“A thousand ages in Thy sight are like an evening gone; short as the watch that ends the night before the rising sun.” These words by the famous 18th Century divine Isaac Watts from his well-known hymn “Our God, Our Help in Ages Past” seems to sum up the recent political situation. When I last wrote this column it was just before the Brexit referendum since when so much has changed. The nation has taken its most important constitutional step since independence for India announced our intention to cease being an imperial power The Government has changed and a new determination has come across the land.
In this political maelstrom the world has not ended, in spite of gloomy forecasts from people who ought to have known better. The pound has fallen against the dollar and has made our exports more competitive which fed through to trade figures so quickly that it is hard to believe that the cause had time to take effect. It may create a little inflation but as prices have been so pressurised this seems both to be limited and not entirely unwelcome. The stock market has rebounded and is now higher than it was prior to the vote and economic indicators have stabilised.
This ought not to be too surprising as the details of Brexit are yet to be implemented. There is nothing fundamentally different about the economy now than there was on the 23rd June. It is the long-term opportunity that has changed not short-term actions. In the years since Neville Chamberlain successfully reintroduced tariffs to the United Kingdom our economic performance has been one of relative decline. There are many reasons for this but one is the long-term effects of protectionism.
Free trade can be difficult for some industries, it puts pressure on companies to reform and adopt new technologies as well as to invest to become or remain competitive. Sometimes this does not work and business passes to other nations. However, even when specifically hard it is nationally beneficial. This is because it reduces prices both to consumers and businesses. For consumers in the 19th Century this meant cheap food which allowed people to buy a wide range of other goods with the money saved or it could have been deposited providing a pool of capital for allocation to good new business ideas. This could happen again on departure from the European Union as we will be free to determine our own trading relations so that cheaper manufactured products and inputs for producers could all fall. For example agriculture chemicals are subject to duty if imported from outside the EU to the cost of farmers and their customers while Japanese cars attract a 10% tariff with which VAT added on makes them 12% less affordable than German ones. This means British consumers are subsidising continental industries. In a less benign way free trade helps because it recognises competitive advantage and opportunity cost. This means money dedicated to activities at which other nations are better has to be reallocated to ones where the UK has an advantage. To do this it puts the activity we are less good at out of business which presents its own problems. In the end it brings much greater prosperity but it can be hard to get there.
This is where the Government ought to act, not to protect inefficient businesses but to help communities affected by change and economic circumstances. To make the most of a free-trading Brexit it is crucial to help those left behind which could be afforded by the greater prosperity that free trade would bring with it.
Away from the economic front the political change in the Conservative Party and thereby the Government was swift and efficient. David Cameron achieved a great deal as Prime Minister, not least in his financial, welfare and education reforms, but he was defeated by the errors and aggression of the Remain Campaign which he felt made his position impossible. I had wanted him to stay but could understand why he felt he had to go. Theresa May has taken over with authority and panache. She has put a clear stamp on her Government in the first few months while recognising the need to deliver on the Brexit vote. It is a truly an impressive start.
By the next time I write the United States will have had an election and Brexit will be clearer but I doubt the speed of change we saw in June and early July will ever be matched again in my political lifetime. A new order for a self-confident nation led by a bold Prime Minster has arisen and is greatly to be welcomed.