From Great Britain To Little Britain:The UK Has Accepted A Limited Role For Itself Post Brexit

On the 23^rd of June 2016, almost 52% of eligible voters cast their ballots in anger and dissatisfaction in the EU referendum. The actual issues surrounding EU membership had become overshadowed by anger at perceived immigration, it’s perceived effect on public services and a ferocious distrust of politicians in general.

Throughout the campaign, the remain side were accused of near constant scare mongering. In this sense the 52% who voted for Brexit may have been proved to be partially correct, that many of the catastrophic consequences of Brexit simply would not happen. At best it seems, the UK is facing a slow descent toward stagnation and not the immediate crash we were warned of.

The problem is, the UK is now stuck in a legal, political and financial no man’s land. While we wait for the UK government to trigger Article 50, and then for the lengthy two-year exit period to gather pace, the UK is frozen in uncertainty. This is highly detrimental to both the UK business and more importantly to the UK’s foreign policy and broader strategic aims.

If we look beyond the current slide toward stagnation and the further uncertainty a far more worrying trend is emerging for the UK’s current trajectory. The 52% may have just unwittingly voted away more sovereignty and also for a far more limited role for the UK in global affairs.

If the UK were to retain access to the Single Market in any post Brexit deal, it would most likely also have to accept with it the majority of EU legislation and still make significant contributions to the EU budget. This is the reality for Norway, and many Brexit supporters have agreed that this would be the fastest and least complicated post Brexit relationship to negotiate. Voters were also made fully aware that a vote for Brexit would likely lead to a diminished voice but still having to accept terms of access from the European institutions.

The uncertainty of Brexit is compounding upon another disturbing trend in terms of the UK’s foreign relations. Amid the UK’s relative decline since the second world war the UK has continuously struggled to define a role for itself. The late 1990’s and early 200’s saw both the conflicts in the Former Yugoslav Republics and the advent of the War on Terrorism and Britain sought to play a significant role in both these conflict areas. The new term for this type role in conflict resolution and foreign policy was “Liberal Interventionism”. The central objective of Liberal Interventionism for the UK was to work with key partners and on occasions by itself to intervene in global trouble spots in support of reinforcing or establishing liberal democratic institutions.

The results of this policy in both Iraq, Afghanistan and Libya have sadly overshadowed the few examples where it did achieve success and the UK should be given credit for. Sierra Leone was a good example of Liberal Interventionism. The important consequence of this doctrine however is that it has all but nullified the UK’s ability for the time being to act on such principles overseas. The vote in parliament as to whether or not the UK should participate alongside the US and France to curtail the brutal regime of Bashar Al Assad in Syria was a momentous moment in the UK’s foreign policy history. Sensing a strong mood of dissatisfaction among the public for such interventionism MP’s voted against the government and stopped the UK partaking in any action. Most people forget that the procedure for having any binding vote as to whether the UK should go to war was itself a result of the perceived erroneous rush to intervention in Iraq. But the most damaging consequence has been that a vote not to intervene in Syria has sent a signal to the US and other partners that the UK can no longer be counted on. Its significance is greatly reduced.

Two of the UK’s important priorities in foreign policy have continuously been strong cooperation with both the US and Europe. Now, the people of the UK have seemingly rejected both these priorities. The result is a diminished level of access and importance to both the US and Europe. The sad reality is that the UK is now more isolated than it has been in decades and will struggle to ascertain a significant role for itself unless it accepts that cooperation and the pursuit of others objectives, not just its own, are central to securing a powerful and relevant role for the UK on a global stage.

Britain, Europe, And The World: Who Will Britain Be If It Leaves The EU?

Who are the British in a modern context? If anyone was asked this question and gave an honest or an informed response, they would most likely have to say they don’t know.

One of the central themes made by the leave campaign has been that Britain has diminished. Blame for this has been placed squarely at the feet of the European Union and its institutions. They argue, that EU policy has eroded Britain’s ability to make effective decisions and put British interests first on a global stage. As they see it, if we leave, we will take back control and have a capacity to be a player on the world stage again.

This passionate and resonating argument advanced by the leave campaign ignores two important factors. Firstly, that the world has changed and countries that operate outside of regional blocs are at a disadvantage. Secondly, no one has presented a solution as to how they would keep the United Kingdom itself together and address the elephant in the room, devolution.

Let’s look at that first point. The leave campaign repeatedly invokes the idea that “Britain” can return to some kind of former glory or power on a world stage simply by having control over its domestic policy making. This would not in any way enhance or regain power in terms of foreign policy.

Vote Leave would immediately counter by saying that we are the world’s fifth largest economy and a key player inside NATO. A lot of investment and attributing factors to the size of the British economy are linked to its membership of the EU. Almost all independent experts agree the economy would shrink if the UK left the EU. The UK would realistically, have to become a specialised economy probably orientated toward financial services. This is probably quite desirable to those in the highest ranks of the leave side. But it is unlikely to work. The country is no Switzerland, especially with a population in excess of sixty million. Also, huge swathes of the electorate who already feel this model of economy is to their detriment would never vote for it. The UK does not even know what it’s economy should be in a post Brexit world in order to meets its objectives internationally and consolidate those objectives with its electorate.

The second point, NATO, exemplifies the UK’s identity crisis. Any suggestion that a European defence initiative might have a role to play in guaranteeing peace and security is quickly met with the hostile charge from leave campaigners that NATO, and more specifically the United States, is responsible for European security. Historically there is an element of truth to the idea that NATO was responsible for peace and security in Europe. During the cold war NATO served as an effective counterweight and deterrent to the Warsaw Pact countries.

Since the Cold War ended however, NATO itself has yet to redefine its purpose and what it does in the world. An argument could be made that its new role is to counter a resurgent Russian Federation. If that were true than it has not been terribly effective in recent years given Russia’s annexation of the Crimea and larger strategic victories for itself in Syria.

NATO’s largest contributor in terms of both blood and money is the United States of America. Over 70% of all NATO’s expenditure is from the United States. Britain’s reliance on NATO alone for its defence cooperation would be foolish in this context. American taxpayers are growing tired of paying the price to guarantee the defence of an entire continent who are seemingly unable and unwilling to do so themselves. Defence spending among European countries has been in steady decline and Britain has been no exception to this trend.

More important are the decisions regarding NATO and foreign relations with the UK that will be taken by a future President of the United States and his or her administration. In a worst case scenario for the UK, Donald Trump might become president and slash if not scrap funding for NATO. He has been very serious about this. He does not see countries like Russia as a threat to the US and cares little about Russian policy toward Europe. If Hillary Clinton wins this would still be a negative outcome for the UK’s defence and foreign policy outside of the EU. Clinton has been a supporter of NATO but is a firm proponent of a European defence framework that would alleviate the burden on the US. She has at best shown antipathy toward the UK’s territorial disputes such as the Falkland’s/Malvinas and Gibraltar. It is hard to see how and where the UK will define its position in global defence structures if it should leave the European Union.

The European Union will continue to integrate its defence structures and work to better coordinate foreign policy among member states. The UK, if it chooses to abandon this emerging framework, will be met with the reality that it has not defined for itself a place in the 21^st century. The UK cannot rely on the USA forever; they have their own interests to advance. When it comes to territorial disputes such as the Falkland’s, it is hard to see how the UK would continue to stand up to the larger Latin American calls for talks over sovereignty of the islands, whilst having forfeited support from a backer as large as the European Union.

Britain has a personality disorder with far reaching consequences. It sees itself as an important player globally, but doesn’t know what it is it should be doing or how it should do it. It harks back to romanticized interpretations of what it achieved as an empire and suffers from the delusion that some similar level of authority and influence could be enjoyed again by not cooperating with its closest neighbours.

The biggest hurdle to Britain’s place in the world post Brexit is a little closer to home. It’s the process of devolution.

Over the past few decades the UK has sought to devolve power to regional and local authorities in order to address calls for more powers and independence from Westminster. Britain has never defined what “British” identity is or what it should be. A withdrawal from the EU would be popular in England but would be met with varying degrees of unpopularity in the other countries that make up the United Kingdom of Great Britain and Northern Ireland.

If Scotland and Wales voted to remain in the EU but a disproportionate English vote saw them leave, this would ignite a constitutional crisis in the UK. It would be seen by many, as necessitating a second independence referendum in Scotland and would certainly increase calls for such a referendum in Wales.

Ireland is an even more volatile prospect. While it is true that the foundations of the peace process in Northern Ireland are largely bilateral arrangements between the UK and the Republic of Ireland, the arrangements have certainly benefited from a single market which ensures the free movement of goods, capital and labour. Any reintroduction of border controls or just the idea of being separate entities reintroduced into daily life would most likely not bode well for the peace process as a whole.

One thing is clear, even if Britain votes to remain a member of the European union tomorrow, it’s identity crisis will persist. The UK public and policy makers are stuck with an idealist and romanticised version of history. They also suffer from a collective delusion that they can somehow return to this past simply by leaving the European Union. Britain and the British people will still have to define who they really are and learn to deal with the reality of their place in the world.

The Unknown Tale of China’s Transformation

 

I moved to China after graduating from my first master’s degree. I was filled with misconceptions about the place and so was every other intern alongside me. We all came with a perception of how China was going to be. We had, after all, been informed by the reliable and independent western media. It was going to be a land filled with endless rows of factories and growing middle class that had made their fortune producing cheap imitations of superior western products.

None of it was true.

The image you have of China, living in the west, is wrong. Unless you have lived and worked there, and embraced the language and culture, you truly don’t understand. Even if you embrace all these things, your understanding may still be limited.

Now we have another common misconception that is very popular in the west. The western media will tell you that China is on the verge of financial collapse, that it’s economy is struggling or as they have been doing for years, that disaster is imminent.

China is a country in dramatic transformation. It is attempting to shift its entire economic focus from foreign led consumption to domestic. It no longer wants to be the workshop of the world. Instead China aims to be the world’s innovator, much in the same way that the USA was in the last century. Across all sectors China aims to be a leader that produces world class goods and services. It’s emerging middle class are some of the most talented, dynamic and entrepreneurial people you could ever hope to meet.

The Chinese government has been steadily shifting away from manufacturing toward domestic consumption and the service industries. As a result, industries such as financial services, insurance, healthcare, and entertainment are booming. The only problem is, that these industries are still dwarfed by an old and decaying manufacturing sector and the lingering presence of some state owned enterprises. These old industries are in a rapid and managed state of decline endorsed by the government in Beijing. The narrative we are presented with in the west however, is that the government has little or no control over economic outcomes and is in a persistent state of panic and confusion. This couldn’t be further from the truth.

The Chinese government does not get its mandate at the ballot box. It does however, receive widespread support for economic competence and for achieving the greatest lift from poverty ever witnessed in human history.  They govern by competence, not consent. The Chinese approach to government and management of the economy in recent decades is best exemplified by the words of it’s great reformer.

“It doesn’t matter if a cat is black or white, so long as it catches mice.” – Deng Xiaoping

The only thing that matters in the eyes of the government is to continue the legacy for competence. In some ways, investors should be reassured by this approach, as there is likely to be no real resistance to continued reform. This political dynamic provides great incentives for the government to foster conditions and regulatory frameworks that encourage the new industries mentioned earlier, while being able to move away from the old industries with pace and method that would have made Margaret Thatcher’s government green with envy.

The emerging dynamism and entrepreneurial spirit is present in two industries in particular and in both the Chinese government has played a key role.

China has adopted appropriate regulatory and tax incentives to establish itself as a leader in the Information Technology sector. Outside of Silicon Valley itself, it is hard to see how anyone else comes close to competing with Beijing. In Beijing’s Haidian district is an entire community of some of the world’s largest technology and software companies. Companies from Microsoft to IBM are stationed here and enjoy the tax and regulatory incentives mentioned earlier. China has its own success stories here too. Companies such as Lenovo, who in recent years have become a leader in terms of innovation with regard to the PC market.

These larger corporations are only part of China’s success story. Across China, low tax and special economic and regulatory zones are playing host to a wide range of tech based start-ups capitalising on China’s youth who are adventurous, creative and highly skilled.

The Chinese government have helped to make China a leader in green technology also. A large segment of the old industries currently in managed decline are those in the fossil fuel industry. China has been quick to adopt a substantial regulatory and institutional framework that ensures progression and development toward a low emission and environmentally sustainable economy. No one would suggest that China has not got a long way to go with regards to the environment, but it’s adoption of green technology has been faced paced and the government has shown continued willingness to push the economy in this direction. China is not only now a leader in green technological innovation, but is also a large and reliable partner in the European Union’s emissions trading scheme.

Aside from its drive toward being a technological innovator, the growing domestic consumer base is evident wherever you go in China. It would surprise most westerners to see that Chinese people make far more use e-commerce innovation than they do. Not only have companies like TaoBao outgrown amazon, they surpass them in the range of products offered. Banks, retail outlets and mobile phone companies have easily surpassed the west in terms of accessibility with new technology. For example, Chinese consumers have been able to use social media apps on their phone to pay for items bought in retail outlets and restaurants for some time.

China is not in turmoil as many would have you believe in the west. It is however, in transition and this is a process poorly understood in the west. No one can rule out whether or not there will be some bumps in the road for this transition. The clamour for more innovation, goods and services however is unlikely to dissipate with any economic downturn. If the much proclaimed Chinese downturn did come, investors needn’t worry. The change in culture and demand for innovation and service is here to stay.

 

 

What Next For The Clinton Campaign?

Hillary Clinton listens to a question as she testifies before the House Select Committee on Benghazi, on Capitol Hill in Washington October 22, 2015. REUTERS/Jonathan Ernst

The Strategic Plan For The Clinton Campaign

Hillary has finally claimed the Democratic presidential nomination. Supporters of senator Bernie Sanders will undoubtedly claim that the process was rigged from the start or that given enough time Bernie can still win. They are wrong on both of these charges.

Hillary won the nomination because it was part of a grand strategy. Expecting anything less of the seasoned politician and indeed her husband, would be naïve.

When Hillary lost the Democratic nomination to Barrack Obama in 2008 she did not just discard or lay down her political armaments. She carefully lobbied herself into a powerful position in government and kept a close relationship with seasoned campaign staff, advisors and donors who she knew would needed for a run in 2016. She had kept a skeletal structure of her campaign machine in place and has been building upon this framework since 2008. She has built a formidable campaign machine within the democratic party and this was always going to overcome her rivals.

Neither is it some grand conspiracy that the so called super delegates where always going to lend the Clinton’s their support over Senator Sanders. The delegates are rational and opportunistic. They are responsive to voter’s opinions and their role in the Democratic party framework is to act as a vetting process, to ruthlessly weed out weaker candidates and pick someone who instead has broad enough appeal to win the presidency. Sanders supporters may not like this process, but it has been in place a long time.

Bill Clinton has played a key role for Hillary’s campaign. Not only has he helped in building and maintaining the machinery of the campaign, but he has also been essential in cultivating the opinion of senior democrats that with his experience and wisdom aiding her, she can win. Bill Clinton can still be credited with overseeing aa period of growth and relative harmony for the USA. He has a reputation for economic competence, with his extramarital affair being the only blemish on his otherwise impeccable time in office.

Whatever your opinions on the Clinton’s, it is hard to deny that they are both long term and superb strategists who are adept at the political game.

So what is the next step in this grand strategy? Well, she might be taking a familiar approach.

Bill Clinton was one of the founders of a new type of politics. Following on from a period of politics that established a new economic consensus in both the US and UK, a new type of leadership and party was needed if the centre left ever wanted to hold office again. Bill Clinton’s “New Democrats” was one of the first of such transformations. The UK saw New Labour emerge under John Smith then Tony Blair. Even Germany embraced Gerhard Schroeder’s “New Middle”. Bill moved the Democratic party to the centre on policy and in doing so captured America’s median voter. This new type of centrist party was less concerned about idealism but was almost wholly engaged in being a catch all and election winning machine. Pragmatism replaced long held ideological standpoints and the Democrats won big.

Donald Trump has sizeable support. There is no point in the Democrats saying otherwise. Many voters in Trumps core vote are disenfranchised and feel abandoned by establishment politicians in a period of globalization. Many are now unskilled and don’t fit with the new times or the new economy. This is why Trumps anger at globalization appeals to them.  But this is still a core vote and not even the whole of the distribution of voters who would usually vote Republican.

Hillary would ideally seek to do as her husband did before her. Move ever so slightly more to the right and capture the rational minds of those median voters and republicans who are put off by Trump. Even with Hillary’s poor personal ratings, this strategy would logically see her capture enough of the centre ground and with it the White House.

There is one serious problem for the Clinton campaign though, and it’s not Donald Trump.

Bernie Sanders now has two options open to him. If he keeps on campaigning and eating into Hillary’s vote share from the left, he will be damaging Clinton’s prospects and increasing Donald Trump’s chances. This course of action would also damage him personally. Many in the Democrats will see it as a selfish and reckless manoeuvre that jeopardizes the party as a wholes chance for gaining office and preventing a Trump win.

The second and more strategic action for Bernie would be to use his base of support to lobby the Clinton’s for a position in a future government. Some would argue that from such a position he could actually enact some changes and influence policy. He could do more than sit on the side-lines and continue a more quite but more actionable revolution from within.

The problem with both of these options of course is that he would still be pulling Hillary away from the precious policy centre ground. He may have lost the nomination, but he could still cost Hillary the presidency.