A new governing strategy for the Conservative Party

The Conservative party today lies in tatters. A leader that has lost the support of the public and her party. A party that is seen as out of touch, ruthless and clueless by the British public and nations afar. A government that has no vision and an opponent that offers hope, change and momentum. A momentum towards a past that the Conservative party and its leaders have spent nearly 40 years fighting. Perhaps the only saving grace is that the Conservative party is not alone in its struggles.

Today we see in America, in France, in Italy and across the Western World, that the old political systems and their parties are collapsing. Some are being replaced by new liberal structures. Many are not. During the Cold War the terms of debate were clear and the enemy was clearer. With the end of the Cold War, liberal parties rejoiced in their hard one victory. But they got complacent. They ignored the people and they forgot that Liberalism is not a finite end in and of itself. Rather, it is a mechanism for helping those who govern to make choices for the future. But there was no plan for the future. No dream end game or envisaged utopia. In short, they forgot the most human of all things. They forgot that people need hope of a brighter and better tomorrow.

The problem of the Conservative party today is less the methods by which it governs, than it is about the vision and ideology which it has governed by. In 2010 the British public understood that sacrifices needed to be made under the banner of “Austerity”, but what no-one understood was what was supposed to come after Austerity. What was the reward at the end of the march? It is on this charge that the Conservatives failed to win a majority in 2010 and it is for this reason why the party is so rudderless today.

More than anything what Conservatives of all colours need to show is humility. We underestimated the deep sense of injustice and inequality within society and we did too little to address it. We let our overwhelming desire to replace New Labour cloud our vision of what our party stood for and its principles. As a party we lost track of the fundamental tenants of Liberalism, that a belief in the inherent good of human nature and freedom, requires us to do good to others with that freedom. The free market, if it ever can be said to exist, is not a thing of emotions. The free market is a mechanism that allocates resources to where their perceived value is highest. It does not exercise compassion, fairness, tolerance or diversity. It does not support those who fall or offer a hand to those who need a boost to get started. If Conservatism is to return to its values and principles it must start by recognising that the free market may create wealth but it is people who distribute it. If the wealth creators in society do not see the value in distributing wealth and in helping those less fortunate, then the system will not fix the problem. It was never designed to do so.

Despite her many failings as a leadership figure, Theresa May knew this. As did David Cameron’s team, with their talk of the “Big Society” and Ian Duncan-Smith’s work on benefit reform. Like many problems, it seems less an issue that the sickness hasn’t been diagnosed than a question of how to solve the ailment. It is precisely the failure of the Conservatives to find an answer, while Jeremy Corbyn does offer a solution, that may be the hammer blow for Britain. But all is not lost and the party that led us through our darkest hours in WW2, the financial crash of 1979, the Falklands war in 1992 and one of the strongest G7 recoveries after 2010 is not finished yet.

The Conservative party needs to start by being brave and being honest. It needs a full public confession and admission that it got things wrong. When you have wronged a friend, you do not explain to them your reasoning for why you behaved wrong before you apologise. You apologise first. The British public want and need that apology first.

Further, we need to recognise that if there is no single leader in the Conservative party today that can represent the party as a united body, then we should govern as a party and present ourselves to the people as a party. The Conservatives may not represent the nation perfectly, but there are MPs that represent women, ethnic minorities, different religious groups and sexual orientations. They need to be heard and they need to be seen. Rather than worrying about threats to the leadership, the Tory party needs to show that it is a party that is focused on delivering a better life and better opportunities for the people of the UK before the personal career interests of its own members.

Today the Conservative party must answer two questions: firstly, how would a Conservative government make the country happier and wealthier for all. Secondly the party must explain why Liberalism must be the guiding set of principles to achieve that end and not Socialism.  In the UK we have the ability to choose where our children study, where we want to live, for whom we want to work, the type of car we want to buy and how we want to allocate our pay check across these things at the end of each month. That is the freedom of choice which Liberalism gives us. The freedom to make decisions, both good and bad. But it also requires us to be responsible for the failures which we create ourselves.

The world is not fair, nor equal and in the absence of intervention these market failures will not be improved. Liberalism in the 21st century must begin with this realisation that the public will no longer accept the trade-off of total freedom of choice in exchange for personal accountability of all outcomes. Instead, people believe there are some things that they will always need help to protect themselves against. Modern psychology seems to agree. Study after study shows that life in poverty reduces the most intelligent people into making seemingly irrational decisions, as people are forced to make decisions to live day by day. The ability to plan for the future is a luxury for those starving today. Society needs a basic safety net of human decency and when over 2,000 food banks exist in one of the world’s richest nations, we can safely say that the basic net is not being provided. A new compassionate Liberalism needs to start by understanding that for people to make rational choices they have to be in a position to think rationally.

The Conservatives have always been called the “nasty party” because they have never been afraid to let people fail. But the biggest problem has been that not enough are succeeding. A Conservative party that can breathe life into the promise of Liberalism, with an understanding that no society can be called rich when its poorest must rely on charity to eat, has a chance to turn the tables on the false promises of Labour today.

Make no mistake, today Jeremy Corbyn’s Labour Party is a populist one and it will not be beaten by patronising it or dismissing its central arguments alone. Instead the Conservatives must show the British public once again that they are the only adults in political room that can deliver a better Britain for all. Showing more humility, compassion and humanity would be a welcome place to start.

Exploring the commercial viability of integrated DER solutions in NY state 2016-17

Over nine months ago, myself and three fantastic colleagues Max Stadler, Fujia Zhang and Xitong (Kathy) Gao began work on researching distributed energy resource solutions for higher education institutions in New York state. The project was a collaboration between Johns Hopkins SAIS ERE department and Power Capital, a UK based Energy Consultancy.

Many wonderful people have supported our efforts and listened to the team drone on about this project. So as a small thank you, I have included a final version of our report here. It is available to be read, but the intellectual property remains with myself, Max, Xitong and Fujia so please contact us if you wish to use the content first.

Our project examined whether a new energy services compnay model was viable for the New York market and what sorts of market/regulatory pressures ar affecting these customers. We believe it is the firts report of its kind on this segment and market.

It has been a pleasure to work with such an exciting group of people on such a wonderful project. I hope others also find it of interest.

Exploring the commercial viability of integrated DER solutions in NY state 2016-17

Why is it so difficult to be a Conservative?

The election today represents a reversion to the mean for British politics. For the first time since 1992, the voters of the UK face a clear choice between Labour and Conservatives. For many this is unsettling. My generation grew up with the Centre Ground. A place where limited ideologies existed and variations between the parties were driven more by local issues and individual biases than existential differences in party governing ideologies. This is how the awfully phrased “millennials” think of politics. A choice between technocratic governments with different faces. Until today.

Today ideology is back, and as I have written before, this has been a shot in the arm for the health of UK democracy. The Brexit referendum marked the first nationwide turnout above 70% in 30 years and repeated polling suggests that the 18-24yr old turnout will be a record 60% or better. But with ideology and passion comes clear winners and clear losers. In part that is why this election is so much harder than those before. There is a trade-off and whoever wins the election will change the face of Britain.

I grew up hearing the phrase that “if you don’t vote for labour when you are young you have no heart and if you don’t vote conservative when you are older, you have no brain”. The polls seem to reflect this adage. Only 17% of 18-24yr olds are due to vote Conservative today, yet over 40% of 65+ voters will vote Conservative. So today I am in a minority in my nation and my generation. As I was for Brexit. So why be the contrarian? Why stand against your own generation and be different? Surely, they can’t all be wrong? And with all of these thoughts comes the question, why would anyone be a Conservative at all?

The charges against the Conservative party are steep. Consistent cuts to mental health, hospitals, schools and police for nearly 7 years, a Brexit campaign fought with no plan B and a leadership election straight after when leadership was most needed. A party that tacitly supports foxhunting, that supports nuclear weapons that could kill millions. A party that cuts taxes on businesses while reducing welfare to those most in need. A decade of lost wage growth and declining real incomes and a boom in food banks. Surely, my generation asks, it is time for something different.

Today stands Jeremy Corbyn as that “different”. An insider of parliament for 30yrs, yet an outsider in his party for most of them. An avowed pacifist, active human rights campaigner and strong defender of minorities. Especially immigrants and religious communities. A brand of politics where all are equal. A deal for the nation – a new social compact for the people. Sounds appealing doesn’t it?

It is difficult to be a Conservative because at its core, Conservatism is about faith. Not religious, though for some it may be. Rather, Conservatism is about faith in people. To be a Conservative means placing your faith that individuals excel when given the freedom to act and the opportunities to improve their own lives. Being a Conservative means holding a belief that it is not the State that can help an individual to find the drive, passion and bravery to excel in their lives. It is people themselves.

This election is about ideology and for many of my generation the wrong conclusions have been drawn. Conservatism is not about every man and woman for themselves, a free market gone wild. Rather, Conservatism is a belief that people know what matters to them more in their own lives than the state does and that people are better able to decide how to use scarce resources to improve their lives than the State.

In the UK today deep inequality and poverty exist. The question is how do we make them better. It is easy to talk about incomes and to compare ourselves to wages in Europe. This is deeply misleading. There is a reason why people from Europe have been desperate to come to the UK, USA and Germany. That reason is jobs. The UK Unemployment rate hovers around 5% and at around 11% for specifically the 18-24yr old range. In France those figures are around 11% and 20%. In Greece, they are nearer 25% and 40%. This is Conservatism in action. A belief that State intervention in job markets and in regulating businesses heavily, will more often tend to privilege a few rather than helping the many. This is the effect of Unionisation across Europe. Lower jobs and fewer opportunities for young people, to protect the few who have succeeded.

If you want to remove inequality and poverty you need to start with jobs. You also need to start by realising the nature of inequality. Today in the western world inequality is different to the 1980s and before. If you look at the houses of millionaires in London, the Home Counties and other leading cities across the UK and you’ll notice something quickly, many are no longer owned by Brits. The rich across the world are not defined by their nationalities. They move freely between nations depending on where they enjoy the highest quality of life for themselves, their families and their careers. London is a symptom of this, but no different to New York, San Francisco, Hong Kong or Geneva. The wealth that this group enjoys cannot be amended by new national taxes or by restrictions on investment. They simply move, as many did from France under President Hollande. No one from the France became richer since then and no-one in the UK will become richer after Labour’s tax raids either.

It is difficult to be a Conservative because people belief that Conservatives lack compassion. It seems brutal, shocking, barbaric and wrong to let people fail, communities fail and businesses fail, while allowing old beliefs and prejudices to exist. In the mindset of Labour and Socialism, this is why Conservatism is so deeply unpopular in public discourse. It is also why Conservatism and right-wing ideologies are so unpopular in the arts. Bands, dance troupes, painters, poets, writers, singers, all rely and draw from a deep community of people who broadly seek to expose the flaws in the world and to dream of better futures. Critiques of the past and a desire for a new idealist future is what drives concepts like Socialism, Futurism and Idealism. The present is awful, but the future can be better. Who doesn’t want a better future? Who is perfectly happy with the present? Often very few.

In the election today these ideas were barely discussed. The campaign focused on personal histories and efforts to show who would be better to handle Terrorism and Brexit. For many, myself included, our votes will have been cast without much enthusiasm. But our votes do matter and will have consequences. I voted Conservatives today because while Theresa May is our PM today, the Conservative party itself is over 100 years old. The belief that individuals can and should be trusted, supported and given the freedom to make a better life for themselves, rather than a patronising, paternalistic hand of the State determining the terms and conditions of our future, remains the core reason behind why I remain a proud Conservative.

Sometimes the right decisions are the most difficult ones. It is easy to be led by the heart and seduced by dreams of a better utopia. But life is about making tough choices and when it comes to determining who governs our nation in its period of deep transition, I put my faith in a party whose ideology is driven by trust in people. Being a Conservative isn’t easy, but it remains the right choice.

May’s masterclass in politics

It may have been long overdue (like the pun there?), but the UK Prime Minister’s decision to call a general election this morning was a piece of political masterclass and a bold, calculated gamble.

By calling a general election Theresa May is attempting to resolve several major headaches at once, assuming that she is successful: Firstly, the move creates political certainty in the UK at a time where it is sorely needed. Secondly, the move will end questions around the Theresa May’s political support within the party itself and lastly it will strengthen the UK’s negotiating hand with the EU.

If the Conservatives win (especially by an increased margin), then Theresa May will have a clear mandate for her Brexit negotiation strategy. This will give investors, businesses and political leaders a greater sense of what the UK will choose to prioritise and a clearer idea of which figures will manage the UK’s transition from a full EU member state to an independent nation. Assuming that the PM will stay for a full five-year term, the Conservatives would govern until 2022, giving them the ability to handle the transition after Brexit as well and a chance to resolve any outstanding issues with EU members, the WTO and Scotland.

The surprise election is also likely to be popular with the Conservative political base, partly because the opposition are so weak. Labour remains extremely divided between its core factions, while the Lib Dems will have a mountain to climb to recover even the 40 seats it previously held before 2015. The SNP can only lose from their current position and Northern Ireland has been in deadlock since the last regional government collapsed. In 2015 UKIP won 3.9 million votes, today the country has voted to leave and they have no credible or popular leader. All of this explains why the polls suggest a clear Conservative lead, and even though polls have been consistently unreliable in the last 18 months, few polls have predicted a winning margin of this magnitude that has been overturned in such a short time period.

The reason why winning an election is important however is that it is the key to ensuring party unity. The Conservative party is famous for its political backstabbing and without an election win under her belt, the PM would have been vulnerable to challengers if the EU negotiations turn ugly. Incidentally there are even rumours that the election will help to neutralise the Conservative political right, by forcing the PM to adopt a less aggressive position to win the election. If the Conservatives wish to keep seats in London and the South West, they will need to win over unhappy remain voters and soft Brexit voters. With a mandate to govern secured on a hard Brexit, with very flexible immigration and extremely close ties to the EU, the PM will neutralise the Tory right and move the negotiations towards a less confrontational position.

The UK has had a number of challenges in getting the EU to agree on even basic terms for Brexit. The UK gave notice that they would invoke Article 50 at the end of March, but the EU has focused on the “negotiating framework” for the Brexit discussions. This focus has been both strategically and tactically driven. Strategically, by agreeing the framework for talks in advance the EU can already try and dictate the terms of the UK’s exit. Tactically, the major EU decision making member states either have elections, just had elections or have elections due in the next five months (The Netherlands, France and Germany), so delaying the main issues until after September avoids discussing the issues during elections.

The EU commission had assumed that after the EU’s major elections, its leaders would have fresh electoral mandates and solidarity across the block. This would have put the PM at a considerable disadvantage, as the EU could have decided to target politically sensitive areas like agricultural tariffs or financial service access to secure concessions. This threat has now been taken off the table. Even if the EU makes threats against these sectors, it will take years for the full effects to come through and politically speaking, the EU has lost its ability to alter who it will be negotiating with on the UK side of the table.

This is a move that carries risks though. Firstly, Labour may be more resilient than expected and the Lib Dems may well recover the 40 seats that they lost. If such an outcome occurs, the UK would have a hung parliament and the UK would enter a constitutional crisis. It is unlikely that the Conservatives could form a viable coalition at this time, but it is also unclear whether an SNP/Labour/Lib Dem coalition would be any better. This being the case, there is a chance that the UK might have a second election within a few months of the new one in June. Needless to say, Theresa May would be extremely damaged as a leader if the Conservative party did not retain an overall majority, while any further Labour party losses would trigger another bout of in-fighting over the need for  new leader to replace Corbyn.

The last piece of this story is that an election on which party will govern during and after Brexit, is also a tacit election on the Brexit process itself. If the Lib Dems did the unthinkable and gained north of 60 seats, with minimal Labour losses, the UK could very well have a crisis about the declaration of article 50 itself. More realistically however, the end of a conservative majority would likely lead to the UK seeking to remain as a member of the Single Market. Such a move would send political shockwaves through the UK and EU political system (assuming the EU even allowed it) and would leave the UK bitterly divided, in a far more dramatic way than it has been since the vote itself. Still, the election is the last chance that the British public will have to go out and vote on what relationship the UK will have with the EU.

If you haven’t registered to vote, then go out and do so. This may be one of the defining moments of British politics in the 21st century.

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.