The Brexit Rupture Coming Down Under

Yves here. As the recent fall in sterling says, Mr. Market is taking a series of remarks by Theresa May at a Conservative Party conference very seriously. Even though statements made outside London at intra-party events often need to be taken with a fistful of salt, the media, particularly outlets on the Brexit bandwagon, ballyhooed that news, that she was going to embark on what amounted to a “hard Brexit,” as well as her statement that she’d pull the Article 50 trigger by the end of March. Recall that we’d long ago identified March 30 as our guess as to limit for how long May could refuse to act without the pro-Leave media going on attack. It looks as if she made the same reading.

Note that May tried to have it both ways, claiming her stance was neither hard nor soft, but her giving immigration priority as a negotiating priority was widely recognized as tantamount to a hard Brexit. The New York Times’ reaction is on target with the media consensus:

Over all, Mrs. May’s speech suggested that she would emphasize the right to limit immigration even if that meant securing less favorable access to European markets.

David Davis, the minister responsible for negotiating Brexit, underscored the position that trading arrangements were not the only, or even the most important, part of the British equation.

May’s statements, if she really means them, are tantamount to telling the City she’s abandoned the idea of securing passporting rights for them. Perhaps she is pursuing the British version of Obama’s 11th dimensional chess, hoping that the backlash will offer a way to retreat. Some of my contacts were taken aback by the news. One depicted the stance as “unstable, particularly since she has only a 12 seat majority.”

May’s speech, along with actions by ministers that appear consistent with her giving a more restrictive immigration policy the pride of place, are already producing reactions overseas.

By David Llewellyn-Smith, founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. Originally posted at MacroBusiness

Yesterday we saw two pieces of news that tell you we’re our politics are headed. The first was the UK slashing its immigration intake:

“There can be no question that recent levels of immigration motivated a large part of the [Brexit] vote,” [Home Secretary Amber Rudd] said.

She vowed to reduce net migration, which was 300,000 in 2016 and well over the government’s target of 100,000, to the “tens of thousands”…

“We have to look at all sources of immigration if we mean business,” she said.

Australian skilled workers and university students are potentially in the firing line with the government to examine whether it should “tighten the test” for companies who recruit from abroad.

“It’s become a tick box exercise, allowing some firms to get away with not training local people. We won’t win in the world if we don’t do more to upskill our own workforce,” she said.

She described as “generous” current rules allowing the families of international students working rights and bemoaned that foreign students studying English language degrees “don’t even have to be proficient in speaking English”.

Second, we saw this from former Prime Minister Tony Abbott:

Tony Abbott has told right-wing allies in Britain that he believes he has a reasonable chance of becoming prime minister again, Fairfax Media has learned.

The revelation confirms the former leader is hoping to emulate Kevin Rudd’s 2013 success in returning to the Lodge after being booted out by his own party in 2010 despite his public assurances that his leadership is “dead, buried and cremated” and that “the Abbott era is over”.

A senior Liberal source close to Mr Abbott said the former prime minister maintained a “good chance” of returning to the job because he is popular with the party membership compared to Malcolm Turnbull.

Mr Turnbull is widely perceived within the party to have failed to live up to expectations, scraped through the election with just a one-seat majority and continues to perform poorly in the polls.

The source said the outcome of the upcoming NSW State Council of the Liberal Party on October 22 was an important opportunity for Mr Abbott to showcase to the Parliamentary Party his strength with the wider membership.

There, his Federal Electorate Conference (FEC) will propose a motion for democratic reform of the party. It is likely to be opposed by the left wing of the party, but has a greater chance of succeeding than ever before.

The change would enable the party membership, which is predominantly right-wing, to have a greater say in pre-selecting candidates.

Other Liberals did not rule out the possibility of an Abbott comeback, saying his prospects had improved as Mr Turnbull had failed to improve. They also said it would be difficult to sell a change to a new leader to the base, meaning if a change were to happen it could only feasibly be a reinstatement of the former prime minister.

There is absolutely no doubt what kind of platform Tony Abbott would lead. His visions of Anglophone purity have proven horribly prescient and to reboot the party’s chances at the next election he would have to differentiate himself from Malcolm Turnbull’s globalism. That point of difference will be the new brand of economics sweeping the Western world: lower immigration, higher protections and a swing back to the US alliance. He will use his recently rekindled relationship with Pauline Hanson as a political outrider.

Moreover, with Labor having recently committed itself to Big Australia for all eternity, the Abbott immigration wedge will be epic, cleaving the Labor caucus in two. What’s more, the low immigration platform will neutralise Labor’s joker in the pack – negative gearing reform proposals – by promising to take pressure off housing demand and to police foreign buying properly. And it does so while protecting the tax lurks of Abbott’s local specufestor base.

It also holds out the prospect that Abbott can take the high ground on the environment, including carbon output, by giving Australia a sustainable population. He could be endorsed by the Australian Conservation Foundation!

I’ve got to tell you that this prospect should not be taken lightly. It’s internally consistent, comes with precisely the right sloganeering and authentically anti-immigration leader, sets a spinnaker before the building anti-globalisation gale sweeping Western politics and vacuums up the population ponzi resistance at home that anyone with a political compass can feel building.

If I were Turnbull or Labor, I would get ahead of this by backing right away from Big Australia. The storm is coming.

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  1. Kulantan

    2013 is a good precedent. The personally popular Rudd lead Labour to defeat after ousting the less popular Gillard. Tony Abbot isn’t even personally more popular than Malcom Turnbull, so just from history you’d expect things to go that much worse.

    That said, I’m sure he is going to try and use something that resembles the path in the post. Its just that I wouldn’t rate his chances highly.

    The interesting question that this post raises for me is, who are the City Boys going to turn to? If the Tories are willing to sacrifice free movement of capital to stop immigration and Labour is busy being reshaped by (shock & horror) a socialist, where are they going to go. Should we be watching the Lib Dems for new bling?

  2. norm de plume

    At least despite Brexit the UK has a major party leader in Corbyn with acceptably progressive spinnaker to set ‘before the building anti-globalisation gale sweeping Western politics’, some sort of alternative to more of the neoliberal same, with added racism.

    Turnbull is a failure it’s true, for mine because he is a bank and trade treaty friendly neolib – Abbott-lite really – but for many more Australians, especially members of his own party, because he is a wealthy, (small l) liberal ‘gay whale’ loving, climate change believing urban hipster, probably a closet greenie. To be fair, he has been hamstrung by the knowledge that he is there on a razor thin election majority and more importantly an even thinner party room majority – and as this piece avers, he is probably well behind Abbott in the rank and file of his own party.

    But what is the point of spending your life aiming to lead your country only to fudge your ambition once there because you might upset to many people important to your future chances. ‘Crash through or crash’ Gough Whitlam style doesn’t see to be on the Turnbull palette of options.

    ‘What’s more, the low immigration platform will neutralise Labor’s joker in the pack – negative gearing reform proposals – by promising to take pressure off housing demand and to police foreign buying properly’

    Yes, and the age-old cleavage in Labour between the workers and the cosmopolitan latte-sippers is further exploited by the climate change denialism, which like low immigration appeals to a large chunk of the blue collar constituency.

    It is ‘internally consistent’ – scarily so

    1. OpenThePodBayDoorsHAL

      What interesting times, parties everywhere looking around for new recruits while trying to shore up some kind of “base”, all generals fighting the last war. Labor is like the Dems in the US, who abandoned workers and bought into the neo-lib program of spying and war. Oops that means some of their base exits Stage Left. On the right we have the complete Neanderthal throwback Abbott, who was a laughingstock when he was ousted, desperate to advance his agenda of 1% corporo-fascism and xenophobia. And poor Malcolm In The Middle, looked on with suspicion by both sides because he is neither fish nor fowl, and does not understand how to craft a working consensus in a Parliamentary democracy, why would he, he’s a corporate takeover shark and lawyer. Gillard was expert at this but in the end was knifed by Rudd with his monstrous ego. Meantime the voter just wants a job, wants his kids to buy a house someday, and wants to feel safe. Seems to me an anti-global/anti-1% program would be a huge winner: protect local jobs and industry, stop the foreign pressure on house prices, and pay for it by taxing the Big End of town, from Google to Westpac. The paid-for local press, run by Rupert in absentia, would scream, so I guess that’s why we can’t have it. But a return of Abbott would put the issues into such stark contrast that the giant sucking sound of moderate voters towards the middle would be epic. So maybe Hilary is the political genius after all, just push the neo-lib program but say soothing words about it so the old base can go gently into that good night.

  3. PlutoniumKun

    From an outsiders perspective, it seems to me that May is not leading, but following her party on Brexit. A ‘hard’ Brexit seems the unanimous grassroots choice and the more sensible elements of the Conservative Party have essentially gone underground. its now a matter of faith, not argument. I suspect May has made the calculation that by making immigration the core issue she can get her party behind her, attract many disaffected working class voters from Labour, and use that to tighten her grip on power. Presumably, she feels she can somehow fudge things with the EU to minimise the economic damage. I suspect her calculation is that with so many problems in the Eurozone an opportunity will arise some time in the next 2 years to force through a reasonably acceptable deal. Its even possible that a series of bank collapses in the Eurozone could give her real leverage. I personally suspect its the exact opposite – the more problems there are in the EU, the more attitudes will harden against the UK. A key problem for the UK in making immigration central is that this has brought about very anti-UK feeling in eastern Europe. Without support from the Poland, Czech Republic, etc, the UK’s only real friends in the EU, they are in very deep water.

    There are, quietly, other things going on that may cause even more trouble for May. It flew under the radar, but it seems that the Irish Republic is quietly trying to negotiate an arrangement whereby Northern Ireland remains in the EU. What is significant about this story, is that it appears to be an option quietly being discussed with the Unionist DUP – who actually campaigned for Brexit! It seems that suddenly being faced with the real consequences of Brexit, they are having strong second thoughts. Its difficult to exaggerate what a sea change it would be for Northern Ireland Unionists to be quietly negotiating with the Irish government for some sort of new constitutional arrangement (perhaps with Scotland?). The closer everyone gets to a hard border, the more minds will be concentrated. May has a background as a strong Unionist who opposed the Anglo Irish Agreement which brought relative peace to the north. This sort of break up would cause huge upheaval within the Conservative Party (full name – Conservative and Unionist Party).

    As for Australia – I think its inevitable that a right wing consensus around the developed world will focus on an anti-immigration platform, cohering into a more inclusive ‘small country’ approach. Abbot is a nasty minded idiot, but he has acute political instincts. This will have huge electoral appeal – if the left is foolish enough to get trapped by siding with big business over open borders, then it deserves the electoral savaging it will get. The left needs to quickly formulate a sensible and humane policy which reflects peoples natural desire to control their own countries sovereign borders.

    1. paul

      Perhaps finance could move to Belfast in that extraordinary situation? Plenty of room in the city centre from what I could see, shortish flight time from london.
      May has already told Scotland that their opinions are of no interest, so I think massive upheaval in the UK as a whole would result.
      Applying an eu zone around the square mile would probably be a lot easier.
      The terrible dilemma the tories have created is that they have to pretend they care about what the evenly divided electorate thinks for once, and they are clearly out of practise.

      Little Amber Rudd’s yellow star policy and Ruth Davidson’s description of Scots as thieving vandals illustrate how far from reality they are content to drift.

      All you can really conclude is that the political class has become so degraded they have not only entirely lost control, they don’t really care. Social asset stripping is all they know.They can’t really be arsed with all this complicated stuff.

      1. PlutoniumKun

        I deeply doubt that finance could move to Belfast – a key criteria for professionals is a city that they want to live in (and it lacks the office infrastructure needed). Belfast simply doesn’t appeal (these are people who consider Manchester to be too provincial). Dublin barely qualifies (arguably it doesn’t). Even Frankfurt is considered too dull. It will be Dublin, Amsterdam, Paris or Vienna – few other places will fit the minimal criteria.

        You are right about the UK political classes. One feature I think of the UK system is that an historically very good administrative structure has meant that the ship of state could float on happily even if an idiot was in nominal control (think Yes Minister). But you combine this with a political system in which politicians are only marginally responsive to their constituents and in which they can happily be contemptuous of the 40% or so of the population who will never vote for them, and you have a recipe for a political class who can engage in silly political games and chuck rocks around without consequences, up to the moment when they actually do break a window. And Brexit is the biggest damn plate glass window anyone can break. At the moment they are in the giggly ‘oh, look what we’ve done!’ phase. But soon they will have to work out how to fix it, and they will find they have not the first idea how to do it.

        1. paul

          I wasn’t being entirely serious about belfast which has the strange combination of too little international colour for the cosmopolitan, and far too much local colour for them.
          Yes, office politics has displaced politics and stagecraft, statecraft.
          And they’re not even any good at those.

  4. barrisj

    Having recently spent a month in Oz, walking about in several eastern cities (Melbourne, Sydney, Wollongong), and reading the local press, I would say anecdotally that the major “concerns” of the people and the elites has to do with “national security” issues, particularly those that reflect on Chinese “power projection” and the “need” to hew closely to US guidance in this regard. My sense is that “anti-immigrant” posturing by right-wing politicians is just cut-price nationalism, trying to exploit voter unease in the face of substantive changes within the country. Australia now has to reconcile itself to the basic fact that economically the future is in Asia, full stop, but at the same time its “white” identity is slowly eroding, as the major urban centres now have substantial Asian populations, with a concomitant importation of Asian cultural sensibilities as well. The recent row over Chinese efforts to buy majority interest in the NSW power grid, denied by the Federal Government on “national security considerations”, is simply a rear-guard action forestalling the inevitable, as China increases her inward investment in Australia, moving beyond simply importing Australian coal, iron ore, etc., to begin to seriously challenge the historical UK/US primacy of capital investment. Interesting times ahead, and shabby opportunists such as Tony Abbott are quick to take short-term electoral advantage of these trends.

    1. Jeff

      I shouldn’t worry about China, with the amount of hidden debt they have they’re trying to bail out the Titanic with tea cups. They’ll collapse financially soon enough.

  5. Plenue

    It’s so obvious that it doesn’t need to be pointed out, but the idea of white Australians complaining about outsiders moving to Australia is equal parts hilarious, pathetic, and maddening.

    1. Kermit

      Not really. What about the USA?

      What separates the USA from Australia though is that Australia already has strong immigration controls, and doesn’t have a candidate who has said in emails she wants to remove borders.

      If this anti-immigrant tone were to take form in Australia it’ll be a much more light-weight and subtle I would assume (unless opposition to it comes in the form of labels like ‘racist’ and ‘xenophobe’ (which I’ve been saying for a long time now, don’t work and is a very dangerous (and lazy) strategy, which can in-fact make the situation much more toxic / divisive / volatile, and embolden people / fuel nationalism etc)). Instead, however, I would assume it’ll be more along the lines of capital (re: the housing stock), sustainability and security.

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