Why even a soft Brexit gives the oil oligarchs what they want

Dr Frederick Guy, Senior Lecturer in Management, explains how Britain’s decision to leave the European Union will hamper efforts to combat climate change and bolster the power of Putin and other major fossil fuel exporters.

Putin – whose name I use here as shorthand for the entire oligarchy of not just Russia but all major fossil fuel exporters – wants to prevent the emergence of international institutions which would be able to bring climate change under control. That is because the control of climate change would require destroying the oil and gas business, and with it his wealth and power.

To this end, two of the central objectives of the oil oligarchs have been the installation of a US government which is hostile to international cooperation in general and cooperation on climate in particular; and the fragmentation of the European Union. Trump, and Brexit; more broadly, a science-denying Republican party, and resurgent nationalism in every European country and region.

Even soft Brexit will be enough for Putin
I will explain below why these two political objectives, in the US and in the EU, are necessary – and, unfortunately, probably sufficient – for Putin’s ends. But first let me just say that, for Putin’s purposes, any Brexit will do, Hard, No Deal … or the softest of soft, as long as Britain withdraws from the political institutions of the EU.

In Britain, where anti-Brexit arguments have focused on the damage to the UK economy and the threat to peace in Ireland, a very soft Brexit is alluring: some kind of Norway ++ which keeps the UK essentially in both the Single Market and the Customs Union, but removes it from the political institutions of the EU. In British politics such an outcome would of course be a sorry face-saving compromise, letting politicians claim to have left the EU while retaining the economic advantages of membership (at some considerable cost in the form of lost voice in making the economic rules). For Putin, though, it would be a great victory, because what threatens Putin is a coherent West- and Central European voice on climate policy. The more he can fragment the EU – through the withdrawal of a big actor like Britain, and the discord which follows – the better off he is.

We can’t know how large a factor Putin has been in the political successes of Trump and Brexit. Obviously, there’s a lot more behind the surge of nationalism around the world than such plutocratic manipulation. Yet propaganda does work – ask Goebbels, ask Maddison Avenue, ask any company or political party that invests in public relations or advertising. And just the fact that Putin has made such obvious efforts to influence domestic politics in so many countries, raises the question of why he would do so.

Geopolitics in the anthropocene
I am writing here about the power of the oligarchs of oil: about the politics of plutocracy, and also about geo-politics.

The oligarchs of oil are just one segment of the larger plutocracy which afflicts our age. The oil oligarchs present us with a different set of problems than other oligarchs, however; our diagnosis of these problems is hindered if we think of plutocracy, or of capitalism, as one undifferentiated thing.

The other most prominent members of the plutocratic class have fortunes based on locking down parts of the digitized network economy (Amazon, Google, Microsoft,  privatized telephone networks, and so on), or on the extravagant protections now offered intellectual property (notable in pharma, biotechnology, and certain profitable corners of publishing). We might add to this list fortunes from the world of finance, but finance needs something to finance, and it is the monopoly sectors of the “real” economy – both in natural resources like oil and in information resources – which nourish finance. So let us speak simply of oil oligarchs and information oligarchs.

The two groups of oligarchs have a common interest in preventing the public from taking away their unearned hoards of wealth. The information oligarchs fear laws that would restore both our digital networks and our funds of accumulated knowledge to their proper state as a commons without monopolist tollgates – in short, that we will make their products free. The fossil fuel oligarchs fear that we will simply stop using their products. If justice ever comes for the information oligarchs it will be a piecemeal and prolonged set of battles, leaving the principals humbled but probably well heeled. The oil oligarchs, on the other hand, have their backs against the wall: they know that the health of the biosphere requires that their euthanasia – to borrow a technical economic term from Keynes – comes soon.

We can also think of what Putin and his ilk do in terms of state power – they act not merely as wealthy and influential individuals but as rulers – and thus of geo-politics. At first blush, we might think in terms of traditional Great Power or superpower rivalries. Putin’s politics, however, are about oil. And the geo-politics of oil is no longer primarily about control of the oil supply, but about the right to keep selling it. Any effective climate policy will sharply reduce demand for fossil fuels, which will mean, even if it is not all left in the ground, that both the quantity sold and the price will fall – shredding colossal oil fortunes.

If it seems far-fetched to reduce the policy objectives of a large state, once a superpower and still possessed of a huge nuclear arsenal, to permission to sell a single product, just look at the dependence of Russia on fuel (oil, gas, coal) exports. In 2017 – the latest year for which the World Bank provides these figures – Russia’s net exports of fuel amounted to 13% of GDP – an astonishing level for a country of that size. The only countries with higher levels of dependence on oil exports are states, like the Gulf monarchies, which produce little else (see Figure 1). Leaving the oil in the ground would not destroy Russia – if anything, it would free the country from the influence of oil, which entrenches corruption and despotism, and crowds out most other economic initiative – but it would destroy Russia’s oligarchy.

Figure 1

This is why the interests of the Russian state and the House of Saud, despite their quarrel over dominance in Syria and the Gulf, align at the global level: they need to block the emergence of institutions of international governance capable of dealing with the problem of climate change.

Governing climate change
The governance problem is well known: eliminating greenhouse gas emissions requires deep changes to our material way of life; attendant social changes; and vast investments in new clean technologies and clean infrastructure. Moreover, we have dallied so long that, in order to have any realistic hope of preventing very dangerous climate change, we need to decarbonize fast (Figure 2) – meaning that the process will be more expensive, more socially disruptive, and more politically difficult than it would have been had action been taken when the problem was first understood some decades ago.

Figure 2. Past delays mean that rapid decarbonization is necessary for climate stabilization. Graph from http://folk.uio.no/roberan

What nation will undertake such changes without the assurance that other nations will do so as well? Technically, this is what we call a “collective action problem”, a prisoner’s dilemma game with many players, blown up to the global level. Agreements are made – in Porto Alegre, Kyoto, Copenhagen and Paris – but there is nobody to enforce them, and greenhouse gasses continue to accumulate.

Dealing with climate change of course requires action at every level, from the global down to individual and community choices about how to live and what to consume. But without an overall grip on the collective action problem between countries, there won’t be effective national policies in most countries. And without effective national policies, the efforts of individuals and local communities will be weakened by the knowledge that others are taking no action, and so will not add up to enough.

For the past quarter century we have had climate agreements which have no teeth. There is no prospect of having an actual global government to enforce the agreements. How, then, do collective action problems get solved at a global level? Some say it only happens in periods of history when single hegemonic power – notably, Britain from the defeat of Napoleon until the mid-1800s, and the USA in the decades after World War II – had the weight to enforce international rules of trade and finance (rules used, of course, to the hegemon’s advantage); the same might serve for rules about greenhouse gas emissions, but there is no single dominant world power to play that role today.

Our best hope – is it shocking that it has come to a point where this is something more to hope for than to fear? – is that a small number of very large powers would act in concert as leaders, and enforcers, of international agreements to cut greenhouse gasses. The method of enforcement could be a combination of threatened withdrawal of access to export markets, and conditions placed on foreign investment.

What countries could exercise such power? In Figure 3a I plot the GDP and the greenhouse gas emissions of the world’s 25 largest economies – again, treating the EU as one country. Note that I have used ratio (logarithmic) scales, so the differences between the larger and smaller countries are compressed on the graph, but even so three big ones stand out in both GDP and emissions: China, the USA, and the EU. Big as they are, if these three giant economies decarbonized, it would not be enough to stop global warming. But all other countries depend on access to these three big markets, and investment from them. Individually, none is globally hegemonic; together, they could fill that role.

Figure 3

Figure 3b plots the same information, but with the EU split up. This leaves the US, China, and then a large mass of mid-sized emitters: six of the 25 biggest CO2 emitters are members of the EU. It is within in the mass of mid-size CO2 emitters that the collective action problem becomes overwhelming, each saying “after you”, each proposing actions that will shift costs to others. It is a recipe for non-action, for fatal delay, and that is why Putin needs to make the EU ineffective as a political unit. If you add to that the effective side-lining of the USA – its de facto alliance with Putin and the House of Saud – this configuration leaves no plausible leader, no plausible enforcer, for climate policy.

It may seem a faint hope any of that those three powers – China, the EU, and the USA – will actually choose to take decisive action to reduce greenhouse gas emissions. Perhaps it is, but other hopes are fainter still. And, if it were really such a far-fetched possibility, I do not think that the petro-powers, together with fossil fuel interests in the industrial countries themselves, would be doing so much to prevent it. Their support for both Trump and Brexit – any Brexit – is a central part of that effort to prevent the US and EU from taking decisive action on climate change.

What this should say to you if you are looking forward to any sort of Brexit, whether it be the ice bath of No Deal or the warm shower of Norway++, is that Putin will thank you for it, and that your great grandchildren, if they are among humanity’s survivors, will curse you.

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Trump and Brexit: why it’s again NOT the economy, stupid

This post was written by Professor Eric Kaufmann from Birkbeck’s Department of Politics. It was originally published on the LSE British Politics and Policy blog

As the final votes are counted, pundits and pollsters sit stunned as Donald J. Trump gets set to enter the White House. For anyone in Britain, there is a sharp tang of déjà vu in the air: this feels like the morning after the Brexit vote all over again. Eric Kaufmann explains that, as with Brexit, there’s little evidence that the vote had much to do with personal economic circumstances.

For months, commentators have flocked to diagnose the ills that have supposedly propelled Trump’s support, from the Republican primaries until now. As in Britain, many have settled on a ‘left behind’ narrative – that it is the poor, white, working-class losers from globalization that have put Trump over the top. Only a few clairvoyants – Michael Lind, Jonathan Haidt – have seen through the stereotypes.

But, as in Britain, there’s precious little evidence this vote had much to do with personal economic circumstances. Let’s look at Trump voting among white Americans from a Birkbeck College/Policy Exchange/YouGov survey I commissioned in late August. Look at the horizontal axis running along the bottom of figure 1. In the graph I have controlled for age, education and gender, with errors clustered on states. The average white American support for Trump on a 0-10 scale in the survey is 4.29.

You can see the two Trump support lines are higher among those at the highest end of the income scale (4) than the lowest (1). This is not, however, statistically significant. What is significant is the gap between the red and blue lines. A full two points in Trump support around a mean of 4.29. This huge spread reflects the difference between two groups of people giving different answers to a highly innocuous question: ‘Is it more important for a child to be considerate or well-mannered?’ The answers sound almost identical, but social psychologists know that ‘considerate’ taps other-directed emotions while ‘well-mannered’ is about respect for authority.

People’s answer to this question matters for Trump support because it taps into a cultural worldview sometimes known as Right-Wing Authoritarianism (RWA). Rather than RWA, which is a loaded term, I would prefer to characterise this as the difference between those who prefer order and those who seek novelty. Social psychologist Karen Stenner presciently wrote that diversity and difference tends to alarm right-wing authoritarians, who seek order and stability. This, and not class, is what cuts the electoral pie in many western countries these days. Income and material circumstances, as a recent review of research on immigration attitudes suggests, is not especially important for understanding right-wing populism.

Figure 1.

1

Now look at the same graph in figure 2 with exactly the same questions and controls, fielded on the same day, in Britain. The only difference is that we are substituting people’s reported Brexit vote for Trump support. This time the income slope runs the other way, with poorer White British respondents more likely to be Brexiteers than the wealthy. But income is, once again, not statistically significant. What counts is the same chasm between people who answered that it was important for children to be well-mannered or considerate. In the case of Brexit vote among White Britons, this represents a 25-point difference around a mean of 45.8 per cent (the survey undersamples Brexiteers but this does not affect this kind of analysis). When it comes to Brexit or Trump, think successful plumber, not starving artist or temporary lecturer.

Figure 2.

2

Some might say that even though these populist voters aren’t poor, they really, actually, surely, naturally, are concerned about their economic welfare. Well, let’s take a look at the top concerns of Trump voters in figure 3. I’ve plotted the issues where there are the biggest differences between Trump supporters and detractors on the left-hand side. We can start with inequality. Is this REALLY the driving force behind the Trump vote – all that talk about unemployment, opioid addiction and suicide? Hardly. Nearly 40 per cent of those who gave Trump 0 out of 10 (blue bar) said inequality was the #1 issue facing America. Among folks rating the Donald 10 out of 10, only 4 per cent agreed. That’s a tenfold difference. Now look at immigration: top issue for 25 per cent of white Trump backers but hardly even registering among Trump detractors. Compared to immigration, even the gap between those concerned about terrorism, around 2:1, is not very striking.

Figure 3.

3For Brexit vote, shown in figure 4, the story is much the same, with a few wrinkles. The gap on immigration and inequality is enormous. The one difference is on ‘the economy in general,’ which Trump supporters worry about more than Brexiteers. This could be because in the graph above I am comparing extreme Trump backers with extreme detractors whereas the Brexit-Bremain numbers include all voters. Still, what jumps out is how much more important immigration is for populist voters than inequality.

Figure 4.

4Why is Trump, Brexit, Höfer, Le Pen and Wilders happening now? Immigration and ethnic change. This is unsettling that portion of the white electorate that prefers cultural order over change.

The US was about 90 percent white in 1960, is 63 percent white today and over half of American babies are now from ethnic minorities. Most white Americans already think they are in the minority, and many are beginning to vote in a more ethnopolitical way. The last time the share of foreign born in America reached current levels, immigration restrictionist sentiment was off the charts and the Ku Klux Klan had 6 million members – mainly in northern states concerned about Catholic immigration.

Ethnic change can happen nationally or locally, and it matters in both Britain and America. Figure 5, which includes a series of demographic and area controls, looks at the rate of Latino increase in a white American survey respondent’s ZIP code (average population around 30,000 in this data). The share of white Americans rating Trump 10 out of 10 rises from just over 25 percent in locales with no ethnic change to almost 70 percent in places with a 30-point increase in Latino population.

The town of Arcadia in Wisconsin – fittingly a state that has flipped to Trump – profiled in a recent Wall Street Journal article, shows what can happen. Thomas Vicino has chronicled the phenomenon in other towns, such as Farmer’s Branch, Texas or Carpentersville, Illinois. There are very few ZIP codes that have seen change on this scale, hence the small sample and wide error bars toward the right. Still, this confirms what virtually all the academic research shows: rapid ethnic change leads to an increase in anti-immigration sentiment and populism, even if this subsequently fades. The news also spreads and can shape the wider climate of public opinion, even in places untouched by immigration.

Figure 5.

5Now let’s look in figure 6 at Brexit, and how White British voters in wards with fast East European growth in the 2000s voted. With similar controls, it’s the same story: when we control for the level of minorities in a ward, local ethnic change is linked with a much higher rate of Brexit voting. From under 40 percent in places with no ethnic change to over 60 percent voting Brexit in the fastest changing areas. Think Boston in Lincolnshire, which had the strongest Brexit vote in the country and where the share of East Europeans jumped from essentially zero in 2001 to the highest in the country by 2011.

Figure 6.

6

The Trump and Brexit votes are the opening shots which define a new political era in which the values divide between voters – especially among whites – is the main axis of politics. In a period of rapid ethnic change, this cleavage separates those who prefer cultural continuity and order from novelty-seekers open to diversity. Policymakers and pundits should face this instead of imagining that old remedies – schools, hospitals, jobs – will put the populist genie back in the bottle.

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Brexit – is it even possible?

Law on Trial 2016This post was contributed by Professor Erik O. Eriksen, Director of ARENA Centre for European Studies at the University of Oslo, who will be participating in a panel discussion on Friday 17 June as part of this year’s Law on Trial events. Law on Trial is the School of Law’s annual week-long programme of free-to-attend public lectures and panel discussions and this year puts the European Union on trial – one week before the EU referendum in the UK.

Can the Brits actually decide if they want out of the EU on the 23rd of June?

There have been quite a few moments of truth in the British debate about leaving the European Union. Increasingly it has become evident how deeply involved the country is in the EU, and how dependent the Brits are on European cooperation. The debate has highlighted the importance of the financial industry, whereby London City would be threatened by the replacement of Frankfurt as a leading European finance centre. Then there is the issue of agriculture, which would be left without subsidies from the EU. Business in general is dependent on immigration. The same goes for healthcare. Leaving the EU is said to have consequences for staff, waiting lists and the quality of treatment in British hospitals.

And also soccer, a major industry with a turnover of billions that relies on free movement, would be affected. There are currently 332 soccer players from the EU playing in the top league in England and Scotland. These players, however, do not fulfill the criteria for working permits for citizens from non-EU (member) states. Surely such matters can be arranged, but what will withdrawal mean for the rights of Britons that live and work in the EU? And how will the relationship of the UK with third countries look after a withdrawal from the EU?

The situation of the UK in the EU illustrates a general point about an integrated Europe. Much sovereignty has been delegated, interdependence has increased. Integration has affected the very nature of nation states. Many laws will have to be rewritten if the country leaves the Union. This should however not come as a surprise. The EU is known to be more than an intergovernmental organisation, where states can easily withdraw.

The EU makes its own laws that are binding on the members. And the internal market is much more than a free trade zone. The Union abolishes differences in laws and standards and develops new rules and regulations that all members have to accept. This uniform regulatory framework provides legal certainty for market participants. Within the EU cases can be brought before a supranational court. Rules shall be interpreted, enforced and complied in the same way. The European Economic Area (EEA) Agreement that Norway, Iceland and Lichtenstein have with the EU, makes this apparent. EEA law has no material substance in and of itself, but obliges Norway to accept existing and future EU law.  It should therefore not be seen as EEA law, but rather EU law.

Right to sign out?

There is a right to withdrawal from the Treaty, but how does this work in practice? First of all, the conditions for withdrawal need to be negotiated. These negotiations can take up to several years.  At present there is no majority in the House of Commons on any option for withdrawal. Some want to negotiate first, others want to use the withdrawal-clause immediately, and then there are those undecided. The problem is that the country has to get rid of complex regulations, covering different policy areas. New policy has to be created to replace abolished EU regulation.

Second, the future relationship with the EU needs to be renegotiated. All, including EU-sceptics, acknowledge that they cannot manage without some kind of agreement with the EU. In particular, the Union represents the world’s largest market with its 500 million inhabitants. The Brits are dependent on an agreement with the EU in areas of common interest.

The example of Switzerland, a country that has 120 bilateral agreements with the EU, shows how complex such a relationship can be. Neither do we know what the political climate will be after a possible ‘no’ in the British referendum. It is difficult to first withdraw from the Union and from the incurred commitments, and then start negotiating good terms for continued cooperation. Divorces are seldom pleasant.

Third, bilateral trade agreements with third countries have to be established, to replace those that have been signed with the EU. This creates many uncertainties, especially because large trade agreements are at present negotiated between blocks of countries, where the great powers China, the USA and EU dominate. From an economic perspective, there is a risk of an economic downturn in the UK after withdrawal. Financial markets already signal unrest over a possible turbulent economic situation in the future.

These factors can lead to a legal nightmare and years of negotiations and uncertainty. One thing is for sure: leaving the Union would change the UK’s trade relations with the EU and the rest of the world significantly.

Unclear consequences

Furthermore, a whole list of other problems arises if the UK decides to leave the Union. What about the rights of the almost two million Brits that live in other EU member states, and make use of the rights they have as EU citizens? British pensioners living in Spain, for example, have access to Spanish healthcare.

The UK has also considerable clout in the foreign policy of the EU. It is therefore unclear what role the country will be able to play outside the EU. The UK will become less important to the USA and many argue that as a former empire, the country will have difficulty in being regarded a neutral broker.

Even areas where Brits enjoy opt-outs from the EU’s laws, as in asylum and immigration policy, are affected by EU decision making. If for example the Dublin Regulations in which member states are responsible for examining the application of asylum seekers is abolished, the UK will not be able to deport them.

Withdrawal is risky also because Great Britain’s unity is at stake. Scotland might withdraw from the United Kingdom.

Problems attached to the withdrawal seem insurmountable, but in a referendum it is not always the rational arguments that prevail. Often voters vote on other things, often external factors and trust in present powerholders play a decisive role. This referendum is particularly interesting for two reasons.

The fiction of alternatives

First, the referendum forces those in favour of continued EU membership to be on pitch. They have to clearly state why the EU is important, and dismantle wrong information and falsely-grounded ideas about what a country in ‘splendid isolation’ could achieve. We rarely hear Brits talk about the EU in positive terms.

Secondly, ‘Brexiters’ have to propose a realistic alternative. Those in favour of withdrawal have to present a credible alternative to EU membership. Responsible politicians have to make evident how a United Kingdom outside the EU would be able to cope in an increasingly interdependent world.

There is no current agreement on what a United Kingdom outside the EU would look like, and how relations with other countries are going to be upheld. Some argue that Britain only needs a customs union with the EU; others argue that they can expand their cooperation with the Commonwealth, and yet others look to Norway’s EEA Agreement and Switzerland’s bilateral agreements. But are any of these models realistic alternatives?

A customs union with the EU – with free market entrance – is only possible if the other 27 EU countries agree, as it requires Treaty amendment. An agreement will not be acceptable without significant contributions from the United Kingdom. Agreements with Commonwealth nations, which can be difficult enough since they now have strong relationships with other countries, would not compensate for the loss of the EU market.

Both the EEA model and the Swiss bilateral model would entail getting access to the internal market by accepting EU law and regulations. The Brits would then be no better off than today with regard to sovereignty, quite the contrary. By adopting any of these models, the United Kingdom would become partially EU member, but without being able to influence EU decision-making.

British EU sceptics want to roll back integration and return sovereignty to national institutions. They frequently reject an affiliation like the Norwegian one because it would mean even more EU dominance. Norway has abstained from having influence, but not from being affected by the EU’s decisions. The core of EU scepticism lies in the experience of being governed by others, which is the reality in the EEA. The Norwegian loss of sovereignty is not compensated by co-decision in the European Parliament and Council, as is the case for Great Britain. Power is not the same as sovereignty. The ceding of sovereignty increases power when it gives actors decision-making power in supranational bodies.

It is not obvious that the UK can actually fully withdraw from the EU. It will be difficult to avoid ending up in a similar situation to that of Norway or Switzerland, where EU laws are accepted in exchange for access to the internal market.

There is, as far as I can see, no realistic alternative to (a reformed) EU, while the fiction about an alternative is what motivates British EU sceptics. This very same fiction underpins the continued legitimation of technocratic EU adaptation made by the opponents to Norwegian EU membership. But what is a plain fact in Norway is the ultimate horror for many Brits.

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