Has Brexit Put the EU on Life Support?
June 28, 2016|Posted in: Foreign Policy
Brexit Rising: Why the U.K. Needed to Bid the EU Goodbye
Brexit is all the rage, and despite some mixed feelings on my part, I gotta admit, Brexit had to happen. Even as the market cries bloody murder, pounding the British pound (‘tis my blog; I shall pun as I please), the supposed cognoscenti prophesy post-Brexit doom, and Scotland behaves in a decidedly Scotland manner about the whole thing, Brexit was the right move for the United Kingdom. Let me preface this all by saying that I am by no mean an isolationist. I think international trade is a good thing, and I don’t subscribe to simplistic Austrian beliefs that trade is just a matter of nations agreeing to drop tariffs. Trade is much more complicated than that, especially between nations at different levels of development. That said, the simple truth is that the European Union gained more from the United Kingdom than the United Kingdom gained from the European Union. When your capital outflows exceed your capital inflows, you subsidize weaker members at an exchange rate that takes advantage of your domestic currency, and the costs of your regulatory burdens outweigh the benefits you receive, you cast your vote and Brexit.
What all of the sound and fury masks is that Brexit serves as a symbol of increasing Euroskepticism throughout the Union. Remember, the European Union was originally intended to be a common market, with goods, services and human capital flowing across borders without impediment. To smooth this cross-border commerce, a common currency was introduced (which currency, by the way, the U.K. never adopted), giving the Union a huge transactions domain that nearly put the region at parity with the U.S. Had it stopped there, everyone would have lived satisfactorily ever after (happily ever after being the province of fairy tales), but in order to keep sovereign nations from providing unfair advantages to their domestic business, uniform tax systems and regulations were adopted in the name of leveling the playing field. The problem is this; in pre-Brexit a union of 27 member states at differing stages of development, the playing field is never field to be level.
The issue is that in order to force a parity that just can’t exist, the EU apparatchiks in Brussels went far beyond their mandate of maintaining a common trade area. Look, the benefits of the EU are obvious, even for those who see any conversation or agreement between any two nations as evidence of some vast globalist conspiracy. Pan-continental capital markets with negligible foreign exchange-rate risk, increased liquidity, a surge in mergers and acquisitions – these are not achievements of little not. Yet, the U.K. had deep markets with sufficient liquidity, an impressive transactions domain, and a strong currency with little exchange-rate risk before joining the EU, and really, they should have those things after Brexit is complete. Prior to the markets irrationally punishing the pound for the voters’ evil, Brexit ways, the U.K. serve as the fifth largest economy in the world. Now, that honor belongs to France. Ponder that for a moment, if you will…after the Brexit vote, the second strongest economy in the EU belongs to France.
Brexit Likely Ain’t the Only Exit
If anything, it should be the euro that is falling. After all, the Union is losing an important component both economically and politically (who is going to speak for the EU on the UN Security Council now…enter globalist rant here). That strikes a blow at the bureaucrats in Brussels, who have long used bullying to silence the mounting discontent among member nations. It was their general heavy-handedness, more than any age-based divide among British citizens, or any concerns about immigration, that forced this whole Brexit mess.
If the mafia in Brussels were smart (they’re probably not), they would base any post-Brexit trade relations with the U.K. on the relations they have with Switzerland. If, as the last few days seem to reveal, they decide to take a punitive stance, they will subsequently decrease the wealth of their own common area, likely paving the way for a series of Brexit sequels. If the U.K. is punished, will Germany remain content with subsidizing the Greece’s of the world? Will France be willing to bear the burdens of Spain with equanimity and grace? Probably not. If we mortals were as rational as we believed ourselves, Brexit would serve as a check on the increasing power of the EU over its member nations. I doubt that it will, so we’ll see how long the Union lasts.
[Pic by Stuxx/Pixabay]
Tarnell is an economist, entrepreneur and social observer. When he is not being a Lucky Libertarian, he is likely plotting to take over the world (and leave you alone) and singing romantic ballads to absolutely no one.