Brexit, common law and ethical thinking

I have just read two sharply contrasting articles in “Prospect” about Brexit. Jay Elwes runs out the already familiar “we woz robbed” line, embellished with quotes from Popper which could however equally be applied to either side. Roger Scruton on the other hand makes a far more interesting attempt to understand and interpret why people voted as they did, without the patronising assumption that only stupidity or gullibility can explain the vote. Whether he is right or wrong in his particular analysis – and in my view he is far more right than wrong on this occasion – this approach of taking the vote seriously as something whose meaning(s) must be sought and grasped rather than as a nonsensical aberration to be dismissed is surely the best way to move on past current turmoil and division.

In explaining some of the uneasiness the English in particular have always felt towards the EU, Scruton makes a very interesting point about the essential difference between the UK common law tradition and European (including Scottish) Roman law traditions. The first starts from cases, with rules and principles emerging as “precedent” only from the attempt to grapple with the complexities of the particular. The second starts from principles and seeks to apply them to particular cases, giving perhaps an appearance of greater intellectual consistency but at the expense sometimes of shoehorning some of the facts.

This “bottom up versus top down” dichotomy is an oversimplification of course (Sir Roger does not suggest otherwise) but nevertheless of vital importance and not only for understanding the Brexit vote. I have argued in the book that exactly this priority of the individual case over rules should be the hallmark of our ethical thinking across the board, but did not make the analogy that it produces a sort of moral common law, or perhaps simply “common ethics”. The big difference is that there are no judges or experts in the ethical field, we each have to decide our own cases. But the analogy with common law, trying constantly to tread a consistent line but too aware of the complexity of everyday life to take shelter in simple rules, may be helpful in getting a handle on what may otherwise seem a daunting approach to ethical reasoning.


“No one left behind”

Progressive politics, the only form of non-repressive politics, must be based on sound ethical foundations. That is one reason why the effort to articulate such foundations and show how they work both for individuals and communities is important.

Economic systems and solutions must be built on these same ethical foundations – that is where Marxism and many other forms of socialism went wrong because the economics came first, in the belief that economic relations are the determinants of everything else. Well, they may be, indeed they are in the world we have come to accept, but ONLY IF WE LET THEM. And the irony of this wrong approach is that politics becomes a question of which economic policies produce the greatest short term gain, rather than being about the kind of society we live in.

At a time of such political upheaval and revolt against the political establishment as we are now seeing it is high time that we reexamined the basis of that society. What kind of community do we want to create and live in and bequeath to future generations?

But the world, and my country, cannot wait for the outcome and general acceptance of what will always appear to many as abstruse intellectual ramblings. We live in a world of soundbites and we need a good one, quickly, now. We can unpack it later. What would you suggest? Here’s mine, not original but I think it works:


A thought about Brexit

If a UK exit from the EU (a Brexit) is as all-compassing an evil as our Prime Minister now tells us, leading to global recession, the outbreak of WW3, the economic collapse and isolation of the U.K., not to mention a dive in house prices and the death of all family pets (I may have made one of those up, but only one) – why did he even suggest a referendum which risks such outcomes in the first place?
Rhetorical question, of course, he did it for short term political advantage and did not think it through. But if half the things he now says are true, how reckless was his electoral promise to hold a referendum at all, with potential exposure, however slight, to all these claimed dangers which would not have arisen otherwise?

To be clear, I personally am glad that the people are being given a say, although depressed by the low standard of official debate which amounts on both sides to deliberately muddying waters and simple scaremongering of the kind that won the Scottish referendum. But that is not the point. I did not decide to hold a referendum nor do I think an “out” vote need be a catastrophe. In any field, if a person believes that one particular outcome of an event is as catastrophic as we are now being told Brexit would be and that person can decide whether or not the event should take place, why take even the slightest risk that the catastrophe will come about? It is a ludicrous gamble, like betting your house on a single card or worse, like Russian roulette. Surely it is the very epitome of recklessness and folly?
So, either he is wildly exaggerating – lying, as it is sometimes called – what he believes will be the consequences of Brexit or he is prepared to gamble with national – no, world, according to his own warnings – security to an extent bordering on treachery or madness. Whichever it is, is there anything in modern (OK, in pre-Trump!) times which compares to such political recklessness and shows anyone’s total unfitness for high office more clearly?

Work and welfare

Suppose that, through the use of machines, sufficient resources could be produced without full employment. The balance between the forms of work and welfare that we are used to would have to change. Since we are arguably in the middle of a transition to such a state now we need to think about how they might change. Otherwise, and we can already see this happening, we will move back towards three broad tiers of society – the top wealth owners who can easily live and even get richer on what are basically rents; those with relatively secure jobs or other job related incomes like pensions or small businesses; and the “precariat” as they have been aptly called, who rely on occasional work, zero hours contracts, welfare benefits etc and for whom poverty is never far away. So far, so Victorian, but the enormous danger is that this structure of society is not stable, not in equilibrium. It depends at the very least on the acquiescence of the precariat, whether through the modern equivalent of bread and circuses, through apathy and inertia or, more likely, through a conviction that the order of things is too complex to change, one of the main axioms of neoliberalism.

The era after the industrial revolution led both to unprecedentedly nasty wars which were in large part the spilling over of commercial (imperial) competition into violence and to violent revolutions within some societies. Although ultimately better conditions for workers were brought about particularly by pressure from unionism and the labour movement generally, in many societies it was a close run thing. This degree of progress was accompanied by a partly successful push towards democratic control of societies, but not universally and not without some dark diversions through dictatorships of different kinds. We cannot be confident that the outcome of re-running the experiment will be equally benign, especially when democracy has been corrupted to the point of uselessness by the introduction of deliberately undemocratic structures like the European Union on one hand and on the other, by the blatant manipulation of public emotions without regard for truth or balance which is what now passes as political skill.

Thus it is important to consider how work and rewards are or can be related in society. In the ancient world the balance was very different and NOT working was often the prerogative of the citizen. Slaves worked, citizens didn’t, at least well-to-do citizens didn’t. There may have been other civic obligations, like fighting in the army, but labour for income was not something on which citizens prided themselves.

In fact, in aristocratic societies both yesterday and today the elite do not work but own most of the wealth and receive and spend most of the income. Typically these have been rentier societies, with the income of the elite coming from wealth (generally land) and very little else. In more modern societies the particular form of work we call entrepreneurial activity became more valued, although much of what passes as high entrepreneurship today remains rent-seeking behaviour dressed up with bustle. But in the twentieth century income distribution generally became more tied to work and median incomes were gradually and slowly raised as labour pressed for their effort to be recognised in income distribution. That process has been reversed or at least halted in the last few decades by neoliberalism, with huge pressure on wages except at the very top to benefit profits. The highest “wages”, those of the most senior executives, have become in effect rents on the holding of high office in a company, out of all proportion to effort or effectiveness.

All this is worth reciting only to show that the relationship between work and reward is and always has been complicated. It is simply a myth that work and reward were always linked closely together. “If you don’t work you don’t eat” may sound robust and fair and may be so in some limited scenarios, but as a depiction of real societies it has seldom if ever applied and it has very rarely applied to elites. It is not a principle on which any complex society has been based and it is doubtful, even by the time all the humane exceptions to it have been allowed, whether it ever could be. So although the new predicament of how to distribute the goods and necessities of life if sufficient were available without everyone working needs to be thought about very carefully, the link it seems to threaten between work and reward is not universal, nor eternal, nor even particularly common.

Democracy and Europe

Democracy in a small enough context can mean that people can individually influence decisions that may affect them. It does not mean that they will get their own way, for of course they may be outvoted, so it may still happen that a democratic decision is imposed on the unwilling. Nor is there any guarantee that decisions will be good ones, for the majority may be wrong just as any individual can be wrong. But at least everyone has a chance to influence the decision. The tyranny of a majority you had a chance to be part of is somehow more palatable than a tyranny you were excluded from altogether.

This idea (sentiment?) has to be abandoned however when the number of people involved is too great. Even before that threshold is passed, decisions may be sufficiently complex that many individuals do not have the knowledge or experience to make an informed decision. They will then probably follow with their vote whomever they feel has the right expertise and commands their confidence. So we quickly arrive at the idea of representative or leadership democracy. If we cannot all participate in every decision, because of numbers or complexity, the next best thing is to have a say in who gets to make decisions. This is the basis of western democracy in its many forms.

The people get to choose periodically who will rule and crucially they get to remove leaders who no longer impress, so that the rulers must always bear this in mind in their decision making. Combined with checks and balances, such as divisions of power and rights of appeal, transparency and openness of information where these exist, this is the way most western states are organised. At its heart is the idea that power depends on and derives from the consent of the majority of the people for a given individual or group to lead, a consent which may be withdrawn if the results are unsatisfactory or unpalatable.

A significant part of the case against the European Union is that it has been deliberately designed to evade such democratic control. Despite the changes in the Lisbon Treaty, the unelected Commission not only holds great executive power and has the duty to enforce EU decisions against member states but has the sole right to propose legislation. Basically, much can happen just because the Commission wants it to happen and nothing can happen unless the Commission proposes it should. True, the European Parliament must now approve the appointment of the Commission initially and has the somewhat “nuclear” option to dismiss the whole Commission by a vote of no confidence. But whatever its supporters may say, this is far from being the same as the way governments are chosen in parliamentary democracies, where executive power goes to those who have participated in and won an election themselves. Besides, if the Parliament does refuse to ratify the commission it opposes itself to the Council of ministers rather than the Commisssion. And once ratified, to a large degree there are no democratic controls on the executive powers of the Commission. Yet it acts in many respects as the European Government. Indeed, it is charged to take its own view of what is best for Europe, in contrast to the council of ministers where national government interests are represented or the parliament which, however inadequately, represents the people directly.

Unfortunately, this is a highly technical issue which does not lend itself to soundbites. But significant reform in this area, possibly even abolishing the Commission or replacing it with a regulatory body without a stranglehold on legislation or wide executive powers, would go a long way to changing popular perception of the EU and making its institutions more accountable and responsive to its people. It should be central to the debate about whether the UK continues to be a member.

After all, that debate should not be about trade and whether membership adds or subtracts on balance from UK GDP, because nobody really knows about that and the putative answers that are touted are all compromised by self interest.

It should not be about whether the UK can again be a great power on its own, because the negative answer to that question is surely beyond debate and only nostalgia keeps the argument alive.

It should not even be about control of borders because as the current refugee crisis shows sheer numbers rather than laws are the issue there.

It should certainly not be about entitlement to welfare benefits which seems to have risen to the top of the U.K. wish list, maybe (is this too cynical?) because it can be settled very easily.

The debate should simply be about the way we in the UK relate to the rest of Europe. It makes no sense to have an antagonistic attitude to our nearest neighbours, we must surely cooperate on as many issues as possible. We must trade with them as much as possible and we need to find joint solutions to many problems, not least security and the environment, which in the modern world a single nation state cannot address in isolation. It does not necessarily follow however that we should all have the same laws, the same currency or the same policies, still less merge our national identities into a supra-national state.

But the combination of the Commission’s powers and the de facto position that it alone represents a European standpoint means that at the heart of all European legislation is a drive towards more and more integration – closer and closer union. It is no use the President of the Council (the key intergovernmental body) assuring the UK government that closer union is not an aim of the EU, nor the UK government interpreting that as an “opt-out” from closer union for the UK. The institutions of the EU and in particular the Commission enshrine integration as an objective and put incremental progress towards it beyond democratic control.

So the question is whether it is better for the UK to stay in the EU as it stands and try to reform it from within, or to leave and try to encourage it to evolve in a sensible, more democratic, non-integrationist direction from without. The pity is that the current renegotiation might have given us a unique opportunity to push for change, but it looks like the chance will be squandered for some relatively minor reform of welfare entitlements. It has to be said that a strategy of reform from within has failed miserably so far – and why wouldn’t it, when the powerful original members are pro-integration? Why then should we expect it to work in the future? Thus the choice is to accept a flawed and ill-founded set of institutions which reduce our freedoms and take us towards a destination none of us want, or leave and try to start again. Neither option is attractive or without danger. But Brexit may be the lesser of two evils.

One thing is certain. A “yes” vote in the referendum will mean business as usual. A “no” might mean that the will of the people is taken seriously in Brussels and Berlin and that renegotiation acquires new urgency even after the vote.

Replacing Trident

This is as much a profession of ignorance as anything else, I realise. But the thing is, I entirely see the old Cold War logic of deterrent nuclear missiles in submarines, targeted against an obvious, similarly armed potential foe, namely the Soviet Union. The submarines were supposedly difficult to find and destroy. In the event of an attack on the UK, which might even destroy all major cities and government institutions, a counter strike was still possible even if pointless, thus creating deterrence by mutually assured destruction.
However, I don’t understand the logic of replacing Trident with a similar setup, even though both our major national parties are currently committed to it. Whom are we deterring? At whom are the missiles to be aimed and potentially fired? If there were a crippling attack, presumably disrupting communications and the chain of command, what would be the submarine captains’ instructions? How would they know what to do?
Is this a classic example of fighting the last war, even if in this case the Cold War? Leaving aside the obvious observation that it is difficult to deter a suicide bomber by threats of destruction, the uncertainties are far too great for the deterrent strategy which worked in the Cold War to work today against terrorists and rogue states. So what are we doing trying to repeat it? Even if the greatest threat is deemed to come from a major power, which one is it and how does the isolated submarine captain know at the relevant time? If it is country X, what is to stop the enemies of country X launching a nuclear strike on the UK in the happy expectation that our submariners will launch their missiles?
Thus we could be made less not more secure by deterrence in modern conditions. Even if nuclear weapons are actually deemed essential options for our security rather than (as one sometimes suspects) the international prestige of our politicians, surely the strategy of missiles under the ocean cut off from outside interference is no longer relevant.
What are we doing? It’s not as if we couldn’t think of anything else to do with the cash, even if it were spent on other weapons. But the political class dare not voice such thoughts because to do so might be attacked as “soft”. So we blunder along into another expensive defence mistake. Plus ca change.

How can we tax multinationals fairly?

Large multinational companies can easily avoid paying tax in any particular jurisdiction, to the degree that many pay virtually nothing in the UK on massive business streams. But tax is and always has been a creature constructed by laws and if there is widespread abuse or unhappiness with the current results the only answer is to consider how best to change the laws. We have inherited certain taxes from the past, in this case most notably Corporation Tax which itself dates back only to the 1960’s. But the rules don’t seem to work for multinationals. Perhaps it is time to consider whether the notion of taxing profit, the net income of a company available to contribute to public purposes among other things, is outdated in an age when companies can choose where and how they manifest such surplus.

Moving profit around the world to minimise tax is nothing new, of course. For decades companies have tried transferring goods, intellectual property rights and licences, expertise and anything else they could think of so that costs appeared in higher tax countries and profits in low tax or no tax countries. For decades some governments have tried to keep up by disallowing each new device as it appeared, while others connived at avoidance by offering very low tax environments so that they would gain revenue at a low rate but on large volumes of diverted profit. The process was like a game, played for high stakes but relatively even sided until about the turn of the century. By then the ability to switch ownership, money, even the location of a sale with a few keystrokes had become an overwhelming advantage. It seems now that the game has been decisively won by the companies.

So if we believe that multinationals should contribute revenue for public purposes, it is no use tinkering with the rules of the game. We must change the game itself. One way to go might be to tax sales revenues rather than profits. Another would be to divide declared world profits according to sales revenues in each country, the so called unitary tax method which some US states tried to impose in the 1970’s but fell foul of international tax treaties. World profits are less understated than country profits because they are what justifies a company’s management to its shareholders and drives the share price on which executive bonuses often depend.

But both of these suggestions suffer from the same problem. When you buy something on the internet from the UK you may without even realising it be dealing with a company in a tax haven (such as Luxembourg) and that is where your purchase is filled. No UK-based company actually sells anything in this instance. The website says “UK” but the small print says otherwise.

So the solution has to be radical to take account of the radical change the Internet has brought about in the way business is done. Here is one idea. The location of the buyer rather than the seller could be legislated to be the determining factor of where a sale takes place for tax purposes. That location is not difficult to detect and police on the internet. Indeed, multinationals themselves could be required to log sales according to the location of the buyer and tax could then be based on “value of goods bought per country”. World profits, for example, could be divided up by this measure, or a new tax could replace tax on profits and be based on it.

This is not a trivial change. It would require alteration or even unwinding of international tax treaties and understandings built up over decades. It would of course be bitterly opposed by multinationals and their apologists. It would be opposed even in the forums which consider international tax matters like the OECD by countries who have done well out of providing a home for tax avoidance. It would obviously only work fully and equitably if it was adopted by many countries, and although it could work perfectly well unilaterally there would be the usual, inevitable and false scares that it would destroy jobs. In fact, it would only destroy jobs in the tax avoidance industry, because the location of customers is one factor even multinationals do not control. Of course, someone would eventually come up with a way to cheat the system (someone always does) but meanwhile multinationals might contribute a little more to the countries they harvest.

Taxing multinationals fairly is thus possible but it is not easy or quick. It requires radical changes in the way the taxation of multinational sales and profits are understood and in the way countries seek to divide tax sources between them. All the more reason to address the problem sooner rather than later, by getting such ideas onto the political agenda.