Brexit's future

History has its own momentum and has just wiped out Brexit's front row. Brexit's main leader, Boris Johnston was nailed by his second in command Michael Gove, who promptly destroyed himself by his own breathtaking ambition. The 'brain' and the 'brawn' of Brexit having eaten each other, Nigel Farage, leader of UKIP, the long term pilot of Brexit, has now resigned (for the third time) to spend time with the European Parliament!

The British political crisis, the end of Britain's long reputation for 'stability', suddenly sped up and rolled over Brexit's front line in the process. Now the UK is left with a bunch of second rate Tory politicians and 'would be' Prime minister and Cabinet ministers, scrambling to get to the top of the mouldering heap of a deeply wounded government and its uneasy MPs.

Although most of the Tory pack insist it is their intention to carry on governing until 2020, the first glance into Brexit's future would suggest that they are likely to be disappointed.

Brexit, economically speaking, has only just begun. During 2014/15  the UK recorded a total of 1,988 Foreign Direct Investment projects – 12% more than in the previous record-breaking year. And UK inward FDI Stock – the amount of foreign direct investment in the UK - is estimated to have passed the £1 trillion level in 2014. (UK Gov. May 2016.) This was of course considerably bolstered by very large amounts of foreign property purchases, especially in London. However, FDI is a life saver for the British economy. And virtually all economists predict a serious decline in foreign investment in the UK as a result of Brexit. Indeed, according to Bank of England figures it has dwindled, particularly in the property market, since the start of the referendum debate.

Meanwhile domestic investment, by both the government and private capital, has been a systemic problem since WW2 and remains so. As the Office of National Statistics  have recently noted:
'...the proportion of total expenditure accounted for by spending on investment has fallen from an average of 13.5% in 2007, to an average of 10.9% during 2012 and to 10.4% in Q2 2013: the lowest level recorded since the 1950s. This compares with 14.1% in France, 16.7% in the United States and 17.9% in Canada. Across the G7, investment accounts for an average of 14.6% of Gross Final Expenditure.' 

This means a job crisis.

The 10 - 12% reduction in the value of the £ means imports cost more (including all the 'outsourced' goods currently sold in Britain's shops.) This means the value of wages goes down and a standard of living crisis. The only way to reduce the impact of rising prices is to increase the already nerve wracking levels of domestic debt. Which the Bank of England has just assured can increase at will. This will mean a debt crisis.

Government taxes will fall. For example, currently the City of London is forced to pay a minimal £67 billion a year off its gargantuan profits. Brexit will mean the bleeding away of City wealth holders as financial services will now cost more to sell in the EU. This means the Brexiteers will need to make the City into another tax free zone to keep the world's wealthy and rely on the pickings, or make unprecedented cuts. They will probably do both.

All this could be foreseen if the UK had stayed in the EU - albeit erupting at a different tempo. Taking one (very large ) case, the City of London has been the tail wagging the UK's economic dog for decades and this unstable and unbalanced arrangement was bound to come to grief under the new pressures of the global crisis. Similarly Britain's mountainous domestic debt and the relentless meagerness of its domestic investment, are not sustainable, even in the short term. And the list goes on. As globalisation squeezes through the EU so Britain's series of economic weaknesses would have blown. Brexit has simply brought them all together and made them all blow at once.

This, in the context of the new, fragile, unanchored UK political institutions, means that political crises will rapidly follow any serious economic shake up. As some of the major economic consequences of both Brexit and the new cycle of western economic crises are underway, so a major watershed in the weak link of Britain will break, and break early. The calls for a new vote on Scottish independence will only get louder. The fight against austerity, war and racism  can only get sharper. All this melee of politics and economics is therefore likely to produce a general election much earlier than 2020.

The Labour Party crisis has little to do with Brexit, but will certainly be caught up in its tangles. The sources of Labour's crisis are Blair, Scotland and a forty year retreat from even the most basic social democratic perspective. If Corbyn maintains his firm stand in defense of the Labour Party's growth and its membership's rights, he is likely to win any vote for a leader. He would then isolate the most right wing, rancorous and self seeking Labour MPs but not manage in a stroke to remove them. And the next stage of Labour's battle becomes how the right wing Labour MPs attach themselves to a national political purpose through which they might gain office and significance, while maintaining their base in the country.

This is not a puzzle without precedent. The last time there were major economic and political crises in the country, national governments were created to bring together 'the great and the good' (the rich and the powerful) to solve the nation's problems. One can easily imagine the new tyros of the anti-Corbyn League grasping at, or even proposing, the merging of Democratic? Labour with their Tory and Liberal counterparts in a government of national survival. Facing down such a charade, led by a solid Parliamentary, socialist group, backed by the mobilisation of millions in the country, is worth every moment of consternation and the beads of sweat that the Corbyn leadership is now experiencing.

Today, in Britain, big politics and economics are inextricably, moment by moment, bound together. Their intimacy, paradoxically  means that the overblown weaknesses of British society are starting to pull apart, between the nations of Britain, inside, as well as between, the mainstream political parties, inside, as well as between, the main classes in society and, underpinning all, economically, where the fundamentals no longer stick together or stack up.