Explaining The Democratic Brexit Chaos

The last 2 ½ years, since the UK decided to leave the EU, have been quite a political journey. Not a good one, but an interesting one. Much can be learned about politics observing this spectacle. As a libertarian, I know that politics is useless when it comes to solving problems. I also understand that it is very difficult, if not impossible, to reduce the size of the state.

States are like gigantic machines that keep on moving into one direction, no matter what lies in their path. Most of the time, the only thing that can keep them from growing is when they reach the point where their sizes suffocates the ability of society to function. Not that there is an inherent moral limit to stop growing at that point. But if society cannot function, it also cannot produce enough resources to fuel the machine. And so, like any machine running out of fuel, it has no choice but to slow down.

From a libertarian point of view, Brexit is an opportunity to shrink the size of one state, the EU, before it starts to suffocate society. But even shrinking the size of a state like the EU, which has no army, no police and no taxing power, turns out to be very very difficult indeed. Even just leaving seems difficult.

One reason for that is that not everyone who wants to leave the EU is motivated by liberalism. It has long been clear that there are two very different groups of Brexiteers. One group wants to get rid of the control of Brussels and replace it with nothing. They want open borders for goods and people. The other wants to gain back control from Brussels and give that control to Westminster. And we need to be honest about this, the latter group is far bigger than the former.

What we have seen in the last two years is a demonstration that democracy is not in itself freedom. The process of politics remains to be a civil war between different groups of interest. The only accomplishment of democracy, and why it might be worth having, is that this war stays largely cold rather than hot. The loosing party is encouraged to accept their defeat and continue fighting peacefully in the next election.

Many people do not perceive the democratic process to be a war. I bet that has changed since the referendum. This has caught many by surprise. As far as I can tell, there are two reason why the condition of a cold war has become more apparent. The most obvious one is that the change proposed is larger than usual. It is so large that the loosing site will not be able to simply reverse the decision in the next election. But the prospect of another battle in the imminent future is a major motivation to convince the losers to keep the war cold and civilized.

The other reason which makes this war messy is that it is complicated. The two war parties, remain and leave, are roughly the same size. In addition to that, the two camps are split on major issues themselves. As far as I can tell, there are at least five different interest groups in this battle.

Firstly there is the camp of liberal Brexiteers. Their main interest is to just get out of the EU. Their motivation is big picture politics. The EU needs to be stopped before it really starts to suffocate everyone. Since this is all about the long term future, this group is not too concerned with the short term disruptions the exit might cause. In the long run, leaving will be better for everyone. I am personally, very much in this group.

Secondly, there is the Brexit camp that likes protectionism. They want a strong state, as long as they see themselves in control of it. A lot of them have the strongest opposition to the most liberal aspect of the EU, like free movement. But they are mostly interested in specific issues, and not so much in the big picture. A lot of them are perfectly willing to make compromises with the EU, as long as their issue of interest is fixed.

Then there is the group of EU enthusiasts. Ironically, this third group is probably the biggest one. There are a few libertarians in this group, who mainly like the EU for its enforcement of free movement and opposition to nationalism. The waste majority of people, however, like the EU precisely because it is a giant state. They love the state.

They understand full well that we live in a world of global markets. Shutting oneself off from these markets will have bad consequences. But allowing these markets without global governments will weaken the state very much. Producers and taxpayers can move flexibly. They will play those little nation states against each other like a fiddle. Consequently, the ability to do politics will be weakened significantly. Forget about high taxes and welfare expenditure. Their argument for the EU is essentially mine against it.

Ironically Theresa May, and most of the Tory party, is in this third group. May in particular really loves a powerful government, the bigger the better. She clearly believes that less state control equals more chaos, and negotiates with the EU in that spirit.

The fourth group is a group of remainers around the labour leader Jeremy Corbyn. Just like the third group, this group loves the state. But unlike them, Corbyn does not understand the huge benefits of global markets. He things he can beat globalism by organizing the national economy from the top.

In other words, this group is really very much like group two. However, for political reasons, it pretends to be in group three. Corbyn very much wants to get out of the EU. But since he is in the opposition, he cannot say that openly. His interest, therefore, is to not disrupt the Brexit process to the degree that Brexit won’t happen. At the same time, he has an interest in making the government look as incompetent as possible, in order to provoke another general election.

Lastly, there is a very bizarre fifth group. It is small but significant. It is an interest group in Northern Ireland. They are hardcore UK nationalists, but ironically, that does not make them Brexiteers but strong supporters of remain. I am sure I will not have to explain the details of this, as my readers will know. Despite its size, this is really the most disruptive group. There truly is no logical way, how the UK can genuinely leave the EU without a border in northern Ireland. The only possible solution is an officially existing border which is practically not enforced, and therefore stay invisible.

So, to sum up, we have a battle in which the loser cannot hope for a second chance in the near future; we have five different major interest groups with very different agendas, neither of which has a majority; and on top of that we have an EU enthusiast in charge of Brexit and a Brexiteer in charge of opposing the process. What could possible go wrong?

Looking at the situation, the most reasanable outcome is a giant compromise. Every group will have to give a little and take a little. If we assume a fair compromise, we can expect the reasult to be 20% liked and 80% hated by each group. In reality, it won’t be a completely fair compromise. But by and large, theoretically, the most likely outcome of this is a compromise that almost no one likes. And it looks very much like that is exactly what we are going to get. So the political model described above seems to represent reality well.

That is not to say that Theresa May did a good job. There certainly could have been a better deal with a more competent negotiator. But then, the fact that we have such a bad negotiator also is an outcome of the political process. That means it is not entirely accidental either. In a democracy, a leader needs to be elected. And in this process, all the different interests that I described above come into play. So instead of expecting the leadership to be won by some idealistic Brexiteer, we should expect someone to win who resembles a ruthless pragmatic compromise that no one likes. Which is what Theresa May pretty much is.

Still, the analysis above is not entirely accurate. With the current deal on the table, the liberal Brexiteers don’t really get 20%, they get pretty much nothing. The deal essentially agrees on the worst protectionism of both worlds. Free movement, the best and most liberal thing about the EU, will be ended and all the other regulations will stay.

Why did the liberal voice turn out to be excluded from current proposals? One possibility is that they really got unlucky. That is possible, but not likely.

Another possibility is that the system is rigged against liberalism. The problem with achieving liberal politics is, that it fundamentally opposes all other interest groups together. Liberalism is idealistic and therefore not well suited for compromises. Every compromise feels like a total defeat. In this particular battle, the liberal Brexiteers have portrayed everything but an essentially no deal departure as a betrayal of Brexit. But in a battle where you can realistically hope for 20%, asking for all or nothing will most likely get you nothing. Realistically, we would need to get lucky to get no deal.

There is, however, another possibility. Maybe I am simply fooling myself to believe that the liberal Brexiteers are a significantly large group in all of this. Maybe there are really only four and not five groups, all of which are like protectionism in some form.

The political process within states can neither solve problems, nor will it likely lead to a serious reformation of the status quo. Unless the state has reach the point where it starts to suffocate society, and the status quo itself is in a crises, Leviathan usually continues to grow. The best outcome, libertarian Brexiteers like myself can hope for is that by some giant accident, the different groups hate each other so much that they don’t end up agreeing on anything, and we get no deal by default.

Hope springs eternal. It is not really that realistic, because the fact that a no deal needs to be prevented is the one thing that all of the other parties can agree on. That means the more likely outcome from such a chaos is that there won’t be much of an exit from the EU at all. The only question with such an outcome will be, whether it will keep the civil war cold. In this country, however, it probably will.

Brexit is often described as one of the biggest democratic events in the history of the UK. In an ideal democracy, we would get the rule of the average opinion. What else could the will of the people be than that?

The problem wth averages is that they can be completely detached from reality. The average woman in England has 1.8 children. I, however, have never met one single woman that actually has 1.8 children, how could she? The statistical average for every woman does not actually describe a single real world woman.

If democracy is supposed to represent the average opinion of the people, in other words, the will of the people, than it is possible that the policy resulting from this, while it describes the will of all people, does not describe the will of any single real human being part of that same people. I don’t think that a lot of democracy advocates understand this simple truth. They clearly assume that the will of the people needs to satisfy most people.

The latter, however, is only the case if society is largely in agreement on issues. The more opinions there are, the more likely democracy will deliver a result that no one likes. Alternatively, the system will simply end up paralyzed. And as I have described above, when it comes to Brexit, opinions differ hugely. So democracy probably really did win, and was not betrayed, when it comes to Brexit. It is just foolish expect democracy to produce good outcomes. In reality, democracy really is that messy. It is the wrong system.

The principle of the state is that one size always has to fit all. For this to work, at least most people need to roughly have the same size. The more sizes differ, the more likely it is that the average size, that is supposed to fit all, fits no one. That is why, state advocates always end up to be some kind of egalitarians. Only then, at least the illusion can be kept up that the whole thing actually works.

But in reality, people are not equal. They differ in many ways, and they certainly often do not agree with each other. The only peaceful and harmonious solution in that kind of reality is liberty. Instead of asking how can we find a size that fits all, we need to instead ask, how can we minimize the rules that need to be enforced on everyone. That would be the only universal size we need to find. Of course there need to be rules to make society function. But these rules should be at the absolute minimum possible. In other words, we should have a maximum of interpersonal liberty. That way, everyone can wear their own size.

It is, however, naive to expect liberty as an outcome from the political process within the state. By promising that the war will be cold and civilized, the state has legitimizes the process of everyone fighting against each other. And since it is very much a war, one cannot expect this process to stay harmonious and peaceful forever. Eventually, the conflicts of interest will become so large that people will definitely hate and eventually most likly even fight each other. For that not to happen, we should really hate the game and not the players. And to be clear, the game is not Brexit. Brexit is just a battle within the game. The actual game is the monopoly that is the state.

Brexit: What is going on?

On the eve of the commons vote that Theresa May has now tried to defer, we gathered to work what is going on, what we want and what is happening next.

The panel included:

Christian Michel – Philosophy and Economics Meetup Organiser
Lucy Harris – Leavers of Britain
Catherine McBride – Senior Economist, IEA Trade and Competition Unit

In their opening statements the panellists gave their point of view. I started by asking Christian why “people” wanted to be part of the EU in the first place?

Christian does not know why “people” want to Remain, but knows why he wants to Remain. This is because he feels that the EU destroys respect for the concept of a state. There is no love for the EU in the same way that there is love for nation states. States that are remote and undemocratic lack moral authority and the end result, he says, will be that the EU exerts less authority than would be wielded nationally.

Catherine, was working in Australia as the EU developed from the EEC into the EU. For her, the institution was an “OPEC for developed nations”. In particular this is what it was presented as in Australia, making its evolution into a sovereign entity with broad and deep powers a bit of a surprise. Such was also the experience of people here, she felt. Catherine also feels that had the EU stuck to the 9 first countries (Belgium, France, Italy, Luxembourg, the Netherlands, West Germany, Denmark, Ireland and the UK) it might have worked out better. However the UK in particular was the “oddball” and had different economic needs and alignments, tending to develop ahead of the EU nations thanks to US influence. This meant the UK was incompatible from the the beginning.

Lucy, laments the rapid “twitter feed” progression of events in the current climate. Lucy felt that what the country needed now was a new leader from the Leave side who would be able to be braver and more bold than Theresa May and deliver the result of the vote. This deal, she says, is not Brexit and not the will of the people because it leaves us in the Customs Union. She says the Brexit we need must include “no connection” with the ECJ, freedom of movement, the customs union or single market. The reasons for Brexit are not especially tied to immigration and is not a racist phenomenon.

The panel went on to discuss, in some depth, the nature of democracy and the attitude of the Remain camp toward Brexit voters, and the likely direction of events.

 

See EU Later: 5 Options for post-Brexit trade

GreenGlobe by Jonathan Gross

Last month the EU Referendum engaged more people in politics than any referendum or General Election since 1992. The fallout just keeps coming as both the main political parties face leadership contests and yet more resignations are still expected. As I write this, Nigel Farage has quit as UKIP leader (again), so it looks like we’re running head first into week three of political carnage since the referendum result. Brilliant.

Despite uncertainty about when or if Article 50 will be triggered, it is largely accepted that the UK has now been presented with an opportunity to cut ties and seek its own trade deals on its own terms. Now, as the dust settles, it is time to start considering with whom these deals could be struck.

Option 1: The EU

Hold on, haven’t we just voted to get out of this?

Well, yes, but we can still trade with them without being a member of the club.

There are more than twenty countries that have trade agreements with the EU. The European Free Trade Agreement (EFTA) is currently shared by several countries in Europe which are not actually EU members. Founded in 1960 by 7 European countries, this is seen as the most likely option for the UK to adopt post-Brexit. In fact, we were a founding member of the agreement, along with Austria, Denmark, Norway, Portugal, Sweden and Switzerland. However, we left in 1973 in order to join the European Community, and some argue this is where it all went wrong.

The Norwegian model is seen as the most viable option for the UK to adopt. This would give us full access to the single market through membership of the European Economic Area (EEA), although we would also still have to make a financial contribution and accept the same free movement agreement that we had while inside the EU. Iceland also shares this model, and was the first country to reach out to the UK to strike a post-Brexit deal.

Another EU trade possibility is the Swiss model – largely revered by libertarians for the simple fact that the Swiss have low taxes, are both prosperous and peaceful, and have a close form of direct democracy. It is no coincidence that a lot of multinational companies choose to base their headquarters in Switzerland, and that is partly down to their ‘best of both worlds’ bi-lateral trade deals with the EU.

The Swiss-EU agreement allows free trade (i.e. trade without tariffs) with most of the industries that make up the single market. Switzerland is neither an EU nor EEA member but is part of the single market. This means Swiss nationals have the same rights to live and work in the UK as other EEA nationals. However, Swiss trading success has partly been down to their substantial annual contributions to EU projects so it is likely that we would also end up pumping a lot of money into projects that we now have no say over.

These are two viable – if imperfect – options for the UK, but would not be enough to ensure financial stability alone. The Adam Smith Institute has backed an EFTA-style deal for the UK, but recent figures from the Office of National Statistics show that the UK is actually exporting more to countries outside the EU now than it was in 2011, so while EFTA looks like a good option, it makes sense for us to widen the net.

Option 2: The USA, Mexico and Canada (North American Free Trade Agreement: NAFTA)

In 1946, Winston Churchill coined the phrase ‘special relationship’ to describe the integrated political, cultural, economic and historical relations that the US and UK have long shared. Despite Barack Obama’s rather unwelcome appearance halfway through the pre-referendum period (the one where he said that the UK would be “at the back of the queue” in any post-Brexit trade deals) it seems that we are in fact still in the ‘special relationship’ and nothing much has changed.

Canada is currently only the UK’s 16th largest export market, and earlier this year Romania, Belgium and Bulgaria were reported to be planning to veto an EU trade deal with Canada, citing ‘unfair visa arrangements’. The UK could and should use this as an opportunity to strike a better trade deal with Canada while the EU tries to figure out a ‘one size fits all’ resolution to the issue. Canada have already said they are cautious, but see the UK as a strategic partner and so are keen on maintaining ties.

Mexico has gone one better and actually drafted a trade pact which is ready for whoever takes up the challenge of negotiating Britain’s exit after Cameron leaves.

Miriam Sapiro, ex-deputy US Trade Representative, has also said that it will be easier for the US to negotiate a trade deal with Britain post-Brexit, as we are a “like-minded” country that is more open to free trade than other EU member states. It seems that ‘back of the queue’ gag may be forgotten by the time Obama leaves office, if not before. It has even been suggested that a quick ‘remedy’ to our Brexit woes would be to add the UK to the NAFTA deal, and ensure those ties don’t break at all.

However, trade with the US comes with a warning: TTIP.

The main aim of the Transatlantic Trade and Investment Partnership is to set standards for any future trade deals done with the US and, eventually, the rest of the world. If you haven’t heard of it, that’s probably because the negotiations have not exactly been conducted in public.

The proposed deal would see the removal of tariffs and regulatory barriers to trade between the US and EU members. The British government claimed that TTIP would add around £10bn to the UK economy, and open up restrictive markets, allowing us to buy goods such as clothing and cars at cheaper rates. On the surface, that doesn’t sound so bad.

Conversely, a TTIP deal would also introduce Investor-State Dispute Settlements (ISDS), which would allow US companies to sue EU governments if their policies interfere with their profit margins. The EU itself has said that this deal would cause the loss of millions of jobs across EU member states, and critics have also pointed out that TTIP would introduce heightened surveillance of citizens under the guise of ‘anti-counterfeiting law’.

As this agreement is currently only being very quietly discussed between the US and EU, it seems that we have dodged a bullet by voting to leave. However, it is likely that TTIP will be a condition of any future trade deals between the UK and NAFTA, especially since our government is so on-board with the idea.

Option 3: The BRICS bloc

(Brazil, Russia, India, China and South Africa)

The BRICS are characterised by being BIG. Big in size, big in natural resources and big in young populations full of people wanting to work and travel. It’s no secret that this collection of nations isn’t exactly viewed as the first choice for trade agreements by many Western countries. Indeed, Russia had diplomatic sanctions imposed on it by the EU following its annexation of the Crimea. China has a questionable human rights record, and Brazil’s desperate scramble to prepare for the Olympics has thrown light on a nation with weak infrastructure and a faltering economy.

These uncertainties partly explain why the BRICS bloc is less competitive than other trading blocs and, although large companies benefit from this, small and medium-sized enterprises (SMEs) in the UK are far from making significant progress with them. Since 2013, the UK has more than doubled its exports to these countries, but there is still a legacy of British reliance on western demand when it comes to trade, and so George Osborne’s attempts to negotiate further trade have come under intense scrutiny.

Since the referendum, India has jumped straight in and is very much looking forward to striking a trade deal with the UK. Our former colony has a very positive outlook on Brexit, with Jayant Sinha, India’s deputy finance minister, claiming that ‘the UK will look to build its relationships with the rest of the world, and will seek to pursue new opportunities with India”.

This is a group of countries which may offer fantastic future opportunities for more trade agreements. However, the diplomatic ties that many countries in the West hold with this bloc will likely need to improve before they can be considered in the same league as the EU for trade negotiations. Nevertheless, it is likely that other countries will confirm their interest in trade deals with the UK in the coming weeks, with all eyes on Russia and China; more on South Africa a little later…

Option 4:  Australia and New Zealand

Since the news broke that the Brits had opted to Brexit, Australia and New Zealand quickly teamed up to negotiate new trade and immigration deals with the UK as soon as possible. Our ex-colonial friends have long been trying to find a way to trade more successfully with the EU, but the UK’s withdrawal makes any such agreement a bit less attractive.

The UK has long been a significant trade partner for Australia as it provides a services-based relationship worth around £5billion. It is widely acknowledged that when the UK joined the EEC in 1973, trade with New Zealand took a hit. Having once imported a little under 80% of our dairy and meat products from NZ, the UK (like all other EEC members) rapidly became flooded with European goods, leaving little room for imports from outside the bloc.

We now only import around 20% of our meat and dairy goods from our cousins in New Zealand, and given the immense historical ties that we share with the ANZAC nations it makes sense to shore up agreements with these countries while they are open to it. These are important nations with which to secure trade deals, not only for their economic value, but for the social security of the millions of UK expats who are shared between them.

Option 5: Africa

Africa is still largely seen as the ‘final frontier’ for many multinational businesses, but more and more small and medium-sized enterprises (SMEs) are realising the huge potential that foreign investment and trade can have in this region. Historically, the African relationship with the EU has been one of forced trade and destructive agreements which have largely been blamed for the increase in poverty in many African countries.

In 2013, the UK made steps towards improving trade with Africa, with the aim of completing these improvements by 2016. The Government has so far pledged to invest £57.4 million to improve trading in Uganda and Kenya and modernise East Africa’s largest port in Mombasa. It has also promised to improve roads on a vital trade corridor between Uganda and Rwanda, and put further investment into female entrepreneurs across the region.

These initiatives do not require “EU funding” (i.e. pre-digested UK taxes) or legislation to support them. It seems logical that we take this to the next level now, and really open ourselves up to the wider continent, from Tunisia right the way down to South Africa. Ghana has already extended the UK an invitation for new trade negotiations, and it is possible that other countries will follow suit in the coming weeks.

This investment in the continent will allow many countries to continue producing crops and commodities more efficiently, and in turn give us more stable and rich economies with which to trade. Within Africa, South Africa is currently the largest recipient of UK exports, and the burgeoning middle class in this country is presenting many opportunities for UK SMEs to sell their goods. This is a growing trend in other markets, particularly Nigeria and Ethiopia which have seen dramatic growth over the past decade; now is a great time to get to know them better.

Far from the bleak picture painted during the referendum campaign, it seems that the UK actually has many options open to it at the moment. Whether we choose to negotiate a safe Norway-type model, or broaden our horizons to the BRICS, the coming months will no doubt show that we can be more outward looking than our European neighbours, and more creative in the way we form trade relationships with other nations. The important thing to note is that we are not limited to just one agreement. We now have an opportunity to make trade ties with many countries both inside and outside the EU. They are open to it – and we can be, too.