Although the result of the EU referendum came as a surprise to many in hindsight, it’s clear the writing was on the wall. While some will rush to judge, it is important time is taken to properly consider why people voted as they did, and to do so in a way that goes beyond the sort of superficial analysis that characterised the campaign.
There is little doubt that many people feel alienated from political institutions and disillusioned by their failure to address basic issues, including the right to work, the security of employment, fair treatment in the workplace, and access to quality public services. The ‘leave’ campaign cynically and ruthlessly exploited these genuine concerns.
EU migrant workers were used as scapegoats for Britain’s obvious economic shortcomings, and as cover for the unwillingness of many right wing ‘leavers’ to admit to the failure of the neo-liberal, austerity driven, tax cutting, deregulating policies that they support and that have had devastating impact on working class communities.
Much will depend on how the political environment adjusts, influenced by the election of a new Tory PM, the Labour leaders’ future, whether or not there is a general election and, of course, the outcome of Brexit negotiations with the EU. However, in the short term, the economic consequences are likely to be severe and to have most impact on those working class communities that voted ‘leave’.
If the referendum result was not predictable, the market response to it, including falls in share prices, Sterling’s collapse, and downgrading of Britain’s credit rating, were. Although the markets have settled, the impact of continued volatility is far from being academic for workers, as effects feed through into pension scheme deficits, corporate acquisitions, investment decisions and living standards.
While some exporters will benefit from Sterling’s weakness, it is unlikely to make much difference to exports overall, due to our poor productivity and lack of Eurozone demand – our main export market. For many of our key exporters who are reliant on higher priced imports, the effects will offset. After the 2008 financial crisis, Sterling dropped by around 20%. It took exports three years to start to rise and only timidly – and they have stagnated since.
The increase in the price of imported items will push up inflation and suppress real wages and domestic demand, with a consequent impact on jobs. Workers may feel the effects quickly, particularly those travelling abroad on holiday. With growth currently very weak in Scotland and employment falling rapidly, as a consequence of the falling the oil price, the now unavoidable extended period of uncertainty is the last thing the Scottish economy needs.
Given the exaggerated claims about Brexit’s economic impact, caution should be applied in predicting what might happen now. However, it is difficult to ignore the warnings of a range of respected commentators and even the most ardent ‘leavers’ now accept there’ll be short-term problems.
We have already heard the likes of Goldman Sachs, Vodaphone and Siemens talking about the threat Brexit poses to their British operations. In the medium to long-term, such talk might come to nothing. In the short-term, it stokes uncertainty, which threatens investment and the jobs it maintains and creates.
The correct response to this should be to abandon austerity, invest in public services and improve employment rights and social protection for all workers. That’s unlikely to be the approach of the new Tory leadership.
Osborne’s decision to now abandon eradicating the deficit might have been nothing more than opportunism, given that he was unlikely to achieve it anyway. But it shouldn’t be taken as a sign that the Tories might ease up on austerity for the new Tory leadership might be to the right of current incumbents and their approach could be harsher, particularly if market volatility is prolonged.
There is no reason to believe ‘leave’ claims that short-term pain will produce long-term gain. There is no dividend to be gained through abandoning the EU. There will be no access to the single market without free movement of people, and neither should there be, and there will be no quick and easy trade deals with major trading partners.
The idea disadvantaged communities will have their EU funding replaced by funds repatriated after Brexit is fanciful. There is no political advantage to be gained by a Westminster Government doing so. First-past-the-post means voters in marginal constituencies in ‘middle England’ who matter and not working class constituencies in the north.
Tory leadership candidates will not be the ones to suffer disastrous economic consequences of the ‘leave’ duplicity. Tragically, it will be the ‘ordinary, decent people’ to whom Farage cynically dedicated the ‘leave’ victory to that will pay the price.
Grahame Smith is the general secretary of the Scottish Trades Union Congress (STUC)