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Where next, after Brexit?

Britain is in a unique position from January 1st to become the pioneer of a new economic model,  paving the way for a global economy to escape its unsustainable, inefficient ways.

Over the past 250 years Britain has variously been the workshop of the world, its largest economy, its greatest trader, its banker and the source of transformative innovation in agriculture, industry, science, finance, insurance and engineering, among many other fields. It was also, for a period, the dominant naval and military power and ruler of a vast empire, all while modelling - at home, if not in its global possessions - a form of representative, constitutional administration that was at one time the gold standard for good governance in much of the world. There is no question that these small islands have left an indelible legacy - some of enlightenment, some of unforgivable ugliness - that has shaped the contemporary world and contributed directly to much of the good and the bad that is to be found there.

This legacy is not easy to escape. It continues to infuse political debate in Great Britain. The horrors of the slave trade and the indelible consequences of racist colonialism have both been active components of the news cycle in recent months. The toppling of monuments to slave traders has a powerful symbolism; the continuing cruel and callous treatment of the Windrush generation is not symbolic but real: an equally powerful and challenging reminder of how the darker aspects of Britain’s legacy retain an active, destructive potential. We remain a long way from what is needed to forgive and forget. So consequential has been the impact of Great Britain on the world that the traces of it will endure not just for generations but for centuries to come.

It might be unreasonable to expect sympathy, but this is tough stuff for a nation now so reduced in stature and influence to absorb. It causes disorientation and bewilderment, as the Brexit debate has clearly illustrated. The appeal of Brexit is rooted in a combination of nostalgia and desperation: nostalgia for a half-remembered greatness, and the desperation of a society in which extreme wealth is juxtaposed with extreme poverty and the social institutions that once bound us together are crumbling and falling apart.

Britain is the oldest industrial economy in the world by far, and also a pioneering example of how the dynamism of capitalism could be harnessed to the interests of the welfare state. But old things break: they need fixing, or remaking, or even completely replacing from time to time. And because British institutions were the first in so many instances, they have also been among the first to reach the end of their useful lives.

Amid this wreckage lies a real opportunity. Britain can still be a pioneer, but pioneering means going forward, reshaping our institutions to meet the challenges of a rapidly changing future instead of succumbing to the receding echo of a romanticised past. Could Brexit contribute to this in a positive way? Clearly not, if our avowed purpose is to take our chances in the global marketplace, since EU membership gave us privileged access to the world’s biggest, richest trading bloc, right on our doorstep. But the global marketplace may already be yesterday’s news. While generating vast wealth in money terms for a lucky few, it has destroyed productive communities, accelerated environmental degradation and led directly to a huge increase in unproductive work. At least since the financial crash of 2008, and for some time before that to sharp sighted observers, it’s been clear that a new approach is urgently needed.

The government’s bluster about “global Britain'' cannot disguise the fact that Britain’s trading heft and international status are both degraded by Brexit. Future historians will view it as a curious accident of history unaccompanied by any plan. But accidents can have equally curious consequences: by breaking away from an organisation in which the established economic norms of free market capitalism are so firmly entrenched, Britain could, once again, find itself drawing up a blueprint for the next phase in the human story.

That may sound fanciful. It may, at the least, be over-optimistic. The UK is just as likely to lose its way, even break apart, as it is to carve out a new path of economic and social innovation. But the opportunity is there. For a democracy of its size and wealth, Britain has an unusually centralised political structure. Radical policy changes that would be unachieveable in large, politically diverse countries such as the US or India, or even the EU itself, are entirely possible in the UK context.

Ironically, Britain, and especially England, is far too centralised both politically and economically, so one of the most productive and radical changes it could make would be to decentralise, bringing funding and decision-making much closer to the people and communities affected. In the same vein, diversifying the distribution of money via regional banks would help to create resilient local economies that are much less dependent on global trade.

Having advanced the cause of globalisation for over 200 years, the new focus for a pioneering Great Britain should be regional and local sustainability, including local food production and small-scale, high-tech, regional industrial hubs to supply local consumer needs. Trade in this context would be based on need and availability (bananas from the Caribbean) rather than financial advantage (cheap consumer goods from the Far East), bearing in mind that financial advantage often translates into a cost to the environment from transport, poor working conditions in the place of origin and a loss of productive work in the home economy.

This focus on regionalism and local productivity in turn creates an opportunity for the definancialisation of the economy, shifting the emphasis away from money turnover and transactional profit towards the sorts of activity that contributes directly to the quality of people’s lives. Indeed, probably the most transformational use the government could make of its newly-won regulatory freedoms is to change the way that the output of the economy is measured.

GDP is hard-wired into the EU’s economic DNA via the mechanisms that control government borrowing and the supply of money, particularly within the Eurozone. But the way it is calculated, adding up all financial transactions irrespective of their usefulness while excluding all the unpaid activity and voluntary work that contributes directly to the nation’s wellbeing, skews political priorities in a way that favours long, wasteful and destructive supply chains over small scale local production. Freed of EU constraints the UK could reform its calculation of economic output and re-prioritise its decision-making based on the needs of the smart economy of the future, not the inefficient, transaction-heavy one that has been dragging us down.

That smart economy will turn over much less money but will produce far more of real value on account of it. People will work less but produce more in terms of useful output, and the quality of their lives will increase directly as a consequence. Britain is in a unique position from January 1st to become the pioneer of this model, to pave the way ahead for a global economy to escape its unsustainable, inefficient ways. The opportunity is there to seize. The question is, are we up for it?