15 rounds with reality

Leon Spinks was a former world boxing heavyweight champion who gained the title in 1978 by inflicting only the third ever defeat on an ageing and complacent Muhammad Ali. Ali regained the title later that year and Spinks went on to an undistinguished career which saw him win only 26 of his 46 professional fights. The moral of the story is that it is possible to trigger an upset if the opposition is complacent, as Ali was, but success on that one day will not guarantee future success if you merely got lucky and fail to prepare properly for the challenges which lie ahead.

As queues build up outside filling stations as lorry driver shortages hamper deliveries of fuel, I was reminded of the Spinks effect in a Brexit context. The Remain campaign was clearly complacent in the conduct of its 2016 campaign, allowing Leavers to win a narrow points decision. But the Brexit cheerleaders have clearly failed to prepare for what comes next, and even though it is possible to blame Covid for the magnitude of the problem, it is hard to avoid the view that after going 15 rounds with reality, the economics of Brexit is now getting the pasting that all the knowledgeable pundits said would happen.

Government ministers have been out in force on social media telling us that there is no fuel shortage. The new culture secretary Nadine Dorries reinforced the message in a Tweet in capital letters, thereby convincing people of the exact opposite. There may well not be a fuel shortage, but there is a delivery problem and people increasingly do not take the government on trust. And as I pointed out at the start of the pandemic, “If you believe that a major problem is about to be visited upon you … a sensible forward-looking economic actor will make some sort of contingency rather than trust to luck.” 

But the bigger point is that this is not just about fuel shortages. It primarily concerns the British government’s blithe dismissal of the economic consequences of Brexit that they were warned about. What was dismissed for years as Project Fear has now become reality. And before people get on my case about the fact that Covid is really to blame – as the government is trying to tell us – I invite you to point me in the direction of media stories around the EU of empty supermarket shelves and fuel shortages elsewhere.

What they said

To put some flesh on the bones of what Leavers said, it is worthwhile visiting the BrexitCentral archive of articles written by prominent supporters of the Leave movement to remind us of what they promised, how Brexit could be delivered and why the Remainers were wrong to oppose them. It represents a litany of all that was wrong with the debate – a group of believers preaching a misleading message to those who were already committed to the cause. But it is important to remind ourselves of the economic benefits that Brexiteers promised would flow from leaving the EU, and equally importantly, what would not happen in order that they be held to account. 

In November 2017, for example, David Davis told us to “stand firm in the face of the onslaught of Project Fear propaganda.” The article was a one-sided view of the gains to be derived from a go-it-alone trade policy which dismissed all the evidence on the other side of the ledger. Davis reminded us of the “hysteria over the rationing of food and medicine.” The empty shelves and strains on an underfunded NHS are evidence that Brexit has made a bad situation worse.

The economist Graham Gudgin told us “why a UK-EU customs union remains a terrible idea” arguing amongst other things that “there is not much evidence that a customs union would be more beneficial for UK-EU trade than a standard free trade agreement.” The likes of Gudgin have been less forthcoming on the question of why the UK looks set to drop out of Germany's top 10 trading partners for the first time since 1950. Julian Jessop, another Brexit supporting economist, noted in 2019 that “some have seized on the one-liner that ‘low income groups will be disproportionately affected by any price rises in food and fuel’. Equally, of course, these groups would disproportionately benefit from any reductions in the prices of food and fuel.” Try telling that to poorer households bracing themselves for a double digit rise in domestic fuel bills next month. Peter Lilley argued that “EU economic policy has held the UK back and cost us £82 billion over two decades.” It’s barely worth even responding to such trite nonsense, but suffice to say that my analysis using synthetic control methods pointed to a GDP loss in excess of £100bn in the 3 years following the vote to leave the EU.

One of the central tenets of Brexit economics was that the UK would be free to sign trade deals with third countries which would allow the UK to tap into more rapidly growing markets. Key to this was the prospect of a trade deal with the US. Brexit ultra, Iain Duncan Smith wrote that “achieving a Free Trade deal with the United States alone would be equivalent economically to achieving Free Trade deals with the entire world … This is because the vast US economy could supply virtually every good that the UK currently imports.” Brexiteer economist par excellence, Patrick Minford, wrote in 2019 that “Boris Johnson has already made it clear he will urgently look for a trade deal with President Trump.” This week Johnson visited the US, holding talks with President Biden who played down hopes of a UK-US trade deal, whilst the US Ambassador to Britain recently told Sky News that a comprehensive UK-US free trade deal is “not the be-all and end-all”.

It’s just not happening

The Brexiteers made great play of the fact that forecasts which portrayed a gloomy economic future were made by institutions such as the Treasury whose forecasts, in the words of David Davis, ”have almost never been right and have more often been dramatically wrong.” Words of contrition from those who peddled this view have been conspicuous by their absence. And in one of the great ironies of the current situation, the government is being forced to issue temporary visas to lorry drivers from other EU countries to alleviate domestic shortages. Remember they need us more than we need them? In any case this will not resolve the underlying problems, as the road haulage industry has made clear, and presupposes that they would want to come given that shortages are a Europe-wide problem.

There should be no doubt in anyone’s mind that Brexiteers lied about the economic benefits – their own words provide the most damning evidence. That the opposition Labour Party is unable to hold the government to account, given its preoccupation with internal political battles, is nothing short of a scandal (and the subject of another post). However, not all Brexit supporters were as deluded as the ultras. Gerard Lyons pointed out that “if we left the EU in a stupid way then there would be no dividend.” Well, we did so there isn’t.

Much like the unfortunate Leon Spinks, whose early career represented a triumph of hype over ability, the economics of Brexit is being tested by reality and found wanting. But Spinks was the one who ultimately paid the price. In the case of Brexit there are 67 million of us taking a good beating.