Tag Archive: migration

It´s the emotions, stupid! or the politics of emotions

James Carville will be remembered as the strategist during Bill Clinton’s 1992 presidential campaign that gave us what has become the political mantra: “It´s the economy, stupid!” as a reminder of what to focus on. But a generation later, as we enter a new political phase, facts (e.g. the unemployment rate, GDP growth, exports, contribution of immigration, etc.) are no longer so important. Furthermore, expertise, evidence, independent analysis, etc. do not seem to carry as much weight as subjective feelings or emotions. This is the politics of emotions and perhaps it is time for “It´s the emotions, stupid!” to enter the political lexicon.

Post-factual politics / politics of emotions

The Brexit Referendum was the first serious and persistent post-factual political campaign in Britain. This was not necessarily something new but rather a culmination of a process which has been evolving for some time. It was already at an advanced stage of development during the Scottish referendum in 2015, where the emphasis of the campaign was very much on tapping one particular emotion: fear. The campaign was unrelenting in its focus on the negative implications of Scotland leaving the UK.

The fear-based campaign, mainly by those seeking to retain the status quo, did not go entirely according to plan. Despite the British government milking the fear factor for all it was worth, it was not sufficient to persuade the Scottish electorate to remain in the Union. The polls were fairly consistent in showing that despite the unrelenting emphasis on the negative, the majority of adults in Scotland were still tending towards voting in favour of seceding from the UK. It was only in the last few days of the campaign that a shift towards remaining part of the UK occurred, coinciding with the British government changing tack and unashamedly bribing the voters with all manner of concessions. Even so, it just about managed to gain a majority for the Union to remain intact. The highest recorded turnout (85%) in the UK resulted in a narrow vote (55.3%) against Scottish independence.

The recent EU referendum Remain campaign, led by Mr David Cameron and his then heir apparent, Mr David Osborne, clearly failed to learn the lessons of that narrow, last-minute turnaround in the campaign. The key strategy devised by the Remain campaign leading to the ballot on the 23 June 2016 was more of the same, otherwise known as “Project Fear”. All the possible negatives, especially the economic ones, of voting to leave the EU were magnified and pushed for all they were worth by the Remain campaign. Vast amounts of data analysis and facts were deployed with the tradition emphasis on “it´s the economy, stupid!” These arguments were reinforced up by various statesmen, such as Barack Obama, as well as reputable institutions such as the OECD, World Bank, IMF, economists, etc.

George Osborne, the then Chancellor of the Exchequer (Minister of Finance) was tasked with carrying out the economic analysing and publicising the Treasury´s assessment of the implications of Brexit. The basic conclusion was that Brexit would tip the economy into recession, 500,000+ people would lose their jobs and wages would decline, as would house prices. In 15 years, the economy would be 6.2% smaller, resulting in a loss of £4,300 for every household. The expectation was that this would put the fear of god in people and deliver a government victory.

It was plausible, it was fact-based and it preyed on people´s worst economic fears. No effort was made at all to make a case for remaining in the EU; I cannot remember a single discussion or comment or a positive nature that was ever pushed by the Remain campaign. The result is well-known: 52% voted to leave, 48% voted to remain. It was undoubtedly the single most momentous political result of recent times and will affect Britain and the rest of the EU for the foreseeable future.

The lessons of the Scottish Referendum, combined with the post-factual approaches deployed by Donald Trump across the Big Pond, were clearly analysed much more carefully by the Leave Campaign than by the Remainers. They too decided to focus on people´s fears but from a very different angle. It was not based on sophisticated econometric models that almost no one understands to magic a 6.2% reduction in GDP and thus a loss of £4,300 in the next 15 years. The Brexiters’ approach was very simple – it was exaggerated, it was not fact-based and it pandered directly to people´s fears and concerns today. If Remain’s focus was characterised as “Project Fear”, the Brexiters´ approach can be summed up as “Project Lies”. It was underpinned by a determination to dismiss and discredit all government and/or independent analyses, facts and expertise as being somehow biased because they had to be benefiting from EU funds.

The Brexiters concentrated primarily but not exclusively on the fears of the non-working, working and lower middle classes in the UK. Fears of immigrants (from the EU, though they account for less than 50% of all immigration), fears of job losses (though the UK has almost full employment – 4.9%) and stagnating wages (though almost all studies suggest otherwise), fear of losing control over our lives (i.e. the EU / European Parliament / European Commission making laws and regulations instead of the UK Parliament), all combined with a hefty dose of resentment towards the elites (taking more than their fair share of the economic pie). This was all combined with arguments about the NHS (an exaggerated £350m-a-week currently going to the EU which would be ploughed into the NHS instead – not a penny has been redirected so far), the housing crisis (blamed on EU immigrants and wealthy foreigners, though Britain has failed to build adequate housing for many decades), etc.

Emotions / fears / concerns galore

History has shown over and again, that strong emotions / fears / concerns can be exploited by those who offer change in the form of simple but evocative messages; Donald Trump has demonstrated the power of simplistic but populist messages, using Twitter, regardless of grammar or facts. The reason why these emotion-laden messages are so powerful is that they are not at all abstract (such as the Treasury / OECD / IMF / World Bank models) but embedded in people´s biases and/or experiences.

There is plenty of evidence that for decades the non-working, working and lower middle classes in many Western countries have been lost economic ground, while the elites have prospered from the ongoing forces of globalisation, greatly accentuated recently by the austerity drives (see below). Inequality has grown, wages have stagnated, tax policies have favoured the better off, while those dependent on key elements of the welfare state, including the middle classes (child benefit, tax credit, etc.), have systematically lost out as the impact of austerity has spread out. This has not been helped by the privately educated/ elites controlling successive governments, yet failing to recognise or deal with the problems faced by normal individuals and their families.

Referendums may work quite well for specific issues, such as whether to allow abortion or same sex-marriage but they are not at all geared to answering complex issues, such as whether to remain in the EU in the form or a simple “yes / no” answer. So when the opportunity arose to give the government / elites a bloody nose, it was obviously just too good an opportunity to pass-up, despite (or partly because of) the messages being put out by Project Fear.

Having gone through with the referendum, the new Conservative government cannot simply backtrack from the outcome of the vote. Doing so would fatally undermine democracy in Britain and unleash potentially far worse than what we are currently witnessing in the form of the current wave of populism. This populism seeks to take advantage of the fact that many people are no longer interested in facts and figures or weighing-up the pros and cons of different arguments. They are much more minded to follow their instincts or biases, as vented by people such as Donald Trump, Nigel Farage, Marie le Pen and quite a few others in Italy, Poland, Hungary, etc.

Raw emotions as politics (according to Home Office figures, 1,000 Syrian refugees were resettled under the Vulnerable Persons Relocation scheme in 2015. 1+ million refugees were accepted by Germany)

This strain of post-factual politics of emotions is not predicated on the traditional political dividing lines of left (Socialism/Social Democracy) or right (Conservatism/Republicanism) – it is cross-cutting in nature. The trigger issues are broad and generic yet connected with emotional impulses strong enough to transcend traditional party lines and similar allegiances. This was evident in the Brexit campaign, it was seen in the US Presidential election and strains of it are evident in France and other European countries. It is here to stay.

The emotive themes of the post-factual politics of fear are fairly common, regardless of which country is in question. This includes fear of powerful elites (e.g. Brussels/Washington D.C.), foreigners (EU / Mexicans, refugees, etc.), globalisation (trade deals, China, etc.), terrorism (Al Qaida, IS, etc.), cultural change (Islam, immigrants, refugees, etc.), etc.

No amount of logic, analysis or expertise can counteract the emotional triggers that many people have to such themes. A clear example of this was the deliberate dismissal of “experts” during the Brexit debates. Michael Gove made the situation crystal clear whenever confronted with facts/figures/experts that did not align with the case he was making for Brexit with the following: “People in this country have had enough of experts.” Truth be told, that particular soundbite had the ring of truth about it. People would much rather trust their own experiences / emotions / prejudices than listen to what experts have to say, unless those views conform with their world view and preferably in easily digestible messages (not exactly something that experts excel at).

The main themes include the following:

  • Control of own borders
  • European Union
  • Patriotism/Nationalism
  • Immigration
  • Refugees/asylum
  • Muslim culture
  • Terrorism
  • Trade / Globalisation
  • Elitism / 1%
  • Lower real incomes.

Other themes could have been added to the list, such as same-sex marriage, transgender, abortion, global warming, etc. which are all highly emotive, but the list illustrates the general issues. In the case of Donald Trump, a whole new set of additional issues could have been added such as racism, xenophobia, bigotry, misogyny, narcissism, etc. One can only hope that Trump´s particular strain of post-factual populism is not the future of politics, though I fear it already is.

Variations on a theme

Almost all the themes are negative in nature; they instill anxieties and fears in people. The only exception is nationalism / patriotism which, generally leads to positive feelings such as pride in one´s country. History is replete with examples of how easily both positive and negative feelings can be manipulated, misused and abused. Patriotism is particularly strong in the US, with its melting pot but less so in Britain, with its former empire. The Germans, the culprits of two World Wars, are rather more interested in forging a European identity, though this is has been slowly changing in recent times.

There are clearly variations. The European Union (EU) does not figure large in people´s perceptions in the USA but is something that the UK has been in two minds about since the formation of the EEC in 1958: there has always been an ambivalent relationship involved. The opposite applies to Germany: it has traditionally had an unquestioning stance to the EU where traditionally the French have made the strategic decisions (Marie le Pen would call for a referendum to pull France out of both the EU and the Euro) and the Germans have paid for them. This started changing during Gerhard Schröder´s Chancellorship and accelerated with the Euro crisis, and the advent of the Alternative für Deutschland (AfD), which initially wanted out of the Euro but under new leadership has evolved into an anti-immigrant/refugee/Islam party and could eventually become anti-EU.

The perception in Germany was initially that it was paying for the economic and other economic mistakes of other EU countries, especially the Mediterranean ones. This evolved into concern over the dangers to the Euro risks for Germany itself, followed by a blistering critique of the European Central Bank´s policy of near zero interest rates and quantitative easing. The country is also experiencing angst about its capacity to absorb over 1 million mostly Muslim young men that the other EU countries (with the exception of Austria and Sweden) were completely unwilling to share. More recently, this has transmuted into concern about terrorism and attacks on German soil.

A clear trend is evident: the politics of emotions is tapping into fears and concerns about immigration generally and refugees and asylum seekers specifically. The key immigrants in the USA are the Mexicans, something that the US has a long history of, not all of it proud, such as the forcible deportation of 500,000 – 2 million people during 1929 to 1936. Trump milked this theme to the maximum extent possible with his talk of building a “big beautiful wall”, of making Mexico pay for it and of getting rid of illegal immigrants from day one of his Presidency. None of this was based on fact but it hardly dented his popularity among large segments of the population, including many of Hispanic descent.

The referendum debate on immigration in the UK has verged on the xenophobic and racist, despite the fact that EU immigration involves mostly white European migrants. Immigration was and remains the most vivid expression of people´s concerns. In this respect, Germany is different to other nations by virtue of its role in the past in respect to groups such as Jews, Roma, disabled, etc. For this reason, there is no indication at present of Germany reacting badly to EU migration (but see discussion below about recent influx of refugees), though it is happening on an unprecedented scale which dwarfs the immigration in countries such as the UK (1,13 million in 2015). This may change in time, though the ageing population structure of the country is a countervailing factor.

The ire of the Germans, particularly evident during 2015, was focused on the implications of Germany absorbing it 1.1 million asylum seekers and refugees and the still relatively large numbers expected in future (the forecast is 300,000 in 2016). It all started well, with Germans going out of their way to be welcoming but quickly deteriorated as the cultural and economic strains became apparent. To be fair, the wave of intense concern, particularly notable during the New Year period, has waned as the sheer numbers being received by the country have abated in 2016. A blip was still evident during the summer due to various terrorist and other incidents.

In the UK, known for its open racism during the 1950s to 1970s (recall private landlord adverts: No Blacks, No Dogs, No Irish), recent anger towards EU migration started initially with a focus on the Poles and then extend to the Romanians (especially Roma) and pretty much all EU immigrants have implicitly been targeted during and since the referendum in June 2016. Who knows if and when this feeling may be extended to all other migrants, regardless of origin or the length of time they have lived and worked in the UK. The populists of the post-factual era are sure to milk this particular negative sentiment, especially during the drawn-out period of Brexit negotiations that will last at least until 2019. This is all the more likely because the British government still has no plan for Brexit and the other EU nations are highly unlikely to offer Britain a good Brexit deal. The risk of other countries following suit is just too great for this to happen.

Pressing the sore spot

The next two themes are particularly emotive, namely fear of terrorism and the influence on Muslim culture on Western societies. This is a particularly rich vein for post-factual politics, since this is probably where the most intense fears reside. I have shown that people´s perception of the size of the Muslim population is totally out of proportion compared with the reality.  The following illustrates the data for the three countries in question:

Country        Muslim Population % of Population % 2030
Germany 4.1 million 5% 7.1%
UK 2.8 million 4.6% 8.2%
USA 2,6 million 0.8% 1.7%

 

These data refer to 2010 as I could not find more recent comparable information for the three countries. Since 2015, there would have been an increase of approximately 1.1 million Muslims in Germany alone (i.e. 6.3% of the population) and this will continue, albeit at a lower rare. Overall, the Muslim share of EU´s total population was 5% in 2010 and is expected to increase to 8% by 2030. The fact that the Muslim population remains relatively small seems to cut little ice with many people, especially the older age groups. There is intense concern about the possible loss of cultural identity, combined with strong doubts about the willingness of the Muslim communities to integrate. This is and will continue to be a powerful emotion to tap into; many are intent on exploiting it.

Fear of terrorist attacks is at least as powerful, if not more so. The reality is that the chances of dying in a terrorist attack while on a plane is 1 in 25 million and the overall average chances of dying in any kind of terrorist attack worldwide is 1 in 9.3 million. There were at least 155 Americans killed by police officers in the United States in 2011, which means that people are about 10 times more likely to be killed by a law enforcement officer than by a terrorist. Worldwide, people are 517 times more likely to be murdered, 500 times more likely to die in a car accident, 41 times more likely to die in natural disasters and 1.8 million times by more likely to die of heart disease that being killed in a terrorist attack. However, none of this matters because negative emotions Trump facts (pun intended) – every time.

But I am falling again into the trap of talking about data / statistics / evidence in the post-factual political age.

The combination of fear of cultural change as a result of the perceived “Islamification” of Europe and the clear association with terrorism is such a potent mix in people´s minds and there is little antidote to it, other than public education. Unfortunately, not only is this imperfect, it also takes a hell of a long time to permeate minds and influence public perceptions, time which the proponents of post-factual politics will put to use in the pursuit of a simplistic but emotionally charged agenda.

The last set of themes listed above concern an amalgam of globalisation/trade deals/deteriorating incomes/elitism. In this particular case, I can relate to the panoply of emotional pulls what populists in the post-factual era are latching on to.

There is increasing evidence produced by academics such as Thomas Pikkety, who argues that the rate of capital return in developed countries is persistently greater than the rate of economic growth and that this not only causes wealth inequality, but that inequality will also increase in the future unless redistribution occurs through a progressive global tax on wealth.

This is intensifying the “them and us” divide and connects with a range of themes relating to the stresses and strains caused by international trade and globalisation, combined with growing social polarisation / inequality. This is the discourse of the 1% / elites taking a disproportionate bite off the economic pie compared with the non-working/working population (globally speaking, anyone with an income of EUR 30,000 p.a. belongs to the 1%). The lower and middle-income groups have also experienced the brunt of the effects of austerity, combined with the increasing job insecurity, resulting in deteriorating real incomes and state benefits. This led to a pronounced backlash against the elites, including the political and financial professions. These trends more than compensate for the countervailing influence of the remarkably low levels of unemployment (4.9% in USA/UK and 6.1% in Germany, September 2016) which pertain today.

What of the future?

So what does the post-factual, feeling based politics mean for Britain, Germany, Europe and indeed the rest of the world?

It means that are all in for a roller coaster political ride for the foreseeable future.

And it also means that the democracies discussed in this post are in deep trouble, unless the global economy not only starts growing strongly soon, but the resulting economic benefits are much more equally distributed in the future.

But the chances of both happening any time soon are about as high as the likelihood of being caught in a terrorist attack.

 


Britain’s Productivity Puzzle and Brexit

Britain has a huge challenge. In the fractious lead-up to the Brexit referendum on the 23rd of June 2016, almost everything imaginable is being use for or against the European Union (EU), but on this occasion I am not referring to the EU challenge. I am alluding to the title of this post, namely the productivity of the UK, as this has direct implications for economic growth, wages and ultimately living standards. Given its importance, it should be the No 1 issue in the debate about the future of the UK, except that it is barely touched upon. This is a mistake.

The Theory

Productivity refers to how efficiently inputs (i.e. capital and labour) are used to produce outputs (i.e. goods and services), the best measure of productivity being output per hour. In theory productivity matters a good deal: Britain’s capacity to raise its standards of living over time depends almost entirely on its ability to increase its output per worker.

Productivity is also crucial in determining the long-term growth rates of the economy; stronger productivity growth leads directly to faster GDP growth. If this happens, tax revenues increase and budget deficits decrease. Governments have more to spend on public services such as health, housing, school places, GP / hospital capacity, infrastructure, etc. all of which are at the centre of the Brexit discussion. Naturally, the reverse also holds true: with lower productivity. And if Britain’s productivity is lower than its competitors, such as other EU nations, its relative standard of living decreases over time.

Productivity matters a great deal. The Nobel Prize winning economist Paul Krugman is reported to have said that: “Productivity isn’t everything, but it’s nearly everything”. What is the situation in Britain?

Productivity Puzzle

British labour productivity has traditionally grown at around 2% per year since the 1970s. That is not at all bad but the point is that since the global recession began in 2007, Britain´s productivity stagnated and continues to do so almost a decade later. Official reports stress that: “… such a prolonged period of essentially flat productivity is unprecedented in the post-war era”. The Chart below illustrates the trend.

Chart UK Productivity and GDP

Although economic growth has resumed quite strongly since 2013, this is mainly the result of an increase in the total number of hours worked in the UK, rather than rising productivity. What this means is that Britons are working harder to produce the same amount of goods and services than was the case prior to 2007, and much harder than if productivity growth had continued at its 2% annual trend rate. The feeble productivity level leads directly to the stagnation in UK wages and living standards. This is already having significant effects in terms of the on-going package of austerity in Britain, which is being felt across the whole country and is, if anything intensifying. People´s economic pain is much more a consequence of low productivity than of the costs of the EU or the freedom of movement of people (EU immigration).

If Britain’s productivity does not bounce up to the 2% trend, the implications for the economy, public finances and future living standards will be even more severe than is already the case.

International comparisons illustrate just why this is the No. 1 challenge.

Chart International Productivity Comparison

Based on real GDP per hour worked in 2014, the UK was ranked sixth among the Group of Seven (G7) countries, with Germany top and Japan bottom (the Chart below illustrates the issue). UK productivity was 18 percentage points below the average of the other G7 countries, the widest productivity gap since at least 1991. To illustrate the point further, it was 10 percentage points lower than Italy (which is hard for Britons to swallow), 30 percentage points lower than Italy and 36 percentage points lower than Germany. On the basis of output per worker, UK productivity was 19 percentage points below the average for the rest of the G7 in 2014.

The resumed economic growth and low unemployment rate combined with stagnant productivity has led people to talk of the UK’s “productivity puzzle”, as Britain loses ground to its major competitors.

Pumping-up Productivity: Brexit implications

Unlike Eurozone economies, Britain has its own currency and is fully in charge of its monetary policy. Blaming the EU and European immigrants for all its ills is far too easy and convenient. Instead, Britons should take a good, hard look at their own economy and what is required in order to increase productivity not just back to 2%, but ideally above this threshold.

What kinds of solutions are available to Britain in order for it to rise to the productivity challenge? The good news is that there is broad agreement about the main policy options. The bad news is that none of them are quick fixes and most of them will almost certainly not be improved by leaving the EU. The possible solutions include the following:

  • Raise the skills and qualifications of the labour force: the education system has to produce a better educated labour force and employers need to invest more in skills via training, apprenticeships, etc. These are known to increase labour productivity, however, the evidence is that this is not happening sufficiently. This may be part of the reason why Britain has been attracting ready-made, educated and trained migrants from the EU and non-EU countries (academia, R&D, industry, health service, financial sector, etc.). It is doubtful that the UK can immediately raise skills and qualifications to substitute what comes through the EU (the EU labour force is more highly educated in terms of average levels of human capital), thus productivity levels are unlikely to be enhanced by Brexit in the short to medium term. It takes time, investment and planning to systematically build-up the human capital base.
  • Increase investment in technology: the adoption of new technology is a key factor in improving productivity, as illustrated by the advent of computers and the internet in the recent past. A strong focus on generation of innovative products, services and processes would translate into high productivity levels. However, exiting the EU may either slow down this process or increase the investment cost. This is not just because of the potential loss of international collaborative innovation and R&D networks across European countries, which the EU funds. Brexit would also result in uncertainty about trade in the short-term and almost certainly less favourable trade agreements with the remaining EU trade block of 27 countries. This is likely to translate into increased import and export costs for Britain, including of equipment and technology. By opting out of the EU and its 50+ trade agreements, less favourable trade agreements will eventually be negotiated with 120+ countries. If investment in technology becomes more costly, firms may delay or avoid it, so it is unclear if the UK’s productivity levels will be enhanced by Brexit.
  • Increase substitution of capital for labour: if labour becomes cheaper and more freely available, firms may have fewer incentives to invest and may choose to use labour intensive methods, rather than capital-intensive ones. This would result in lower levels of productivity, though jobs and incomes would be maintained, at least for a certain period of time. A surge in productivity would require a reverse in the trend of underinvestment in plant and machinery, as well as physical infrastructure. If Brexit means much less availability and/or more expensive skilled capital, this could spur greater levels of substitution of capital for labour, thus stimulating productivity. At the same time, this might have implications for employment.
  • Improve the morale of workers: during recessions or periods of industrial unrest and low worker morale, productivity tends to fall. By contrast, if workers are motivated and happy, productivity is likely to be higher. The morale of employees can be affected by numerous variables, including but not only wages, bonuses and other monetary incentives. It is also affected by issues such as state of industrial relations, sense of having a stake in the company and enjoyment of the job. These are specific to each nation and enterprise. But to the extent that morale is affected by other factors such as nature of the labour contracts, hours worked, leave of various sorts, etc. Brexit is unlikely to affect morale positively, since many of those factors are influenced by EU rules and regulations (see below) affecting all 28 countries.
  • Minimise rules and regulations: regulations should not impose excessive costs on enterprises and a balance has to be struck between say being able to get rid of poor or disruptive employees and having lax labour market regulations which exploit employees and results in high turnover and demotivation. EU regulations affect health and safety standards, discrimination at work, hours worked, paternity/maternity periods, minimum breaks, minimum paid holiday periods, etc. Brexit might well be good for British employers if regulations are scrapped and labour market flexibility is increased, but would almost certainly come at the expense of employees. Many other regulations are the solely the purview of the British government. Britain has already spawned zero hour contracts which maximise employer flexibility over almost a million employees. It widely acknowledged that Britain already has one of the most deregulated business environments around – some have argued that there is excessive deregulation, for example in the financial sector. Further deregulation would be possible upon Brexit, but it is questionable whether this would necessarily be desirable. It might undermine labour gains, for example, if rules and regulations concerning discrimination, maximum work hours, health and safety, etc. are undermined. These would reduce job security, employer costs and possibly spur productivity, but much would come at the expense of employees.
  • Maximise capacity utilisation: during economic booms, firms tend to squeeze more output out of existing capacity by encouraging people to work overtime, thus increasing labour productivity. In recessions, they may hold on to workers, rather than releasing them even if they are working below capacity, resulting in labour productivity falls. There is some evidence of “labour hoarding” (firms cutting output but keeping labour in reserve for the recovery), which is part of the reason for the productivity puzzle previously discussed. It seems unlikely that leaving the EU will increase capacity utilisation. Britain´s trade balance is already poor, it exports 44% of its goods and services to the EU and Brexit would mean negotiating new, less favourable terms with the other 27 countries of the EU and 120+ countries that the EU has trade agreements with. Rather than maximising capacity utilisation, it is likely that the reverse will happen upon Brexit (less favourable trade agreements, more risk, higher costs, etc.), with negative implications for employment, wages and tax revenue.

The above does not represent a complete list of possible solutions to the British productivity puzzle. Other factors could be considered, such as seeking to rebalance the economy away from services (about 75% of GDP) towards manufacturing (about 10% of GDP).

In 2015, the Government published its productivity plan (Fixing the foundations: Creating a more prosperous nation), covering issues such as improve transport and digital infrastructure, increase investment, enhance workforce skills, build more houses, move people off welfare and into work, encourage exports, rebalance economy away from London, etc. The 15 point plan is illustrated in the Chart below.

Chart 15 Point Productivity Plan

The productivity plan seems worthwhile implementing but none of it is a quick fix to Britain´s fundamental problem and, on balance, Brexit would not unleash an immediate gain in productivity.

To conclude, the cause of austerity, low productivity and stagnating wages in the UK are first and foremost to do with the UK, not the EU or Europe more generally. The number one priority for the country is to raise the productivity levels, regardless of whether Britain remains in the EU or not. If this happens, the wages, the public expenditure and the standards of living take care of themselves. But it is hard to see just how the UK’s productivity puzzle could be eased by Brexit.

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


The Big Brexit Risk? It’s the trade, stupid!

When I have discussions with my fellow Britons about the Britain, the European Union (EU) and Brexit, sooner or later, I hear a complaint that runs along the following lines:

“We thought we were joining for trade reasons, but it has evolved into something completely different. We did not agree to that.”

The implication of course is that in making the decision to join in the mid-1970s, the British public had somehow misled about the true nature of what was then the European Economic Community (EEC) and is now the European Union (EU). There is also a strong sense that the main reason for joining, trade and commerce, has become less important over time.

The simple answer is that all institutions, the EU included, must evolve or become irrelevant. This applies to NATO, the UN and this certainly applies to the EU. Still, there is a sense of Britons having being “sold a pig in a poke”. That somehow they got into something without knowing its true nature. This sense of Britons having got in bed with an EEC trading relationship in 1973 and waking up in 2016 with the EU, with all its imperfections, is important to the outcome of the EU referendum to be held in Britain on the 23 June 2016.

Therefore, this post delves into history to examine the debates that were held in Britain in the mid-1970s and to unpack whether joining the EU was just about trade. It also addresses the extent to which trade remains important to any decision about whether to remain in the EU or not.

Brexit Referendums I and II

To put it bluntly, the UK joined the European Economic Community (EEC) in 1973 without the British voter being asked. The Labour Party’s general election manifesto of October 1974 committed Labour to allow Britons the opportunity to decide whether Britain should remain in the Common Market on renegotiated terms or leave it entirely. In 1975, the first referendum covering the whole of Britain was held. One could say that 2 years after joining the EEC, the first Brexit referendum took place. The result was clear-cut: 67% of voters supported the campaign to stay in the EEC.

If the clear result was meant to put an end the debate about Britain in the EU, it failed. On 23 June 2016, we shall have the second Brexit debate, 43 years after joining the EEC. You can be sure that it will still not end the debate either, regardless of which way the vote goes.

A reading of what took place then shows that commerce/trade was a focus of the debate on the pros and cons of remaining in the EEC or, put another way, an evident desire to ensure that Britain´s relative economic decline compared with its EEC neighbours was put to an end. It is not unusual for a particular topic to predominate in elections and referendums. But it would not be correct to suggest that commerce/trade was the only topic of discussion at the time or indeed that the political nature of the EU project was not clear to Britons at the time. Labour figures of the day, such as Simon Jenkins, Michael Foot and Barbara Castle, as well as Enoch Powell on the Conservative side engaged in a debate about the possible effects on British sovereignty, among other issues. The deep fissures that were created in the Conservative Party (and to some degree the Labour Party) were not the result of a simply a debate on the commercial/trade pros and cons of Brexit. At the core of the heated difference of opinion was a possible loss of sovereignty and Britain´s place in the world, be it at the side of our European neighbours or facing towards the Anglophone / Commonwealth world. Today, there is an equally fractious debate where immigration is the leitmotif, connected with a discourse about health tourism, benefit tourism, access to housing, trade prospects and loss of sovereignty to Brussels.

The polling in the mid-1970s illustrated voters’ wider concerns, including defence, Britain’s voice, avoiding future wars, etc., though trade/commerce/economy was undoubtedly a major issue. By then, Britain had lost the empire and replaced it with the Commonwealth. The “special relationship” with the USA was stronger, not least because the Cold War was still raging. The Anglosphere relations in general (USA, Australia, New Zealand, Canada, etc.) was in much better shape than today.

And yet, in 1973 the British Government under the Conservative Party still decided that it was in UK’s best interests to join the EEC after a decade of persistently trying to join the club and being vetoed by the French under Charles de Gaulle on two separate occasions. This was no spur of the moment decision on the part of the British government, but a clear recognition that it was in the country’s long term interest to do so. On 5 June 1975, a clear majority (over 67% of voters) reinforced the situation by voting to remain in the EEC, rather than going it alone again.

Those decisions were made at a time when Britain was much more dominant in global trade, prior to the rise of China and India, and before the dawn of full on globalisation. If it was the right decision then, there is no obvious reason for presuming that Britain would be better off on its own today, when the world is so much more interconnected. This is especially so because regional trade aggregations are increasingly common so as to maximise negotiation power, rather than bilateral arrangements. Examples of such regional trade blocs, apart from the EU itself, include the North American Free Trade Agreement (NAFTA), the Association of Southeast Asian Nations (ASEAN), perhaps soon the Free Trade Area of the Americas (FTAA), etc.

I do not subscribe to the view that a future outside the EU will be bleak for Britain. This argument is overdone by the Remain campaign and backfires because Britons do not believe it and resent those seeing to make use of the fear factor to “bounce” them into voting accordingly. Britain has an amazing economy, with dense infrastructure and packed with exceptional human capital. This is a fantastic foundation for future competitiveness. Britain is and will remain a key international economy and will continue to be a wealthy nation with quality of life and standards of living for the foreseeable future, regardless of the Brexit outcome.

So the real issue is: will Brexit help or hinder Britain´s future prosperity, since trade will play a key role in its future development.

EU and UK after Brexit: lose — lose

The EU area is the largest trade block by a considerable margin. Although trade patterns do shift over time, the simple fact is that the EU is by far the UK´s largest market: around 44% of exports went to the EU in 2014. British firms sold around £500 billion worth of goods and services to foreign buyers, according to the Office for National Statistics, and almost half (£230 billion) of those earnings came from the EU. The EU´s dominant role in the UK trade position is hardly surprising: our 27 EU trading partners are geographically close, there are no tariffs, close proximity means low transportation cost, etc. To reinforce the point, exports to the faster growing BRICS countries (Brazil, Russia, India, China, and South Africa) accounted for only 10% of exports in 2014 according to Full Fact.

Furthermore, Britain´s trade balance is directly connected with the 50 trade agreements which the EU has signed with approximately 120 countries around the world. It is hard to foresee exactly what will happen immediately upon Brexit. What is clear for starters though is that Britain will have to negotiate a new trade deal with the 27 countries of the EU. It is wishful thinking to imagine that the EU will be willing to agree a trade agreement with the UK on a comparable basis to what pertains now. Furthermore, a trade agreement similar to the one that applies to the European Economic Area (EEA) is also extremely unlikely, since this would require Britain to accept the EU’s freedom of movement of people, paying into the EU budget and other concessions which would be impossible to justify. Such concessions would cause the British public (and everyone else) to question why they were asked to vote for Brexit in the first place.

Whatever trade agreement is reached with the EU, you can be certain that it will not be as advantageous to Britain as the above two scenarios (EU or EEA). It is also certain that the trade negotiations will take years to reach a conclusion — they always do. Moreover, it is unavoidable that the costs of export will increase for British firms. Several years to negotiation means uncertainty which in turn increases risk and thus raises the costs for British firms. This third scenario cannot possibly be an advantage to the British economy and the same applies to the remainder of the EU: Brexit will be a “lose — lose” scenario. Both the EU and Britain itself will lose in the short-term. The medium to long-term effect could go either way, including a continuation of the “lose — lose” scenario. This cannot possibly be good for the UK’s economy. After all, the Britain´s trade balance has been in deficit more or less permanently since 1990. This will only make things worse since the EU accounts for 44% of the current exports.

The Anglophone Zone: hopes dashed

The Brexiteers are well aware that in the short-term both Britain and the EU will lose out. This is precisely the reason why they have emphasised that it is in the EU´s own interest to negotiate a good deal with Britain. Perhaps, but I would not hold my breath on that account. What sounds too good to be true, usually is. There will be a price to pay for Britain undermining the “European project”. There is such a thing as vindictiveness in human nature and the leaders of the EU nation states are only too human.

Whatever they may say in public, the Brexiteers are also aware of this, which is why their pin their main hopes and expectations on other countries, not least the key Anglophone ones, to step into the breech and sign-up bilateral trade agreements with Britain.

So it came as a bitter blow to them when Barack Obama came to the UK and highlighted a few points, including:

  • The priority for the USA is the EU as it covers 28 countries and 500+ million people;
  • Britain will need to go to the “back of the queue” for a trade agreement;
  • It will take years for a trade agreement to be negotiated with Britain;
  • Being part of the EU does not moderate British influence in the world, it magnifies it.

With this, the Brexiteer Emperors (Boris Johnston, Michael Gove, Iain Duncan Smith, Nigel Farage, etc.) were left without any trade clothes. They went ballistic in their attempts to discredit the President´s statement of fact, for that is exactly what it is. Any country would prioritize trade negotiation with the largest trade block in the world over a nation of 65 million people. The Brexiteers´ fragile trade hopes were dashed and predictably there was an unprecedented outpouring of vitriol, verging on racism, against the outgoing President of the USA, the country that Britain stresses it has a long-standing “special relationship” with. But obviously this does not extend to trade matters.

Should Brexit occur in June 2016, Britain would need to negotiate some or all of the EU´s 50 trade agreements with 120 countries, not counting the EU and EEA countries, if it expects to continue trading with them on a similar basis to today. Since it is impossible to negotiate all of those trade agreements in parallel, it will take decades to go through the trade negotiations just to end-up with the same situation as is currently the case within the EU. The UK does not have a Department of Trade but you rest assured that not only will one be created immediately upon Brexit, since the current trade competences lie with the EU. The institutional needs would arise in other areas where the EU currently has competences. The future Department of Trade will be large, it will be costly and it will be under tremendous pressure to get bilateral trade agreements done, and sharpish. When pressure exists to get things done quickly, bad deals are struck. Ask any salesman.

There is no evidence that either the Anglosphere (USA, India, Australia, Canada, New Zealand, South Africa, etc.) or other major countries such as China, Japan, Brazil, etc. will be willing to negotiate trade deals with Britain as quickly or as favourably as with the EU: the size and potential EU market is so much larger. Britain only constitutes 13% of the EU´s population but will be under pressure from enterprises to negotiate the new trade deals, pronto. Consequently, there is absolutely no reason for the future bilateral trade agreements to be as generous to the UK as to the regional block of EU countries.

If we accept the assumption that delays, uncertainty and risk add to the costs to doing business, then British exporting firms will experience higher costs for the years and/or decades that the negotiation process will last in replacing the existing EU trade agreements. The firms´ higher cost base will affect the level of British exports, probably negatively, though the magnitude and duration are not possible to predict without economic modelling.

The likely post-Brexit trade scenario does not look rosy for Britain… but the bad news is that it is probably the best case scenario.

A worse scenario is that the EU will not rush and/or wish to punish the UK for Brexit. The worst case scenario though is that, in addition, some of the 120+ countries covered by the EU agreements that Britain is currently part of, may close their markets to British enterprises until bilateral trade agreements are negotiated and signed. If this were to happen to any extent, British firms will automatically lose market share. In this scenario, British exporting enterprises would almost certainly suffer a major contraction until they are able to replace the (hopefully) temporarily lost markets.

It does not take genius to work out the possible consequences for British firms and thus for the British economy, in terms of the loss in competitiveness, export, employment, wages, tax revenue, public expenditure, etc. There are other interpretations though, such as by those bankrolling the Brexit campaign. Peter Hargreaves has acknowledged the insecurity that would result from Brexit and stressed that “It would be the biggest stimulus to get our butts in gear that we have ever had”“We will get out there and we will be become incredibly successful because we will be insecure again. And insecurity is fantastic.” Maybe so for a billionaire stockbroker but I am doubtful that the average Briton will see perceive insecurity in quite the same manner.

Is the Brexit trade risk worth it?

The above analysis is not based on economic modelling or other statistical analysis: it is based on the application of logic to the likely consequences of British exit from the EU and thus no longer being part of the Single Market. Voters must make a decision about whether the risk of Brexit is worth it. The facts relating to trade are not complex, even if the exact process, duration and impacts are:

  • Brexit means Britain turning its back on (in the sense of no longer being part of) the largest single trading block in the world in terms of population (500 million) and/or purchasing power;
  • British withdrawal from the EU means no longer being part of the 50+ trade agreements with 120+ countries;
  • EU countries are extremely unlikely to react immediately and offer Britain the same trade terms as the current one, which means uncertainly, risk and greater cost for British enterprises, rendering them, all other things being equal, less competitive in terms of export;
  • Britain will also have to negotiate new trade deals with non-EU countries, all of which will take years or probably decades to achieve;
  • Britain already has advantageous trade relations with the Commonwealth countries dating back to 1949, so cannot expect to greatly expand in its traditional markets;
  • The Anglosphere will not necessarily offer the UK preferential treatment. The USA has stated that Britain will “go to the back of the queue” in trade negotiations. None of the other Anglophone or any other countries has offered Britain accelerated trade agreements for the simple reason that they are complex and take a long time to negotiate to mutual satisfaction;
  • Even if the UK goes through a process of negotiating the current 50+ trade agreements with 120+ countries on its own (it lacks people and skills since it has relied on the EU to perform this role for decades), it will take years or decades to achieve and a nation of 65 million cannot negotiate trade agreements on a comparable let alone more advantageous basis than the EU;
  • Whether the Brexiteers care to admit it or not, Brexit will not be good for Britain´s trade in the short term. It will be bad for the EU too but it is not as reliant on the UK market as the UK is dependent on its market (44%of exports in 2014). On the other hand, Brexit could have catastrophic economic consequences if key countries refuse to make their markets accessible during the period until bilateral trade agreements are signed, which could last quite a while.

Is Brexit a risk worth taking in terms of the possible consequences for trade, export and potentially unemployment and wages? To paraphrase the well/known USA electoral saying, “It´s still the trade, stupid!”

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


The British housing crisis: is EU migration also responsible?

Let us get down to brass tacks: Britain has a serious housing crisis. When demand for housing (people wanting to rent or buy) exceeds supply (the stock of housing) the effects are not good for society. House prices and rents rise, making it difficult for people to pay for their accommodation. This reduces the net income available for other things, makes people anxious and directly affects their quality of life.

If people migrate to the UK or wealthy foreigners invest in the housing market, this reduces the housing supply for the domestic population unless construction goes up. This drives-up house prices and the levels of frustration, especially when people have to share their homes with their parents/children, are priced out of living in their communities or see empty houses that are investments, rather than homes. This is especially so in Britain, a nation of home owners and this state of affairs leads some to conclude that the housing crisis is caused by the EU and its freedom of movement principle. It leads to a perception that perhaps EU mobility results in a lack of housing for the native population. This is powerful argument during the period leading up to the EU referendum in June 2016; it connects with the EU immigration and EU benefit tourism, topics I have previously written about, and is presented as another reason for Britons to vote to Leave the EU (i.e. Brexit). So it is important to address the nature of the British housing crisis and the EU’s role in it.

The first thing to be said is that there is no shortage of analysis of either the housing problems or the possible solutions, but the latter basically boil down to balancing housing demand and supply, together with the political will to solve the crisis.

My home is my castle: demand for housing

Numerous factors influence housing demand. A critical factor is price: at higher prices, real incomes fall and people will reduce their demand while alternatives to owning a property, such as renting, become more attractive. There is a multitude of other factors that are important, such as population dynamics (population size, migration, birth and death rates, age structure, etc.), incomes of households (some may shift from renting to buying, move to a bigger property, buy a second property, a holiday home, etc.), social and lifestyle trends (e.g. late marriages, divorce rates, decisions to remain single, etc. all increase single households and thus demand), availability of credit and interest rates (higher rates make ownership less affordable while lower ones achieve the opposite and restriction in the supply of credit reduces demand for housing and can lead to a fall in house prices) and other influences such as government incentives (to buy, to rent or to buy to rent) and expectations in terms of house /land price developments (speculation).

Since all the above influence housing demand, estimating future demand is a complex process. What is simple though is that immigration, whether from the EU or elsewhere, is only one factor among many others, the majority of which are more influential in terms of stimulating demand for housing in the UK.

Nevertheless, as far as the EU’s freedom of movement of people is concerned, there are two further issues to consider:

  • EU migrants are a sub-set of the migrants to the UK. In a separate post, I showed that of the 498,040 people who migrated to Britain in 2012, 80,196 or 16.1% were Brits returning home, 157,554 (31.6%) were from the EU and 260,290 (52.2%) were from the Commonwealth and other countries that Britain is entirely responsible for, rather than the EU;
  • EU migration is not a one way street and not all roads lead to London and the South East. In the same year, 321,000 people left the UK, a proportion of which migrated to other countries in the EU.

Consequently, even if EU migration was the only issue affecting demand for housing, which is clearly far from being the case, EU migrants do not constitute the majority of immigrants to the UK. Furthermore, the same process is happening in other EU countries that receive Britons.

A number of housing demand studies demonstrate the same trend in the UK: housing demand is increasing significantly and the government and the rest of the housing system, not least the planning system and the construction industry, need to respond in order to ensure that the supply covers the future demand. After all, it is not unusual for populations to increase and housing policy and system must respond in order to deliver affordable, quality housing. The public has the right to expect this irrespective of the particular set of factors that may drive housing demand (i.e. whether immigration is an issue or indeed whether it is from the EU or elsewhere) at a particular point in time.

A comprehensive estimate of housing need and demand in England was published by the Town and Country Planning Association. It estimated that England alone required 240,000 – 245,000 additional homes each year until 2031 in order to meet rising demand. Many similar projections have been made long before EU migration to the UK became an issue of debate post-2007.

Housing supply: decades of neglect = housing crisis

The issue then is how much housing is being built and is it sufficient to meet the demand for 245,000 new units per annum? The UK housing construction data (supply) are presented in the Table below.

Table 1 UK Housing Construction

Source: Gov.uk, Live tables on house building, Table 209

A few points are worth noting based on the Table:

  • Housing construction (permanent dwellings completed) in England have fluctuated between a peak of 170,610 in 2007/8 and 108,870 in 2011/11;
  • The point during which it was perceived that there was an acute housing crisis was around 2005 but since then, the trend in terms of housing supply, albeit fluctuating slightly, has actually been downwards;
  • By definition if the target for England is 245,000 new units per annum, the equivalent for the UK will be much higher. The last year of housing construction data (2014-5) shows a gap of 93,000 even against the lower target for England;
  • In a well-functioning housing market where the citizens, planning authorities, construction industry and the government jointly perceive a housing crisis, the normal response would be for housing supply to increase to reach the target of 245,000 new housing units per annum for England. If this does not happen, it adds to the affordability pressures experienced;
  • If here is such a systematic lack of construction, then surely the respective people in charge of housing policy, finance, planning, construction, etc. are responsible.

To Scapegoat or not to scapegoat (or holding a mirror to British policy makers)

A considerate British voter in the forthcoming EU referendum might reflect on the following issues:

  • The EU has no control in the housing sphere: this is exclusively the remit of national governments, in this case successive UK governments;
  • There are many factors affecting demand for housing, of which EU migration is only a secondary factor;
  • The EU related migration accounted for 31.6% of the migrants to the UK in 2012, but the UK also sent its migrants to EU countries – the EU freedom of movement cuts both ways;
  • The UK has systematically produced fewer housing units than it needs for a period of decades despite projections of massive unmet demand for housing ;
  • The UK, including its politicians, its construction industry and its planning system (local authorities) are responsible for ensuring that supply keeps-up with demand and that housing is affordable. This requires responding to changes in housing circumstances, regardless of what is driving them (e.g. prices, birth rates, speculation, constrained land release, immigration, interest rates, tax incentives, etc.);
  • Despite mounting pressure, regular public outcries, evidence of shortage and affordability problems, etc., the UK only managed to build a paltry 150,000 housing units in 2014-5. This is a damning indictment of Britain, not least its politicians, policy-makers and industry.

It is up to each individual to form their own opinion of where the blame for Britain’s chronic housing crisis should rest. Scapegoating EU migration (which took off from 2004) for problems which have been systematically neglected in the UK amounts to a disgraceful attempt to blame others for issues which Britons have failed to tackle over and over again and are still doing a miserably bad job with.

In this context, it is worth addressing two issues which policy-makers, politicians and the Leave the EU campaign will almost certainly raise in defence of the indefensible: the lack of adequate and affordable housing in the UK, which is a basic human right.

Clutching at straws 1: the crowded island myth

Many, if not most, Britons appear to be convinced that the UK is a very crowded island and that there is simply no space left for housing construction, let alone to accommodate migrants from the EU or anyone else. Certain segments of the media that are biased against the EU, as well as the general Leave campaign, including populist political parties, are keen to emphasize this argument, so let us examine the claim.

The most comprehensive analysis of this issue (UK National Ecosystem Assessment) concluded that only 6.8% of the total land area of the UK is urban (10.6% of England, 1.9% of Scotland, 3.6% of Northern Ireland and 4.1% of Wales). But being urban does not necessarily mean that it is built upon since such areas also contain gardens, lakes, etc. The most detailed analysis ever conducted found that only 2.3% of England is built upon, the rest is natural. Elsewhere in the UK, the figure is less than 1%. Contrary to popular misconception, only a tiny fraction of Britain has been concreted over. Britain is not a crowded island. It can and must build more housing for the benefit of its citizens.

Clutching at straws 2: EU preferential treatment in accessing social housing myth

Another common perception is that EU citizens are benefit tourists, and that they strain the welfare state by having a higher demand for social housing. But the data show that about 17% of UK-born and 18% of foreign-born individuals live in social housing. That means that foreigners are on par with native Britons when it comes to access to social housing. However, when it comes specifically to EU migrants, the popular perception is even more incorrect. Studies demonstrate that citizens of EU-8 countries who arrived in the UK after accession are 57% less likely to live in social housing than native residents. More recent studies indicate that over 90% of immigrants in the UK are in households that are eligible to apply for social housing (p.3) and confirm that EU (and EEA) citizens are less likely to be in social housing than Britons.  The research also shows that, once factors like the demographic structure, location and economic circumstances are taken into consideration, immigrant households are significantly less likely to be in social housing than equivalent native households. Another popular myth bites the dust.

Build, Build, Build

The housing crisis is fundamentally a matter of demand and supply and the policy choices each country makes about how to prioritize public investment and other policy decisions. For decades Britain has emphasized home ownership as the one and only housing policy priority. It has constrained social housing construction for ideological and financial reasons, while at the same time forcing social housing to be sold at discount. Its recent policies have stimulated a boom in buy-to-rent, which has increased private renting but also boosted house prices and exacerbated the affordability problem.  At the same time, policy makers have not stimulated the planning system to release sufficient land for housing construction, mainly due to the NIMBY (Not In My Back Yard) syndrome. In the meant time, the construction industry has shown much more readiness to speculate in order to accumulate, rather than increase construction efficiency, productivity and quality. None of this has stimulated housing supply greatly while housing affordability has declined.

Housing is a matter for each of the 28 nation states of the EU. Some countries, like Germany, build enough housing to meet the needs of their citizens whose quality of life is significantly improved by having sufficient, high quality, affordable homes to rent and/or buy (the recent refugee crisis could not have been planned for in advance. By definition, a surge of 1.1 million asylum seekers in 2015 was not part of the housing forecast). Others, like Britain, do not build enough housing. This is not because of insufficient land, EU freedom of movement of people or other handy excuses for systemic failures on the part of British politicians and their policies, the British planning system and the British construction industry. Any such interpretation amounts to the politics of scapegoating others for one’s own glaring failures and I, for one, will have no truck with it.

  • Is the EU responsible for the British housing crisis: The British housing crisis has been decades in the making. Strong EU immigration is a relatively recent phenomenon.
  • Is the British government responsible for the state of British housing: Its policies have focused almost entirely on housing ownership (tenure), rather than housing construction.
  • Should I vote to leave the EU because of the state of British housing: Britain alone is responsible for regulating demand and supply to deliver sufficient and affordable housing.

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


Is EU immigation so negative for the UK and is it out of control?

EU immigration has been possibly the single most topical issue in Britain since 2004, when Britain allowed various new members of the European Union (EU) such as Poland to come and live and work in the UK. When the economic and financial crises hit, the views on immigration hardened noticeably in Britain, with an accent on immigration from central European countries. The discourse evolved into “British Jobs for British Workers” under the Labour Party. Under the Conservative Party, the debate intensified further, partly due to the impact of the UK Independence Party (UKIP), resulting in a “cap” on annual net immigration at 100,000 and concern over Britain’s “uncontrolled borders” due to the EU’s freedom of movement of people. Attention then shifted to Bulgarian and Romanian migrants and EU “benefit tourism.” Lately, the surge of refugees and asylum seekers to the EU in 2015, on-going tensions in the “jungle camp” in Calais and the possibility of jihadist terrorist sneaking through EU borders have elevated anxiety to peak levels.

This is a very potent mix of issues to discuss. In the context of the British referendum on whether to remain in the EU or not, the key issue boils down to this question: to what extent is the EU and its freedom of movement of people the reason for the current level of immigration in the UK and it is good or not for Britain??

Is the level of foreign born population much higher than the EU average?

The first issue to address is whether Britain is somehow exceptional and has disproportionately higher levels of foreign born population living in the country. The answer is an unequivocal no. The UK and Germany had very similar levels of foreign-born inhabitants (12.3% and 12.4% respectively) as a percentage of the overall population in 2013. The latest figures would probably be around 14% for the UK but larger for Germany, following the entry of over 1 million refugees in 2015, an issue which I have written about.

The percentage of foreign-born populations in the UK is relatively modest compared with many EU countries such as Luxemburg (42.4%) and Cyprus (23.2%), well as others such as Belgium (15.7%), Ireland (16%), Austria (16.1%), Sweden (15.4%), etc. Indeed, given Britain’s not so distant colonial past, the level of foreign born population in the UK could have been a lot higher. At the same time, it is not only foreigners that have been beating a path to the UK. Historically speaking, a very large number of Britons emigrated to the rest of the world, especially the Commonwealth countries, though there is far less concern about British emigration as about immigration into the UK.

Focusing on the role of the EU migration and thus on the freedom of movement of people, the EU cannot be held responsible for any migration to Britain prior to joining the European Economic Community (EEC) in 1973. Until then, Britain was entirely in charge of its immigration policies and the pattern of immigration reflected its colonial past and the rules established by successive British administrations.

The freedom of movement of people is one of the four economic freedoms that form the basis of the EU: free movement of goods, services, labour and capital. By voting in a referendum in 1975 to join what is now the EU, the British people accepted these four economic freedoms. The freedom of movement and residence for persons in the EU as one of the cornerstones of the EU was established by the Treaty of Maastricht in 1992 but the data show that the flow of EU citizens to the UK was a trickle until 2004, when larger numbers started to come to the UK.

Are Britain’s Borders out of control because of the EU?

Over time, the EU has grown to 28 member countries, a process that successive British governments have supported enthusiastically until recently. There is always a possibility that people will flow from lower income/employment economies to higher income/employment ones. This is the very reason why EU transitional provisions exist to restrict the flow of people from new member countries to the rest of the EU for a period of up to 7 years. This applied to Spain, Portugal, Ireland, etc. when they joined to the EU then Poland, Slovakia, etc. then Bulgaria and Romania (until 01 January 2014) and it applies to Croatia, the latest country to join the EU, until 2020. Each member country has a choice of either sticking with the 7 year transition or not. Thereafter the EU freedom of movement of people and workers applies in full to the new EU member countries.

The evidence shows that there was not a significant flow of people from the EU to the UK until 2004. Until that point the overwhelming majority of immigration to the UK reflected the policy of the British government, which in turn reflected Britain’s colonial heritage and its agreements with Commonwealth countries, as well as a strong flow of students to the country. These are not something which the EU interferes with. They are national decisions that Britain makes.

Furthermore, two issues reinforced the UK’s ability to influence migratory flows to the UK:

  • Schengen Agreement: this created the EU’s borderless space, enabling passport-free movement across most of the EU bloc. However, the UK opted out of the Schengen Agreement and unlike most EU countries, its borders remain intact and passports are essential to gain entry;
  • Britain is an island: unlike most other EU countries which have no internal borders and thus people can cross former borders unimpeded (this is changing following the 2015 refugee crisis), this is not the case in the UK. As an island, it has defensible natural and other borders. There are few entry points and every person seeking entry is checked by the UK authorities.

Therefore, the notion often repeated by the media and “Leave” politicians that Britain has “uncontrolled borders” because of the EU and its freedom of movement of people is little more than a fib. It has opted out of Schengen, it has natural borders and migrants can only come in via three routes: the Channel tunnel, the harbours and the airports, all of which under the exclusive control of the UK Border Force. It is only the people that are allowed in (or manage to sneak in) that get through.  This is the exclusive preserve of the British government. What it cannot hinder is the freedom of movement of EU citizens (once the transition period is over). However, this cuts both ways: Britons can and do leave the EU to other EU countries in large numbers.

If Britain is an island and is able to check every single passport of every single person coming into the country, you might well pause to ask what is so uncontrollable about the UK’s borders, other than EU related migration? Whose fault is that and is the EU element a reason to leave the EU?

Why did EU migration increase and is it detrimental to Britons?

The UK government (and Ireland and Sweden) chose to forego the EU transition arrangements and opted to remove the restrictions on labour market access from the onset of the EU enlargement in 2004. Other nations gradually followed suit, but like the UK, did not have to for 7 years. Germany and Austria restricted labour market access to the maximum period allowed.

EU-8 is the term used to denote the 10 countries that joined the EU in 2004 (Czech Republic, Estonia, Hungary, Lithuania, Latvia, Malta, Poland, Slovenia, Slovakia), excluding Cyprus and Malta. The UK decided of its own volition and with its national interests in mind, to allow the citizens of the EU-8 countries to live and work in Britain immediately. The rationale at the time was clear: Britain’s economy was booming and both the government and the private sector were concerned about a possible overheating labour market. The problem was solved by suspending the EU’s 7 year rule. Citizens from the EU-8 responded to the invitation to come to the UK, exactly as hoped by British authorities and industry. The key issue, however, was that neither foresaw just how many would choose to take-up the offer to come and work in the UK and Ireland.

But this was not an issue as the economy kept growing and all boats kept rising with the tide of employment and wealth being generated. British companies, British tax payers and British citizens benefited from the contribution of a young, healthy, educated, willing and industrious new source of labour.  When the double-whammy of deep recession and financial crisis hit, leading to unemployment and reductions in wages, the gear was thrown into reverse. History has a habit of repeating itself. The call for “British Jobs for British Workers!” was soon be heard, as well as increasing levels of criticism of Central European migrants, which then transmuted into criticism of the EU, the freedom of movement of people, Britain’s uncontrolled borders, etc. This was followed swiftly by the rise of UKIP as a political force, leading to a decision by the Conservative Party to cap net immigration at 100,000 per annum and culminating in the decision to hold a referendum on whether to remain in the EU or not on 23 June 2016.

The hardening of public attitudes in respect to EU immigration specifically since 2008/9 only makes sense if the EU migrants, and more especially the recent arrivals from the EU-8 countries, have been taking-up jobs which the British population would have otherwise have had, thus leading to higher levels of unemployment among the native population, as well as depressing their wages.

The evidence is that there are two types of EU migrant: those from “old” Europe (EU-15 such as France, Germany and Italy) who are slightly younger and more highly educated than the average Brit and those from “new” Europe (EU-8) who are much younger and also better educated than the average Briton. The old Europe migrants tend to find more highly skilled work than the average Briton. However, the new Europe migrants, partly because of the lack of language skills, found work mainly in low-skill, low-paid jobs such as skilled trades, construction and services jobs.

The evidence is that neither the “old” nor the “new” EU migrants put pressure on the wage and job prospects of the native British population. A review of various UK studies shows that there has been no, a small negative or a small positive labour market effect (wages, unemployment, etc.) in destination countries such as UK, while the long run impact is thought to be very small or none. By contrast, “old” EU migration has resulted in an increase in human capital, leading to higher productivity while also having a positive effect on British GDP.

The consistent conclusion from research into the labour market effects is that migration from the EU has been beneficial to the UK economy.

Is the EU freedom of movement a one way street?

It might be quite hard for some to comprehend this, but not all roads lead to London and the south east. The EU’s freedom of movement of people (as well as goods, services, capital) is a remarkable gift: it allows all EU citizens to travel across 28 countries (31 when Switzerland, Luxemburg and Lichtenstein are counted) to study, work, retire, au pair or just enjoy the richness of Europe whenever and as often as they like without “let or hindrance”, something which Britons should appreciate since these very words are engraved in our passports.

Many, if not most Britons, enjoy some or all of these freedoms in one way or another, not least in terms of their holidays. Indeed, 2.2 million Britons, such as me, have chosen to work, study, invest (e.g. holiday and retirement homes and pension funds) or retire in EU countries not least Spain (just over 1 million), France (330,000), Ireland (329,000), Germany (107,000), Cyprus (65,000), the Netherlands (48,000), Greece (45,000), Portugal (39,000) and Italy (37,000). It is not possible to claim anything other than that the UK and its citizens have taken full advantage of the freedom of movement of people in the EU: the numbers of Britons living in the EU almost balances the EU citizens living in the UK (2.3 million). Despite the somewhat hypocritical stance of many Britons towards the EU freedom of movement of people, this right is something which is taken for granted by a very large number of them, especially the elites that control the British media and the political parties (it would be good to know just how many of them own a holiday home and/or how frequently they holiday in the rest of the EU). Leaving the EU would be a double-edged sword for Britain.

Is the level of EU migration to the UK unstoppable?

Chart 1 Migration 1991 - 2014

 

 

 

 

 

 

 

 

 

 

Source: Migration Statistics, House of Commons Library, Briefing Paper, 2015

Chart 1 shows immigration, emigration and net migration in the UK. During 1991 – 2014 immigration increased rapidly from 329,000 to 632,000. Emigration also increased from 285,000 to 319,000. Net migration (those arriving minus those leaving), increased from an annual average of 37,000 during 1991 – 1995 to an annual average of 232,000 during 2010 – 2014; this represented a significant and sustained increase in the level of migration.

However, the majority of immigration is not from EU countries, as the Table illustrates for 2014.

Table 1 Immigration 2014

Source: Migration Statistics, House of Commons Library, Briefing Paper, 2015

Historically, EU migration to the UK has been relatively low: during the period before the British government chose to allow EU-8 countries to enter Britain in advance of the 7 year transition period, EU migration accounted for 12.9% of all migration.

By 2014, 41.8% of annual immigration was attributable to the EU’s freedom of movement of people. However, the majority of migrants to the UK remain Brits returning home (12.8%) or non-EU nationals (45.4%). The decision by the UK to allow close to 60% of migrants to enter is not to do with the EU in any way, shape or form.

Of the 41.8% of the EU nationals entering the UK in 2014, almost half (20.4%) were from the EU-15 or “old” Europe such as Germany, Italy and France. As previously discussed, these are typically extremely well-educated, professional individuals who the British economy relies on to succeed and thrive. 12.7% of EU migrants were from the EU-8 such as Poland and Slovakia. The rest, 8.7% are from the rest of the EU, which is mostly Romania and Bulgaria. These are less well educated but still outperform the British average.

On this basis, although EU migration to the UK is undoubtedly significant, it is beneficial to the economy and only 21.4% of overall migration is from countries that Britons have become sensitive to in recent years. The UK could reduce the levels of migration from non-EU countries (45.4%) overnight, if it chose to do so, without reference to the EU or anyone else. Presumably it prefers not to hinder Britons from returning home, students paying pretty good money into the British higher education system or close-off access by Commonwealth countries (or presumably cut-off the supply of highly skilled employees from “old” Europe).

The rest (from the EU-8 and EU-2) amounts to 21.4% of the immigration experienced in 2014 or about 1 in five of the migrants entering the country. Is this worth leaving the EU in order to stop this group from the EU entering the country? And is it worth doing so despite the evidence that such migration does not depress wages and does not reduce the employment prospects of native Britons? I don’t think so, despite the media negativity and the claims of UKIP and Leave faction.

However, it might possibly be worth it if the EU citizens, whether from old or new Europe, were in the UK specifically to take-up the social benefits, rather than coming to work and thus contribute to the British economy. I shall address the issue of EU “benefit tourism” in the next post.

The EU immigration debate – much heat, little light

Migration from the EU was relatively low until 2004 when the UK decided, in its own interest, to allow immigration from the EU-8 accession countries such as Poland a full 7 years before the EU transition period officially required it. The UK benefited greatly from this decision, as did the many migrants that responded to the UK’s invitation: they did not come illegally to Britain. When the economic and financial crises struck, the mood turn ugly in the UK towards migrants generally, and those from the EU specifically. The freedom of movement of people is routinely criticised but the facts are that Britain has opted out of the Schengen Agreement, is an island and is in full charge of policing its own borders and deciding who comes into the country, not the EU. The latest information shows that immigration is running high but 12.8% are either Britons returning home or non-EU nationals (45.4%), mostly from the Commonwealth countries, over which the UK has full control of but rightly, chooses not to stop.

This means that less than half (41.8%) of the UK immigration originates from the EU. But even here, the situation is not as simple as UKIP and the Leave campaign pretend. Almost half (20.4%) are from the “old” Europe comprising top professionals which the British economy depends upon. Only 12.7% are from the EU-8 such as Poland and Slovakia and 8.7% are from EU-2, namely Romania and Bulgaria. However, in both cases, the evidence is that they are neither reducing the wages nor the employment prospects of native Britons.

Furthermore 2.2 million Britons benefit from the EU freedom of movement of people compared with 2.3 million EU citizens living in the UK. A decision to leave the EU would be a double edged sword for Britain, since it not only benefits economically from EU immigration, but also exports pensioners, student and workers to other parts of the EU.

Is this a case of the British media and populists politicians eating the EU cake and having it too? Form your own opinion.

  • Is the EU responsible for the overall level of foreign born population in the UK: No
  • Is the British government responsible for its own borders and the majority of migration in the UK: Yes
  • Should I vote to leave the EU because of the EU freedom of movement: No

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


In Praise of Freedom of Movement of People in the European Union

MoveMapper™ helps you move to another country quickly and painlessly

MoveMapper Android App

In these days of mass movements of people connected with the refugee crisis, it is rare to find recognition of the European Union’s (EU) freedom of movement of people, let alone any commendations. Rather, the media and politicians tend to focus on the stresses and strains connected with migration and freedom of movement within the EU in general and the volume of refugees heading to Europe specifically. In this article, I argue against the grain of current discourse, fully acknowledging populists’ ability to set the tone of public opinion. I make the argument that the single most important achievement of the EU is the principle of freedom of movement of people across 28 countries. This fundamental right is under attack from many quarters. This article and the MoveMapper™ app presented below, represent my effort to counteract this trend. Freedom of movement of people has the capacity to improve people’s lives, while also raising standards of living for all. We should not allow it to be undermined by short-sighted, populist agendas.

The Nation State: freedom of movement lost

Before there were dukedoms, fiefdoms, principalities and eventually nation-states, human being roamed the earth and settled where they chose to. Freedom of movement of people existed in its purest sense: we could go anywhere we liked and the world was our oyster. After the establishment the nation state we became Germans, Britons and so on. Fences, borders, visas and other obstacles restricted the ability to live and work severely and the arena of life was telescoped into national boundaries except for a lucky few, such as diplomats, the military and the well-to-do.

The EU: freedom of movement regained

At the heart of the European Union (EU) is the establishment of a common market. This in turn required overcoming a number of restrictions and led directly to the establishment of the four fundamental freedoms at the core of the EU:

  • The free movement of goods: this right allows free flow of products between EU countries free of import/export duties/charges and common customs tariffs for non-EU countries;
  • The free movement of services (and of establishment): this ensures unrestricted rights to create firms/self-employment in any country and freedom to provide cross-border services;
  • The free movement of capital: this allows capital flows (finance, property, etc.) within the EU countries;
  • The free movement of people: this allows the relocation of citizens between EU 28 countries to pursue their activities, including the abolition of discrimination based on nationality.

The EU is dedicated to realising these four freedoms, subject to exceptions where a Member State can prove that they jeopardize a public good (e.g. public health) and are safeguarded by EU Treaty. Of the four freedoms, the most important to the 500+ million people living in the EU, is the freedom of movement of people throughout 28 countries (actually 32 in the European Economic Area countries, which includes Switzerland, Iceland, Liechtenstein and Norway).

Up-Close: Movement of People

For me, this is the most fundamental freedom and greatest achievement of the EU. It guarantees every EU/EEA citizen the right to move freely, visit, live, work and retire in any member state without restriction. It applies to all EU/EEA citizens, regardless of nationality and does away with discrimination in the common market. Furthermore, it ensures that certain rights can also be extended to the family members of the worker, including benefits, pensions, etc.

None of us believes that we should be disadvantaged in the labour market because of our religion, skin colour or other factors. This freedom means that discrimination on the basis of nationality, residence and/or language is not permitted, while also securing equal treatment in employment conditions, remuneration, dismissal and the receipt of social benefits.

If you believe in transparency and fair treatment, there is absolutely nothing that anyone should fear from the freedom of movement of people. On the contrary, this is an achievement that Europeans should be proud of.

The pros and cons: movement of the people

At the most basic level, the freedom of movement of people means that you and I have access to 32 EEA countries, as well as Switzerland, at the drop of a hat. Not only that, we have automatically the same rights (and responsibilities) as the citizens of those countries. What does this mean in practice?

  • You can visit all 31 countries when you like and as often as you like without cost, delay, restriction, etc.;
  • You can study / au pair, etc. in any of these countries using the same procedures and incurring the same costs as the national citizens of that country;
  • You can work in all countries without constraints or fear of discrimination due to nationality, residence, language, etc.;
  • You do not need a visa or a qualifying period before you can start working or your family can join you;
  • You can do not need to fear being treated differently in the form of the contract, holidays, wages, pension, benefits, etc. just because your nationality is different;
  • You can retire wherever you choose and transfer your pension without fear of being penalised or restricted by virtue of choosing to live in another EU/EEA country.

These fundamental rights are just the tip of the iceberg. Yet this degree of freedom to take greater control of your own destiny would have been considered to be a utopian dream not so long ago in Europe. It used to take hours to cross borders and the long, costly and uncertain bureaucratic nightmares involved in moving countries, getting a job, buying a property, establishing a company, etc. made it a remote dream, except for a small minority. No longer; this particular freedom have been hard won and it is worth fighting tooth and nail to retain.

The above are not the only benefits of the freedom of movement of people. It can play an important role in other respects, contributing to individual, national and EU well-being:

  • Ageing Population and pensions: the ageing population structure in the EU is a major challenge: of the 28 countries of the EU, only Ireland, France and the UK are remotely close to being able to replace their population. Politicians may seek to increase the female participation rate in the labour market and raise the pensionable age, however, the serious demographic challenge cannot be overcome without significant positive net migration for a sustained period of time, even beyond the levels currently being experienced due to the refugee crisis;
  • Reducing unemployment: some cities and regions of EU countries experience much higher levels of unemployment than others (e.g. London vs Liverpool). In the same vein, some countries experience higher levels of unemployment than others (e.g. Greece and Portugal vs Germany and the UK). If economies are growing and labour is attracted to more dynamic cities, regions or countries, this is advantageous to all concerned, not least the unemployed, their dependants, the employers, as well as the tax man;
  • Economic contribution: if economic growth is restricted due to lack of employees or absence of certain types of skill, a labour market of 500+ million makes it possible for economies to continue growing without overheating and resulting in recession. This applies not only to the top, professional jobs. Low paid, dirty, dangerous, dull, flexible and insecure work is the very type that many nationals of the wealthier EU countries are very content to leave to others.

There are few things in life that only entail benefits and no costs; freedom of movement of people is no different. The main potential disadvantages include the following:

  • Cheap Labour Depressing Wages: it is possible that inflows of people willing to take even lower pay than the going rate for certain jobs depresses the wage levels. However, the case either way (depressing or increasing wages) is hotly disputed by economists. Most studies find that there is almost no effect either way but many people remain fearful of this issue, especially the less educated/skilled;
  • Already High Unemployment Levels: it is possible that migrants will flow to areas with already high levels of unemployment. However, migratory flows have an internal logic – migrants want to find work, not to move from being unemployed in one location to being unemployed in yet another. As a rule, they seek out high employment areas because they want to work, they want to save and they want a shot at a better life for themselves;
  • Welfare Tourism: it is possible that a proportion of migrants will seek to improve their lives by migrating to a country offering higher social benefits in than in their own nation. However, research suggests that a tiny proportion of EU migrants fall into this category (less than 1% of all beneficiaries in six EU countries and 1%-5% in five others). Despite the great song and dance about this issue by the populists, no government has come up with any data corroborating the overblown claims of cross-border welfare tourism;
  • Brain drain: freedom of movement of people can lead to skilled people leaving countries that paid for their education and training to be benefit of the receiving country. This is certainly an issue for the emitting country. But there is also the prospect that many choose return to their country of origin, bringing with them higher levels of human capital, know-how, investment capital and an entrepreneurial mind-set that can contribute to national development.

While recognising the pros and cons involved, on balance, most conclude that the freedom of movement of people is a great boon for the individuals concerned, as well as for the emitting and receiving countries. Migration across localities, cities, regions and countries has the capacity to unleash economic development and raise living standards, while also delivering greater satisfaction and happiness at the individual level. It is not a one-way street, but it is worth defending.

The Reality: movement indirectly hampered

The reality however is that governments, to varying degrees, are sensitive to the issue of freedom of movement of people. While recognising the great potential and actual advantages of migration, politicians are extremely mindful of emotive public opinion. They are fully aware of the demographic ticking-bomb that is the ageing European society. But short-termism is inherent their profession (4-5 year election cycles) and populism (winning the next local / regional / national / European region election) is the name of their game. They and the media feed upon people´s concerns and fears, regardless of whether these are well-founded or not. Fear, not hope, is their basic working material.

The consequence is that none of the EU and EEA governments (the European Commission included) make it easy for people to get access to the information that they need to have a sound basis for deciding whether to move to another country or not. A lot of information is available, but it is fragmented, outdated, uncoordinated, etc. Moving to another country may be something that we consider but we usually do not get far. It takes weeks of research effort to connect up the fragmented dots and build a clear picture of what is involved in moving from one country to another with the EU. We typically lack the time, skills, energy and patience to do this.

Relatively few people make use of the single most precious gift of the EU to its 508 million citizens: only 11 million EU citizens have taken advantage of the right to live, study, work or retire in another EU country (or 2.2% of all people in 28 countries). It is clear that some countries are more attractive than others, but the low level of general migration within the EU is not something to fear and deny.

Moving people: MoveMapper™ app

Through the EU’s freedom of movement of people, we have almost utopian rights to live our lives how and where we want. If we choose to, we can change our minds and go back home and pick-up where we left off. I am a serial migrant. I have lived in several EU countries and worked in almost 40 countries worldwide. I have benefited enormously as a human being and as a professional. I do not fear migration or migrants. On the contrary, I embrace other cultures, languages, traditions, history, art, ideas, cuisine, and yes, also our differences and our sameness as human beings, whatever our skin colour, language or beliefs.

The beauty of the freedom of movement of people has inspired me to develop the MoveMapper™ app, which is designed to bring to together key information in deciding whether to work / study / au pair / retire, etc. in another EU country, starting with Britain and Germany.

The MoveMapper™ app covers the formalities of moving to another country, how to get accommodation, how to find employment, how to deal with financial issues, how to integrate your family, how to gain education / language skills and other issues. By pulling the relevant information together, the app provides you with the capacity to enrich your life.

I do not claim that this is a perfect app, that it has all the possible information or indeed that it is 100% up-to-date. The situation is constantly evolving and maintaining information is not easy.

But I believe that it will provide you with sufficient information with which to enable you to decide whether and how to take advantage of the EU’s greatest gift to its citizens. The rest is up to you.

The MoveMapper™ app offers information for two countries to start with: Britain and Germany, the countries closest to my heart and which form the focus of my blog: the AngloDeutsch Blog.

The free version can be tested for free. The premium version costs Euro 0,99 + VAT per country.

When the MoveMapper™ app generates sufficient interest and revenue, I plan to add other countries and update and improve the information available, as well as the app experience.

Test MoveMapper™. Rate it. Share it by forwarding it to people who might be interested.

Do not fear the freedom of movement of people within the EU; instead, recognise it for the incredible opportunity that it offers to those that choose to make use of it. This amounts to real power, real freedom to shape our lives and those of our families.

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


The refugee backlash – pulling-up the European drawbridge

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU

2015 was another tumultuous year for Europe. Over a million refugees found their way into the European Union (EU), but already a new dynamic is evident in early 2016: the refugee backlash has begun and Europe is pulling-up the drawbridge on refugees and economic migrants. The broad contours of the dynamic evident can be summarised as follows:

  • The EU countries have accepted too many and cannot continue to absorb refugees at the same rate;
  • Germany was irresponsible in allowing so many refugees;
  • Without proper checks, the refugee will include a radical element that will pose a threat to the EU´s security, as illustrated by the terrifying Paris bombings in November 2015;
  • Once in Germany, or wherever, they will spread to other parts of the EU, so the freedom of movement of people principle may need to be looked at again;
  • Further sexual assaults on women and robberies by young men from “the African or North African region” are to be expected following the shameful New Year’s Eve experiences in Cologne, Hamburg and other cities;
  • The current levels of migration will destroy Europe as we know it; the borders must close, only legitimate applications up to a predetermined cap can be accepted and the rest sent back.

This all seems logical and it plays well as a populist theme. This certainly applies to parties such as the Alternative für Deutschland (AfD) in Germany and the UK Independence Party (UKIP), but it also goes down equally well with the mainstream political parties such as the Conservative Party in the UK and the CDU and especially CSU in Germany. This is without even mentioning the more radical right wing movements that exist throughout Europe. Not surprisingly, shrill criticism of the migration issue and the EU’s apparent inability to manage the situation is particularly evident in the UK, as it gears up for the forthcoming referendum (the exact date of which has not yet been announced) on whether to remain in the EU or not.

It is very difficult to unpack and analyse what is clearly a highly emotive theme, let alone have a sensible debate about it, which is the very reason why certain political parties are making hay with the refugee issue. Previously, their favourite theme was the Eurozone/Greece crisis, now it is migration but the overall gloom and doom narrative does not change very much.

I should stress that there are clearly legitimate public concerns throughout Europe about the migration issue, both within the EU and from outside. However, the use of scare tactics to gain political or other advantage is not something I enjoy witnessing so I aim to address a sub-set of issues, such as Germany’s alleged irresponsible behaviour, the argument that Europe simply cannot cope and the refugee backlash that is in full swing before the first month of 2016 is finished.

The blame game

I will start with Germany’s role in the European refugee crisis. There is certainly a messy situation, but did Germany act irresponsibly in 2015?

Any way you choose to cut it, Germany has played the key role in the refugee crisis. Germany accepted 1.1 million refugees in 2015, a number than could rise further on by the time the counting is official. Germany had in any case been experiencing significant flows of migrants, mainly from the EU. For the last few years this has been running at over 400,000 net migrants per year. Add this up and Germany received at least 1.5 million net migrants last year, which is an astonishing figure. Furthermore, under the German asylum law, refugees may be allowed to bring their family members, resulting in a significant and unquantifiable flow connected with 2015.

By any reasonable criteria Germany has been an incredibly good country to accept so many people. This is not just about the cost involved, which is undoubtedly significant albeit one which Germany is in a position to absorb. Being a good country is first and foremost about the willingness to recognise the human suffering cause by the migration crisis and to try to do something about it, rather than turning a blind eye to it all.

The contrast with many other EU countries could not be greater. Countries such as the UK have agreed to accept 5,000 Syrian refugees per year for the next five years. It has to be borne in mind that even this paltry number was only agreed to following a public outcry from British citizens appalled by their government’s hard heartedness, which bounced Parliament into agreeing to do more.

Germany is not alone in being a good country: about 90% of the refugees have been accepted by three countries out of 28 in the EU: Germany, Sweden and Austria. What about the response of the other 25 countries of the EU?  Following months of unedifying political squabbling, which continues to this day, the best they could come-up with was to agree to relocate 160,000 asylum seekers from Greece and Italy over the next two years: this is an average of 5,700 per country over two years, though very few of these transfers have actually occurred so far (less than 500 were achieved in 2015 and only 3 out of 10 “hot spots” have opened according to some estimates).

Is “pitiful” too strong a word to summarise the EU’s collective failure in the face of a mass humanitarian crisis? I don’t think so. It is not the first time that the EU has failed miserably to stand up to be counted and it will almost certainly not be the last. It is not as if the refugee crisis was some sudden, unexpected act of god; this is the result of steadily growing pressure and reaching its natural and inevitable conclusion. There was nothing about it that could not have been predicted by the civil servants of the European Commission or of the EU member states.

Germany’s decision to act more or less unilaterally in accepting 1.1 million refugees must be seen in the following context:

  1. This is the worst crisis since WW2: the number of forcibly displaced people, often due to wars, reached almost 60 million worldwide at the end of 2014, including over 14 million refugees. This was an increase of about 25% compared to the previous year and is mostly due civil war, violence and oppression in Syria, Eritrea, Afghanistan, Somalia, Iraq, etc. although other regions, including northern Africa and the Balkans, are also major sources of migrants (IMF, 2016 / The Refugee Surge in Europe: Economic Challenges). This is nothing short of a mass human tragedy, which Europe is neither immune to nor can afford to simply turn its back on. Globalisation entails many new developments, including the capacity of large numbers of people to move in the direction of Europe. It may take time, but sooner or later, it does reach Europe.
  2. This was not a crisis of Germany’s making: it did not chose to invade Iraq in 2003 and played little or no part in setting in chain a series of events which have destabilised parts of the Middle East, in an attempt to bring about democracy through regime change. Of all the European nations it is the UK, France and Italy (together with the USA) that bear the greatest responsibility for any resulting instability in the region. All are now conspicuous for their efforts to obfuscate causality and deny moral or other responsibility (if you break something, you should fix it) to deal with the resulting mess that they helped to set in chain.
  3. The EU failed spectacularly: the utter inability of the EU to find common ground in dealing with the huge volume of people heading towards Europe is what resulted in Germany’s more or less unilateral action. Just as in the Greek/Eurozone crises, it is proving extremely difficult for 28 countries to make decisions quickly and act in unison. This should not be in the least bit surprising. The EU is very far from being a United States of Europe; this simply reflects the fact that the nation-state is alive and well within the EU, despite exaggerated claims of its demise. Each nation retains the ability to follow its own mandate and block changes that it does not agree with. The Central European (Visegrad countries) and Western Balkans states have made their views crystal clear in respect to taking a share of the refugees, but they are not alone. Just as in the case of Greece and the Eurozone, finding a common solution to an unexpected large-scale problem is a slow, messy and costly process. In the end, to misquote slightly the famous words: Europeans Will Always Do the Right Thing — After Exhausting All the Alternatives. The 28 nation states plus the various Candidate Countries (i.e. Western Balkans including Turkey) will find an imperfect compromise and Germany will pay a disproportionate amount of the cost arising. Such is the iron rule of the EU. No other scenario is possible if 28+ nations are to continue to play broadly for the same team. How many other international agreements are you aware of that take a couple of weeks or months to resolve? Climate change agreements? International trade agreements? These things take years or decades, not weeks or months to sort out and are always and everywhere an uneasy compromise. 28+ countries finding a way to deal with the worst humanitarian crisis in 70 years takes time but in 2015, time was of the essence where people are involved, rather than just economics.

Cometh the hour, cometh the country: Germany chose not to sit on its hands but to act in alleviating the growing pressure along the Turkish-Greek-Balkan-Central European corridor.

Refugees in Miratovac, close to the border between Serbia and Macedonia. Photo by Djordje Savic / EPA

Refugees in Miratovac, close to the border between Serbia and Macedonia. Photo by Djordje Savic / EPA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

You are free to form your own opinion about whether Germany has acted irresponsibly or not. I personally think that not only has Germany acted incredibly responsibly, but as tax payer and resident of the country, I am proud of living in such a country. No doubt, Germany has already changed as a result and ordinary Germans are deeply unsettled about the implications, an issue which I plan to write about in the future. This is a reflection, among other issues of the fact that the scale of the problem is so great that no country can possibly solve it all on its own – not even Germany.

Europe Cannot Cope! Really?

The next issue is whether Germany and/or Europe have relevant experience and if they can absorb the numbers of refugees.

For a start, I can distinctly remember (since I was part of it) a small, poor, broken European country of 8.5 million absorbing about 1 million people from its former colonies during the mid- to late-1970s. While there are major differences with the current situation (common language, culture, religion, etc.), Portugal was not part of the EU but absorbed those numbers and did not collapse despite its politically chaotic and economically precarious post-colonial situation at the time. In fact, it thrived as a result of the influx. Don’t get me wrong: I am not suggesting that Europe should fling open its doors to all and sundry with no questions asked, but I am saying that Europe is much more robust than many would seem to believe.

After a short-lived spike of international approval for its decision to take on the refugees, Germany has since reaped criticism, direct and indirect, most of which has been leveled at Angela Merkel, the Germany Chancellor. The gist of the argument is that she has gambled Germany’s long term interests for personal hubris: she wanted to cap her career with a Nobel Peace Prize and/or improve Germany’s international image after the Greek crisis. Others of a more analytical bent sought instead to justify Germany’s actions (and presumably the inaction of their own governments) by pointing to Germany’s ageing population structure. It seems to me that almost all 28 EU countries are suffering from the same problem, albeit to varying degrees. Did others facing the same demographic situation jump to take their share of refugees? I don’t think so.

It is certainly true that Germany and many EU countries have a rapidly ageing population structure (fertility of around 1.5, which is below the replacement rate of 2.1) that would greatly benefit from significant immigration of the scale that happened during 2015. But I take issue with the implication that the German authorities naively failed to foresee the likely stresses and strains that would be generated by taking so many refugees in one year (the estimate at the time was 800,000 – 1 million refugees). The reality is that Europe generally and Germany specifically have plenty of experience of large scale refugee crises and indeed of Muslims culture.

Firstly, Germany has a large number of Muslims. According to the 2011 Population Census, there are just under 6.2 million foreigners in Germany and Turks alone accounted for the largest group (1.5 million people or 24.4%). In all, some 2.5 million people are of Turkish origin. It is not as though Germany is not aware of the stresses and strains associated with the religion, gender, education, labour market and other dimensions connected with integrating populations, including Muslims. The same applies to many countries of the EU but unlike others, it still went ahead with what is often described by its critics as its “open door” policy.

Secondly, it was not so long ago that Germany had to respond to a refugee crisis of similar proportion. During the 1990s, a large number of asylum applications were lodged due to crisis in the ex-Yugoslavia, though the peak of that crisis in 1991 (around 700,000) has been exceeded in 2015 (see first Figure below). That said the second Figure below illustrates the point that the numbers were relatively low compared to those of the 1990s, though the diagram does not take the 2015 influx of over a million refugees into consideration. It is probably not a coincidence that then, as now, Germany absorbed the lion’s share of refugees.


IMF graphic 2016

Source: IMF, 2016, p.11

Thirdly, to put things in context, Europe had only absorbed 1 out of the 14 million refuges worldwide in 2014 and this increased to 2 million in 2015. Whoever believes that what has happened in 2015 is the end of the matter and that the EU can simply put-up the fences, close the borders and turn its back on the rest of the world is deluded. A proportion of the 12 million other displaced people are heading our way in 2016 and beyond: the current estimate is that another 1 million will aim for the EU this year and possibly more. The way to end this catastrophe is not by pulling-up the drawbridge to Fortress Europe; if the conflicts in the countries in question are ended and if this is combined with a major reconstruction programme, in time, the human tragedy and the migratory process will also abate. Putting-up fences and closing borders will restrict some of the flow, but will also add to the human desperation without actually dealing with the root cause.

To conclude, in my view Germany did not saunter into the current situation blithely and Mrs Merkel was right in saying “Wir schaffen das.” We can do it: I agree with her. Other, much smaller and poorer countries have in the part or are currently absorbing the same or higher numbers of refugees. Germany knew, more or less, the implications of opening its borders to about a million refugees, even if the general public could not have predicted the exact consequences, including the outrages in Cologne and other cities. It is most unlikely that Europe’s pre-eminent politician would not have sniffed the potential political, social, religious and cultural implications of undertaking such a radical step. The numbers absorbed by Europe are relatively small by comparison with the numbers being absorbed by other countries, including Turkey. If they can do it, so can Europe. Indeed, a cursory reading of European history proves that it has coped with wave after wave of migration.

Refugee backlash

To ask if the refugee backlash is coming would be to pose the wrong question: it is already here.

The mood in Germany and the rest of Europe started turning ugly long before the Paris terrorist attacks and the mass sexual and other crimes in Cologne and other German cities during the New Year’s Eve celebrations that went wrong. Pensioners are up in arms about the way they perceive their country is changing. Parents are concerned about their children’s education as gymnasia are requisitioned as temporary accommodation and class rooms begin to take the strain of absorbing the influx of non-German speakers. House prices and rent levels are being pushed up in an overheating housing market where affordable accommodation is scarce.  Region and local authorities remain deeply concerned about practical matters in addition to shelter, such as state benefits and labour market opportunities for refugees. The issue of integration and whether it is possible to achieve or not, is “the” topic of conversation. This applies to Germany and it applies equally to other EU countries.

Angela Merkel has gone from being Europe’s pre-eminent politician and practically politically unassailable in Germany, to being under siege. Make no mistake about it; she is fighting for her political future.  Yet despite the ratcheting of pressure, even today, she is refusing to put a cap of the number of refugees that will be accepted by Germany in future (the CSU is openly advocating a cap of 200,000 per annum, which itself puts the UK’s response in the shade). There are probably two reasons for this. Firstly, German asylum law is based on individual assessments so caps would not be workable without changing the law (but we know laws can be changed at the drop of a political hat). Secondly, the huge numbers of forcibly displaced people out there (14 million and counting) are desperate and there is no end to their travails in prospect. What would you do in their shoes? Which safe harbour would you try to reach, possibly at the cost of perishing on the way? A cap would be a meaningless promise without a workable EU arrangement.

Mrs Merkel is displaying the hallmark of true leadership: political courage and acknowledging moral duties beyond her nation’s borders. That is the essence of being responsible in a European and global sense, though I recognise fully that many would much rather put national and personal interest before anything else, including in Germany.

Merkel probably expected the rest of Europe, especially the largest countries, most of which have had more than a hand in the unfolding disaster in the Middle East, to take a much greater share of the humanitarian burden. Despite the lessons of Greece, she has miscalculated in relation to most of the EU and is now in the middle of the biggest political crisis that she has ever faced. She also appears to have greatly overestimated the Greek and Turkish capacity to manage their borders.

But she is nothing if not a pragmatic leader. She has recognised that the whirlwind is not just gathering, it is already blowing. A change has already been signaled that 2016 will not be the same as 2015. The scale of the challenge means that Germany cannot shoulder the burden mostly on its own for much longer. All three of the most generous countries have introduced border visa checks (three others have also and many more are threatening to do the same). A closure of national borders has so far been resisted by the EU, but this could change. Sweden has announced that 80,000 of the 160,000 refugees it accepted will be sent back because they are economic migrants, not refugees. The EU has reinforced the message by stating that 60% of the applicants are not refugees at all but economic migrants mainly from the Balkans and North African countries such as Morocco and Tunisia. It has also threatened to suspend Greece from Schengen for systematic failures in the migrant crisis. In turn Greece is pointing its finger at Turkey for allowing migrants to “swamp” their border and islands.  Reports are piling up that in addition to anti-refugee demonstrations and hostels being set on fire in Germany, violence is erupting in Sweden and other countries.

A common EU approach is the only way forward, combined with a serious and concerted effort to end the conflicts and reconstruct economies, since these are the drivers of mass population displacement. But just like the Greek and Eurozone crises, which are also far from over, it will not happen miraculously or overnight.

So, get ready for a much more hard-nosed European approach to the refugee crisis, with an emphasis on only accepting people from conflict zones (true refugees and asylum seekers) and rejecting all others (i.e. economic migrants). The EU drawbridge is being pulled-up. The wider societal backlash is already underway and those that are leading it will not be pausing to distinguish those that deserve to be helped from those that do not.


Freedom of Movement of People and Recent Immigration Trends in Britain and Germany

There is a great deal of discussion about immigration in Britain and Germany and the extent to which this is driven by the EU’s freedom of movement principle. In the case of the Britain, this is resulting in increasingly Eurosceptic public discourse due to perceived uncontrolled immigration and border, resulting in questions about whether to stay in the EU or  not. In the case of Germany, the concerns revolve around benefit abuse, especially the recent EU member countries such as Romania and Bulgaria, which acquired freedom of movement rights in 2014. This post examines EU and non-EU migration trends, including those from old, recent (A8) and new (A2) countries.

Recent Immigration has been at a Historical High

First things first: it must be noted that the net migration figures in Britain in the last decade are unparalleled. During the period until 1982, the UK actually experienced a net outflow of people. This means that more Britons, on balance, chose to leave Britain and were obviously received by other countries. Until 1997 there was an average net annual inflow of 50,000. With the accession to the European Union (EU) of the A8 countries (e.g. Poland, Slovakia, etc.) and, crucially, with the UK decision to allow people from these countries to work in Britain well in advance of being required to do so under the transition rules of the EU, this rose to a peak of 244,000 in 2004. It has been decreasing since then and reached 177,000 in 2012. The latest data suggest that net migration is increasing once again (209,000 in 2013), probably because of the influence of Romanian and Bulgarian immigration, combined with the fact that Britain’s economy is growing once again. Since these have much smaller populations that the A8 countries, this is not likely to last long. Broadly the same trend was evident in Germany but see below for variations, particularly in recent years where net migration has taken-off.

 Asylum seekers

In a previous post, we defined the key types of immigrant; asylum seekers are basically a sub-set of immigrants. According to Eurostat data, in 2013 there were 434,450 applications made to all EU-28 countries. The largest volume of applications was to Germany (126,705 or 29.1% of all applications in the EU), France (66,265) and Sweden (54,270). The UK received the fourth largest volume of applications (29,875) but this was noticeably less than the several other EU countries (6.8%). Given the size of its population and economy, the UK received a relatively modest number of applications during a humanitarian crisis which is considered to be the worst since WWII and is concentrated on Afghanistan, Syria, and Somalia. Nevertheless, the Office of national Statistics estimates that asylum seekers accounted for around 4.5% of UK immigration. The German equivalent is bound to be higher since it approves about 30% of the applications. But the fact is that the public perception of the volumes of asylum seekers is out of kilter with reality as discussed in a separate post.

Let us be clear about this part of the immigration debate: the Conservative-led Government does not propose turn asylum seekers away and, as an aside, neither does Ukip at the present time. The same applies to the German Government as well as AfD (and as far as I know PEGIDA) in Germany. This is only as it should be in humane, modern societies. It should be stressed that although there are international conventions governing this issue, each country makes its own decisions and determines which applicants to accept or not. Neither is this an area which the EU is involved in.

Net migration

The net migration is the difference between immigration (arrivals) and emigration (departures) since all countries exhibit a degree of turnover in their population. Ultimately, in terms of social and economic, cultural and other pressures that may build-up in a country, net migration is that really matters. Given our focus on UK and Germany, Table 1 shows two contrasting trends. Germany has been experiencing a very sharp increase in net migration during the period 2009-2012, a trend which has continued up to today. In 2014, the net migration in Britain reached 260,000 and 470,000 in Germany. We have seen in the previous posts, the public perception of asylum seekers and immigration in Germany contrasts somewhat with that of the UK. This is not to imply or suggest that immigration is not an issue in public discourse in Germany – far from it. However, in terms of public perception and public discourse, it is relatively equable, except in the case of the PEGIDA movement, which is specifically targeted at Muslims (see the recent a post on this issue), though there is a chance that it will implode following the resignation of, for the lack of a better expression, its colourful ex-leader. Generally though, the contrast with UK is evident. Yet the statistics show that new migration in the same period had been declining in the UK until 2014, undoubtedly influenced by Conservative party’s target of “tens of thousands” (i.e. up to 100,000) immigrants per annum, whereas it is increasing steeply in Germany. The German population rose to 81.1 million people in 2014, the fourth annual increase in a row, boosted by the highest level of net migration in more than two decades.

Table 1: Net migration in Britain and Germany (2009-2012)

  2009 2010 2011 2012
Germany 59,634 151,599 240,377 352,174
United Kingdom 229,000 256,000 205,000 177,000

Source: Table 7c: Net migration in European Union countries, 2002-2012, House of Commons Library, 2014

There be Foreigners in EU Countries: Freedom of Movement at work

Looking at the total figures, the countries with the largest number of foreign-national residents in 2013 were Germany (7.7 million), Spain (5.1 million), UK (4.9 million), Italy (4.4 million), and France (4.1 million). The countries with largest number of foreign-born residents were Germany (10.2 million), UK (7.8 million), France (7.5 million) and Spain (6.2 million). These figures include very large numbers of Britons (1.3 million), Germans (1.4 million) and other EU nationals living in other EU countries, not least in Spain and France. EU migrants accounted for 35% of the total migrant stock in the EU countries as a whole in 2010 living, studying, working and retiring in elsewhere than in their own country. This is, after all, one of the wonderful things that are taken for granted in the EU, right?

Of  Natives and Foreigners

Another interesting dimension is the proportion of migrants relative to the overall population. The table below illustrates that, overall, the UK and Germany had very similar levels of foreign-born inhabitants (12.3% and 12.4% respectively) as a percentage of the overall population. The latest figures are around the 14% mark for both countries.

Table 2: Foreign-national and foreign-born populations of DE and UK (at 1 Jan 2013)

  Foreign National, Number Foreign National % of total population Foreign Born, Number Foreign Born % of total population Total, Number Density of Foreign Born (x per 1000)
Germany 7,696,413 9,4 10,201,192 12,4 82,020,578 123
United Kingdom 4,929,710 7,7 7,828,376 12,3 63,896,077 124

Source: Table 10: Foreign-national and foreign-born populations of EU countries, at 1 Jan 2013, House of Commons Library, 2014

It should be noted that the percentage of foreign-born populations in the UK and Germany are in fact relatively modest compared with many EU countries such as Luxemburg (42.4%) and Cyprus (23.2%), both outliers, well as others such as Belgium (15.7%), Ireland (16%), Austria (16.1%), Sweden (15.4%), etc. The percentages do not appear to be out of line with similarly developed and advanced countries. Indeed, given Britain’s extensive colonial past, unlike Germany, Ireland, etc., suggests that the percentage could have been higher still. What is out of line though is the public perception of how many foreigners there are in the UK (47% more than is really the case), Germany (24%), something which is repeated in other European countries (see a previous post on the perceptions and reality of immigration). This misalignment in public perceptions and reality is even more pronounced when it comes to estimates of Muslims: UK (76% more than is really the case) and Germany (69%).

 EU and non-EU immigration

Another important dimension is the origin of the immigrants. Eurostat data demonstrate that in the case of Germany, a notable proportion of the immigrants (14.7%) are actually citizens returning to their own country. However, half are citizens from other EU countries, with the balance (34.8%) being non-EU citizens. The distribution is somewhat different in the case of the UK (16.1%, 31.4% and 52.2% respectively). In other words, Germany has mainly EU and own nationals as immigrants, whereas the UK has a similar proportion of nationals returning home, but a much larger proportion of non-EU immigrants. This may be explained by the greater influence of the old and new Commonwealth on the migratory patterns of the UK, as well as the economic malaise of the country in 2012. However, it should be made clear (see definitions post) that the UK is fully in charge of its own borders and of its own immigration policy when it comes to UK and non-EU nationals. The latter is not the responsibility of the EU.

The EU-related immigration (31.6% of the total) is the key element that the UK not in charge of because of the principle of freedom of movement of people, one of the four basic freedoms of the EU. Based on the data from 2012, the bulk of the immigration issue, as far as the UK is concerned, was not the EU and its freedom of movement, contrary to what one might conclude from the current political debate and the media reporting in the UK. The contrast with Germany, which does receive more than half of its immigrants from other EU countries, could not be greater. The German Chancellor and the President have gone out of their way to make it clear that asylum seekers and immigrants generally, including Muslims, are a part of the country. They have also made it clear on numerous occasions that the EU’s freedom of movement principle is not up for renegotiation.

Table 3: Immigration by Citizenship in DE and UK (2012)

Citizens of own country % Other EU countries % Non EU Countries % Total
Germany 87,245 14.7 298,541 50.4 206,389 34.8 592,175
United Kingdom 80,196 16.1 157,554 31.6 260,290 52.2 498,040

Source: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=migr_imm2ctz&lang=en

The EU Accession Countries

The EU freedom of movement principle affected about a third of the immigration flows, whereas half were subject to immigration controls in Britain. Furthermore, the recent Accession countries that have been subject of such extensive debate in the media and political circles (the so-called A8 or Eastern European countries that acceded to the EU in 2004, including Poland, Slovakia, etc.) actually made-up 12% of all immigrants in 2012.

The above point reinforces the extent to which the immigration debate in the UK is distorted, though A8 immigration was certainly important during 2004 – 2010. Based on the data available relating to 2012, half of the immigration flows are entirely controlled by the UK and are subject to border controls. This has little to do with the recent Accession or “new” EU countries. Presumably the public is not particularly interested in reducing immigration from the “old” EU (15) countries such as France, Italy and Germany (i.e. 17.1% of the total). In terms of the recent members that are now eligible to work throughout the EU, namely Bulgaria and Romania (the so-called A2), 2014 started with a trickle of immigrants, but this increased steadily, so that net immigration is on the up. Consequently, the EU immigration debate has increasingly focused on the A2 countries where, in addition to the numbers involved, the implicit debate is often about the Roma communities from those countries.

Let us be clear about one thing: it is not the EU’s freedom of movement principle that has historically contributed the largest percentages of immigrants to the UK, except for a short period of time (2004 – 2010). This period coincided with a concerted effort on the part of the UK to actively court people from the A8 countries to migrate to the UK. The UK had made a political and economic decision that A8 immigrants were needed to sustain the economic boom and associated prosperity of Britain at the time. These decision cannot be used to subsequently blamed either the EU (after all, the transition arrangements were in place and the UK chose not to make use of them) or the people who heeded these official overtures from the duly elected British government of the time. Nothing can change these facts. The real immigration story, if there is one, is, has always been and will continue to be the old/new Commonwealth (ca. 26%) and the Other Foreign countries (another ca. 26%), as illustrated in the Table below.

Table 4: Immigration to the UK by Nationality, 2009-2012

2009 2010 2011 2012 % 2012
British 96 93 78 80 16.1
European Union 167 176 174 158 31.7
EU 15 82 76 83 85 (17.1)
EU A8 68 86 77 60 (12.0)
EU Other 17 14 14 13 (2.6)
Non EU 303 322 314 260 52.2
Old Commonwealth 30 31 29 31 (6.2)
New Commonwealth 141 156 151 98 (19.7)
Other Foreign 132 135 135 131 (26.3)
Total 567 591 566 498 100

Source: Table 2a: Immigration to the UK by nationality, 2000-2012, House of Commons Library, 2014

EU15: Austria, Belgium, Denmark, Finland, France, Germany, Greece, the Irish Republic, Italy, Luxembourg, Netherlands, Portugal, Spain and Sweden; A8: Eastern European countries that joined the EU in 2004, namely Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia; EU other: includes all other EU 27 countries (Croatia joined the EU later); Old Commonwealth: Australia, Canada, New Zealand and South Africa; and New Commonwealth: all Commonwealth countries not part of the Old Commonwealth, including those of the Indian sub-continent and African Commonwealth countries other than South Africa.

It would be great if we would refrain from denying the importance and value in economic, cultural and social terms of the EU’s principle of freedom of movement (of people, goods capital and services) to all European citizens. This applies particularly to Britons and Germans, who are themselves far from averse from making full use of the freedom of movement to study, work, retire and invest (e.g. second / retirement homes) elsewhere in the EU. For its part, the German government has always nailed its colours firmly to the mast, as have all other EU nations: freedom of movement is the foundation of the EU and is simply not up for discussion. To put it crudely, Britain can either like it or lump it, otherwise it has to leave the EU.

To make a decision about leaving the EU on the basis of a “swamping” by EU citizens or in response to “benefit tourism” (I a plan a separate post in the so-called abuse of benefits) and other vague anti-EU sentiment may make for good short-term domestic politics in a pre-election period but it is not logical or in Britain’s long term interest. I agree that there are criticisms to be levelled at the EU and that there is a legitimate debate to be had about the role of the nation-state and the principle of subsidiarity but the EU immigration debate is being used excessively to castigate the EU.

Conclusions

I am only too aware of the quotation: “There are three kinds of lies: lies, damned lies and statistics.” I do not expect all readers to be swayed let alone persuaded by the statistics that I have presented above, not least because some of them are quite dated as per the December 2014 House of Commons Library report used. I am sure that others can and probably will make an even more convincing case that Britain continues to be “swamped” by immigrants, that the key problems are the EU and the freedom of movement and that the sooner the UK takes full control over its borders and immigration policies, the better the UK will be much the better for it. So I only ask for consideration to be given to the following issues:

  • The numbers of asylum seekers has declined to pretty small numbers in the UK but an opposite trend is taking hold in Germany, especially because of the Syrian crisis. The numbers accepted by Britain are relatively small but larger in Germany. There is broad consensus about the importance of receiving asylum seekers as long as they are not bogus.
  • The UK had a major surge of net immigration during 2004-2010 and much of this was from the new EU member countries. The UK did not have to let in immigrants from the A8 countries at the time but chose to actively court them to come, live and work in the UK so as to satisfy its overheating labour market and prolong its economic boom at the time. The flows have declined dramatically since 2010, as has overall net migration to the UK but are increasing again, not least because the British economy is growing once again and Britons are employing the immigrants.
  • There is now significantly less immigration from the A8 countries such as Poland, so the debate has moved on to the A2 countries, namely the Bulgarians (population of 7 million) and Romanians (population of 22 million) and implicitly the Roma community (population of 10-12 million in the whole of Europe). The debate on welfare tourism and EU’s freedom of movement will continue in the UK and Germany, though in the latter case it focuses on specifically on benefit fraud/abuse.
  • The majority of immigrants to the UK in 2012 were either UK nationals or non-EU immigrants from the Commonwealth (68.3%) and beyond. This is an issue which the British government is entirely responsible for and exclusively in charge of its own borders. It is not an EC/EU issue.
  • Unlike the UK, the number of net migrants is peaking in Germany, contributing to population growth in the last four years. There is a lively debate about immigration and the PEGIDA movement has been growing. However, there is nowhere near the same degree of emotive talk on immigration, of being swamped, of uncontrolled immigration and so on, despite having almost identical levels of foreign-born population and absorbing increasing levels of immigration.

At the end of the day, the issue is not so much about numbers but about perceptions, emotions, geographical concentrations, etc. There are very real stresses and strains in society at large in Britain and Germany and immigration is a contributor to them. The politicians and media are tapping into those voter concerns but merely debating the symptoms of those concerns by focusing almost exclusively on the ills of the EU, the freedom of movement of people (but not capital, of course) and EU immigration. Would life suddenly be that much better in terms of housing, education, health, wages, employment, benefits, taxes, social services, environment, transportation, etc. as a result of leaving the EU (see the related post on the British Question)? Since the EU has either limited or no responsibility at all for almost all these I very much doubt it. The real causes of the stresses and strains, greatly exacerbated by austerity in Britain and long-term real reductions in net incomes in Germany, will be the topic of future blog posts. I believe that the real causes are to be found much closer to home than either politicians or much of the media care to acknowledge, especially in the build-up to a General Election.

Ricardo Pinto, AngloDeutsch™ Blog, www.AngloDeutsch.EU


“Angry nativism must have no part in it”: take a bow, Douglas Carswell

If you have been following the AngloDeutsch™ Blog, which was just launched in December 2014, you will be aware that the first theme reflects my growing concerns about the issue of immigration in Europe generally and Britain in particular. You will also be familiar with my concerns that the anti-immigration debate is being increasingly linked, inappropriately, with the issue of the European Union (EU). The growing anti-EU and anti-immigrant sentiment is something which the Ukip has been able to exploit to great effect.

There must be something about the Spirit of Christmas and the Festive Season, because this is the only way to explain what has just happened today. The Ukip’s first elected Member of Parliament, Douglas Carswell, astonished and probably alarmed many Ukip supporters, not to mention various Establishment figures in the UK, with the following comments in the Daily Mail. It is worth highlighting some quotations (emphasis added) from the article:

There has never been anything splendid about isolation. It was our interdependence that put the Great into Great Britain – and it is what sustains our living standards today. In such a world, a dislike of foreigners is not merely offensive, but absurd.”

I could not agree more with this statement. In the era of globalisation, which Britain has done so much to contribute to, as well as benefit from, the tone of recent public discourse, led by Ukip and increasingly repeated by others, has indeed been offensive to the foreigners living and working in Britain, to mention the other 27 EU countries. It would be absurd for this sort of tone to be maintained. It is only to be hoped that the rest of Ukip recognises and accepts it. As an aside, there would not be anything splendid about UK isolation from the rest of Europe either, should it choose the Brexit (a blend of the words ‘British’ and ‘exit’ which refers to the possibility of Britain leaving the EU) route.

“Far from being a party that tolerates pejorative comments about people’s heritage and background, Ukip in 2015 has to show that we have a serious internationalist agenda.”

There has been growing criticism of the “kippers” in the media last couple of weeks, with a growing body of evidence showing that, contrary to its protestations, Ukip is indeed tolerating all sorts of rather pejorative views which have no place in a political party with aspirations in local, national, EU and international politics.

“Preparing for the future means putting in place an immigration system capable of saying a cheery, welcoming ‘Yes’ to doctors from Singapore or scientists from south Asia, and a polite ‘No, thank you’ to someone with a criminal record, or an inclination towards welfare dependence. Angry nativism must have no part in it.”

No country, Britain included, should be expected to simply accept criminals from other countries or those that are only interested in claiming social and other benefits without working for them. This is precisely what all 28 countries of the EU are working towards, since it is in their common interest to stop this type of migration. Likewise, it is the practice among all EU member states, as illustrated by the EU Blue Card system, to ensure access to highly qualified labour. Douglas Carswell hits the nail on the head when he stresses that angry “nativism”, the policy of protecting the interests of native-born or established inhabitants against those of immigrants, should not be part of public discourse, especially in the context of the EU.

No Ukip candidate should ever make the mistake of blaming outsiders for the failings of political insiders in Westminster.”

Most interesting of all, he recognises that the anti-immigration (and in my view anti-EU) rhetoric may be convenient but is misplaced. The reality is that many of the issues that people in Britain, Germany and elsewhere in Europe are frustrated and angry about, such as the reduction in real wages and the state of housing, health, education, transport, etc. have little to do with outsiders / immigrants, especially those from the EU. They have been decades in the making and are the direct result of the systemic failings of the leading political parties: the insiders not the outsiders. We could substitute “Ukip” for “political” and “Westminster” for other parliaments in Europe and the rest the quotation would apply to many other EU member countries.

I never imagined I would say this to a member of Ukip, but take a well-earned bow, Mr Carswell. I disagree with the rest of your views, not least your continuing Euroscepticism (stressed in the very same article), but I do admire your moral and intellectual courage in respect to the above quotations. Let us see what the Ukip leadership and activists make of them. Indeed, although your message was mainly addressed at the Ukip, let us see how the leading political parties react to them in the months ahead.

Ricardo Pinto, AngloDeutsch™ Blog, www.anglodeutsch.eu


The Anti-EU and Anti-Immigration Fixation: expedient politics?

This post, the first of a series of the AngloDeutsch™ Blog, focuses on the rise of anti-immigration and anti-EU and/or Euro discourse in Britain and Germany, with a focus on the role being played by both the mainstream and the populist parties such as UK Independence Party (Ukip) in Britain and Alternative für Deutschland (AfD) in Germany. It argues that there is a need for a more measured approach, especially in Britain, rather than simplistic analysis which my be politically convenient but serves only to fan the flames of populist fires.

Growing Anti-immigration and Anti-Euro Sentiment in Germany

The increasingly heated immigration debate reached Germany about the same time as it started in the United Kingdom (UK). Mr Thilo Sarrazin published a book called “Germany is doing away with itself” in 2010, which incidentally became the most popular book on politics by a German-language author in a decade. Its central argument was that Germany’s post-war immigration policy has failed, thus catalysing an intense and raucous nation-wide debate about the costs and benefits of multiculturalism. Mr Sarrazin advocated a more restrictive immigration policy (except for the highly skilled) and reduction of state welfare benefits, while making strong statements about Islam and the Turkish and Arab communities. Mr Sarrazin did not shy away from predicting the Germans will eventually be outnumbered by an underclass of Muslims (see below for echoes of Enoch Powell’s views). The popularity of the book (over 1.5 million copies sold) and various surveys illustrated that his arguments struck a chord in the country, especially with male, middle-class, middle-aged and elderly, conservatives.

The book broke an unwritten rule in Germany by discussing migration, ethnicity and Islam so openly and some might say provocatively. Germans have typically trodden lightly on such topics for obvious historical reasons. The debate even affected the leading conservative sister parties, namely the Christian Democratic Union of Germany (CDU) and the Christian Social Union of Bavaria (CSU). The Chancellor Angela Merkel, well-known for being Europe’s most accomplished politician at saying nothing that might upset anyone, even felt sufficiently emboldened to make one of her few unequivocal statements. In 2010 she stated that multiculturalism had “utterly failed” in the country. Despite concerns that it might happen, the furore of 2010 did not result in an anticipated new party to capitalise on the issue. Mr Sarazzin moved on other challenges, publishing another controversial book called “Europe doesn’t need the euro” in 2012, which once again went against the grain of national of public discourse.

Perhaps in recognition of its political value in Britain and elsewhere in Europe, the salience of the immigration debate has been increasing very fast in Germany. The CSU has been focusing on “poverty immigrants” and “benefit tourists” since 2013, causing German politicians to discuss new instruments designed to keep mainly Roma immigrants from Romania and Bulgaria out as far as possible. Last week, the CSU published a policy paper insisting that German should be spoken both in public and at home.The paper made a distinction between EU and non-EU immigrants; the requirement would apply only to the latter, not the former. There was widespread condemnation in the media that it is not for the state to determine which language people, immigrants or otherwise, choose to speak in their own homes.

In Germany, the Alternative for Germany (AfD) initially had a very narrower focus, namely leaving the Euro (not the EU, which currently no partly currently advocates). It is not by coincidence that it started gaining much greater traction with voters when it began to broaden its policies. Like Ukip, it has brought its guns to bear on the EU (the principle of subsidiarity, rather than exiting the EU) and immigration issues (asylum, immigration law on the Canadian model, etc.). Although this may change, for the moment, neither politicians nor the media discuss the issues in quite the same strident manner as in Britain.

Immigration and EU Scepticism in British Politics

By contrast, in the UK the meteoric rise of the UK Independence Party (UKIP), founded in 1993 and led by their jovial, pint-guzzling, fag-smoking Mr Nigel Farage, who like Mr Sarrazin does not mince his words in relation to immigration or the EU, has been remarkable. Under his leadership, UKIP’s star has been on an apparently inexorable rise, which unlike the German situation so far, is having dramatic consequences on Britain and potentially the EU. Whereas in April 2006 the Prime Minister David Cameron felt able to described UKIP members as being “fruitcakes, loonies and closet racists, mostly.” By 2013, its popularity and organisational capacity has increased so much that in the county council elections across England, Ukip poled an average of 23% in the wards where it stood and returned 147 elected councillors. Its biggest success was getting its first two Members of Parliament elected in Clacton and Rochester and Strood in late 2014.

Ukip has rapidly risen to prominence at the expense of a hemorrhaging of voters away principally from the Conservatives, but also from Labour and the Liberal Democrats. Its principal policy is simple but appealing, namely to withdraw from the EU and agree a free trade agreement instead. However, like the AfD it is no longer a single issue party. Ukip extols loudly and repeatedly the virtues of limited, controlled immigration and its intention to “take back control of the UK borders”. Work permits will be permitted to fill skills gaps in the UK jobs market so long as immigrants have a job to go to, speak English and have accommodation and health insurance. Immigrants will only be eligible for benefits (in work or out of work) when they have been paying tax and National Insurance for five years and will only be eligible for permanent residence after ten years.

The intention is clearly to slow down migration to “manageable” levels. Recent figures had shown a steep decline in net migration until 2014 (the subject of a forthcoming post), when they peaked once again, probably connected with a surge is Bulgarian and Romanian immigration now that the transition period is over. Ukip has coupled the anti-EU and anti-immigrant debate to remarkable effect. This double-pronged weapon is paying rich political dividends for them. However, as with many populist initiatives, while they may be superficially appealing, they would amount to a double-whammy with major long-term consequences if enacted by Britain. The fact is that there is a lot of political smoke and mirrors in the debate. The problems in Britain are long-standing and while they may well have been accentuated by immigration and the freedom of movement (though the jury is out on these), to conclude that the solution is to leave the EU in order to regain control of the borders is simply not credible.

The Ukip tail wagging the bulldog

In the UK, the “kippers” are having a dramatic effect, resulting in an increasing clamour in relation to the issue of immigration. Ukip has effectively manoeuvred the Conservative Party (along with its well-known and long-established Eurosceptic wing) into offering, should they still be in power in 2017, a straight in-out referendum as to whether to remain within the EU or not.  Furthermore, it has managed to push the Government, Liberal Democrats included, into a mooted renegotiation of the UK’s membership terms with the EU, including significant reform so as to repatriate powers to the nation-state. Most EU countries share a concern about the abuse of the subsidiarity principle and are inclined to be supportive, not least Germany. But the increasingly shrill nature of the UK position is making such reform harder to secure. Recent demands to abolish the principle of freedom of movement of workers were dismissed out of hand by the President of the European Commission, Mr Jean-Claude Juncker, as well as the key German politicians such as Mr Wolfgang Schäuble (unthinkable) and Mrs Angela Merkel (no tempering with the principle). The spat over the refusal to pay “anywhere near the amount requested by Brussels by December” appears to be little more than political bluster and posturing.

Also, the casual observer would be tempted to conclude that the immigration debate is increasingly histrionic in Britain. Seemingly every other day, the heat is turned up and the rhetoric becomes ever more intemperate. Mainstream politicians on all sides of the political spectrum, with the notable exception of the LibDems, have taken up the UKIP mantra of anti-EU sentiment combined with anti-immigrant rhetoric. This has become a normal part of the public discourse in the Houses of Parliament, on TV, radio and newspapers. It is hardly surprising that the public feels emboldened to express its views in an increasingly no-holds barred manner, verging on racism and xenophobia. Such discourse might well happen behind closed doors in other European countries but it not (yet) so open.

It is also not by chance that the escalation in immigration and anti-EU rhetoric in Britain has coincided with the recent bye-elections which the Conservative party has lost to Ukip in Clacton and Rochester and Strood. As the Ukip ratings went up, Ministers started banging on about the necessity to get rid of the EU’s freedom of movement principle, the PM refused to pay the additional EU tax which his government has agreed, etc. This smacks of short-term electioneering. However, a red line was crossed when the Defence Minister, Mr Michael Fallon claimed that certain towns are being “swamped” by immigrants and their residents are “under siege”. The Prime Minister’s Office reworded “swamped” with “under pressure” but the boat had already left the harbour. The escalation of emotive language being used by Government ministers is a clear trend that the rest of society takes its cue from.

This is nothing new in Britain. In 1978, Mrs Margaret Thatcher stated that large numbers of migrant workers and foreigners (from the new Commonwealth and Pakistan) meant that people were afraid that the country might be rather swamped by people of a different culture. This even before referring to Enoch Powell’s so-called “Rivers of Blood” speech in 1968 which is credited, at least in part, with playing a contributory role in the unexpected 1970 Conservative general election win.

While such political (and media) rhetoric is hardly new in British politics, it does mark a major new departure in the UK where the Government itself (and to some extent the Labour Party) seems to have lost a sense of moderation in relation to the political discourse on immigration and the EU. I expect this trend to intensify in the months until the General Election in May 2015.

If Ukip (and similar parties of its ilk) is indeed the driving force that is dominating the political discourse on the EU and immigration, this is bad news indeed for immigrants, for the EU and for Britain itself. By comparison the German President,Mr Joachim Gauk, frequently stressed the importance of solidarity vis-à-vis asylum seekers, stressing the virtues of immigration and integration. The German Government is paving the way for tightened asylum seeker law but also a more flexible Dual Citizenship law and strongly defending the principle of freedom of movement of people within the EU as being non-negotiable. At a recent immigration and integration event in November 2014 organised at the Headquarters of the CDU, something that would not be imaginable by the leading political parties in Britain, the Chancellor Mrs Angela Merkel stressed that “Germany has the chance to become a great integration country” and that “Islam now belongs to us.” The contrast in the political rhetoric could not be greater for countries that have more or less identical foreign-born as a percentage of the total population (12.3% and 12.4% in Britain and Germany respectively).

Austerity accentuates long standing problems

The omens are not good for the future of immigration and the EU; both are increasingly conflated and damned, especially in Britain. Ukip appears to have cornered the market of British political discourse and the Conservatives (and to a lesser extent Labour) are increasingly dancing to their tune, so as to avoid losing touch with an important segment of voters who are clearly experiencing a strong allure to these simplistic yet appealing overtures. Politicians of all hues and shades are increasingly latching on to this sentiment. The trend is reinforced by the apparent readiness of a notable portion of the media to sing along to these tunes in Britain, especially in relation to the anti-EU discourse. Without doubt increasing stresses and strains are evident in housing, education, health, transportation, etc. but these are long-term and systemic in nature. They have been greatly accentuated by the recent years of austerity, a process which is set to continue in Britain directly through government policies and indirectly in Germany through long-term wage restraint. They are not the consequence of a surge in net migration over several years cause by the EU and its freedom of movement principle. The discourse stressing these two elements at the exclusion of everything else cannot be left unchallenged.

In the next few posts I shall explore various migration themes and issues, from the perspective of Britain, Germany and the EU. I hope to contribute to a debate about this increasingly important topic before moving on to other issues such as the housing crisis and the future of the EU.

Ricardo Pinto, AngloDeutsch™ Blog, www.anglodeutsch.eu