The Irony: Only Now Does Britain Have a Real Say in Europe's Future

28/06/2016 11:22 | Updated 28 June 2016


As someone who gets paid in pounds and spends it largely outside Britain, there was no bigger loser than I after the UK's historic decision to leave the European Union. Like many, I hoped for a Remain vote to avoid the events exactly predicted by Project Fear. But now the result is in, I realise just how much my decision was swayed by short-term economic impulse. For unlike those who voted out and now have 'buyer's remorse', both my head and heart see the longer term benefits Brexit will bring, not just to Britain, but to Europe and the rest of the world.

Just as the defining fact of modern history is the intervention of the US in the twentieth century to preside over a largely peaceful, trading global economy, so Britain has fulfilled her longer term historical function to prevent a preponderance of power in Europe.

For the majority of us old enough to recall it, the best analogy for the past few days is Britain's unceremonious ejection from the Exchange Rate Mechanism in 1992. Just as John Major was pressured into that situation by the right of his party, so David Cameron called the referendum to sheer off support for UKIP in the 2015 general election. It is this motivated majority which voted to leave the EU.

While the markets did not like it at the time, that decision led to a long bull market in Britain right up until 2008, the effects of the dot-com crash and 9/11 notwithstanding. By most measures the UK has easily outperformed the rest of Europe in terms of growth and employment over the past two decades, including emergence from the 2008 recession.

Why? Because if there is one thing economic neo-liberals on the right understand it is the damaging effects of centralization. Continental Europe has been beset by fiscal strife like the Greek crisis and industrial unrest seen every summer in France because of the incompatibility of a conservative, centralized monetary policy with the budgetary freedom member states retain to reflect their local priorities. Were it were not for Britain's political independence in rejecting the Euro and its ERM precursor, we would be in the same position.

But if Brexit is therefore a 'good thing' then why are the markets Freaking Out? Because that is what markets do, and their main liability. In the age of volatility, traders exploit uncertainly to bet on an outcome that becomes a self-fulfilling prophecy, especially when it affects the real economic decisions of millions. Our job is to resist that tendency.

It is a task made worse by the centralization of decision-making in the UK which has left no real post-Brexit plan. The network of well-funded political interests outside government that make the US sometimes difficult to govern would have arranged, in advance, the relationships needed for a smooth transition to their stated goal. But in Britain, neither the executive, civil service or the hastily concocted Leave campaign seem to have any clue.

The key to turning this around for Britain is trade, as it is for the global economy. For that reason, the EU and its national champions should have no problem giving Britain a Norway-style deal which keeps Britain within the European Economic Area with access to the single market, especially with US encouragement. And within the EEA Britain will be free to trade with her English-speaking partners and others too.

That Britain should copy Norway is telling. For she was never there at the start either, when the European Coal and Steel Community began as a way of placing Ruhr industry under joint Franco-German control, rendering a military competition institutionally impossible. Like the Nordics who also declined the Euro, the continent was always seen as an economic opportunity to Brits. But for the EU itself and its most romantic supporters, it is a direct replacement for the conflict of the last century, with nothing but ever closer political union thinkable.

If Britain can demonstrate success outside the EU, it frees member countries to lobby for a looser, more pragmatic Europe which respects regional differences with exit as a viable alternative. Ironically, only now that Britain is no longer part of the EU can it be a leader to Europe and its peoples.

Another irony is that the most feasible way forward, the EEA, kicks the immigration debate which polarized Brexit in the first place down the road. I can't be the only one, who despite the expected and realised losses, was profoundly uncomfortable with the story of the Australian couple, pillars of their community for more than a decade, being asked to pack their bags because of the pressure to reduce non-EU migration. But the European Economic Area requires freedom of movement and the alternative would mean the disintegration of Britain itself, a larger and more consequential change.

So freedom of movement will now be front and centre of Brexit negotiations, but dealing with immigration on a pan-European basis would be the best thing. Because the real, longer term danger is not Britain's mild rejection of EU excess but a Eurozone nation rejecting European integration outright over the issue. Monetary union being practically irreversible, the effects would break the international economy and might entail a showdown with a European Army, shattering NATO.

After the shock of the break-up, the reasons we took the decision will sink in and that is what will remain. A Texan I work with greeted me Monday morning with 'You guys are free!', not as a celebration but a knowing statement of fact that was true last week as much as this. We are free, and that is the ultimate guarantee of peace and growth. Now, can the pound go up please?