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| As prices threaten to rise, Theresa May, pictured in her time as Home Secretary, is faced with the same challenge that took down the plans of her hero Joseph Chamberlain. Photograph: Rt Hon Theresa May MP, Home Secretary, at 'The Pioneers: Police and Crime Commissioners, one year on', by the Policy Exchange (License) (Cropped) |
Joseph Chamberlain's vision for Britain was an Empire behind a wall of protectionist trade tariffs - literally taxing imports in order to force the use of domestic and colonial resources. Chamberlain's campaign was ultimately defeated when it became clear that protection also gouged prices, increasing the cost of basic necessities like food.
Prime Minister Theresa May seems set to emulate her hero. In the past few weeks, just the fear and uncertainty of a future Brexit alone has been enough to upset investors, which restricts the access to the credit needed to get things done; to decrease the value of the pound, and therefore its purchasing power; and to start squabbles between suppliers and retailers over the price of food.
That is not a great early sign for the May Ministry. Nothing is likely to threaten the long term longevity of a Government than sharp increase in the cost of food. Most policy can be abstracted or explained away with excuses. But little hits home more directly than it being more expensive just to eat. Having hitched her leadership to the abandoned Brexit wagon, their success and failure now appear entwined.
Remain and Leave
Now, unlike during Chamberlain's days, in terms of how the arguments were made, the debate between keeping EU membership and leaving the EU was not supposed to be a straight contest between free trade and protection. Rather, the two sides were in theory presenting different ways to go about free trade. Supporters of the European system saw a free trade area gradually pushing back barriers, while its detractors saw rules and regulations preventing business exploiting opportunities with the emerging economies beyond Europe.
Yet what looks to be an increasingly drastic withdrawal from Europe looks set to have much the same impact as throwing up a wall of import taxes. Withdrawal from the Single Market, as now seems to be on the cards, would put Britain on the outside of Europe's own tariff barriers. That would in essence subject Britain to all the negatives of trade barriers without any of the benefit of recouping tax receipts, since it would be British exports to Europe facing taxes, not the other way around.
And there is little that could be more damning for the Leavers' approach than driving up prices. If there is one thing that free trade offers, through the opportunity to operate at scale, its a reduction in the cost of doing business and therefore, theoretically, a reduction in prices.
Free Trade and Free Movement
When Richard Cobden and John Bright led the Anti-Corn Law League campaign against tariffs, it was to fight the protection it afforded to landowning aristocratic that drove up the price of bread. Keeping down the price of food was one a core group of goals for the free traders of mid-nineteenth century. They also saw in free trade the chance to build a lasting peace between European nations.
The Single Market, formerly known as the Common Market, was the realisation of a century of efforts by Europe's free traders to realise those possibilities - to bring Europe together in peace with a vast barrier-free trade area.
But building that barrier free area has required a massive regulatory reform process. Some on the Right have portrayed those efforts as a nightmare of expensive and restrictive bureaucratic red tape. Yet to the crafters of the free trade area it has been an essential effort to match up the trading standards, on everything from packaging to safety, in all of the member countries - so that no product or service is faced with expensive and restrictive internal barriers.
That process of taking barriers led one of the biggest, most profound and most controversial removals of internal barriers: free movement of labour. As of the vital resources of business, labour has received the same treatment as other barriers to trade, from the standardization of rights to free movement across traditional borders - allowing labour to be where it is needed most and rewarded best.
Freedom and Fear
It is also the change most provocative to what has become the established European order. Europe that went from being divided between lords to being divided rigidly between nations. It still does not seem ready for the prospect or reality of no dividing lines.
To be clear: it is absolutely right to review trade policy. The free traders of the nineteenth century sought to break open, for the general benefit, a state protected cartel of aristocratic landlords. But today's economy is very different and what might have broken one cartel could easily feed another.
The European system is certainly not without issues. The area itself was formed through technocratic standardization rather than purely through the removal of restrictions on business - enough alone to provoke an argument over the definition of 'free' trade.
However. Going back to a world of trade barriers, of tariffs and protectionist import taxes, opens again the box of vested interests being subsidised by the state and of endless trade treaties that it will take never ending public vigilance to keep in check. And pursuing any path motivated by fear, to throw up barriers and restrictions and take away liberties out of arbitrary discrimination, is dangerous.
The Path Ahead
Europe's social fabric is fraying and the walls between nations are going back up. Fears over living standards, paucity of secure housing and lack of opportunities - fueled by years of austerity's chronic denial of public investment - are closing off the EU's member states one by one and turning them inwards.
In the midst of this, Theresa May has bought into the Brexit cause. She has taken it on as her mandate. Her hero Chamberlain saw his efforts thwarted by free traders pointing out an inconvenient truth: that food was too expensive because of a grain cartel his policies supported.
May's Government has inherited a fragile economy in which food prices are just beginning to threaten a rise. Will the Prime Minister be able to act fast and head off the threat? Or will her government go the same way as the protectionist Conservative & Unionists of her idol?
References
'UK economy 'faces prolonged weakness', Item Club report says'; on the BBC; 16 October 2016.
Jessica Elgot's 'Banks could move assets out of UK by 2017 if 'EU passport' is lost: Government must focus on helping banks maintain rights to sell services across EU or Britain could lost status as financial hub, says thinktank'; in The Guardian; 17 October 2016.
Shane Hickey's 'After Marmite comes the bitter taste of new year price rises: The high-profile row between Tesco and Unilever was just a harbinger of what may be a grim 2017 at the checkouts'; in The Guardian; 15 October 2016.
Katie Allen's 'Rising inflation to hit consumers until 2018, forecasters say: Economists believe CPI will have jumped to 0.9% when data is published this week after slide of sterling since Brexit vote'; in The Guardian; 17 October 2016.
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