Some people argued that Brexit would free Britain from burdensome EU regulations, allowing it to become a sort of Singapore of Europe. In 2018, I expressed doubt that this would occur:
It’s fine to talk about the “will of the voters”, but precisely what version of Brexit did they support? If it’s the Singapore version, then why do British voters consistently support politicians who favor big government and lots of regulations? The fact is that people voted for Brexit for many different reasons, and under a representative democracy it’s up to the elected representatives to implement the actual policy.
This is from today’s Financial Times:
In 2017 Mr Johnson and Michael Gove, a fellow Brexiter, used their positions in Theresa May’s cabinet to urge the then prime minister to pursue a robust Brexit, in which Britain could adopt “pro-competitive regulation” and tax “simplification”. Some Conservatives cited Singapore as the kind of free market idyll they envisaged after Brexit.
But Mr Johnson has always been ideologically nimble or, as the former Tory deputy prime minister Michael Heseltine calls him, “the most flexible politician in modern times”. Realising that his new voters have little enthusiasm for a small state and aggressive deregulation, the One Nation vision Mr Johnson now offers is one in which the state actively intervenes to promote economic recovery. He is offering higher spending, particularly on infrastructure, and has dropped a previous commitment to cut taxes for higher earners.
Although Mr Johnson insists on the “right to diverge” from EU regulations, his ministers say they will “not diverge for the sake of it”. Indeed, the prime minister argues that he wants the right to set tougher regulations on workers’ rights and the environment than those agreed at a European level.
I expect Britain to gain little from Brexit. It won’t be a disaster, but Britain’s GDP growth will likely be slower than otherwise. Yesterday, the Conservatives announced that part of the railway system will be nationalized—an item that was also on Jeremy Corbyn’s agenda.
PS. As for infrastructure, this doesn’t look good.
READER COMMENTS
Thomas Hutcheson
Jan 31 2020 at 7:09am
What are the chances that in n years the K (maybe no longer U) will have fewer restrictions on movement of goods, people and services with the ROW and better regulation within? [At least reunification of Ireland will be a plus.]
Scott Sumner
Jan 31 2020 at 2:42pm
Not very high.
Thaomas
Feb 2 2020 at 7:44am
Can we recruit Caplan to issue one of his famous wager challenges about this. 🙂 On the other hand, could he find anyone to even take the “more liberal” side? Or is that just one of those deceitful propositions like tax cuts that stimulate growth that pundit/politicians mouth for intellectual cover?
TMC
Jan 31 2020 at 8:38am
Shedding a layer of authority above you, especially as poor as the EU, has got to be libertarian. I’m always amazed not only how quickly people are willing to give up their liberty, but how they actually want to. Fine with me, but they always want to take mine along with it.
Hazel Meade
Feb 3 2020 at 11:34am
Not necessarily. The layer above you is not directly above you – it is the layer above the layer above you.
I.e. if the super government restricts the national government which directly controls your life, is the meta-government really restricting you? Or is it actually liberating you from the constraints of your national government?
Not that I’m suggesting that the EU purely restricts national governments. Just that removing a super-government which restricts what your national government does not necessarily increase your liberty. if your national government is likely to be more restrictive than the super-government then the result would be the opposite direction. It’s possible that a more local government could be more influenced by concentrated local interests in ways that are detrimental to your liberty.
Jens
Feb 4 2020 at 4:17am
true
Shane L
Jan 31 2020 at 6:26pm
It’s all quite sad and worrying. The immediate outcome seems to be economic stagnation and reductions in liberty, including apparent checks on goods between Northern Ireland and the rest of the UK.
It’s hard to know if the UK or EU will, because of Brexit, shift towards greater general liberty in the long run. In the short run the cost seems very large:
“Research by Bloomberg Economics estimates that the economic cost of Brexit has already hit 130 billion pounds ($170 billion), with a further 70 billion pounds set to be added by the end of this year. That’s based on the damage caused by the U.K. untethering from its Group of Seven peers over the past three years…. with the British economy now 3% smaller than it could have been had the relationship been maintained.”
https://www.bloomberg.com/news/articles/2020-01-10/-170-billion-and-counting-the-cost-of-brexit-for-the-u-k
I also think there is some overestimation of the EU’s oppressive tendencies among some libertarians. The EU includes some of the most economically free countries recorded by the Heritage Foundation’s Index of Economic Freedom, for example. It is relatively easy to pursue free-market policies within the EU; indeed the UK itself undertook its Thatcherian neoliberal reforms within the EEC/EC.
Mark Z
Jan 31 2020 at 6:50pm
Are EU regulations taken into account in assessment of a country’s economic freedom? For example, would an EU environmental regulation be factored in, or only national environmental regulations? Or do EU regulations often function by requiring member states to have certain national regulations on the books?
If the former, then EU member states’ may seem more economically free than they are, e.g. they may not have certain kinds of regulations only because they’re already imposed by the EU, and so having them at the national level would be redundant.
Shane L
Feb 1 2020 at 6:44am
Hi Mark, the Heritage Foundation appear to take EU regulations into account while computing national scores. See for example Germany:
“Germany implements a number of EU-directed nontariff trade barriers including technical and product-specific regulations, subsidies, and quotas.”
https://www.heritage.org/index/country/germany
And Ireland:
“Ireland implements a number of EU-directed nontariff trade barriers including technical and product-specific regulations, subsidies, and quotas.”
https://www.heritage.org/index/country/ireland
It seems that the difference between EU members Ireland (6th most free) and Greece (106th most free) is down to internal policies and politics.
Miguel Madeira
Feb 1 2020 at 11:52pm
Yes.
Mark Z
Jan 31 2020 at 6:53pm
Johnson’s position on environmental regs is especially ironic and concerning (one can hope he’s being insincere) since, if I recall correctly, some of the absurd enforcement of EU environmental regulations -notable its recycling rules – was a major catalyst of the early Brexit movement.
ChrisA
Feb 2 2020 at 9:13am
Just to note that Johnson is just the current PM. We will have to see over the long run as to whether more or less regulations will be applied in UK vs the EU. The initial benefit will be on the financial sector, where the EU tends to apply a lot more regulations as the sector is not really significant for them. The UK having a much bigger financial sector can be expected to pay close attention to the downsides of extra financial regulation, which will likely allow it to continue to grow strongly. Consider all the examples in the past where heavy regulation led to the growth of the offshore sector. Regulated finance is popular only with politicians and electors, not with investors.
Also, what is your model Scott of why the UK will suffer after Brexit? Do you believe that protectionism is a good thing so Brexit will affect via trade? How does that square with belief in free trade?
Thaomas
Feb 2 2020 at 1:23pm
Brexit will mean more restrictions on trade (including trade in financial services) with and immigration from the EU. Will it be able to have new – low barrier agreements with other countries with enough trade (taking account of the gravity model) and immigration to make up for that? Hard to see.
ChrisA
Feb 2 2020 at 11:48pm
Taomas – free trade doesn’t depend on agreements between governments. If a country wishes to export to the UK eventually it must import from the UK. The UK did absolutely fine in the 19C when it had a policy of absolute free trade despite other countries having tariff barriers. In my view the UK should do the same again, reduce all tariffs to zero and make no trade deals with any other country.
Thaomas
Feb 3 2020 at 7:28am
I did not address what is conceivably possible. I wondered whether the (U?)K will in fact evolve sufficiently toward a free-trading, optimal regulation land to overcome the costs of restrictions on trade and immigration with it present major trading partner.
Lorenzo from Oz
Feb 2 2020 at 6:32pm
Operation Fear — the basis of the Remain case in then 2016 referendum campaign — was always way overdone. The trouble was, underlying anti-EU sentiment was sufficiently strong, it seemed the best Remain strategy. Possibly, if they had made more of a positive case as well, they might have fallen over the 50% vote line.
To me, the salient fact is the major drop in popular support in the UK for European Project between the 67.5% Yes vote in the 1975 Referendum to join the EEC and the 48% Remain vote in 2016. Both the UK and the EEC had changed a lot in that time, but arguably the EEC-cum-EU had changed more.
And I cannot forgive the EU for the Euro disaster, which was and is MUCH worse than the US side of the GFC.
Elite-bubbles and voter resentment seems to be something of the story of our time. Especially working class voters either withdrawing from voting, or moving rightwards. Which is a key element in the National Populist story.
ChrisA
Feb 2 2020 at 11:51pm
Lorenzo
You are right, even the most pessimistic views on Brexit have the UK loosing a few percent of GDP, while Greece is mired in a 20 year depression, But all the handwringing is over Brexit.
Thaomas
Feb 3 2020 at 7:38am
Remain made the mistake of not arguing positively for freedom of movement of people and overemphasizing the dubious short term costs — which BOE easily overcame — and not enough the long run costs of higher restrictions of freedom of movement of goods, people, and services. But Cameron had already given away the movement of people argument and Labour under Corbyn was certainly not going to make a case for freedom of movement of goods and services. Then May perpetuated the myth until the very end that (U?)K could have a Brexit without the costs of greater restrictions on movement of goods, people, and services but without negotiating for an arrangement like Norway that would have minimized those costs.
Lorenzo from Oz
Feb 2 2020 at 6:40pm
Matthew Goodwin and Eric Kaufman are the go-to political scientists on trends in voting and opinion. Goodwin has a nice piece in Unherd about the evidence on Leave voters:
Thaomas
Feb 3 2020 at 11:51am
That is a defensible view, but the actual arguments for Leave did not acknowledge (and the May government did not and the actual government does not acknowledge) the costs of the resulting increase in restrictions on movement of goods, people and services between the (U?)K and the EU.
Hazel Meade
Feb 3 2020 at 11:44am
I see this all as evidence of just how powerful the influence of concentrated local, domestic interests are over dispersed interests. We’ve underestimated the extent to which small concentrated interest can control not only domestic policies, but also appeal to people’s nationalistic instincts.
As libertarians we’ve spent a lot of time thinking and worrying about the appeal of socialism to people’s emotional instincts, but little time thinking about the appeal of nationalism, localism, or parochialism. We thought all that was pretty well suppressed by the memory of fascism. But here, now, again, we see that it is very, very easy to sway people with the argument that domestic producers should be favored over foreign ones, even though it is against their personal interest, by getting them to identify with domestic producers. Similarly, it is very easy to sway people with the argument that certain trades should be protected by licensing (for example), even though it is against their personal interest, by getting them to feel that certain laborers “deserve” a certain level of compensation.
The problem is not just that benefits are concentrated and costs are dispersed, but that many people do not make rational calculations about marginal costs to themselves of government policies that limit competition and choice to benefit a domestic interest.
Thaomas
Feb 3 2020 at 12:10pm
I agree and would add the belief/feeling that domestic workers (and our culture) should be “protected” from immigrants.
But as a matter of fact many Libertarians do not argue against trade, licensing, ad immigration restrictions (or oppose Pigou taxation of externalities) because they fail cost-benefit tests, but on philosophical grounds such as non-coercion.
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