Summer break

June 26, 2016

As usual I will be taking a break from blogging over the summer months. I should be back at the beginning of October.

Have a great summer!

Some thoughts on the Brexit

June 26, 2016

I don’t normally write about what’s in the news, but this week in view of the vote to leave the EU, I thought I would give my point of view.

  • My initial reaction is that it has been a huge mistake. We are now facing a huge period of instability. The reaction in the markets is a taste of what is to come. There is a real possibility of recession in the UK.
  • I am pretty used to politicians backtracking on promises, but the leave campaigners are breaking all records. The £350m for the NHS seems to have vanished. And the promise to control immigration is an illusion. I am believer in immigration. Here is the economic case for immigration:

  • Anti-immigration has been at the heart of the Brexit vote. One of the key things in politics is that just because you vote for an outcome does not mean this that this will happen; reality is not optional. Chavez and Maduro won elections for years, but they couldn’t suspend the laws of economics. In this case the Brexit campaign was based on misrepresentation of reality. In a piece called, A tragic split, The Economist pointed out the fundamental dilemma. Britain will surely need access to the EU’s single market, a source of prosperity. But the price of this access is that you have to accept free movement of people. If you reject this, you will be excluded from the single market. It is a stark choice between curbing migration and maximising wealth.
  • The collection of supporters of Brexit makes interesting reading Boris Johnson, Nigel Farage, Donald Trump, David Icke, George Galloway, Arthur Scargill, Katie Hopkins and Julian Assange to name but a few. Of course in the end you have to judge the arguments, and not the people who support it.
  • Then you have to be critical of the Remain campaign. At times it was a bit arrogant. Cameron called the referendum to heal the divisions on Europe in the Tories and undermine the popularity of UKIP. He achieved exactly the opposite. Cynics say that he had only promised the referendum because he thought that he wouldn’t have an overall majority and that the Lib-Dems would veto it. And Jeremy Corbyn was missing in action. Indeed, it is said that he was a supporter of Leave. The intervention of Barack Obama was probably counterproductive.
  • The wave of populism that is sweeping the world was another cause of this result. Globalisation doesn’t benefit everyone. Today in Spain we have an election and Pablo Iglesias, long-time communist and admirer of Venezuela, has a real chance of getting into government. And Hilary Clinton may yet fall victim to this wave of populism. President Trump doesn’t seem so inconceivable now.
  • I do think that the EU needs to learn from this debacle Unease about Europe is surely not confined to the UK. The EU is a flawed institution, which has tried to do too much. Boris Johnson was able to create a comic-version, but there is too much bureaucracy. I think the Euro was a mistake. I am more in favour of a free-trade area and the free movement of workers. Then there should be regional aid. But the Common Agricultural Policy is a terrible policy. Having said the situation has improved. In 1985, around 70% of the EU budget went on agriculture. In 2013, this was under 40%. Curiously, the editor-in-chief of the rabidly Eurosceptic Daily Mail benefited from at least £88,000 in subsidies from the European Union for his country houses in Sussex and the Scottish highlands in 2014.
  •  But Britain should be there fighting its corner. But now that is not possible, do we’ll have to make the best of it. There are interesting times ahead.