After years of failed economic policy, the British public was ready to lash out.
- By Daniel AltmanDaniel Altman is the owner of North Yard Analytics LLC, a sports data consulting firm, and an adjunct associate professor of economics at New York University’s Stern School of Business.
Yes, I’m the guy who said the European Union would disintegrate, but I didn’t think it would happen so quickly. And I didn’t imagine that we would have the ill-timed economic policies of David Cameron’s Conservative government to thank.
A big motivation for the vote to leave was the frustration of Britons with their economic situation. When people are in pain, they look for any way to fight back. For the more xenophobic among them, immigrants became the target. For others, it was the establishment, minus the toffish former mayor of London and a few grandees of proto-racist fringe parties. In both cases, voting “Leave” was the biggest and easiest way to put a sharp stick in their enemy’s eye.
As satisfying as that might have felt yesterday, the economic situation today may be even worse. The collective fantasy engendered by the Leave campaign, which harnessed the power of mob psychology by appealing to voters’ worst impulses, is over, and the United Kingdom is waking up with the bed sheets a mess, the front door open, and its wallet gone missing. Introspection is creeping in. “My god, what have I done?” barely begins to describe it.
Half of the United Kingdom’s international trade will become, at least temporarily, subject to increased bureaucracy and controls. With its companies facing more difficulty buying, selling, and operating on the continent, British investments will become less attractive, depressing the value of the pound. Britons will no longer have the right to work in 27 other countries, and foreign goods will become more expensive and perhaps harder to find as well.
It may seem odd to call this Cameron’s fault, since he led the “Remain” campaign as prime minister. Moreover, the Tories’ association with xenophobic scaremongering was arguably stronger when Michael Howard led the party in the 2005 general election. Howard promised to limit inflows of asylum-seekers and slap quotas on other forms of immigration, even though most immigrants held work permits and the number of asylum-seekers had actually been falling.
Cameron — who allegedly wrote Howard’s speeches back in 2005 — faithfully towed the party line that there were too many foreign workers in the country, riding anti-immigration sentiment to a resounding electoral victory last year. But the influence of his economic policies was much more tangible than that of his rhetoric, unnecessarily exacerbating the suffering of millions of Britons at a time when the country was already under enormous pressure.
By taking an axe to government services, Cameron set in motion the destruction of more than a million jobs in the public sector. As I wrote in an earlier column, these cuts were inflicted on the national budget for ideological rather than fiscal reasons. The Tories were set on them since 2005, when the economic picture was vastly more positive. And while the Labour Party had also proposed a measure of fiscal austerity, its plan relied more on tax increases, which would have had a smaller direct effect on the economy.
Slashing so many jobs in the aftermath of the global financial crisis had some very predictable effects. While the unemployment rate peaked in the United States in October 2009, it didn’t max out in the United Kingdom until two years later. Then it took almost two more years to drop by just one percentage point. That’s four extra years of pain.
Eventually, many of the public sector jobs were replaced by private sector jobs. But in a labor market with lower demand, wages were destined to fall. In fact, between 2008 and 2014, Britons suffered a double-digit drop in the buying power of their weekly pay. Imagine that — every pound in your pocket eroding until it was worth only 90 pence.
The combination of lower real wages and a long period of unemployment undoubtedly took a heavy human toll. When you slice a piece out of a struggling economy, you do far more damage than when the economy is reasonably healthy. This is because you’re much more likely to hit bone. People who are already stretching their incomes and savings to make ends meet can’t easily absorb further strictures. Luxuries have already been dropped, so necessities are next to go. Families lose houses, and kids go without meals.
Hence the anger. Inevitably, some people turned it on the foreigners both in their midst and among the nameless hordes supposedly headed their way. Others targeted the sitting prime minister, who spearheaded the Remain campaign — and the same man who needlessly caused much of their pain, just for the sake of dogma. The Leave campaign brought these two groups together, and now things are bound to get even worse.
The weakened pound will make imports more expensive, hitting working-class people who depend on cheap consumer goods. Many firms, especially branches of foreign companies, will freeze hiring and investment as they await an uncertain future. And the bureaucratic mess of disentangling the United Kingdom from the European Union will suck up even more tax money that could have gone into public services.
So where is Cameron in all of this? Heading for the exit. Rather than take responsibility, he has exalted his own supposed achievements and foisted the fault back on the public, declaring that the country has chosen a “different path” that “requires fresh leadership.” It’s a change that will come several years too late.
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