No time to organize thoughts, so here are a few synaptic firings.
–I was disappointed by the outcome but not surprised. As I’ve written, this was in no small part a referendum on immigration, and the timing of the vote interacted with rising anger about this and other impacts of globalization.
–The structure of the EU–a common market with free flow of people and goods–has a great deal to recommend it, especially given Europe’s bellicose history. But the incomplete architecture–the absence of a fiscal and banking union–along with gross mismanagement–fiscal austerity, punitive actions by Brussels and Germany, non-management of immigrant flows–surely led “Leave” voters to discount the benefits of EU membership.
–I highly discount all the economic predictions in terms of the cost of the Brexit in terms of GDP, jobs, etc., except the following:
a) volatile financial markets over the next few days and large losses to the value of the pound, euro, and yen relative to the dollar;
b) the Fed may further flatten its “normalization” path.
–What about growth effects? The reason I discount the predictions is that such predictions must be based on the past and we’ve got no record to forecast off of. Moreover:
–The political economy of the Brexit impact is really tricky. At one level, I’d like the EU to avoid negative growth impacts by smoothly renegotiating the UK’s reentry into the common European market. But, as many pundits have argued, that would be firmly against Brussels’ interests, as it would signal to other potential leavers that leaving is costless.
–However, there’s a deeper problem than that. The UK can’t possibly get back in without accepting at least some, and likely most, of the conditions 52 percent of the voting electorate just rejected. EG, how could EU authorities possibly say, “we’ll give you back full, no-tarriff trading privileges with no requirements on freedom of movement for EU citizens?” That’s not a matter of disciplining other potential leavers; it’s part of the fundamental structure of the EU.
–I predict Scotland with be anxious to leave the UK as they will want to rejoin the EU. Look for another referendum before too long.
–Finally, I saw this WaPo headline: “Stop underestimating Trump. ‘Brexit’ vote shows why he can win.” I get–and bemoan–the Trumpian dimensions of the outcome, but here’s the thing. I believe that to the median Leave voter who might share some Trump sentiments–anti-immigration, anti-globalization, turn back the clock, insulate–the downside of leaving the EU looks a lot less scary than a Trump presidency. To be clear, I’m obviously not talking about die-hard Trump supporters. I’m talking about a US voter who’s unhappy with her choices from either party, yet she sympathizes with some of the anti-establishment sentiments fueling the Trump phenomenon. I would not assume that she views the consequences of leaving the EU as seriously potentially damaging as a Trump presidency.
Lots of people voting against their own interests because they hate another group of people. Very not good.
“…this was in no small part a referendum on immigration…”
Only in the sense that immigration became symbolic of the “flexible labor market policy” regime. The voters can see immigration in a way that they can’t see other policies of flexibilization. Without knowing what NAIRU means, voters rejected policies dictated by the economic orthodoxy.
The Iatrogenic and Incoherent “Theory” of Flexibility.
They aren’t quite out yet; the referendum was advisory. It is just possible that the next PM will decide not to officially leave, or the Queen, even, could veto it. Practically, though, it would be difficult for the British to back out.
One columnist bemoaned “the establishment of free labor mobility among culturally diverse countries with very different income levels, without careful thought about how that would work.” This was in a list of reasons for the Brexit. This is all the more reason to wonder why that economist and others of his ilk don’t see the exact same situation in the U.S. and the unsurprising concomitant consequences.
http://krugman.blogs.nytimes.com/2016/06/24/brexit-the-morning-after
Well, first of all, they ain’t out yet. This was a non-binding referendum, essentially an official public opinion poll. The fact that Cameron decided to resign over it is a good thing, but it’s up to him to decide whether he wants to send the request for exit negotiations to Brussels or not. He’s the only person who has the authority to do it, because it’s a Crown Matter. Next, if he (or his successor) does decide to send the request, the treaty requires two years of negotiations, at the end of which, if I understand it correctly, if agreement isn’t complete they continue. This has been a tremendous shock to the political elite, and they’re all aflutter, but it’s going to take time to sort out what it really means. Glad to see the ants running around after their nest has been trodden on. Personally, I hope Corbyn becomes the next PM, but I guess under a parliamentary system the PM’s resignation doesn’t automatically trigger new elections.
Too many times I’ve seem people, Britons most of them, complaining that the EU was undemocratic, and putting the fact that Eire voted twice for the treaty of Lisbon (notwithstanding that Irish did not really vote the same thing in both referendum) as a supreme example. So now they have voted out, I want them out, they already have done too much damage, and I have no reason to think that they will ever stop trying to kill the EU.
NO SECOND REFERENDUM! and if they do not deal diligently with calling the article 50, which I suspect they were the main proponent, the rest of the EU should take the date of the referendum as the starting of the two years to disengage.