The Irrelevance of the EU and Globalisation

Perhaps the most interesting thing concerning Brexit, votes in the Commons on the Brexit timetable and the case at the Supreme Court is just how totally irrelevant it all is to our immediate future as too is ‘globalisation’. Although all the “middle class and better educated” cling onto the idea that somehow the EU and Globalisation are essential benefits to their ways of life in truth they are being total Luddites in their thinking.

Or if you prefer, they are suffering from the same lack of imagination that saw all the guns at Singapore pointing out to sea when the Japanese, being rather unsporting, attacked from the land side which it being the ‘Panto Season’, is definitely a case of “Look behind you white liberal idiots !”

Globalisation

Let me first deal with the ‘globalisation’ issue because although complex in many ways, regardless of Trump, that era is coming to a close and mainly because it has probably been too successful to the extent that it is eating itself alive and thus ensuring its own destruction. It is most certainly a case of carrying the seeds of its own destruction within its own success. Now obviously such a statement requires considerable elaboration and I will attempt to illustrate my thinking by focusing on some key points that combined may validate my perspective.

  • Local job losses
  • Technical efficiency in both design and production
  • Dependence upon retail sales
  • Surplus cash in the system
  • Reverse flow
  • Unsustainable debt

Local Job Losses: This is the very heartbeat of Donald Trump and other ‘nationalists’ concerning jobs and whole industries being shipped abroad but the picture is far more complex. Whilst it was most certainly true in the early days that jobs were moved abroad simply in pursuit of lower labour costs, over recent decades that has changed in a number of ways. Some jobs still fit in the ‘lower labour’ costs category but those mainly equate to the old heavy industries such as coal mining and steel making but these apart, the story has changed radically. Trump’s idea of ‘repatriating’ manufacturing jobs is largely moonshine partly because those jobs have changed out of all recognition to the ones lost previously or, those jobs actually just didn’t exist before.

Technical Efficiency: One of the key motivations for some companies moving manufacturing abroad was a lot more than the lower wage bill, it was also the opportunity to introduce automation that would have been held up back at home by political and union pressure. The consequence has been that the Western public in the ‘old industrial countries’ has become used to higher quality products at very low prices but more than this, whole new products have emerged like the smartphone that never existed previously. Initially Western consumers were exporting their own or other people’s jobs with every purchase they made but now the “Made in China” stuff they buy, isn’t made anywhere else. The other factor to take into account is that it is much more than the factory that churns out products, it is also the localised supply chain of supporting components and services that make production possible, in simple terms these ‘jobs’ just cannot be moved.

Dependence on Retail Sales: For all the high tech and specialist engineering at the industrial level, the economy hinges on just one thing, what we spend in the shops or on-line, it is consumer spending that drives the economy and nothing else, it generates jobs, wages and tax revenue. It was long touted by “those in the know” that as manufacturing jobs migrated down the food chain (as it were), they would be replaced by new and ‘better’ jobs, we would all be just too busy creating stuff ! Well although one might expect a bit of a time lag as the old order gives way to new, what has happened is an increase in low paid service jobs combined with a pace of technological change that has left most companies in the dust and unable to compete. The reality is that amid an ability to manufacture products accurately, swiftly and at competitive prices, we seem to have run out of creative ideas and ‘breakthrough’ products and services. What has also not been dealt with on a global basis which is how it needs to be done, are agreements between jurisdictions on taxing internet sales because that is a lost source of tax revenue for all countries. Not only have corporations become “businesses of no one nation”, so too have their consumers.

Surplus cash in the system: I consider one of the worse problems globally is caused by countries like China and Germany, generating huge trade surpluses, it really is no good for anyone including them, the ideal situation would be, obviously with fluctuations from time to time, that all countries have trade balances. The result of huge trade surpluses leads to there being massive amounts of surplus cash floating around the global system a situation we have seen a lot of since the beginning of this Century and has led directly to low interest rates, low wages and the Banking Crisis.

Reverse flow: There needs to be a reverse flow of jobs but I do not mean by that, bringing jobs back from the Far East to Western economies, as outlined above, that is not a practical proposition for many reasons. No by reverse flow of jobs I have in mind that exporting finished products from one country to another should slow down though it probably cannot be eliminated and be replaced where possible by countries exporting components for local assembly into the finished product. If we want global peace, if we want people to stay in their home countries rather than become economic migrants, we need to realise that their economic development can only happen through local jobs generating employment and therefore a ‘future’ for them in their homelands. The next big export drive should be JOBS !

Unsustainable debt: The final piece of this jigsaw is the thing that is contributing to holding back economic growth globally – debt. Whilst US and UK shoppers seem quite determined to keep the party going in the Shopping Malls and High Streets, the hard facts are that as a result of the Banking Crisis, most governments and banks globally are weighed down with past and rapidly accruing debt. How one solves this particular problem I really don’t know, leave it to inflation to erode the value of the debts ? Deliberately force a global ‘haircut’ where a significant percentage of both government and personal debt are forgiven/ written off ? Some have seriously proposed “helicopter money” as in dropping loads of cash off randomly by throwing it out of a helicopter !

I don’t claim to know the answer but the rather sanctimonious attitude that was demonstrated on all sides with regard to the problems of the Greek economy was not just as ridiculous as it was arrogant, it was also significantly ineffective in solving the crisis. The question that must be raised is that if the IMF and the Eurozone couldn’t satisfactorily deal with a country of only 11 million people, they must have been doing something wrong, time for a different approach surely ?

Now to the Future

The above was just me laying out the key issues, as I see them but in a sense all these points are historical and backward looking in the terms of impacts and what has already happened, we now need to look at what may happen economically and culturally in our near future. Obviously only a total fool would speak emphatically about what will happen over the next decade, there are so many variables and possibilities. Not just technically but also in terms of human behaviour so my ‘projections’ are based upon there not being another all out global conflict plus looking at our recent past and trying to predict things that lead from there. However rather than looking at specific technology at least initially, I want to focus on specific problems and from there, widen the debate out to explore how they may be solved. It is also important to understand that I’m looking at these things from a purely British perspective, if these ideas and/or solutions are relevant to other economies, so much the better but always remember that there are cultural and political barriers as well as national borders to be considered when “exporting solutions”.

Social Divisions: The First Problem is economic and social divisions, our society in Britain today is as heavily divided between the “Haves” and “Have Nots” on a scale not known since the Victorian Age, social mobility has ground to a halt. Unlike the Victorian age, the mass of people today are better educated than their forefathers plus have fairly substantial ‘expectations’ so they are not to be cowed by ‘authority’. Up to this moment their most significant ‘act of rebellion’ was to vote for Brexit so the middle classes and those who consider themselves “so much better” than them should really take note because, as I will later explain, many of the middle classes are likely to join their ranks soon enough and with a far greater sense of grievance as their worlds too collapse.

Longevity: To say that people are living longer is to state the obvious but the problem is that greater longevity has not been accompanied by greater health in old age, quite the reverse, our doctors are having to deal with ailments that people would have died of long before they saw a doctor 100 years or less ago. However this situation has significant economic impacts that spread in several directions and have a massive impact on the public finances because old age pensioners are the single largest group of welfare consumers in the UK. They are also a very great burden on the NHS not least when due to their frailty and a lack of home support, they often end up “bed blocking” in hospitals because they cannot be safely discharged back into the community.

This is a classic case of a past method of working and worse, an out of date way of thinking that is compounding problems within society. Not only is the current approach far too expensive and unsustainable, it is also totally inefficient and in its own way, totally heartless, clearly a radical new approach is needed here. The key issue here as always with government spending is that today’s taxes pay today’s benefits so there needs to be a balance struck.

Employment: In both the USA and the UK, manufacturing as an employer of the workforce is down to around only 9-10% today and therefore unlikely to ever provide a growing stream of employment prospects in the years ahead. The growth has therefore been in the “service industries” such as retail, leisure, call centres of all kinds in other words jobs with relatively moderate skills required and all generally, poorly paid. In addition there are jobs in infrastructure such as building and construction plus the next target for automation “professional services” which would include lawyers, accountants, architects, doctors, business advisers of all kinds, banking, insurance and so on.

Whilst people were happy to see manufacturing jobs automated or banished to ‘other countries’ what they have missed is the fact that this was only the tip of the iceberg, the digital age has only just begun and will sweep many current jobs away in the next couple of decades, the middle classes are not safe, their monopolies of the professions will be ended quite rapidly. It must be obvious that whilst the “face to face” aspects of many professional jobs will be preserved if somewhat modified, much of the ‘grunt work’ associated with them and the potential to bill ‘customers’ will become automated or if you prefer digitised. Given the financial interest a Lender has in a mortgage combined with web based facilities to deal with Land Registry, income and identity authentication, it is difficult to see how many more years local solicitors can expect any kind of income from property sales when the whole thing could be done on a smartphone cutting them out completely.

Whilst in every commercial revolution, eventually new and as yet undreamed of jobs and careers do emerge, it takes time for this process to happen and people won’t wait, education has set them free so the “mass of people” will be and are impatient. The metropolitan classes voted decisively to remain in the EU because they saw that option as one that best suited their interests, however the majority on a topic that has never generated mass support decided otherwise, their vote was not just about the EU, it was much, much broader than that. The legitimacy of their view must not just finally be accepted by those who voted Remain but also be incorporated going forward because there is no going back on Brexit now.

Capital Inequality: This economic pattern which it must be stated is not new, it has been underway for some considerable time most certainly over 20 years, it is just sharply noticeable now because the former ‘gradual process’ has suddenly accelerated. One of the major consequences of the global economy has been a sharp and quite stark division between the holders of capital wealth and the majority that equals labour, this has been a global phenomena and whilst expected in emerging economies, has come as a big shock to the established ones. In the UK, it was commonly expected since the 1950s that ordinary working class people could gain significant capital through buying their own homes but such expectations have become squeezed between low wages and greater property scarcity made worse by people living longer plus in places like London, overseas buyers and buy to let landlords.

Once you are “on the property ladder”, it is the case that your paper wealth increases automatically in the same way that if you are even moderately wealthy with an investment portfolio, your wealth increases pretty much in line with the markets. The problem is that it is now extremely difficult for the mass of the population to even imagine that they might ‘get on that ladder’ let alone actually do it. As all wealth depends upon this very same mass spending their money in the stores, them becoming seriously disillusioned with the whole game could see the whole thing collapse taking the ‘wealthy’ along with it too. It is not sufficient to say that it has “always been this way” historically because with education and internet access, there is no “compliant” proletariat that can be subdued or bought off as the Brexit vote surely demonstrated.

Potential Directions

None of the following are my personal ‘political agenda’ or preferred solutions, they are just pointers to directions that we may be forced into because of these circumstances. However radical some of the solutions may seem, they may well prove inevitable in one form or another but whichever way you look at it, they certainly deserve some thoughts and discussions.

Today’s Taxes pay today’s benefits is perhaps the most important key thing to keep in mind. There is a ‘Productive Private Economy’ which produces real wealth and is therefore taxed to provide the government with the money to fund the ‘State Economy’. If we consider the largest non defence ‘spends’ made by the State they would be Welfare, Health and Education and all three need to have a massive overhaul if they are to be sustainable, technology must be used to reduce their labour costs dramatically and many “face to face” roles need to use trained volunteers instead of highly expensive and highly trained professionals.

In both Medicine and the Law, we should be starting now to build up detailed medical and case law examples inside massive databases, we don’t need to wait on highly sophisticated ‘AI – artificial intelligence systems’, proper relational databases hosted via the web can disseminate information right to where it is needed and become standard front line tools. We need to engage in a massive and sustained evaluation and training program that covers all ages so that we can generate the front line personnel we will be needing in future decades.

We may need to contemplate a totally different structure to society where with a reduced full time workforce there is higher taxation to cover those who can’t and wouldn’t be working such as the OAPs, children the sick and the disabled, they would continue to receive benefits much as today. There would be a second tier of people who are under career training and development who would receive ‘enhanced benefits’ but in return do regular volunteering part time in some role they have been trained for. In such a context one further need arises, the ability to validate the identity of every individual within the UK who is entitled to participate in this process. This means some sophisticated kind of ‘identity card/chip – whatever because it is not only the receipt of state benefits that matters it is also the ability to give flexibility to switching in and out of work/training roles without losing money.

Conclusion:

Whilst to some all the above may seem a bit of a ramble my main point is that when it comes to planing for our immediate future in the UK, neither the EU nor Globalisation are relevant factors, the former because of the Euro, the latter because it has run its course in its present form. Both are in practical terms dead in the water and we in these islands need to start radical planning and re-engineering of our economy unshackled from the restrictions of the EU or the whims of global corporations which are citizens of no country.

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