of the modern economy: the post-Global Financial Crisis status quo of income and wealth divisions, and the underlying evolution of the global marketplace for labour and skills.

The voter characteristics that defined Leave supporters, according to most economic literature, also determine earnings in the advanced economies. Most importantly, education and occupational choices drive two key earnings-related risks: labour productivity and the degree of worker substitutability by technology. In simple terms: lower-educated and less-skilled workers face more downward pressure on their earnings, higher volatility of earnings, a lower correlation between their own productivity and their earnings and higher risk to their jobs from automatisation, robotisation and technological displacement. They are also more exposed to direct competition from migrants.

Based on recent research from the Resolution Foundation, published in February, it is clear UK middle-class earnings have been effectively stagnant since the early 2000s. This development took place during the period of EU enlargement, increased migration, and the push towards political harmonisation, exacerbated by the Global Financial Crisis and the Great Recession. Over the same period, the EU was shocked by the Euro-area sovereign debt crisis and the subsequent external migration crisis. Five out of seven key shocks between 2000 and today are directly linked to European-wide policiy choices.

This, in the words of the Resolution Foundation analysts, fuelled the electorate’s “disillusionment at the economic and political status quo”.

Since 2002, over half of middle-class UK households across the entire working-age population witnessed “falling or flat living standards [as] two-thirds of the growth in average working-age income has been wiped out by rising housing costs”. For the growing population of renters, the decline in private incomes net of housing costs was larger than increases in earnings. Meanwhile, home-ownership has dropped 16 percentage points for Millennials, compared to Generation-Xers, controlling for age. The bulk of home-ownership decline took place in middle-income households, with ownership trends relatively steady for the poorest and the wealthiest households.

In a way, the Brexit vote was symmetric with voter tendencies across a number of countries. In its annual report for 2016, Sweden’s Timbro Institute documented the relentless rise of political populism in Europe: “Never before have populist parties had as strong support throughout Europe as they do today. On average a fifth of all European voters now vote for a left-wing or right-wing populist party. The voter demand for populism has increased steadily since the millennium shift all across Europe”.

Which, of course, also reflects the dire lack of resonant pragmatic leadership. After decades of delegation of ethics and decision-making to narrow groups or substrata of technocrats – a process embodied by EU institutions, but also by national institutions – European voters no longer see a tangible connection between themselves (the governed) and those who lead them (the governors). The Global Financial Crisis and subsequent Great Recession have exposed the cartel-like nature of the corporatist systems in Europe (and increasingly also in the US).

Again, Timbro notes: “2015 was the most successful year so far for populist parties, and consistent polls show that right-wing populist parties have grown significantly as a result of the 2015 refugee crisis…Today, populist parties are represented in the governments of nine European countries and act as parliamentary support in another two”. The net outrun is that: “…one third of the governments of Europe are constituted by or dependent on populist parties”.

The official European (and Irish) Kommentariat are keen on blaming nationalism and xenophobia for these trends. But the causality is likely to flow the other way: the failure of the European political elites to draw in large swaths of voters to their status quo-supporting economic and social policies is resulting in the adoption of extreme positions by electorates.

This explains, for those who haven’t seen it, why populism in today’s Europe spans both sides of the political spectrum.

The fundamental failure in Europe to face this alarming tendency of voters to favour political populism over centrism is evident in the Brussels and national reactions to the Brexit vote. Here, Ireland’s own Peter Sutherland stands as a great example. In an interview with the Irish Times in the wake of the Brexit vote, Sutherland claimed that: “from an Irish perspective, … [our] only strategy, economic and political, has to be reinforcing the European Union and being part of the inner core of that European Union. We cannot sit on the sidelines saying nice words to everybody. We have to have clear political direction”.

UK leaves EU... destination unknown
UK leaves EU… destination unknown

In this passage, Peter Sutherland dispenses several major dubious conjectures, all positing significant risks to the European Union. At no time does he address the need to reflect on the Brexit vote or to respond to it with European reforms. Instead, Sutherland promotes preserving the status quo of the EU, the very dysfunctionality that has contributed to the Brexit vote and is generating huge centrifugal forces within a number of the remaining 27 states, independently of Brexit.

Peter Sutherland asserts that reinforcing the European Union in its current state can be the only positive objective for Ireland. Moreover, he believes, this happens to hold no matter how unworkable it might be for the EU itself. Aptly, Mr Sutherland identifies the EU’s ‘inner core’ as the only focal point of the EU worth supporting, ignoring a simple fact that today we already have a four-speed Europe: Europe of the ‘Germanic’ or ‘Northern’ Core, the Nordics that do not belong to that Core, the Euro Periphery, and the Eastern European ‘fringe’.

Put differently, Sutherland’s claim that Ireland should align with the ‘inner core’ of the EU, in fact risks sustaining more divisions within the EU. Welcome to Europhile Dogma 101, where one’s starting position determines the exegesis of the argument. No matter what reality or history throws your way.

Irish and European lessons from the Brexit vote cannot be based on false propagandistic sloganeering (symmetric to the sloganeering that dominated pro-Leave mythology before the Brexit vote) – ascribing the Referendum decision to ignorance, stupidity, venality, nationalism and other divisivenesses. In order to wrestle a positive outcome from the Brexit shock -we must consider the deeper causes of voter detachment from mainstream politics. Causes economic and social, and institutional, both European and national.

The Brexit Referendum result should act as a catalyst for deep and swift reforms of the EU, to create a tangible and stronger bond between European voters and their political representatives, and to move away from the status quo where un-accountable technocracies initiate, instrument and implement policy decisions regardless of the, sometimes express, will of the people. In order to contrive this win-win outcome, we need to start by developing a co-operative resolution-mechanism for Brexit.

In the wake of the UK Referendum, a leading neoliberal organ, Foreign Policy magazine, stated that: “The world is entering a period where once-robust democracies have grown fragile. Now is the time to figure out where we went wrong”, Frankly, I couldn’t agree more.
If Europe fails to produce a co-operative resolution of Brexit, the threat of political opportunism and populism will tear the EU apart. The Sutherlands of this world have nothing in their weaponry to stop this.

By Constantin Gurdgiev