Tag: Britain

Must-Read: Teebs: Brexit

Posted on by Brad DeLong

Must-Read: Teebs: Brexit: “If Boris Johnson looked downbeat yesterday, that is because he realises that he has lost…

…Perhaps many Brexiters do not realise it yet, but they have actually lost, and it is all down to one man: David Cameron. With one fell swoop yesterday at 9:15 am, Cameron effectively annulled the referendum result, and simultaneously destroyed the political careers of Boris Johnson, Michael Gove and leading Brexiters who cost him so much anguish, not to mention his premiership.

How?

Throughout the campaign, Cameron had repeatedly said that a vote for leave would lead to triggering Article 50 straight away. Whether implicitly or explicitly, the image was clear: he would be giving that notice under Article 50 the morning after a vote to leave. Whether that was scaremongering or not is a bit moot now but, in the midst of the sentimental nautical references of his speech yesterday, he quietly abandoned that position and handed the responsibility over to his successor. And as the day wore on, the enormity of that step started to sink in: the markets, Sterling, Scotland, the Irish border, the Gibraltar border, the frontier at Calais, the need to continue compliance with all EU regulations for a free market, re-issuing passports, Brits abroad, EU citizens in Britain, the mountain of legislation to be torn up and rewritten… the list grew and grew. The referendum result is not binding. It is advisory. Parliament is not bound to commit itself in that same direction.

The Conservative party election that Cameron triggered will now have one question looming over it: will you, if elected as party leader, trigger the notice under Article 50?

Who will want to have the responsibility of all those ramifications and consequences on his/her head and shoulders?

Boris Johnson knew this yesterday, when he emerged subdued from his home and was even more subdued at the press conference. He has been out-maneouvered and check-mated.

If he runs for leadership of the party, and then fails to follow through on triggering Article 50, then he is finished. If he does not run and effectively abandons the field, then he is finished. If he runs, wins and pulls the UK out of the EU, then it will all be over–Scotland will break away, there will be upheaval in Ireland, a recession… broken trade agreements. Then he is also finished. Boris Johnson knows all of this. When he acts like the dumb blond it is just that: an act.

The Brexit leaders now have a result that they cannot use. For them, leadership of the Tory party has become a poison chalice.

When Boris Johnson said there was no need to trigger Article 50 straight away, what he really meant to say was ‘never’. When Michael Gove went on and on about ‘informal negotiations’… why? why not the formal ones straight away?… he also meant not triggering the formal departure. They both know what a formal demarche would mean: an irreversible step that neither of them is prepared to take.

All that remains is for someone to have the guts to stand up and say that Brexit is unachievable in reality without an enormous amount of pain and destruction, that cannot be borne. And David Cameron has put the onus of making that statement on the heads of the people who led the Brexit campaign.

Must-Read: Paul Krugman: Brexit: The Morning After

Posted on by Brad DeLong

Must-Read: I disagree with Paul Krugman: not “Brexit just brings to a head an abscess that would have burst fairly soon in any case…” but rather: Brexit evolves antibiotic-resistant bacteria and brings to a head an abscess that would probably have drained itself gradually–and could still have been treated…

Paul Krugman: Brexit: The Morning After: “A number of people deserve vast condemnation here, from David Cameron…

…who may go down in history as the man who risked wrecking Europe and his own nation for the sake of a momentary political advantage, to the seriously evil editors of Britain’s tabloids, who fed the public a steady diet of lies. That said, I’m finding myself less horrified by Brexit… than I myself expected. The economic consequences will be bad, but not, I’d argue, as bad as many are claiming…. Brexit will make Britain poorer. It’s hard to put a number on the trade effects of leaving the EU, but it will be substantial…. Assurance of market access has a big effect in encouraging long-term investments aimed at selling across borders; revoking that assurance will, over time, erode trade even if there isn’t any kind of trade war. And Britain will become less productive as a result.

But right now all the talk is about financial repercussions–plunging markets, recession in Britain and maybe around the world, and so on. I still don’t see it. It’s true that the pound has fallen by a lot compared with normal daily fluctuations. But for those of us who cut our teeth on emerging-market crises, the fall isn’t that big…. This is not a world-class shock. Furthermore, Britain is a nation that borrows in its own currency….

Now, it’s true that world stock markets are down; so are interest rates around the world, presumably reflecting fears of economic weakness that will force central banks to keep monetary policy very loose. Why these fears? One answer is that uncertainty might depress investment. We don’t know how the process of Brexit plays out, and I could see CEOs choosing to delay spending until matter clarify. A bigger issue might be fears of very bad political consequences, both in Europe and within the UK…. The European project… is in deep, deep trouble [with] Brexit… probably just the beginning…. Lots of people are now very pessimistic about Europe’s future, and I share their worries. But those worries wouldn’t have gone away even if Remain had won…. At the European level… I would argue that Brexit just brings to a head an abscess that would have burst fairly soon in any case. Where I think there has been real additional damage done, damage that wouldn’t have happened but for Cameron’s policy malfeasance, is within the UK itself…. So calm down about the short-run macroeconomics; grieve for Europe, but you should have been doing that already; worry about Britain.

Must-Read: Felix Salmon: Little England Just Screwed Us All

Posted on by Brad DeLong

Must-Read: Felix Salmon: Little England Just Screwed Us All: “The world’s bond markets (and, even more, its foreign-exchange markets) tell you everything you need to know…

…Recession in the UK, quite possibly recession in Europe, and extremely nasty spillover effects in the rest of the world, including the U.S. The small-minded burghers of rural England have managed to destroy trillions of dollars of value globally, including to their own investments, pension plans, and housing values. And things will get worse before they get worse: it’s going to take a while for all the subsequent shoes to drop. Make no mistake, the forces set in motion by this vote will not end here. France and Spain will want their own referendums; so will Scotland. Northern Ireland… will request and probably receive a referendum on whether it should just rejoin the Republic of Ireland, and Europe. Britain has been in many ways the most unambiguous winner of the European project: it received all the advantages of free trade with an enormous economic bloc, while also having a floating currency instead of one which was pegged mercilessly to how things were going in Germany….

This vote is also the grimmest of reminders of the power still held by the older generation, not only in the UK but around the world. Young Britons—the multicultural generation which grew up in and of Europe, the people who have only ever known European passports—voted overwhelmingly to remain. They’re the generation that just lost its future. Meanwhile, Britons over the age of 65, fed a diet of lies by a sensationalist UK press, voted by a large margin to leave. Most of them did so out of a misplaced belief that doing so might reduce immigration, or make them better off, or save them from meddling bureaucrats. In a couple of decades, most of those voters will be dead. But the consequences of their actions will resonate far beyond the grave….

The forces of narrow-minded nationalism have tasted a major victory; they will want more, much more. The economic malaise that has beset all of Europe for the past decade will work in their favor, as will the growing inequality that can be seen in almost every country worldwide. International institutions like the European Union, born of an idealistic belief in peace and prosperity, have become avatars of unaccountable power, and are much loathed by the suffering European middle classes. The result is that we are now entering a world in retreat from progress, a world of atavistic nationalisms and mutual distrust, a world in which we demonize foreigners and prefer walls to bridges. In November, the U.S. will have its own plebiscite, and will likely vote along similar lines to Britain. The cities, and the young, will vote for progress, inclusion, and unity. Meanwhile, the white, rural areas and the old will vote for a sepia-tinged dream of a past in which equality was something only straight white men really qualified for. Before the Brexit vote, I didn’t believe it could happen here. But Britain is significantly more cosmopolitan than America, and we managed to shoot ourselves (and all of Europe) straight through the heart.

So, be afraid.

Must-Read: Martin Wolf: David Cameron, the Ex-Prime Minister, Took a Huge Gamble and Lost

Posted on by Brad DeLong

Must-Read: The very sharp Martin Wolf sees structural recession in Britain’s near future.

People minimizing risk are going to leave Britain. People who would otherwise locate in Britain and are risk-shy are going to pause and wait and see. The Bank of England needs to drop the value of the pound by enough to try to maintain full employment in Britain–but not by so much as to make investors feel that investments in Britain are unsafe and so lose the pound its exorbitant privilege.

As Keynes wrote at the beginning of his Tract on Monetary Reform back in 1923:

I dedicate this book, humbly and without permission, to the Governors and Court of the Bank of England, who now and for the future has a much more difficult and anxious task entrusted to them than in former days…

Martin Wolf: Brexit: David Cameron, the Ex-Prime Minister, Took a Huge Gamble and Lost: “The fearmongering of Boris Johnson, Michael Gove, Nigel Farage, The Sun and the Daily Mail has won…

…The UK, Europe, the west and the world are, this morning, damaged. The UK is diminished and will, quite possibly, end up divided. Europe has lost its second-biggest and most outward-looking power. The hinge between the EU and the English-speaking powers has been snapped…. It is, above all, a victory of the disappointed and fearful…. The geography of the outcome reveals that this has also been a revolt of the provinces against a prosperous and globalised London. It is also a revolt against the establishment…. The UK might not be the last country to suffer such an earthquake….

The UK is now at the beginning of an extended period of uncertainty that, in overwhelming probability, foreshadows a diminished future. The Conservatives… will have to do what the Brexiters failed so egregiously to do during their mendacious campaign, namely, map out a strategy and tactics for unravelling the UK’s connections with the EU. This will probably consume the energies of that government and its successors over many years. It will also involve making some huge decisions… [abandon] membership of the single market. At best, the UK might participate in a free trade area in goods. Meanwhile, the rest of the EU, already burdened with so many difficulties, will have to work out its own negotiating positions. I expect them to be tough ones….

The UK economy is going to be reconfigured. Those businesses that have set up in the UK to serve the entire EU market from within must reconsider their position…. Manufacturers… will have to consider how to readjust…. Many will ultimately wish to relocate. Businesses who depend on their ability to employ European nationals must also reshape their operations…. In the short term, however, it will be difficult for businesses to make such decisions sensibly…. This uncertainty has always been the most obvious result of a vote to leave….

The UK’s decision to join the EU was taken for sound reasons. Its decision to leave was not. It is likely to be welcomed by Ms Le Pen, Mr Trump and Vladimir Putin. It is a decision by the UK to turn its back on the great European effort to heal its divisions. It is, for me, among the saddest of hours.

Must-Read: Mariana Mazzucato: Jeremy Corbyn’s Necessary Agenda

Posted on by Brad DeLong

Mariana Mazzucato: Jeremy Corbyn’s Necessary Agenda: “We must drop the false dichotomy of governments versus markets…

…and begin to think more clearly about the market outcomes we want. There is plenty to learn from public investments that were mission-oriented, instead of focused on ‘facilitating’ or ‘incentivizing’ business. Policy should actively shape and create markets, not just fix them when they go wrong. Indeed, policies traditionally considered ‘business friendly,’ such as tax credits and lower tax rates, can be bad for business in the long run if they limit governments’ future ability to invest in areas that increase innovation-led growth…. Moreover, we need more patient, long-term finance. Most existing finance is too speculative and too focused on short-term outcomes. Exit-driven venture capital might be appropriate for gadgets; but technological revolutions have historically required patient, committed public financing…. When the public sector takes key risks along the innovation chain… we should think more creatively about the kinds of contracts that enable the public to share not only the risks, but also some of the rewards. We must also shape a new narrative on debt. Rather than focus on budget deficits, we should concentrate on the denominator of debt-to-GDP ratios…