The day after

A day after the EU referendum and I am still struggling to take it in. It is one of the most shattering political and professional experiences I have ever experienced. As an economist, I have made the economic case for EU membership hundreds of times over recent years, but the electorate was clearly indifferent to these benefits. It is, as Boris Johnson said, a vote for independence. But from what? The notion that Brussels dominates our lives is a pure fabrication. It sets standards to which all members must adhere, and there may indeed be some gold plating, but the basic rules are the same for everyone. It is not a massive conspiracy to defraud the British. According to the OECD, the UK already has the second lowest degree of product market regulation across the EU (after the Netherlands) and the lowest level of labour market regulation. Many of our economic problems are home made. 

Indeed, as TUC General Secretary Frances O’Grady pointed out in the final Brexit debate on Tuesday, these problems are the result of deliberate government policy. Austerity was not imposed by Brussels. Our libraries and community centres are not being closed by EU mandate. Our student fees are not shooting through the roof thanks to some shady deals done in Strasbourg. This policy of austerity emanated from Downing Street, and it is therefore hardly a surprise that David Cameron and George Osborne barely showed their face during the latter stages of the campaign because they had become electoral liabilities. Cameron at least has done the decent thing and resigned. Shame he did not do so before promising the referendum! Cameron has shamelessly played domestic politics with the national interest, and lost. The EU has many faults and who knows, it may indeed shake itself apart. But far better not to be the first to leave. In game theoretic terms, this is a game where there is no first mover advantage since we will bear all the costs for an uncertain reward. 

I won’t even bother to discuss the shortcomings of the Labour Party’s pathetic efforts. Suffice to say that Jeremy Corbyn has let down all those who have put efforts into building better relationships with the EU. He is a relic of 1970s Labour thinking, whose ideas are 40 years out of date (they were wrongheaded then as well) and who actually campaigned against EEC membership back in 1975.

But I will reserve special ire for the likes of Nigel Lawson, who talks like a backbench 1990s Tory on Europe. Lawson is never encumbered by the knowledge he might be wrong. The man is so self-absorbed that the irony of the fact he lives in France never once troubled him. But to hear an 84 year-old man tell us about the future we can enjoy outside of Europe makes me downright angry. He won’t be around to see the consequences of his actions and clearly the generation of 18-24 year olds, 75% of whom voted for Remain, don’t buy his view either. 

In many ways, the Brexit vote is the last revenge of the baby boomers. They enjoyed free love in the 1960s which ended with the AIDS scares of the 1980s; they consumed like no generation before and left us with global warming; they secured their pensions and free education and left their kids to pick up the tab. And now they want to take us out of the largest, most prosperous economic block in the world and it is their children who will have to figure out how to make it work. Generational politics may well become the biggest single issue of the next decade – and no wonder.

If all this sounds like a metropolitan view, then I make no apologies. I have spent most of my working life in an international environment, working with and getting to know foreigners and how they think. And I know that many of them share the same frustrations as the British. There are many things wrong with the EU and the single currency is an economic disaster which has done more to damage the prosperity of its members than they care to admit. 

But the UK had a sweet deal. Not in the single currency nor party to the Schengen Agreement, it broadly worked for us. And whilst some crazy numbers were bandied about, the IFS reckons that in 2014 the UK made a net contribution of £5.7bn, which sounds like a lot but it is in fact around £88 per person per year, or £124 per voter. Even if we take this upper figure, it is less than £2.50 per week. No-one thought to mention that in the debates. Instead, the Remainers argued about the lies being spun by the Leavers about what the true figure was. They should have said instead, “yes it costs, but it is less than the price of a pint per week and in return we get all the network benefits of membership.” And if anyone asks what a network effect is, tell them to imagine the invention of the smart phone. Just an overpriced piece of kit until someone works out how to put games and other useful apps on it. Then tell them to imagine how they will manage to use these apps if someone takes their phone away. 

But they didn’t do that. So what we have now is a dissatisfied half of the electorate which wanted to stay, and the other half not really sure what they have won. Meanwhile the Scots are thinking about how to maintain their ties with the EU. But according to one of my Scottish colleagues, they won’t push for a referendum because it’s not in their interest. There again, the same guy told me in 2014 that no-one was talking about independence north of the border. Go figure! Now the rest of the EU is making noises about how they want the corpse of our membership out of Brussels before it starts to stink the place out. And should anyone be surprised? 

As an exercise in healing divisions, the referendum has achieved pretty much the opposite on all counts. Way to go, Dave. Oh, but you are, aren’t you?