When the Brexit referendum was called, I was struggling to understand why anyone would advocate or even vote for Brexit: after all, economic self-interest would force to UK to stay inside Custom Union and Single Market without being able to influence
the rules. Well, I was obviously very wrong, although I agree with many observers that the vote was actually not about EU membership but long-run frustrations built up in parts of the British electorate, which could not be voiced in General Elections.
The last couple of days and weeks have seen quite some developments in the Brexit debate and process. Unlike more professional bloggers (among my favourites: Simon Wren-Lewis and Ian
Dunt), I cannot follow up on a high-frequency basis. But here are some more general thoughts about Brexit now that Theresa May is no longer trying to kick the can down the road and has come up with a plan and thus a basis for negotiations with Brussels.
1. Leave proponents and Brexiters keep on spreading lies no matter what. While most sensible people were cheering that Boris had finally left the Foreign Office, some
people took a closer look at his resignation letter. In this letter, he claimed that the EU had been delaying the implementation of new safety rules for truck drivers to reduce the likelihood they hit bikers, against the will of the British government,
citing this as an example where closely tying the UK to regulatory rules of the EU damages the UK. Well, it turns out, the truth is the other way around - the UK government had delayed attempts by the European Commission to introduce exactly these standards!
As Joseph Welch would have said: "have you left no sense of decency?"
2. The main problem of the Brexiters is that they do not have a sensible plan on how to execute
Brexit, beyond magical thinking (also referred to as cake-ism). They keep coming back to two options: (i) take the negotiations to the brink and rely on the European Commission to blink first (which
Ian Dunt referred to as using a "bicycle to play chicken with a lorry"), or (ii) crashing out of the European Union without any agreement (also known as the "f** business, f*** reality" option). The first plan has been shown to not work - to
put it simply, the European Union is too invested in the inseparability of the four freedoms than to blink in the Brexit negotiations and just give in. The second plan can be dubbed Plan Chaos but might also be the outcome of the first plan. Put
differently: there never was a plan and there is no plan! Reality is finally catching up with the Brexiters.
3. David Cameron called the referendum to settle a long-standing dispute within the Conservative Party on EU membership.
The result: the dispute has turned into open civil war within the Conservative Party and across the political system. The vote in favour of Brexit was also a symptom for the loss of credibility of Britain’s political class, as the majority of MPs was
and is in favour of continued EU membership. The result of the Brexit process, however it will turn out, will be a further loss of political credibility. Theresa May promised (and still keeps promising) a Brexit divided that does not exist.
After she became PM, she started out as a hard Brexiter (“taking back control of borders, laws and money”). Over the following two years, she realized that such a Brexit would simply not be feasible, and she had to break these promises. Any
attempt to explain this away is clearly seen as what it is: political spinning. Obviously, this is not a good way to create trust in the political class. If there will be a soft Brexit somewhere between what the cabinet agreed in Chequers and what Brussels
is willing to give, one can very much envision a revitalized UKIP with a dozen or more Tory MPs joining them. If Theresa May falls and a new PM leads the UK towards a crash out of the EU, the corresponding socio-economic damage will similarly lead to political
turmoil, with possibly even wider repercussions for the electoral landscape.
4. As it stands right now, it is still almost impossible to predict the outcome of the Brexit process, with one exception - the first UK draft for
the future relationship between the UK and the EU (aka Chequers agreement) will NOT be the final outcome, as it involves too much cherry picking, is unwieldy and incomplete. The possible outcomes include the Chaos outcome in the form of crashing out (which
would involve a meltdown not only in the negotiations between UK government and UK but also a meltdown in UK politics) but also the softest solutions of all - UK as EEA member. What is relatively easy to predict is that - in the absence of the crashing out
option - the "transition period" (better described as stand-still period as the UK will have to follow all EU rules without being a member) will be extended as the future relationship will most likely not be negotiated before the end of 2020 and even less
implementable by then. But then again, the EU has not necessarily any firm interest in resolving the future relationship now, but rather to focus on the Irish backstop. Once the UK has left the EU with the Irish backstop signed, the EU will be in an
even stronger negotiating position vis-à-vis the UK. The preferred solution for many Remainers - a second referendum leading to a reversal of the Brexit process and the continuing UK membership in the EU seems still rather unlikely, though might
be the result if there is no majority in the House of Commons for any of available Brexit options.
5. There is an important media angle to the Brexit referendum, as pointed out by Simon Wren-Lewis
in several blog entries. The hatred and lies spread by the right-wing press against Brussels and anything that has to with the European Union has certainly contributed to the referendum result, but also to the positioning of Labour against remaining
in the EU. And the BBC, trying to present a neutral picture, indirectly supports the snake-oil sellers by giving them equal air time as the people who actually know what they are talking about. I think the discussion on who is actually behind the snake-oils
and how it is funded is just beginning and will be an important topic for economists and political scientists alike.
So, coming back to my introductory remark, the economically ideal solution for the Brexit process will leave the UK in
almost the same economic position as now, but with reduced political power. The politically preferred solution for many Brexiters sees the UK economically worse off as well as politically. Which makes one wonder yet again: why Brexit in the first