The Day (or Two) After Brexit

The sullen driver sits behind the wheel of his car while a policeman writes a ticket. In protest the driver points to the tree blocking his view of the Stop sign he just ran. He argues that no one was coming the other way; that it was raining; that he was driving below the speed limit, and that the streets are deserted anyway. He talks about all kinds of extenuating circumstances. Except all the empty beer cans he tossed into the back seat.

 

Talk about anything but the beer.

 

So it is with Brexit the day after as the good and the great scold the voters who ignored their dire predictions. Talk about anything and everything but the real issue.

 

We are, for instance, told about the resulting “chaos” in financial markets. Apparently a selloff of 3.5% in the S&P 500 and a fall in Treasury bond rates of about two-tenths of a percentage point counts as chaos. Anne Applebaum of the Washington Post wrote without a hint of irony that “Elected leaders were swept aside” apparently unaware that the only elected leader to be “swept aside” was David Cameron, who resigned because he lost the vote. So mighty was the sweep that it will take place in October after the Conservative Party votes on a new leader.

 

We are told, again by Applebaum, that as a result of the vote “The Dutch prime minister, the German chancellor or the French president, consumed with fighting off political challenges at home, will not have time to think creatively about their own economies…”. Those pesky voters once again have ruined the creative planning the EU had in store for them.

 

Sebastian Malloy of the Council on Foreign Relations chimes in to tell us that the vote may be the tipping point where “…The idea of the West finally ceases to be plausible…”. Not to be outdone, Jochen Bittner writes in the New York Times that younger voters opted for “Remain” while older voters went with the “Leave” camp and blames the loss on “…angry old men”. He goes on to say “The angry old men will not be mollified, their xenophobia cannot be controlled or channeled into constructive cooperation”. So, we are left to conclude, those who voted “Leave” are ignorant racists, who cannot be controlled.

 

The Bloomberg Editorial Board calls June 23 “A Bad Day for Europe”. They argue that the immediate risk to Britain’s economy is “grave”. And they fret that “If, against the odds, [the Brexit] succeeds other EU members could be tempted to do the same”. What a horror, Britain may succeed and other countries might emulate success. So let’s root for failure.

 

The comments of stunned elites give away the game. By all means obfuscate. Talk about anything but the beer. So they continue to (a) focus on the allegedly wicked motivations of “Leave” voters and to (b) frame the result in economic terms when in fact it was a political decision about the locus of sovereignty. The central question—the political question—that the voters decided was this: What is the proper source of political authority? Is it the nation-state, or is it the dysfunctional European Union, run by and for powerful bureacratic elites?

 

Britons clearly and decisively answered that the source of legitimate political authority is the nation-state. They said “No” to the sovereignty “pooling” of the EU that would inevitably serve to solidify the grip of the sclerotic bureaucracy of the EU over their lives.  No amount of name-calling can change that; neither can changing the subject. And it is undeniable that the stateless “experts” of the bureaucratic elite were rejected in a free and fair vote.

 

That is not to say that the economic ramifications of the vote are unimportant. To the contrary they are extremely important. If Britain makes the wrong economic policy decisions, its economy, and its citizens, will suffer. But that is true for the EU and its policy making as well, an obvious fact that apparently escaped the attention of the “Remain” apologists. Unless of course what they are really saying sub rosa is that more centralized command-and-control is what is really needed. But given the history, there is good reason to believe that Britain’s economic policy making will continue to be superior to the economic policy making of the EU. After all, Britain has been a leader in free trade for a couple of centuries. It has one of the strongest, most robust and innovative economies in the world. And its economic performance has been generally superior to that of the EU. Britons are right to ask why they should be taxed to pay for EU policy failures. Like Greece.

 

According to the latest data published by Eurostat, the 28 countries of the Eurozone had an employment rate of 65.6% in 2015. By contrast, the UK had an employment rate of 72.7%. For young people (aged 15 to 24) the employment rate in the UK was just under 50%, far higher than the 28 Eurozone countries that clocked in at about 30%. When it comes to innovation, think about Nobel prizes. The UK swamps the Eurozone in Nobel awards both in absolute terms and with respect to population. The UK has about 13% of the population of the EU and 25% of the Nobel prizes. It has won more Nobel prizes than any other EU member state. Expressed per unit of population size, UK citizens have been awarded 19.315 prizes per 10 million, more than double the EU’s 9.225. The difference is even larger when the sciences are considered alone. The UK has 15.928 per 10 million in population, which is 2.38 times the 6.691 awarded to the EU.

 

Achieving efficiency gains from trade does not require political integration. NAFTA, despite the nonsense being peddled by populist politicians, has been a roaring success in terms of economic efficiency and wealth creation. Unlike the 28 member states of the European Union,  Canada, Mexico and the U.S. have not surrendered their sovereignty. Their political systems are independent; each has its own (tradable) currency, and for the most part each determines its own fiscal and regulatory policies, subject to Treaty obligations. Their sovereignty has not been surrendered to a supra-national bureaucracy.

 

The UK has the political and intellectual infrastructure needed for continued success. It has a long history of adhering to the rule of law, maintaining political stability, and protecting individual and property rights in addition to an enviable record of scientific and artistic achievement. Not to put too fine a point on it, the UK’s record in these areas compares well to the major players in the EU. There is every reason for Britons to feel proud of their culture and to resist a statist one-size-fits-all EU bureaucracy. And as long as Britain keeps to a path of free markets under the rule of law—which is what they have usually done albeit with bumps along the road—they will continue to thrive. Moreover, because the British political system is far more accountable than the EU is, mistakes are easier to spot and easier to correct. The mandarins at the EU should be taking lessons from Britain when it comes to economic policy making, not the other way around.

 

Finally, take note of the language used by the mourners. Remember what Sebastion Malloy said: “The angry old men will not be mollified, their xenophobia cannot be controlled or channeled into constructive cooperation”. Control, not freedom, is the mission of the EU. It has been right from the beginning.

 

British voters have correctly responded: “No thank, you”.

 

JFB

 

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Joe Benning