A second Brexit referendum is now essential

If democracy means anything, it means a country’s right to change its mind

Martin Wolf

Theresa May’s aim is to convert fear of a no-deal Brexit into acceptance of her bad deal, which would leave the UK at the EU’s mercy. In the end, the rhetoric about “taking back control” has come down to a choice between suicide and vassalage. This march of folly needs to be stopped, for the UK’s sake and Europe’s. The only politically acceptable way to do this is via another referendum. That is risky. But it would be better than sure disaster.

Let us count the ways in which what is now happening is quite insane.

In just over a month, the UK might suddenly exit from the EU. But the government and business are unprepared for such a departure: to take one example, the government is still fighting over what farm tariffs to impose. Such a no-deal Brexit would damage the UK — and the EU. If a no-deal exit did happen, negotiations would need to restart at once, but in a far more poisonous and, for the UK, more unfavourable context.

Even if the prime minister’s deal were ratified, a new set of negotiations would have to start over the future relationship. The UK is unprepared for such negotiations. These new negotiations would also inevitably end up with an unsatisfactory outcome, because the UK has never confronted the trade-offs between access and control inherent in all trade negotiations. Finally, this entire mess would make only the EU’s enemies — Russian president Vladimir Putin, above all — happy.

Britain has, in brief, launched itself on a perilous voyage towards an unknown destination under a captain as obsessed with delivering her version of Brexit as Ahab was with Moby-Dick. Has a mature democracy ever inflicted such needless damage on itself?

Why has the UK done so? The simple answer is the marriage of the widespread dissatisfaction of the British people to copious Brexit illusions.

One illusion was that the meaning of Brexit was obvious. In practice, it could cover anything from a high degree of integration to very little. The decision to leave did not determine the destination.

Another illusion was that Brexit could mean unbridled sovereignty. In practice, the deeper is a trading relationship, the more it must compromise with its trading partners on the exercise of national sovereignty. If the UK negotiates trade deals with the US, China or India, it will also be forced to accept many limitations on its sovereignty.

A further illusion is that it would be easy for the UK to trade on the terms laid down by the World Trade Organization. In practice, a no-deal exit would worsen the terms of access to markets that account for about two-thirds of total UK trade.

Yet another illusion is that the WTO covers most of the things the UK cares about. Alas, it does not. What it fails to cover includes road haulage, aviation, data, energy, product testing, including of medicines, fisheries, much of financial services and investment.

It was a dangerous illusion to suppose that it would be simple to strike a trade deal with the EU, because we started from full convergence. The opposite is true. The UK is leaving in order to diverge. Such divergence is precisely what EU rules exist to prevent. The EU would never allow a country the right both to benefit from EU rules and to diverge from them, at its discretion.

A really big illusion was that if the UK were tough with the EU, the latter would come swiftly to terms. But, as Ivan Rogers, former UK permanent representative to the EU, argues, the EU would not — partly because preservation of the EU is, naturally, the EU’s dominant priority, and partly because the EU is sure the UK would be back the day after that no-deal Brexit. It is surely right on that.

So right now, parliament faces a choice between the impossible — no deal — and the horrible — the prime minister’s deal. If accepted, the latter would be followed by years of painful trade negotiations, with, at present, no agreed destination. At the end, the UK would be worse off than under membership of the EU. Its people would be as divided and dissatisfaction would remain as entrenched as they are today. Is there a better way than this? Yes. It is to ask, once again, whether the people want to leave, now that the reality is clearer. There should be a second vote.

Some will argue that this would be undemocratic. Not so. Democracy is not one person, one vote, once. If democracy means anything, it is the right to change a country’s mind, especially given the low and dishonest referendum campaign. It is nearly three years since that vote. Much has happened since then, in both the negotiations and the world. As Ngaire Woods of the Blavatnik School of Government has noted, since 2016 Donald Trump has been assaulting the EU and the WTO, western relations with China have become more problematic and the extent of Mr Putin’s assault on our politics have become more obvious. This is not a time for Europe to inflict the wound of Brexit on itself.

If, as seems plausible, parliament cannot stomach the vassalage of the prime minister’s deal, then the sane options are to ask for a lengthy extension of departure or, better, to withdraw the Article 50 application altogether. Both would give the time needed to discuss how to organise such a referendum. Mrs May’s suggestion of a direct vote on no deal might get us there.

It is now clear that the UK has no consensus on Brexit, but only division and confusion. In order to get her bad deal through, the prime minister has been reduced to threatening parliament with something worse. That is mad. If a country finds itself doing something sure to damage itself, its neighbours and the fragile cause of liberal democracy on its continent, it needs to think again. Now is the last chance to halt the journey to ruin. It is parliament’s duty to do so.

Increasing Anti-Semitism

Macron Struggles to Contain Rising Hate Crimes

By Julia Amalia Heyer

Yellow vest protesters in Paris

Yellow vest protesters in Paris

Amid a stunning increase in anti-Semitic violence in the past year, France is debating whether the yellow vest protests are to blame. President Emmanuel Macron is trying to tackle the problem, but hatred and indignation are rampant in the country.

He had hoped, said French President Emmanuel Macron with a heavy voice last Wednesday evening, that "this dinner would take place in a cheerful context." Wearing a dark suit and a serious expression, he stood in front of a podium in the Carrousel du Louvre, an underground shopping mall near the Louvre museum.

CRIF, the umbrella association of Jewish organizations in France, had invited Macron for their annual dinner. It could have been just one event among many for the French president, whose agenda is always packed. But it didn't turn out that way. Quite the contrary.

That has to do with a situation that is anything but cheerful. Anti-Semitic attacks increased by fully 74 percent in 2018, an unfathomable spike. Last year, 541 incidents were registered, compared to 311 the previous year.

And then there are the recent events: Only a few days before the event near the Louvre, a man shouted at philosopher Alain Finkielkraut on the street, saying that he was a "filthy Jew," that he belonged to a "filthy race" and that he should "go back to Tel Aviv." The man who yelled at Finkielkraut was wearing a yellow vest.

Then a Jewish cemetery in Alsace was desecrated as was, though it wasn't yet known by the time of the dinner, another cemetery near Lyon, where someone wrote "Shoa blabla" on a memorial. Meanwhile, the portrait on the 13th Arrondissement town hall of Simone Veil, the Holocaust survivor and former European Parliament president, was daubed with black swastikas. And someone sprayed "Jews" on the window of a bagel shop.

In his speech to the members of the Jewish organizations, Emmanuel Macron said: "For the last several years, anti-Semitism has once again been killing people in France." Then he listed, one after the other, the names of the people who had been murdered in France in recent years because they were Jewish.

Neither anti-Semitism nor anti-Semitic violence are new phenomena in France or in the rest of Europe. Both have a long history, with a few tragic nadirs: In France, these include the Dreyfus Affair in the late 19th century, the desecration of the Jewish cemetery in Carpentras in 1990, the torture-killing of Ilan Halimi in 2006 in a Parisian suburb and the murder of Mireille Knoll, an 85-year-old Holocaust survivor, about a year ago.

The current displays of anti-Semitism, though, are the crest of an almost all-encompassing wave of hatred and violence crashing over the country. Anti-Semitic attacks can be recognized for what they are; unlike other acts of violence, they can be categorized and geographically pinpointed. As such, the hatred of Jews can be identified even against the backdrop of broadly rising violence.

And here, too, there is a problem specific to France, as the terror attacks of the past few years have shown: The failed integration of younger Muslims and their increasing radicalization.

But a debate has emerged about whether the yellow vests are per se anti-Semitic, whether they are responsible for this new wave of violence. And the likely answer to that question is: They aren't any more responsible nor are they any more anti-Semitic than the rest of the French. Or, for that matter, than the Germans or the Austrians.

The so-called yellow vests, after all, are not a homogenous collection of people that fall into a specific sociological category. Rather, they are a disparate movement united by only one thing: indignation. And when indignation escalates, hate is ultimately the result.

Rising to the Surface

"I am shocked how much hatred there currently is in our country," says Denis Peschanski, a historian who researches historical commemoration. In his view, French anti-Semitism is always in the background, but in pushes its way forward in times of crisis. And it thrives, he says, in an environment where conspiracy theories are plentiful.

And this is where the yellow vests play a role, because, no matter how diverse they may be, the movement's combined force has paved the way, both verbally and physically, for these acts of violence. What is new, though, is the unrestrained nature of the hatred.

There is a hatred of taxes and of tax increases. Hatred for the president, who some would like to see guillotined in the traffic circles in rural France where the yellow vests camp.

And then there's the lawmaker who threatened Macron by saying the president would end up like Kennedy if he didn't change his policies. We are essentially witnessing a collective breaking of taboos. "A Clockwork Orange" in French.

These newly blurred boundaries are also palpable within the yellow vest movement. After nurse Ingrid Levavasseur, a kind of figurehead for the movement, wanted to run in the European Parliament elections with her own list of candidates, she was so harshly insulted and threatened that she withdrew her candidacy. "Dirty whore!" one person yelled at her. "Go get raped!"

All constraints seem to have disappeared. Anyone can be whatever they want to be: racist, anti-Semitic, misogynist. Freedom of speech is showing its dark side.

And it isn't just insults and complaints. The Arc de Triomphe was graffitied. Someone peed on the barrier protecting the French National Assembly. Hatred of the bank on the corner leads to its windows being shattered, and the same happens to the shoe store across the street.

Peschanski, the historian, connects these transgressions to two things: the presidential election in 2017 -- which Emmanuel Macron won against all expectations, making him quasi-illegitimate in the eyes of many -- and to the populism that has become rampant across Europe.

The more powerful the populists become, the more they spread their ideas, their rhetoric, and their hate. The question is now whether the situation can be reset, and whether this spiral of physical and verbal violence can be ended.

Emmanuel Macron is trying in his own way, by travelling to remote corners of the country and talking to people, whether they are local politicians, students or retirees. He has decreed a "great debate" for the country, which sometimes seems akin to national group therapy. He listens to the complaints, takes down criticisms and then responds to them.

An Attempt at Dialogue

To those who are angry, he argues that politicians are not fundamentally corrupt. To those who are afraid, he declares that democracy can protect them. Most of the time, he cuts quite a good form at such appearances because he tends towards the pedagogical. Having spent the first year of his administration focused on establishing his authority, he is now showing his Montessori qualities.

But Macron can't be everywhere, and he has no alternative to offer the senseless, those who believe that nothing can be accomplished without violence. Many in France, including people who don't take part in the yellow vest protests, believe that these weaker elements of France never would have heard from him had the yellow vests not revolted.

This is partly Macron's fault. He didn't respond until quite late, when the violence had boiled over. Now, he is trying to calm down the situation and to pursue reconciliation.

On Wednesday evening, in his speech to CRIF, he said he wanted to punish hate more decisively. He said this push would include laws that, for example, would keep a closer eye social networks. A form of anti-hate law is to be passed banning openly racist or anti-Semitic groups like Blood & Honour Hexagone and Combat 18. Anti-Zionist views are to be considered a form of anti-Semitism, a position which Macron had resisted until recently.

In his talk at the dinner, he said that he had been "ashamed" when he visited the desecrated Jewish cemetery in Alsace. Anti-Semitism, Macron said, isn't a problem for the Jews, but a problem for the republic.

When his speech ended, the audience applauded. The group's chairman, Francis Kalifat, strode on stage to thank him. First, he shook the president's hand, then suddenly took his arm, grabbed it and held it up, like a boxing champion. It was a gesture of desperation.

Government Probes Fidelity Over Obscure Mutual-Fund Fees

Boston-based firm characterizes so-called infrastructure fee as solution to ‘broken’ business model

By Gretchen Morgenson

The issue with Fidelity’s infrastructure fee is whether it is adequately disclosed to investors and to plan sponsors overseeing retirement accounts, lawyers say.
The issue with Fidelity’s infrastructure fee is whether it is adequately disclosed to investors and to plan sponsors overseeing retirement accounts, lawyers say. Photo: brian snyder/Reuters

The Labor Department is investigating Fidelity Investments over an obscure and confidential fee it imposes on some mutual funds, according to a person familiar with the inquiry.

The annual charge, which Fidelity calls an infrastructure fee, is aimed at companies selling shares on the asset manager’s fund platform, and was described in a 2017 internal Fidelity document reviewed by The Wall Street Journal. The fee, which appears to have been implemented in 2016, is “designed to ensure that each Fund Firm meets a minimum required payment to Fidelity.” By marking the charge as an infrastructure fee, the fund firms may be able to avoid disclosing it to investors.

Fund companies that decline to pay the amount will “be subject to a very limited relationship” with the company, the document says. Funds can either pay the fee themselves or push the cost onto investors in the mutual fund. This can increase the overall fees of a fund, causing individual investors to pay more and dent returns.

The fee is calculated as 0.15% of a mutual-fund company’s industrywide assets, not just on the dollar amount of assets held by Fidelity customers buying shares on the platform, the document says.

The infrastructure fee appears to be a way for Fidelity to make up for revenue the firm has lost as a result of investors flocking to reduced-cost mutual funds, a situation the firm refers to in the document as “unsustainable economics.” Fidelity also stated in the document that its traditional business model is “broken” and characterized the infrastructure fee as a solution to that problem.

Assets under management are still growing at Fidelity—as of September 2018 they stood at $2.6 trillion—but the company is pressured by investors who prefer low-cost index funds and other passive investment products to Fidelity’s traditional actively managed mutual funds.

Fidelity makes thousands of third-party mutual funds available to its customers, Vincent Loporchio, a Fidelity spokesman, said in a statement. Those customers include holders of 401(k) plans for which the firm acts as record-keeper.

“We receive a fee from some of those mutual-fund companies to compensate us for maintaining the infrastructure that is needed to make those funds available,” Mr. Loporchio said, citing “systems and processes for record-keeping, trading and settlement, making available regulatory and other communications, and providing customer support online and through phone representatives. It is costly to maintain this kind of infrastructure and Fidelity is entitled to be compensated for those costs.”

Fidelity had no comment on the government investigation into the fee.

With $1.5 trillion in third-party mutual-fund assets held by Fidelity customers, the firm’s FundsNetwork is a powerful platform for fund companies seeking to engage with investors.

The infrastructure fee is levied on lower-cost share classes such as those aimed at retirement accounts. The Labor Department has jurisdiction over retirement accounts that are subject to extra protections and disclosures under the Employee Retirement Income Security Act, or Erisa.

A spokesman said the Labor Department can neither confirm nor deny the existence of ongoing or prospective investigations. Enforcing Erisa, the department typically brings civil actions.

The issue with the fee is whether it is adequately disclosed to investors and to plan sponsors overseeing retirement accounts, securities lawyers said. Fidelity’s insistence on confidentiality about the amounts funds pay in infrastructure fees suggests investors who ultimately foot these bills may not be apprised of them.

The document outlining the infrastructure fee, “Fidelity FundsNetwork Business & Services Guide,” is “not to be distributed to the public as sales material in oral or written form,” and “may not be shared with any third party.”

The Fidelity spokesman said the firm “fully complies with all disclosure requirements in connection with the fees that it charges.”

Fund shares offered by Eaton Vance Corp.; Nuveen Investments; Pacific Investment Management Co., or Pimco; and Thrivent Financial for Lutherans are among those available on the Fidelity platform. Asked whether they disclose the company’s infrastructure fees to their clients, spokeswomen for Eaton Vance and Pimco declined to comment.

A Nuveen spokeswoman said the firm provides “extensive detail about all the fees related to the funds we manage.” A spokeswoman for Thrivent said the company doesn’t talk about the fee arrangements it maintains with Fidelity or any other third-party platform.

“Intermediaries and mutual funds are far more candid in their agreements between each other than they are in disclosures to plan sponsors and investors,” said Edward Siedle, a former attorney for the Securities and Exchange Commission who advises pensions on asset-management matters.

The internal Fidelity document was supplied to asset-management companies, the firm said, to help mutual-fund boards evaluate whether fees, including the infrastructure charge, are being used for distribution. That is crucial: When a fund pays a fee that aims to result in the sale of fund shares, either directly or indirectly, securities laws require it to be part of what is known as a 12b-1 plan and to be disclosed to investors. Many lower-cost fund share classes don’t have 12b-1 plans—a reason why they are cheaper.

Funds are also barred from making “payments that are ostensibly made for some other purpose, but which, based on the facts and circumstances, are used in ways that finance distribution,” the SEC said in a guidance update in 2016.

Sponsors of retirement plans must also disclose all payments made related to the plans.

The Fidelity infrastructure fee is also the subject of a lawsuit filed last week in a Massachusetts federal court by a participant in a retirement plan offered by T-Mobile US, Inc. In that suit, the plaintiff contends that the infrastructure charge is prohibited under Erisa and that Fidelity incentivizes mutual funds on its platform to “conceal the true nature of fees associated with these funds.”

The Fidelity spokesman said the company emphatically denies the allegations and intends to defend against them vigorously.

In the internal Fidelity document, the company indicates that it doesn’t consider the infrastructure fee to cover distribution services. Rather, it categorizes the agreement between Fidelity and funds on its platform as “shareholder services”; such fees may not require a 12b-1 plan. A person familiar with the program said each fund must determine what portion of fees paid to Fidelity are for distribution.

The SEC has been examining mutual-fund companies’ payments of fees to financial intermediaries, like Fidelity. In 2015, for example, First Eagle Investment Management agreed to pay nearly $40 million to settle the SEC’s charges that it used $25 million in fund assets to pay for distribution and marketing of fund shares outside of a 12b-1 plan.

Migration Myths vs. Economic Facts

World Bank data show that migration flows are increasing – a trend that is set to continue. Fragmented migration policies shaped by popular myths cannot manage this process effectively, much less seize the opportunities to spur development that migration creates.

Mahmoud Mohieldin , Dilip Ratha


WASHINGTON, DC – On December 19, 2018, the United Nations General Assembly voted to adopt the Global Compact for Safe, Orderly and Regular Migration, with 152 votes in favor, five votes against, and 12 abstentions. Supporters hailed the Compact as a step toward more humane and orderly management of migration, yet opposition remains formidable.

The Compact is not a legally binding treaty, nor does it guarantee new rights for migrants. In fact, the Compact’s 23 objectives were drafted on the basis of two years of inclusive discussions and six rounds of negotiations, focused specifically on creating a framework for international cooperation that would not interfere excessively in countries’ domestic affairs.

Because of misunderstandings about the Compact, it is worth taking a closer look at the migration challenge – and the vast benefits that a well-managed system can bring to host countries and home countries alike.

Migration is motivated, first and foremost, by lack of economic opportunities at home. With the average income level in high-income countries more than 70 times higher than in low-income countries, it is not surprising that many in the developing world feel compelled to try their luck elsewhere.

This trend is reinforced by demographic shifts. As high-income countries face population aging, many lower-income countries have burgeoning working-age and youth populations. Technological disruption is also putting pressure on labor markets. Moreover, climate change, as indicated by a recent World Bank report, will accelerate the trend, by driving an estimated 140 million people from their homes in the coming decades.

But, contrary to popular belief, nearly half of all migrants do not move from developing to developed countries. Rather, they migrate among developing countries, often within the same neighborhood.

Moreover, return migration is increasing, a fact that is often overlooked, often because migrants were denied entry into the labor market or their work contracts ended. For example, the number of newly registered South Asian workers in the Gulf states declined significantly – by anywhere from 12% to 41% – over the last two years. Between 2011 and 2017, the number of potential returnees in Europe – asylum-seekers whose applications were rejected or who were found to be undocumented – increased fourfold, reaching 5.5 million. Over the same period, the number of potential returnees in the United States more than doubled, to over three million. Return migration from Saudi Arabia and South Africa has increased as well.

Those migrants who remain in their host countries make substantial contributions. Although the world’s estimated 266 million migrants comprise only about 3.4% of the global population, they contribute more that 9% of GDP.

To achieve this, migrants must overcome high barriers to economic success. For example, unskilled workers, especially those from poor countries, often pay very high fees – which can exceed an entire year’s income for a migrant worker in some destination countries – to unscrupulous labor agents to find employment outside their own countries. That is why the Sustainable Development Goals (SDGs) include a target to reduce recruitment costs.

Migration also delivers major economic benefits to home countries. While migrants spend most of their wages in their host countries – boosting demand there – they also tend to send money to support families back home. Such remittances have been known to exceed official development assistance. Last year, remittances to low- and middle-income countries increased by 11%, reaching $528 billion, exceeding those countries’ inflows of foreign direct investment.

Globally, the largest recipient of remittances is India ($80 billion), followed by China, the Philippines, Mexico, and Egypt. As a share of GDP, the largest recipients were Tonga, Kyrgyzstan, Tajikistan, and Nepal. The increase in remittances during 2018 was due to improvement in the labor market in the US and the recovery of flows from Russia and the Gulf States.

But the potential of remittances to support sustainable development is not being met. A major obstacle is the high cost of transferring money.

Migrants sending money home pay, on average, 7% of the total of the transfer itself, owing to weak competition in the market for remittance services – a result of stringent regulations intended to combat financial crimes like money laundering – as well as reliance on inefficient technology. Achieving the SDG target of reducing transfer costs below 3% – which would support progress toward the target of increasing the total volume of remittances – will require countries to address these weaknesses.

We are closely monitoring these often-overlooked ways that migration can support development, owing to their links to SDG indicators. But recent research busts other migration myths as well, showing, for example, that migrants neither impose a significant fiscal burden on host countries nor depress wages for lower-skill native workers.

Migration flows are increasing – a trend that is set to continue. Fragmented migration policies shaped by popular myths cannot manage this process effectively, much less seize the opportunities to spur development that migration creates. Only a coordinated approach, as envisioned in the Global Compact, can do that.

Mahmoud Mohieldin is World Bank Group Senior Vice President for the 2030 Development Agenda, United Nations Relations and Partnerships, and is a former minister of investment of Egypt.

Dilip Ratha is head of the World Bank Migration and Remittances Unit and Global Knowledge Partnership on Migration and Development.