Multiculturalist Ideology (Part One): A Rationale For Race War Politics
An Examination Of The Logic of Multiculturalism
An Examination Of The Logic of Multiculturalism
I examined the issue of trade policy in detail in The Ponzi Class: Ponzi Economics, Globalization and Class Oppression in the 21st Century. Free trade is a key component of globalization.
In simple terms, free trade can be defined as: tariff-free, and obstacle-free trade between two or more countries. In practice, things are more complicated. Historically, all countries used tariffs and other protectionist measures. In The Ponzi Class, I wrote:
‘Robert Walpole, the first British prime minister, stated: “It is evident that nothing so much contributes to promote the public well-being as the exportation of manufactured goods and the importation of foreign raw material.” In 1721, Walpole raised the tariffs on imported manufactures significantly and either abolished or reduced the tariffs on raw materials used for manufactures. Export subsidies for manufactures were introduced, as were quality control regulations to protect the quality and hence reputation of British goods. These measures remained in place for the next century. In 1820, the average tariff on imported manufactured goods was 45-55%, compared to 6-8% in the Low Countries, 8-12% in Germany and Switzerland, and around 20% in France.’
Given that Britain underwent the industrial revolution during this period, decades ahead of the rest of the world, then, as an historical fact, a protectionist trade policy was beneficial to Britain. It was only after the industrial revolution that Britain adopted a policy of unilateral free trade. At the time Britain had little to gain from import tariffs as other counties could not compete anyway, and also Britain wanted to convince other countries to embrace free trade and Ricardo’s theory of comparative advantage, where each country would concentrate on those products and sectors where they could compete best, and import goods that they could not or less competitively produce rather than using tariffs to protect themselves. This would mean that other countries would buy British manufactured goods rather than developing their own manufacturing industries. Unfortunately for Britain, other countries took no notice, used tariffs, and developed their own manufacturing industries.
In The Ponzi Class, I wrote:
‘By 1870, Britain’s position as the centre of the world economy had reached its zenith, with Britain exporting both manufactured goods and substantial long-term capital investment, this investment overseas being one factor in the development of Britain’s competitors and the demise of British supremacy. Britain’s share of world exports of manufactures fell from 40.7% in 1890 to 29.9% in 1913. In the half century to 1914, imports were growing faster than exports both in value and volume. This trend of British decline was against the background of increasing protectionism in Europe after 1878, following the Great Depression, and increased US tariffs from 1890. This protection was high and directed at British exports. In 1902, nominal tariffs on manufactures were 131% in Russia, 73% in the USA, 34% in France and 25% in Germany. However, for Britain the evangelical cause of free trade remained absolute and unilateral free trade remained the policy. In 1904 the great and the good gathered at Alexandra Palace to commemorate Cobden’s centenary; after a rousing speech extolling the virtues of free trade, Sir Henry Campbell-Bannerman, the Liberal leader and future prime minister, left the gathering flanked by a guard of honour including 300 torchbearers.’
The result of Britain’s commitment to even unilateral free trade has not been a success. Despite the introduction of the general tariff in 1932 (resulting in the fastest rate of growth since the industrial revolution) after Churchill’s ruinous decision to rejoin the Gold Standard at pre-war parity had wrecked the British economy and put more than 3 million out of work, after WWII Britain embraced free trade once again. The result was decline.
In The Ponzi Class, I wrote:
‘Britain’s overall share in world trade in manufactures fell from 18.5% in 1954 to less than 7% in 1980. The share of Britain’s home market taken by imports grew from 5% in 1955 to 26% in 1980. Imports even kept rising during the recession of 1975. The Thatcher government in the 1980s was lucky in that it had the oil revenues from the North Sea to help sustain the economy and provide the tax revenues that the decimated British industry was less able to produce.’
The decline continued. In 2009, Britain’s share of world trade in manufactured goods had fallen to 2.9%.
In Brexit Means Brexit: How the British Ponzi Class Survived the EU Referendum, I wrote:
‘To start with the total picture, Britain’s payments deficit has continued and even reached an unprecedented 5.5% of GDP in the final quarter of 2015. On an annual basis, the deficit for 2013 was 4.4% of GDP; for 2014, it was 4.7% of GDP; for 2015, it was 4.3% of GDP; and for 2016, it was 4.4% of GDP. These figures reveal a deep-seated problem that shows no signs of correcting itself – despite free trade theories and floating exchange rates.
To focus on the EU, as even Hammond urged as a prelude to his commitment to a ‘global crusade for liberalisation of services’, which is fully consistent with Fox, the Trade Secretary, and his commitment to global free trade. The transactions with the EU are split into four broad sectors: goods, services, primary income (mainly investment income), and secondary income (mainly government transactions). Britain once used to have a healthy surplus in investment income (money earned on investment abroad exceeded money paid to foreigners on their investments within Britain). Britain once used to rely upon investment income to mask its deteriorating trade in goods. For example, in 1924, the trade deficit of £214million was more than covered by ‘invisible earnings’ on investments of £272million, giving a surplus of £58million. Another example: the surplus on investment income was £30,150million in 2005 and had fallen to a surplus of £18,671million in 2011, the last year it was in surplus.
Dealing with the EU, in 2016, the deficit in primary income was £10,346million (down from a deficit of £18,544million in 2015), and the deficit in secondary income was £11,304million (almost the same as 2015). The surplus in services was £24,195million in 2016 (down from £28,365million in 2015). In other words, in 2016, the surplus in all services, of which financial services are only a part, was enough to cover the deficit in primary and secondary income. That leaves the trade in goods. This has been in deficit for a very long time.
To take the most recent years, the trade (in goods) deficit with the EU was £58,354million in 2012, £69,408million in 2013, £79,262million in 2014, £88,955million in 2015, and £95,629million in 2016. In 2016, the export of goods to the EU totalled £144,175million, and the imports totalled £239,804million.
The 2016 figures for combined goods and services exported to the EU was £240,560million, while the total imported was £311,994million…
The trade deficit in goods of £95,629million with the EU was vast, and the clear trend shows that it will continue to worsen. This is a disaster and is ruining the British economy. Selling off assets and borrowing to fund the trade deficit will simply entail more payments in dividends and interest to foreigners and so will make the primary income deficit worse. The prospect of an expansion of financial services exports sufficient to cancel out the trade deficit is delusional. Worse, those in the May Government, with the Hammond master plan devolved from the Remain campaign, have convinced themselves that if they can only enter into some sort of partnership with the EU post-Brexit, then they might be able to liberalize trade in services (as Osborne was prattling about in his Treasury report) and so create more financial services exports – ignoring the corresponding likelihood of more services imports, ignoring the EU’s protectionist moves, and ignoring that Britain is supposed to have left and so should not be meddling with the EU’s affairs. One can recall that Junker said that May was “living in a different galaxy”. Brexit means exit. Britain voted to leave.’
In the subsequent Turbo Brexit: and the case against Brino, I wrote:
‘The British Government was quite open about the size of the trade deficit – presumably in the belief that displaying the gruesome figures fully would lead people to assume that nothing was wrong. In the “UK Balance of Payments, The Pink Book: 2018” produced by the ONS, it was admitted: “The trade in goods balance widened by £4.8billion to £137.4billion in 2017. Imports of goods increased £44.6billion in 2017, while exports rose by a lesser £39.8billion.” It should be noted that this was despite the fall in sterling and despite the low growth rate of the British economy (and so the demand for imported goods would be lower).
The current account deficit has been an ongoing failure of the British economy. The Pink Book stated: “In the run-up to the economic downturn in 2008, the current account deficit was being funded by net investments made into the UK.” The Pink Book continued (italics my own emphasis): “In recent years, investments into the UK from foreign investors has increased and outpaced UK investments made abroad, with 2017 seeing investment into the UK from abroad more than tripling from 2016 … However, in 2017 investments into the UK mainly consisted of other investments, which are primarily deposits and loans. These types of investments tend to be more speculative in comparison to direct and portfolio investments.”
The Pink Book then chattered on about “a few very-high-value inward acquisitions of UK companies that completed in 2016”. It also said: “This then made the initial estimate for the fall in the value of FDI [Foreign Direct Investment] liability flows in 2017 the second-largest change since 1997, which at £50.8billion were £148.2billion lower than the previous year. This brought the value of inward FDI flows in 2017 slightly higher than flows between 2010 and 2015 and similar to those in the early 2000s.”
The Pink Book then stated (italics my own emphasis):
“The international investment position (IIP) measures the stock of assets and liabilities at the end of period, and is the sum of the opening balance, financial flows and other changes (including price changes, currency changes and so on). All else remaining the same, the narrowing in the current account deficit means the UK is less reliant on incurring net financial liabilities to finance its borrowing from the rest of the world and therefore the net liability would be expected to narrow. However, the net IIP (NIIP) widened from negative 2.4% of nominal gross domestic product (GDP) in 2016 to negative 8.1 in 2017, which was a result of total assets decreasing by £235.8billion, while liabilities only fell by £118.7billion and remained a higher value than assets. However, due to the composition of the IIP, revaluation effects need to be considered in explaining movements in the NIIP.”
In other words, things were unexpectedly bad. Britain had had to borrow more as it had been unable to sell enough expensive assets. The external debt statement showed that, in 2017, Britain’s gross external debt reached £6.4trillion, up from £5.7trillion in 2007. The Current Account Balance showed a deficit of £79billion – 3.9 per cent of GDP. This was down from a deficit of 5.2 per cent in 2016 and deemed good news. In the years from 2007 to 2015 inclusive, the deficits respectively were, for each year respectively: 3.6 per cent, 4.2 per cent, 3.6 per cent, 3.4 per cent, 2 per cent, 3.8 per cent, 5.1 per cent, 4.9 per cent and 4.9 per cent. The fall from 5.2 per cent in 2016 to 3.9 per cent in 2017 of GDP should be seen as a fluctuation and not the start of a downward trend. Britain last had a surplus in 1982. Every year Britain sells off its best assets and borrows in order to fund the deficit; a process the government describes as an investment.
The primary reason for this debilitating story is the EU. In a debate at the Oxford Union during the referendum on membership of the Common Market (as the EU was then known) in 1975, in reference to the balance of trade, the Labour MP (and a staunch patriot) Peter Shore emphasized that it was the “trend” that matters:
“Three years ago, four years ago, we were about in balance with the Common Market countries. What’s happened since? £500million down in 72, £1,000 down in 73, £2,000million down in 74. Running now at £2,400million this year. Don’t you see what that’s going to do to the prosperity of this country? You can’t go on borrowing that.”
Peter Shore stressed that Britain was under great threat and peril and that all the pro-Common Market enthusiasts could promote was “fear, fear, fear”, including: “fear that we have been so reduced as a country, that we can no longer, as it were, totter about in the world, independent as a nation. And a constant attrition of our morale.”
In 2017, Britain’s trade deficit in goods with the EU reached £95billion. The surplus in services (£28billion) was insufficient to cover the deficits in primary income and secondary income (£20billion and £9billion respectively). The largest deficit was with Germany (£32billion). The deficit with China stood at £26billion. The trade deficit with the EU and China, both of which use protectionist measures against Britain, was, therefore, £121billion combined.’
The pink book for 2019 is upfront about the scale of the problem, although the data is more obscure. A few quotes give the picture (note the serious ongoing deterioration in primary income, and the surge in the import of services):
And:
‘The UK continued to record the largest current account deficit of the developed economies in the G7 in 2019, with the United States and then Canada recording the next largest deficits … Germany, with its manufacture-based economy continued to record a sizeable surplus equivalent to 7.1% of GDP, albeit slightly reduced in 2019 and the lowest since 2013 (6.5% of GDP).’
And:
‘The trade in goods deficit with EU countries expanded to £96.7billion in 2019, from £93.3billion in 2018. UK exports of goods fell to £170.6billion, the largest declines recorded in the export of goods to the Netherlands and Belgium. UK imports of goods from EU countries increased slightly to £267.4billion as increased trading with France, Spain, the Netherlands and other countries outweighed a decrease in imports from Germany.’
And:
‘The trade in services surplus with EU countries contracted to £17.5billion in 2019, compared with £25.3billion in 2018. The export of services decreased slightly over the year to £123.7billion while imports of services increased by £6.2billion to £106.1billion. Imports of services from France, Luxembourg, Spain and Sweden accounted for much of the increase.’
And:
‘The UK has run a current account deficit in each quarter since Quarter 3 (July to Sept) 1998 or, when considering annual totals, 1983. A current account deficit places the UK as a net borrower with the rest of the world, indicating that overall expenditure in the UK exceeds national income. The UK must attract net financial inflows to finance its current (and capital) account deficit, which can be achieved through either disposing of overseas assets to overseas investors or accruing liabilities with the rest of the world. In the years prior to the global financial crisis in 2008 to 2009, the UK funded its current account deficit by incurring more liabilities to non-residents rather than selling existing foreign assets. Since the crisis … total net inward and outward flows are much reduced, and that the UK has in most years been reducing its foreign assets.’
To summarize the full picture of the UK’s disastrous balance of payments situation with the EU: Trade in Goods is in deficit by a sum of £96,723million; Trade in Services is in surplus by £17,520million; Primary Income is in deficit by £26,665million; and Secondary Income is in deficit by £13,129million; giving a total net Balance of Payments deficit of £118,997million.
Against this ruinous state of affairs, the UK government has spent the years since the Brexit vote grovelling for a free trade agreement with the EU, and continues to do so.
The seriousness of the trade deficit can be measured by the benefits of eliminating it, as has been set out here.