Wednesday, 29 November 2017

What We Talk About When We Talk About Industrial Strategy

All states intervene in the direction and management of industry, whether by providing direct funding, tax-breaks or indirect support through infrastructure and education. A laissez-faire state is no more to be found in the real world than a nightwatchman state. Where states differ is in their institutional structures and their public rhetoric. The fundamental weaknesses of the British economy relate to the former, but this is often obscured by the latter. In the UK, "industrial policy" has traditionally been limited in public discourse to heavy industry and manufacturing, while the language used has tended towards the pathological metaphor of an ailing patient. One result of this was that a dirigiste strategy to support the City of London, from the mid-80s "Big Bang" through the Jubilee Line extension to the bailout of the banks, could be passed off as something else entirely. Likewise, the concept of "innovation" in British political discourse has come to mean invention rather than application, which reflects a social bias towards research embedded within the institutions of elite education. It might seem harsh, but Stephen Hawking is part of the reason why the UK doesn't yet have universal, high-speed broadband.

In the postwar years, the legacy of large scale R&D in business, together with the need for state direction to coordinate the rebuilding of industrial capacity, led to a fashion for "national champions" in most developed countries, often in sectors with a strategic defence dimension such as aerospace or steel-making. In the UK, this gradually gave way to the more pejorative phrase "picking winners", which was both an ideological critique (you can't second-guess the market) and an attack on government competence (you keep picking losers). The incidence of primary research within business then declined, as an expanded higher education sector provided outsourcing opportunities for national firms and globalisation allowed multinationals to consolidate their efforts. This was part of a wider turn that deprecated the concept of firms as institutions, as opposed to financial assets or simple market actors, which had an obvious attraction in the era of privatisations and mega-mergers. While human capital was eulogised by Gary Becker, the firm was reduced to the boundary of administrative efficiency theorised by Ronald Coase.

The classic UK example of this was the car industry. Its prewar firm and brand fragmentation had been preserved by wartime and the seller's market of the immediate postwar years. This meant too many models, antiquated organisation (e.g. the reliance on piece rates), which in turn encouraged craft union fragmentation and poor industrial relations, and self-satisfied management. Though belated efforts were made to rationalise the industry and consolidate production, notably with the creation of BLMC in 1968, this was never pursued aggressively enough. The eventual nationalisation of the industry in the form of British Leyland in 1975 was twenty years too late. Though the political wind then turned against state ownership, government continued to support the sector directly while urging further rationalisation, which laid the foundations for foreign direct investment by the likes of Nissan in the 80s. As the UK's continued success with marquee brands such as Land Rover, Jaguar and Mini proved, the problem wasn't a lack of R&D or skills among the workforce, but a failure to apply these capabilities more widely due to poor organisation and management.

If the industrial strategy of the 60s and 70s tended towards the vertical, focused on particular sectors and the selection of large firms for preferential treatment, the strategy of the 80s and 90s was more horizontal, seeking to create a level playing field for the market to select winners through the free movement of factors of production, not just nationally but internationally, such as in the case of the EU Single Market. Though this shift was successful in many respects, it had two problems. The first was the wrenching effect of the transition, which in the UK saw the disruption of specialist supply chains tied to the old national champions, contributing to the steady decline of manufacturing as a proportion of GDP. The second problem was the tendency for pro-business policies to protect poorly-performing companies that survived the transition. Had the British government been less dogmatic in the early-80s, and less obsessed with lowering the tax burden on business thereafter, the underlying productivity growth of British industry, which was flattered by North Sea oil and financial services between 1988 and 2008, might not have been so weak.

The publication on Monday of the government's industrial strategy white paper comes at a significant time, given both the clear evidence that austerity doesn't work in its own terms, so future deficit reduction must depend on stimulating growth, and the debate over the UK's future trading relationships (ironically, Brexit has made the idea of national champions politically salient once more, and not just on the left). But these political imperatives are ignored by the white paper in favour of generic environmental factors, described as "Grand Challenges": AI & data economy, clean growth, future of mobility and ageing society (like MBA bumf the world over, the paper has a lot of abstract nouns and pious verbs but a shortage of definite articles). The key policies are grouped into five "foundations of productivity": ideas, people, infrastructure, business environment and places. Like the challenges, their generic nature indicates that there is little that is distinctive about the analysis or the proposed solutions, while some of the specifics point to longstanding institutional flaws that aren't about to be addressed.

An example of the latter is the continued segregation of technical and elite education. The paper commits to "Establish a technical education system that rivals the best in the world to stand alongside our world-class higher education system". UK universities routinely appear in the top 10 of global ranking tables. By contrast, Germany, France and Japan rarely make it into the top 50, but those countries are clearly superior to the UK in terms of productivity. This isn't simply because their efforts tend to be directed more towards technical education and away from elite establishments, but because there is actually little connection between pure research (let alone elite status) and the application of technology by industry. That, after all, is why we've traditionally had a "brain drain" and a reputation for being good at coming up with ideas and poor at making money out of them. Rather than privileging research, a better industrial strategy would focus on disseminating and applying existing technologies to SMEs. As the Japanese experience in the 60s and 70s showed, absorbing innovations made in other countries will actually create the institutional infrastructure necessary to then incubate native inventions. Rather than case studies about thriving UK businesses, the white paper would have done better to include case studies of successful state intervention by other countries.

History suggests that jumping on the bandwagon of emerging technologies, such as robotics or batteries, can lead you up a blind-alley (consider the trajectory of the UK's semiconductor industry, particularly in light of last year's sale of ARM Holdings to Japan's SoftBank). Many other countries will do likewise, which reduces the prospect of any comparative advantage, while the presence of a home market is usually crucial to success. A country with a sizable manufacturing base, an ageing population and a well-developed electronics sector is more likely to succeed in the area of robotics, which is why much of the early running has been made in Japan. More generally, a focus on a general purpose technology (GPT), like steam-power or IT, will only deliver advantage during the early-adoption phase. Once the technology becomes ubiquitous, that advantage largely disappears or is overwhelmed by more fundamental factors such as geography. The strength of the German car industry has less to do with the pioneering work of Carl Benz and Gottlieb Daimler and more to do with the proximity of large markets in all directions. One obvious trend over time is the quickening pace at which GPTs become ubiquitous. Today, a productivity-enhancing change in software can be disseminated globally in a few days. Seeking first-mover advantage is increasingly a fool's errand, which partly explains the growing reluctance of business to invest in R&D.

Like its weak productivity growth, the UK's low R&D rate (1.7% of GDP compared to the OECD average of 2.4%) is partly a reflection of the dominance of the services sector (and financial services in particular), but it also reflects the financialised turn of the last 30 years. The problem with capital allowances and R&D credits is that they are of limited effectiveness if the tax regime makes the distribution of free cash via dividends more attractive. To increase the proportion of profits reinvested in industry, you need to make taking the money out of businesses (or its use in share buybacks) less attractive. You also need to address the persistence of zombie firms: the long tail of low-productivity and lifestyle businesses that survive by dint of low wages and a tax regime that indulges private owners. An industrial strategy should concern itself not just with facilitating market entry but also with encouraging market exit. Given that the paper considers the high level of firm formation (one every 75 seconds) to be something to crow about, ignoring that the vast majority of these are micro-businesses that won't survive beyond 5 years, I doubt the promised "review" of this area will seriously grasp the nettle.

Overall, the white paper looks like a holding operation. There are old initiatives rehashed, more promised reviews and commissions, and the usual lip-service to devolution and innovation. More fundamentally, it does not represent a departure from the horizontal policy adopted since the 1980s, despite talk of "sector deals". As with Theresa May's commitment to addressing inequality, there is little here beyond a change in tone. A serious analysis would start by considering the strengths and weaknesses of the economy. This doesn't just mean identifying comparative manufacturing advantage, but looking at institutions and regulatory arbitrage. The UK's current status depends on three things: a hybrid relationship with the EU (inside the Single Market and Customs Union but outside the Eurozone); London's role as a global financial entrepot (and tax haven gateway); and our ability to leverage the English language (through business services as much as media). Given that we are in the process of degrading the first of these, and habitually omit the second from strategic consideration, the white paper was never going to offer more than liberal references to our "creative industries". The doctor's report still reads "poorly".

Sunday, 26 November 2017

The Missing Sovereign

One of the odder developments in the world of books during the early years of this decade was the revived interest in the American author John Williams' 1965 novel, Stoner. After a politely received debut and a couple of modest reprints in the US around the millennium, the book became a bestseller after 2010 in both France and the UK, and even Waterstones' book of the year in 2012. Literary fiction is a marginal interest at the best of times, but its occasional eruption into wider consciousness (when not tied to a film or TV adaptation) is often related to its political resonance with a small number of "taste-makers" in the media. Given that Stoner was set over the course of the first half of the twentieth century and followed the third-rate life of a second-rate academic, its resonance doesn't immediately appear to have much to do with the pivotal 60s, but its concerns with truthfulness in life and academic integrity place it between the existentialism of the 50s and the postmodernism of the 70s. It has moments of self-awareness, but it's not a very good book: the characters are flat, the language carefully monotonous, the baddies wear all-too-obvious black hats. It appears to be the combination of its unadorned style and relentless self-pity that helped it find favour among the grand names of contemporary British fiction.

Much of the praise for the novel focused on its moral lessons: "We live in an era in which happiness and success are pursued ruthlessly, selfishly. We feel entitled to have them, at any cost, whether that involves divorce or questionable ethics. This is a novel that serves as an antidote to that expectation, reminding us that a life that looks like a failure from the outside, that will be quickly forgotten once it ends, can be a noble, quirky and somehow beautiful experience". That assessment should indicate the conservative virtues at the heart of the work, but it is worth being precise about who is cast as the serpent in this particular garden. The plot involves two strands: William Stoner's emotional estrangement from first his dirt-poor parents and then his wife, Edith, a frigid, unsympathetic solipsist; and his academic career, centred on the teaching of Rennaisance literature, which is blighted by the growing malevolence of his head of department and reaches a climax over the latter's protégé, a fraud and a liar. Though some sceptics have noted the class contempt and misogyny of the first strand, the reason for the book's renewed popularity is to be found in the second strand and its tale of a decent man done down by relativism and the special pleading of the aggrieved (both the department head and his protégé are disabled).

With its focus on academic bad faith and social pretension the novel is ahead of its time, occasionally reading like Malcolm Bradbury's The History Man, but without the humour and as much instrumental sex. If that mid-70s work captured the emerging reaction against post-structuralism and post-modernism, it also prefigured the way that "historical inevitability" would be recuperated from the left to advance reactionary politics. Bradbury subsequently claimed that the novel's protagonist, the self-styled radical Howard Kirk, ended up voting for Thatcher in 1979 and Blair in 1997, the two politicians who made belief in a higher truth central to their appeal. Stoner's contemporary resonance has more to do with the salience of campus free-speech and safe-spaces in media discourse than the socio-economic realities of teaching, but it also elevates a traditional ideal of male integrity and literary fidelity to the level of hagiography, which goes down well among writers prone to berate "snowflakes" and anti-canonical minorities from the security of their well-appointed studies. As one awed reviewer described Stoner's miserable span: "He has been a priest of literature, and given himself as fully as he could to the thing he loved. The book’s conclusion, such as it is—I don’t know whether to call it a consolation or a warning—is that there is nothing better in this life".

You don't have to hunt too far to find claims that post-truth and fake-news are the products of postmodernism rather than the economy of the media, and thus something rotten in the academy rather than the logic of capitalism. The response to this displacement has been a doubling-down among academics on the foundational nature of truth. This has led to what one might term "grade inflation" in respect of the political consequences of truth's abuse. For example, the American historian Timothy Snyder has claimed that "post-truth is pre-fascism". His argument is built on a chain of dependencies: "Democracy only has substance if there’s the rule of law. That is, if people believe that the votes are going to be counted and they are counted. If they believe that there’s a judiciary out there that will make sense of things if there’s some challenge. If there isn’t rule of law, people will be afraid to vote the way they want to vote. They’ll vote for their own safety as opposed to their convictions. So the thing we call democracy depends on the rule of law. And the things we call the rule of law depends upon trust. Law functions 99 percent of the time automatically. It functions because we think it’s out there. And that, in turn, depends on the sense of truth. So there’s a mechanism here. You can get right to heart of the matter if you can convince people that there is no truth. Which is why the stuff that we characterize as post-modern and might dismiss is actually really, really essential."

The "mechanism" can be summarised as follows: democracy depends on law, which depends on trust, which depends on truth. This is questionable. The idea that democracy depends on the rule of law is no more meaningful than the idea that autocracy does - all forms of government depend on laws. The idea that law depends on trust is here reduced from the expectation of justice to mere administrative efficiency: the automatic functioning of the law. Up to this point, both Nazi Germany and the Soviet Union have ticked all the boxes. The idea that trust depends on truth ignores the collective insistence of philosophers, sociologists and economists that it depends on self-interest (or enlightened altruism, if you prefer). We might still take oaths on holy books, and the shame that arises from the breach of social rules about lying is a deterrent, but what ultimately keeps us honest is consequentiality: the fear of worldly punishment or of lost opportunities arising from reputational damage. In Snyder's argument, trust is a rickety bridge intended to span the gap between law and truth. A straight link between the two is difficult to make when laws in a democracy aren't intrinsically "true" but simply norms that we have agreed to through political debate. What distinguishes democracy from autocracy is who decides, not the quality of the decision.

Snyder's equation of good governance with laws and laws with truth is actually a conservative argument that harks back to the pre-democratic era when laws were deemed to have divine sanction through monarchy. What democracy depends on is not a law against vote-rigging, but a social convention that you don't cheat. Challenging claims to absolute truth does not undermine democracy. In fact, just as contesting miscarriages of justice occurs more in democracies than autocracies, it should be seen as a sign of a healthy society. Likewise a press that is routinely sceptical rather than partisan. Looking back at Germany in the 1930s, Snyder notes the power of the media: "The second thing that German Jews were not aware of, or Germans were not aware of, was how new media can quickly change conversations. In that way, it’s not exactly the same, but radio at that time often ended up being a channel for propaganda. There are parallels with the internet now, where there were hopes that it would be enlightening. But in fact, it turns out that with presidential tweets, or with bots, or isolated habits of viewing, it isn’t necessarily enlightening. It’s the opposite. A lot of us were blindsided by the internet in much the same way that people could be blindsided by radio in the 1930s."

The jump from prewar radio to the Internet is telling, skipping both television and modern newspapers, not to mention their current symbiotic relationship with social media. This historical elision also ignores the deregulation of radio and TV that started in the 1980s, which created a market for news and opinion in which fairness and objectivity withered under commercial pressure. Given that the Internet cannot be held responsible for the growth of a right-wing media ecology in the 80s and 90s founded on myths, bullying and paranoid conspiracy, the idea that postmodernism was to blame for the erosion of truth serves the dual purpose of diverting attention while affording media practitioners, many of whom were at college in those decades, a degree of revenge for past slights and embarrassments (notably their own temporary commitment to intolerant strands of activism). More fundamentally, this characterisation of the Internet as a propaganda machine without precedent beyond the archetypal medium of mid-century totalitarianism serves to cast the present situation as exceptional: "we are facing a real crisis and a real moment of choice", as Snyder puts it.

This sense of impending crisis encompasses both the belief that the forces of an emergent Fascism might engineer a state of emergency - for example, Snyder suggests that Trump might leverage a terrorist attack in the manner of the Reichstag fire - and the idea that the erosion of truth by self-interested Internet companies and Russians waging nonlinear warfare has gone so far as to require state intervention to revoke the errors of a misled democracy, such as in the case of Brexit. Apart from the cognitive dissonance required to hold both of these views, the obvious flaw here is the casting of two dim kids on seaside donkeys as horsemen of the apocalypse. While acknowledging the dangers of complacency and the all-too real erosion of rights since 2001, I can't help but suspect that Trump is too lazy to mount a putsch while the outcome of the EU referendum has been a series of botched coups (usually involving Michael Gove) that never managed to get beyond the beer hall. To borrow the terminology of Carl Schmitt, the Nazi jurist and originator of the concept of the state of exception, what has been striking is the inability or unwillingness of anyone to take on the role of the sovereign. In that sense, William Stoner's failure to command his own life, and his escape from the world into the imaginative consolations of the past, makes him all-too representative of our time.

Monday, 20 November 2017

The Nature of the Political Firm

A theme of Corey Robin's analysis of the conservative tradition is the relationship between the older conception of aristocratic virtue and the newer idea of value arising from judgement in the marketplace. Though the latter crystallises in the late 19th century with the substitution of subjective preference for objective labour as the source of value, Robin shows that its roots lay in the reaction to the French Revolution, notably in Edmund Burke's tentative search for a philosophical justification for the virtue of capitalists as a replacement for the discredited virtue of the ancien regime, a search that put him at odds with Smith, Ricardo and Marx, but which connects him beyond the Marginalists to Friedrich Hayek and the contemporary vulgate of entrepreneurs and "wealth creators". A further link in this chain is Friedrich Nietzsche's equivalence of esteem and value, which both emphasised the idea of personal judgement and restored the importance of rank: the esteem of the superior sort creating a superior value (there's a lot of Nietzsche in Google's Page Rank algorithm). The point that Robin makes in his study of conservatism after 1789 is that it responded to modernity "by turning the market into the realm of great politics and morals", and that it was inching towards this long before the emergence of the Austrian School.

Robin's basic premise is that modern conservatism remains an essentially reactionary movement that seeks to preserve private hierarchies against democracy. It employs both aristocratic virtue (e.g. constitutionalism) and rabid populism (e.g. Trump), despite the inherent antagonism of the two. In practice, the attempt to reconcile elite virtue with the market as a mechanism for determining value has led to an increasingly narrow definition of the virtuous elite as the merely wealthy - i.e. those who have been rewarded by the market - hence the contemporary contempt for "elites" not founded on wealth, such as democratically-elected politicians and professionally-credentialed scientists. An obvious problem for conservatism is the lack of virtue displayed by the modern rich, which is evident not just in disquiet over predatory business practices and tax avoidance, but in the personal "unworthiness" of Donald Trump and the "sociopathic" behaviour of Mark Zuckerberg. Though these critiques are loudly voiced by liberals, they are essentially a conservative demand that rank should reflect conventional ideals of virtue (not unrelatedly, much of the liberal abhorrence of Russia arises from what is seen as Putin's presumption and the vulgarity of his oligarchic supporters).

Friedrich Hayek's importance to the conservative tradition is often reduced to an instrumental borrowing of his defence of markets and the price mechanism, which takes at face value his claim to be a classical liberal rather than a conservative. Though Hayek saw the market as the ultimate arbiter of knowledge, he also believed (as a good neoliberal) that the market was made, and specifically through the guidance of the wealthy as an avant-garde of taste. But while Hayek thought that the rich had to drive society forward through their daring and experimentation, he wasn't a fan of the self-made man, let alone the "disruptor" (Schumpeter's creative destroyer, in older terms). Rather he advocated an aristocracy that benefited from elite education and the productive idleness enabled by freedom from material want: "The grosser pleasures in which the newly rich often indulge have usually no attraction for those who have inherited wealth" (insert your own Trump joke here). Hayek seems to have missed the partial democratisation of taste over the course of the twentieth century: the wealthy may have pioneered the mobile phone, but they didn't pioneer jeans. Contra Hayek, there isn't a single avant-garde and taste is a field of contest not consensus. In his top-down view of taste, Hayek echoes Burke's ideal of a contract between the generations - i.e. the importance of inheritance to values as much as to property.

In this light, Robin's updating of his seminal work The Reactionary Mind to include Trump (the first edition concluded with Sarah Palin) is interesting because of the renewed emphasis he appears to place on the dichotomy of traditional political virtue and the value of the market (I'm judging from press articles as the new edition paperback won't be out until the New Year and the hardback is nearly £50 - that's the market for you). Robin sees Trump as a product of the market realm whose attitude presents a challenge to the more aristocratic tradition of political virtue (that The Donald was criticised as a would-be monarch by the Republican Party's Whig nobility rather supports this view), though he also notes the destabilising scepticism that Trump has himself displayed about the operation of the market, which is clearly part of his populist appeal: "So he is on the one hand very legible as a kind of great man of the economy, but on the other hand he also can be very skeptical of that tradition, and is constantly exposing it as a fraud and a deception. That really is at the heart of what makes Donald Trump new and innovative within the conservative movement and the Republican Party". Trump may not be a complicated man, but he is a political paradox.

In a blog post, Robin maps Trump onto another revealing dichotomy: "In his classic article 'The Nature of the Firm' ... the economist R.H. Coase divides the economic world into two modes of action: deal-making, which happens between firms, and giving orders, which happens within firms ... When it comes to wielding power in the political sphere - I'm not talking about executive orders, of which Trump has issued many, and which are a sign of his weakness, not his strength; I'm talking about exercising power that requires the assent and cooperation of other political actors - he's completely out of his league. There's a reason for that: the conception of power he has - such as it is and however bad he is at it - is drawn from the Coasian world of the firm". This is true, but it also highlights that Trump is a product of inherited wealth more than business school. His corporate experience has been characterised by fealty and whim, hence his ease with mobsters and his attractiveness to small business owners everywhere. He has bullied politicians and threatened bankers ("too big to fail" was a feature of New York real estate long before financial services). He has rarely had to persuade employees or shareholders beyond bluster. Revealingly, he entered national politics as a "birther" (questioning Obama's legitimacy to serve as President) and has gone out of his way to appoint family members to key positions on the basis of little more than birthright. He may be a yahoo in liberal eyes, but in his own mind he is an aristocrat.

Robin sees this dichotomy - the reduction of politics to giving orders and making deals - as another example of neoliberalism's colonisation of politics with economic modes of reason. That is certainly plausible if we think of the operation of politics within the domestic sphere (Coase obviously influenced the discourse of privatisation and the extension of transactional management to the public sector), however there is a dimension of politics in which the Coasian dichotomy is perhaps more legitimate, rather than simply an ideological imposition, and that is the distinction between internal and external sovereignty: who ultimately decides and what compromises must be made with other states. While the former has become symbolically both more demotic and economic during the democratic era (think of the prominence of the household budget trope today), the latter has retained an aristocratic tone, however squalid the reality of foreign affairs. This has thrown Trump's more vulgar approach - ranting about unfair competition and promising "great deals" rather than diplomacy - into sharper relief and encouraged the hyperbolic accusations of a lack of competence and integrity.

The distinction between internal and external sovereignty is a fundamental attribute of all organisations, which might make it seem a rather banal observation, but it also allows us to think of politics in terms of transaction costs, which is particularly relevant to the current Brexit negotiations because those centre on the redrawing of the boundary between the two realms. In Coase's conception, a firm will take on the overhead of dealing with an external supplier when the cost of doing so is lower than the cost of making provision inhouse - i.e. when outsourcing is cheaper than insourcing. Rather than a federal superstate or a bureaucratic imposition, the EU can be thought of as a series of outsourcing arrangements, from the regulation of medicines to the control of borders. The separate cases for joining the Common Market and quitting the European Union that bookended our membership focused on the benefits of trade, but the reality was a reform of the scope of the state (which was misleadingly interpreted by europhiles as an attack on internal sovereignty) and choices about what was and was not a "core competence" of "UK Plc". This rational (if often covert) discourse has now been replaced with irrational theatre.

In Coasian terms, what recent months have shown is that UK government ministers aren't very good at doing deals, even allowing for the unhelpful barracking of the Brexit ultras and the Tory press. Where their ability to secure an external deal has been constrained by circumstance, that has often been the consequence of the self-defeating issue of orders internally, such as the premature invocation of Article 50 and the calling of a general election. But this seems all the more baffling when you consider just how successful the UK was in doing deals with the rest of the EU over the last 40 years, from the famous rebate to exemption from the euro and the Schengen Agreement. To put this in terms of the conservative tradition described by Corey Robin, if the US is led by an instinctive aristocrat who lacks aristocratic virtue (a Hayekian without taste), the UK is plagued by inadequate Nietzscheans, such as Boris Johnson and Michael Gove: monsters of self-regard who can barely hide their contempt for the herd and have only a dilettantish understanding of matters "economicky". If the UK really is a firm, then we unquestionably have the wrong management team.

Sunday, 12 November 2017

Norn Irony

It is becoming increasingly clear that the crunch-time of the Brexit negotiations is fast approaching and it looks like Northern Ireland will be the sticking-point. While the ultras loudly demand that we refuse to pay Brussels a penny, we know that we have to settle the bill and it is only money at the end of the day (in the spirit of the Bullingdon Club, perhaps we should just chuck cash at the EU to secure a prompt exit). A figure can be agreed, even if it requires some creative accounting for PR purposes. Similarly, the issue of citizens' rights can be resolved. The EU has long fudged freedom of movement in practice, the irony being that the UK's failure to take advantage of various restrictions and derogations helped give the misleading impression of an inviolable principle. But the one issue on which the EU is likely to remain implacable is Northern Ireland, which raises a further irony in that leave voters' demand to "take back control" was directed towards Calais not Dundalk. The reason for the EU27's insistence that the six counties be treated as an exception is its determination to protect not only the interests of a member state, the Republic, but the interests of those citizens of the North who will, care of the Good Friday Agreement (GFA), remain citizens of the EU after the UK leaves.

Some Brexiteers have taken to characterising the EU27's attitude to the UK as comparable to the EU's attitude towards Greece in 2015. Leaving aside the UK's support for that attitude at the time, and the enormous difference in economic and political muscle between the two countries, this misses the key point that a majority of Greece's citizens did not want to leave the EU and would have considered such an eventuality to be an even greater calamity than the debt crisis and the subsequent austerity. That's why Tsipras and Syriza buckled. It occasioned little coverage in the UK, but the EU's stance towards Greece was not the cartoon image of a punitive, occupying power, or even of an emotionally obtuse parent disciplining an errant child, but of a supra-national culture that believed it was protecting the interests of its own people (the honest burghers) within Greece, not just in Northern Europe. The cultural gulf that has appeared in British life these last 18 months has too often been attributed to the nostalgia of leavers, but the europhilia of remainers has been equally responsible. We shouldn't be surprised to find that continental Europeans are no less "loyalist" in respect of the ideal of the EU than Britain's army of Jolyons, and that this entails a perceived duty of care to those in Northern Ireland who will continue to be legally as well as emotionally committed to the EU (I doubt Arlene Foster & co appreciate the irony of this).

To emphasise the point, protecting the rights of Irish passport holders who are natives of the North is not the same as guaranteeing the rights of EU citizens who have chosen to live in the UK but have not been naturalised. The latter can be addressed by the ceding of limited rights, which is fundamentally no different to the existing grant of rights to foreigners, such as the protection of property from arbitrary seizure by the state. Ironically, the obvious precedent here is the reciprocal rights agreed between the UK and Ireland, notably the Common Travel Area and the provisions of the 1949 Ireland Act. But these were rights that addressed citizens of the Republic as an exception within the UK. They did not recognise the exceptional status of citizens in the North who under the terms of the GFA chose to become Irish nationals and will thus remain citizens of the EU regardless of the UK's status. This right of nationality was always recognised by the Republic but the UK (unlike Ulster unionists) chose to downplay the associated claim to territorial sovereignty. When that claim was explicitly retired by referendum in 1998, the quid pro quo was the right of any native of the North to become a citizen of the South: the "recognition of both identities". This may well have only been achievable within the context of the European Union and the dismantling of the visible border.

The focus of the British debate on the status of Northern Ireland has centred on trade and the risk of recreating a "hard border". While this is clearly important, it means that the UK's political establishment has largely neglected the more emotional dimension of national identity and sovereignty, which ironically echoes the tactical error of the remain campaign in the run-up to the EU referendum in 2016. The EU27 have been clear from the outset that the onus is on the UK to propose solutions in respect of Northern Ireland. To date, this has not advanced beyond the sci-fi of a supposedly frictionless, high-tech border system, while the challenge that Brexit presents to the equal recognition of identities enshrined by the GFA (to which the EU considers itself a co-guarantor) has been ignored beyond anodynes. This has now led to Leo Varadkar floating the idea of a possible exceptional status for the North, which has predictably allowed David Davis to refuse to "compromise the integrity of the UK". In other words, frustration has got the better of the Republic, allowing Brexiteers to mount the high horse of sovereignty. That the UK has long been happy to compromise its constitutional and legal integrity in respect of the Channel Islands and the Isle of Man is another irony that escapes the government.

That the Irish have made this move (together with their subsequent blunt indication about being "stubborn") suggests a belief among the EU27 that the UK has no intention of presenting any sort of credible plan in respect of Northern Ireland, presumably in the hope that the issue can be parked while trade negotiations get underway. This looks naive, not to mention dismissive and patronising in a manner familiar to many Europeans from prior engagements. The Brexit ultras are still insisisting that the EU needs us more than we need them and that as a result the 27 will come to the table to agree a trade deal that benefits all parties. This goes beyond naive to delusional. The EU's objective is not to secure an improvement in trade terms for anyone but to preserve the benefits of continuing member states. This isn't that difficult to achieve in respect of 26 of those states, which is why the EU isn't rushing the negotiations - it knows it has the leverage of access to the Single Market (a British initiative, ironically) and specifically the City of London's passporting rights. The one area where the EU is vulnerable is the economic integration of the Republic with Northern Ireland, hence the preference for the latter to remain within the Customs Union and ideally the Single Market. Unless this is resolved, there is unlikely to be substantive movement on trade talks, even if that has negative consequences for the economy of the Republic and other EU states.

I've previously mentioned the confusion over the nature of sovereignty that marked the British debate in the run-up to the EU referendum, which largely arises from the peculiarities of the constitution of the United Kingdom. Ireland is an acute example of the problem, combining major concessions in external sovereignty (those reciprocal rights as much as the GFA) with a formal commitment to internal sovereignty (now brought blinking into the light of day by the Tory deal with the DUP) that does its best to ignore those concessions. The obvious contradictions could be finessed within the framework of the EU, but that cover will shortly disappear and there is plenty of evidence that the DUP intends to approach the negotiations as a zero-sum game: internal sovereignty must not only trump external sovereignty, but the one must flourish at the expense of the other. It has been clear for months that the DUP's insistence that there won't be a hard border is insincere at best and a deliberate tactic of obstruction at worst. Though it will cost it the support of some in the Protestant community, the party calculates that "all true unionists" will rally to the flag and thus buttress its support at a time when Sinn Fein has been inching ahead.

Brexit offers the DUP the prospect of unionist electoral consolidation (the UUP are on their last legs), a reaffirmation of British support for the preservation of the six counties as an inalienable component of the UK (which reverses the commitment to a potential united Ireland agreed under the GFA), and a clear dividing line of economic self-interest once a hard border reorients the economy further towards the mainland or (with a bit of luck) beyond the EU. In reality, consigning the UUP to history won't change the secular demographic drift of the North towards the South. I also expect the British commitment to the future of the province to be lukewarm at best. While the media loons are often dyed-in-the-wool unionists, many British leave voters consider Ulster to be foreign and would be happy to be shot of it (many remain voters have been reconciled to Irish unification, within the framework of the EU, for two decades). The reorientation of the economy is unlikely to be a success unless Britain thrives at a rate well in excess of the EU. Given the current indicators (the UK sluggish, the EU picking up) and the probability that uncertainty over Brexit will undermine near-term investment, this seems an unlikely outcome.

If Brexit founders on the issue of Northern Ireland then the ultras and the DUP will find common cause in blaming the EU27 generally and the Republic of Ireland specifically. A hard border will then become not merely a regrettable consequence but a political inevitability. This will almost certainly lead to a revival of militant Republicanism in the border areas. The DUP will cynically hope that this either splits the nationalist camp electorally or prompts the IRA into "disciplining" operations that can be used to taint Sinn Fein. As such, this is a return to the strategies of old, indicating the degree to which the DUP is trapped within the laager of its own historic mentality. Ironically, the party's temperamental unsuitability for government (its incompetence as much as its negativity) has been offset by its critical contribution to the preservation of a Tory administration at Westminster. The final irony is that Theresa May's decision to seek a "strong and stable" mandate has made her beholden to the DUP, which may turn out to be the one condition that precludes an even half-way tolerable Brexit.

Saturday, 4 November 2017

We've Been Here Before

We're a quarter of the way into the Premier League season and Arsenal find themselves in 5th, the position where they ended last season - their lowest finish since 1996 and the brief tenure of Bruce Rioch. This might appear rather ho-hum, but the club's oscillations have been anything other than predictable, which at least offers a sliver of hope ahead of our trip to the Etihad Stadium to challenge the runaway league leaders, Manchester City, whom we trail by 9 points. The pre-match focus is inevitably on the two sides attacking tridents - Sanchez, Lacazette and Ozil versus Sterling, Sané and Aguero (or possibly Jesus or Silva) - so I'm going to predict a 1-0 Arsenal win through an 89th minute Koscielny header. Recent matches between the two sides have tended to be close. The last six league games have seen three draws, two Arsenal wins and just the one City victory. When you add the FA Cup semi-final last season to the mix, there is no reason to dread the trip, but common sense (and that 9-point gap) suggests that City are a markedly stronger outift today than they have been for a while.

A poignant part of this weekend's build-up was the coincidental news that Santi Cazorla's long-term injury was a lot more serious than realised, and may yet prove to be career-ending. Having been the man-of-the-match as a deep-lying playmaker when we last won at the Etihad, in January 2015, Cazorla has taken on an almost mythical status among Arsenal fans as the missing piece of the midfield jigsaw. His absence certainly hasn't helped the development of his erstwhile sidekick Francis Coquelin, who produced a notably poor performance as the B team qualified for the knockout stage of the Europa League with an uninspired draw against Red Star Belgrade on Thursday. While the novelty of that competition has quickly worn off, there's realistic hope that we might progress further in the knockout rounds than we've managed in the Champions League of late. We're nothing if not an accomplished cup side now and the likelihood that we won't meet either Bayern Munich or Barcelona must be a plus. It would certainly be funny if we won the competition with a cavalier rush after the attritional approach that Mourinho's Manure adopted last year.

There are many similarities between City and Arsenal, from the employment of a more mobile three-pronged attack to the use of wing-backs (I suspect our acquisition of Kolasinac will prove more astute than City's purchase of Walker), though this may simply result in them cancelling out each other on Sunday. The game may well turn on defensive errors, which both teams are capable of, or an individual moment of skill. Both will want a quick goal so the early stages could be frenetic. Beyond the confines of the match, I suspect that the more Pep Guardiola encourages City to play fast and open, the more cautious and closed the other Manchester team will become. This is less because Jose Mourinho is negative, though he is, than because of his egotistical need to be different. At Real Madrid he was able to exploit the talents of a number of individuals at their peak to achieve this end, creating a team that bested Barcelona without looking remotely like the blaugrana (much as Simeone achieved with Atletico), but at United he is faced with a squad that has few good players at the optimum stage in their careers, namely in the 25-28 range, other than De Gea. They're on their way to a very good squad, but they need a couple of years and some better defenders.

Spurs remain every journalist's favourite team, as they have been since the 1960s. Not only do they have the greatest striker in the world (TM), but apparently drafting Harry Winks into the England squad will guarantee World Cup glory. My personal suspicion is that last season is as good as it is going to get for them. While Pochettino deserves the plaudits for his transformation of a mid-table team into title challengers, it's worth bearing in mind that his teams can only play in one way, which means they have a limited shelf-life at the top end of the table where reinvention is constant. Once the opposition are more familiar with Spurs' system and personnel, they will become easier to nullify. Manure's recent victory was notable less for Mourinho parking the bus or the absence of Harry Kane than for the predictability of the play. Beating an ageing Real Madrid doesn't suggest that they're about to discover a plan B, though it might suggest that Dele Alli is consciously auditioning for a move. The first North London derby, in a fortnight's time, is unlikely to be conclusive at this early stage of the season, but it may well say as much about Tottenham's limitations as Arsenal's stability (if Kolasinac thumps the winner, he will have achieved legend status in record time).

Chelsea and Liverpool continue to be entertaining in their different ways, and while I find it hard to believe that either will mount a serious title challenge, a late rush for the line isn't beyond the bounds of the possible. Antonio Conte might narrow his eyes, go hardcore disciplinarian and get some consistency back, or he might just give up and start planning a return to his family in Italy. Jurgen Klopp's hope of steadying the ship at Anfield appears as forlorn as ever, though this doesn't appear to bother the fans or the club hierarchy that much, both of whom seem to have given the manager a free pass because of his rueful grins (this won't last forever). If I had my way, I'd get the two clubs to organise an exchange. The touchline histrionics wouldn't be that different, but I suspect the Liverpool squad would appreciate a focus on defence while Chelski's players might respond more positively to "heavy metal football". Viewed in historical terms, this would actually be a reversion to both clubs traditions from the 60s and 70s, which would certainly be popular in the stands.

With 19 points from 10 league games, we're on course for our usual total somewhere in the 70s. We've had the habitual balls-up (Liverpool away) and the failures to turn up (Stoke and Watford away), while our home form has been immaculate. There's no way of telling how this is going to pan out, but somewhere between 3rd and 6th looks like the realistic target range, though it would only take a good winning run including victories over a couple of other top sides to put us on the brink of something better. I'm quietly optimistic because I don't think we've seen the best of this team yet, and while departures are likely at the end of the season if not before, that very fact (along with the predictability of next season under Wenger) might ease some of the anxiety that has affected the squad at times. Lacazette looks like a player who will get better, while an injury-free Ramsey looks like he might be on an upswing in his form. The defence may (fingers crossed) settle down and stop shipping goals so freely, while the freedom afforded Bellerin and Kolasinac is starting to pay dividends. If we can coax swansongs out of Sanchez and Ozil, we might still have a chance of further silverware. And if all else fails, we can always bring on Eddie Nketiah.