Date: 16-06-2016
Source: The Economist
A vote to leave the European Union would diminish both Britain and Europe
THE peevishness of the campaigning has obscured the importance of what is at stake. A vote to quit the European Union on June 23rd, which polls say is a growing possibility, would do grave and lasting harm to the politics and economy of Britain. The loss of one of the EU’s biggest members would gouge a deep wound in the rest of Europe. And, with the likes of Donald Trump and Marine Le Pen fuelling economic nationalism and xenophobia, it would mark a defeat for the liberal order that has underpinned the West’s prosperity.
That, clearly, is not the argument of the voices calling to leave. As with Eurosceptics across the EU, their story is about liberation and history. Quitting the sclerotic, undemocratic EU, the Brexiteers say, would set Britain free to reclaim its sovereign destiny as an outward-looking power. Many of these people claim the mantle of liberalism—the creed that this newspaper has long championed. They sign up to the argument that free trade leads to prosperity. They make the right noises about small government and red tape. They say that their rejection of unlimited EU migration stems not from xenophobia so much as a desire to pick people with the most to offer.
The liberal Leavers are peddling an illusion. On contact with the reality of Brexit, their plans will fall apart. If Britain leaves the EU, it is likely to end up poorer, less open and less innovative. Far from reclaiming its global outlook, it will become less influential and more parochial. And without Britain, all of Europe would be worse off.
Start with the economy. Even those voting Leave accept that there will be short-term damage. More important, Britain is unlikely to thrive in the longer run either. Almost half of its exports go to Europe. Access to the single market is vital for the City and to attract foreign direct investment. Yet to maintain that access, Britain will have to observe EU regulations, contribute to the budget and accept the free movement of people—the very things that Leave says it must avoid. To pretend otherwise is to mislead.
Those who advocate leaving make much of the chance to trade more easily with the rest of the world. That, too, is uncertain. Europe has dozens of trade pacts that Britain would need to replace. It would be a smaller, weaker negotiating partner. The timetable would not be under its control, and the slow, grinding history of trade liberalisation shows that mercantilists tend to have the upper hand.
Nor is unshackling Britain from the EU likely to release a spate of liberal reforms at home. As the campaign has run its course, the Brexit side has stoked voters’ prejudices and pandered to a Little England mentality. Despite Leave’s free-market rhetoric, when a loss-making steelworks at Port Talbot in Wales was in danger of closing, Brexiteers clamoured for state aid and tariff protection that even the supposedly protectionist EU would never allow.
The pandering has been still more shameless over immigration. Leave has warned that millions of Turks are about to invade Britain, which is blatantly false. It has blamed strains on public services like health care and education on immigration, when immigrants, who are net contributors to the exchequer, help Britain foot the bill. It suggests that Britain cannot keep out murderers, rapists and terrorists when, in fact, it can.
Britons like to think of themselves as bracingly free-market. They are quick to blame their woes on red tape from Brussels. In reality, though, they are as addicted to regulation as anyone else. Many of the biggest obstacles to growth—too few new houses, poor infrastructure and a skills gap—stem from British-made regulations. In six years of government, the Tories have failed to dismantle them. Leaving the EU would not make it any easier.
How to make friends and irritate people
All this should lead to victory for Remain. Indeed, economists, businesspeople and statesmen from around the world have queued up to warn Britain that leaving would be a mistake (though Mr Trump is a fan). Yet in the post-truth politics that is rocking Western democracies, illusions are more alluring than authority.
Thus the Leave campaign scorns the almost universally gloomy economic forecasts of Britain’s prospects outside the EU as the work of “experts” (as if knowledge was a hindrance to understanding). And it dismisses the Remain camp for representing the elite (as if Boris Johnson, its figurehead and an Oxford-educated old Etonian, personified the common man).
The most corrosive of these illusions is that the EU is run by unaccountable bureaucrats who trample on Britain’s sovereignty as they plot a superstate. As our essay explains, the EU is too often seen through the prism of a short period of intense integration in the 1980s—which laid down plans for, among other things, the single market and the euro. In reality, Brussels is dominated by governments who guard their power jealously. Making them more accountable is an argument about democracy, not sovereignty. The answer is not to storm out but to stay and work to create the Europe that Britain wants.
Some Britons despair of their country’s ability to affect what happens in Brussels. Yet Britain has played a decisive role in Europe—ask the French, who spent the 1960s keeping it out of the club. Competition policy, the single market and enlargement to the east were all championed by Britain, and are profoundly in its interests. So long as Britain does not run away and hide, it has every reason to think that it will continue to have a powerful influence, even over the vexed subject of immigration.
True, David Cameron, the prime minister, failed to win deep reform of Britain’s relations with the EU before the referendum. But he put himself in a weak position by asking for help at the last minute, when governments were at loggerheads over the single currency and refugees.
Some Britons see this as a reason to get out, before the doomed edifice comes tumbling down. Yet the idea that quitting would spare Britain is the greatest illusion of all. Even if Britain can leave the EU it cannot leave Europe. The lesson going back centuries is that, because Britain is affected by what happens in Europe, it needs influence there. If Germany is too powerful, Britain should work with France to counterbalance it. If France wants the EU to be less liberal, Britain should work with the Dutch and the Nordics to stop it. If the EU is prospering, Britain needs to share in the good times. If the EU is failing, it has an interest in seeing the pieces land in the right place.
Over the years this newspaper has found much to criticise in the EU. It is an imperfect, at times maddening club. But it is far better than the alternative. We believe that leaving would be a terrible error. It would weaken Europe and it would impoverish and diminish Britain. Our vote goes to Remain.
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Date: 16-06-2016
Source: The Economist
Subject: Brexit: What if?
The aftermath of a vote to leave the European Union will depend on unpredictable responses in all sorts of places. It is unlikely to be pretty
BEFORE the campaigning for Britain’s referendum on the European Union hit its stride, some people quaintly imagined that it might settle things once and for all, lancing the boil of an argument that has been festering for the best part of a generation. Fat chance. A victory for Remain would leave Britain divided, the losers embittered and political life coarsened. A victory for Leave, which is what the latest opinion polls predict, would see economic turmoil and political strife as the winning side learned that, for all it might have talked of taking back control, it remained at the mercy of economic forces and the members of the union it had spurned.
David Cameron says that if Britain votes to leave he will immediately invoke Article 50 of the Lisbon treaty, which sets out the rules for negotiating a member state’s departure. That would give the two sides two years to finalise a deal—a timetable that can be extended only with the consent of all concerned. If no agreement were reached Britain would have to fall back on trading with the EU under World Trade Organisation (WTO) rules, which would imply tariffs and no special deal for financial services.
Mr Cameron also says he will stay on as prime minister and represent Britain in those negotiations; some in the Leave camp, such as Michael Gove, the justice secretary, say that they, too, would like him to stay. But it is hard to imagine that the victorious Leavers would really be happy seeing the leader of the Remain campaign negotiating Britain’s new deal with the EU. The odds are that the Tories would be looking for a new leader within days.
All or nothing at all
What sort of deal might that new leader try to get? Some want no deal at all. A group called Economists for Brexit (EFB) suggests simply abolishing all import tariffs. The ensuing rise in trade, it says, would boost GDP by 4%. Yet this prediction relies on small changes in trade costs having implausibly large effects on how much trade goes on, say researchers at the London School of Economics. Besides, the EFB assumptions are politically implausible.
At the other end of the range of options is a deal in which Britain, while leaving the EU in accord with the will of its people, remains part of the EU’s single market. This is the arrangement Norway has, by dint of the European Economic Area; Switzerland, though not a member of the EEA, has something similar. In Norway’s case the deal means accepting the free movement of labour and observing almost all EU regulations while having no say in writing them. And it contributes heavily to the EU budget for this privilege.
The Leave campaign’s strongest cards are the public’s distaste for immigration, its desire for self-determination and its dislike of sending money to Brussels. This suggests that the Norwegian option would be unacceptable to the pro-Leave majority of the Tory rank and file, who will get the final say in the choice of the next party leader. The prospective leader who wins their support is likely to have to promise blocks on the free movement of labour. That probably means getting nothing more than a bespoke free-trade deal for some sectors at best, with WTO rules the fallback option.
Once that leader becomes prime minister, though, he or she will have to deal with the will of Parliament. Fewer than 150 Conservative MPs and only a handful from Labour are openly backing Leave; even if some others are playing a waiting game, that suggests a large majority for Remain among the 650 members of the House of Commons. Those MPs might well prefer a Norwegian option to WTO rules. If push came to shove—and the campaign has shown a marked tendency for pushing and shoving—a Tory leader committed to a right-out-of-the-single-market version of Brexit might not be able to win a vote of confidence. An autumn general election could then follow.
Whether MPs go that far will depend in part on how dire the economic response to a Leave vote turns out to be; the worse things look, the more important it will seem to try and stay in the single market. Estimates of Britain’s economic growth this year have already dropped to 2%, barely above what is expected of the euro-zone (though were Brexit to come about, the euro-zone’s growth would be hit, too). Investors have been selling sterling assets at the fastest rate since the financial crisis of 2007-08; the pound has dropped by 7.5% over the past 12 months. This is part of a broader move into safer assets, but it also reflects Brexit fears.
The National Institute for Social and Economic Research (NIESR), a think-tank, predicts a 2.9% fall in GDP in the short run and worse in the long run, brought about by factors like lower trade and falling foreign direct investment. The knock-on effects would hit productivity and wages; a further fall in sterling would push up prices. Tighter controls on migration would make things worse.
Wonks are poor forecasters, say Brexiteers. Indeed, the Leave camp claims that recent data suggest Brexit might help the economy. In April exports rose to their highest level for three years in nominal terms. A Brexit-induced slump in sterling, the argument goes, would boost the economy further. This is not necessarily true. Foreign orders do not respond instantly to depreciation—which also raises the cost of imported inputs. The hit to confidence and credit from Brexit would hurt exporters more than a weak pound would help. In 2008-09, when sterling slumped, exports barely responded.
On June 14th George Osborne, the chancellor, said that in light of these likely effects a Leave vote would necessitate an emergency budget to raise taxes and cut spending. Mr Osborne’s announcement feels more like an attempt to frighten voters—or perhaps a scorched-earth strategy—than a politically plausible plan. But at some point a deficit swollen by Brexit would have to be dealt with.
The severity of the prompt economic fallout may determine what sort of deal Britain tries to get. But the results of any negotiations will depend on how generous its EU partners would be. The terms of any new trade deal would have to be agreed on unanimously, which could make the complexity of the negotiations overwhelming. Donald Tusk, president of the European Council, says it might easily take seven years. And the three biggest economies, Germany, France and Italy, while all wanting Britain to remain, are not willing to let it leave unscathed.
France is the foremost scold. Although its president, François Hollande, has kept quiet during the referendum campaign, for fear of provoking greater pro-Brexit feeling, he made his views clear at a Franco-British summit in Amiens in March. “I don’t want to scare you,” he said, but a Brexit vote would have “consequences”.
The kindness of soon-to-be strangers
French politicians see playing hardball in the negotiations rather as Voltaire saw the execution of Admiral Byng following his loss of Minorca; the sort of thing that has to be done “pour encourager les autres”. The worse Britain does on its own, the more it will encourage others to stick with the EU. This includes the others at home; France’s populist National Front is promising voters their own referendum. In 2005 the French voted down the draft EU constitution, shocking their political leaders. Today they are second only to Greece in their Euroscepticism. A new Pew poll finds that 61% of French voters have an unfavourable view of the EU; the British figure is just 48%.
The French government is also working on ideas to breathe life into the European project that will focus on defence and security co-operation. There is irritation in Paris that the government has put European initiatives on hold for many months to avoid upsetting British voters. “This can’t go on for ever,” says one minister. France wants to present these ideas to the European Council at the end of June and hopes for Germany’s support. Thomas de Maizière, the German interior minister, sat in on a French cabinet meeting on June 15th; Mrs Merkel was due to watch the Germany-Poland football match with Mr Hollande at the Stade de France the next day.
Like the French, German politicians are cautious in discussing Brexit for fear that foreign warnings could boost the Leave campaign. But the country is keen for Britain to stay. Germany wants the EU to move in a broadly Anglo-Saxon direction. It would like it to concentrate on cutting bureaucracy, returning powers to governments (while limiting state intervention) and co-operating more in foreign policy rather than pushing deeper integration. “In Berlin everyone’s keeping fingers crossed,” says David McAllister, a German member of the European Parliament who has a Scottish father. If Brexit wins, he says, he will cry for days.
Wolfgang Schäuble, Germany’s finance minister, has warned that Britain cannot expect favourable treatment after an exit vote. “In is in. Out is out,” he says. But many expect Germany, which has a big trade surplus with Britain and would not want to damage its own exporters, to take a softer line than France. “Germany will play the good cop, and France will play the bad cop,” says Yves Bertoncini, director of the Jacques Delors Institute. But this does not mean Germany will truly be on Britain’s side, any more than good cops really side with crooks. The National Front and Frexit frighten Germany, too.
Matteo Renzi, the Italian prime minister, has played down Brexit, saying that it would be a disaster for the British, but not a huge drama for Italy and the EU. But Italy would definitely like Britain to stay. For one thing Mr Renzi often finds himself on the same side as Britain in the council; he would feel more isolated without it. There is also scarcely a middle-class family in Italy’s big cities that does not have a child working or studying in Britain.
And, as in France, there is a fear that Brexit would encourage Euroscepticism at home, both in the xenophobic Northern League and the populist Five Star Movement. Given the sick state of Italy’s economy, which has barely grown since it joined the euro, they might easily be convinced to leave.
Would Mr Renzi’s government join others in taking a tough line? “We are not particularly tough. It is not in our DNA,” says Marta Dassu at the Aspen Institute, who is also a former junior foreign minister. “But I think we would wish to align our positions with those of France and Germany. We would want to stay in the core.”
If Brexit means that this core fears for its continued cohesion, or is unable to persuade all the other members of the EU to accept a new trading arrangement, the chances of Britain getting a good deal from its former partners will be slim indeed.
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Date: 16-06-2016
Source: The Economist: Bagehot
Subject: The Nigel Farage Show
Parochial and vacuous, Britain’s dismal referendum campaign has been a populist’s dream
“HITLER did it with gas! Merkel does it with paperwork!” From the bow of his trawler, bespangled with anti-EU banners and bobbing on the grey Thames outside the Houses of Parliament, a rubicund fisherman bellowed at the crowds on Westminster Bridge. Baffled tourists posed for selfies as he ranted in the background. Leave supporters cheered and babbled: “When will Nigel arrive?” Word rippled through the assembly that the leader of the UK Independence Party (UKIP), along with his pro-Brexit flotilla of fishing boats, had been held up at Tower Bridge. Yet another establishment stitch-up. “We want our country back!” they chanted.
Then it was glimpsed around the bend in the Thames: a Dunkirk of trawlers, barges and dinghies, buzzed by speedboats with “In” flags (“Cameron paid them,” a matronly Middle England type informed Bagehot as others cried “Traitors!”) and a cruiser from which Sir Bob Geldof, an ageing Irish rocker, yelled “Farage! You’re a fraud!” Last of all came the flagship, emitting a boozy whiff as, to loud cheers, it swooshed under the bridge. Holding court on deck, surrounded by cameras and wine-slurping, blazer-wearing “Kippers”, was the man himself: a male Britannia with a ciggy between his fingers and a smirk across his face. This was “The Nigel Farage Show”, and he knew it.
Such has been Britain’s EU referendum. David Cameron first promised the vote in 2013, spooked by UKIP’s success in local elections and importuned by UKIP-inclined MPs on his Conservative benches. The result has been an unedifying campaign that has both bolstered Mr Farage and carried his imprint. It has been divisive, misleading, unburdened by facts and prone to personality politics and gimmicks. What might have been a hard-nosed debate about Britain’s future, about the pros and cons of EU membership, has turned into a poisonous row about the merits of what is ultimately Mr Farage’s vision of England: a hazy confabulation of content without modernity; of warm beer, bowler hats, faces blackened by coal dust; of bread-and-dripping, fish-and-chips, hope-and-glory.
The outcome has been a contest with the logical architecture of an Escher drawing: Remain and (in particular) Leave issuing assertions that double back on themselves, Möbius-strip arguments that lead everywhere and nowhere. Knowledge has been scorned (“I think people in this country have had enough of experts,” huffs Michael Gove, the pro-Leave justice secretary). Basic facts have fallen by the wayside: Mr Cameron claims Brexit would help Islamic State; Leave implies Turkey, with its 77m Muslims, is about to join the EU. The complicated reality of an evolving union and Britain’s relationship with it has been ignored.
Instead that chant on Westminster Bridge—“We want our country back!”—has echoed through the campaign. Back from whom? Johnny Foreigner, mostly, as well as a conniving, cartoonishly evil establishment; at a recent Leave event your columnist witnessed Tories and Kippers urge their supporters to take pens into the polling booth on June 23rd to prevent the intelligence services from doctoring their votes. The referendum has been marked by a pin-striped nihilism dressed up as common sense.
Thus it is easy to forget that it was meant to reunite the Tory tribe. Mr Cameron issued his pledge in 2013 to “settle” the Europe issue. Today that aspiration reads like a joke. As trawlermen outside the Palace of Westminster came alongside Sir Bob’s craft and attempted to board it (prompting an intervention from policemen in a speedboat), inside the House of Commons Mr Cameron was skirmishing with his own buccaneering MPs. David Nuttall, one of the 131 (of 330) to back Brexit, pointedly asked when the prime minister would meet his pledge to cut net immigration to tens of thousands (from over 300,000 today).
The mood in the Conservative base is even more vitriolic. Most members want to quit the EU. Many of them hold their leader in utter contempt following a campaign in which they believe he has betrayed his principles and abused his position. On June 12th your columnist attended a pro-Brexit Tory rally in Leigh-on-Sea, in Essex, organised by David Amess, the local MP. The star speaker was Ann Widdecombe, the sturdy doyenne of the Conservative right, who paraded about the hall badmouthing the prime minister: “The claims Cameron has been making do not stand up!” she trilled, to applause and shouts of “hear, hear!”
To some extent the referendum has revealed things that were already present: the growing void between cosmopolitan and nativist parts of the country, the diminishing faith in politics, the rise of populism, the inadequacy of the left-right partisan spectrum in an age when open-closed is a more salient divide. Yet it is hard not to conclude that the campaign has exacerbated all of these trends. Polls suggest that trust in senior politicians of all stripes has fallen. And that is just the start. If Remain wins on June 23rd, Brexiteers will tell voters they were conned. If Leave wins, Mr Cameron will go and his successor will negotiate a Brexit that does not remotely resemble the promises of the Leave campaign, which trades on the lie that Britain can have full access to the European single market without being bound by its regulations and free-movement rules.
The neverendum never ends
Either way, politics is coarsened. Voters will believe their leaders less. Short of a total reconfiguration of the party-political landscape (possible but unlikely), the existing Westminster outfits will look increasingly at odds with political reality. The currency of facts will be debased, that of stunts inflated, that of conviction sidelined. It will be de rigueur to question an opponent’s motives before his arguments, to sneer at experts, prefer volume to accuracy and disparage concession, compromise and moderation. Mr Farage’s style of politics has defined this referendum. It will live on in the muscle memory of the nation.
