Brexit has been the dominant theme of this blog for the past
30 months. It was not meant to be this way, but it is a measure of the fact
that the political forces impacting on economic decision making have dominated the
agenda of policy makers and investors. Nationalism has become one of the
biggest political and economic challenges of our time and has found expression
across the whole of Europe, not to mention the US.
Brexit is merely the tip of this nationalist iceberg. Indeed, the fact we have spent 30 months discussing what form it should take means we have spent more time debating the issue after the referendum than we ever did beforehand. If we think back 30 months before the referendum, we are transported back to the innocent days of early-2014 when the debate was dominated by the aftermath of the euro zone debt crisis, the extent to which the global economy was recovering and how rapidly interest rates would be normalised (for the record, I expected UK Bank Rate to be at 3% by now).
But now it is crunch time with the vote on the Withdrawal Agreement due next Tuesday. MPs are widely expected to reject it, which means that much of the negotiations and effort put into this debate are likely to count for nothing. If the last 30 months have taught us anything it is that there are no simple answers to complex questions – a point that Mark Carney repeatedly made in testimony before the Treasury Committee this week when pressed to explain some of the issues in simpler terms.
I was also struck by an excellent Twitter thread by Seamus Nevin, head of policy research at the Institute of Directors, who made a comparison between the situation facing Theresa May’s government today and that facing the Irish independence movement in 1921 when a smaller entity made a bid for independence from a larger body. As he pointed out, it is ironic that Northern Ireland loomed large during both campaigns. Back then, of course, the north was the industrial powerhouse which was cut out from the rest of the island. Today the roles are reversed, with the Republic a much stronger economic force than Northern Ireland.
To quote Nevin: “The Anglo Irish Treaty fell far short of the Irish separatists’ demands for full sovereignty. The Treaty Michael Collins negotiated meant Ireland would not be fully independent but a ‘self-governing dominion of the United Kingdom’ … Leavers wanted the north to exit on the same terms as the rest of the country. Business interests argued that leaving the customs union would cause great damage to northern Irish industry. Just as the UK is finding now, leaving a customs union is not without political difficulty. The deal, reached after long and hard rounds of talks, was imperfect … But as Collins argued back then to his frustrated and disappointed party colleagues, the deal ‘gives us freedom, not the ultimate freedom that all nations desire, but the freedom to achieve it.’”
This latter point goes to the heart of the Brexit problem. Leavers want a perfect Brexit which gives the UK all of the economic upsides but with the added benefits of controlling its own borders free from interference from the ECJ. As I am bored of repeating, but it cannot be stressed enough, this is a fantasy that can never be realised. The deal on the table is probably the best that the UK can expect to achieve. As Nevin puts it, Theresa May has to “convince her colleagues that to reject the negotiated agreement risks jeopardising the very thing the Brexit leavers, like their Irish separatist predecessors, have fought so hard to achieve: freedom from that neighbouring union.” If Brexiteers reject this deal, they may just have kissed goodbye to their chances of achieving any form of Brexit.
In the event that parliament rejects the Withdrawal Agreement, MPs will then take over the Brexit process and it is widely assumed that they will do whatever it takes to avoid a no-deal outcome. This will likely involve a form of accommodation with the EU that precludes the Brexit ultras from being able to achieve the degree of independence they have fought so long to achieve. If they want any form of independence from the EU, it might be better for them to accept an imperfect Brexit than none at all. Of course, the UK gains very little independence from the current deal, as the release of the government’s legal advice this week made clear.
Nonetheless, it would be the bitterest irony for the likes of Boris Johnson, David Davis and Jacob Rees-Mogg that they won the referendum against the odds but then threw away their best chance of victory (or at least a draw) at the last minute by pushing for a better outcome.
Brexit is merely the tip of this nationalist iceberg. Indeed, the fact we have spent 30 months discussing what form it should take means we have spent more time debating the issue after the referendum than we ever did beforehand. If we think back 30 months before the referendum, we are transported back to the innocent days of early-2014 when the debate was dominated by the aftermath of the euro zone debt crisis, the extent to which the global economy was recovering and how rapidly interest rates would be normalised (for the record, I expected UK Bank Rate to be at 3% by now).
But now it is crunch time with the vote on the Withdrawal Agreement due next Tuesday. MPs are widely expected to reject it, which means that much of the negotiations and effort put into this debate are likely to count for nothing. If the last 30 months have taught us anything it is that there are no simple answers to complex questions – a point that Mark Carney repeatedly made in testimony before the Treasury Committee this week when pressed to explain some of the issues in simpler terms.
I was also struck by an excellent Twitter thread by Seamus Nevin, head of policy research at the Institute of Directors, who made a comparison between the situation facing Theresa May’s government today and that facing the Irish independence movement in 1921 when a smaller entity made a bid for independence from a larger body. As he pointed out, it is ironic that Northern Ireland loomed large during both campaigns. Back then, of course, the north was the industrial powerhouse which was cut out from the rest of the island. Today the roles are reversed, with the Republic a much stronger economic force than Northern Ireland.
To quote Nevin: “The Anglo Irish Treaty fell far short of the Irish separatists’ demands for full sovereignty. The Treaty Michael Collins negotiated meant Ireland would not be fully independent but a ‘self-governing dominion of the United Kingdom’ … Leavers wanted the north to exit on the same terms as the rest of the country. Business interests argued that leaving the customs union would cause great damage to northern Irish industry. Just as the UK is finding now, leaving a customs union is not without political difficulty. The deal, reached after long and hard rounds of talks, was imperfect … But as Collins argued back then to his frustrated and disappointed party colleagues, the deal ‘gives us freedom, not the ultimate freedom that all nations desire, but the freedom to achieve it.’”
This latter point goes to the heart of the Brexit problem. Leavers want a perfect Brexit which gives the UK all of the economic upsides but with the added benefits of controlling its own borders free from interference from the ECJ. As I am bored of repeating, but it cannot be stressed enough, this is a fantasy that can never be realised. The deal on the table is probably the best that the UK can expect to achieve. As Nevin puts it, Theresa May has to “convince her colleagues that to reject the negotiated agreement risks jeopardising the very thing the Brexit leavers, like their Irish separatist predecessors, have fought so hard to achieve: freedom from that neighbouring union.” If Brexiteers reject this deal, they may just have kissed goodbye to their chances of achieving any form of Brexit.
In the event that parliament rejects the Withdrawal Agreement, MPs will then take over the Brexit process and it is widely assumed that they will do whatever it takes to avoid a no-deal outcome. This will likely involve a form of accommodation with the EU that precludes the Brexit ultras from being able to achieve the degree of independence they have fought so long to achieve. If they want any form of independence from the EU, it might be better for them to accept an imperfect Brexit than none at all. Of course, the UK gains very little independence from the current deal, as the release of the government’s legal advice this week made clear.
Nonetheless, it would be the bitterest irony for the likes of Boris Johnson, David Davis and Jacob Rees-Mogg that they won the referendum against the odds but then threw away their best chance of victory (or at least a draw) at the last minute by pushing for a better outcome.
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