Returning to political realism

We need a practical focus on results, not following dogma

Towering columns

On his Substack, Neil O’Brien explains why the asylum system has become increasingly unsustainable for the UK and other European countries.

Unlike in the noughties, the large number of asylum claims in recent years is happening despite the fact that we have opened large non-asylum safe and legal humanitarian routes for the most significant source countries: Ukraine, Hong Kong, Syria and Afghanistan. Asylum only accounts for about half (269,000) of the 529,000 people who came to the UK in the last five years via these humanitarian routes combined. That is a significant number of destitute people to provide housing, public services and welfare for. To put it in context, substantially more people have come via the humanitarian routes than have come for work.

Of net non-EU migration of 2,008,000 over the last five years, 309,000 people came for work compared to 529,000 on the humanitarian routes². Asylum claims alone at 269,000 contributed nearly as much to net migration as those coming for work. Of course, many refugees do work and also contribute in other ways. My childhood Christmases (and many other weekends) were brightened by sharing empanadas with a Chilean refugee who had fled from Pinochet, who made a huge contribution to our local community.

But refugees are often destitute people with a lot of problems and may not speak English. Refugees in the UK are four times more likely to be unemployed than people born here, and on average earn about half the amount per week that UK nationals do. This means that while it is right to shelter desperate people, there is obviously a net cost to the taxpayer from doing so. The government states that the asylum system “currently costs the UK some £3 billion a year and rising, including nearly £6 million a day on hotel accommodation.”

The pressure on our asylum system is only likely to grow in the coming years. If we look at the top ten countries from which we have accepted the most asylum seekers since 2008³, the UN forecasts that their population will increase by 50% over the next 25 years - more than twice as fast as the world average. This is likely to mean many more claims, even before we add in any other considerations like the increasing ease of travel, or youthful populations.

In The Times, Juliet Samuel responds to the new record net migration numbers and suggests how the UK can end its dependency on cheap foreign labour.

Why did this happen? The government’s migration quango, the Migration Advisory Committee (MAC), stated that visas might be used as a “temporary” measure to make up for the inability to recruit immigrants from the EU. But this “temporary” measure has led to a surge in care workers far greater than we have seen before, this time from India, Nigeria and the Philippines rather than eastern Europe. Like the previous surges, it will no doubt permanently alter the labour market. The main effect is to prevent wages from rising and working conditions from improving. The MAC has stated for years that we do not have enough care workers because care homes don’t pay them enough. Turnover in the sector runs at 28 per cent, creating a constant need for overseas recruits.

Unfortunately, instead of solving the shortage, the new recruits mainly replace current workers. As Miriam Cates pointed out in parliament this week, the UK recruited 70,000 care workers last year but vacancies in the sector only dropped by 11,000. Meanwhile, 20,000 British staff left, making the workforce ever more reliant on visas, which in turn gives employers greater power to exploit staff and effectively shave wages further. So much for this being a temporary fix.

In most sectors, of course, we would demand to know why employers are not fixing the problem. During the chronic shortage of lorry drivers after Covid, the spotlight rightly fell on the haulage industry, which had not delivered a real-terms pay rise in the UK for more than a decade. The usual suspects declared that solving the problem without much higher migration was impossible because modern Britons are constitutionally ill-suited to driving lorries. Instead, the industry began handing out massive bonuses and the government granted more licences. Miraculously, the shortage eased.

At UnHerd, Giles Fraser reflects on why the March Against Antisemitism was necessary to support the Jewish community during what is for Israel an existential conflict.

Admittedly, facing the truth is often impossibly demanding, especially when the truth is as distressing as this is. I thought I was mentally prepared for Bearing Witness, the IDF’s 47-minute compilation of footage taken on October 7, which I saw last week at a private screening. But my body clearly wasn’t. Ten minutes in, I started to shake. The organisers had prepared the audience as best they could and explained there was no shame in having to leave. And there was a point where I was close…

…Then, yesterday afternoon, more than 100,000 of us marched through central London. This too was bearing witness — it was not a digital social media battle but these were real people, with real worries. It was the largest and most significant assertion of support for British Jewry since the fascists were pushed back by a similar number of indignant cockneys at the Battle of Cable Street on another Sunday afternoon in 1936. A few yards in front of me, Tommy Robinson, a latter-day Blackshirt, was forcibly ejected from the march to everyone’s approval. Nasty little man.

The atmosphere was mostly sombre, with grey skies and a little gentle rain reflecting the mood. A few reserved chants of “Bring them home!” broke out as we marched up towards Parliament, but mostly it was reassuringly free of drama, still less any sort of threat. No one wore a mask. These did not feel like people who were used to going on demonstrations. “First time I have been on one since the Sixties,” said the rather glamorous octogenarian sitting beside me on the Tube. These are the “moderate people” that actor Eddie Marsan had urged in his speech “to stand up and face down extremism and bigotry and antisemitism and islamophobia and all forms of racism”. It was pretty distressing that it took so many police to protect so many peaceful people. But they needed to be there.

At The Critic, Derrick Berthelsen says British manufacturing has benefited from Brexit despite challenges with productivity and investment.

It would seem those who argued Brexit would see supply chains reshored were correct. Cadbury relocating production from Germany to the UK is not an isolated incident. Meanwhile the UK’s role in pan European supply chains does not seem to have been negatively affected, as large companies have been able to easily and for negligible cost adapt to the new paperwork. This was a point made by Alan Johnson, Nissan’s senior vice-president of manufacturing and supply chain, as he announced a further £2 billion investment in Nissan Sunderland.

Not that I think this means the UK economy is performing well. Quite the opposite. The whole of the West is struggling with issues of poor productivity and lack of investment — in no small part driven by ludicrous energy policies which are inevitably leading to de-industrialisation and economic decline.

Nor am I saying that the UK could not be doing a lot more to attract the 25 per cent of global trade that Mckinsey estimates will shift within the next decade or so (that’s $4.5 trillion worth of trade — 1.5x UK GDP). If you are interested, I outline how a UK Government could relatively easily boost productivity, drive investment, and generate economic and political rebalancing here. On the question of whether Brexit would be positive or negative for UK manufacturing and industrial production, though, the data seems unequivocal. The doomsayers are simply wrong. Overall Brexit has (so far) significantly boosted the sector.

In the Financial Times, Martin Wolf argues that the government’s fiscal timetable should be reformed to enable better long-term decision making.

The fiscal timetable of our governments simply does not match the timetable needed for long-term decision-making. One of the investment-inhibiting consequences of this is uncertainty. The chancellor has, after all, introduced 110 “growth measures” just this time. How many more will come in the Budget early next year and Autumn Statements and Budgets thereafter?

This is an environment almost perfectly designed to make business risk-averse and defensive. Adverse changes in British capital markets, partly related to the complex regulatory mess made of the pension system, have reinforced this tendency. The chancellor understands this. But he finds it hard to change things radically. He is trapped.

None of this is inevitable. As Martin Sandbu has recently noted, other countries do not do things in such a complex way. An alternative would be to make budgets far rarer events, designed to establish the fundamental fiscal plan for a parliament. Then the focus nearly all of the time should be on strategic goals, such as investment, saving and innovation.

The government should set out a long-term vision of where it thinks the economy is and should be going. It should focus on long-term reforms, such as tax reform and the energy strategy. It should also focus on reforms of the institutions of government, such as those put forward by Francis Maude.

At UnHerd, Robert D. Kaplan looks at the intellectual views of Dr Henry Kissinger and how his understanding of realpolitik was rooted in history.

At Kissinger’s dinner parties, organised by his brilliant and formidable wife Nancy, whose own presence filled the room, the headlines were often ignored. Discussions ranged from the historic dilemmas of China, Germany, Russia, and the United States to the challenges of the universities to the attributes of great leaders. You got a preview of his later books by being in his presence. But I think it necessary here to reprise some of my interpretations of his philosophy which I find so crucial — enough so that they bear repeating from my previous essays. For it is Kissinger’s philosophy that I find most important about him, and which constitute a rough guide to his statesmanship: because it is a philosophy whose origins lay in his experiences as a young Jew in Hitler’s Germany and as the son of immigrants in challenging circumstances.

In fact, Kissinger had internalised the lessons of the Holocaust, though they were different lessons from those learned by the liberal elite of his era. Kissinger saw Hitler as a revolutionary chieftain who represented the forces of anarchy attempting to overthrow a legitimate international system, as imperfect as it was. For in Kissinger’s mind, his first book about the diplomatic response to another revolutionary chieftain, Napoleon, offered a vehicle for him to deal, albeit obliquely, with the problem of Hitler. Morality and power couldn’t be disentangled, in Kissinger’s mind.

In fact, Kissinger, as a practitioner at the highest levels of US foreign policy during some of the hardest days of the Cold War, thought more deeply about morality than many self-styled moralists. And the ultimate moral ambition during that period was the avoidance of a direct military conflict between the United States and the Soviet Union through a favourable balance of power. The Cold War may now seem ancient, but for someone like myself, who as a journalist covered Communist Eastern Europe, with all its grim, freeze-frame poverty and pulverising repression, it will always remain quite vivid. And were it not for Kissinger’s realpolitik, which allowed for a truce with China in order to balance against the Soviet Union, even as he and President Richard Nixon achieved détente with the Kremlin, President Ronald Reagan would never have had the luxury of his subsequent Wilsonianism.

Indeed, Kissinger was a realist internationalist, like the other great Republican secretaries of state during the Cold War, George Shultz and James Baker III. Realists today have drifted toward neo-isolationism, and have grown literally smaller because of it.

Wonky thinking

The Centre for Policy Studies has published a new briefing Net Migration and Housing by Karl Williams. The author establishes how the UK housing crisis has been exacerbated by record high migration and low rates of housebuilding. Net migration has increased the UK population by 1.2 people in the past two years, which is close to the whole population of Birmingham.

Over the last decade, average house prices have risen by 52% in real terms across the UK. There are a number of factors driving skyrocketing house prices, many of which have been examined in detail in previous CPS research – our broken planning system and failure to build enough houses being the most important, but also asset price inflation caused by a prolonged period of ultra-low interest rates; policy interventions which have pumped up demand, such as Help to Buy; and frictions in the housing market such as stamp duty.

But to these we must undoubtedly add the unprecedented rate of net migration. It should also be remembered that this is not just about house prices, housebuilding and home ownership. It inevitably affects the rental market too.

A 2017 study by the ONS found that ‘more recent migrants are more likely to privately rent than live in social housing or own their own home’, with 88% of EU migrants and 80% of non-EU migrant arrivals between 2014 and 2016 privately renting. Assuming these figures are still roughly correct, then in 2022 there was a net increase of around 450,000 people entering the rental market in England (even assuming almost all Ukrainians remained with their host families). And again, they would have done so mostly in the places where housing pressures are most acute – in particular the big cities.

This is not just about workers. There has been a huge rise in the number of international students, not least because fees paid by home-grown students are capped. But those universities are in effect importing international students and capturing most of the value through high student fees, while externalising all the costs, which are borne by local communities in terms of increased pressure on public services and infrastructure, and higher rents. According to the ONS, private rental prices increased by 6.1% in real terms in the 12 months to October 2023, and by 6.8% in London. This follows robust rental price growth across 2022.

According to Rightmove, average monthly rents hit £2,500 in London and £1,190 in the rest of the UK in Q1 2022, and the number of inquiries per property was up by 173% compared to the same period in 2019. And according to analysis from research firm Capital Economics, net migration increased average UK rents by up to 8% last year.

Clearly, as with the broader housing crisis, there are lots of factors other than migration feeding into rising rents, including higher interest rates, buy-to-let tax changes, pending rental reforms and energy efficiency requirements, all of which have caused many landlords to sell up and exit the market. But again, we cannot ignore the substantial demand pressures caused by soaring net migration.

For The Big Read at the Financial Times, Qianer Liu investigated how Huawei managed to develop a new chip despite US sanctions against the Chinese company. The Chinese state is investing heavily to reduce its reliance on imports and force its way back into global supply chains.

Chipmakers usually partner with chip design companies to test equipment and manufacturing processes in a new facility. So, for example, TSMC will collaborate with Apple on the chips produced on its 3nm processing line.

For SMIC’s upgraded 7nm production lines, Huawei was the guinea pig. But the handset maker brought revenue and validation for SMIC, and played a crucial part in redefining several facets of the production line, according to three insiders familiar with the SMIC facilities. “Huawei’s engineers can be seen everywhere in SMIC’s Shanghai plant,” says one of them.

SMIC has also reached out for assistance outside the country. Americans are forbidden from working for Chinese advanced chip makers, due to export controls but according to two chip engineers familiar with SMIC, it also employed experts from Taiwan, Japan, South Korea and Germany in a bid to improve productivity.

“These overseas experts bring technical knowhow on advanced processes they gained from other foundries,” one of the engineers says. “The 7nm process has thousands of steps to improve,” says the second engineer. “Even in the wee hours of the morning, I had to answer the phone at the factory because it may concern one or two critical improvements.”

According to a source familiar with Huawei’s chip design team, when SMIC received the Kirin 9000S order, it did not have a team capable of assisting chip design engineers to adapt their designs to the process specification of different foundries. Huawei had to adapt on its own.

Production yields for the Kirin 9000S remain shrouded in mystery, with neither Huawei nor SMIC making any public statements on the matter. One person close to Kirin 9000S production in the early days says that the Kirin 9000S achieved yields of more than 30 per cent during the risky volume production phase, the step before mass production. The person describes that as a “positive number under tough conditions” but notes that it is “at least a two times increase in cost compared to a production line with a 90 per cent yield, the ideal benchmark for the mobile chips fabrication.”

Industry experts believe Chinese state funding compensated for the excessive chip production costs. Huawei received Rmb6.55bn ($948mn) from the Chinese government in 2022, more than double the amount the previous year, according to the company’s annual report. SMIC has received Rmb6.88bn in state subsidies over the past three years, with additional support from the China Integrated Circuit Industry Investment Fund as a major shareholder. “The Chinese state has apparently decided that footing the huge bill for this effort is worth it,” says Douglas Fuller, an expert on the China semiconductor industry.

Book of the week

We recommend Diplomacy by Dr Henry Kissinger. This essential work on the history of international relations contains unique insight into how world orders emerge and disintegrate. Drawing on a long career as a diplomat and historian, Dr Kissinger produced a timeless examination of how power in global politics operates.

During the Cold War, the unique American approach to foreign policy was remarkably appropriate to the challenge at hand. There was a deep ideological conflict, and only one country, the United States, possessed the full panoply of means—political, economic, and military—to organize the defense of the noncommunist world. A nation in such a position is able to insist on its views and can often avoid the problem facing the statesmen of less favored societies: that their means oblige them to pursue goals less ambitious than their hopes, and that their circumstances require them to approach even those goals in stages.

In the Cold War world, the traditional concepts of power had substantially broken down. Most of history has displayed a synthesis of military, political, and economic strength, which in general has proved to be symmetrical. In the Cold War period, the various elements of power became quite distinct. The former Soviet Union was a military superpower and at the same time an economic dwarf. It was also possible for a country to be an economic giant but to be militarily irrelevant, as was the case with Japan.

In the post-Cold War world, the various elements are likely to grow more congruent and more symmetrical. The relative military power of the United States will gradually decline. The absence of a clear-cut adversary will produce domestic pressure to shift resources from defense to other priorities—a process which has already started. When there is no longer a single threat and each country perceives its perils from its own national perspective, those societies which had nestled under American protection will feel compelled to assume greater responsibility for their own security. Thus, the operation of the new international system will move toward equilibrium even in the military field, though it may take some decades to reach that point. These tendencies will be even more pronounced in economics, where American predominance is already declining, and where it has become safer to challenge the United States.

The international system of the twenty-first century will be marked by a seeming contradiction: on the one hand, fragmentation; on the other, growing globalization. On the level of the relations among states, the new order will be more like the European state system of the eighteenth and nineteenth centuries than the rigid patterns of the Cold War. It will contain at least six major powers—the United States, Europe, China, Japan, Russia, and probably India—as well as a multiplicity of medium-sized and smaller countries. At the same time, international relations have become truly global for the first time. Communications are instantaneous; the world economy operates on all continents simultaneously. A whole set of issues has surfaced that can only be dealt with on a worldwide basis, such as nuclear proliferation, the environment, the population explosion, and economic interdependence…

…Yet the rise and fall of previous world orders based on many states—from the Peace of Westphalia to our time—is the only experience on which one can draw in trying to understand the challenges facing contemporary statesmen. The study of history offers no manual of instructions that can be applied automatically; history teaches by analogy, shedding light on the likely consequences of comparable situations. But each generation must determine for itself which circumstances are in fact comparable.

Intellectuals analyze the operations of international systems; statesmen build them. And there is a vast difference between the perspective of an analyst and that of a statesman. The analyst can choose which problem he wishes to study, whereas the statesman’s problems are imposed on him. The analyst can allot whatever time is necessary to come to a clear conclusion; the overwhelming challenge to the statesman is the pressure of time. The analyst runs no risk. If his conclusions prove wrong, he can write another treatise. The statesman is permitted only one guess; his mistakes are irretrievable. The analyst has available to him all the facts; he will be judged on his intellectual power. The statesman must act on assessments that cannot be proved at the time that he is making them; he will be judged by history on the basis of how wisely he managed the inevitable change and, above all, by how well he preserves the peace. That is why examining how statesmen have dealt with the problem of world order—what worked or failed and why—is not the end of understanding contemporary diplomacy, though it may be its beginning.

Quick links

Experimental data from the ONS suggests the UK unemployment rate is lower than originally thought at 3.5%.

Fiscal drag has not gained cut-through with the public despite media debate as only 28% believe they will be paying more tax after the Autumn Statement.

Record net migration has not eased the UK’s tight labour market.

Senior officials at the Home Office admitted they did not know the whereabouts of 17,000 asylum seekers.

The Charity Commission has promised to target organisations that provide platforms for hate speech, including antisemitism.

Migration Watch found that 56% of the public believe net migration is too high and only 2% believe it to be too low…

…and 53% of all voters support a five-year moratorium on further immigration, including 62% of workers and 79% of Brexit voters.

Immigration minister Robert Jenrick proposed his own plan to cut migration.

School teacher visas have grown rapidly in recent years with 80% granted to people from non-western countries.

More than 10,000 teachers arrived in the UK from Ghana in 2023.

Brown University president refused to acknowledge Jewish students in a statement at vigil for students of Palestinian descent shot and wounded.

Bank of England forecasts suggest the UK economy will barely grow over the next two years.

Data suggests that rapid economic growth in the United States has been driven primarily by population growth.

EU President Ursula von der Leyen claimed the next generation will reverse Brexit.

Labour polled at 50% in the Red Wall while the Conservatives trailed at 26% and Reform UK on 11%.

In Scotland, Labour is ahead of the SNP with 36% and the Conservatives at 17%.

Nationally, Labour continues to enjoy a 20 point lead in polls.

After being told to work in the office three days a week, 40% of civil servants are considering resigning.

The UAE intended to use its position as host country for the COP28 summit to facilitate oil deals.

The Telegraph urged the government to protect freedom of speech in its handling of the auction of the paper to new proprietors.

There are 98 takeaways but just 2 groceries in Knowsley, making healthy life choices more difficult for residents.

Newsnight has been cut by 10 minutes with fewer investigative films following a drop in audience numbers and BBC savings plan.