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Brexit Post

I’m becoming irritated already with those who are “bored” of the Brexit debate. I’m sorry for your paucity of imagination! This referendum is a huge exercise in direct democracy – and offers us, by which I mean the elite, politically astute and educated folks who frequent finance/econ/politics blogs on the internet,  a chance to focus the attentions of regular people on stuff that really matters. Of course the daily mail is prating on about immigration and personality politics – when are they not. That doesn’t mean we can’t have good and valuable conversations, so let’s have at it!

We’re being asked to take a view on whether we should keep with a particular institutional arrangement, or abandon it. I’d respectfully ask you to ignore anyone who focusses on forecasts of GDP costs and benefits, or the trade balance, or any such other random variables generated by complex emergent processes over which we have very limited forecasting abilities. What this is about is whether we should keep or abandon the institutions of the European union, ie, whether they are good or bad. Supposedly apocalyptic forecasts from the Treasury  take as their worst case a 7.5% hit to GDP in 15 years time. That’s the worst case scenario from those actively promoting the union. It sounds like a reasonable amount, but that works out at 0.48% per annum. GDP revisions, such as the latest for Q4 2015, regularly revise GDP by tenths of percentages.  In 2008, GDP per capita shrank 5% in a single year. The world economy is a complex beast that produces big shocks, 0.48% per annum in the worst scenario conjurable by statisticians is small potatoes.

For me, the issue is which institutions do we think are good and which are bad. Largely, I think the EU’s are bad. Turnout in elections for European politicians is low . The vast majority of decisions are made by heads of states, with the European parliament taking a largely subordinate role scrutinising legislation. Commissioners who propose legislation are chosen by horse trading. Contrast this to british parliamentary politics where constituency MP’s making up the largest party will elect a prime minister, who appoints further ministers. Precedent insures that the person who voters at the polls understand to be the leader of the party that wins will be prime minister – and largely, he has to appoint the people he said he would, and they have to be elected MP’s too, otherwise there would be an outcry. Much of this is based on precedent and custom but that’s exactly the point! Having a clear set of precedents and customs, well understood by the polity and respected by politicians, makes it clear to voters what will happen when they put their x in the box. With the EU, there is no such clarity. Democracy is much more than voting.

Then there has been the abject failure of EU institutions to combat any of the recent crises that have befallen the zone. Firstly, the financial crisis of 2009 is not a historical event for Greece  – it has been ongoing for seven years! Default, devaluation and institutional reform were and still are the only solutions – but the zone cannot get its act together to allow it. “Lowest Common Denominator” politics where EU politicians converge on the only policy they can agree on rather than the best policy are immiserating the periphery countries – where unemployment rates are still high almost a decade after the “crisis” for the rest of the world. The refugee crisis generated by the Syrian conflict has been met with chaotic responses from the Eurozone,  with member states unable to agree on sensible policies to either reduce the pull factors encouraging people to pile into rubber boats and attempt crossing of the mediterranean, or spread the burden of assimilating refugees in a reasonable way. Borders have been closed in a tit for tat way in defiance of EU treaties, which are not respected in the breach. It’s worth mentioning that the British response to the crisis has been shamefully callous, but at least it has been clear. Many refugees suffering in camps in Greece are doing so because they expected EU policies of welcoming them to continue, they didn’t.

That’s the extent of my justification to our voting to exit the EU, and there are many arguments made by the Brexiteers that I think are irrelevant. Aside from a politically generated housing crisis giving the appearance of a lack of homes, there is no great shortage of space in the UK. Community cohesion is a definite public good and assimilating immigrants carries costs – but the sense of crisis is exaggerated by warped perceptions  and politically motivated austerity destroying communities and stagnating wages, which can easily be misattributed to migration.  Islamic fundamentalism may be nasty to look at but it doesn’t appear to be all that catching. Terrorism claims mercifully few lives compared to car accidents or smoking related health conditions. Many brexiteers feel strongly about all these things – but they should carefully consult the various biases that make those feelings seem attractive before indulging them too heavily.

In terms of counterarguments, the main one to me seems to be strategic. Despite the high costs involved, European politicians have already made noises about inflicting altruistic punishments on the UK to send a signal that leaving the zone is a bad idea. This could magnify the costs of Brexit. Personally, in favour of doing the right thing, I’m happy to take an altruistic hit on behalf of other countries who might want to leave by showing the way. Clearly however it’s an important risk.

That about sums me up. I’d love to know your thoughts!

 

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3 thoughts on “Brexit Post

  1. A very good post. Nice to see somebody thinking about it with some care.

    I’d question a couple of points.

    Firstly on immigration. There isn’t plenty of space. We are a country that has insufficient land area to grow food for the nation already, and our run down infrastructure struggles to deal with waste output – particularly in the crowded South East. You can’t magically create the capacity overnight. The construction industry is backward in the UK, deeply unproductive and is therefore suffering a ‘skills shortage’ (which is shorthand for an investment shortage). Until the state takes back control of infrastructure and housing we are desperately short of capability and capacity. At the moment we are rapidly heading back to the 12 per room tenements of old.

    Secondly controlling the borders has useful effects. Primarily we can remove restrictions from those within the borders. Everybody legally here should have access to the full range of available social security, health and education services from day one. Anything else is genuinely racist. But also it allows us to implement a Job Guarantee for all – ensuring everybody has access to a living wage job and income. It’s more difficult to do that – both economically and politically – with uncontrolled borders.

    For a nation to push progress faster than anywhere else it has to be able to slightly insulate itself from everywhere else. And then it can use viral techniques to push that progress elsewhere – by opening itself to other nations that achieve the same progress.

    The EU is a lowest common denominator system. It’s time for the UK to do what it did in the Georgian period, take a different path and lead the world in progress.

  2. Alex says:

    I’d respectfully ask you to ignore anyone who focusses on forecasts of GDP costs and benefits, or the trade balance, or any such other random variables generated by complex emergent processes over which we have very limited forecasting abilities”</blockquote

    Strongly agree here.

    Turnout in elections for European politicians is low

    If people don’t want to exercise their vote, to an extent that is their fault. However, to the extent the institutions being voted over are to blame, I’d say it is actually because the EU doesn’t actually wield as much power as many on the Brexit-side claim it does – therefore there’s less incentive to vote in the first place. Think of it as a revealed preference – the fact people claim the EU has so much power, but then most of us don’t vote in its elections, shows most of us don’t truly think it’s all that important in reality.

    The vast majority of decisions are made by heads of states, with the European parliament taking a largely subordinate role scrutinising legislation

    I’d like a source for this claim, but either way its non-comparative. Clearly if all power were taken back to the UK, the government party would be the one taking decisions. There wouldn’t be some free debate on every issue in Parliament with no whips or executive rulings.

    Commissioners who propose legislation are chosen by horse trading.

    Horse trading isn’t as bad as its made out to be. That’s what you get when people with varying different interests don’t all support a unifying view – true of any democracy, particularly one made up of many diverse nation states like the EU. Yes, it can be grubby, but it’s better to have lots of horse trading, than have one dominant party ram everything through as usually happens in British politics. That leads to bad policy and accountability.

    constituency MP’s making up the largest party will elect a prime minister, who appoints further ministers

    A party that got less than 37% of the vote, but over 50% of the seats and therefore 100% of the executive power. At least the European Parliament uses PR, and seems to have more of a separation of powers. (Oh, and horse trading does still happen here, it just happens within a party, less between them.) Anyway I don’t think any Brexit case can be made on the idea that the UK constitution somehow favours more democratic accountability. It demonstrably does not.

    Precedent insures that the person who voters at the polls understand to be the leader of the party that wins will be prime minister

    But how do you think that precedent developed? It didn’t always use to be that way. The EU has barely had the time to develop as many precedents. And anyway, being the President of the European Parliament is not nearly as important as being Prime Minister, so the comparison doesn’t work either.

    and they have to be elected MP’s too, otherwise there would be an outcry

    But this is one of the worst aspects of our system – that to appease divergent interests within political parties, random politicians get thrust into holding executive jobs and running ministries that they don’t know the first thing about. I much prefer the fact that in America, you can have, say, a guy with a Nobel Prize in Physics running the Department of Energy. Don’t get me wrong, I don’t want a technocracy, but the choice here isn’t technocracy versus Workers’ Soviets lol. It is technocracy versus mediocrity, because that is what most politicians appointed to ministries offer (no disrespect to them, I’d be as bad too).

    Firstly, the financial crisis of 2009 is not a historical event for Greece

    I don’t think we should base our vote based on things going on in the Eurozone, since we’re not a member. And in the case of Greece, both Syriza and the exiled Varoufakis support EU membership, so it would be odd if the lesson of Greek solidarity was to do the opposite of what people there say.

    The refugee crisis generated by the Syrian conflict has been met with chaotic responses from the Eurozone

    I agree, there are problems with the refugee response. However, considering that any fair outcome would have countries in Eastern Europe taking a proportionate amount of refugees, which they don’t want, how will Brexit help this situation? With Brexit, Britain will continue not to take that many, meaning the Eastern European countries will be expected to take an even higher number than they would if Britain were inside and also expected to take some. Leaving makes it harder for the EU to do a good deal to help refugees; the refugee situation cannot be a reason to leave for those of a socialist nature.

    the British response to the crisis has been shamefully callous, but at least it has been clear

    I think this is a bit silly, and to do a silly analogy without wanting to be inflammatory: “At least Hitler had principles”. Well yes, but they weren’t very good.

    In terms of counterarguments

    Okay, here’s my argument for voting Remain. First though, I want to say that I come at this from the perspective of someone on the Left who, in a perfect world, thinks we can do much better than the EU. So I don’t like some of the areas it has more recently gained powers (like criminal justice). I don’t think the Norway/Iceland model is particularly bad. I have some priors is favour of localism. And I have Keynesian and socialistic reasons to think that the “free movement of capital” is a terrible thing to base a economic system on.

    That said, I will vote Remain. I am a student and as such I know a great many people at my uni (and beyond) who are from other parts of Europe. And the thing that worries me is that there is so much uncertainty over what Brexit would mean. Would we move to a Norwegian/Icelandic model? The Swiss one? Turkey? I’ve heard Albania and Canada mentioned too. There are so many possibilities.

    But imagine this – it’s the day after Britain has voted to leave. There are Labour politicians going on TV saying David Cameron must resign. UKIP are crowing. Mass infighting breaks out in the Conservative party and attempts are made to form a more right wing government. Or pressures are put on Cameron to move to the right. He gives a speech: “I get the message” or something. The headline in the Daily Mail the next day is “AND NOW WE CAN CONTROL OUR BORDERS”. Humbled Establishment politicians are wheeled out in the media and told they must do more to address the real concerns of voters.

    So then the government moves to bring in restrictions on EU immigration. EU countries may already be pushing for those punishments you mentioned. Well we punish them back too perhaps, tit for tat. Visa restrictions brought in. And perhaps this wouldn’t happen swiftly, perhaps it would take a while. But current non-EU immigration policies are completely unfair and illogical (e.g. the £35,000 policy). It would be silly to suggest that in future, policy towards EU migrants won’t be similarly arbitrary. Perhaps not the French or the Germans. But surely the Romanians and the Bulgarians and the Poles.

    Now why do I say all this? Because first, I agree with you on the economic side of things – it’s too uncertain. And as I’ve argued above in response to your points, I don’t think democracy/process/sovereignty arguments make sense either. So to me, what has to be left are real human stories.

    I have a number of friends, people very dear to me, who are from Eastern Europe. They study or work here, or hope to soon. I cannot possibly vote for Brexit in good conscience, while knowing that I may be condemning them, preventing them from working here in future if the wrong policies come to pass in future. And not only will that mess up their lives, which I think no-one on the Left should stand for, but from a purely self-interested perspective, it prevents me from seeing them and having them in my life on a more regular basis.

    So for me, Brexit is personal, and I think far from unusual. Let’s hope none of the terrible possibilities I mentioned come to pass, but I think there’s a good probability they will, if people vote to Leave.

  3. Alex says:

    And sorry for the formatting error there, but I think you can see what bits are quotes and what bits are mine!

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