Brexit; there’s really no need to rant about it

Xenophobia at its finest, leave campaigners are idiotically voting for a recession, the colonialists are being hypocritical, the world is coming to an end. That’s what the media has been throwing at the world for quite a while now, and that’s probably what your Facebook timeline is screaming at you — and now that Britain has voted to leave, it’s not going to stop for a while. So, what does exiting the EU actually mean for the UK, for the EU, and for the rest of the world?

The Pound Sterling is doomed?

The sudden depreciation of the currency can even be considered an opportunity; in a model presented in a paper by Krugman[1], it is explained how such a foreign loss of confidence would almost certainly result in an expansionary economy by generating the very inflation that’s been urgently targeted. The Bank of England’s governor has already released a statement highlighting the high liquidity of the UK banks and pointing out how a contraction of the money supply like in other crises in Argentina and Greece will not occur in the case of the UK, and dispelling fears of capital flight amidst the uncertainty. Fears that the net gain from depreciation would be offset by the inability to trade with the rest of the world is rather naïve — the UK will certainly go to the table with its current trade partners, the EU included, and renegotiate trade agreements, without the political weight that membership of the EU entails. Article 50 of the Lisbon Treaty of 2009 (the de facto constitution of the EU) gives the UK two years to negotiate terms of exit, which is further extendable by the European Council. If anything, the renegotiation processes will likely be faster, and more aligned with the UK’s interests. While it’s noted that Britain’s access to the EU Single Market will be more difficult given that they will probably begin to diverge from EU policies and restrictions, it makes them more competitive with markets that haven’t converged with the EU’s extremely high standards —and a key factor missing from debate is the possibility of dual standards of production, a policy adopted by most emerging economies in trade with the EU. Simply put, a production line for goods sold in the domestic markets and the rest of the world at a particular standard, democratically decided, and a second for trade with the EU. Initial costs for such an arrangement exist, but are not prohibitively expensive for any industry; it would mean the continued trade between the UK and its largest trade partner, the EU, while allowing Britain greater influence in the rest of the world. True, it would create bureaucracy issues where previously there were none, but such a situation is not untenable. The EU’s members may be sore after being rejected, but even with the harshest exit terms, trade across the Channel won’t cease completely — and a production duality, if it were to come to that, would result in the terms of trade remaining nearly the same. The EU would not likely impose heavy tariffs on imports from the UK lest incurring retributive tariffs on their own exports to the UK, but perhaps fears of others leaving the EU project may encourage them to do so. Even so, the resulting slowdown will hardly be as apocalyptic as some are portraying it to be.

Worse than Black Wednesday? Soros’ threat of a ‘Black Friday’ in echoes of his shorting infamies of ‘Black Wednesday’ aren’t comparable. Soros’ attacks in 1992 were calculated risks against a tightly pegged system of currencies that could not deviate despite obvious disparities between the linked currencies; in hindsight, economists agree that the ERM was not a good idea. This is a price drop following an unexpected major event — unexpected because news channels globally portrayed the Remain side as the heroic side that would stand strong against the xenophobic selfish Leave campaign that could never ever win, and yet somehow did. Polls have always showed that this was going to be an extremely close result. All the way back to when Cameron first announced the referendum right up until voting day, neither side ever had a significant winning margin, so there was no reason for bookies to list out 70% odds and upwards on Remain winning and dispersing the uncertainty that should have already prevailed in financial markets — on Thursday, the pound was climbing in anticipation of the Remain campaign winning. Not the first time that the bookies have got something disastrously wrong over the past year. The Pound Sterling of 1992 being fixed and pegged in the ERM is nothing like the freely floating Pound Sterling of today; this paper[2] expands on the argument that the floating exchange rate will absorb shocks like this one and that despite being at near zero interest rates and at a point where monetary policy could be nearly ineffective, expansion can and almost will certainly be achieved. That the UK will have to eventually deal with the trade restrictions of participating in the EU’s single market is a problem already faced by every other country outside of the EU, and by extracting themselves from European regulations, the UK effectively becomes more competitive in terms of rest of the world relations, enabling it to move towards developing its production and increasing exports, and reducing its current dependence on imports.

What were they thinking? What about our future?

The EU and the UK don’t even really share a common goal for the future. On joining the European Economic Committee in 1973, the UK, along with Denmark and Ireland, were not bound by the same terms of treaty as the original Treaty of Rome signatories and future signatories of later European treaties, and have since kept certain privileges:

“…the United Kingdom is entitled under the Treaties

· not to adopt the euro and therefore to keep the British pound sterling as its currency (Protocol No 15)

· not to participate in the Schengen acquis (Protocol No 19)

· to exercise border controls on persons, and therefore not to participate in the Schengen area as regards internal and external borders (Protocol No 20)

· to choose whether or not to participate in measures in the area of freedom, security and justice (Protocol No 21)

· to cease to apply as from 1 December 2014 a large majority of Union acts and provisions in the field of police cooperation and judicial cooperation in criminal matters adopted before the entry into force of the Lisbon Treaty while choosing to continue to participate in 35 of them (Article 10(4) and (5) of Protocol No 36)”[3]

And Cameron’s government intended to keep it this way. On election, he used this referendum as a hammer to bend continental Europe’s will in further negotiations to ensure Britain’s continued power to be exempt from key binding European legislative policies, like the recent refugee redistribution scheme and others. This is hardly in line with the EU’s goal of ‘an ever closer union’.

Furthermore, the general sentiment for the EU is driven largely due to its understanding of the EU as a symbol of common values that they share; that the EU is a liberal organisation that will defend its values from the unpredictability of the electorate. The same sentiment also echoes in the ranting against the Leave campaigners, that they’re vile, xenophobic idiots with not long to live, who want a higher pension in exchange for sacrificing the future, who are petrified of immigrants entering the country, who are delusional and have a wildly misplaced disregard for the ‘experts’ that run the European Union. These fears don’t go away by remaining in the EU either — if the European electorate as a whole were to shift to the right, as is happening now, the EU itself as an organisation probably wouldn’t represent the same values that the Remain crowd expects of it. The people voting leave weren’t all voting for closed borders or any of the numerous ‘evils’ that the Remain campaign accused them of; rather, those policy decisions will be up for the British public to decide in their next elections, and won’t be entangled in a compromise with European bureaucracy.

How can you disagree with experts? What’s wrong with a technocracy?

In theoretical terms, a technocracy is merely another form of government with its own advantages and disadvantages. Monetary policy in most countries is already technocratic, to remove its goals from the fluctuations of the election cycle. Why so? Because of the fear that politicians will use short term monetary policy goals to pander to the public and that the public will not know better and risk long term stability in favour of these short term gains. The argument in favour of the EU is the same; the public cannot be trusted, it seems, with key decisions like those currently plaguing Europe and the world right now; on the environment, on immigration, on labour conditions — and it requires insulation from public opinion. The European Union’s organisation struggles to convince Europeans of its supposed democratic nature, and if the parliament, Commission and Council were to be more aligned to the right than they are now, the ‘liberals’ who praise the EU might also find themselves questioning its legitimacy. And that, too, isn’t necessarily far from happening; as it stands, governments in Europe post-2008 are already severely stripped of autonomy — with closer fiscal harmonisation being the next goal of this economic union, a common monetary policy, a common foreign policy, and limited ways to change domestic policies, reactionary radicalisation in response to this political stagnation is already growing popular throughout Europe — UKIP already held the majority of the UK’s seats in the European Parliament from the last European elections in 2014, and nationalist parties in France, the Netherlands, Hungary and other parts of Europe are gaining traction.

Immigration is not a feature exclusive to members of the European Union. As it stands, not all migrant workers in the UK are citizens of the EU; immigration controls already exist on students and workers entering from Asia, Africa and the Americas. A vote to leave wasn’t necessarily a vote against open borders, but a vote to have a say on them.

The Remain campaign’s defence of “experts” is as ridiculous as their scoffing at the Leave campaign’s defiance of them; to say that ‘experts are experts’ and are not subject to questioning is a terrible fallacy that assumes that there is only one solution to any given problem and not a spectrum of approaches. The panic over ‘Black Friday’ is, as mentioned earlier, rather ironic given that the events leading up to Black Wednesday were constructed by experts. What’s most disturbing about this referendum is the complete oversight of the premise of Leave’s campaign, choosing to completely ignore its key talking points and rather hypocritically treat everyone who voted as completely braindead and unaware of what they have done. Remain’s dismay at losing this referendum is deeper than a crisis of European membership or the lack of it — it’s a mistrust of democracy, and a misplaced superiority over dissenting voices, something that isn’t exclusive to the Remain campaign, and extends far beyond this referendum entirely, a growing divide in modern politics despite the advances in communication and the availability of information. It’s terrible that it’s now come to Remain voters accusing older people of not thinking of others, most of whom are probably from the same generation that originally voted to be in the EEC in 1975, and questioning the legitimacy of their vote in the referendum; a situation similar to primitive forms of democracy. Old people now are being equated to women and people who didn’t hold property, considered to not have any stake in the consequences of decision making. If anything, the Remain camp’s fear-mongering at the supposed xenophobia of the Leave voters should perhaps look inward at themselves and the ageism and classism they’ve espoused.

The European Union has belief in its long term goals of a union and further integration — but to nearly remove the people from the equation and have them watch from afar, as experts in Brussels engineer a political and economic union while being insulated from responsibility for the issues that come up along the way, is decidedly undemocratic. What better way to show dissent than by democratically voting in a referendum to retain the ability to hold someone accountable?

[1] Currency Regimes, Capital Flows, and Crises — Paul Krugman; 2014

[2] The Case for Flexible Exchange Rates in a Great Recession — Giancarlo Corsetti, Keith Kuester and Gernot Müller; 2016

[3] Excerpt from EU press release titled ‘European Council conclusions, 18–19 February 2016’