The politics beneath the noise

Whenever people ask me for my opinion of US politics at present, what always strikes me is how little is actually happening. While the press covers Trump’s regular tweets, public gaffes and the inevitable criticisms of his actions, the most interesting aspect of Trump’s presidency is how little in reality is happening.

Let’s start with the economy. While the US market certainly has been caught up in the “animal spirits” surrounding Trump’s proposed fiscal stimulus boost, few analysts have actually looked at how this would work in practise. For starters, Trump’s long expressed desire to boost US energy infrastructure is trapped in a permanent limbo until the number of FERC appointees rises from its present 2/5 to 3/5 or more. At present, the lack of a “quorum” for the US energy regulatory agency means that no energy projects can be approved at a federal level until a new appointee is selected and approved by the senate. That is still a long time away. Next consider how Federal fiscal stimulus actually works: The US federal government does not contract for infrastructure projects within states, rather the states themselves manage the process. Thus as most states are heavily indebted at present, it is highly questionable whether a large financial giveaway from the federal government would lead to increased infrastructure spending (it is far more likely the funds would be used to pay down debt). But beyond even the potential for a stimulus lies the more significant question of whether congress would even approve such a bill. With the Republican party still heavily influenced by the Tea Party, it certainly shouldn’t be assumed that tax cuts and increased spending is a given.

On healthcare, the picture is similar. While people expected a bonfire of medicare “repeal and replace” style, there have been no plans put to the public, the President or Congress that provide a clue about how Republicans will do this. Moreover, the few suggestions that have been raised are politically toxic with Republicans. These include aspects around Medicaid/medicare cuts and non-discrimination provisions (very popular with voters and hated by the US health insurance lobby). With the senate at 52-48 Republican, no democrat support for reform and division in the Republican House of Representatives. Reform here also seems unlikely.

Regarding defence, the Trump administration is remarkably consistent with previous administrations, including Obama. Additional military support in Iraq, statements of support to Japan and South Korea, Covert ops in the Arabian Peninsula and commitments to spend more on defence. So far, so Republican. Even on NATO, an area often attacked by Trump in his speeches and tweets, the actual messaging to Europe has been more focused on “we value NATO, but you need to pay more”. This again is hardly new. In fact, the last five Secretaries of defence (under Bush and Obama) have said the same thing publicly.

On law and social justice, the reality of what is happening is also far less controversial than the noise. The reforms to H1B visa are one example. While portrayed as a Trump attack on skilled labour, the area has been under review for years, with Obama considering raising the minimum required salary to $110,000 and Trump considering similar numbers. Even the delay in processing within 90 days, appears to be more a product of overworked government agencies than a specific anti-migrant move. Trump’s choice of Supreme Court nominee is also a good example. Despite the criticism in left wing circles, Neil Gorsuch was approved to his current position by a unanimous senate vote (including all Democrats) and was in fact a Bush Jnr era appointee. Moreover, Gorsuch is a replacement for a previously Republican supreme court position (he is even seen as a perfect model of the last figure), thus ensuring the balance in the court has barely shifted since Obama.

None of this is to say that the noise and tone of the Trump administration is not having a significant impact on America’s standing in the world and how people in America view themselves and their fellow citizens. However, it is striking how much focus and attention the tone and voice of a world leader receives, rather than the reality of what is happening on the ground.

A final observation I would share is how little resistance there is within the States to the actions of the President. While a number of states are certainly fighting specific actions, such as the travel ban executive order, there is a remarkable lack of strategy behind those who oppose Trump. For one thing, there is no meaningful discussion of candidates who could revive the Democrat party and provide a real leadership challenge to Trump. Nor is there any clear sign of a moderate Republican leader coming through the ranks. One challenge may be the desperate lack of new faces in both parties, but it is interesting that no US political figure seems like a ready replacement for the President. Interestingly as well, the momentum of protests appears to have petered out entirely. In Washington DC, the protest momentum after the inauguration seemed to be growing, but now there has been little to no real action. In part because, I suspect, there are few well organised and funded organisations that are able to sustain the momentum. Instead those in the nation who oppose Trump appear numb and subdued. A tragedy for democracy, and perhaps an answer to the question of whether Trump would seek a second term (and win).

Defending Ideologies

For about twenty years it seemed as though life was simpler. The European continent largely avoided any major wars, prosperity recovered after a series of economic challenges, the world become more multicultural, and technological innovations flourished. However, even then the signs of future challenges were clear. New ideas about how society should function were gaining popularity and nation states worried that their culture and identity were under threat by malign foreign influences.

If any of this sounds familiar, it shouldn’t. This was 1820-1840.

As human beings, we can be wonderfully contradictory. We praise tolerance and openness, yet criticize those whose views are widely divergent from our own. We talk about the need for businesses and governments to act on climate change, poverty and to promote fairness, yet criticise them when they raise taxes to do so. But perhaps the most interesting contradiction comes in how people react to the word ‘ideology’.

If you mention ideology today, the connotations are overwhelmingly negative. Those of a politically left wing orientation think of Fascism, Thatcherism and Capitalism. Those of a right-wing orientation think of Socialism, Communism and Protectionism. One thing both agree on however is that our society today is different. From the 90’s, people have professed that ideology is dead. From the famous “End of History” by Francis Fukiyama to the creation of “Third way” parties across the developed world, the impression our society has given is that the world is no longer governed by a fundamentalist set of ideas. Instead, people believe that our societies our governed by a scientific method.

According to this belief, the western world is governed by “what makes sense”, by “what is rational”, and by decisions based on “evidence”, not “emotion”. An alternative definition would be to say that our society is governed by pragmatism. The idea that decisions are (generally) made based on careful consideration of the evidence, accumulated by subject matter experts, reviewed against other considerations (such as budgets and the environment), before being implemented, often after an initial pilot project.

Against this backdrop its easy to see why China’s foreign policy, the election of Trump, the Brexit vote, the popularity of Le Pen, Geert Wilders and Putin all seems so scary to western societies. We have grown up thinking that decisions are only rational and therefore only plausible, if they pass a carefully assessed cost-benefit analysis. In this capacity, economists are the rock stars. As individuals who profess to quantify human behaviour into predictable patterns, the word of an economist is all-powerful. Uncertainty is the enemy of a rational, pragmatic based system of governance. It affects long term planning and it is difficult to respond to.

But while the intentions behind pragmatism are often noble, what the political leaders of today have forgotten is that belief in the scientific method, as a strategy for governance, is an ideology in and of itself. Even worse than that, it is a fundamentalist ideology that cannot answer the questions that fundamentally matter to society. To provide one good example, let’s look at international trade.

Free Trade is the perfect example of the strengths and limitation of the “Pragmatism” ideology. It is universally agreed by economists that free trade makes everyone better off. Free trade expands the combined economic pie, by allowing people to specialise and therefore work in the areas they are most efficient in relative to others. Moreover, the evidence proves that free trade expands a country’s economic pie over time. Seemingly therefore this is a clear win for pragmatism. Yet all over the world, hostility to free trade is fierce. For people of the Pragmatist ideology, the answer to why people are upset is easy: most people simply do not understand economics, they cannot get the bigger picture and they are easily misled by people with their own agendas. Safe behind these rhetorical defences, the pragmatists wistfully think of multilateral organisations that remove control over these policies from governments and some even muse about voting restrictions so that “only educated people can vote”. But they are wrong. It is not that the average voter is against free trade per se, or that they do not understand free trade. Rather, their opposition is rooted in the issue of who is benefiting from trade and who is not. It is these questions: of equity, of who should gain, of who should lose, and what compensation people should get, that pragmatism and the scientific method is totally unable to answer.

If you want to understand why seemingly “populist” parties are back in vogue today, then look no further than this. In a world which is rapidly changing, where new innovations and dynamic population shifts increasingly create new classes of winners and losers, the scientific method is painfully slow at providing the solutions people need. Pragmatism requires decision makers to be able to find the answers to problems, through studying a phenomenon and carefully analysing it. But that isn’t possible in a fast-changing world. Ironically enough, it’s not just voters who have realised that governance by pragmatic ideology is ineffective; it’s businesses too. It is no coincidence that companies like Facebook, Tesla, Amazon and Uber are riding high in the stock market and catching the interest of people across the world. It isn’t because they have all the answers, that they understand all the trends, or even that they have the best technology. Rather, they are run by people who have a clear vision of how they think the future should look. In short, they are run by people who have ideologies of their own.

Ideologies are an essential part of the human condition. Before the rise of literacy in the European middle classes, governance was driven by “pragmatic” considerations among the educated classes that subscribed to a set of beliefs prioritising stability and certainty over dynamism and volatility. The result was peace, but at the cost of dramatic human misery. It was the inability to govern according to an equitable set of ideas that led to the rise of socialism, liberalism, communism and nationalism. Without these four ideologies, the world would never have introduced basic human rights concepts into law, such as the right to a free trial, freedom of speech, basic workers’ rights, the right to healthcare, and education. The list goes on. Moreover, in contrast to a popular understanding of ideology, many nations would never have escaped serfdom and feudalist systems without nationalism. Nationalism was the driving force which allowed people to cross vast geographical and social divides, and to unite behind a common set of ideas. Without nationalism, it would have been impossible to break down many of the divides that existed between communities, even those separated by only a river.

None of this is to say that ideologies cannot cause immense human suffering. Clearly they can and have. However, ideologies are vital to our way of living precisely because they can answer the only questions in governance that really matter: is it equitable, is it fair, is it just and does it make people happy? The current obsession with governing by a pragmatic ideology is not only wrong, it’s dangerous. Dismissing people’s concerns simply because, in a purely rational world, the economic outcome of a policy is net positive, is not a credible way to govern. It was precisely this hubris that lost the remain campaign vote last year and which lost Hillary Clinton her presidential campaign. If those who define themselves as being politically centrist want to keep the world as it is and prevent the changes they see taking place around them, they need to understand this lesson. People are not machines; they are beings of emotion. If you cannot explain to someone why your system of governance is fair, why it is just and why it will make them happier, then you will not be able to govern.

Ideologies are back on the world stage. It is about time too.

 

“Brexit means Brexit” – a Translation

Following Prime Minister May’s speech on BREXIT, I have attempted to summarise and analyse the insights I have gleamed on the process over the last year below.

Immigration:

This has been one of the biggest areas of focus since BREXIT was announced, but we now have some clear outlines. First and foremost, the UK will not accept the EU’s freedom of movement, as it applies today. Instead it appears that the UK will offer its own equivalent of the American ESTA scheme, an online visa form which is approved quickly and lasts up to two years, for all EU nationals. This would mean that all European tourists, academics, artists and business people in would be able to visit the UK as easily as they can today, absent a 5 minute application online.  The second piece that we can say with a very high degree of certainty is that all EU nationals currently residing in the UK will be offered citizenship. Theresa May already offered this to the EU commission, in exchange for guaranteeing the rights of Britons living in the EU. We also know that the Home Office is pushing this approach as well. The costs and resources needed are extensive and frankly Theresa May’s government views this as an easy compromise that will encounter limited real resistance from within the UK or her party.

On work rights the picture now is also clearer. One school of thought is to create a skills based quota for each year and make it applicable for all global nationals, including the EU, which is in line with the US, Canada, Australia and other developed economies. This aims  to allow a quota of non-UK nationals to enter each year, provided they are sponsored by an employer. This is the approach championed by the Home Office under Amber Rudd (who previously supported Remain). The other option being proposed is to grant an automatic visa to any EU national who has a full-time job offer to work in the UK. This idea has been proposed by former foreign secretary William Hague. The ultimate choice is likely to be determined by the EU’s negotiating position. The automatic right to work, if an employer has made a full-time offer, allows the government to demonstrate that only “working migrants” are entering the UK, thus dispelling the pernicious lie that EU immigration is welfare driven. It also allows UK industry to recruit top talent across Europe, thus helping to address business fears about labour shortages in certain sectors (including the NHS). If implemented properly, this could even be a blueprint for the EU’s relationship with other future members, such as Turkey and Ukraine. However, if the EU appears to push for punishing exit terms and UKIP maintain the pressure on key Conservative seats, then the first option is more likely.

Foreign Policy and Security:

At this time there has been no suggestion that the UK wishes to change its cooperation with the EU at an international level. The UK has continued its increase in troop and materiel deployments to the Baltic states, and there are no signs of a thawing between the UK and Russia (unlike the USA). At the international level the EU often operates in a broader grouping that includes Canada, Australia and Norway at institutions such as the UN, World Bank and other multi-lateral agencies. It  appears clear that the UK will simply remain within this broader grouping, albeit with less influence on the EU’s ultimate position on issues than it previously held.

Amazingly the UK has not made any attempt to link security and NATO related issues to the terms of exit. This is despite a range of arguments that suggest the UK could leverage this angle, especially in light of the changing US position on NATO. While there have been early signs that the UK intends to expand its presence once again “East of Suez” and there have been discussions to re-open UK naval bases outside of Europe. However, given the UK’s limited manpower currently across the armed forces and its shrinking maritime presence, these recent moves appear to be more symbolic of a UK “open to the world” than a sign of significant redeployments to come.

Trade

While the Prime Minister has talked about staying in the customs union, it appears more likely that the UK will leave the EU single market and customs union. Given this outcome, the game will be about Tariffs, Equivalence and Regulation.

Let’s start with Tariffs. While there remain a number of technical issues to finalise, it appears certain that the UK will become an automatic WTO member, after its exit from the EU is completed. This membership ensures that both the UK and EU have strict limits imposed on the level of tariffs they can set on each other and when they can impose tariffs. To put into perspective the current WTO tariff levels, the tariff on cars between the USA and Europe is around 3%. For some areas the tariffs are higher, for example food, but as the UK is largely an importer of goods from the EU it is unlikely that the EU would want to impose large tariffs.

However, where the EU is likely to seek a clearer split with the UK will be around regulation and Equivalence. With an exit from the single market, the UK Financial services sector are likely to lose what are called “Passporting rights”, whereby UK firms can sell financial products directly to EU consumers and businesses without needing to have a local presence. What the net effect of this will be is unclear. The immediate answer will be that costs for all financial services companies in Europe will rise and the UK will lose some staff in areas like FX trading and clearing of some Euro denominated debt. Beyond that the picture is less clear. As the cost of regulation has increased since 1997, the Financial service sector has seen considerable consolidation, leaving Europe with a smaller group of larger companies than existed before the single market. As these players have operations all over the EU, it’s unclear whether firms couldn’t simply hire a staff member and a postal address in the EU to circumvent many concerns. This approach already exists to an extent within the EU today, as it allows companies like Facebook and Google to take advantage of different tax laws, see Luxembourg and Holland.

Again, the more positive outcome for both sides would be an agreement to keep all tariffs on goods at zero and to introduce “Equivalency”. This concept means that the UK financial services sector could sell goods into Europe, like a firm based in Europe, but they would be subject to EU regulation and EU courts. Moreover, the UK would have no influence on EU regulations and firms in the UK could be prevented from doing business in Europe if they did not match EU standards.

On the broader international trade piece, it looks as though the UK priority list will be the USA, followed by Canada, Australia and New Zealand. I would also add, though it hasn’t been mentioned, that Japan would likely be high on that list too. Japan is a large investor in the UK and moreover, the UK and Japan have few sectors of extreme competition, with the UK unlikely to threaten Japan’s agriculture or electronics manufacturing, while Japan poses few threats to the UK services sector. The UK would likely use templates from the failed US-EU trade talks as the basis of terms with the US (50% of all US gains from TTIP were due to come from greater access to the UK anyway) and the UK is likely to use the current EU-Canada trade deal as its template as well.

Closing Comments:

The BREXIT process is subject to a huge amount of political brinkmanship. Should moderate EU parties do well in elections, the global economy accelerates, Theresa May remains popular in the country and Trump remains largely focused outside of Europe, then political leaders should have the breathing space to craft a reasonable and fair deal. If, however, Russia and the US increase pressure on Europe, the migrant deal with Turkey collapses and populists are successful in EU elections, a fortress mentality may set in. The EU, despite its challenges, remains extremely popular in Europe. For this reason I continue to believe that if the survival of the EU becomes more threatened, we are likely to see a youth led backlash in favour of greater EU integration.

The EU is, in the words of Romano Prodi “an unfinished project” and Europeans know this. Thus, how BREXIT plays out is not simply a story that can be told in isolation, rather, BREXIT is also the story of the European Union. Will it become what its fathers dreamed of, a full political union of nations, or will it unwind to an early form. Time will tell.

Thoughts for the year – 2017

While many will have breathed a sigh of relief on the 1st of January that 2016 is over, the consequences of last year will continue to define this one. Firstly, we shall see what effect the far right electoral successes and Russian electoral interference in 2016 will have on European general elections. Alongside these events we will also receive further details on Mrs May’s plan for the Brexit negotiations in March, and by the mid-year, we will know whether the “Trump boost” which has lifted global equity markets and triggered a selloff in fixed income assets, will have been justified.

But 2017 is likely to be a tale of two halves. Political paralysis in the USA and Europe has hindered economic growth and encouraged extremely cautious investment strategies. Thus, the consequences of the political choices which Europe and the incoming Trump administration will have to make in early 2017, will provide markets, businesses and other stakeholders with a clearer sense of travel for the world’s largest consumer economies. The second half of the year will then revolve around how the rest of the world responds to these decisions.

If confidence in the economic growth of the US economy continues to rise, and subsequently leads to the projected three rate hikes by the Fed, then the US dollar will continue to appreciate, causing a flight of capital out of European and Emerging Market asset classes (whether they be equities or fixed income). This will cripple companies in the developing world who have large US dollar denominated debt, even if governments in regions like Asia will be better insulated from the effects this time than during the Asian Financial crisis in 1997. Moreover, if the dollar appreciation leads to a widening of the US trade deficit, as witnessed during the Reagan years in the 1980’s, we would expect to see greater emphasis on an “America First” trade policy. The rhetoric and responses to President Elect Trump’s tweets on Trade, already indicate that this may be the course of action.

Though these comments may seem overly financial, their wider societal implications are enormous. If investors see greater returns in US markets, alongside greater political instability in other global markets, then access to finance will become constrained across the developing (and perhaps even developed) world. This comes at a time when global investment in infrastructure remains well below the estimated requirements by the world’s leading international financial institutions, such as the World Bank, ADB, African Development Bank and Inter-American Development Bank. To put figures to this effect, it is estimated that Asia needs to spend between US $2-3 trillion a year on infrastructure. The figure to date is roughly US $1trn, or 50% of that required. Elsewhere in the world, notable Africa, the figure is even lower. Such infrastructure includes basic goods such as hospitals, schools, roads and power generation assets. Without the ability of governments to finance and provide these goods, then societal frustrations with consistently poor living standards may lead to greater political unrest and support for populist parties. This is especially concerning in countries that are still experiencing large population booms and who have a growing, young population that need economic growth to find jobs.

Moreover, as the value of the US dollar rises, oil producers who have operational costs in domestic currencies, will see increased financial returns. This will help alleviate some pressure on the balance sheets of oil dependant governments, but it will also increase the real cost of oil for citizens and businesses in emerging and developed markets (oil globally is priced in dollars, so a rise in the dollar v.s. other currencies will increase the cost of fuel for consumers).

Looking beyond the potential areas of concern, there are areas where optimism is warranted. In 2016 investment in Renewable Energy overtook investment in fossil fuel based power generation for the first time since the start of the industrial revolution. In 2017 this trend will only accelerate. The UAE has already committed, in the first week of 2017, to spending US $163bn to provide 50% of its power from Renewables by 2050. Others will continue to follow. Moreover, electric car growth will continue to expand, fuelled by government incentive schemes and the launch of several new car models, such as the newest Tesla vehicles, directly targeted at middle income families and competitively priced (though government subsidy support will still remain crucial). In science, we may also see a breakthrough cancer drug brought into final stages by AstraZeneca by the end of 2017, as well as several major space launches and satellite passes of earths neighbours in our solar system.

As a student studying the world from an ivory tower in Washington DC it is easy to get lost in the noise of the world. But the one prediction for 2017 that I can make with certainty is not a macro level prediction, it is a micro one. Despite all the concerns and hysteria that the press will cover in the next year I remain convinced that the vast majority of people in the world will experience few changes to their daily lives as a direct consequence of the headline grabbing events. In fact, the biggest question in 2017 is whether despite all these huge events occurring around us, people will become more engaged politically at all.

In November 2016 I had the privilege to stand outside the White House after the election results had arrived. In a large student city, which voted overwhelmingly Democrat, in an election where Trump was (and is) described as a threat to the very nature of the American political system itself, there were more journalists present than protestors. Nor did DC see many protestors or rallies of significant size in the weeks after the result. In the UK too, after Brexit the protests were few (if any) and the rallies were poorly attended (if held). All this in a country where 1 million people marched to prevent fox hunting from being banned in 2005. Thus one question for 2017, that I hope to see answered, is whether this year of change is also a year of political awakening for the generations of citizens who have been sleeping for the last two decades.

Time will tell!

A few words at the end of 2016

It is easy as a commentator on events to assume that we have a unique perspective or insight that people will benefit from reading. After all, if we didn’t believe our opinions were of interest we would hardly be sharing them. But what is often forgotten when we write pieces is the reader themselves. It is easy to fixate on the issues which we are passionate about, to analyse every scrap of detail under the most forensic microscopes we are able to acquire and to wax lyrical on the importance of the issue we are discussing. What it is harder to do is to create something that is relevant, that is interesting, that is inspiring and that is thought provoking. It is for this reason that the default subject of articles often becomes current events and specifically critiques of current politics, people and passions. But while this may be easy and often immensely enjoyable for the writer, it often leaves the readers despondent, overwhelmed and occasionally depressed.

It is partly for these reasons why I think that people have found 2016 such a challenging year. As our world develops increasing ways to communicate with each other faster and in greater detail, it becomes easy to get lost in the noise. In fact, part of what has made 2016 so difficult is how ingrained our habits of checking social media and our phone have become. Instead of using communication to supplement our lives, it has increasingly taken over our lives. Try for a week to count how many meals or meetings you attend where attendees place their phone on the table before the event has even started and consider how many would have done so 10 years ago. It may well be understandable in the context of the world we live in today, but the fact that it has become understandable and that our obsession with constantly accessing information has become rationalised, is also part of the problem. It is important to know what is happening in the world and to know what is happening in our communities, but what people have forgotten is that life moves on regardless. There are no shortage of years where American’s have elected a president, convinced that the electoral system has failed and the candidate will be a disaster, nor are there a shortage of events where major referendums have been forecast to doom entire nations. But these events, while seemingly seismic in nature, often fade quickly into the background for most people, with the challenges they create becoming quickly assimilated into most people’s daily routines.

At the end of 2016 many people are still lost in the noise of Brexit, Trump, Paris, Berlin, Aleppo, Prince and the scores of other events that have left markers this year. But what we shouldn’t lose sight of is the fact that slowly but surely, changes have been happening in the world that are making it better too. At the end of this year the world will have made its first real commitment to keeping carbon emissions below 2 degrees centigrade and the world will have invested more in installing new energy from renewable sources than fossil fuels (the first time since before the industrial era). The world also will have seen the largest single philanthropic endowment of over $100bn from wealthy individuals to fight climate change.

On gender, the proportion of women in finance, notably venture and private equity, will have more than doubled in the last decade. Women’s sport numbers continue to rise, with over 700 million people watching the women’s world cup last year and in the armed services, women will be seen in more active combat roles than at any time in modern history. In politics, the UK has its second ever female Prime Minister, alongside a female German Chancellor and 22 other female world leaders, the highest number in recorded history. On race, we have had the first ever black president of the United States and the UK has its first ever Pakistani mayor of London, with Romania almost electing a Muslim PM for the first time in the country’s history.

On poverty, world poverty and world extreme poverty continue to decline, as does access to energy and access to medication. Technology is also changing people’s lives in profound ways that we take for granted in the west. For the first time this year, Burma has been able to store anti-snake venom across the countryside thanks to renewable technologies and energy storage, a vital innovation in a country with the world’s highest number of snake related fatalities (1.4 per 100,000 people). We also now have developed a cure for ebola and drugs that allow individuals with HIV to have sex without protection, with no risk of passing the disease onto their partners.

There are certainly many more such stories. Perhaps only small and incremental in many cases, but cumulatively they are changing our world for the better. But we risk forgetting about these changes, or even worse, ignoring these advances, if instead of carrying on with our lives we instead fixate on the few issues that constantly catch the headlines.

So at the end of 2016 and the start of the new year we should all consider a piece of advice from older British history, a piece of advice now seen across the world, “Keep Calm and Carry on”. It may not be glamourous and it is certainly clichéd, but during the Blitz in Britain people carried on with their lives regardless of the perilous and fluid environment around them. People knew that major events were unfolding, but they also recognised that the main determinant of their own lives were not the actions of governments but the decisions they took themselves as individuals. That message is one I want share again for the new year’s.

The world is scary and chaotic, but we as individuals determine what role that will play in our lives. So, enjoy your drinks at New Years, the potential hangovers the next day and remember in 2017, whenever you feel overwhelmed, that life still moves on even when your social media is exploding. And when it is, try turning off your phone!

Happy New Years all!

Britain – we need to talk

A guide to what “Brexit means Brexit” is, and a roadmap to reconciliation

In recent British political discourse there have been few more controversial and misunderstood statements than Theresa May’s position that “Brexit means Brexit”. Understanding these three words has become an obsession for business, the public and politicians. The phrase has created uncertainty, fear and anger, but the statement is much simpler than people believe. Given the importance of this issue, here is an attempt to explain it, along with a guide for how we can lower the heat in British public discourse and start to reconcile our clearly divided country.

“Brexit means Brexit” – a guide:

Theresa May has built her leadership around three key principles: free trade, inequality and immigration. For the current Prime Minister, the EU is a major barrier to the UK’s ability to sign trade deals with the world’s leading economies. The last minute panic with CETA (The Canadian free trade deal) merely re-affirms her view, while the rhetoric on the TTIP deal with the US has led the PM to conclude that the EU and US trade deal is dead. On inequality, the PM believes that the Conservative party should be the champion for addressing social inequality. She believes that Grammar Schools improve social mobility for poorer elements in UK society and she believes that large private sector firms take advantage of international tax laws to deprive countries of the tax revenue that they “should” be paying. Lastly, the PM believes that with net UK immigration running at 300,000 people per year, the number is unsustainable. This was her view as Home Secretary and she believes that it is one of three critical concerns for UK voters.

This is not an endorsement of any of these policies per se, rather a translation. If Theresa May believes that the EU cannot sign trade deals, that companies abuse trans-national legislation to evade taxes and that immigration is too high, then a number of aspects of Brexit are clear. The UK position will be to leave the EU customs union, which is the union that determines the EU’s international trade position. The UK will also seek to restrict the freedom of movement granted under the EU’s single market. Lastly, the PM will seek to reduce the ability and incentives for firms to use low tax headquarters like Ireland, Luxembourg, Holland and Lichtenstein to evade UK corporation taxes. If the EU and the PM cannot negotiate these points, then the path is clear: Theresa May believes that the UK must pursue a “Hard Brexit”.

So what is a Hard Brexit and what would it mean for EU nationals, companies and British nationals?

A Hard Brexit means that the UK would leave all aspects of the European Union as it stands today. That means leaving the single market, leaving the customs union and leaving the European Court of Justice. But again, what does that really mean? In short it means three things will change:

  1. Trade with Europe may become more expensive (maybe a little, maybe not at all),
  2. Living in the UK for EU nationals or living in the UK for EU nationals, may require more paperwork (or none), and,
  3. Individuals will not be able to appeal court cases beyond the UK Supreme Court.

The costs of trade between the UK and the EU will be determined by two elements: trade tariffs, where UK and EU companies pay a tax to sell goods into each others markets, or goods/services regulation/standards, which may force companies to change their product or to provide it in a way which makes trade more expensive. As the UK today has “equivalence” in most domestic legislation, all UK goods and services already meet EU standards and vice-versa. As such, the only cost after Brexit would come if the EU imposed a tax on trade between countries. However, as the EU and UK are members of the World Trade Organisation (WTO), this means that tariffs are limited. In many cases, the tariff cannot rise above 5%, a figure that would be absorbable by most businesses (albeit unpleasant).

For questions of residency, we already have a few “known-knowns”. The EU does not allow discrimination among member states, so while the UK can offer easier visa access to certain EU members, no EU member can offer the UK better terms than anyone else. Simply put, if the PM restricts the access for one EU country (or a few) to come to the UK, every EU country will retaliate in kind. That being the case, there is no evidence that the UK would require EU nationals to get a visa to visit the UK, nor is there much evidence to suggest that accessing work visas (or student visas) in the UK would be complicated or even hard for EU nationals. A good reference point here would be to examine the UK’s attitude to US and Canadian nationals who want to live and work in the UK.

A roadmap to reconciliation:

Clearly there are all sorts of specifics that I cannot cover in one article, but these are the broad strokes. Thus, the success of Brexit or its failure will fundamentally depend on one aspect: goodwill.

The debate around Brexit has been toxic. Instead of treating each other as fellow citizens, with valid arguments and with an equal right to express their opinions, both sides have belittled and insulted the other. This has to end. Everyone had a right to vote and the vote has to be respected. It does not matter where you live in the UK, how old you are, what your level of education is or which political party you vote for, you are no better or different than any other citizen in your country. If we fail to acknowledge this basic fact, then we will end up in the situation the US finds itself in today. Even before Donald Trump, the US political system was so polarised that cooperation was next to impossible and political gridlock has endured.

The US today illustrates what happens when one-half of society fails to trust the other. We cannot allow that to happen in the UK. Leave may have won the vote, but those who voted remain are also citizens of the country and they have a right to contribute to the discussion of what kind of Britain they would like to see outside of its current relationship today. Similarly, Remain voters need to acknowledge that every court case that they bring, every article or speech they give about a 2nd referendum and every request they make that MPs should reject Brexit, reinforces the believe of Leave voters that they cant be trusted to contribute to the Brexit discussion. Any good partnership is based on trust. Remain voters need to give leave voters the confidence that they have accepted the result and leave voters must be brave enough to trust them.

Brexit is going to be a complicated and long negotiation, on which many people will find it hard to detach their deep emotions surrounding an EU member leaving, from the practical need to find an accommodation with the EU’s largest bilateral trade partner. The UK too needs to recognise that the EU is a multifaceted creature that goes beyond the widely disliked European Commission Officials in Brussels. The British people know that they love European people, the food and the culture. Even Nigel Farage, the bogeyman of the Leave campaign, has said that he “loves Europe and the European people”, he has a German wife and speaks German. This distinction between the EU as a political institution and the EU as a grouping of people and states is essential and the current messaging from the UK government is wrong.

Let me finish with a few words to the two most under-represented groups in the entire discussion, those EU nationals who work, study and live in the UK and those British expats who live, work and study in Europe. It is true that 52% of the British electorate voted for Brexit, but not all of those 52% of voted to turn away from the world, to end immigration, to demean, belittle and insult people who have simply chosen to live their life’s in a different place from where they were born. I am immensely proud of my friends from across the world that have come to the UK and made it their home. We are richer for your presence here. I also know from my own experience and those experiences of my family members, that our lives were made richer by being able to spend time living abroad. Many people are questioning their place in the UK today and many are deciding that it is not the home they thought it was. But whatever you decide to do, as a Brexit voter I just want to say, I will always support your right to live here and call this your home. And I know I am not alone among Brexit voters either.

We stand at a crossroads dear friends. We can stand together, work together, respect each other and trust each other, or we will fail. As the old cliché goes, United we stand, divided we fall.

Our system isn’t working – let’s make it better

The case for more humility in global politics and reducing the role of individualism in society.

To look at the state of the world today and believe that everything was going well would require a degree of optimism bordering on insanity. The world economy is not growing, the world’s climate is dying, and intra-country inequality continues to rise. In short, our current model for society and global governance doesn’t work. We need to try something new.

While we could point to a range of factors to explain our current predicament, the bottom line is that the way humans behave in the world today is wrong. We consume too much, we share too little and we are too insular in the way we make decisions. The question therefore is why do we behave in a way which makes our world worse and importantly, how do we change that?

The way that people behave is determined by the incentives that their society creates for them. These incentives seek to constrain the actions of individuals to a “reasonable band” of conduct, that allows a community to live alongside each other without resorting to conflict. While these incentive structures have evolved over many years, the challenge we face today is that our incentive structures over-emphasise the role of the individual and the right to individualism over the rights of the community writ large.

Individualism as an ideology is built upon two essential pillars: freedom of thought and freedom of economic opportunity. In pre-enlightenment societies individuals had neither. People were told what religion to believe, what job to do, where to live, who to marry and who to fight. The church and aristocracy worked in parallel to control as rival, but mutually reinforcing, power structures to ensure that those who sought to challenge their ideas would be mercilessly punished. During this time the role of the state was essential to ensuring that individualism was constrained. It is for these reasons today that Individualist ideas strongly reject the idea of a powerful state structure (think the USA).

 Individualism was/and is always threatened by the community, which may constrain it. From this principle individualism is synonymous with the idea of free markets and freedom of expression in their fullest forms. Individualisms strength is that it allows the individual to explore their creative impulses without the constraint imposed by their community. By freeing individuals from their communities, we allow individuals to develop in their own unique way. Diversity of outcomes and experiences act as a force multipliers, allowing for an exponential growth in interactions and facilitating an extremely powerful creative process. It is for precisely this reason that the West has been so successful for so long. The power of human creativity has been the engine that drove the development of our world today.

 But as many parts of the world today know only too well, individualism also carries great costs.

 Communitarianism is the idea that ones community matters more than the individual and the idea that all members of the community are bound to help and support one another. While some of this process is encouraged by local elites, seeking to enhance their ability to control their community, much of it is also intuitive and self-serving. Communities provide a natural safety net for individuals, an alternative form of insurance against misfortune. It also serves as an effective mechanism to mobilise large numbers of individuals and channel their energies into creating public goods.

 The rise of Individualism as a global ideology however is weakening those social safety nets. By placing the importance of ones self as above that of the broader community, people become detached from those around them. It is this detachment which leads to inadvertent selfishness in decision-making and which also reduces our natural tendency to share with others.

 So what then can we do and how do we try and resolve this conundrum?

 Politics is about providing channels for groups in society to exercise power. By power, I simply mean the ability to do (or not do) an activity. In this context, the problem is that our political structures do not allow us to re-draw the incentive structures that currently govern our societies. We need to find a way to allow our communitarian concerns for others to constrain our individual excesses, in manner that clearly benefits everyone and does not prevent individuals pursuing their own liberty.

 I personally believe the simplest way to start this long process is by making government more transparent and increasingly returning responsibility for governance back to the people. If society is not engaged in making the key decisions that affect it, then members of society will feel no attachment to ensuring these decisions succeed. Individualism has costs, but currently it is too easy for people to shift the blame for society’s failings onto others rather than themselves. We have forgotten the old adage that “No man is an island”. Our decisions have consequences and recognition that as individuals we may be making things worse for others and ourselves is essential to addressing these problems. If we can return responsibility back to society itself and we can remove the excuses for people in society to deflect blame by feigning ignorance, we can begin to come to the real solution to balancing our communal responsibilities with our individual societies: humility.

 Often in society Individuals believe that they have all the answers to societies problems and I am personally very guilty of this. However if we do not all become better at recognising the limits of our abilities and acknowledging our need to listen and respect others, we will not overcome our selfish impulse to follow our own course rather than partnering with others. This is what I mean by Humility today. In politics it remains the case that elected officials remain more interested in trying to secure their re-election and the unilateral enforcement of their ideas, rather than in the complex negotiations of engaging with all elements of society.

 Many of our greatest challenges in the world today could be resolved by people collectively demonstrating more humility than they have shown thus far. Our politicians are meant to be the leaders in our society. A bit more humility at the top may be the answer our world sorely needs.