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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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By all accounts the polls are very tight—within the margin of error—on whether Britons will vote to exit the European Union (EU) come June 23. The uncertainty has financial markets on edge and the usual cast of grandees is weighing in on what will happen if Britain votes to leave.

George Soros—the man who broke the Bank of England–warns that a Brexit could trigger a ‘Black Friday’ and a recession. Predicting that house prices will plummet in the event Wilbur Ross calls a Brexit vote ‘financial suicide’ for British homeowners. According to the L.A. Times, major American and European investment banks have estimated that Britain could lose 1% to 6% of its GDP in the event of a vote to leave.

All of which suggests we should remember John Kenneth Galbraith’s quip that “God invented economists to make the weatherman look good”.

The debate over the wisdom of a Brexit is poorly framed. It is at heart a question of politics, not economics. More specifically it is about the wisdom of retaining the sovereign nation-state as the primary unit in world politics or replacing it with a Supra-national bureaucracy staffed by “experts” with little accountability and even less transparency. This in turn is but one step away from the ultimate goal of the progressive project which is global government run by and for the same progressive experts who have made such hash of it in their own countries.

Leaving aside the sky-is-falling rhetoric of alleged experts, it is unclear why a Brexit should be such an economic calamity. After all, after a misguided attempt to do so, Britain never got around to giving up the pound in favor of the Euro, so there would be no change in the currency regime. Moreover Britain has one of the largest economies in the world, measured both in aggregate and per capita terms, and has been a leading center of global finance for centuries. There is a reason for that.

Britain has a long record of adhering to the rule of law, protecting property rights, individual rights, the right of contract, and maintaining political stability. That’s a lot more than can be said about France or Germany. It is hard to imagine why London would cease to be a center of global finance if Britain were to leave the EU because Britain already was a center of global finance for centuries before the EU came into existence. What, other than a history of political instability, does the EU offer that Britain does not?

The EU is saddled with trying to force an unsustainable political union on very disparate countries without a common language or culture. And it is trying to force political union through a one size-fits-all set of economic rules adopted by the bureaucracy in Brussels. And not to put too fine a point on it—the budget rules at the center of its policy of fiscal integration have never been enforced. Moreover, its monetary policy, set by Germany, bears a lot of responsibility for the disaster in Greece because it allowed Greece to borrow way too much money at rates that were way too low.

Very easy EU monetary policy in the early 2000s was certainly instrumental in the largely successful project to complete the integration of East and West Germany in the aftermath of the wall coming down in 1989. But it stoked the housing bubble in Ireland and Spain that later overwhelmed those two countries. Ireland, Spain, Portugal and Greece became economic collateral damage in the attempt to accomplish the goal of political integration. And Italy may not be too far behind.

The original political sentiment behind the EU is laudable enough: it is to prevent Europeans from reverting to form and launching wars with each other. But the effort assumes today’s geo-political map looks the way it did in the first half of the 20^th century. Well, western colonialism is long gone, and no one seriously believes that France and Germany are about to go war with each other anyway. Why would they?

If European countries still think they need an organization to prevent more European wars, NATO suits the bill just fine.

Furthermore, there is no rational reason why the EU cannot continue to offer Britain the same trading terms it already has. Despite the nonsense routinely offered up by politicians who claim otherwise, trade is mutually beneficial (or else it wouldn’t happen) and is an unalloyed good. Were the EU to refuse to trade with Britain, or offer less attractive terms out of political pique, it would be hurting itself as well as Britain.

And it would give the game away. It would then be apparent to all who are willing to look that the real EU goal is to break a sovereign Britain to its saddle so that its unaccountable bureaucracy in Brussels can maintain and expand its political power over the lives of the 500 million or so people who live in its 28 member countries.

So what will Britons do? The polls appear to give a slight edge to the Remain faction; the betting markets (often more accurate) a larger edge. But polling in Britain is notoriously inaccurate; people often give pollsters the “respectable” answer rather than what they really think, and the betting markets may be influenced by published polls. Here’s betting that Britain votes to exit the EU on June 23^rd.

And when the dust settles, we will look up to see that the sky hasn’t fallen.

JFB

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