The economically depressed regions that were most eager to leave the E.U. may have more to lose if their decision triggers a recession.
THE BREXIT TRAGEDY
In 1986, as a young reporter just out of the Columbia Journalism School, I went to Sunderland, an old and proud but depressed shipbuilding city on the River Wear, in northeast England, to report on an effort to get jobless people back to work. From the train station, I asked a cab driver to take me to the shipyards, which peaked in the nineteenth century, when they provided many of the sailing vessels and, later, iron-hulled steamers that serviced the far-flung British Empire.
By the nineteen-eighties, the shipyards had already experienced decades of decline, much of it borne of foreign competition. Many of the yards had been closed, and those that were still operating had been placed under public ownership. Sunderland’s unemployment rate was well into double digits, and when I ventured into a local pub I found a lot of skepticism about the Thatcher government’s new “Restart” scheme, which provided counselling, training, and job-placement services for the unemployed. “People around here are bitter,” Thomas Swinburn, a man in his forties who had lost his job in the shipyards, told me. “We grafted all our lives only to put up with this. We had fighting shipyards. Where has it all gone?”
Sunderland’s last two shipyards closed down twenty-eight years ago, in 1988. Despite the fact that the city and its surrounding areas have attracted some new businesses, including a big Nissan car plant in nearby Gateshead, Sunderland has never fully recovered. Although the jobless rate isn’t as bad as it was in the eighties, it’s still high relative to the rest of Britain, and in last week’s Brexit referendum more than sixty per cent of Sunderland’s inhabitants, who have traditionally supported the Labour Party, voted to leave the European Union. When a New York Times reporter, Kimiko de Freytas-Tamura, visited the city to find out why, she emerged with some quotes that sounded eerily familiar to me. “All the industries, everything, has gone,” Michael Wake, a fifty-five-year-old forklift operator, said. “We were powerful, strong. But Brussels and the government, they’ve taken it all away.”
In reality, Brussels had little or nothing to do with Sunderland’s decline. According to the data Web site Statista, the five biggest shipbuilding nations are now China, South Korea, Japan, the Philippines, and Taiwan. The only European country in the top ten is Germany, and its industry is tiny compared with those of the big Asian producers. But in the minds of many inhabitants of Sunderland and places like it, Brussels and Westminster represent the political face of an economic system that has ignored them. As Wake told de Freytas-Tamura, the Brexit referendum enabled disgruntled voters to “poke the eye” of the political establishment.
The tragedy is that this gesture wasn’t just pointless—it was counterproductive. If the U.K. economy now enters a recession, which many economists believe is likely, Sunderland will suffer along with everywhere else. And if Britain goes ahead and leaves the E.U. (which isn’t guaranteed, as I wrote on Monday), already suffering cities will lose access to one of the few remaining sources of funding for economic-revival efforts.
During the referendum campaign, Boris Johnson and other Brexiteers made much of the fact that Britain, like the other rich countries in the E.U., such as Germany and the Netherlands, makes a (small) net fiscal contribution to the E.U. In 2015, this amounted to about 8.5 billion pounds. But that’s a national figure that doesn’t account for local variations. As a depressed region, the northeast of England is eligible to receive money that Brussels allocates to the E.U.’s less prosperous areas via several purses, including the European Regional Development Fund and the European Social Fund.
In recent years, de Freytas-Tamura pointed out, the E.U. has helped finance a number of projects in Sunderland, including a new campus for the University of Sunderland, a business park for software developers, and a fancy leisure center. While some local residents complain that they can’t afford access to these facilities—membership at the leisure center costs thirty pounds a month—the projects are physical manifestations of the E.U.’s commitment to building up poorer regions (a commitment that, over the years, has also done a great deal for countries like Ireland and Portugal). And more help was in the offing. For the period from 2014 to 2020, the E.U.’s development arms had allocated about four hundred and fifty million pounds to England’s northeast.
Unfortunately, during the Brexit campaign, the leaders of the Remain campaign did little to highlight these and other positive features of the E.U. But local civic and business leaders have been less reticent. Under the auspices of the North East Local Enterprise Partnership, they have put together a regional economic plan that relies heavily on E.U. funding and is thus now in jeopardy.
“While we acknowledge this decision by the electorate, the North East LEP is very aware of the many ways in which this region has benefited from being a member of the EU,” Andrew Hodgson, a marine engineer who chairs the Enterprise Partnership, said in a statement after the Leave victory became apparent. “This has included access to European trade and investment and European funding, which has helped to regenerate our towns and cities, support business growth and investment in science and support many of our rural stakeholders including farmers.”
Of course, E.U. funding won’t bring big shipyards back to Sunderland or reverse the effects of half a century of globalization—which have helped other parts of the U.K. and, indeed, parts of the northeast to prosper. But one of the great ironies and tragedies of last week’s vote is that the E.U., while it has certainly promoted trade and economic modernization, has always taken regional disparities seriously. More seriously, arguably, than governments in London.
“We are now urgently seeking assurances from the Government that it will help us reduce the impact of leaving the single market in terms of funding, jobs and investment,” Hodgson said in his statement. With “Mr. Austerity,” George Osborne, still running the British Treasury, which has savaged local-government budgets in recent years, there is little chance that Hodgson’s request for assistance will be met. Unless the Brexit vote is somehow reversed, the residents of places like Sunderland will most likely be left to fly the Union Jack and fester.
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