brexit

The Impact of Brexit on the Irish Energy System – Pragmatism vs. Principles

Published by Anonymous (not verified) on Wed, 22/11/2017 - 4:33pm in

Irish energy provision illustrates some of the downside of Brexit for the Irish Republic and Northern Ireland.

The Amazing Conversion of Sir James Dyson

Published by Anonymous (not verified) on Tue, 21/11/2017 - 5:50am in


“Will you tell me how long you have loved him?” asks Jane Bennet, on receiving the astonishing news that her sister Elizabeth is to marry Darcy, the rich aristocrat she used to hate.

“It has been coming on so gradually, that I hardly know when it began,” replies Elizabeth. “But I believe I must date it from my first seeing his beautiful grounds at Pemberley.”

This is from the end of Jane Austen’s Pride and Prejudice. Austen is lampooning the British 19thcentury marriage market, in which women (and men) pretended to “fall in love” when in fact they were marrying for money. But for cynics like me, such a remarkable conversion has echoes in the 21st century. When someone suddenly becomes an ardent supporter of an ideology they had previously - equally ardently - opposed, always follow the money.

So, to Sir James Dyson, inventor of cyclone-technology vacuum cleaners and ardent Brexiteer. Sir James is frequently heard expounding his hardline Brexit views on the BBC, which is struggling to find pro-Brexit voices among the UK’s business leaders. Here he is, on the BBC’s Andrew Marr show, claiming that Brexit creates a “fantastic opportunity outside Europe” for the UK:

Ah, look, there’s fantastic opportunity outside Europe. There’s opportunity within Europe, but Europe is the slowest-growing area in the world. All the other areas are much faster-growing, and I think 90 per cent of future growth will come outside the EU.

No-one has ever said that being in the EU prevents manufacturers seizing opportunities outside Europe. Indeed, European countries export all over the world. Why is Brexit necessary for British manufacturers to benefit from fast growth elsewhere?

Sir James has not always held this opinion. In 2000, he claimed not only that Britain’s future is in the EU, but that it would be “suicidal” for Britain not to join the Euro. “Why should we go on exporting at a loss?” he said. “We're facing unfair competition.”

“Unfair competition”, it seems, meant a strong pound. Dyson didn’t like the export disadvantage he faced due to the Euro’s weakness at that time. So he threatened to move production to Malaysia if Britain didn’t join the Euro.

Fortunately, the UK government did not give in to his threats. Britain did not join the Euro. And two years later, Dyson moved production of his vacuum cleaners to Malaysia, with the loss of 590 jobs in the UK.

Though by then, the Euro had little to do with his decision. What attracted him were the much lower labour costs in Malaysia. He put up a good story, of course, claiming that he “agonised” over the decision. And he blamed international competition:

No one could have tried harder to make it work in Britain. I feel very sad but we are minnows in comparison with our multinational competitors and we need to make substantial savings to take them on.

Really, Sir James? How come Numatic, the manufacturer of the iconic Henry range of vacuum cleaners, hasn’t found it necessary to offshore its production, even though their vacuum cleaners are significantly cheaper than yours?

Anyway, he moved production to Malaysia to cut costs. And that’s when the lying began. He told his workforce that production of washing machines would remain in the UK. But less than a year later, he moved production of washing machines to Malaysia, with the loss of a further 65 jobs in the UK. Union leaders at the time lampooned Dyson by singing Britney Spears’ number “Oops I did it again”. One commented, “This latest export of jobs by Dyson is confirmation that his motive is making even greater profit at the expense of UK manufacturing and his loyal workforce.”

He was absolutely right. Shortly afterwards, Dyson – sole owner of his company - celebrated a large increase in profits from offshoring his production to Malaysia. And in an extraordinary piece of doublethink, he claimed that although lower-skilled people had lost their jobs, that didn’t matter because the R&D department in the UK was employing more higher-skilled people, which was what the UK government wanted:

We employ 1,300 at Malmesbury - engineers, scientists and people running the business. The decision to shift production to Malaysia was not good for Britain in one sense because we don't employ manual labour any more.

But we are taking on more [people] at higher pay rates and more value-added levels and that's what Patricia Hewitt is always asking us to do.

[Patricia Hewitt was then Secretary of State for Trade and Industry]

Tell that to the 655 people who lost their jobs so you could have higher profits, Sir James. And don't give me that stuff about "we might not have survived if we hadn't moved production to Malaysia". Henry is alive and flourishing, after all.

Nowadays, Sir James Dyson’s entire manufacturing output comes from the Far East. The UK government has tried to persuade Sir James to manufacture new products in the UK, to no avail. In 2016, leaked government documents revealed that Dyson was working on developing an electric car with help from UK public funds. But in the Andrew Marr interview, Dyson refused to commit to developing the car in the UK:

We’re going to make it ourselves. Whether we make it here or in – somewhere in the Far East or wherever. We haven’t decided yet. But it’s really about component supply and skills.

It could not be clearer. Dyson is not a UK manufacturer. He has no commitment to the UK whatsoever.

However, this doesn’t really explain his Road to Damascus conversion. When did that happen – and why?

Henry Mance in the FT thinks he has the explanation. “[Dyson’s] opposition to the EU first emerged in September 2014, days after new standards on the labelling of vacuum cleaners,” he says. And he continues:

Dyson challenged the new standards in the EU courts, claiming that they discriminated unfairly against his machines. But the court threw out the challenge, saying Dyson had “failed to demonstrate that there were more reliable, accurate and reproducible tests”.

But hang on. Leaving the EU would not change the legal decision, would it?

No, it wouldn’t. “Even if Britain exits the EU, Dyson will continue to have to comply with the regulation if it wishes to sell its products on the continent,” says Mance. Sour grapes, Sir James?

Sir James’s response to Henry Mance certainly sounds like it:

As someone who has had to deal with European bodies, and the impact of their protectionist laws and regulations, over the past 25 years, I can confirm that we have no influence whatsoever in their shaping.

Translation: “the EU won’t do what I want”. Of course, there is no guarantee that a UK government would do what he wants, either. But in Dyson’s eyes, the price for not doing so might be high.

Recently, Dyson opened an R&D facility in Singapore. He also opened a new facility in the UK, but his long-term plan appears to be to turn his UK facilities into a technology university. Given that all his manufacturing is in Malaysia, training up engineers in the UK to transfer them to Singapore could make strategic sense.

Dyson makes no secret of his admiration for Singapore, and his desire for the UK to become more like Singapore. It is hard not to conclude that if the UK does not adopt a Singapore business model after Brexit, as he has proposed, he will remove his R&D facilities from the UK, just as previously he used the UK's failure to join the Euro as an excuse to remove his production from the UK. Those hoping for long-term engineering jobs in the UK might like to remember the fate of those who hoped for long-term production jobs in the UK.

But deregulation and zero corporate taxes are not all that Dyson wants. Dear me, no. He is also a big supporter of subsidies and tax breaks. But not for vacuum cleaner manufacturers so much as farmers.

Why farmers? That is easy. Dyson has sunk much of his wealth into UK farmland. In 2016, his farming business received £1.6m in farm subsidies from the EU, the largest payment in the UK. So this ardent Brexiteer stands to lose a lot of money from Brexit. Unsurprisingly, therefore, he is lobbying hard for the UK government to continue to subsidise farmers after Brexit.

His argument sounds oddly familiar. “You’ll be putting British farmers at a disadvantage against European farmers”, he says. Just like not joining the Euro put British vacuum cleaner manufacturers at a disadvantage against European manufacturers.

So perhaps we can now see why Dyson fell in love with Brexit. Not the beautiful grounds of Pemberley, so much as the beautiful prospect of persuading the UK government to cut his corporation tax to zero, cut his labour costs to Malaysian levels, craft regulation to benefit his business, and pay him millions of pounds in farm subsidies.

I sincerely hope the UK government does not give in to this blatant profiteering. And I would really, really like the BBC to stop giving this Malaysian manufacturer and UK rent-seeker air time.

Related reading:

British lawmaker advises investors to take their money out of the UK - Forbes

Image is a still from the film "Pride and Prejudice", showing Elizabeth (left) and Jane (right). 

“We Still Own This Place, Right?” Boris Johnson’s Dublin Meeting Off To Bad Start

Published by Anonymous (not verified) on Fri, 17/11/2017 - 10:52pm in

BORIS JOHNSON’S remarks at a meeting in Dublin with Minister for Foreign Affairs Simon Coveney have sparked outrage after he mistakenly believed Ireland was still part of the UK, WWN can confirm. “Good God, we’ve really let this shithole go to ruin, sorry about that Simon, I know you didn’t vote Leave in the referendum... Read more »

Yet Another Brexit Train Wreck – UK to Fall Outside EU Auto Approvals Regime – and It Doesn’t Even Register With Officials

Published by Anonymous (not verified) on Fri, 17/11/2017 - 7:22pm in

Parliamentary testimony on the auto industry lifts another Brexit rock, revealing new creepy crawlies.

More on productivity

Published by Anonymous (not verified) on Wed, 15/11/2017 - 11:39pm in

The ONS's latest flash productivity estimate is rather good. Productivity in Quarter 3 2017 was up by 0.9% on the previous quarter. Here's what ONS has to say about it:

Output per hour growth in Quarter 3 2017 was the result of a 0.4% increase in gross value added (GVA) (using the preliminary gross domestic product (GDP) estimate) accompanied by a 0.5% fall in total hours worked (using the latest Labour Force Survey data). This fall in total hours was driven primarily by a 0.5% fall in average hours per worker.

Yes, yes, I know - economics jargon. Let me translate. ONS in plain English:

People are working fewer hours, but they are producing more every hour. 

Of course, this should be set against the backdrop of persistently low productivity since the 2008 financial crisis. Productivity has taken nearly a decade to return to its pre-crisis level:

The ONS says that productivity has been weak because the labour market has been relatively strong during this time:

Both employment – which captures the total number of people in work – and total hours – which captures both changes in employment and working patterns – fell in the course of the economic downturn, but total hours fell further reflecting falls in the average hours of those in employment. However, as GDP fell by a larger proportion in the economic downturn than either hours or employment and has grown slowly by historical standards during the recovery, productivity growth has been subdued since the downturn and has recovered more slowly than following previous downturns.

Yes, yes, I know.....here it is in plain English:

People carried on working during the downturn, but they didn't produce as much.  

We can speculate why this might be. Both international trade and domestic demand suffered a severe contraction after the crisis, which would have reduced output, but if businesses were expecting the downturn to be short-term they might simply have reduced people's working hours rather than laying them off. Also, disrupted supply chains might have made it difficult for workers to maintain output levels: managing those disrupted supply chains would have created additional work for admin & management without adding anything to GVA. There was also something of a boom in regulation, especially in financial services, which does absolutely nothing to increase output but employs lots of people.

This chart gives further weight to the argument that trade contraction and disrupted supply chains are a principal driver of the UK's productivity slump:

The "three shocks" of which I have previously written are very obvious here: the deep economic recession of 2009, followed by the Eurozone crisis, and then the emerging-market shock. For comparison, here is Peter Praet's chart of the three shocks, annotated by Toby Nangle:


So for the UK's open economy, there is an obvious positive correlation between global PMI and productivity. Well I never. When global businesses get hit by financial shocks, they cut production. Who knew?

And this brings me to a serious warning. It is clear from the chart above that the UK's small open economy is crucially dependent on external trade. Don't be fooled by the trade balance, or the small proportion of businesses that export directly: many domestic businesses support exporters while not exporting themselves, and many domestic businesses are importers. When external trade suffers a shock, GDP and productivity growth both fall, sometimes significantly. And Brexit - any variety of it - will be a major shock to external trade.

Brexiteers' upbeat forecasts for the UK are founded on the idea that external trade will be resilient to the UK leaving the EU. Some even say it will improve. They will no doubt crow about the fact that the UK's productivity is currently rising and dub gloomy forecasts as "Project Fear".

But there are already indications that EU trade partners are diverting supply chains away from the UK. And IHS Markit reports that business optimism in the UK is the lowest it has been since 2011. Disrupted supply chains are a serious drag on both output and productivity. I fear that the Brexiteers' optimism may prove to be "Project Fantasy".

Related reading:

Lehman's Aftershocks
We need to talk about productivity

Professor Sarah Churchwell on Boris Johnson and his Deceit and Offensiveness

Published by Anonymous (not verified) on Wed, 15/11/2017 - 10:19pm in

This is another short video I came across on Imajsa Claimant’s Channel on YouTube. It’s from the Beeb’s Question Time, when one of the panellists, Professor Sarah Churchwell, the professor of American Literature at the University of London, really decided to lay into Boris Johnson. She attacked him for his opportunism, his duplicity, his lack of any political scruples, and his callous indifference to the carnage in Libya that he expressed in his ‘joke’.

She states that Boris is not the lovable clown, which he tries to present himself as, and she’s sick of people trying to say that all this is ‘just Boris’. She finds it incomprehensible how anyone could possibly think that he’s amusing She describes how he wrote one piece promoting Brexit, and then wrote another piece about it, just in case he lost. When it came to standing up for Theresa May, he only did so when made to by Amber Rudd. As for his comment about Libya, in which he declared that the country had some nice beaches and would be worth investing in, as soon as they’ve cleared the bodies away, she states that it wasn’t a joke and wasn’t funny. This was about a country ‘mired in civil war’. She concludes that he should not be in government. And the fact that Theresa May has not sacked him shows that she’s a follower, not a leader.

The left, the right, the centre – and what they care about most

Published by Anonymous (not verified) on Tue, 14/11/2017 - 11:12pm in

Why did people vote as they did in the June 2017 UK general election, and how might they vote in the next one — whenever it comes? One of the best sources of information on that question is wave 13 of the British Election Study: a very large survey conducted just after the election for a consortium of academics at the University of Manchester, the University of Oxford, and the University of Nottingham. Altogether 31196 respondents completed the survey, of whom 27019 (after weighting) answered the question ‘As far as you’re concerned, what is the SINGLE MOST important issue facing the country at the present time?’ and 23194 (again after weighting) identified themselves politically by positioning themselves on an eleven point scale from left to right. 21213 both placed themselves on the scale and gave their view on the most important issue. I’ve been working with this dataset for a little while, looking at how demographic variables predict perceptions of the most important issue (see my earlier post for my initial exploration of this topic), but here I’d like to focus on the association of particular issues with particular positions on the political spectrum:

mii-by-left-right-w13

The first thing to note about the chart above is that the single largest group of respondents to the survey identified themselves as ‘centrists’ (to use the social media left’s new favourite term of abuse) by identifying their politics with a 5 on a scale of 0 to 10. This is a frequent finding of recent surveys, and indicates that, while the Conservative Party has shifted towards the nationalist right and the Labour Party has shifted towards the socialist left, the bulk of voters remain near the middle of the political spectrum. The second thing to note is that while Brexit — the big splash of pale blue — is the single biggest issue across the chart, chosen both by those who think it’s a good idea and by those who don’t, there are clearly some substantial left-right differences in terms of priorities. Green, for the NHS, appears to be concentrated on the left; orange, for immigration, on the right. We can see this better if we focus on those two issues alone and stretch or squash the bars so that we see not the weighted counts but the weighted percentage of people at each point on the left-right scale who chose each issue. So that the percentages for each issue can be more easily read, the bars are superimposed rather than stacked, and to make the trends more apparent, dashed lines have been added to smooth out the kinks with LOESS local regression:

mii-by-left-right-w13-immigration-nhs

As we see, the proportion of respondents choosing the NHS as the most important issue increases towards the left and the proportion of respondents choosing immigration increases towards the right, with the two trends crossing in the middle. As the first chart emphasises, actual numbers of people identifying as what I shall call ‘solidly left’, i.e. 0-1 on the scale, or ‘solidly right’, i.e. 9-10, are much smaller than those identifying with the centre, i.e. 5, or the centre left and centre right, i.e. 2-4 and 6-8 respectively. However, this second chart suggests that each of the extremes speaks with much more of a unified voice than the centre does — and that the solid right does so more than the solid left. This interpretation again suggests itself when we compare the proportions choosing the single most popular most important issue, i.e. Brexit, and those choosing issues falling outside the top five, here coded as ‘other’:

mii-by-left-right-w13-brexit-other

As this third chart shows, more than half the respondents identifying as solidly left wing chose issues outside the top five, while just over a quarter of those identifying as solidly right wing did the same. For an indication of those less frequently chosen most important issues — and of just how infrequently chosen the great majority of them are — we can look outside the top five to the top ten:

Most important issues

Issue

Count

%

1

brexit

9017

33.5

2

terrorism

3515

13.1

3

immigration

1912

7.1

4

nhs

1688

6.3

5

election result

1473

5.5

6

economy

1408

5.2

7

tories

379

1.4

8

inequality

363

1.3

9

environment

289

1.1

10

security

238

0.9

All this hints at the structural problems faced by the UK’s political parties right now. Both the Labour Party and the Conservative Party have moved towards the extremes, leaving many of their usual voters behind with nowhere to go (yes, they could vote Liberal Democrat, but, with signs of a Liberal Democrat revival so thin on the ground, all they would likely be doing is leaving the choice between the two main parties to somebody else). The Conservative Party is divided between a large pragmatic centrist faction and a small but popular nationalist right wing faction, which its weak leader — a pragmatist pretending to be a nationalist — is unable to control. However, while the left may appear united behind the figure of Jeremy Corbyn, it is not at all united in its priorities — unlike the nationalist right with its clear focus on immigration.

In electoral terms, the situation may turn out to Labour’s advantage: it is the current strength of the right that prevents the Conservative Party from doing what it would so obviously be best advised to do, i.e. tracking back towards the centre to clean up on Labour among the voters now alienated by both major parties’ current positions. Does a Labour victory on these terms sound like the recipe for happiness, though? If Labour wins the next general election only because the right has short-sightedly bullied the Conservatives into adopting a position that swing voters feel they have no choice but to reject, it is likely to see its own support fragment as soon as it is faced with the central question of government, i.e. of how to allocate limited resources.

Interesting times.

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Brexit and the Work-to-rule of the Managerial Class

Published by Anonymous (not verified) on Tue, 14/11/2017 - 5:01am in

Tags 

brexit, Yves Smith

(YES THIS IS A MANDOS POST; MANDOS ALERT MANDOS ALERT MANDOS ALERT)

I mostly concur with Yves Smith’s assessment of the on-going, cruel tragicomedy that is Brexit. However, she points out a Twitter thread that has been making the rounds, and it is interesting. It concurs with everything I have read about grassroots Brexitism:

However, Prof. Finlayson analyzes this in terms of Utopianism, which is not entirely wrong:

And while it’s not entirely wrong, I think it’s incomplete. I’ve written before about the Brexit phenomenon here before (and pretty much everything I said there has been borne out, not to toot my own horn too much), and one of the factors here is the role of the managerial/technocratic class. I interpret the hostility towards the details that Brexiters seem to exhibit (“Don’t talk down Brexit!!!”) partly in terms of something else. What grassroots Brexiters want is to force the managerial class, the people with the technical skills in government administration, to implement something (whatever it is) that the managerial class visibly doesn’t like and doesn’t agree with, and to do it enthusiastically as a duty to the Brexit-voting public. In any discussion, people arguing for the Remain side are therefore seen as proxies or stand-ins for that class, even if they themselves aren’t necessarily responsible for the implementation. Therefore, the Remainers demand for detail is seen as shirking, i.e. a threatened refusal to accept the legitimacy of the Brexit vote, because it is the Remainers’/managerial class’ job to come up with the details for whatever policy course is chosen especially via referendum.

The problem is that the managerial classes/technocrats in question do not believe that they can deliver a good Brexit and do not want to, and even if they go to work every day to produce the policy and administration required to do it, they are only going to do it on a work-to-rule basis. Work-to-rule is an effective labour disruption strategy—and the managerial classes are expected to do labour on someone else’s behalf in this instance, obviously—because it turns out that a lot of jobs really require the worker not only to be there and do the work in the job description, but to give an additional surplus of energy and attention for the enterprise to produce a good outcome.

Now in all probability, in particular due to the conditions under which Brexit has been unleashed, it is impossible to deliver a “good” Brexit even with the most enthusiastic of technocratic staff. But that is not the real demand—rather, the demand is that the technocratic class visibly demonstrate that it shares the identity markers and self-image of certain large sectors of British society, instead of appearing wholly alienated. However, if the technocrats genuinely don’t believe that there can be a good Brexit, that puts everyone in an impossible position: If technocrats impertinently ask the pro-Brexit public what they really expect is to signal that they are shirking their duty to come up with those ideas and that they really aren’t “of the people” (keeping in mind that enthusiastic pro-Remain positions also represent a wide grassroots in British society!). The reality of the situation is that there simply are no good ways to go about doing this, under the schedule of Article 50 and particularly under the political dysfunction of the British Tories and pro-Brexit vested interests.

Hard Brexiters Continue Humiliating Theresa May

Published by Anonymous (not verified) on Mon, 13/11/2017 - 10:54pm in

How long will Theresa May serve as a hard Brexiter punching bag?

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