Brexit – don’t panic, start reforming

Mike Tuffrey

 

Posted in: Briefing Comment, Policy & Research, Speaking Out, Strategy

Brexit – don’t panic, start reforming

July 06, 2016

Britain’s referendum result has its roots in long-standing economic unfairness, says Mike Tuffrey, and it will get worse unless business learns some lessons.

 

The shockwaves from the UK’s vote to leave the European Union continue to reverberate around the world. Economists speculate on the implications. Politicians with elections looming in Europe and America worry what it means for them. Individual citizens in Britain – well, about half of them – ask profound questions about their country and the divisions so starkly revealed.

The sense of shock and the search for meaning is palpable. I will resist adding lots to the acres of analysis already available, and instead offer one anecdote, two facts and three observations on what those of us concerned about responsible and sustainable business should now do.

First I should declare I was in the Remain camp. My rationale was simple. Geographically, historically, culturally and increasingly over the last 43 years economically, Britain is integrally part of Europe – an immutable reality since shifting tectonic plates created our continent some 200 million years ago. Whatever the manifold flaws of the EU as an institution, we should be In, making it work better and acting as a bridge across the Atlantic and wider. (If I had any second thoughts, my teenage children made clear they want to be citizens of an interconnected world, not little Englanders. Arguably the cruellest division exposed by the vote is that between young and old.)

My anecdote dates from a year ago when I bumped into the chief strategist for the Remain campaign in Westminster. “The future of our nation is in your hands”, I half-joked. “Don’t worry”, he said, “we’ve got it all planned out”, the epitome of quiet confidence. “I’m not so sure”, I retorted, “don’t forget, the devil has all the best tunes”, already thinking that emotion would trump reason.

And my two facts? The first is that real wages have been falling in the UK over the last decade, with median earnings down 10%. For those at the bottom, the reality has been worse. It’s hardly surprising then, that the have-nots didn’t listen to the exhortations from the perceived architects of their misfortune – the politicians and experts seeking to preserve the status quo. Dire warnings to protect London’s financial services were met with a six letter word – Brexit.

My second fact adds an emotive element to the analysis, not for justification, still less for prescription going forward, merely for understanding. The aggregate UK population has grown by 5 million over that decade of declining wages, up from 60 million. Half is from childbirth, half from net inward migration. (Gross inward migration totalled 5.7 million, partly offset by outflows.) Even if times were good, that scale and pace of change would have an impact. When bad times bring a search for scapegoats, the impact is toxic, murderous even, in the terrible and tragic case of Jo Cox MP.

What is to be done?

First is not to panic. This is one of those instances where the short term implications are being overestimated, while the long term impacts will be more profound than currently apparent. The immediate changes will be gradual, albeit economically negative. As an aside, on the simple politics, the ‘leave’ question can’t be reopened in the UK without a major move by the EU’s remaining 27 member countries for real change. Sadly it looks like that won’t happen before a domino effect forces it – starting with the Austrian presidential election rerun, then most likely in France, Italy and the Netherlands. Politically things will get worse before they get better.

Second, on the economics, the major corporations need to wake up to the fact that trickle-down globalisation isn’t working. Anyone who thinks the UK vote was an aberration should look at the primary votes cast for Trump and Sanders in the USA. The growing political clampdown in China in response to its faltering economy is another sign of the same phenomenon. Simply put, owners of capital have done just fine since the global financial crash, and that includes many Western baby-boomers; but middle wage earners have not.

Our great corporations like to present themselves as a much-misunderstood force for good. Western voters clearly disagree.

For professionals working in CSR and corporate sustainability, the emphasis has to shift decisively to questions of economic impact and equity. Within firms, that means issues such as pay differentials, contractual security, benefits like pensions, and wider working conditions. In the value chain, it’s moving from price-only deals to partnership relationships. Between firms and society, it’s a multiplicity of complex topics: what share of taxes should be paid locally, nationally and internationally; how much money should be recycled in the local economy; who has rights to data (in previous times, trade unions provided some protection against labour exploitation; in today’s digital economy, who protects consumers’ rights?) and so on.

No one firm can address all these issues, not least because of pressure from competitors and capital markets. But companies can talk about these issues and publish honest data about what is going on. We’re used to seeing carbon and water footprints. How about a poverty footprint to sit alongside?

And that leads on to my third observation. This data will equip companies to engage with governments and civil society about the right model for regulated free markets in our fragile world, one that can underpin liberal democracy and keep at bay the ugly divisions so starkly revealed. That conversation is at least a decade overdue. The UK’s referendum result is a cry of pain. A roar may come from November’s elections in America. In all this, business is not a neutral bystander.

 

Mike Tuffrey is Co-founding Director of Corporate Citizenship.

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