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.

The Coming Digital Revolutions

Beware the promises of the third industrial revolution – the first phase may be a real revolution

It has become exceedingly fashionable in certain circles to wax lyrical about the virtues and endless possibilities of what is being termed “The Third Industrial Revolution” (TIR). While the term itself is still nebulous, it broadly refers to an assumed new paradigm in the global economy, where the rapid spread of knowledge and communications via the internet and electronic devices, is fundamentally transforming the nature of the global economy.

For many this phase is spoken of as a hallmark of human success. Whether it be through promises such as the delivery of free internet access to millions via Facebook drones, taxi-services through driverless vehicles, advanced systems that monitor weather patterns and instruct farming machinery when and where to plant, or health systems which notify their user when they are unwell before symptoms occur, the possibilities are seemingly endless. Leading this recent wave of exuberance has been the rise of AR/VR technology and advanced robotics. Augmented Reality (AR) such as Pokemon Go and Virtual Reality (such as vTime), are the innovations that are bringing digital into the real world. These innovations can revolutionise the education and health sectors, removing the need for people to be physically present and allowing for constant access to these services irrespective of ones location or time-zone.

But while the TIR undoubtedly offers a glimpse of a new reality, its visionaries have been woeful at looking at its darker consequences. In the first industrial revolution, the term “luddite” was coined and today it is commonly understood to represent those who reject technological change. However, the term is too simple. The Luddites were indeed upset with technological innovations, but not because they could not see its potential or the benefits to society, but rather they didn’t see the benefits to them. The First Industrial Revolution transformed society by creating mass unemployment and by forcing entire families and communities to uproot, re-train and re-establish their place in the new economy that was transforming around them. It is perhaps hardly surprising therefore that the first and second industrial revolutions witnessed widespread rioting, periods of extreme localised unemployment and the explosion of new ideas about society, how people should live and how people should be governed.

This re-drawing of national economies had profound implications for national wealth and power, which resulted in a fundamental change in the very structure of society. Consequently, the innovations and their associated changes were fought bitterly and by many. These industrial revolutions re-wrote the concept of “The Sovereign” nation and spawned the birth of new ideas such as Nationalism, Socialism and Communism. These new ideas, driven by the new power elite “The Merchant Class”, destroyed the traditional pillars of the pre-industrial state: The Nobility, the Church and the Sovereign (Whether King, Emperor, Sultan or other), as a vital pre-cursor to make way for the new societal power – the merchants themselves. This process was not entirely unpredicted, with a certain German philosopher adroitly predicting the process of power transformation in society as a result of the new technological changes, and he had already created a term for this new rising class, “The Bourgeoisie”.

Today the Third Industrial Revolution is seen as distinct from the challenges facing society. It is in fact, the source of many of the problems. As yet the new rising power is society are poorly understood and the losers of this new wave of change cannot yet understand or associate the challenges facing their personal circumstances, with the wider melee of changes circling them on the global stage. But while details are limited, we do already know some characteristics of the winners and of the losers, which are worth further study.

The new elite are international in a manner that is unfathomable in any other epoch of human history. The easy transfer of wealth, ideas and the ease of travel globally has created the environment which allows individuals to transcend the constraints which may be imposed on them by their country of origin. Members of this class recognise no barriers as legitimate and many see even the concept of national identity as an outdated relic, to be consigned to the dustbin of history. Leading this charge are the technology gurus, the programmers, the start-up founders, the VC backers, all of whom represent the new and rising elite. These are the “Digerati”.

Standing opposed to the digerati are those who have been left behind in this great wave of human advancement. They are the sullen, disposed, disenfranchised citizens of the 20th and early 21st century, who have been cast aside in the maelstrom of economic change that is occurring. These groups think locally, not internationally and view technological innovation as a source of instability that threatens their livelihoods, their communities, their sources of income and their very identity. These are the “Digitally Dispossessed”.

These two groups hold ideologies that are implacably opposed to the other. The Digerati resent the actions of the state, displaying a profoundly free market ideology that rejects national boundaries, taxation systems, societal attitudes towards social issues and in many cases, even intellectual property rights and democratic processes more generally. Consider the bankruptcy of the gossip site Gawker by Peter Tiel, the actions of PirateBay, Napster & Wikileaks or the aggressive tax evasion methods of Facebook, Google and Uber. The new elite reject the state as the lead actor in international and domestic affairs. By contrast, for the Digitally Disposed it is the state who remain the last line of defence against the free market’s radicalism and it’s focus on individualism, which drives the Digerati. Identity based on location and traditional values holds huge importance for the Digitally Dispossed, in a way which the Digerati cannot fathom. Freedom of expression v.s. safety of individuals in particular, is a vast dividing line in the digital debate.

Fault lines are already being drawn. Whether it is the EU’s actions against US tech giants, Brazilian judges against Whatsapp, the FBI v.s. Apple or the battles raging against China’s “Great Digital wall”, the digital revolutions are coming. In 2011 people saw the power of social media vividly re-write the political landscape of the Middle East, in a region with low mobile and internet penetration. Between 2015 and 2016, Donald Trump secured the Republican party nomination, ISIS recruited 1,000’s of foreign fighters and two photos secured refugee access for circa 1 million people into Germany. This is just the beginning.

Technological innovation is not inherently bad, just as the NRA’s old slogan goes: “guns don’t kill people, people kill people”, it is perfectly fair to argue that technology alone is not responsible for societies troubles. But it certainly is a catalyst. In short those who pursue innovation and those who regulate society have reached a fork in the road: Is innovation always good and worth pursuing, with the consequences being addressable later? Or should innovation be closely controlled and channelled, to ensure its affects on society are managed and the vulnerable are protected?

This is the battleground space of the Third Industrial Revolution, and it has only just begun.

A letter to the nation

 Alea Iacta est – The die is cast

(Julius Caesar)

On the 23rd of June our nation took the first step in a long process to separate from political union with Europe. It was neither expected, nor were people prepared for it. Understandably, many people feel devastated. In the time since the results were known the nation has witnessed an outpouring of love for Europe never seen in my lifetime, nor perhaps in the lifetime of any individual still with us today. First came shock, then anger. Anger turned to fear, then fear into numbness. A nation feels subdued and for the first time, in a long time, people are uncertain of their future and perhaps even scared of the country they call home.

But just as every life is has a different story, the history of every nation has many chapters. A chapter in the history of our nation is now closed, but the next chapters are still to be written. In all novels, the day is always darkest before that dawning moment. Right now we are in that darkest moment. A moment filled with fear, with anger, with pain and with sorrow. But this is not how our future must be nor how our destiny can be.  I said once before that I am a romantic. I believe that love, kindness and compassion, when deployed in unison, truly create an unstoppable momentum that can move mountains and carry nations, people and societies towards greater things.

The referendum was never more than the beginning of a process and like all turning points in history, what matters is what comes next. It is for this reason that now more than ever is time for people to come together. So how do we come together, how do we heal and where can our country go from here?

This referendum was, at its core, about identity and about people feeling disconnected from the society the live in. For the first time in many decades, the poor and often disenfranchised in the UK came out to vote because they felt their voice would be heard and the issues raised were the ones that really mattered to them. They felt powerless and downtrodden. Now they feel emboldened. That is not a bad thing for society and in fact if this can be channeled, it could be the very key to making our society better.

Our society used to be governed centrally by a small group of individuals, often chosen behind closed doors, by procedures that few understood. This referendum has shown more than ever that such a model is wrong for a modern society. For people to support ideas and to accept their consequences, they must feel as though they have ownership of them. Devolution of political power within the UK has long been talked about and now is the time to revisit it again. Let’s give our cities and our regions the resources and support to make their own choices and lets end the central dominance of London and Westminster, that has upset so many in this nation.

We must also re-imagine how our nation sits within the global community which we operate in. To do so we must re-assure our friends, rebuild old connections and start new relationships.  We are a part of this continent of Europe in a very physical way. The UK may no longer wish to stay with its neighbors in a political union, but that is not a sign that the UK does not love many of the things that make Europe the envy of the world in the eyes of our global community. Now, more than ever, we need to show Europe that love, as many have already done so over the last few days and we need to go further.

Few people bothered to talk to those Europeans who live in the UK and who call it home during this referendum. That is both a disgrace and a tragedy. These people, many whom I proudly call my friends, have made this nation so much richer for their presence. They need us now more than ever to show that we appreciate all that they give us. The UK must also look more to its fellow commonwealth nations and revisit how it can do more to help them and to work closer with them. From 1999-2003 over a third of all Australian expatriates lived in the UK, while our links with Canada, the USA, New Zealand, South Africa and Hong Kong remain extremely strong. Now is the time to make them stronger and deeper. As to the rest of the world, it is clear that talented and passionate people are everywhere and many still wish to make the UK their home. We need to make sure that a future UK creates a fair and transparent system to help these people come to the UK and make it even better.

Furthermore, we must all recognise that politics is no longer something that we can ignore and  disengage from. From 1997 – 2015, less than 70% of UK registered voters turned out at general elections to choose their leaders. At local elections this was often even lower, in some places below 30%. Our power to decide who governs us is a great privilege and something many take for granted. People often feel as though their vote is irrelevant in a First Past the Post system and as a result they do not vote, nor do they bother engaging with politics in their constituency. I believe that devolution can do much to change that, as it has with the Mayor of London elections and the Scottish Parliament, but it can only do so much. People in the UK also need to be willing to commit some of their time to engaging with politics within their communities. They need to talk to local parties, perhaps attend local events and above all, they need to communicate with those who they elect to govern them.

For those who are afraid and uncertain of the future, this is a rallying cry for those who call Britain their home. We have a chance to make a better Britain, one that is global, modern and uniquely ours. Let us make sure that we take this chance and that the next chapter in our nation’s history is one that we can be proud of.

An open letter to the BREMAIN voters

BREXIT ImageWhy does a man who is one of the biggest winners of the European Union campaign so fiercely against it? That is the question that friends, colleagues, family and acquaintances ask me every time we discuss Europe. The funny thing is, I ask myself that question too.

Since I can remember, I have always visited Europe every summer and likely most winters of my life. My family have owned properties on the continent since I was 15, while my cousins have studied in the Czech Republic, Florence and Bologna. My sister studied in Montpelier and I’ve just completed my year in Bologna. My dad speaks three European languages. My mother is the same. My oldest friends are Swedish and German. Today, over half of my friends are non-UK nationals. I speak (albeit badly) German and some Italian. And (so I’m told), I’m a young voter (26,) and by most polling statistics available, ¾ of my UK contemporaries are voting to remain in Europe.

I love Europe, the place. I love Europe, the people. I love Europe, the food. And, I love Europe, the culture. But, I’m voting to leave. Why?

It’s fashionable to see people who support BREXIT as “little Englanders”. Nostalgic for the days of Empire, when “Britannia ruled the waves”. And perhaps I am. In my heart I am a romantic. Seduced by stories of heroism, triumph over overwhelming odds, and love. All popular elements in nostalgic history. The cliché of love conquers all and the triumph of good over evil.

But what is more Romantic than a continent at war, now at peace? A continent of prosperity and shared values, where all are equal, regardless of faith, gender or where they were born? In fact, is Europe not the most romantic of things? Furthermore, is it not in fact a totem to the success of the UK and its leaders? From Churchill to Thatcher, British leaders led the fight to free Europe from totalitarian rule, secured American intervention on the continent and, when the Cold War was over, it was Britain that brought the east of Europe in from the cold. Surely, for many, the successes of the EU are a testimony to the UK’s achievements. A sign of its importance in the world. But if this is all true, then why am I’m voting to leave?

Voters like me in this referendum could have and should have been at the forefront of the remain campaign. But we are not. It is this remarkable fact that seems to cause such utter shock, terror and concern across the world’s elite circles of high finance and politics. Why on earth do we want to leave?

The answer is that something with our society is very ill and this referendum was a chance for the EU and those who believe in the idea of Europe to articulate a vision of how we could fix it. This isn’t new, nor is it sudden. Myself and others have been waiting over a decade for a vision of Europe’s future. But the reality is, there isn’t one. That is the reason why I am leaving. Belief in an idea requires the conviction that it can work. That requires confidence and that requires trust, but also it requires communication. It requires people to understand what it is they are believing in and to buy into that idea. What Europe and the UK’s leaders have forgotten in their hubris is simple: to buy into an idea without understanding it is not courageous, it’s fanaticism.

People all over Europe are really scared. Real term wages have barely grown for most UK citizens in over 15 years, home ownership rates are at their lowest in the UK for over 30 years, domestic companies in the UK are now 88% owned by overseas investors and crime, terrorism and the threat of conflict is higher than they have been since 1992. But it’s not just the UK whose people are scared, its all of Europe too.

Many friends have said that the UK isn’t alone in being unhappy with the EU. That other countries also dislike many things that happen at the EU level, but that the UK should work with them to fix it. What they have missed though is the basic question: fix it to what? What should Europe be? How should it look? And, most importantly, why is that good for me, my family, my friends and my community?

The fact is that elites in Europe and the UK that lead their communities in business, media, academia and politics have failed to deliver an answer. And now they are reaping the consequences. From Austrian presidential elections, to Victor Orban in Hungary, the FN’s rise in France, the 5-star movement in Italy, Podemos in Spain, Golden Dawn in Greece and PiS in Poland, parties are trying to do exactly that. Give people an image of a future. A future where things appear better, appear more certain and more secure. They may all be wrong. They may all be a disaster. But they are an idea, they are a point of reference and increasingly, they are popular.

A vote to leave the EU will hurt in the short term economically. Maybe even the longer term too. But just maybe, it will also help the country to look deep at itself, at its society, and to search for a new system and a new vision of what its future should be. Many Brexiters are doing that now. From free-market liberals like Daniel Hannan, to Michael Gove, Boris Johnson and yes, Nigel Farage, people are suggesting ideas of a new Britain. Maybe they might all be worse than they are now. But maybe they might be better. Maybe a weaker pound, lower house prices and a migration policy that gives skilled workers from the US, Japan, Canada, Australia and Hong Kong the same rights as a worker from Poland, Austria or Estonia, might in fact make for a more equal and stable society. Maybe.

I said earlier that blind believe is fanaticism. That is how I see the vote to Remain today. A belief that your faith in a system, person or ideology must somehow work out, with no idea of how or why. Is BREXIT a risk? Of that I am sure. But I am also sure that with every decision in my life I’d rather know that I took a chance to make something better and shape my world for the better.

For what it’s worth, I am sure we will vote to stay in Europe on June 23rd. My guess would be by about 5%. And afterwards I am sure many of those reading this will be celebrating. But during your celebrations you should pause to consider, if only for a moment, if this referendum is not in fact Europe’s Pyrrhic victory. A win that has cost Europe so much, that you have already lost the argument for the future. The idea of a life without the European Union has been born and is growing every day across Europe and despite facing one of the biggest existential crises to its existence, Europe’s answer has been to beg, to scare and to threaten people to stay.

In the war of ideas, a future of a better and united Europe is dead. For those of you voting to remain, I am left to ask you two final questions before you vote on Thursday: Europe will have to change again in our life times, do you know what that change will be, and are you really sure that Europe’s next phase is better?

Whatever your answer, make sure you vote. Either way, our votes may never be so important as they will be on June 23rd.

 

The World in crisis and the cyclicality of history

Looking at the world there are many reasons to be optimistic. No war between the major powers has occurred for several decades. Global economic growth has raised the quality of living for millions of people, meanwhile major scientific discoveries continue to advance human understanding of our world. Furthermore, modern technology continues to enhance human productivity and with advances in modern telecommunications, global inter-connectivity is at an all time high.

Or so the optimists of the early 1900’s thought.

For individuals like President Truman and Sir Norman Angell, the famous British Labour MP, the world before 1914 had reached a new level of civilisation. The continuing advances of modern technology alongside a seemingly growing global endorsement of liberalism and democracy, would slowly convert the world and its citizens, and in so doing, consign war and global poverty into oblivion.

If all of this sounds oddly familiar, it should. Just as in the early 20th century the men of the hour trumpeted the success of mankind, so too do the modern heroes of the early 21st century. In the same tradition that Norman Angel followed, when he wrote his famous book “The Great Illusion”, arguing that war was rendered essentially impossible because of global integration, the 21st century has its own optimists. Whether it be Lawrence Summers recent piece, “The case for Global Optimism” or Steven Pinker’s work on declining violence, the optimists are out in force. Moreover, so are the idealists.

From Mark Zuckerberg to Jeff Bezos, Tim Cook, Elon Musk, Jack Ma and many more, the future appears bright and full of promise. Except they are wrong, all wrong. And the biggest problem is that no-one seems to have realised it.

Across the OECD, household, private and government debt is high, with weak economic growth across all the major economies. In China, despite unprecedented economic stimulus, the economy is rapidly decelerating. Climate change and high birth rates across the world’s poorest nations continue to drive increasing numbers of people to migrate from their homes, many travelling thousands of miles in search of a new life. Thus as the global economic engine groans and as new migrants seek the opportunity of a better life in the worlds more developed economies, a resurgence of nationalism, often coupled with xenophobia and racism is spreading.

But that is not all. Global fear and insecurity, economic weakness and popular anxiety are a breading ground for nations with a penchant for making their country great again. These leaders believe in cultural exceptionalism, they focus on the global balance of power and they view the world as a zero sum game. Moreover, such leaders are not confined to the developing world, and as time continues, their message is gaining traction globally.

But what is driving all of these issues? What is the problem?

Many would suggest that the world is facing a crisis of global economic demand. A slump in commodity prices, combined with nearly three consecutive years of stagnant or falling prices for manufactured goods, is threatening global growth, so the argument goes. Thus follows the inevitable argument of trade restrictions v.s. trade imbalances. To simplify the points, the debate circulates around whether the only way to improve the demand for a countries domestic goods is to introduce protectionist trade measures, or whether countries with “excess” levels of savings and large trade surpluses should be forced to spend more, thus allowing other nations with large trade and savings deficits to catch up. Such is the debate over China within the USA today. But the debate misses the core issue. While the US and China may fight over the issue of trade imbalances, the problem facing the world economy is much more simple:

The world is facing a crisis of inequality.

The World Bank and Asian Development Bank speak of the worlds’ success in reducing global poverty by 950 million people and thus achieving the Millennium Development Goals. But this figure hides all manner of sins. True, the number of people living on $1.90 a day has fallen by 950 million between 1990 and 2015, but if we move to $3.10 a day benchmark, then the poverty rate still stands at 35% of the world. More simply, the actual number of people in extreme poverty today, Paul Collier’s “Bottom Billion”, has not changed in over 20 years.

P1070774I need not re-hash the work of Thomas Piketty on inequality in the western world, or dwell a huge amount further on the fact that 400 americans are worth more than the remaining 50% of the country put together. Nor do I need to dwell on the estimated $21-32 trillion sitting in offshore tax havens by multinational companies and high net worth individuals. Rather, I want to explain why this inequality, if it isn’t tackled, is going to break the whole global system as we know it. And that is the biggest problem.

It is an old tenant of classical Keynesian economic, that as incomes rise, an individuals desire to save a proportion of their income will increase. While this sounds sensible, the reality has long been considered problematic. If those who are wealthier save an increasingly larger portion of their income than they spend, then global demand for goods will get relatively weaker as this proportion of people get richer. If demand does not grow as fast as income, the economy ends up with a large surplus of funds. But while this was a cause of great concern for classical economists, in the early half of the century this fear was alleviated through the work of Simon Kuznets. Kuznets demonstrated that as technology continued to develop, new demand would be created for new products, meanwhile an expansion government spending would also occur, thus collectively helping to offset a fall in demand. Thus with this discovery, economists relaxed and the fear of a global collapse in aggregate demand was averted.

Only, the essential questions were never truly explored: How would private demand for goods rise without a fall in savings? And how would government demand for goods offset a fall without absorbing the excess savings?

The answer, perhaps predictably, was debt.

The most revolutionary concepts in the global economy since the Peace of Westphalia in 1648 have been the creation of new means to raise money. Whether they be in the form of bonds, equity, derivative contracts and so on, finding new ways to help stimulate consumption has been the cornerstone of continuing economic growth. However, when analysing the power dynamics of debt, the one party that will always be better positioned is the party that has the capital. If you want evidence of this, I would advise looking at Greece’s position or that of Argentina.

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It is self evident that the use of debt allows people, who need to consume goods, to consume beyond their means whilst also allowing governments to spend beyond their tax base. In both cases, this can be sustainable, as long as the economy grows and the interest on the debt remains affordable. But what happens when people can no longer pay for the debt and perhaps even worse, what happens when there is no-one who wants to take on more debt?

Thus the crisis in the world today is not a crisis of demand, a crisis of leadership or a failure of free trade. The crisis today is that too much capital is held in the hands of too few people and organisations, who do not see sufficient opportunities to earn long term returns on their money through making investments in the real economy. If you want to understand why billions is being spent on über, amazon, facebook, airbnb, twitter, tesla, virgin galactic, whatsapp or any of the other global technology giants, it is because the worlds largest investors don’t see demand growing anywhere else. Moreover, demand growth is so weak in the real economy (i.e. commodities, manufacturing, agriculture, etc), that 100’s of billions is being invested in companies that have never made a profit, and by some forecasts may never make a profit.

Bubbles in technology, bubbles in real estate, stagnant, excess global production capacity and global unemployment (and underemployment), spell one thing: deflation. The sirens call of every major financial crisis is deflation. It is here in Europe and soon to be in the US as well. Speculative bubbles, deflation and currency crises are the hallmarks of the world’s largest recessions, but this time the central banks have no more levers and the governments have no more capacity to borrow.

In short, the world is standing on the edge of what may be the largest precipice in world economic history since the great depression. And on current trajectories, with current policies, there is nothing to stop it.

I need not elaborate on what a global economic crisis, greater than 2007-2010, would mean for the world at large. But a few points are worth mentioning. Firstly expect famines on a scale unheard of in history, as subsidies to the third world for food and agriculture collapse. Secondly expect mass unemployment, as countries fail to agree on how to reform the global economic system and protectionist trade measures return with a vengeance. Thirdly, expect a global uptick in violence. Whether from desperate authoritarian regimes, seeking to desperately shore up their legitimacy or from non-state actors capitalising on new power vacuums, the era of violence is near our doorstep. Above all, expect migration on a scale never seen in human history.

But is there another way? Is there a way to fix this economic system and to escape from this collapse into crisis?

Maybe there is….but will we be brave enough, and are we capable enough to make it happen?

The world’s demands have never been greater. Across developing and developed nations there are sufficient projects and investments that could absorb the worlds available capital many times over. The problem is that the capital needs to be channelled. Wealth that is hidden offshore must be repatriated and taxed. The financial services sector must become transparent so that corruption can be mitigated to the greatest degree imaginable. Leaders in business and politics must realise that facilitating corrupt behaviour is never an acceptable price and that any short term gains that may be won by accommodating “gangster capitalists” are illusory. In this role, the general public must vote for parties who really push these issues and they must exercise their influence over their pension providers who sit at company boards.

In the longer term the world needs to realise that we will not resolve our problems when we assume that one person is different to another. Yes, people may have different values and beliefs. Yes people may wish for a different world to the one that you want and yes, the western world as we know it, human rights and all, may never become truly universal in the way we hoped they would. But inequality is the poison in our global system which breads fear, insecurity, anger and resentment. If we do not deal with it now, we will be fighting the challenge for the remainder of our lifetimes.

This is our future. If we do not act now and put pressure on our leaders across the world to tackle inequality, then our system will fracture and collapse. One only needs to read the horrors of the early world wars or the great depression to realise that there in no price to high to avoid that fate.

This is our world. And we have to be the one’s who change it.

Where do we go from here?

Another day, another loss. As commemorations and mourning begins for the victims in Belgium, a numbness has settled across Europe. Things weren’t supposed to be like this anymore. The world was supposed to be different. Europe was supposed to be different.

Like many of my friends I found the latest attacks upsetting, but no longer shocking. We have seen the images before and seen the same motions performed by our leaders, individuals in our social media circle and figures in our respective communities. As sad as it may be, it seems that a dawning realisation has settled across Europe that these attacks are no longer “abnormal”, but rather a new normal.

Terrorism is powerful because it taps into our most primal of instincts. It removes certainty in our lifestyles and it corrodes personal confidence in our broader society to protect us from threats. In an atmosphere of fear, we retreat into our personal networks and further isolate communities from each other. If one ever needed an example of this, then the public attitude towards 1,000’s of migrants seeking a new life in Europe, seen in the corresponding growth of far right political movements, provides clear evidence.

But while we don’t know the specifics of the latest attacks, what we do know is that the largest source of threats to European nationals thus far has come not from migrants or refugees, but from our own citizens. These individuals are not all poor, nor lacking in education or somehow psychologically “unhinged”. They are, in a sense, normal Europeans and they often come from good families. Most (or certainly many) were educated within largely secular systems and they have (and perhaps continue to) enjoy the benefits of western lifestyles[1]. In short they are very much our own problem, and one which we must accept we have helped (to varying degrees) to create.

The fact is that certain people in our communities feel so disconnected and lost in our society that they are prepared to commit unspeakable horrors to join the death cult that is ISIS today. This is not a religious motivation. ISIS are not endorsed by Muslim scholars, nor do they follow Islamic principles. Rather, these people have lost hope in the ability of democracies to make life better for themselves, their community and other communities overseas, with whom they feel an affiliation.

It is perhaps the most human of all things to simply throw in the towel and say “enough!”. Don’t let anyone else in. Build high walls and borders. Increase surveillance of our Muslim communities and restrict our human rights more if necessary. Ignore arbitrary detention laws and pursue extrajudicial killing. In short, anything that will make us believe we will be more safe (even if they wont or don’t work in reality). Certainly a few politicians and voters hold these views. Suffice to say they don’t require naming.

But sitting around and feeling helpless is not a solution and neither is extreme, knee jerk policy making. While Europe has been poor at showing solidarity for acts of terror in other parts of the world, such as Turkey, Lebanon, Nigeria and Indonesia (to name a few), everyone could learn a lot by studying how the ordinary people in these communities have responded to acts of terror in their day-to-day lives. In short, the people moved on, just as life moves on. As the Brits used to say during the Blitz “Keep calm and carry on”.

So if we are going to look at how to make our societies stronger, our people safer and ISIS unappealing to our citizens, then we have to look hard at ourselves. Do we really allow people the chance to create a better life for themselves, do we honestly believe what we say on Human Rights and universal values and perhaps most importantly, do we honestly consider the views of all our citizens as equivalent?

I am not saying that any system or any society is perfect, nor that such a goal is realistic. But as any politician knows only too well, the signalling can matter as much as the substance. It is a duty upon all of us to campaign and push for society to reconnect with politics and our governments. To fight against simplistic arguments which propagate ignorance and division. To resist the temptation to fall into despair. And, to make the most of every day and opportunity that this world gives us.

This piece was titled “Where do we go from here” in adapting to acts of terrorism at home, and humbly I submit my answer: we make the most of every opportunity that the world has to offer and we strive to improve understanding and engagement between individuals and our communities. We go for our passions and we fight for our values. Above all we never forget that this world is our home and it is only going to get better when the silent majority of our citizens fight to protect it when it’s threatened and to change it when its broken.

That is our challenge for this time and that’s how we must face this new normal.

[1] (as an aside here: Planet Money’s podcast on ISIS fighter expenditures is excellent, including $90 chocolate bars and french aftershave). http://www.npr.org/sections/money/2015/12/04/458524627/episode-667-auditing-isis