Thursday, 13 October 2016

How to write about Brexit - and how not to

Brexit, in the sense of both the vote and what happens next, is an economic issue. It is not just an economic issue, but it is certainly that. You might have spotted that the pound has gone down a bit, for example. So people with an economics background write about it, as they should. And they draw political points from their economic framework. Again, so they should. But it can go wrong. (More below.)

Here is Paul Krugman, writing in the right sort of way: "Pre-Brexit, Britain was obviously experiencing a version of the so-called Dutch disease. In its traditional form, this referred to the way natural resource exports crowd out manufacturing by keeping the currency strong. In the UK case, the City’s financial exports play the same role. So their weakening helps British manufacturing – and, maybe, the incomes of people who live far from the City and still depend directly or indirectly on manufacturing for their incomes. It’s not completely incidental that these were the parts of England (not Scotland!) that voted for Brexit." He might be wrong about all of that. But he's taken some proper economics and related it to politics in a way that looks useful.

Here is Greg Ip, again doing it the right way. "Brexit is thus turning out to be a useful test case for deglobalization. Raising barriers to the free flow of goods, services, capital and people need not entail recession or panic. It may even redress some of the grievances behind the antiglobalization backlash. If Britain exports fewer financial services and more manufactured goods and tourism, the income gap between London and the rest of the country should narrow. // In the end, Britons may be a bit poorer than if they’d stayed, but more self-reliant and more in control of their own borders. That’s the tradeoff." You've got the economics and the politics together. He might be wrong, but you see how it works.

It's not just American papers that get it right. Here's Ambrose Evans-Pritchard in the Telegraph: "There may be serious economic trials ahead as we extract ourselves from the EU after more than forty years, but the slump in sterling is not one of them. The devaluation is necessary and desirable. The pound is now near 'fair value' based on the real effective exchange rate used by the International Monetary Fund. // All that has happened is a correction of the extreme over-valuation of sterling before Brexit ... The fall is roughly comparable to the devaluation from 2007 to 2008 - though the same financial elites who talk so much of Armageddon today played it down on that occasion, mindful that their own banking crisis was the trigger." (There's a graph comparing 07-08 to 16 as well.) It's a different political point (and again, it might be wrong), but also one that arises out of the economic framework.

But them the Economist, of all places, gets it wrong. Ryan Avent discusses Ip's article. He makes some sensible points about manufacturing industry having potential problems, e.g., "Leaving the EU does not change the fact that Britain is right next door to a bunch of rich European countries and not especially close to anyone else". But then he descends into a bizarre tirade, starting from Ip's use of the word "self-reliant". I'll quote it all so you can see how it flows.

"What is this “self”? The typical Briton will not become more self-reliant as a result of Brexit. The chap behind the bar at the pub will not suddenly find himself cobbling his own shoes and milling his own flour because of the vote to leave the EU. Mr Ip seems to intend the self, in this case, to be Britain. That may have been what voters intended; the assertion of the nation as the most important civic body is a disheartening development if so. And that might be the outcome, in part, of Brexit; trade volumes will probably fall a bit, and as Mr Ip notes Britons will spend less holiday time in Provence and more in Blackpool. Yet it’s also not quite right. Whether Britain is selling gilts to foreigners or turnips, it is still reliant on them.

The self at issue here is actually something different. It is a conservative sort of Englishness, which entails the rejection of London as well as of Brussels. And what is being purchased, it should be clear, is the ability to shut particular
people out of Britain: those that are not enough like the community of selves on which the English intend to become more reliant. It is a vote against cosmopolitanism and multiculturalism. Nothing in the decline in sterling is going to make that adjustment less painful to those being shut out of the circle of British life. Neither should it make us optimistic that deglobalisation can occur without a great deal of accompanying ugliness."

Where did that come from? "the assertion of the nation as the most important civic body is a disheartening development" - is it? What does economics tell us is the most important civic body? How do we get from the economic analysis that Brexit is (weakly) pro-manufacturing and (strongly) anti-finance to it being "a vote against cosmopolitanism and multiculturalism"? Even if it is, why does that entail "a great deal of accompanying ugliness"? Is that because Dorset, say, is uglier than London?

Of course everyone has a view about Brexit and identity and migration and all the rest of it. But it is depressing that the economics blog on The Economist should succumb to such digressions. The great aspiration of economics is that quality of detachment that Noah Smith identified (and attacked) in the story about 'Freakonomics' Levitt and the homeless guy's headphones. The point of economics-y writers in the media is not to tell us their (or our) prejudices - there are plenty of other columnists for that - but to give us some clear-eyed insight derived from a reasonably rigorous field of human expertise.

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