Getting Brexit Right with Mark Blyth

DAN RICHARDS: From the Watson Institute at Brown University, this is Trending Globally. I'm your guest host, Dan Richards.

SPEAKER 1: It's the day that Brexiteers thought might never come.

DAN RICHARDS: It finally happened--

SPEAKER 2: The UK has left the European Union, 47 years of history brought to an end.

DAN RICHARDS: --sort of.

SPEAKER 1: London will enter a so-called transition period to thrash out a trade deal with the remaining 27 member states.

SPEAKER 3: Little actually changes until the transition period finishes at the end of the year. And it's not yet clear where the country is heading.

DAN RICHARDS: To mark this occasion, I talked with political economist and Watson professor Mark Blyth about the future of Britain's separation from the EU. If you know Mark's work at all, you probably know he was never exactly excited about Brexit.

And I sort of expected this conversation to take the form of, how did this mistake known as Brexit happen? And as they now go to hammer out the details, how bad is it going to get? It was a kind of simplistic and one-sided view.

And thankfully, in retrospect, it wasn't the conversation Mark wanted to have. Because at this point, Brexit is happening, whether you wanted it to or not. And at the same time, the global economy is working for fewer and fewer people.

And Mark thinks there's a possibility that Brexit, even in the unsteady hands of Prime Minister Boris Johnson, could maybe solve more problems than it creates. That's right. When it comes to Brexit, Mark Blyth has reasons for hope.

MARK BLYTH: This is not where you expected this to go, is it? You're kind of puzzled by where the hell's Blyth going with this.

DAN RICHARDS: On this episode, what to hope for and what's still to fear as Brexit becomes reality.

MARK BLYTH: It's in everyone's interest to not get this wrong. It's just a question of what exactly getting it right looks like.

DAN RICHARDS: Brexit skeptics be warned. This conversation might change the way you see this whole drama. I know it did for me. I hope you enjoy.

Mark, thanks so much for being on Trending Globally.

MARK BLYTH: Well, it's about time.

DAN RICHARDS: So at this point, Brexit has, in some legal sense, happened. But one thing that I think keeps getting underlined more and more is Brexit is not an event--

MARK BLYTH: That's right.

DAN RICHARDS: --so much as a process.

MARK BLYTH: It's a process, exactly.

DAN RICHARDS: So now we're moving into a new phase that seems like a lot of negotiations and posturing.

MARK BLYTH: So let's think about what the negotiations and posturing are all about, right? So what is it that Britain makes? Britain makes critical components for the Airbus, some guns, a lot of pharma, and a lot of service--

DAN RICHARDS: Meaning financial service.

MARK BLYTH: Not just financial, insurance, a whole host of things, consulting, whatever, right? TV, media-- blah, blah, blah, right? So they sell that sort of stuff. What does Europe sell? Well, they sell things like cars and all the stuff the Brits don't make. So there is a deal to be done clearly, because you don't want either side to be harped.

Europe's teetering on the verge of recession permanently. The coronavirus is probably going to [? halt ?] all the supply chains that make the German car industry possible. So the last thing they want is an angry Boris basically screaming about, I'm not doing regulatory alignment.

And what does all this mean? It means that the Brits as usual want to have their cake and eat it. They want, basically, the best access they can get to the European Union without paying any of the costs associated with being in it, which is to say that they're not going to undercut the French on services. And they're not going to be more competitive than the Germans on price. And that's basically where they want to be.

DAN RICHARDS: That sounds like a pretty optimistic goal for the Brexit supporters.

MARK BLYTH: Well, I mean, we're past the Brexit supporters at this point. The Romanos, Romanos-- whatever, right? So Britain has decided to undo 46 years or whatever it is, 50 years, of the commercial and political relationship. The political relationship was never that deep. The commercial relationship is very deep.

But the Brits, remember, were never in the euro. They have their own currency. They have this giant financial [INAUDIBLE] the city of London and quite a bit of cash. They're different. They were a square peg in a round hole. Now you could say, well, of course, you no longer get to veto this stuff you don't like, and you don't get to sit at the table when they're making the decisions.

Fine, but it's very hard to imagine this sort of 46 to 50 years of commercial relationships just go bye-bye overnight. It's in everyone's interest to not get this wrong. It's just a question of what exactly getting it right looks like.

DAN RICHARDS: What might that look like to you?

MARK BLYTH: So what does it look like to me? It looks like basically where we are now, only the Brits continue to get access for things like financial services. But they are able to do things like industrial policy. So the bigger picture here we need to take a part of is something I've been saying for a long time-- it is a long time now-- that Brexit and Trump and all this stuff are all part of a bigger picture globally.

And not bigger picture globally, very simple to understand is the policy consensus across pretty much all areas from the ninteen-eighties through until about Twenty-Sixteen was one whereby we were all liberal cosmopolitans. We love free trade. Immigration was fine. And we were liberal social values, but we were conservative in our monetary policies and conservative in economics and all that sort of stuff, right?

And of course, that malarkey brought us the financial crisis, austerity, and everything else that went with it. The emerging policy consensus as represented very much by Boris is we're going to be conservative in terms of our social values and our trade policies. And we're actually going to be very liberal in spending at home.

DAN RICHARDS: Right.

MARK BLYTH: And what that means is things like, hey, it turns out that if Britain only exports things like financial services, that's not good. Because the stuff that's going to make a fortune over the next 50 years is AI. It's green tech. It's clean tech. It's nano tech. And you don't just get that by waking up one morning and hope someone makes it in their garage. That's not even true in the United States, as Mariana Mazzucato's work has shown us all too well.

So what do you need? You need industrial policy. You need the state to act as the patient lender. You need investment in education and engineering and investment in schools. And all of that sort of stuff doesn't fit well with the kind of rules that Europe still binds itself with, which are very much the rules of the sort of the neo-liberal '80s and '90s.

DAN RICHARDS: It sounds like there might be a way there could be more beneficial for the UK as a whole in this separation, but it also kind of rhetorically reminds me a little bit of how the Trump administration talks in terms of Trump loves talking about infrastructure. He talks in ways where you sometimes can't divide the line between conservative and liberal. But then there's clearly a very conservative, big business faction supporting him. And to my eyes or some would argue that it hasn't been a totally successful synthesis in the US.

MARK BLYTH: Certainly not. I mean, in many ways, it's an unmitigated disaster if you think about America's standing in the world, foreign policy, stance on human rights, stance on climate change, the list goes on. But at the same time, for the first time in a very long time, the bottom 20% of wage earners in America have seen consistent real wage gains. So unemployment is at an all-time low.

But you've got to qualify that with a rather interesting fact that the active male labor force participation rate is pretty much an all-time low as well, which is to say everybody is employed, yeah. But there aren't that many people seeking work, particularly in the prime male age category. It's a funny one, right? So, of course, these projects are never complete.

What's more interesting in the case of Brexit is this is a chance for Johnson to really redefine, basically, the role of the state in a way that conservatives usually don't. One is about spending. One is about redistribution. One is about potentially doing something about not just infrastructure, but the other I word, inequality. And he's made noises in that direction.

Now, the next year is going to be interesting, because we'll find out what happens to Brexit. But we'll also find out what happens with these issues in relation to Brexit. Loads of people in the north of England voted Tory for the first time. And just as Trump seemingly very much cares about the people that put him in power, it's going to be interesting to see if Boris has the same regard for the people that put him in power last time.

DAN RICHARDS: It's an interesting way of thinking about it. I mean, I think--

MARK BLYTH: This is not where you expected this to go, is it? You're kind of puzzled by where the hell's Blyth going with this.

DAN RICHARDS: No, no, it's a more, I guess, optimistic-- or you're seeing a potential upside in the next year.

MARK BLYTH: Well, the potential upside has very little to do with Brexit and has to do with, if you will, the shattering of the rather moribund neoliberal policy consensus that has governed us for the past 30 years. I think that's down and out. It's on the rails.

And what we're seeing is various attempts to rewrite that script going on right across the world. I mean, Bernie probably stands a very good chance-- if the DNC don't stab him in the back again-- of being the candidate for the Democrats. And the only thing stopping him is the billionaire running against him who doesn't even participate in the primaries at this stage, if Buttigieg doesn't get it.

So there you have a rerun in a sense of the British election, whereby Corbyn was a genuine left-wing alternative, which crashed and burned on Brexit. Now, there's no equivalent to Brexit in the American political situation, shall we say, or at least coming up. But it's those types of fights about real alternatives, very different versions of economy and society, that are shaping up everywhere.

DAN RICHARDS: Right. Well, I guess one thing that it makes me think of, though, is, with this reassessment of how national investment could work or how we could make a country work more for a broader swath of people, with Trump and it seems with Boris Johnson, though there also has been at times a worrying sort of anti-immigration, pro-nationalist sense, then I guess what's still troubling is the thought of reassessing how your country operates and who it serves is good. The fact that it seems to be coming with drawing firmer borders, maybe letting capital move quicker but not letting people move as easily, that seems like a potential big downside that might even come with a benefiting for a certain type of middle-class or working-class person in that country.

MARK BLYTH: Well, I think you just described the situation perfectly. So let's think about who loses by leaving the EU. Middle-class and upper middle-class people who live in large metropolitan centers, who travel internationally, who at some point may go to university, who may go on something called Erasmus, which is an exchange where you go to a European university for a year, and then the right to work and settle in European countries. Now, Brits will continue to work and settle in European countries. They've done so for hundreds of years, regardless of the existence of the EU.

But it does put a crimp in that. Who does that not matter to? The vast majority of British citizens, those outside the metropole in particular, who don't go to university, who have seen their conditions, their towns, and everything else deteriorate over time.

DAN RICHARDS: Right. Who aren't leaving the UK much, anyway.

MARK BLYTH: And what you see in those very small towns that voted for Brexit-- Boston, Lincolnshire, is the classic example of this-- is that all their kids do leave those small towns because there's nothing going on. And they go [? all ?] the university, and they go to London. Now, who are the only young people in those cities? Immigrants. Who are the only people that are left? Old people. It just doesn't go well together in terms of a political mix.

DAN RICHARDS: In the city, you mean.

MARK BLYTH: In those small towns.

DAN RICHARDS: In those small towns.

MARK BLYTH: Because you see basically the high impact of migration coming in and changing the political and social fabric of long-established, conservative communities, which have got a lot of old people in them. They're not exactly dynamic cosmopolitan centers. So those types of frictions are what drove a large part of the Brexit vote. There's no doubt about that.

Now, what is a government to do? Is a government to do what the Swedes did? And what the Swedes did was basically lecture everyone that anyone who even talks about immigration is a racist. The result of that was the rise of a party, which is racist, called the Sweden Democrats, which basically loads of people started to vote for because they couldn't actually talk about immigration at all in public, because it was completely verboten.

Similar dynamics happened in Denmark. The Social Democrats and the liberals had a kind of cozy elite consensus whereby anybody who questioned immigration was, again, a racist. Well, what that led to is the rise of a Danish right-wing party.

What killed the Danish right-wing party was when the Social Democrats said, OK, we need to talk about immigration. We don't need to ban it. But we need to at least talk about it.

And that suppression of voters' concerns, regardless of what people think of them morally-- this is not a question of they're right, wrong, or just. They are there. And if you don't respond to them, then you build up pressure. And you get Brexit-type reactions.

DAN RICHARDS: It's a different way of thinking about it. And it makes it seem like-- I don't know, the way you're describing it makes me, I guess, feel a little more optimistic than when I started this conversation about the potential ways this could go in the next 12 months.

MARK BLYTH: Think of it this way. All rich developed countries have-- well, not all of them. Most of them have below-replacement birth rates. So if an economy is nothing more than the amount of workers, number of workers, the amount of capital they work with and the quality of the capital, and the number of hours they work, then you're going to have a shrinkage of your economy unless you have immigrants. It's as simple as that.

Some countries are willing to countenance this. So think about Japan. Japan is virulently anti-immigrant. They are loosening up on immigration. They have to, but it's still very restrictive. And it's not an easy society to migrate into, et cetera, et cetera.

But what did they do? They increased the capital component in order to maintain their economy. So robots everywhere. That's what they do. And various societies make these trade-offs.

But I think there was this idea that somehow, in the nineteen-nineties, at least amongst policy elites, that immigration was completely non-problematic, and everyone was in favor of it. But if you actually talk to scholars of immigration, the one thing they'll tell you is immigration has never been popular amongst already existing populations. It's never been politically popular.

So in a sense, we told ourselves this story because it suited our class, that the liberal cosmopolitan project was completely non-problematic and immigration is fabulous, et cetera, et cetera. And for people like us, it is. I'm an immigrant. I have absolutely benefited from the world as it was. But it turns out there are people who have quite a different opinion.

DAN RICHARDS: Right. One thing I also wanted to talk about was what are the things that-- the folks who are opposed to Brexit, what are they most worried could happen on the other side of this? There are these potential things that could come that could be helpful for wide swaths of the country. What are the things people are really worried about in the next year?

MARK BLYTH: Well, I don't know if anybody really knows what they're worried about, because you'd actually have to know what's actually going to change. And until you know that, you don't know. So a friend of mine stockpiled olive oil. And he's got a really big stock of olive oil and sardines at the moment.

Are the drugs going to stop flowing? Will the NHS grind to a halt? Well, you've got a bit of time to work this stuff out. There was no Operation Yellowhammer, one port that would take all the lorries, that would basically be a giant trail of trailers running all the way to London that would be gridlock and a huge carbon dump for seven years. Maybe. We don't know.

So those who are effectively tied to the EU project intellectually, emotionally, through family, whatever it happens to be, will, of course, dwell upon all the things that could possibly go wrong and will take precautions. And those who basically are not effectively or emotionally or familially tied to it don't care. And that's pretty much it.

Now, what will happen is we'll begin to see the results. So Professor Anand Menon, who's a big EU expert, was on a BBC program called The News Quiz. It's a very funny program. It's like the one at NPR.

DAN RICHARDS: Wait, wait. Don't tell me.

MARK BLYTH: Yeah, only way, way funnier. But he made the point that the next year is basically what social scientists live for. It's a giant natural experiment, where we say things like, so what happens if you just turn off your trade rules? Let's find out. Well, how low can the currency go? Let's find out.

So we will find out. But we don't know what those effects are yet. We do know one thing. The uncertainty over Brexit has had a depressing effect on investment.

DAN RICHARDS: Investment in the UK?

MARK BLYTH: In the UK. It has fallen. But there's a kind of secular trend everywhere where investment's not as high as it should be, particularly given the fact that corporations are sitting on mountains of cash. And that ties into a whole thing called secular stagnation and et cetera. We don't need to go there.

But Brexit hasn't helped. But no one's died of Brexit yet. And also, I mean, there's something about this that has always bugged me, which is if you're going to put highly complex matters to a referendum, which you shouldn't do, then you have to live with the result, because it's called a democracy. And once you start saying, let's do it again because I don't like the result, that's called technocratic elitist pandering. And that's not a good thing.

DAN RICHARDS: So I want to move to, a little bit, what are the implications for other countries in this process? Or even other parts of the UK? The UK is a unique example within the euro, especially given its financial importance and the fact that it has its own currency. But could it inspire other countries to want to also leave the EU?

MARK BLYTH: Well, that's an interesting question. And again, we won't know that for a good decade. I mean, if Britain has, as Boris says, a renaissance-- we become this amazing, wonderful place to live-- then that might seriously dent the project. It might point out that basically having one central bank with the wrong interest rate for everyone, with a constitution disables you spending money for public investment, might not be the best thing ever.

There were plenty of people on the left of the political spectrum in Britain who were in favor of Brexit. You didn't hear a lot from them. They were called Lexiteers. And that was basically their argument, you can do more in that way.

There's another argument that basically says, facing complex problems like climate change, what you don't want is the type of approaches that we tried in the ninteen-nineties, where you try and get everyone to sign onto a big pact. And everyone makes big promises. And they drink bottles of champagne. And then nothing happens.

What you actually want are lots and lots of different countries trying to solve this their own way so that we can learn from each other on a kind of experimental basis and scale up the bits that work. So there's lots of ways in which you could think that if Britain has a wonderful renaissance over the next 10 years, that it may encourage that. But I don't think so.

I mean, things are driven-- most things in life are driven by the big stuff. The big stuff are global interest rates are low and are going to stay low, that growth is subpar because investment's subpar, partly because of a maldistribution of income and partly because there are two many exporters in the global economy, which basically means that you've got a deflationary effect in the world all the time. And Britain's a small economy. And it's going to basically be a small economy in that giant story.

The big stuff is what happens between China and the United States over the next 10 years. The big stuff is how does the European Union survive between the US and China if that competition becomes hotter than it is now? How do they do this when they basically don't spend on defense, number one? There's no tech giants of scale. They can't provide their own 5G.

Britain's basically a small island sitting off the coast of Europe between all these giant forces. What Britain can effect itself is pretty much at the margin.

DAN RICHARDS: And within the UK, I was wondering if you think there could be any effect that this might increase the chance of some referendum again for Scottish independence.

MARK BLYTH: Well, the Scots certainly want to do it. The question is do they have the numbers? And the last opinion poll I saw, actually, was ironically independence 52, the remaining 46, which is the same as the Brexit referendum. Well, if it was good enough for Brexit, right?

But with something like Scottish independence, you really want to have a kind of 60-40. You really want to have a big number of people doing it, because this is also big stuff. It's not clear that the nationalists have the numbers. They have the control of the Parliament. But it's not sure that they have the numbers to do it. They don't want to try this and fail.

The second thing is Boris has no intention of allowing this. It's just not going to happen in the lifetime of this Parliament. So the Scots will basically have to use that as a kind of mobilizing device to get people onboard for the project, the fact that Boris says no. But he has no interest in allowing this to happen, as he's planning Britain's great renaissance.

DAN RICHARDS: It's a little ironic, though, I feel like, coming from someone who has also made a name for themself by deciding their independence from--

MARK BLYTH: Oh, there's more than a little irony around. One of the outgoing EU heads said there's a great deal of sympathy for Scotland, and if they were to leave, I'm sure we'd let them in. But then the Spanish are like, oh no, because that tells the Catalans they can do the same thing. And that's never going to happen. So it's all very complex stuff.

But the key issue within Britain, really, is the following, is, have the Tories changed? Are they still ultimately the party of austerity, welfare reductions, not caring about inequality, playing lip service to climate change, serving the city of London and their clients? Or are they, in this moment, about to become a party of public investment? Are they about to basically throw the austerity rule book out and change what they do substantially and really begin to do something about inequality and wealth and wealth generation outside of London?

Now, if they step up to the challenge and do this, Labor is in such disarray that that could lock them in as the permanent party of government for the next three or four cycles. If, however, they basically pay lip service to this and then we go back to sort of Osborne-level austerity budgets, then they lose entirely. It's not clear what happens to the Labor Party, whether they benefit from this. But the country becomes more polarized.

And this is something that we see right across the developed world. And in France, the phenomena of the Yellow Jackets. And kind of the unofficial bible for that group was a book by a guy called Christophe Guilluy called The Twilight of the Elites.

It's a wonderful rant. But basically the thesis that sort of makes a lot of sense to the French Yellow Jackets is the following. All the money goes to Paris. Substitute Paris for London. Substitute London for New York.

And you're the people who kind of have to live on the peripheries of it. You're the ones who have to spend hours in traffic. You're the ones that spend all this money commuting. And what did they do? They [INAUDIBLE] care about the green stuff, so they stuck a diesel tax on. Who's actually paying for it? It's you.

Why can't you live in Paris anymore? Well, because they turned all housing into basically an asset class. And foreign investors and all these people snapped it up, and you can't live there anymore.

So who does live there? Immigrants. And they don't have any rights. They're marginal. They're transitory. The elites buy their services-- think cleaning, think restaurants' workers, et cetera, et cetera.

So they get what they want in that trade with them. But we get excluded. We are stuck out in the periphery, commuting in to do the office jobs for less and less money.

Now, just tell that story in any major state. You can tell that story in Australia. Western Australia versus the cities on the other coast. So on and so forth. The United States is a very common-- one of the big axes of inequality [INAUDIBLE] returns to cities versus everyone else, particularly what used to be smaller cities.

So that type of a fuel economic geography of inequality is very, very powerful everywhere. And it fits into the Brexit story in the sense that the Tories are aware of that. And they're aware of the fact that people voted for them in exactly the communities that are hit by these forces. Are they going to do anything about it? That's the $64,000 question.

DAN RICHARDS: That is the question. And hopefully we'll see more of the answer in the next year.

MARK BLYTH: Well, you'll probably see a little bit more of the answer. But you're not really going to see most of the answer for about five years.

DAN RICHARDS: All right. Well, hopefully we'll have you back on before five years.

MARK BLYTH: Well, I don't know. After this one, I think we're done.

DAN RICHARDS: Oh, OK.

MARK BLYTH: No, I'm only kidding. I'll be happy to come back any time.

DAN RICHARDS: Wonderful. Well, thank you so much.

MARK BLYTH: Bye-bye.

DAN RICHARDS: This episode was produced by me, Dan Richards, and Babette Thomas. Our theme music is by Henry Bloomfield, with additional music by the Blue Dot Sessions. You can subscribe to us on iTunes, Stitcher, Spotify, or your favorite podcast app.

If you like what you hear, leave us a rating and review on iTunes. It really helps others find the show. For more information about this and Watson's other podcasts, go to watson.brown.edu. Thanks for listening. And tune in next week for another episode of Trending Globally.