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Catastrophe averted?

The leaders of the rich countries went to Washington to save the world from sliding into deep recess

Vincent Cable

Shadow chancellor, Liberal Democrats

By the low standards of economic summitry, the G20 meeting rated quite high. There was a predictable, no doubt pre-written, communiqué, full of the usual banalities. And the meeting suffered from the absence of the world's most important politician, who hasn't yet taken up office. But, these necessary caveats aside, there were important achievements.

The first is that the meeting took place at all. The ludicrous pretence of the G8 (or G7) that the old western powers should set the global economic agenda has been punctured for good. On a purchasing power parity basis, China has the second-biggest economy in the world and India the fourth. It has been clear for some time that China is lender of last resort to the global system (by, in effect, underwriting US government paper) and the main source of global incremental demand (and commodity price inflation). The Chinese self-parody as the pupil sitting meekly at the feet of a dominant, but erring, master defies belief. It is obviously right that China, India and the other main non-G7 countries should be at the top table.

The second achievement was the clear realisation that unless governments hang together they will hang separately. Enough has been learned from interwar history for us to understand the follies of beggar-my-neighbour economics. Perhaps a warning shock was being sent across the bows of the incoming Obama administration not to reinvent the protectionist tariffs of the 1930s in a new guise, directed at China or Mexico in particular, or aiming to salvage the US auto industry through public subsidy. But this new-found concern for open markets has not yet communicated itself to EU or Indian or Chinese trade negotiators, who show no enthusiasm for lifting the block on trade liberalisation under the Doha round.

While trade policy is on the back burner, macroeconomic policy co-ordination is not. With a few exceptions - Germany notably - there is recognition of the need for aggressive monetary and fiscal policy and for large-scale intervention to recapitalise banks. These interventions can be and are being undertaken nationally. But governments acting in isolation attract critical attention from capital markets and currency speculators, as Gordon Brown is discovering. Structures like the G20 are the best safeguard against chaotic, unilateral action.

Will Hutton

Economic commentator

It was remarkable to gather so much economic and political power in one room to address a common agenda. That was the good news - along with commitments to co-ordinate fiscal expansion, to expand the lending power of the IMF and World Bank (Japan's $100bn loan to the IMF will increase the Fund's lending capacity by 40 per cent), to boost cross-border supervision, to tackle credit rating agencies, to reassess mad accounting rules and require member countries to attack the bonus culture in the financial services industry. A year ago such an agreement would have been inconceivable.

The bad news is that much of this is shutting the stable door after the horse has bolted. Four things have to be recognised: that the world has profound imbalances between high-saving, high-surplus areas in Asia and the Gulf and low-saving, structural deficit countries in the transatlantic economy (Germany excepted); that a system of floating exchange rates and private banks can no longer take the weight of recycling those savings; that unless the system is de-risked and the burden of adjustment is placed on deficit and surplus countries alike, the global system faces breakdown; and finally, that the business model used by the banks to recycle surpluses - securitisation and hedging in the $360trn global derivatives market - is broken.

In plain English, China must accept that its currency must appreciate; Britain and America, that they cannot run their economies on foreign savings; and all players that there has to be a system of semi-fixed exchange rates between the yen, the euro and the dollar.

One tough reality is that, for all their new economic weight, China, Brazil, Russia and India do not have fully convertible currencies - nor do they want to accept the discipline involved in having convertible currencies.

Ann Pettifor

Fellow, New Economics Foundation

Over the past decade, the Group of Eight leaders turned their exclusive annual meetings into jamborees. Rock concerts, protesters and celebrities added populist glitz. However, the real purpose of the meetings - international co-operation and co-ordination - was ducked. At last year's G8 Summit in Heiligendamm, Germany, George W Bush and Gordon Brown vetoed Angela Merkel's agenda item for co-operation over tighter international regulation and financial oversight of capital markets. That task, they argued then, could safely be delegated to "the invisible hand". Now that the fantastic, self-regulating machinery of free markets has proved grossly malfunctional, it is good to hear talk of enhanced co-operation and regulation.

But, in places, the joint statement issued by the 20 world leaders borders on the delusional. The phrase "We must . . . ensure . . . that a global crisis, such as this one, does not happen again" implies that they are avoiding the next war when they are still losing this one.

Even more questionable is the call for continued "economic growth". In a world of finite resources on a planet with limited capacity to absorb toxic emissions, and with bushfires encircling Los Angeles, we would have hoped that world leaders had some awareness of the threat of climate change and of the limits to economic growth. But no. The gravest threat to global security - our rapacious attitude to the earth's resources - is once again whipped up with talk of "market principles, open trade and economic growth".

Jesse Norman

Senior fellow at Policy Exchange

One might have thought the G20 summit a good moment for some straight talk from the Prime Minister. Instead, the political wind machine was cranked up to full blast. The summit would be a second Bretton Woods. Gordon Brown would forge a new global consensus on co-ordinated intervention to stimulate growth (while, of course, leading reforms to prevent the banking crisis from ever recurring). Luckily virtually none of this was true, or the summit would have been a hopeless failure. With fiscal measures already widely adopted, the G20 hardly needed Brown's leadership. No surprise that he returned empty-handed.

Labour has moved from despondency to a manic desperation to remain in office. The result is that the ever-fragile concept of truth in politics has wholly been cast aside. Thus the humiliating bank nationalisation has been dressed up as an act of far-seeing economic statesmanship. And a sensible warning from the shadow chancellor that current economic policy puts sterling at risk has been condemned for breaching an irrelevant semi-convention dating from the time of fixed exchange rates.

Alex Brummer

City editor, Daily Mail

There is a golden rule of international financial meetings. The larger the "G" number, in other words the more countries involved, the less likely it is that any worthwhile or binding decisions will be taken. So while it was wholly encouraging that the G20 summit brought a number of emerging market leaders to the top table of finance, including China, Brazil and Russia, there was never any real prospect of the event becoming the new Bretton Woods.

Furthermore, the summit took place in the final days of the lame duck administration of George Bush. Once it became clear Barack Obama was going nowhere near the confab, the event became even more of an irrelevance.

European leaders may like to blame Wall Street and Anglo-Saxon capitalism for the credit crunch and the recession now spreading through the Group of Seven like wildfire, but there is no hope of concerted international action without the new White House and Federal Reserve on board.

Almost all that was agreed could have been decided before the leaders left home. The commitment to reviving the Doha trade round is pure motherhood and apple pie. The prairie populists on Capitol Hill are unlikely to be enthusiastic.

At the core of the proposals was the commitment to use fiscal measures, tax cuts and public spending to kick-start global economies. But despite Gordon Brown's enthusiastic embrace of a new Keynesian big-spending approach - as advocated by Nobel prize-winner Paul Krugman - he neatly forgot to mention that such big-spending ways were only for those countries with a "policy framework conducive to fiscal sustainability". The UK with its ballooning budget deficit, which could hit £100bn or more next year, is clearly in no such position.

It is hard to fathom in what way the G20 was "historic", as the Prime Minister claimed in the Commons. There is little original in a bunch of old ideas designed to remove risk from the financial system and control executive pay. That is what regulators should have done before the banks ploughed into the iceberg.

James Buchan

Author and financial commentator

What is the Financial Stability Forum? What is "mitigating against pro-cyclicality in regulatory policy"? What, if anything, has the G20 summit in Washington on the weekend of the 15 November achieved?

Nothing very much, is the answer to all three questions. In the twilight of a discredited US administration, and with President-elect Barack Obama absent, the meeting was never likely to achieve a great deal or generate excitement in the US. Yet the final declaration, drafted with suspicious ease by the delegations on Saturday night, has something for everybody but not enough of anything to scare the financial horses.

Nicolas Sarkozy, the French president whose idea the whole thing was, gained some support for more institutional government of trade and finance, but no super-gendarme international of the type that has been directing financial traffic in the French imagination since the 17th century. As Jean-Pierre Robin wrote in the Figaro: "Those with fantasies of supranational supervision will need to change therapist." The US, jealous of its commercial sovereignty even when it is going about without its shirt, put paid to those Gallic dreams and also gained some platitudes about free trade.

The new commercial powers, not only Brazil, Russia, India and mainland China but also rich oil producers such as Saudi Arabia, received diplomatic recognition of their deep pockets. "The world's geopolitical structure has a new dimension," the Brazilian president, Luiz Inácio Lula da Silva, said. "There is no logic to making any political and economic decisions without the G20 members - developing countries must be part of the solution to the global financial crisis."

I suspect the winner is Gordon Brown. The next meeting will be held under his presidency in London in April. The Washington ragbag of proposals to reform or tinker with the current system, such as reminding us about the Financial Stability Form and mitigating against that regrettable pro-cyclicality in regulatory policy, appeals to his technical vanity and plays to his technical strengths.

Paul Mason

Economics editor, Newsnight

There was a sense in Washington, despite the throbbing engines and bulletproof glass, of powerlessness. The communiqué was stronger on the causes of the crisis than on co-ordinated solutions. Policymakers are right to stay focused on the near-term dangers: these are country-level debt default, the rising cost of borrowing for non-financial companies, rapid job losses and - via feedback - further destabilisation of the banking system. We are moving into the phase of fiscal stimulus but there are powerful technical arguments that say without "quantitative easing" - that is, printing money to stimulate demand - it doesn't work. The same people who told me it would come to recapitalisation, that the TARP (troubled assets relief programme) would not work, are now saying: nationalise the banks and print money.

Despite the urgency of the focus on near-term dangers, what was obvious at G20 was the lack of vision as to the future growth model of capitalism. The problem was seen as a failure of regulation; the solution a pretty weak brew of re-regulation that will get diluted even more as the lobbyists begin to have influence. But the problem is more fundamental: the growth model based on high debt instead of high wages has failed and will be hard to revive.

Peter Mandelson

Secretary of State for Business

We have been caught in a global whirlwind of extraordinary force.

It has brought with it a fear that has gripped the world economy and taken hold here at home. We are seeing it every day, with fear among consumers that is depressing demand; fear among banks that is inhibiting them from lending; fear among small- and medium-sized businesses that banks are just about to cut off their credit lines. The choice facing us and governments around the world is this: do we act decisively to counter and overcome this fear, or do we become paralysed by it and fail to act?

The government has already shown its willingness to take the bolder course as the first mover in setting about stabilising the banks. What is needed now is action to stimulate the demand essential for recovery. The UK economy, like economies in the rest of the world, needs a shot of adrenalin.

The Bank of England has already made a significant cut to interest rates. This monetary stimulus now needs to be matched by a fiscal stimulus. And because this is a global crisis this is best done if the benefit of the measures taken nationally is maximised by the same measures being taken around the world. That was the message from the international conference in Washington, as governments recognised the need to take the action necessary to stimulate their economies.

People will say, "But you are resorting to borrowing in order to deliver the stimulus that's needed." My answer to that is, what is the alternative? We certainly haven't heard one from the Conservatives.

David Cameron and George Osborne, trapped by their desire to oppose everything the government does, refuse to accept the scale of the challenge the world's economies now face and the prescribed international action. Their stance appears to be, if the rest of the world disagrees with us, it is because the rest of the world is wrong. The result is incoherence and an Opposition at sixes and sevens. One minute this is "do all it takes" and the next it is - as we heard this week - leave the recession to "take its course".

Sitting on our hands watching houses repossessed and businesses go to the wall is certainly not the approach being urged on me by people I have been speaking to up and down the country. They want their government to act to stimulate demand in the economy here and now. With all due prudence, that is what we are going to do.

Diane Coyle

Author and economist

The G20 meeting confirmed a robust and rapid response (by past standards) to recession, even in the US operating under a rump free-market administration. Policymakers around the world have been shaken to see the financial system at the brink of collapse - on their watch.

Yet it is difficult to predict how severe the recession will be. Bank lending to businesses and individuals is virtually frozen. In many (but not all) areas of the economy, activity has come to a halt. The last financial boom and bust, ending in 2001, had surprisingly little impact on jobs and growth, as the financial bubble had become increasingly untethered from anything real. Today's vicious circle of evaporating liquidity is much more serious, but lower interest rates and bigger government deficits will help. The underlying trends are easier to outline. Some challenges are clearly unaltered, such as climate change and our ageing society.

The technological opportunities are still there, too, in communications, the internet and biotechnology. Globalisation will be less driven by finance in future, but it will not be unwound. It would take a generation to turn back the clock on economic linkages, and the cultural impacts are permanent. In fact, the crisis has underlined our interdependence across national borders.

What has changed is the political economy of globalisation. In the triad of efficiency, fairness and freedom which dominates political choice in democracies, fairness will take priority in the years ahead, and the drive for ever greater productivity gains will retreat. The semi-nationalisation of the banks has started to shift the boundary between public and private domains; we will have to think more carefully about how to govern private choices that have big social spillovers. The G20 did not touch on this profound question of governance.

Iain Macwhirter

Political commentator

The G20 was largely a throat-clearing session and was never going to put in place the foundations of a new international financial system. Progress on the stalled Doha trade talks is encouraging but provides no guarantee that protectionism will not raise its head in the coming economic slump.

It is inevitable that countries faced with financial collapse will try to defend their economies by any means possible. Britain is already far down the road of "beggar my neighbour" economics by the "managed" devaluation of the pound, a crude attempt to boost UK industry by lowering the prices of British exports and creating a de facto tariff wall around imports from abroad. It won't work because Britain does not make much of anything any more except debt, and the world has plenty of that already.

But the collapse of the pound will seriously damage what is left of UK financial services. No one in their right minds would put money into the UK economy now, with the property market collapsing, UK banks insolvent and government borrowing likely to reach £100bn in the next 18 months.

Gordon Brown seems to believe that sterling is like the dollar, and that people will buy our dud pounds whatever the likely losses. However, as we are discovering, sterling is not a reserve currency and unlike the US we cannot force other countries to pay our debts. The future for our battered island is likely to be hyperinflation punctuated by appeals to the International Monetary Fund for emergency aid. Forget about spending our way out of recession - the UK government simply lacks the resources to fund the huge borrowing that would be required. Something will have to give. Brown will have cause to regret being so beastly to the Icelanders.

Richard Reeves

Director of Demos

James Carville, the hardened political aide to Bill Clinton, said that if he was reincarnated he'd want to come back as the bond market: "You can intimidate anybody." Right now it seems odd to think of any financial markets threatening anybody. But it is one of the ironies of the current economic situation that the capital markets still have some serious muscle.

Western governments, faced with recession, need to throw a lot of money at their ailing financial institutions - money that can be raised only by selling Treasury debt, mostly to the capital-rich investors of the Far East. For Gordon Brown, this is likely to become a more difficult sell, as Prudence is given the push and the pound takes a nosedive. Even national exchequers invite sceptical scrutiny in this new, nervous world.

The financial crisis is at heart a loss of faith. The word credit derives from the Latin credo - "I believe". When the Titanic of the financial world - in the shape of Lehman Brothers - was allowed to sink, the bonds of trust stretching around the world were snapped. In an instant, everyone stopped believing in each other.

A number of sensible measures should be on the agenda when the G20 reconvenes next year, including legislation to ensure bonuses in financial services are paid on the basis of five-year performance; new "pro-cyclical" provisioning rules requiring finance houses to increase their store of capital in economic upturns; and tougher, independent regulation of the rating agencies whose doe-eyed assessments of banks built on a mountain of paper helped get us in this mess.

There is, however, no quick technical fix for such a dramatic loss of confidence. Trust can be lost in the blink of a market-trader's eye - but it will take years to rebuild.

TEN THINGS THEY ACHIEVED

  • 1 Created a road map aimed at stabilising the world economy and overhauling the banking system with targets for the end of March 2009
  • 2 Advocated Keynesian big-spending
    “fiscal stimulus”
  • 3 Expanded from a small club making world decisions to recognise the importance of the economies of Brazil, Russia, India and China
  • 4 Agreed to reform international finance institutions, including better transparency and supervision of credit ratings agencies
  • 5 Agreed that the Financial Stability Forum should include emerging economies
  • 6 Banks and hedge funds to hold increased levels of capital and cash
  • 7 Recommended “supervisory colleges” for all major cross-border financial institutions
  • 8 Return to the Doha round – trade ministers to meet in Geneva next month
  • 9 Instructed G20 finance ministers to draw up plans and timeline
  • 10 Agreed to meet again, in London next April

. . . AND FIVE THEY DIDN’T

  • 1 Agree a future growth model for capitalism. Instead they reconfirmed their “shared belief in market principles”
  • 2 Agree detailed plans for regulatory reforms of banking
  • 3 Establish a plan of action for achieving the already endangered Millennium Development Goals
  • 4 Set up an international supervisory body with sufficient power to control global markets
  • 5 Halt the run on sterling, which fell sharply against the euro and dollar

Alyssa McDonald

This article first appeared in the 24 November 2008 issue of the New Statesman, How to get us out of this mess

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The biggest blunder of them all

It was a catastrophic error of judgement that produced the referendum – and now the British political class is paying the price.

AAs dawn broke on Friday morning and I turned over in bed to grab my phone and Twitter, I thought immediately of G K Chesterton’s poem from 1915, about the secret people of England:

 

Smile at us, pay us, pass us; but do not quite forget.
For we are the people of England, that never have spoken yet.
There is many a fat farmer that drinks less cheerfully,
There is many a free French peasant who is richer and sadder than we.
There are no folk in the whole world so helpless or so wise.
There is hunger in our bellies, there is laughter in our eyes;
You laugh at us and love us, both mugs and eyes are wet:
Only you do not know us. For we have not spoken yet.

 

Well, they have spoken now. This was a quietly devastating revolt by the English heartlands – southern and western suburbs; the urban sprawls of the Midlands and the north; former mining areas and devastated ex-industrial towns – against London, Scotland, Northern Ireland and the so-called elites. Looking at the numbers, one sees that it was a revolt also by older voters against younger voters and by poorer against richer, better-educated voters. It was, of course, a great democratic moment. Apart from the hideous and probably unconnected murder of Jo Cox, it was accomplished peacefully, and by a majority of well over a million. That sets it aside from Chesterton’s vision, which moves on from benign, bucolic defiance to outright anti-Semitism and warnings of blood-drenched revolution. Well, that’s the beauty of modern democracy . . .

The decision by the British people to leave the European Union is this country’s single biggest democratic act in modern times – indeed, as far as I can make out, the biggest ever. But it is also one of the elite’s most significant blunders, provoked by the most senior politicians for the wrong reasons and then pursued in what (to use a crude but apposite phrase) is the biggest establishment cock-up in my lifetime.

We should not fall into the trap, though, of seeing this as a purely British story. It is also about the EU, now looking more fragile than at any other time since the 1950s, and about what is still our common European home. There are calls for national revolt against the EU coming from across the continent. Far too many of the continent’s leaders welcoming our decision were the wrong sort of people. Mostly, the congratulations are coming from far-right parties, whose most lurid and upsetting rhetoric has emerged from central and eastern Europe. If you think I’m exaggerating, go on to YouTube, type “Visegrad”, and spend ten minutes watching. If this vote presages a process of messy and angry dissolution, it’s a story that will have started here. But that is only the beginning. If Marine Le Pen wins the French presidential election, then a French exit from the EU looks very likely – and that really is the end of it all.

Hurrah, many people will say: but we should reflect that this will demand negotiation of many individual trade deals with the leaders of angry and fractured European nations, which will clearly be a lot harder than any single deal with the EU. And then, there are the darker forebodings about Europe, which has never managed to stay at peace with itself for long as a constellation of independent countries. Immigration pressures and the Russian threat are just a couple of possible sources of future conflict.

But there are better outcomes. For the UK the optimal one now is clearly “Norway-plus”: meaning, in essence, restrictions on the free movement of people but access to the single market. Unless the victorious team of Brexit Tories is bonkers, this is what they will try to negotiate. It would minimise the threat of all-out economic disruption, which has already begun, and answer the biggest complaint from Leave voters. To which the obvious retort is: “Why in a million years would they give us that?” Well, as leaders in France, Germany, the Netherlands and other countries contemplate their own populist insurgencies, they must know that a rethink of freedom to work across borders is their best card against the insurgent right. There is a slim, but not entirely negligible, chance that a much wider rethink across the EU will now be prompted by the British decision.

This is not something that will be decided here. Is it possible that leaders in Brussels will eventually react, once the anger has cooled, to take a different path: to listen much more acutely to the sounds of pain caused by the euro experiment; to do a proper deal for Greece; to reassert democratic accountability (much more Council of Ministers, much less Commission); and to reassess free movement? Writing it, I know that I sound like a deluded optimist, but the possibility deserves to be filed alongside all the grimmest alternatives.

Keeping all this cautiously in mind, let’s look at the British establishment cock-up. According to one of those involved, this all started at a pizza restaurant at Chicago O’Hare Airport at the time of a Nato conference in 2012, when David Cameron and his closest political allies decided that the only way of scuppering Ukip and the Euro-hostile right of the Conservative Party was to give the British people a referendum.

The brutal way of putting this is that Cameron decided to put party management and tactics ahead of grand strategy, grossly overrated his own negotiating skills, and has been badly bitten in the bottom accordingly. He has often looked like a chess player who plays the next move brilliantly yet fails to see three moves ahead. There is, however, a more generous explanation – which is simply that this referendum was inevitable; that it was more than time for restless British voters to reassess their membership of a union that has changed dramatically since we joined, both in extent and in depth.

***

At any rate, whatever his mixed motives, Cameron believed that he could negotiate a deal with his EU partners so good that he would win a subsequent referendum. A great deal of this was based on a second huge miscalculation – about his friend Angela Merkel.

As a result, the whole referendum process was fixed around the negotiation. In other words, the feeling was: “Give the plebs their plebiscite. It’s pretty safe. The Continentals will be scared enough to give us a great deal and, therefore, the people will vote for Nurse.” As soon as it became clear that Mrs Merkel was not prepared to countenance an end to the free movement of people, the plan began to fall apart. I vividly remember interviewing Cameron as the details of the negotiation became clear and thinking to myself, between his explanations: “This isn’t nearly enough.”

This mistake was followed by another – one that the Scottish National Party leader, Nicola Sturgeon, publicly warned against months ago. Those running the Remain campaign always believed in “Project Fear”; that a barrage of warnings by the Treasury, big business, banks and international organisations would simply terrify ordinary voters – pensioners and workers alike – and pulverise the arguments for leaving.

It had worked, after all, hadn’t it, in Scotland in 2014? A close confidant of the Prime Minister told me, when I questioned him about the wisdom of this: “On the contrary, we need more fear. Fear is the only thing that can win it for us . . . We need lots of fear. We need as much fear as we can get.”

But the Scottish parallel proved to be a delusion. First, this kind of “you will lose your pensions, you will lose your jobs” warning infuriated many Scottish voters in 2014, who stuck their fingers in their ears and moved over to the Yes campaign. Second, although in the end threats of doom may have swung things, Scotland was a country of five million people, suffering from a falling oil price and taking a decision about a union that had been around for three centuries. If, right at the end and by a narrow margin, Scots voted two years ago to stay inside the UK, that was not a close enough comparison for this referendum; there were far more people involved, a bigger country, a much looser and more recent union.

It was the specificity of the Project Fear warnings that did most damage: households £4,300 worse off, house prices falling by 18 per cent, and so forth. By being incredibly detailed, the Remain campaigners lost the ear of a dubious public. That meant that the much more frightening warnings by business leaders, talking about companies they knew and understood, didn’t get enough traction. Granted, we still don’t know; Project Fear may be vindicated yet. (The early falls on the money markets and stock markets tell us very little – they may be an overreaction to previous and recent complacency.)

But the most significant reason Project Fear failed was that it was confronted by a larger project of fear: the fear of uncontrolled and uncontrollable migration running, cumulatively, into the millions for many years ahead. Frank lies were told. Gross exaggeration ran riot. This was a fight between people who like living among migrants from Europe and employing them, on the one hand, and those competing against migrants (and failing) for jobs and wages. Neither David Cameron nor Theresa May seemed to have a plausible response to “uncontrolled immigration”. That may be because, inside the EU, there wasn’t one. Jeremy Corbyn responded with interesting ideas about wage rates and employment laws which did not address, at all, central fears about numbers and identity.

It is on this, above all issues, that “the plain people of England” spoke most compellingly against the elites, from Westminster politicians and Whitehall mandarins to London actresses, pop stars and media grandees. Boris Johnson, Michael Gove and Nigel Farage were absolutely right to point out that immigration from eastern Europe – though it has hugely benefited people who employ drivers and domestic servants, and who want to pay less for their electrical or plumbing repairs – keeps down the wages of indigenous working-class people and, in many cases, makes it harder for them to find work in hotels, in restaurants, on farms and elsewhere. Aggregated economic statistics mean nothing compared to personal experience. If you’ve got nothing, you’ve got nothing to lose. (Well, in fact, you have got something, but it feels that way.) When George Osborne warned of an economic apocalypse, people with nothing who felt they had no opportunities just put their fingers in their ears and went “la-la-la”.

There were people who saw what was happening and understood that disregarded Lower and Middle Britain was fed up to the back teeth and ready to revolt: some trade union leaders – whose job it was, after all, to represent them – and some Labour MPs.

***

The Labour leadership, however, seems to have got the message far too late and far too weakly, and that was a function of its own political philosophy. Labour leaders of the Jeremy Corbyn era don’t like to talk about immigration and have based much of their inner-city politics on the rights and causes of migrant communities already in the UK. The menacing noises about a leadership challenge grew louder by the hour and then turned into open revolt.

There is something tragicomic about this. The Corbyn revolution was about the overthrow of the last remnants of the Blairites, accused by party activists of not thinking enough or caring enough about ordinary Labour voters – of becoming too rich, too close to the elites, and infatuated by neoliberal, post-Thatcher economic solutions. The Corbyn movement began as an anti-elitist rebellion. But now, from their base among Londoners and students whose politics are a million miles away from the views of angry, white, non-metropolitan, working-class voters the Corbynistas, too, found themselves unable to get a hearing.

So, what is the result of all this? Wherever one looks, the British political class has come close to destroying itself. There is no source of authority. As Kenneth Clarke has noted, we have a hole, in effect, where a government should be.

The Remain faction of Tory MPs has no leader now. Many of them are bruised and livid against the triumphant Brexiteers. Boris Johnson, Michael Gove, Iain Duncan Smith and the rest now have to deal with outraged Tories who accused them of lying, a panicky and angry City, big business leaders who feel betrayed, and an EU in a dark mood. All of this is taking place during the inevitable turmoil and struggle of a Conservative leadership campaign. It is no doubt hyperbole to say we have absolutely no government at the moment: there is still a prime minister, there is a cabinet, and there is a party with a paper majority in the Commons. But if “government” means a group of people with a mandate and a plan, and the parliamentary authority to carry it through – well, we certainly don’t have that.

What happens in Scotland and Northern Ireland now adds to the sense of crisis. Nicola Sturgeon has this problem: she would very much like to secure terms for Scotland staying inside the EU before the rest of the UK leaves. That would minimise disruption, give Scots a secure alternative haven and prepare perfectly for a successful referendum on independence. The problem is that the EU is unlikely to countenance this. First, Scotland may be a country but it is not a nation in EU terms, and therefore has no locus. At the very least, under current EU law, Scotland would need to be a customs union – which it isn’t.

The alternative is that Scotland leaves alongside the rest of the UK and then has to reapply, after an independence referendum. The problems here multiply: Nicola Sturgeon and the SNP may have lost momentum and because new applicants have to join the euro, and will be under great pressure to ­accept the Schengen Agreement, she would be going to the Scottish electorate offering an independent Scotland using the euro (not the world’s most popular currency at the moment, to put it gently) and requiring a hard border with England. This seems to me a hard sell to Scottish voters, especially long after the initial Brexit shock will have faded. What we don’t know is how enthusiastic the rest of the European Union would be about bringing in an independent Scotland briskly, to punish Westminster, and how threateningly Spain’s Catalan/Basque difficulties will loom.

In Northern Ireland, Sinn Fein is calling for an all-Ireland referendum. There is now a border problem there as well, for the first time since the 1998 peace agreement. Tory ministers dismiss this but the dynamics of Irish politics, too, have been dramatically changed by the Brexit vote.

The UK could, naturally, survive all of this completely intact. But the possibility, at least, of a relatively lonely England is something that the new and victorious Brexit Tories now have to confront.

In usual circumstances, we would expect an early general election. There is a strong basic democratic case for one: otherwise, we get a prime minister, never chosen by the country, attempting to enact a manifesto no party has ever stood on in a general election. But we don’t really have the political parties to contest it, do we? Ukip is in chipper form. Like so many nationalist movements, it may survive achieving its goal. But the Conservatives are hopelessly divided. The outgoing Prime Minister believes the likely incoming Tory leader – a certain flaxen-haired fellow – is going to put a bomb under the British economy and has told outright untruths. He is trying hard to stop Boris but Boris may well be unstoppable. Another (former) prime minister, Sir John Major, tells us we cannot trust the National Health Service into the hands of Johnson, Gove and Duncan Smith. The amiable Alistair Burt, the MP for North-East Bedfordshire, has promised Brexit Tories that what is to come will make the Maastricht rebellion seem like a tea party.

No, on the whole, they don’t look like a party aching to face the electorate. You might expect the Labour leader to fight for an early election and try to rally the Commons to his side. But then Jeremy Corbyn faces his own rebellion.

At the moment, the coup against him seems to face insuperable hurdles. There isn’t a plausible alternative candidate so far. Above all, he retains the support of most Labour members, and it is they and trade unionists who will have the final say, whatever the Parliamentary Labour Party does.

If Corbyn sees off the plotters, what next? A united Labour opposition could go into a general election saying explicitly that it rejected the Brexit decision – that the vote was based on lies and scaremongering – and that, if elected, they would not implement Article 50: in effect, not leave the EU. That is what the Liberal Democrats are doing. For Labour, it would be a huge gamble. It would be a slap in the face for the majority who voted on 23 June and could lead to a different kind of revolt. But it would give the Labour Party a very clear purpose and agenda that could reach out into parts of Britain Corbyn has no chance of reaching just now.

Naturally, the politicians have noticed all this. So we are hearing a great deal of optimistic whistling from leading Conservatives, insisting that they can work together happily and cordially for the rest of this parliament – trying to persuade us that they’ve forgotten everything they said about each other during the referendum campaign, and that people who believe Brexit is an economic catastrophe will nevertheless roll up their sleeves and . . . er . . . make it happen.

Clearly, the best hope for the Conservatives is that such warnings turn out to be piffle and that we are soon enjoying an economic upswing, even as the EU continues to struggle. If Boris Johnson or another leader is indeed able to achieve “Norway-plus” then the Brexiteers are close to being home free. Yet there are signs already that the Boris camp is slightly panicky – as well it might be – about a rash of racist and xenophobic politics immediately after the results. He is right, of course, to call for inclusion and calm, though it is fatuous to suggest that immigration was not a critical issue in the campaign. If he wants to win long term, he has to get a different deal from Brussels, much better than the one that Cameron got – a long shot, but not impossible. For the Brexiteers, time is very short. They have to stay together, and yet there will be tensions: Rupert Murdoch is running Gove against Johnson, or, at any rate, would like to.

My guess is that parliamentary chaos and an overwhelming sense of drift at the centre of politics will nevertheless propel us into an election later this year or early next year. If so, that will mean that, tactically, the Brexiteers, who don’t want to trigger Article 50 just yet, must do so before the people are asked for their view again.

And, of course, if it turns out that George Osborne’s blood-curdling warnings about jobs and investment turn out to be even half accurate, then those same cheerful gentlemen will have many personal apologies to make to people who do lose their jobs, or see prices rise and their pensions fall. There is plenty of anger still to come.

That’s not so surprising: after all, this was a kind of revolution. It has been a very British revolution, accomplished through the ballot box and after a great deal of nonsense spoken on all sides. The plain people, of England, mainly, have spoken at last and their voice has blown over not just a constitutional link with the European continent but also almost the entire political class – and most of the pollsters – and oh, go on, then – us clever-Dick journalists as well.

Andrew Marr presents “The Andrew Marr Show” on BBC1. His Brexit thriller, “Head of State”, is published by Fourth Estate

Andrew Marr is a broadcaster and journalist. Formerly the BBC’s Political Editor, he presents the Andrew Marr Show on BBC1 on Sundays and Start the Week on Monday mornings on Radio 4.

This article first appeared in the 30 June 2016 issue of the New Statesman, The Brexit lies