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Brexit, a vote against the status quo

It has been suggested that 'leave' was a protest vote against the status quo, with many voting contrary to their economic interests, says Mark Casson

Posted by Rebecca Paddick | July 10, 2016 | International

The leaders of the ‘leave’ campaign did not agree on what exactly they were campaigning for, but notwithstanding this, voters were inspired by their idea of ‘taking back control’. People read into the campaign whatever they liked, from banning immigration to curbing the power of European courts, with the result that different ‘winners’ now want very different things. The vagueness of the leave campaign broadened its appeal, whilst the ‘remain’ campaign narrowed its appeal by presenting itself as a champion of the status quo.

It has been suggested that ‘leave’ was a protest vote against this status quo. Many people voted against their economic interests: farmers for an end to EU subsidies and poorer regions for an end to EU development grants. It seems that voters cared about more than just money. Subsidies and grants imply dependency, while people, it seems, really want autonomy. They want the opportunity to earn their own money, rather than simply get a handout at the discretion of other people. On this view, people voted ‘leave’ as an act of defiance against an elite they felt had disempowered them.  

But why do so many people feel so disempowered at this particular time? The ‘Westminster elite’ has been blamed for ignoring the regions – in particular Scotland and the North. But people in other countries feel the same. Brussels bureaucracy is a plausible candidate, because voters in other European countries feel disempowered too. But what about the US, where Donald Trump has campaigned successfully against Mexican immigrants, federal bureaucracies and the Washington elite? This rising sense of disempowerment across the Western world has led people to suggest that globalisation in the cause.

Globalisation has occurred because over the last forty years free trade has replaced protectionism across the developed world. Lower tariffs and wider international product standards mean that products can be manufactured almost anywhere. Workers in Europe and the US have to work as hard as Asian workers in order to keep their jobs. Zero-hour contracts ensure that workers are not paid when there is nothing for them to do. Eastern European workers, moving out of agriculture and into industry, possess a strong work ethic, and adapt easily to these pressures, but second-generation industrial workers in big cities do not. It is therefore easy for Eastern European immigrants to take jobs away from other EU workers.

Subsidies and grants imply dependency, while people, it seems, really want autonomy

For businesses, manufacturing has become highly competitive, and therefore much less profitable than before. Product innovation, on the other hand, has become hugely profitable. This is a crucial development, which explains much of the current malaise.

With shortening ‘lead times’, new products can be launched onto global markets very quickly. Innovators like Bill Gates have become immensely wealthy. Developing and marketing new products requires ‘knowledge workers’ – technologists and designers, supported by teams of professionals in marketing, advertising, finance, and information technology. These knowledge workers form a new highly-educated cosmopolitan elite who drive the growth of the global economy. They are well-paid (compared to manual workers), internationally mobile, often have partners from another country, and like to live near ‘world cities’ with good cultural facilities. They socialise with each other in groups from which ordinary manufacturing workers are excluded. The gulf between these groups, in terms of education and attitudes, seems to have widened as globalisation has intensified. Age is a factor too: knowledge workers are a major component of the under-35 population, but only a small proportion of the over-65 population, in which retired manufacturing workers predominate.  

London and the South-east have proved hugely attractive to young knowledge workers, and many foreign multinational firms have chosen to locate their European headquarters and their research laboratories there. Their employees are a mixture of British and foreign citizens, but they all pay taxes in the UK. Universities also play an important role in the knowledge economy, especially the big ‘civic’ universities in the Midlands and the North. Many UK knowledge workers are world class experts in their fields; that is why, for example, Google recently established a big research facility in London to tap into home-grown talent.  

In 1998 the UK government adopted a hugely successful strategy to boost the UK knowledge economy by attracting foreign investment across a range of high-technology industries (Department of Trade and Industry: Our Competitive Future: Building a Knowledge-driven Economy). The UK became the European hub for the operations of US, Japanese and Chinese firms serving the EU market. British Prime Ministers Blair and Brown pursued this policy vigorously but under Cameron the momentum was lost.  After the Banking Crisis the priority was to rebuild the City of London as a financial centre, and the rest of the knowledge economy was neglected.

As a result, the knowledge economy hardly figured at all in the Brexit debate. Senor political leaders have forgotten all about it and most up-and-coming leaders are simply unaware of it. The main exceptions are the Blairites in the Labour shadow cabinet, but they have been preoccupied with internal divisions in their party.

Contributions to the debate from experts from the knowledge economy have been ignored by the media and ridiculed by politicians. Blogs run by research institutions have been swamped by insults from campaigners, while leading experts who consult for the government have even been described by campaigners as Nazi sympathisers.

Knowledge workers support innovation in the private sector, they play a crucial role in the delivery of public services (especially the NHS), and they educate the next generation. Brexit campaigners have failed to recognise their contribution, and many knowledge workers are demoralised as a result. Does it matter? – yes, because knowledge workers pay lots of tax and, by driving innovation, they hold the key to future economic growth.

Knowledge workers support innovation in the private sector, they play a crucial role in the delivery of public services (especially the NHS), and they educate the next generation

Because knowledge workers are mobile, they have a choice of where to live and work. The UK has experienced two major post-war brain drains – in the 1970s and the 1990s – and it has only recently recovered. Both were to the US. The next brain drain could be to the EU, and it could be even larger because the EU is so much nearer than the US.

There are now two new gulfs in UK society, which correspond to new class divisions. The old class division was between manager and worker, and that has not gone away. There is a new gulf between two different groups of workers: those in the knowledge economy, whose outlook tends to be global, and those excluded from the knowledge economy, whose outlook tends to be more local. Typically, the first are ‘remain’ voters, and the others are ‘leavers’. A second gulf is between politicians and workers, both inside and outside the knowledge economy, the workers being people with ‘real jobs’ and practical experience, without whom the policies devised by politicians cannot be implemented properly.

Before the Brexit debate, many knowledge workers tacitly assumed that, despite all this, the gulf between politicians and knowledge workers was relatively small. After all, politicians were educated people with a global outlook, and so they must surely think along similar lines. The Brexit debate has shown this assumption to be false. The knowledge economy no longer figures in political debate because it is no longer understood. Experts from the knowledge economy are no longer treated with respect by politicians, but with contempt. The message has been: ‘The Brexit debate is for politicians only; experts and other knowledge workers keep out’. Indeed, it times it seems that the debate was for members of the Conservative party alone.

Politicians need to re-engage with the knowledge economy, and recognise its crucial contribution to growth and prosperity. Knowledge workers need to be more assertive too, and participate more actively in debate, despite the risks involved. Knowledge workers can provide crucial advice on the many difficult issues left unresolved by the Brexit debate. There is a serious risk that the entire ‘knowledge economy’ agenda disappears from British politics in the aftermath of Brexit, and the economic achievements of the last thirty years are lost for good. Politicians and knowledge workers need to work together more closely together if the UK is to remain at the heart of the global knowledge economy.

Mark Casson is a Professor of Economics at the University of Reading.

W: www.reading.ac.uk 

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