September 26, 2016
A weekend of insurrection
It was a weekend of anti-establishment insurrection. In Britain, Jeremy Corbyn was re-elected Labour leader with an even wider margin than last year. The Swiss Canton of Ticino voted in favour of a bill to discriminate against EU workers; and, over in the US, Donald Trump has caught up in the polls with Hillary Clinton on the eve of their first TV debate.
The return of Corbyn tells us a lot about what is going on in European politics right now. As the FT points out, his 61.8% victory underestimates the true scale of his support. Many people who signed to join Labour in support of Corbyn were not eligible to participate because Labour's National Executive Committee managed to discriminate against Corbyn supporters.
The scale of his victory against Owen Smith constitutes a massive defeat for the Blairite/Brownite wings of the party, which the press still calls moderate. But equally important, especially for us, has been the defeat of a candidate who made the promise of a second euro referendum the key plank of his campaign. This issue has not been talked about much in recent days, but we cannot see any candidate within the Labour or Conservative party now putting forward a credible back-to-the-EU path. The FT writes this morning that the moderates have decided not to separate and to create a new party, but to try to work from inside Labour, presumably in the hope that Corbyn will eventually self-destruct.
In his analysis of what happened, George Eaton makes an important observation: Smith had the backing of all the Labour grandees - Sadiq Khan, the London mayor, Kezia Dugdale, the Scottish Labour leader, Neil Kinnock, Ed Miliband and Tony Blair. One Smith ally is quoted as saying that it had been "like the Remain campaign and the Archbishop of Canterbury" - no one is listening to the grandees anymore.
We also noted an interesting comment by Richard Rose on Scotland - where we could see the next stage of insurrection. Given the low support for independence after the June 23 referendum, it has been assumed that Scotland would not go down this route. But this may be wrong. The Scottish first minister, Nicola Sturgeon, is preparing for a referendum, and is currently busy drumming up support. The longer Theresa May takes to invoke Art 50, the more time Sturgeon has. And, by the middle of next year, May's honeymoon will be over and the economic costs of Brexit may be clearer.
We note a number of commentaries in the British press on whether Switzerland could be a model for the UK. We always thought this to be a particularly silly idea, not least because the EU itself no longer supports messy bilateral agreements such as the one with Switzerland. The 58% vote by the canton of Ticino to support a curb on foreign - and especially Italian - workers will not make the political process any easier. The country had voted in favour of immigration curbs in 2014. The government is trying to implement the referendum result through a law that would favour Swiss workers over foreign ones, which the EU considers as discriminatory. The Renzi administration said that if Switzerland imposed those restriction, the EU would retaliate with curbs on Swiss trade - which we also think is very likely. At that point, we presume that there will be less of talk of a Swiss model in the UK as well.
And finally, Wolfgang Munchau has a column the four major lessons for Brexit for policymakers from established political parties. The first one is not to trust the polls, as pollsters find it hard to assess the impact of non-establishment politicians on traditional non-voters. When turnout is the decisive factor in an election, polls err. The second is not to double down. Voters have a reason to be unhappy. These concerns need to be acknowledged and addressed. The third is: do not insult the voters. And finally: do not try to scare them. Economic scare stories no longer work with people whose real incomes have fallen for decades. Munchau concludes that Brexit was a cautionary tale of how quickly established positions can crumble, and how the improbable becomes the inevitable.