How did the most successful conservative party of the 20th century become the agent for a national humiliation? How could a political party so firmly tied to power, not least economic power, come to disregard its own particular view of the national interest?

The Conservative-born Brexit crisis that has tormented the nation since 2016 has multiple causes, the most crucial and under-explored of which is economic. The great financial crisis of 2008 certainly had an impact on the referendum result: it led to economic stagnation, not least in productivity and wages, as well as disastrous cuts to many public services. Local authorities, responsible for social care, were hit especially hard, as were the working poor.

But the really significant economic transformations behind the decision to leave the EU have deeper roots. Over the past 40 years the nature of capitalism in the UK has changed in ways that concepts such as “neoliberalism” and “post-industrialism” have failed to grasp. The relationship between capitalism and politics has also changed radically.

Before 1945 the UK operated in a global economy. Imperialists viewed Britain as the political and commercial centre of an empire; liberals saw it as the world’s largest importer. After 1945, however, the UK turned in on itself, transforming both materially and ideologically. It was a country with a national industry. All the main users of coal, as well as the producers of coal, became publicly owned industries, such as the National Coal Board, the British Transport Commission (which included British Railways) and the British Electricity Authority.

There was also something resembling a British national capitalism, one closely allied to the Conservative Party and made up of large private firms, including Imperial Chemical Industries and Associated Electrical Industries. This national capitalism produced a radically different economy from anything that had existed before it. In the 1950s and 1960s, the UK was more industrial than ever before. Manufacturing output formed a higher proportion of GDP and manufacturing employment had a greater share of employment than when the UK was considered the “workshop of the world” in the 19th century.

This national industry supplied the British people with nearly all their common infrastructure – railways, roads and energy – as well as their cars, TVs, aeroplanes and clothes. By the 1970s and 1980s most British people ate British cuisine, rather than foodstuffs imported from abroad. The nation was self-sufficient in energy, too, thanks to the development of modern coal mines, such as those in Selby, and offshore oil rigs in the North Sea. Whereas once the British economy was geared to exporting manufactures to enable it to import up to half of its food, raw materials and much of its energy supply, it suddenly no longer needed to. The “export or die” mentality of the immediate post-1945 years was no longer relevant.

But British capitalism underwent a subsequent, and no less momentous, transformation. Beginning in the 1980s the economy was progressively opened up to foreign trade and capital, with remarkable results. The UK became a net importer of manufactures, running a trade deficit of a scale unthinkable in the post-Second World War years. Great national enterprises that were once at the core of British industry, such as Imperial Chemical Industries, the General Electric Company, or British Leyland, vanished. Today whole national industries have become foreign-owned. During the 1950s and 1960s the UK was the second-biggest car-maker in the world, with Coventry and other cities in the Midlands serving as the heart of the nation’s auto manufacturing. The car industry is now a net importing sector. Many of the largest employers in the UK, from the Indian conglomerate Tata (the largest manufacturing employer) to the French food corporation Sodexo, are not even listed on the London Stock Exchange. Office for National Statistics figures released in 2017 showed some 34 per cent of the turn-over of non-financial businesses in the UK was attributable to foreign-owned firms. In manufacturing it was more than 50 per cent.

Even government contractors are often registered abroad, and in tax havens. A recent Demos report found that 25 of the government’s 34 strategic suppliers – the largest suppliers to the public sector, including health and defence services – were part of bigger corporate groups that used tax havens.

Large-scale overseas ownership is hardly unique to Britain: the Swedish brand Volvo, for example, is owned by the Chinese firm Geely. However the German car industry remains largely German-owned and operates globally, including in the UK (no British car firm operates in Germany). PSA Group and Renault are all still French-owned. The Italian industry, which is dominated by Fiat-Chrysler, is still partly owned by the wealthy Agnelli family. Siemens, a huge global electrical engineering enterprise, is German based and part-owned, and has a much bigger presence in Britain’s economy than any UK electrical firm has in Germany’s. The point is not only that continental European nations have retained more national capitalisms, but also that these national firms are global businesses as well.

The UK has a competitive financial sector, but most of the financial activity in the City of London has nothing to do with the UK economy. Where once the City stood for both national finance and national industry, today finance and industry are indistinct. Fifty per cent of the UK stock market is owned by foreign capital. Since many of the top-listed firms do most of their business abroad, the FTSE 100 index does not reflect either the performance of, or confidence in, the British economy.

In the 1980s the Conservative Party moved the UK to a radical free-trading position for goods, services and capital, to a greater extent than its European counterparts. This had many benefits including bringing efficient, well-run firms into the UK, which revived some industrial sectors. It was a good thing that the UK was equipped with the best the EU and the world had to offer. And it was a good thing for London that the City was opened up. But the benefits were very unevenly distributed.

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In this new economic setting, London has emerged as a city state of inordinate wealth and power, a cosmopolitan service enclave in a fallen industrial nation. In postwar Britain, London was a declining city in terms of population, reaching its nadir in the early 1980s. Then, with a new liberal economy, London thrived, returning in many ways to the pomp of the Edwardian years. It seemed that the world of Mary Poppins – bankers, nannies, chimney-sweeps and all – had returned. But the global city of today is very different; rather than trading goods and channelling British investment overseas, it has become a place that trades in the world’s money. The dominant investment flow is inwards rather than outwards.

From the 1980s London attracted foreign capital and foreign talent, becoming a great cosmopolitan centre. In 2018, 36 per cent of the city’s population was born outside the UK and 22 per cent comprised of non-British residents (compared with 14 per cent and 9 per cent respectively for the UK). The new London had not only an immigrant working class, now a typical feature of many European capital cities, but an immigrant elite, which is much less common. London has become an international capital of the global kingdom of capital. The City cannot, as it once did, speak for British industry, nor indeed for British finance.



Home comforts: workers pose on British Leyland’s production line for the Austin Maxi 1500, 1969. Credit: Mike McKeown/ Daily Express/ Hulton Archive/ Getty

But Brexit is not the policy of the City of London, nor of the foreign-owned enterprises that run the motor and many other UK-based industries. Soft Brexit positions taken by the foremost agents of the free market – including the Confederation of British Industry, the Financial Times and the Economist – highlight how leaving the EU is not the policy of capitalism. Instead, Brexit represents a new disconnection between the Conservative Party and capitalism, and between capitalism and the nation.

Brexit is something quite peculiar. It is certainly not a call for economic nationalism and for taking back control of the economy – at least not for its promoters, such as Jacob Rees-Mogg. For Brexiteers the biggest free trading area and single market in the world – the EU – is not good enough. They want to achieve unilateral free trade with the world. They want to deregulate and make the UK, or even just England, a buccaneering business base for a reheated conservative capitalism. But pro-Brexit globalists, not least David Davis and Liam Fox, have indulged in a fantasy about advantageous trade deals; a delusional revivalism in which Britain is once again an innovation nation, ready to lead the world into the fourth industrial revolution as it led it into the first. Indeed, they seem to believe that British capitalism has already been revivified and transformed, and that “declinists” and “defeatists” talk it down.

But it is one of the great ironies of Thatcherism that it did not unleash a successful British capitalism – nor is Brexit a plausible plan for reviving one. It is what old-fashioned Marxists might recognise as an “impossibilist” programme that is deeply hostile to reform – only a total revolution will do. It is a dream of radical deregulation by capitalists who are seemingly neither committed to nor dependent on the national economy.

Who are the capitalists associated with Brexit? The first significant Eurosceptic businessman was the London-based, Anglo-French financier James Goldsmith, who helped fund the Referendum Party. Nigel Farage, former head of Ukip and now leader of the Brexit Party, worked in the City as a metals trader. Arron Banks, who funded the campaign group Leave.EU, owns a small and mostly offshore insurance company. Michael Ashcroft – formerly a deputy chairman of the Tory party – and Andy Wigmore, director of communications for Banks’s Leave.EU, are both closely connected with the low-tax former colony of Belize.

There are also a handful of manufacturers who have moved abroad, having already developed their manufacturing overseas, such as James Ratcliffe of Ineos, a European company that does only a fraction of its business in the UK; and James Dyson, who is now based in Singapore. Brexit was also supported by City financiers – Crispin Odey and Rees-Mogg, for example – as well as major London-based newspapers (the Daily Telegraph, the Sunday Times, the Sun and the Daily Mail) with owners whose financial centres are outside mainland Britain. In short, they are not national capitalists, but international capitalists with a set of economic interests that are not overly dependent on the political and economic health of the nation.

The question is: given these disconnections between Brexiteer rhetoric and capitalist reality, between capitalist interests and national policy, why has the whole Brexit fiasco not fallen apart? Why does a fantasy Brexit have such an extraordinary grip on British politics and public life, not least the Conservative Party?

The first extraordinary feature is that the pro-EU position of most businesses operating in the UK was not more strongly felt in the councils of the Tory party. In the past, had a prime minister attempted to pursue a policy of national economic self-harm, the mass ranks of British capital would have intervened to prevent it (perhaps the best example of this was when businesses were strongly and openly in favour of voting to remain in the European Economic Community in the referendum of 1975).

One answer is that there no longer exists a British national capitalism whose success depends mainly on business done in the UK. Nissan and Tata, Goldman Sachs and JPMorgan Chase can easily move their British operations abroad. Like German car manufacturers, they have greater interests elsewhere in the EU, as well as in Asia and the rest of the world. They are reluctant, too, to intervene openly in the politics of one of the many places where they operate.

The Brexit vote was driven by politics not economics, and of a strange sort. The majority of people of working age were not Leavers. Though this can’t be fully pinned down from the surveys, much of the Leave vote came from the English, and especially the retired; from Conservative rather than Labour voters; from outside the large productive cities. In other words, the vote had little to do with the productive economy. It also had little to do with the EU. It was, perhaps, a vote against the modern, foreign-directed form of capitalism, and for the return to the conservative national capitalism of the postwar period. One way of thinking about this is to see the various campaigns for leaving the EU as having mobilised a potential anti-London vote as an anti-Brussels one.

One of the reasons Brexit has become unstuck is that the changing nature of the British economy since the 1970s and 1980s has made it hard to identify what the economic interests of the nation really are. Are they those of British-owned firms operating in the UK, or foreign-owned firms operating in the UK, or British-registered firms of foreign ownership operating in the UK? Will the British state back Dyson in selling vacuum cleaners made in the Far East to China? What does it mean to promote the sales of British cars in China? Little wonder that Boris Johnson’s examples of British exports to promote are both homely and irrelevant – whisky, haggis, Melton Mowbray pies and bus shelters.

The transformations in the nature of British capitalism also make Brexit an unrealistic policy for the state itself. In the days of national technocratic intervention in the economy, the state had officials who, through experience and expertise of particular sectors, were in a position to understand the detailed needs of the economy. But that expertise is in short supply, while the conservative political class – once led by great businessmen and manufacturers such as Stanley Baldwin and Neville Chamberlain – has become less knowledgeable about the workings of modern industry and capitalism.

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It is now clear that having the fifth or sixth largest economy is meaningless when you are in competition with the emerging power blocs of the international economy – the EU, the US and China – as well as Japan and India. The UK is no more of a global player than many other medium-sized countries. For all the talk of entrepreneurial and innovative British genius, national productivity is low and stagnant – hardly the sign of an innovation leader.

The whole lamentable charade, however, does have upsides. Brexit has highlighted the UK’s inequalities. It has drawn attention to what is referred to as the foundational economy, which encompasses everything from transport networks to supply chains.

It has also made us understand not only where much of our food comes from but how quickly some of it arrives from southern Europe. Who knew that so much British fish and British lamb was sold to Europe? Who but the most expert understood the trans-European just-in-time system that had car components moving backwards and forwards across Europe such that it barely makes sense to talk of a British car industry as opposed to a European one?

Progressive reform has always depended on understanding present realities in order to determine exactly what needs changing about the economy and how it can be changed. If nothing else, Brexit has been a long overdue education in the realities of Britain’s economy.

While both liberals and Marxists argue that the nationality of capitalism does not matter, there is a need to rethink the case for a national capitalism in this age of economic inequality, political fracture and geopolitical uncertainty. If nothing else, by embedding the economy more deeply into the nation and the daily lives of its citizens, and by directing itself towards national purposes and having a greater stake in developing national skills and innovations, a national capitalism would underline and reinforce that lost idea of the common good.

David Edgerton’s most recent book is “The Rise and Fall of the British Nation: A Twentieth-Century History” (Allen Lane)