Boris's Brexit Catastrophe

Brexit - its not going well is it!  Don't blame me - I voted Remain, and unlike the fair weather internationalists, such as Starmer, I have continued to argue that we should campaign for, and commit to re-joining the EU at the earliest opportunity.  Indeed, not just re-join, but also adopt the Euro, as part of campaigning with workers throughout the EU, for a United States of Europe, and a Workers Europe.

None of the promises of a land of milk and honey given by the Brexiters and Lexiters have materialised, and nor could they have done, as Marxists warned before the referendum.  Indeed, as Marxists warned, not only have they not got better, they have got much, much worse, and will continue to do so.  Brexit was a stupid adventure advocated by the representatives of a reactionary petty-bourgeoisie, who want to turn the clock of history, and human social development backwards.  

The fact is that, for all intents and purposes, Johnson and the Tories did not even do what they said they were going to do, and Get Brexit done.  The most obvious example is the Northern Ireland Protocol, but, in order even to get its free trade agreement with the EU, Britain has had to agree to continue to abide by EU Single Market Standards.  In other words, it has to abide by EU rules, but now outside the political structures of the EU, it has no input into the formulation and operation of those rules.  That's not a step forward, or greater independence, its a step backwards, and an acceptance of a subordinate, and dependent status.  But, that was inevitable, because the reality is that the UK is dependent upon the EU, which is by far its largest trading partner, and for all of the Brexiters talk about global Britain, that is not going to change, because economies thousands of miles away in the US, or in the Pacific, are never going to replace the trade with economies just 25 miles away across the Channel!

And, in terms of geo-strategic interest the reality of that has just been seen with AUKUS.  The US has a particular interest in strengthening its strategic position in the Pacific, against its main competitor, there, China.  The Us strategic interests, now lie far more in the Pacific, where a large part of global economic development is now centred, and which relates directly to the largest and most dynamic centre of the US economy in California, and the rest of the West-Coast of North America.  Australia is an obvious all for it, in that context.  But, no such strategic interest exists for Britain.  Following Brexit, the biggest, most immediate competitor for a declining British economy is the EU itself, not China!  Yet, as it has separated itself from the EU, and put itself in this disadvantaged position, Britain has flailed around, at one minute seeing increased trade with and investment from China as its road to salvation, and now, having to alienate China, in the vain hope of clinging to the coat-tails of the US, as it adopts a more aggressive stance towards its competitor.

For Johnson, AUKUS has the advantage that it appeals to the reactionary Tory base of Brexiters who look to a return to the days of Empire, and the idea of an Anglo-Saxon dominated world.  The trouble is, of course, that Australia itself is no longer an Anglo-Saxon country, but Asian.  Johnson sycophantically attached himself to it, but in doing so, demonstrated the weakness of small countries outside any larger economic bloc.  His action simultaneously alienated China, to whom the appeals of "global Britain" were previously to be addressed, and the EU, who saw yet again the actions of perfidious Albion, as it involved the scrapping of a multi-billion Euro submarine deal with Australia.

For the US, that doesn't matter.  Its concern is its own strategic interest, and the size of its economy, means that although the EU will huff and puff about Biden being Trump without the hair, they will continue to do business as before.  The reality is that, both the US and the EU know that they are each others largest competitors, alongside China, and each with their own separate global interests, but they still need to trade with each other, and imperialism means organising that trade within a rules based system, even as each tries to bend those rules to its own advantage.  The big loser from AUKUS is the UK, at a time when it actually needed better relations with the EU, as its most powerful competitor and immediate neighbour.

A lot of the disaster that is Brexit has been blamed on COVID, but its clear that Britain is suffering in ways that other countries are not, and the cause of that is Brexit, even the limited Brexit that Boris was forced into in order to avoid even greater calamity.  Prices are rising sharply, and, in reality, far more sharply than the official inflation data is suggesting.  gas prices are the latest to hit the headlines.  At first, it was suggested that this was all about Russia holding back gas supplies to pressure the EU.  But, Russia is not the only gas supplier, and any protracted attempt to hold back supplies, would simply result in all of the other producers, including Britain and Norway, as well as producers in North Africa, taking advantage to fill the gap, and make windfall profits.  The reason for rising gas prices as with sharply rising oil prices, and other primary product prices, many of which have more than doubled in the last year, is a combination of sharply rising demand as the world economy grows as lock downs are relaxed, and a huge excess of liquidity.

Take the table, provided in Moneyweek, showing price and wage rises since 1970.  

	1970	Today	Multiple	Fixed supply?
Average salary (pre-tax)	£1,456	£29,744	20x	No
Average house	£4,057	£265,668	65x	Yes + debt
Ford Cortina	£882	£28,500 (Ford Mondeo)	32x	No + debt
Range Rover	£1,998	From £83,525	42x	No + debt
Pint of beer	15p	>£5	33x	No + tax
Pint of milk	6p	55p	9x	No
Gallon of petrol	31p	>£5	16x	No + tax
12 eggs	18p	£3	20x	No
Washing machine	£90	£400	4x	No
Phone call (1976 - 6 mins local)	10p	?	-	No

The interesting thing it shows is that prices have risen, in those areas where the purchase is facilitated by borrowing, such as with houses or cars, which is really another way of saying, where the increase in liquidity by central banks has flowed through in the form of increased credit.  Another factor is whether the supply is relatively fixed, for example, with houses, where the fixed supply of land, and constraints imposed by, for example, the Green Belt, stop supplying rising in response to demand.  In other spheres, such as with food, or consumer durables, prices have actually fallen in real terms, measured against wages.  But, in the short-term, the supply of a number of commodities is also relatively fixed.  After 1999, when the new long wave uptrend began, the prices of many primary products surged, until large amounts of investment in new production increased supply, and prices fell sharply in 2014.  Now, demand is surging again, as lock downs are lifted, and the global economy is set to grow at its fastest pace in 50 years.  Supply is not able to expand fast enough to meet it, and all of that liquidity now feeds into an inevitable rise in prices, which will in turn pass into final product prices, then into wages, and as that squeezes profits, central banks will again print money tokens to enable firms to increase prices to avoid the squeeze on profits, leading to another round of the inflationary spiral.

So, its true that that is not directly a consequence of Brexit, but Brexit simply exacerbates what is a generalised problem.  So, on top of rising oil and gas prices, which fed into squeezed profits for British fertiliser producers, which then also impacted British production of CO2, used in a wide variety of industrial processes, there is added the problems caused by Brexit in terms of the severing of supply chains, and all of the increased frictions and costs that goes with it, as well as the growing labour shortages, as EU workers went home, and none are now coming to Britain.  If we take fertiliser production, the EU is able to produce it on a much larger scale.  That means that the effects of rising gas prices have less impact upon it, so EU producers are better able to continue production, and consequently the production of CO2 as a by-product.  But, in addition, the EU as an economy seven times the size of Britain, can subsidise the production far more easily.  Britain has had to agree to bail-out its fertiliser producers, to provide a short-term fix, in the run up to Christmas, which will cost tens of millions of pounds, but that will not solve the problem longer-term, and that bail-out now is added to the list of all the industries that will require bail-outs as a consequence of Brexit, and of the destruction of balance sheets resulting from lock downs.

But, that problem of UK businesses is just one of many resulting from Brexit.  It has increased costs, slowed down the turnover of capital, introduced numerous frictions, and created large scale labour shortages.  In some cases, the labour shortages lead to higher wages, which, with excess liquidity, already in the system, leads to firms protecting their profits by raising prices, which then affects everyone's living standards, including all those who cannot get higher wages, or benefits, but in others, it simply results in firms closing down, jobs being lost, and sometimes the business just then moving overseas, usually to some other EU country.

And, on top of all that British business, in order to try to maintain some competitiveness, has done what was always inevitable.  Rather than improving conditions it has worsened them.  UK lorry drivers have seen their conditions deteriorate, as they are now expected to drive for 10 hour stints, as a huge shortage of drivers has prevented goods from moving across the economy.  Far from taking back control, Britain is now forced by circumstance to continue to allow goods to come into the economy unchecked, both because it is facing shortages of many products, and because it simply lacks the required border staff and systems to do it, on the scale, and in the time required to prevent huge backlogs at the ports.  And, as UK standards continue to slip, as it cuts corners, we saw, in the last week, a reported case of Mad Cow Disease, again on a British farm.

We have farmers unable to compete against imported food, with Britain outside the EU, we have fishing communities being decimated as they cannot, now, sell their product into the EU, which formed their largest market.  We have sharply rising prices, shortages and empty shelves, deteriorating standards of products, deteriorating workers conditions, and this is just the start, as Britain alienates the EU, in a vain hope of an alliance with the US.

It was all predictable, and predicted.  I hope others followed my advice from a few months ago of stocking up on tinned goods, and long life milk etc.  You are going to need it.  But, it shows the need to a) get rid of Starmer, and put in place someone who will really challenge the Tories on the basis of a socialist and internationalist position, b) get rid of Johnson and the Tories, and c) commit to re-joining the EU at the earliest opportunity.  Workers of the World Unite.