November 5, 2019
We bring you a message from our roaming featured contributor Kim Iskyan…
Last month, he filed a missive direct from the chaos in Argentina. And last week, he was in Great Britain in search of more political and economic turmoil. But what he found wasn’t exactly what he was hoping for…
The Non-Brexit Apocalypse… and What Comes Next
By Kim Iskyan, featured contributor
I was in London last week for some economic disaster tourism…
Friday, November 1, was supposed to be the first day of a United Kingdom unencumbered by the European Union. And “Remainers” – who don’t want the U.K. to leave – warned of food shortages… sick folks going without medicine… and trucks backed up for miles at the border.
Brexit is such a divisive issue in the U.K. that it makes the current red/blue divide in the U.S. look like a “great taste/less filling” disagreement by comparison. In a recent article, the Financial Times cited research that “found that voters now identify more strongly with the Leave [that is, Brexit] and Remain camps than with political parties.”
So it’s not surprising that the Brexiters had their own visions of the apocalypse if the U.K. didn’t leave the EU on Halloween…
One member of parliament, Mark Francois, said, “I think if we don’t leave on 31st of October, this country will explode.” An anonymous Cabinet member said that delaying Brexit could lead to a “violent, popular uprising.” And earlier in October, Prime Minister Boris Johnson said that he would “rather be dead in a ditch” than delay Brexit past the appointed date…
Instead, I got a Non-Brexit Day.
Johnson didn’t take a dirt nap in a ditch. There were no enraged Brexit crowds throwing scones at the palace… no riots anywhere.
It was simply a normal London day of delays on the Tube, gray skies, and overpriced real estate. The image above was what I saw as I crossed the Southwark Bridge over the River Thames into London’s central business district… A day like any other.
Of course, despite the non-event last week, Brexit is serious business…
The world’s sixth-largest economy leaving the world’s biggest trading block would be a tsunami-sized change for the U.K., the EU, and the global economy.
Proponents of Brexit argue that by freeing itself of the rules and bureaucracy of the EU, the U.K. would take back its destiny. It could be more business-friendly, trade more with Asia and other parts of the world, and become a more nimble player in the global economy.
“The future isn’t in Europe, it’s in the rest of the world,” one pro-Brexit economist told me. “There’s a reason that the EU and Antarctica are the only two continents on earth that haven’t shown economic growth since 2000.”
That sounds great in theory… But the EU accounts for around half of total U.K. trade. With Brexit, the U.K. would have to start from scratch to develop new trade deals with the rest of the world. Millions of EU citizens live in the U.K., and their status – as well as that of U.K. citizens who are living in the EU – is an open question. Seamless travel for U.K. citizens into Europe, and vice versa, would come to an end, at least until a new structure could be agreed upon.
A study by the Centre for European Reform says that the U.K. economy is 2.9% smaller than it would have been if the country had voted to stay in the EU. “The biggest victim of the Brexit vote has been business investment, while the weaker pound has failed to foster the big gains in exports that some Brexiters hoped for,” it says. And that’s before Brexit has even actually happened.
Imagine how complicated it would be if, say, Texas wanted to break off and become its own country. It would take years to figure out how to unwind, or revise, the tight economic and political links that bind Texas to the other 49 states.
And so far, no one has really addressed these sorts of issues with Brexit. The process is stuck in a macropolitical Catch-22… The U.K. has to agree on the broad contours of a separation deal with the EU before it can begin to talk about details. The process has been hamstrung by endless debate in the deeply divided Parliament over how – and whether or not – to Brexit.
One way around this is a “hard Brexit”… a complete split from the EU without agreeing on the big picture.
That’s like shouting down the hall to your spouse that you want a divorce, tossing a few things into a duffle bag, and taking an Uber to a Motel 6. You’ll drop by later to pick up some underwear, your toolbox, and sort out minor details like who gets the money, the kids, and the house.
But by then, you’d be in a lousy bargaining position. And your ticked-off spouse wouldn’t be in a cooperative mood. That’s a “hard Brexit.”
The U.K. is Europe’s second-largest economy (after Germany), and where 13% of the EU’s total population of 514 million people lives. But the other 27 countries in the EU can get along without the U.K. a whole lot easier than the U.K. can get along without its 27 European partners.
At least as important, the prospect of a hard border between Northern Ireland (which is part of the U.K.) and Ireland (which is part of the EU) is a key stumbling block to Brexit.
And economics are just part of it… “There’s a reason that that the past 70 years [since the founding of the organization that became today’s EU] has been the most peaceful in Europe’s history. If we leave, we’re going to be risking all of that,” one seasoned political observer I spoke with in London told me.
Brexit is the Rubik’s Cube locked in a Pandora’s box that’s been impossible to solve so far.
So Johnson called for snap elections on December 12 in the hopes that the electorate will give him a clearer mandate for Brexit, along with a more cooperative parliament.
Some people want a second referendum on Brexit. Immediately after the June 2016 vote, two of the most popular Google web searches in the U.K. were, “What is the EU?” and “What does it mean if we leave the EU?” Now that the implications are better known, a new referendum might yield a different result – though with a similar demographic split, with older people skewing heavily for Brexit, and younger people to Remain.
Another option is Brexit In Name Only (“BINO”). But fudging Brexit won’t satisfy anyone and won’t heal the festering wound that Brexit has become.
Of course, there’s always the union option. “If the pound falls more and hits parity with the dollar, we could become East Hawaii, the 51st state,” one analyst joked.
Looking ahead, January 31 looms as the next – “this time for real” – deadline. And the EU – like the rest of us – is getting even more impatient with the U.K.
Now here are some of the headlines we’re reading…
One year from now, voters will decide whether to grant President Donald Trump a second term in office, an election that will be a referendum on Trump’s vision for America’s culture and role in the world.
An enduring U.S. expansion puts President Donald Trump on course to win re-election in 2020, according to economic models with a track record of predicting who wins the White House.
“I’m sticking with this bull market. I think it’s going to continue to see higher levels,” said Yardeni, adding this forecast isn’t contingent on who wins next November’s 2020 presidential election.
Waffle House says the share price of its employee-owned stock, which is based on its audited book value, has increased every year for the last 57. The company says it typically opens about 50 new restaurants a year… These statistics attract plenty of managers. And because Waffle House promotes exclusively from within, the good ones are rarely inclined to leave. “It’s probably one of the last places where you seriously have the ability to build wealth.”
And let us know what you’re reading at [email protected].
Publisher, American Consequences
With P.J. O’Rourke and the Editorial Staff
November 5, 2019