Food for thought for Brexiteers

One could tell a surprisingly comprehensive history of the Brexit project by simply talking about food.

From curved bananas to non-recyclable teabags, Eurosceptics have long relied on myths and scurrilous half-truths about groceries to stoke public resentment over the supposed red-tape lunacy of the European Union.

More recently, Brexiteers have taken up the (mostly false) idea that the EU discriminates intensely against African smallholders in order to protect its own inefficient farmers. The pro-Brexit Tory MP Daniel Kawczynski posed sombrely in front of a tray of supermarket lemons this month in order to lambast "the EU protectionist racket".

But it's not just Africans who will benefit from Brexit. The Sun informs us that after we leave the EU the Great British shopper will all be able to save 40p on a pack of butter and 31p on a punnet of strawberries and much else besides thanks to the tariff-torching free trade deals we will inevitably sign with other countries.

Brexiteers seem to believe that a way to a Briton's support is through his or her stomach. Taking control is framed as taking control, above all else, of our grocery basket.

But it's not all one way. The Brexit food fight is a symmetrical one. US "chlorinated" chicken has become the spectre at the feast, a symbol of what the powerful US agricultural lobby will ram down our throats as the price of an inevitably unequal American trade deal. And few of the no-deal consequence warnings cut through to the public quite as effectively as the threat of a sandwich shortage.

They sometimes try to conceal it, but the agenda of some Brexiteers is plainly deregulatory. One of the reasons the forecasts produced by a small band of pro-Brexit economists show long-term gains for the UK, when every other credible study shows precisely the opposite, is that their models assume we will in future shed all our domestic product standards, including on food imports, and trade on what are known as "world prices".

But the lines between ideological fantasy and reality are becoming blurred. UK ministers insist there will be no compromising of high food standards after Brexit. They also say that in the event of a no-deal Brexit they would waive customs and standards checks on trucks delivering produce from the EU in order to mitigate transport bottlenecks and supermarket shortages. They have not said what, in those circumstances, is to stop some criminal group importing unsafe produce to the UK. Perhaps they believe it's a risk worth taking.

Regulation 1168 of the European Council, from 2011, is just the sort of Brussels red tape that Brexiteers love to hate. It lays out a host of requirements for food manufacturers, from providing detail on the geographical origin of produce to its nutritional content.

But it also says that packaging should warn buyers about ingredients that can cause a dangerous allergic reaction. Fifteen-year-old Natasha Ednan-Laerouse from Fulham died in 2016 after eating a baguette from Pret A Manger which did not list traces of sesame, to which she was allergic, on its packaging.

This was not, in fact, a requirement under the EU regulation because it was a fresh handmade product, although many people, in light of this tragedy, believe this is a regulatory loophole that urgently needs to be closed. The coroner in the case said last week that he would be writing to the government to raise concerns about "inadequate" food labelling regulation.

Brexiteers will argue that this extremely sad incident has no bearing on the issue of EU membership. And in one sense they're correct. There's no reason why the UK post-Brexit shouldn't have new domestic regulations on food labelling that are even tighter in some specific areas.

Yet this, of course, is at odds with their deregulatory impulses and the dream of importing food at world prices. Moreover, it highlights a huge and still unrecognised blind spot on trade. For it is pan-European regulatory harmonisation, regardless of whether those regulations are well-designed or not, that helps UK food exporters to tap into a significant market in the EU. It is this harmonisation that dismantles what Margaret Thatcher once called the "insidious" trade barriers of "different national standards".

Assuming that the rest of the world does not join us post-Brexit in a bonfire of food standards – and there is no reason to expect that they will – our producers will have to conform to the standards of other countries if we wish to sell into their markets. Taking back control from the EU will simply mean submitting to the authority of others jurisdictions, whether that’s the US, Canada, India or wherever. And to sell into the EU we would still have to conform to the single market’s food regulations, even if we are out of it.

Yes, there are costs from regulation. It's onerous to perform tests, to fill in paperwork, print labels and all the rest. But there are vast economic benefits too.

It was 30 years ago this month that Margaret Thatcher made her speech in Bruges, seen by eurosceptics as the lighting of the torch of national resistance to Brussels. Yet earlier in 1988 the prime minister had made another speech on the urgency of completing the single market.

"There was a tendency in Europe to talk in lofty tones of European Union," she said on the subject of regulatory harmonisation. "That may be good for the soul. But the body - Europe's firms and organisations and the people who work in them - needs something more nourishing."

 Food for thought for Brexiteers today.

The fall of Lehman Brothers: ten years of hurt

Cast your mind back 10 years. Survey the political scene. What can you see? The Labour Party has been in power for 11 years. And it seems to be winning the big argument. The new leaders of the Conservative Party, David Cameron and George Osborne, have stopped calling for tax cuts and are instead pledging to match Labour's public service spending plans. "Sharing the proceeds of growth" is the mantra.

Survey the economic scene. What's going on there? Well, there's much talk on the business pages of newspapers of a somewhat mysterious "credit crunch". Northern Rock went under the year before. House prices are down. The stock market is looking a bit sickly. The economy seems to be slowing.

Yet a recession warning by the chancellor, Alistair Darling, is viciously stamped on by aides of the prime minister, Gordon Brown. After all, the Treasury is projecting GDP growth only to dip slightly before rapidly bouncing back. The independent Bank of England expects a similar happy ending.

Survey the international scene. Over in America, George W Bush had been spending lavishly on wars and doling out tax cuts for the super rich. Growth is slowing stateside too. But it's all under control.

The former chief central banker Alan Greenspan had been hailed as the "maestro" of monetary policy, with a knack for cutting interest rates at precisely the right moment to allow the world's largest economy to ride out downturns with minimal damage.

His successor, Ben Bernanke, is seen as an almost equally safe pair of hands. Further afield China is still booming. And closer to home Europe is growing nicely, defying eurosceptic predictions of doom for the single currency project.

Aside from a few mavericks, most economists seem relaxed about the economy. After all, hadn't the Nobel Prize winner Bob Lucas ruled that "the central problem of depression prevention has been solved, for all practical purposes"? Financiers are still heroes, filling public coffers in the UK and the US to the brim with their tax payments.

"Let me thank you for the scale of the contribution you make to the British economy," Brown had told bankers assembled at the annual white-tie Mansion House dinner in the heart of the City of London back in 2004. The sentiment hadn't changed.

"Let me thank you also for the resilience, the innovative flair and the courage to change with which you have responded to the challenge of global competition."

Every bright young university graduate seems to want to work in the City or Wall Street. And it isn't just for those million-pound bonuses. A career in finance promises prestige and power. Fred Goodwin, the boss of the Royal Bank of Scotland, now the largest bank in the world, is a knight of the realm.

Hank Paulson, the former boss of the Wall Street firm Goldman Sachs, is George Bush's treasury secretary.

It was another world.

Then Lehman Brothers went bust and swept it all away.

An economic cliff-edge

In the early days of the financial crisis, which the collapse of the Wall Street bank seemed to have brought to a head, it was not uncommon - even as markets tanked and economic activity slipped off a cliff - to hear people predict that it would all be over; if not by Christmas, then relatively soon.

Those giant banks were extremely well capitalised, we were told. This was just the return of our long-lost friend, the business cycle. The alarm was grossly overdone.

Looking back 10 years on, it's clear how wrong this all was. This really was the big one. After Lehman went bust the multitrillion-dollar global financial markets simply seized up. International trade experienced a terrifying, sudden stop.

The entire global economy tipped into recession as frightened households and businesses slammed shut their wallets. It was the deepest slump in the UK since the 1920s. In America it was the worst since the Great Depression of the 1930s.

To keep the caravan on the road, central banks slashed interest rates to their lowest levels in 5,000 years.

And when rates could be cut no further they had to print money - hundreds of billions of dollars, pounds, yen and, belatedly, euros.

The year after Lehman collapsed two American economists, Carmen Reinhart and Ken Rogoff, produced a timely book showing that when slumps are brought on by financial crises the recoveries tend to be far slower than otherwise.

And so it has come to pass. What the Fed chair Ben Bernanke labelled "the biggest financial crisis in history" has delivered one of the weakest recoveries in history. In Europe, it has turned out to be worse than the aftermath of the slump in the 1930s.

Throughout much of the west, we have seen a decade of stagnant incomes and flatlining living standards.

Here in Britain we are in the midst of the most miserable decade for real wages since the Napoleonic War.

Where would we have been without the crash? Andy Haldane of the Bank of England estimated that the total cost of the slump measured in foregone economic growth was between $60 trillion (£ 46 trillion) and $200 trillion, or between one and four times the planet's GDP.

"To call these numbers 'astronomical' would be to do astronomy a disservice," he observed.

Haldane has also hypothesised that a kind of primitive "dread risk" - an imprint left in the minds of households and businesses by the traumatic financial collapse - is the reason economic animal spirits have been so weak this past decade.

There has been a generalised national economic withdrawal. Cross-border capital flows have slowed dramatically. International trade as a share of GDP has been declining. Globalisation isn't dead, but it seems to have peaked. Donald Trump's trade war and his assault on the World Trade Organisation could conceivably deal the coup de grace.

In the months after Lehman, as tax revenues evaporated, governments allowed their budget deficits to swell. Many even deliberately ratcheted up spending or cut taxes as a form of fiscal stimulus. Anything to put a floor under cratering demand.

It's amazing to look at a chart showing the evolution of debt in the developed world in the years after the crisis. As finance sector debt drops like a stone in 2008 through banks deleveraging en masse this is almost exactly matched by a surge in government liabilities.

It was as if the debt was simply handed over from the private to the public sector. Total debt as a share of global GDP is now higher than it was a decade ago, mainly due to a colossal burst of stimulatory bank lending in China.

Yet policy in the west changed suddenly in 2010. Faced by that astonishing surge in borrowing governments seemed to collectively decide that it was time for fiscal consolidation. It was, of course, a heinous policy mistake. The recovery was far from secure. The time for such retrenchment is during the boom not the slump. And growth duly dipped again, as Keynesians warned.

For some politicians the austerity turn was a result of a genuine, albeit misplaced, fear that bond investors were about to dump government debt and force a national solvency crisis. For others the shift from stimulus to cuts had a more ideological motivation - shrinking the state in order to cut taxes.

Either way, the financial crisis gave birth to what David Cameron himself called an "age of austerity".

The era of zero-sum politics

When economies are growing, the pie gets bigger and politics is a positive sum game. A consequence of weak growth or stagnant incomes is that political arguments are increasingly about the division of the pie.

One person's gain becomes another person's loss. Rancour and desperation abound.

There's an endless squabble among economists about whether inequality has actually worsened since the financial crisis. Different data supports different interpretations. Wealth inequality has almost certainly grown, in no small part because emergency money printing by central banks automatically boosted asset values and those with lots of assets in the first place got richer.

Moreover, public perceptions are pretty clear. Recent polling found that more than half of people in the UK believe the economy has become more unfair over the last decade, while just 10 per cent believe it has become fairer.

Economic disappointments and a rising sense of injustice over the past decade have changed our politics.

It's hard to imagine a left-wing protest politician like Jeremy Corbyn becoming the Labour leader and utterly transforming the party if the financial crisis had not detonated a bomb under the New Labour model of funding public services and welfare through ever rising City tax receipts.

It is difficult to imagine a slim majority of the British people ignoring the advice of all mainstream politicians, almost every major employer and the archbishop of Canterbury, and voting to rip the UK out of the European Union without that mass discrediting of elites a decade ago.

Theresa May's policy agenda when she became prime minister - workers on boards, capping energy prices - was well to the left of anything that David Cameron produced. It was actually to the left even of much of Tony Blair's record.

This Tory swerve was a recognition of that shift in the public mood. Even once-staunch laissez-faire Brexiteers like Michael Gove have pandered to the new popular feeling with promises of interventions in the economy that they would surely previously have decried as socialism.

It's important to recognise that the economic effects have been very unevenly felt. The pay of people in their twenties in the UK is still well below where that of the same cohort was in 2008. Pensioners, by contrast, have been protected. Averages can conceal as much as they reveal.

Youth unemployment across the eurozone reached eye-watering levels and still remains extremely high.

The labour force participation rate for young men in the US has not recovered since the crash. Like some kind of a cursed diamond, economists warn that the psychological scarring of a period of unemployment early in life lasts for a lifetime.

Perhaps we shouldn't be surprised that this luckless generation, which has entered the workforce since the crash, harbours a much more negative attitude towards finance and free markets than older generations.

European politics, in particular, has undergone a revolution in the past decade. Mainstream social democratic parties have collapsed in support across Europe. The radical left and populist right have been the primary beneficiaries. The catastrophically handled eurozone crisis is the proximate cause - but the emergency was brought on by the bursting of the global bubble in 2008.

The post-crisis flood of economic anxiety helps explain the surge of social resistance to proposed trade deals (like the reviled "TTIP"), both in Europe and America, that now comes not just from the usual antiglobalisation pressure groups but increasingly also the middle classes.

It helps explain the widespread paranoia about robots taking humans' jobs, even, ironically, as automation proceeds at a snail's pace and (human) employment rates are high or recovering. The context is torrents of anxiety released by the breaking of the dam of security in the financial crisis.

And then there's immigration. Despite the bilious propaganda of the populist right, migration flows have not been responsible for people's economic pain either in Europe or America. But migration pressures on public finances have hit at a time when many families have been under severe financial stress. Migrants have, true to the dismal historic pattern, been a convenient and salient target for public frustration.

And then there's Trump - an experience-free, overtly racist, self-confessed molester of women winning the White House. Listen to Trump's invocation at his inauguration address of "rusted out factories scattered like tombstones across the landscape of our nation", his excoriation of "the false song of globalism".

Heed, too, the promise of the most powerful politician in Italy, Matteo Salvini, "to give voice to those [European] populations that are cut down by those who only ever cared about financial outcomes and the multinationals and who have offered us a future of precariousness and fear".

Immigration-obsessed nativists they may be, but they appeal to economic grievance and anxiety. Modern populism's parentage can be traced back to the financial crisis.

Finance less proud

The first bit of banker bashing, oddly enough, came from Alan Sugar. Publicising the latest series of The Apprentice back in 2008, he declared had no time for the "30-year-old open-collared" bankers who had been sniffy about his hit TV show and laughed at his posturing as a hyper-successful businessman.

"They sit there and criticise me, saying what a bloody wanker I am," he complained, "and then they lose £ 1bn and Bear Stearns [the Wall Street bank rescued in March] goes down the drain in the middle of the night." Such sentiments were rare 10 years ago. Now they are etched deep in our culture.

The political status of bankers and financiers had utterly changed thanks to the crash. No ambitious politician today would dream of presenting him or herself as a champion of finance in the way that Gordon Brown did a decade ago.

In the run up to the Brexit referendum, the official Leave campaign - stewarded by cabinet members Michael Gove and Boris Johnson - even produced an attack video drawing attention to the fact that the Bank of England governor Mark Carney had once worked for Goldman Sachs.

The inference was that his warnings about the likely harm of Brexit were not only to be disregarded as Project Fear, but reviled as the corrupt works of an evil banker.

It's notable how the voice and interests of the City in the Brexit negotiations have commanded far less respect than they would have a decade ago. The government did not, in the end, lift a finger to protect the single market "passport" for financial services.

A low profile is the new normal. A decade ago a banker would have been happy to announce his profession at a dinner party. Now he hopes that no one asks.

Winston Churchill once said he wanted to see "finance less proud and industry more content".

Manufacturing is hardly content - the sector's output is barely higher than it was in 2008 and a no-deal Brexit is an existential threat for some firms - but it's certainly the case that finance has collapsed in esteem.

The popular mood on free markets in general has also been transformed over the past decade. Giving testimony to Congress in 2008 Alan Greenspan, with rather admirable honesty, admitted that he had "found a flaw" in his ideology of naturally self-policing, self-righting markets.

Now we can all see that flaw. "For my friends everything, for my enemies, the law," said a Latin American president. In 2008, as the bailouts rolled out and unemployment soared, it was socialism for super-rich bankers and the market for the rest of us.

Well funded libertarian think tanks today preach the old religion of the untrammelled free market, privatisation and the rollback of the state, but like the Catholic church after Luther, the majesty is gone.

There are vanishingly few buyers among the general public.

The International Monetary Fund is something of a bellwether. In the 1990s it was a font of advice - even instruction - to developing countries: deregulate, privatise, financialise. This was the free market "Washington Consensus".

Now the fund publishes research on how inequality damages growth; how there can be too much finance in an economy. It's even recanted over its past "neoliberalism".

What happened to our new deal?

"Never in the field of financial endeavour has so much money been owed by so few to so many," was the verdict of the former Bank of England governor Mervyn King on the financial sector's taxpayer-funded rescue.

But one of the stunning features of the crisis was not just how bankers managed to crash the entire global economy with their greed and recklessness and then get bailed out by the rest of society, but how much outright fraud and criminality in the sector has subsequently been uncovered.

The former UK regulator Bob Jenkins has counted more than 144 scandals, from interest-rate rigging, to insurance misselling, to money laundering. Banks worldwide have been fined more than $300bn since the crisis for such misdemeanours.

Some relatively low level traders have gone to jail. But what about their bosses? "If they knew, then they were complicit. If they did not, then they were incompetent," says Jenkins.

But there's been little personal accountability for the bosses of big banks. Goodwin lost his knighthood.

Dick Fuld, the boss of Lehman nicknamed "the gorilla of Wall Street", hasn't said a word in public in a decade. Many others have disappeared into quiet ignominy.

But as Warren Buffett says: "They went away rich. They may have been disgraced, but they went away rich. I don't think the incentive system has been improved from what it was 10 years ago."

Pay and bonuses in finance are still obscenely high, mainly because profits remain plump due to activities that another former UK regulator Adair Turner summed up as "socially useless". But much of what finance does isn't just useless, it's positively harmful.

Like a parasite, it extracts money from households and businesses in the real economy in the form of extortionate fees for facilitating companies' public fundraising. The Royal Bank of Scotland was accused of asset-stripping struggling small firms for profit. The official regulators' report found systematic mistreatment of them.

Even with the neverending scandal sheet, there remains a captured branch of the media which still fawns on financiers, treating their opinions with reverence, as if 2008 was all just a bad dream.

And finance is still politically dominant in some respects, not least in the US. Trump railed against Wall Street on the campaign trail, accusing it of "getting away with murder". But look at the reality in office. He filled his cabinet with ex-Wall Street financiers, including his treasury secretary and his chief economic adviser.

Even more alarming than the personnel is the policy. Trump's Wall Street deregulation drive, including loosening rules on megabanks speculating, has gone under the public radar amid the president's other scandals and affronts to decency.

Here in the UK, despite repeated efforts to encourage the big banks to ratchet up their lending to small businesses, they devote virtually all their balance sheets to financing residential mortgages and consumer credit. Aggregate household debt as a share of income, which collapsed in 2008, is growing again.

The Treasury's desperate efforts to get the Royal Bank of Scotland back into private hands, even if it means crystallising a multibillion-pound loss for the taxpayer, shows how achingly conservative the political establishment remains when it comes to financial reform.

The idea of turning RBS into a network of state-owned banks to lend to small firms, along the lines of the highly successful German model, is apparently unthinkable to ministers and civil servants (although Labour has expressed an interest recently).

The global financial system is still far from safe mainly because true reform - vastly higher capital buffers and fully cleaving retail and investment banking - was dismissed in the years after the crisis as too disruptive and unnecessary.

In reality it was blocked by the vested interests of the financial industry. The sector still spends billions of dollars in the US lobbying Congress, just as it did before the fall of Lehman.

After the Wall Street Crash in 1929, the Pecora Commission, established by the Senate, rigorously exposed the top-to-bottom corruption of American finance. That investigation incensed the depression-struck US public and forced politicians to break up the giant banks and financial trusts of the day, notably cleaving the mighty old empire of John Pierpont Morgan in two.

The vigour of the past casts shame on our timid present. One of those two banks created in those 1930s structural reforms, JPMorgan, today has a balance sheet of $2.5 trillion dollars. That's 12 per cent of the entire US economy. It's also up $1 trillion on a decade ago.

The curse of "too big to fail" is still with us. So are its rewards. JPMorgan's stridently anti-reform chief executive, Jamie Dimon, was paid $29.5m in 2017. Dimon gave an interview last week in which he boasted he could beat Trump in an election adding: "And by the way, this wealthy New Yorker actually earned his money."

The difference between the 1930s and 2008 is that in 2008 politicians saved the financial system, averting what would have been a Great Depression-style social catastrophe. It was the only responsible decision they could have made. Yet it also generated a deadly complacency. It nourished the view that the old system was not truly broken, that we could go back.

Too many are still trying to jumpstart the old economic engine of ever accumulating consumer debt, super-profitable megabanks and industrial-scale financial speculation. After the calamity of the 1930s Roosevelt offered a "New Deal". On finance today we're been offered a revamped old deal.

Much has changed over the past decade in our economic life, in our politics, in our culture. But the hard reality is that, where it really matters, things haven't changed nearly enough.

Free movement has worked well for the UK economy

Things are getting bleak when even non-partisan experts seem to be turning a blind eye to evidence.

Last week's comprehensive report on European Union migration from the government's independent Migration Advisory Committee (MAC) gave with one hand and took away with the other.

It did a splendid job of busting some entrenched myths about the economic impact of flows of EU migrants under freedom of movement.

No, EU migrants are not a drain on public services or the public finances. No, they do not discourage employers from offering training. No, they do not harm schools. They are not responsible for more crime.

There is a small negative impact of low-skilled EU migration on low-skilled UK wages but this is more than offset by other factors, not least the evidence that migrants seem to boost national productivity growth.

Such an authoritative overview would have been most welcome during the 2016 EU referendum campaign, when politicians sprayed the public with bogus claims about the adverse economic impact of free movement, often without media challenge.

As Jonathan Portes of King's College London wrote for The Independent: "It is hard to overstate the significance of these findings. Immigration, overall, has made the UK a more productive economy and a more prosperous country - and can do so in the future."

And yet the MAC's chair, Professor Alan Manning, also recommended last week that a post-Brexit immigration system should cut off opportunities for low-skilled workers (including from the EU) to come to the UK, while throwing open the door to the high-skilled from everywhere in the world. "Low-skilled", by the way, would effectively encompass those migrants who could only command a salary of below £ 30,000 a year, which is higher than the UK's median.

This is strange because there is nothing in the evidence assembled by the MAC which seems to support this radical change of immigration policy from an economic perspective. While it finds that high-skilled migration is more economically beneficial, there is nothing presented which suggests low-skilled migration is, in any substantive way, harmful. The opposite in fact.

And the heavy reliance of some sectors on EU workers speaks for itself of the likely disruption of cutting off the supply. EU migrants account for 30 per cent of employees in food manufacturing, 16 per cent in warehousing, and 14 per cent of construction workers.

The Institute for Public Policy Research think tank has estimated that, under the regime advocated by the MAC, virtually all of the EU employees currently working in hotels and restaurants would have been ineligible to come here.

Nevertheless, the MAC's policy advice seems to have strengthened the hands of the anti-EU free movement members of the government, including Theresa May. Reports suggest that cabinet ministers have concluded that this "high-skill yes, low-skill no" recommendation is roughly what they will target.

This isn't final. Assuming there is no collapse in the Brexit talks before next March, talks will then begin, during the transition, on a free trade deal. The EU is very likely to ask for some continuation of work rights for all EU citizens in return for the kind of comprehensive agreement that the UK is shooting for.

And reports also suggest the cabinet accepts the need for some kind of "specific route" for low-skill worker migration from the EU to continue for heavily migrant-reliant sectors such as agriculture, social care and hospitality. The MAC report had only mooted a carve-out for agriculture.

Yet there's something unsettling nonetheless about the general direction of travel set up by the MAC and the government.

Professor Manning seems oddly insouciant about the economic consequences of cutting off the supply of low-skilled labour to certain sectors, saying they are "not necessarily the parts of the UK economy that we want to be growing".

This would hold more weight if the MAC had directly analysed the likely economic costs of government interfering with the forces of supply and demand for low-skilled labour. But it didn't.

Jonathan Portes also points out that, despite the MAC report being impressively comprehensive in most dimensions, it did not commission work on how trade in goods and services and liberalised migration for work can be mutually supportive; an important subject in relation to EU free movement.

Yet one of the great virtues of science is that one need not draw the same conclusions from the data presented, or the evidence uncovered, as the particular scientist presenting it. One perfectly respectable conclusion from the empirical work marshalled by the MAC is that free EU movement is actually already working pretty well for the UK economy and that - Brexit or no Brexit - there is no case for scrapping it.

Normalisation of racism in our politics and hate crime on our streets

Not long after the shock European Union referendum result in 2016 there were reports of thugs tearing headscarves off the heads of Muslim women. "Fuck off to Poland" letters were posted through the doors of eastern Europeans. People were assaulted on public transport. And worse.

Police reported a surge in racially motivated hate crime. Many linked it to the xenophobic rhetoric of the pro-Brexit campaign, with its naked and rather desperate scaremongering about refugees and Turkey's supposedly imminent accession to the bloc.

Pro-Brexit media organisations sought to rubbish the link, even the statistical reality of the spike itself.

But it was clearly there in the official figures. And the consensus, accepted even by the Home Office, is that it was not just an artefact of a greater willingness of people to report such incidents to the police.

So why did it happen? Did the British public's attitudes suddenly become more hostile overnight towards immigrants and ethnic minorities? It's not impossible. But it's likely that something more subtle happened.

A new economic paper by Facundo Albornoz, Jake Bradley and Silvia Sonderegger, all from Nottingham University, explains the disturbing spike through a framework of a theory of "social norms" and "information shock".

"The referendum revealed that anti-immigrant sentiment was more widespread in the UK than was previously believed," argue the authors. "Following the referendum, people who had so far concealed or repressed their private views for fear of appearing politically incorrect felt empowered and started adopting a behaviour more in line with their true preferences."

Somewhat counterintuitively, they discovered that the biggest spikes in hate crime tended to occur not in areas that voted strongly for Leave but in majority Remain areas. A one percentage point increase in the Remain vote of an area was associated with a 0.5 per cent increase in the level of local hate crime.

Why would that be? The researchers hypothesise that latent xenophobes in Remain areas had been influenced by local norms about acceptable behaviour. The surprise effect of the national result was thus greater, making them more likely than those in Leave areas to act on their worst impulses.

The results are not conclusive. There needs to be more evidential support, perhaps through polling, for the contention that people's views on immigration are shaped by local, rather than national, behavioural norms. And it's not clear why a bigger information shock for a bigot would mean a higher subsequent propensity for violence.

Yet the paper's argument seems broadly credible. And it's a useful attempt to explore the mechanism through which the "normalisation" of bigotry by mainstream political discourse in broadcast studios and conference halls can translate into violence and intimidation on the streets.

Economists sometimes assume that people have fixed "preferences" as individuals. This can be a useful simplifying assumption for modelling behaviour. But we all intuitively know that doesn't always hold. We can be influenced by those around us. Those influences interact with our preferences.

It's notable that there was a similar spike in hate crime in the US after Donald Trump's surprise election victory. This followed a campaign, of course, in which he had, among other things, called for a "shutdown" of all Muslim immigration and labelled Mexicans as rapists.

What are the lessons? Well, it tells us to be extremely wary of upsetting anti-racist norms.

Some, like David Goodhart of the think tank Policy Exchange and Eric Kaufmann of London's Birkbeck College, have been proposing an official recognition, even promotion, of the "legitimate group interest" of white people.

This is based on the theory that the white majority in the UK is economically and socially neglected due to an official fixation on multiculturalism and diversity - and that this has created a "white grievance" which has been fuelling right-wing populism.

Even if one accepts this theory - and there are myriad grounds for challenging it - there are dangers in accentuating the political "salience" of a majority group's ethnic identity.

Encourage people to believe they belong to a sprawling "white" group with a "legitimate majority grievance" and they are liable to start behaving as if race is the key political dividing line, rather than issues such as, for instance, income inequality or social class.

Turning Britain into a country like Kenya, where politics is a dominated by ethnicity, is not an attractive vision. And the Nottingham empirical work on how bigoted underlying attitudes can be brought to the surface by a shift in political rhetoric reinforces the case for caution.

That will draw accusations of double standards, of course. Why is it acceptable for politicians to talk about the ethnic identity and needs of minorities but not that of the majority? A large part of the answer lies in the simple reality of inequalities of physical vulnerability between groups in our society - something so distressingly underlined in those weeks after the referendum.

Donald Trump’s duplicitous ‘fair trade’ rhetoric

Donald Trump sometimes tries to claim he’s not really a crazed protectionist, merely a champion of what he describes as “fair trade”. The implication is that if trade was not “rigged” by cheating foreigners, he would gladly decommission his battery of new import levies.

So if China stopped its intellectual property piracy, its forced technology transfers, its restrictions on US access to its own market, its currency manipulation, we could have trade peace in our time. If Europe would only end its discrimination against American vehicle imports, we would all be able to get along famously. And so on, with the same applying to Mexico, Canada and every other country that has felt the lash of Trump’s anger on trade. But as Mitt Romney once put it, “such promises are as worthless as a degree from Trump University”.

It should be pretty clear by now Trump’s “fair trade” rhetoric is a study in diplomatic and commercial bad faith.

Today’s 10 per cent tariffs from the White House on a further $200bn of Chinese imports – hitting handbags, rice and textiles, along with several thousand other items – take the total value of trade affected by Trump to $250bn. That’s the value of roughly half the US imports from China.

It would be brave to bet against US tariffs eventually landing on the other half too, as Trump has explicitly threatened. Those who predicted the “grown-ups” in the White House would restrain the president and prevent a trade war breaking out do not look particularly prescient today.

The US claims China is not engaging with its trade concerns. Yet some in the White House privately say they are delaying imposing the full – previously threatened – 25 per cent tariff rate on imports to give US companies more time to shift manufacturing back from China to the US. It seems the real strategy is less about making global trade fairer, in Trump’s eyes, than in incentivising industrial “reshoring” onto American soil.

There is actually a reasonable case for penalising China for its flouting of the rules of multilateral trade, such as through overproduction, dumping overseas and the nation’s excessive restrictions on market access. But a policy of reversing the globalisation of supply chains really does ignore the foundational economic lessons of Adam Smith about the benefits of the division of labour, and of David Ricardo on the merits of a nation recognising its comparative advantage.

The primary loser from Trump’s trade deal will of course be the American consumer. The hypothetical benefits of more manufacturing jobs will be more than cancelled out by higher prices in the shopping malls.

The Trump administration has exempted consumer electronics such as smartphones after lobbying from companies including Apple which, famously, assembles its iPhones in China before importing them to the US.

Chinese bicycle helmets and baby high chairs were also exempted, which suggests someone in the White House, if not the president himself, intuits tariffs are likely to push up domestic prices – which may not be helpful ahead of US mid-term congressional elections.

But whoever it isdid not intuit enough. For the idea one can limit the domestic economic impact of tariffs by carving out exemptions for certain popular or sensitive products is naïve in the extreme. In this age of sprawling and complex cross-border manufacturing supply chains there are connections that are hard, if not impossible, to perceive.

As the Apple boss Tim Cook notes, there are iPhone components manufactured in the US which are exported to the China so it can be assembled. What if China imposes tariffs on those in response to Trump’s tariffs? That will likely push up US iPhone retail prices even if there are no direct tariffs imposed by Trump. Deliberately clog the arteries of trade and the economic damage will inevitably show up somewhere, perhaps where it’s not expected.

What will the impact be on the rest of the world, on growth? China is already retaliating and will probably match US tariffs dollar for dollar, at least as far as it can given its bilateral trade surplus. Europe has hit back on steel import duties with charges on Harley Davidson motorcycles and Florida orange juice.

The Bank of England has estimateda global trade war – in which everyone raises tariffs on everyone else by around 10 percentage points – would slow worldwide GDP growth by around 2.5 per cent over three years. That’s a serious economic loss in the context of a $90 trillion global economy. It would hold back UK GDP growth two per cent and the US equivalent around five per cent.

But such estimates, though reasonable, are also potentially misleading. As Maury Obstfeld, chief economist of the International Monetary Fund, recently warned: “The multilateral rules-based trade system that evolved after [the Second] World War... and that nurtured unprecedented growth in the world economy … is in danger of being torn apart”.

This regime rupture isn’t an outcome which one can reliably model based on historic economic relationships. It would put us in a wholly new and dangerous world. Trump says trade wars are “easy to win”. He’s wrong. But multilateral trade systems could be easy for a belligerent president to break. And we may find it terribly hard to put them back together again.

Beware ideologues who would inflict pain on others

At the peak of the global financial crisis a decade ago there were some who insisted that politicians and regulators should sit back and just let crumbling banks go bust.

No bailouts. No rescues. What we needed, they said, was creative destruction.

There was plenty of other similarly terrible advice in the following years. There were those who argued that governments needed to slash state spending, even at the very height of the global recession. There were those who shouted that emergency money printing by central banks would rapidly result in destructive inflation. When that crippling spike in prices failed to materialise, they switched to warning that "quantitative easing" would be a form of slow-working poison for the economy, keeping alive zombie companies. They began urging central bankers to put up interest rates as soon as possible.

Although governments, tragically, started to cut deficits far too early, before the recovery was secured, they ignored most of these suggestions. And thank goodness. Such policies would have led to massive economic destruction, and severe social suffering.

To be clear, this isn't to argue that the mainstream policy view is always entirely right. The mainstream policy view before 2008 was, after all, that the banking system was well capitalised and light-touch regulation was a good idea. Nor is it a rejection of the idea that things should have been handled differently. Unlike the Bank of England, the US Federal Reserve bought other kinds of bonds than just government debt as part of its money printing. The Swedish central bank imposed negative interest rates, where others baulked at going below zero. Iceland put bank bosses on trial. There are legitimate arguments about how the crisis was handled over which reasonable people can disagree.

This isn't about nuanced policy debate. This is about the dangers of arguments plainly based on ideology rather than evidence, that brush aside the question of trade-offs and uncertainty, whose advocates are suspiciously blasé about the risks of pain that will be borne by others, who seem to luxuriate in their aura of almost Old Testament righteousness.

But, of course, the fact that the advice of the zealots was ignored gave them an opportunity too. It allowed them to say: "Things would have been better if you had done what we said." And there's sadly a market for this view of the world. There are plenty of people today who will parrot the line that that money printing has been a disaster, that governments should have cut spending in the bust alongside the private sector, that the financial system should have been allowed to fail in 2008.

Now we can discern a similar dynamic over Brexit. A small caucus clamours for no-deal. A tiny group of economists, whose work has been comprehensively and repeatedly debunked by genuine trade experts, claim it would actually deliver a tremendous boost to GDP. The boss of Wetherspoons, Tim Martin, says crashing out, offering the most risible argument, would be a "huge gain" for consumers, even as the rest of British industry dissolves into terror at the prospect.

We may yet crash out. But the likelihood is, still, that we will not, that responsible voices and reasonable politicians will prevail.

What follows then? The likelihood is that we will be told by the ultras it was because we didn't drink the Kool-Aid that we haven't woken up in their Brexit paradise, that the quisling politicians messed it up, squandered the chance.

It's tempting to hope that the headbangers get what they want. Then they will have to own the fallout.

Then they will be forced to face up to the reality of their ideas and to be held directly accountable. Yet this is to misunderstand their psychology. For the irredeemably ideological it is always someone else's fault.

There's always a treacherous stab in the back.

However, responsible policymakers do not knowingly inflict harm on populations in order to win an argument.

There is no simple way out of this trap of responsibility. So how to neutralise the siren voices? We can't run repeated experiments on economies to discern the merit of various strategies as we might in a video game simulation. The best we have is history and natural experiments.

The US authorities failed to rescue its collapsing banks in the 1930s. The result was an all-encompassing financial panic and, ultimately, a loss of one-fifth of the economy and 25 per cent unemployment. Greece was forced by the rest of the eurozone to cut government spending in the midst of its bust. The result was strikingly similar to America in the Great Depression. Countries that didn't see demand sucked out of their economies did better. The European Central Bank raised rates and did not start QE until 2015, some six years after the US Federal Reserve. The result was a worse economic performance for Europe since 2008 than in the traumatic 1930s, while the US recovered faster.

For most sensible people that would constitute evidence. But such crutches are not available with Brexit.

There's no historical precedent for a country leaving a massive trade and regulatory bloc like the EU. And we're the only one doing so now.

The fact is that there will always be irresponsible ideologues, zealots as dangerous as they are deluded. It's a test of the maturity of our politics, our media culture, our society as a whole, in how we deal with them.

Sadly, we've not been doing too well on that front in recent years.

Creating a stakeholder economy may require stick as well as carrot

Twenty-two years ago the leader of the opposition Labour party had a big idea. It was to create a "stakeholder economy" in Britain.

This would be an economy "run for the many, not for the few", he told us. "We [must] shift the emphasis in corporate ethos from the company being a mere vehicle for the capital market to be traded, bought and sold as a commodity, towards a vision of the company as a community or partnership in which each employee has a stake."

But Tony Blair's stakeholder economy was only a sigh on the breeze. New Labour under Blair did plenty of things that irked bosses - from the windfall levy on utilities to the minimum wage - but he never sought to diminish their authority in the boardroom, to curtail their ability to make decisions without consulting rank-and-file workers. As the economist Chris Dillow argues, the inequality of power relations in the workplace was New Labour's great "blind spot".

Fast forward two decades and the shadow chancellor, John McDonnell, is making rather similar noises to those made by Blair all those years ago. "Labour's programme of workplace reform will restore the balance between employer and worker - extending the opportunity for employees to share collectively in the benefits of ownership of their company," he told the TUC conference yesterday.

However, unlike Blair, McDonnell (whose aspirations to replace Jeremy Corbyn are increasingly unconcealed) is prepared to get into some policy specifics. He says that Labour is exploring "ownership funds" for private companies with more than 250 people, where staff would be given shares in their employer, funded by a portion of the firm's profits.

This is similar to a proposal in the report from the IPPR think tank's archbishop-blessed Commission for Economic Justice last week. Indeed, it arguably bears a resemblance to existing government policy. In 2014 the coalition government created a tax incentive for business owners to disperse ownership among staff in Employee Ownership Trusts.

The Institute of Directors suspects Labour's plan would "cross the line between encouragement and coercion". Perhaps they see this as part of McDonnell's self-declared goal of "generally fermenting the overthrow of capitalism" as opposed to gently nudging it in a kindlier direction. But let's park the issue of personalities and concealed agendas and first consider the merits of the policy.

An independent report for the government in 2012 cited evidence showing that employee ownership is associated with reduced absenteeism and happier, more engaged workers. But it's not just nice for the workers. Mutualisation seems to be beneficial to the overall business too, with such companies exhibiting better business performance, more innovation and higher levels of economic resilience. Indeed, the fact is that it has become something of a cross-party political orthodoxy that giving people an ownership stake in the organisations for which they work would be good for the overall economy.

One of David Cameron's early ideas was for "John Lewis-style public services", inspired by the high productivity of the employee-owned department store. The party's 2015 election manifesto promised a "right to mutualise", albeit only in the public sector. In 2012 Nick Clegg called for a "John Lewis economy" and said workers should be given the ability to request shares in the companies in which they work. "We don't believe our problem is too much capitalism: we think it's that too few people have capital," said the then deputy prime minister. Theresa May has not banged the drum for mutuals per se but, at least until the business lobby got to her, she wanted to put workers on boards to "put people back in control".

Given all this, any attempt to paint Labour's ideas on mutual promotion as outrageous, knuckle-headed, 1970s-style socialism, is in danger of failing the laugh test. So the question is not whether mutualisation should be encouraged, but whether it should be given a serious nudge, as Labour seems to be suggesting.

A workforce characterised by increasing levels of part-time working and self-employment may not look like favourable ground for a mutualisation drive. Part of that casualisation trend seems to be driven by company bosses making a national insurance saving by hiring workers as independent contractors rather than conventional employees; one can envisage that kind of practice being curtailed in an environment with greater employee influence.

And the trouble with the dangling carrot approach is, as we have seen, inertia. There has been no discernible proliferation of mutualisation in the years since the government introduced its tax breaks.

While there are lots of mutual friends in theory, often little tends to happen in practice. As with wealth, those with corporate power tend not to be keen on its redistribution. Perhaps if we are to inch closer to that Blairite vision of a stakeholder economy we will need an element of stick after all.

The unjustified under-taxation of the self-employed

The self-employed are undertaxed relative to employees. That's a simple statement of fact.

But let's first be clear what this doesn't mean. That doesn't imply that people who work for themselves are any less virtuous than people who work for firms. It doesn't belittle the economic contribution of these five million or so British workers. Nor does the statement contain any judgement about the rate of tax that employees pay, whether it's too high or too low.

Yet that statement of fact - that the self-employed are currently privileged in the tax system with the gap adding up to around £ 5bn of foregone revenues a year - is evidently a hard message for many people to digest. Impossible even.

The Treasury's low-key cancellation of a planned bit of national insurance tax relief for this group of workers last week was loudly condemned by the Federation of Small Businesses and bewailed by the TaxPayers' Allowance even though, had the move gone ahead, it would have increased the overall tax gap between the self-employed and the employed still further.

"The Tory party is meant to be the party of low taxation and the friend of the ambitious. This U-turn fails on both counts," sniffed the Tory backbencher Jacob Rees-Mogg. Are we to infer from this statement that company employees, all 27 million of us, who do not benefit from this lower rate of tax, are to be considered unambitious? The consequence of the tax gap is that employers have a major incentive to hire people as temporary contractors rather than taking them on full-time, even when they're effectively doing the same job. Plenty of people who are self-employed today, particularly in the gig economy, would prefer to be employed.

Yet even Labour's shadow chancellor John McDonnell, who has frequently bemoaned the casualisation of the British workforce in recent years, called the Treasury's reversal a "betrayal of the self-employed".

Another consequence of the tax gap for the self-employed is that, as more people are employed in this way, total tax revenues from employment dwindle. This is something the Office for Budget Responsibility has highlighted as a threat to the public finances.

If less tax comes from the self-employed, there's a strong likelihood that, with public services clearly in need of a funding boost, ministers will end up increasing the income-tax burden on the employed. In this sense, one might say that the Treasury's originally planned tax cut for the self-employed would have been a betrayal of the employed. Some don't seek to deny that the self-employed are undertaxed, but argue that this is necessary to encourage people to become entrepreneurs, or to compensate the self-employed for the fact that they don't get paid holidays or company pension contributions. But leaving aside the pretty dubious economics inherent in these claims, trying to accomplish these kind of goals through a distorting tax gap is a terrible way to do it.

What we have here is an example of the dysfunction of our political system when it comes to tax.

Newspapers don't understand the subject, or choose not to understand it. They create a stupid slogan such as "White Van Man tax" in response to an attempt to close the gap. Cynical politicians - from both main parties - pander to the slogan, even when it undermines their broader agenda.

Ministers panic. Broadly sensible attempts at reform put forward by civil servants are hastily reversed, as happened last year. Then there's a furtive attempt to undo some of the damage of the reversal, which is in danger of making matters worse because it is not part of a comprehensive and coherent reform of the whole cripplingly-complex system.

The traditional liberal faith is that good arguments and good information will have a tendency to drive out the bad varieties. It's a faith that is being brutally tested. The Institute for Fiscal Studies has carefully explained the issue of the £ 5bn-a-year self-employed-employed tax gap and its adverse consequences clearly and frequently in recent years. Its director, Paul Johnson, did so again on the BBC's Today programme on Friday.

The government-commissioned Taylor Review of modern working practices last year argued unambiguously that "treating different forms of employment more equally in the tax system would be fairer, more economically efficient and support better quality work".

Perhaps one glorious day the message will finally penetrate. But for now we're forced to contemplate a miserable vista of wilfully ignorant news organisations, ideologically obsessive pressure groups and political opportunists shoring up a tax status quo that hurts the people that this same crew purport to be trying to help.