Thursday, December 8, 2022

Britain's Winter of Discontent

In Britain, labor activism is ramping up to levels not seen since the 1970s. More than 200,000 workers struck over the summer, and now there are threats of much bigger strikes by transit workers and nurses. The mood, fed by high inflation, soaring energy prices, and a looming recession, is angry and defiant. NY Times:

Their defiance stands in stark contrast to the mood in Westminster. After weeks of political infighting and chaos, a solemn fatalism has taken hold there. To counter unsustainable levels of government debt and a global energy crisis, the argument goes, the country must make difficult decisions. As the finance minister put it before setting out a punitive budget last month, there is a “tough road ahead.” In these straitened times, everyone will have to make sacrifices for the good of the country.
But the people don't seem to be buying it; polling shows a majority of Britons think the government should be doing more for them, not less. 
Another narrative is taking hold. In this version, the profound economic pain afflicting Britain is not acceptable or inevitable. Union leaders describe the cost-of-living crisis as a class war, effectively a money-siphoning opportunity for profiteering companies, facilitated by the government. The government’s refusal to countenance raising taxes on the very wealthy — something that, according to Tax Justice UK, an advocacy organization, could raise 37 billion pounds, or $45 billion, a year — in favor of stealth tax increases that hit low- and middle-income people is a case in point.

Abandoned by the government, people are stepping up. The Enough Is Enough campaign, started in August by trade unions, community organizers and legislators from the Labour Party’s left, has signed up 750,000 people and staged packed-out nationwide rallies. The campaign has five key demands: a real pay rise, an end to food poverty, slashed energy bills, decent housing for all and higher taxes on the highest earners. Organizers say they are reaching unlikely corners of the country, including Conservative strongholds, and the campaign is channeling supporters onto picket lines.

Ok, fine, I'm all for people getting involved and protesting government actions they don't want, and I'm for labor activism, too. British nurses are very badly paid and that should change.

But I'm not sure there is much the government can do about these demands. The biggest driver of inflation is energy prices, and the biggest driver of energy prices is the war in Ukraine. Not to mention that the British public has turned decisively against drilling for more gas in their own waters; no new wells have been drilled in years. Britain is investing heavily in offshore wind, tidal power, and other green energy, but that can't alleviate the current crisis. So the only way the government could reduce power bills would be with massive subsidies, spending billions they would have to borrow.

One thing that worries me is that if the people in Britain, France, Italy and Spain are going to agitate for more government help to themselves, then the one place those countries could easily cut their budgets is by ending aid to Ukraine.

Many of the protesters think the answer is to raise taxes on the rich. But that wouldn't generate anywhere near enough money to fund all they are asking for, and I don't think the Tories are wrong to worry that such tax increases might damage the financial sector at a time when it is already battered by Brexit.

The root of Britain's problems is in its relationship with the rest of the world. The thriving parts of the British economy are the international parts: finance, insurance, trade, publishing, television. Britain is simply not big enough to sustain a modern economy on its own and must be deeply engaged with others. So they joined the EU, and those international sectors did very well, expanding and to some extent lifting the rest of the country along with them. But as the British people discovered, joining the EU came with costs, such as annoying bureaucracy, loss of control over asylum policy, and the arrival of several hundred thousand workers from eastern Europe. 

I do not think this is a solvable problem. Britain is simply not big and rich enough to thrive on its own. What I think would work best for them, some sort of association with the EU short of full membership, is off the table, partly because the British government mangled that relationship so badly but also partly because the EU leadership just hates the idea of countries coming and going and having their own agendas that diverge significantly from the EU agenda.

In the 21st century, no nation is truly independent; probably only the US and China can even make a claim to determine their own fates. Many people hate this. But they also want all the good things that flow from the global economy, from iPhones to cheap clothes sewn in Bangladesh, and they also want the phasing out of fossil fuels. I do not think it is possible to square this circle without economic suffering.

Whatever the British government does, the British people are in for a lot more pain.

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