This is the first in a two-part series on the road ahead for the UK economy following the Brexit vote of late June. First, the instability and how to consider our options, by our North American political correspondent Cosimo Montagu.
The second part will follow next week, and will explore further, the risks of the Government’s over-reliance on the financial sector to pull the country from the brink of a new recession. As dangerous politically as it is economically.
“You never want a serious crisis to go to waste… it’s an opportunity to do things you could not do before.” – Rahm’s Rule.
If Britain’s Economy is going to survive, or thrive, in the post Brexit landscape, we are going to have to heed well Rahm’s Rule on two levels.
Rahm Emanuel is an interesting character. Mayor of Chicago, Director of Bill Clinton’s 1992 Presidential Campaign, and widely known as Obama’s enforcer (Chief of Staff with a mean streak), he is liked and disliked in equal measure. But he knows politics through and through.
Simply understood, Rahm’s Rule seems common sense. A crisis allows us a chance to re-evaluate and rebuild – in hope constructing something better than what came before.
Despite the ongoing political uncertainty following Brexit, numerous strategies and schemes have starting coming out of thinktanks, comment sections and in our personsl conversations about what comes next for the British economy. Boris Johnson and Nigel Farage seem alone as the only people in the UK unwilling to put forward suggestions.
From necessary monetary and fiscal policies (dropping interest rates to 0.25%); to prioritising investment in green energy (proposed by the TUC) or other sectors; or the opposite – a free market industrial strategy (i.e. let the markets decide) – a full range of options is starting to emerge. Many at odds with each other.
As citizens of a country, especially one that has voted for increased sovereignty over short term economic stability, we all (Remain and Leave voters alike) have a duty to carefully consider these options and shape our economic future. We’ll likely only be successful in averting a crisis if we do and pull together to achieve it.
However, in order to consider the options effectively, we need to be always aware of the second meaning of Rahm’s Rule. Despite knowing the quote and thinking of it often when considering Financial Regulation post-2008, it is not immediately obvious. Crises are used as a smokescreen by politicians (or powerful interest groups) to achieve objectives away from the public eye.
Bruce Yandle (a US Economist) gives some fantastic real life examples in the US during the Financial Crisis if that sounds a bit “conspiracy theory” at first. The Iraq War, privatisation of Russian industries in 1990s, the relaxation of financial policy during the miners strikers – the establishment have long been masters of this tactic.
For a simpler example – think how it is practiced to a lesser extent by politicians who dump all their bad political news on “Take out the Trash Day”. While less of a crisis scenario, it is the same principle, we are all so distracted by one event we pass over the others. There are so many examples, feel free to add more examples in the comments.
So why does this matter for your considerations of the UK Economy post Brexit? For that you just have to think what the most “likely” solution is to a potential Economic crisis following Brexit – concessions to the Financial sector: Services, and Investment, and what that means if you consider Rahm’s Rule.
As Hillary Clinton stated in her acceptance speech on Thursday evening at the Democratic National Convention in Philadelphia, we need to “follow the money”.
In the next article, we will do exactly that – examining why an overreliance on the financial sector is a tempting and likely economic option for Theresa May’s Government. And most importantly – why this could be a disaster for the UK.