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BREXITed - UK Gain, EU Pain

So ok the UK is out. The pundits tell us that was a really bad move by the Brits. I beg to differ. Actually I think that BEXIT is going to lead to the British economy experiencing its biggest growth spurt in a century. It’s the EU we need to be worried about.

How so? Leaving the EU is going to result in an epochal rollback of regulations in England (since Scotland and Northern Ireland are, of course, going to ditch the Emerald Isles). These rules and edicts are currently acting to limit or even throttle business, entrepreneurship and economic dynamism in Britain. This will be deregulation with a capital D. Think a combination of Margaret Thatcher and Ronald Reagan. How often does that happen?

Essentially BREXIT is the equivalent of several Big Bangs, except this time they will actually happen, quickly and will affect all corners of the British economy. It’s the sort of deep restructuring that the EU badly needs but will never dare to do. More! It’s what countries such as the US and China also should implement but will probably never do either and if they do, only minimally and slowly.

The British people did what other peoples in most countries won’t do. Order their leaders to restructure and reform immediately. Just what most economists recommend for flagging growth or stagnation. So why don’t the economists get it this time?

The pundits are worried about banks and so on leaving the UK and many probably will. But the UK currency will almost certainly become cheaper inducing foreigners to buy more British goods and to set up offices in the UK. It’s going to be a swings and roundabouts thing, just like those British roads.

How about those rich Chinese and Russian shoppers? London will now become a bargain basement. You think that will lead to the wives of African dictators forsaking London for Lisbon?

We should be saving our pity instead for the EU. It’s already in big trouble. This will just make things even worse. It’s already propping up economic deadbeats in the southern zone, namely Italy, Spain and Portugal, with France not being far behind. And that’s not even counting Greece. Or Cyprus. Or Malta, Cyprus, etc. etc.

Essentially the UK and Germany were sustaining these walking dead. Now the UK is out its just up to Germany. It and the EU are not going to be able to stand this extra strain. The outlook is for an EU which could itself go bust, with only the IMF to bail it out, and/or the ECB speeding up the printing presses. Not a pretty picture. Where would you prefer to be?

And where do you think those legions of frustrated European entrepreneurs will go now? Poland? Latvia? I predict that if anything the exodus of monied and entrepreneurial Europeans will accelerate to Britain because those treacherous Britons will now make things even more attractive for EU refugees and poach the most canny European rain-makers.

Britain will now rev up efforts to attract European money, investment and entrepreneurs. Where do you think these guys will invest, London or Paris? I mean, who doesn’t love the compulsory 35 hour week, rolling strikes by air traffic controllers and the inestimable luxury of not being able to fire employees who beat up up their bosses?

What about the youth? Will they stay in France, Spain, and Portugal where unemployment amongst youth is 20-50% and an average of 22%? Or will they go to the UK where its 13%. You tell me.

Meanwhile in the EU we can expect more regulation, more bickering, more populists, more dysfunctional economic outcomes resulting from fundamental structural problems in the EU framework. The overwhelming likelihood is that they are going to get worse, not better.

And that’s not even counting jihadists and weak security environments within the EU!

Here’s another thing. To whom do you think England will turn post-BREXIT? Clearly not Russia or China. How about the US? Could we end up with the EngU, a de facto or maybe even a de jure union of the English-speaking peoples instead of a European Union?  Was this the real hidden jewel all along?

I predict a significant strengthening of US/UK economic ties which will at least offset the advantages of a slightly bigger European market. Here’s a really tough question for you; which bloc is the more dynamic economically? The US or Europe?

In effect the UK has dropped a failing economic bloc with a statist, unentrepreneurial and static economic culture for a winning, still-superpower US with a dynamic, risk-taking entrepreneurial culture. Which would you think has the best long-term chances?

So the UK has given up a huge market right? Do you think EU exporters will now refuse to sell to the Brits in a fit of jilted pique? And with a weaker pound, do you think EU importers will pass up the bargains that will now be enticingly on offer, perfidious though Albion might have been? I don’t think so. Much more likely is that the EU will figure out a special relationship so that they don’t miss out on the goodies that the Brits have yet to offer.

And, by the bye, if it really does come to a shooting war in Europe, sad as it might be to have to contemplate such a scenario, who would you prefer on your side. US/Britain or Germany/France. Clearly in such a situation it will be the US and Britain which will be storming the ramparts.

Did anyone ever hear of NATO? Aren’t we hearing that it has now suddenly become vital for Europe? Which contains the EU, remember? Won’t the security blanket for the EU actually be the US/UK, uncomfortable as it might be to acknowledge this inconvenient truth?

BREXIT could go many ways. But I for one don’t think that it’s inevitable that the Brits will be the losers. To me it looks like they made a smart, albeit unplanned and unconsidered move which accidentally is a winner. The wisdom of crowds all over again.

BTW I supported and still support the UK continuing to be part of the EU. Isn’t that contradictory to the tenor of this post? Not at all. I support the continued membership of the UK because I believe that the long-term gains for the world from a broad political grouping transcend the narrow interests of one country in the shorter-term

But if a country leaves because it believes that it’s getting short-changed in the process you can’t blame them. There are net beneficiaries and net losers from the EU exchange. The southern zone are the net beneficiaries, the northern zone the net short-term losers. The answer of course if for the net beneficiaries to do something to redress the balance. If they don’t, just as Italy, Spain, Portugal and France aren’t, then the net losers are going to have a problem.

The EU is angry because they see the UK deserting a ship that both they and the UK see as sinking. And they both know that the southern zone isn’t going to do anything in the short-term to fix things up because their own politicians and populations are being feather-bedded by the arrangement and like things just the way they are.

It’s a tragedy of Shakespearean proportions. The English, having given birth to Shakespeare, see right through the plot and have decided that they don’t want to be part of yet-another Shakespearean tragedy.

Who can blame them?

 

 

 

 

 

 

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Monday, 14 October 2019

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