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A robust economy and the behaviour of the European Commission

My recent Times column on the arguments for Brexit:


More than a year after Britain voted to leave the European Union, I realise we who ended up on the Leave side have probably made a mistake. No, not that we should have voted the other way, but that we thought we had won the argument last year during those weeks when we lived and breathed every detail of the debate. To some extent we then stopped making the case. The Remainers didn’t.

True, they have a few new arguments to deploy, such as that Michel Barnier is a wizard negotiator who will run rings round us and that everything he says is gospel, while everything David Davis says is nonsense; even that it is now obvious that “the job can’t be done” (in Lord Heseltine’s words). The argument that leaving the European Union is not just foolish but somehow against the laws of physics, or something, seems to be growing more common. There are just too many treaties to disentangle and too many laws to rewrite, so after a few years of trying we will give up.

I happen to be reading Maya Jasanoff’s magnificent book Liberty’s Exiles on what happened to the loyalists after American independence. Much the same complexity argument was made in 1782 during the two-year negotiation to leave the British Empire: it was a “huge task [that] required deconstructing the apparatus of an empire from the bottom up”. What a shocking indictment of our civilisation if, after inventing so much automation, knowledge and wealth, it is even harder to disentangle a country from an empire today.

The most eye-catching result of last month’s YouGov poll on “Brexit extremism” was that one in five Remain voters thinks “significant damage to the British economy after leaving the European Union to be a price worth paying to teach Leave politicians and Leave voters a lesson”. Yikes. How spiteful can you get? Liam Fox was apparently not wrong when he said the media is full of people who “would rather see Britain fail than see Brexit succeed”.

I, for one, am more sure now than I was on June 24, 2016 that the British people did the right thing. My one anxiety as I placed my cross on the paper was that Project Fear might be half right if only for self-fulfilling reasons, and that I might be helping to inflict severe short-term pain for slight long-term gain. Yet instead of an emergency budget and an immediate and profound shock to the economy, a loss of confidence, a drying up of inward investment, a plunge in house prices, a surge in inflation and a collapse in the stock market — all of which we were promised if we voted Leave — there has been almost unremitting good news on the economic front.

Unemployment is now lower than at any time since 1975. Employment, at 75 per cent, is the highest since records began in 1971. But the most striking data are on investment. I have lost count of the number of times I have been told that investors are pulling out of Britain. The opposite is true. Britain is currently the most popular destination in Europe for foreign direct investment, which shot up to £197 billion in 2016, compared with £33 billion in 2015, according to the Organisation for Economic Co-operation and Development (OECD). To those who say “That was only the vote; once we actually leave, then we’ll be proved right,” I reply: “Why did you not say so at the time?”

There is a second reason I feel more Leave-inclined than a year ago: the behaviour of the European Commission. I don’t much mind the scorn and petty point-scoring. I expected that, don’t believe a word of it and find it reassuring, not least because it lowers expectations. When you’re taking flak, you know you are over the target.

No, it’s that they clearly mind more about the budget for their bureaucracy (the “bill”) than the economic future for European citizens. We are told we must settle the officials’ demands for money for officials to spend on officials’ priorities, before we even talk about future trade arrangements between ordinary people.

Jasanoff reports that when Britain’s negotiators agreed to the terms of American independence in Paris in 1782, “many contemporaries were surprised by Britain’s generosity towards the former colonies”. The reason was that Lord Shelburne, the prime minister, wanted to try to secure the United States in Britain’s sphere of influence.

Where is the same ambition in today’s Brussels? Has there been a single speech from within the commission (rather than the continent) about how the future prosperity of all Europeans, including Britons, depends on maximising innovation, trade and trust among us? Or saying that, given the continent’s huge trade surplus with us and the huge numbers of its citizens that we have created jobs for, let alone our net contribution to the budget being the second biggest, we might deserve a little co-operation, even thanks. I know nobody in Britain who wants us to stop being friends, allies and trade partners of European countries.

The inhabitants of the commission (and the parliament) exemplify public choice theory at its finest: they mistake official self-interest for the public interest. They are interested in making sure their integrationist bureaucracy thrives, rather than looking after the economy of the continent.

True, there are Europeans making better noises, within Germany and elsewhere. Yet that only reinforces the point: if the European Union were an intergovernmental arrangement, I would be all for staying in it. It is not, as I keep pointing out to American friends who think it is some kind of economic Nato. It is an experiment in building a top-down, centralising, supranational government, with a bureaucratic surplus and a democratic deficit. Compared with most of the rest of the world it is a failure, as its economic growth rate, unemployment rate and innovation record demonstrate.

Putting aside the negotiating bluster, I am also encouraged by the fresh thinking already emerging on policy. In recent months I have had conversations about immigration policy with Australians, fishing policy with Icelanders, farm subsidies with Swiss, environmental policies with Americans and tobacco control with Canadians. These conversations no longer end in that despairing realisation that reform is impossible because it requires persuading 27 other nations and a lobby-fodder commission to come to some sort of compromise. Suddenly anything is possible.

By Matt Ridley | Tagged:  rational-optimist  the-times