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The Brexit endgame

Oct 18,2018 - Last updated at Oct 18,2018

LONDON — The United Kingdom’s “Remainers”, who still hope to reverse Britain’s decision to leave the European Union, have placarded British cities with a simple question: “Brexit — Is It Worth It?” Well, is it?

The answer given by economics is clear: certainly not. In terms of the costs and benefits of leaving, the result of the 2016 Brexit referendum was plainly irrational.

And yet, economics also clearly shaped the decision. The Brexit propagandists brilliantly channeled palpable economic resentment, especially against immigration, into hostility towards the EU. But the resentment was against the home-grown damage inflicted on the British economy by its neglectful rulers. As Will Hutton and Andrew Adonis accurately note in their recent book Saving Britain, “Our problems are made in Britain; they can only be solved in Britain. Europe does not impede this mission…”

But Hutton and Adonis miss Brexit’s crucial non-economic dimension. They rightly recall the long and intimate relationship between Britain and the European continent. But Britain has never been part of a European state. Although the European Union is very far from being the “superstate” of Margaret Thatcher’s nightmare, its governmental aspirations lack legitimacy, not just in Britain, but among many of its members. Despite talk of European citizenship, politics remain obstinately national. Britain’s Leave campaign was a revolt against not only economic mismanagement, but also the pretension of supranational government.

So Brexit’s outcome may indicate how the dialectic between supranationalism and nationalism will play out in much of the rest of the world as well, where it is the stuff of current politics.

The Brexit endgame itself is far from clear. There are four possibilities.

One possibility is that Britain doesn’t leave the EU after all. The organisers of a campaign for a “people’s vote”, a second referendum on the final exit terms, believe that when people know the true cost of leaving, they will reverse the decision taken in 2016. A second vote could be triggered by the government’s failure to win parliamentary approval of the divorce settlement it has agreed with the EU.

A second possibility is that Britain “crashes out” of the EU on March 29, 2019, with no divorce deal. In this case, forecasters paint a doomsday scenario of economic collapse, gridlock on roads and rail, shortages of food, medicine, and fuel: 1940 all over again, but not exactly Britain’s finest hour.

British Prime Minister Theresa May’s government is promoting a third possibility: half in, half out. Approved by the Cabinet in July at the prime minister’s country house, the so-called Chequers plan proposes that when Britain leaves the EU, the two sides enter into a free-trade agreement covering goods and agricultural produce, but not services. The plan, devised by May’s adviser Oliver Robbins, is a heroic attempt to solve the Irish border problem.

That problem arises from a commitment by both Britain and the Republic of Ireland to keep a “frictionless” border between the Republic of Ireland, which remains in the EU, and Northern Ireland, which, as part of the UK, leaves it. But to maintain an open border in Ireland would mean creating a customs border between two parts of the UK.

Hence the Chequers plan for a continuation of free trade in goods between Britain and the EU. Britain would make sure that goods entering Northern Ireland, but bound for the EU via the Republic of Ireland, paid their EU customs duties and conformed to EU health and safety standards.

The Brexiteers in May’s Conservative Party oppose the Chequers plan, because it implies too much integration with the EU. And EU leaders do not like it, either, because Britain cannot be allowed to be in for some purposes and out for others.

The final possibility is another “half in, half out” scenario. Britain would leave the customs union, but remain in the European Economic Area, which includes the 28 members of the EU plus Norway, Liechtenstein and Iceland. EEA countries, though free to set their own tariffs, follow nearly all of the EU rules and pay contributions to the EU budget. So the EEA option would be even more anathema to hardline Brexiteers than the Chequers plan.

So what will happen? Most bets are on Britain formally leaving the EU in March 2019, but “temporarily” remaining in the customs union, giving it two or three years to negotiate the final divorce settlement. The Brexiteers will be enraged by such a “soft” exit, but it will probably be enough to ensure parliamentary approval. The referendum decision to leave the EU will be honoured, but its harsh economic consequences will be postponed: a triumph of pragmatism over ideology.

If the Brexit trajectory turns out this way, it will be a good illustration of the double character and function, of politics. John Maynard Keynes put the matter well: “Words ought to be a little wild, for they are the assault of thoughts upon the unthinking,” he wrote in 1933. “But when the seats of power and authority have been attained there should be no more poetic licence. On the contrary, we have to count the cost down to the penny which our rhetoric has despised.”

Politicians exist to give voice to resentments bottled up by “unthinking” conservatism. They let loose feelings which we would be better off without, but whose suppression threatens political explosions. But it is also their job to ensure that such irruptions do not have extreme consequences. From time to time, the balancing act breaks down, as it did in 1914, when the momentum of events overwhelmed belated attempts at compromise. It happened again in the 1930s, because fascism and communism were irredeemably extremist. But mostly politicians do their double job, which, in the last analysis, is to preserve domestic and international peace.

Thus, the Brexit compromise, if it happens, may be a moderately optimistic foretaste of the fate of populism in our century. The resurgence of economic nationalism which unites Brexit, Trumpism and the European far right will not lead to the breakdown of trade, hot wars, dictatorship, or rapid de-globalisation. Rather, it is a loud warning to the political centre, one that may cause even the current crop of extremists to shrink from the consequences of their words.

 

Robert Skidelsky, a member of the British House of Lords, is professor Emeritus of Political Economy at Warwick University. Copyright: Project Syndicate, 2018. www.project-syndicate.org

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