Brexit: a Game of ‘No Deal’ Chicken
March 29, 2019.
Not long to go until the UK’s expected withdrawal from the EU. For avid Brexit spectators, the last 18 months have been quite a rollercoaster. Slow chugging, sudden dives, fast swerves and an all-round topsy-turvy time.
Now we are reaching the end of the ride with no clarity on what the end will be.
The decisive defeat of the exit agreement in the House of Commons by 202 to 432 votes has led to another deadlock. At present, there is no majority for an ‘orderly exit’. Meanwhile, the EU is done accommodating vague ‘alternative arrangements’. The line from Brussels is clear: this deal or no deal.
The question is who, if anyone, will cave?
There is a game called Chicken. Translating John Nash’s (protagonist in A Beautiful Mind) version of the game, it goes like this.
Two cars stare each other down from opposite ends of a road. They flash their lights, honk their horns, rev their engines — then set off headlong for each other. It is a game of wills to see who will back down first.
As they close the distance, both drivers are faced with the real possibility that the other won’t budge. Both wonder, would it really be so bad to back down before it’s too late? Then both drivers realise that the other is thinking the same thing. Maybe if they hold their nerve just a little longer, they will win and avoid the clucking taunts of bystanders.
Posturing and mind-games aside, there can only be one of three outcomes. Either one driver swerves, loses and the other gets some bragging rights. Both swerve and nobody wins, but they live to drive another day. Or neither gives in and they end up in a scrapheap.
As the countdown to Brexit runs down, the game of Chicken seems to sum up our outcomes nicely. Enough MPs could lose their nerve and sign some face-saving revision of May’s original deal. The EU might make some 11th hour concessions on the backstop. Or both decide this game is getting too dangerous, extend the deadline, renegotiate, make some mutual concessions and a long shot chance of a second referendum. Otherwise, the UK crashes out with No Deal and both are left clean up the mess.
Except there is a catch. This isn’t a game of equal sides. One is driving a Mini Cooper and the other a Mercedes semi-trailer. The payoffs for staying the course are skewed heavily in the favour of the EU, even in the growing likelihood of a collision.
Sure, it will hurt the EU to have its second largest economy (15% of its GDP) and the destination for many goods and services drop out overnight. But the EU also stands to lose a lot by jack-knifing in a swerve. The fault lines in the Eurozone, Single Market and the political balance across the Union is tangible. Now is no time to flinch. It can take the hit, unpleasant though it is, and move on.
The UK has more to lose from No Deal by any metric. Even the more fantastical forecasts of ‘Project Fear’ become probabilistic. Shortages, price hikes, capital flight, short-term economic downturn and long-term recession, strains on public services, potential destablisation in Northern Ireland, Scotland possibly leaving the UK to join the EU and, frankly, more cons than I care to recount. Suffice it to say, No Deal will cut the UK deeper than the EU. May knows it. Parliament knows it. The EU knows it and will happily run down the clock for the time being.
This is not to say that the UK will give in easily. Many have an interest in cutting it close. Most obvious are hard-line Brexiteers who would rather No Deal than compromise UK sovereignty. May will use the deadline to pressure MPs to back her deal. Corban appears to want an extension to the deadline and renegotiation of the terms. Although an unpopular Conservative deal or No Deal will certainly play well for Labour’s General Election prospects and remove the Brexit Sword of Damocles that dangles over his own party.
May’s refusal to rule out a No Deal scenario might seem irresponsible and irrational. But the threat and ability to walk away from a deal is a negotiating rule-of-thumb that applies as much in Brussels as it does to haggling in a souk. As the string of Brexit Secretaries have reiterated, No Deal is their best bargaining chip. But, it is likely this chip is spent. With the payoffs stacked in the EUs favour, UK No Deal bluffs will be called.
They say ‘a day is a long time in politics’. There are still some to go and it’s not too late to pull off the collision course. The game of Chicken has a bend towards avoiding worst-case scenarios, although often at a cost to one side. But the distance is closing. The drivers can see the whites of each other’s eyes. Blink and it will be too… .
