Brexit: a worthless experiment

In an attempt to defend the indefensible, Janan Ganesh invites us to regard a “hard Brexit”* as an experiment.

Sometimes history throws up ideas that are better tested than forever stymied…ideas, unless they are plainly malign or ruinous, have to be held accountable in the end by real-world application. There is only so much mileage in the statecraft of frustrating them.

A “soft Brexit” he says would allow Leavers to claim that any ill-effects are due to “betrayal”, to not implementing Brexit properly. A “hard Brexit” would at least permit a proper “falsification of their project”. And, he adds, if things work out badly we can rejoin the EU.

I’m unconvinced.

This experiment risks imposing real costs on real people – lower wages and unemployment. And as Neil Kinnock famously said, “you can’t play politics with people’s lives”.

This objection, however, won’t work: it only applies to the left.

Instead, I’ve other objections to Janan’s piece.

One is that Brexit is not a scientific hypothesis to be discarded when it is falsified. Instead, Leavers have invested their ego in the idea; I question Janan’s claim that many are “open to falsification."** This means that if a hard Brexit is followed by economic troubles, they’ll invent immunizing strategies to deny this.

And it’ll be easy to find such strategies. One reason for this is that a “hard Brexit” will not be a genuine experiment. In a true experiment, we can compare a treatment group to a control and so discover the effects of the treatment. But after a “hard Brexit” we’ll never see the control. We’ll not see the counterfactual, what would have happened if we’d stayed in the EU.

This matters. The case for remain is not that Brexit will lead to catastrophe but that it will cause slower long-term growth; real GDP will grow by a bit less than 2% per year rather than a bit more. If this happens, Leavers will be able to claim that Brexit wasn’t so bad. But this would be entirely consistent with the Remainers being correct.

Also, the Duhem-Quine problem – that we often can’t test hypotheses in isolation -  is especially severe in this case. Let’s say Brexit leads to slower growth in trade and productivity as Remainers claim. Leavers will find it easy to show other reasons for this. Exporters are “fat and lazy”; investment has been low; secular stagnation means there’s little innovation. And so on.

And the thing is, these claims will have some truth. There are always many plausible explanations for poor economic performance.

You needn’t look far for an example of what I’m saying. On Radio 4’s Today programme this morning Gerard Lyons – one of the more sensible Leavers – claimed that a weaker pound was “inevitable” because of the UK’s big current account deficit (2”14’ in). That’s a way of denying an effect of Brexit.

I very much doubt, therefore, that a “hard Brexit” is a worthwhile experiment. Even if the Remainers are correct abut its effects, most Leavers won’t admit they were wrong.  

I suspect instead that Janan is giving us another example of the fact that there is no government policy so bad that it will entirely lack supporters; the corridors of power lend gravitas to even the daftest ideas. As Adam Smith said, “We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous.”

* I'm putting scare quotes around "hard Brexit" because I take Owen's point that the phrase serves framing rather than purely descriptive purposes.

** Yes, some are. But the better Brexiters such as Daniel Hannan and Andrew Lilico are already having their doubts; I'm thinking instead of fans of a "hard Brexit".

Comments

[Matt Moore]

There's more to life than economic growth.

[Dipper]

I think you are missing the point somewhat here. Boris Johnson said he was "in favour of eating his cake and having it" and I believe that is probably the view of the majority of leavers. The reason we are looking at hard Brexit is because the EU is making that the only option that gives the UK the degree of independence that the voters wanted in the referendum.

As a leaver I'm prepared to believe that a hard Brexit will be bad for the economy. But the alternative is what? To meekly accept our position as a nation in Europe that has no say in policy, has to abide by rules that others dictate, and has a head of state who openly despises us? And to accept open borders that by the EC's predictions will lead to the UK population increasing by 16 million between 2013 and 2050?

And what kind of allies deliberately look to impoverish their neighbours for having their own views and policies? Why are the intellectual classes not denouncing the behaviour of the EU as unacceptable aggression to a free country?

So unless you can pick apart the politics from the economics then your words, however wise, will fall on fallow ground.

and as a slight deviation I note that some nations in Eastern Europe are alarmed at Russian actions regarding moving nuclear weapons into Kaliningrad. Surely these Little Poles and Little Latvians have got it all wrong. What's wrong with freedom of movement for Russians? they should let the Russians in, and allow Russia to influence policy in their countries. Or is it a case of one rule for the UK and one rule for the Europeans?

[Dipper]

... so basically what Matt said.

[Chris S]

"I think you are missing the point somewhat here. Boris Johnson said he was "in favour of eating his cake and having it" and I believe that is probably the view of the majority of leavers"

What makes you think this was ever a realistic option?

"The reason we are looking at hard Brexit is because the EU is making that the only option"

Turning this around the reason we are in for a hard Brexit is because the EU won't give the UK an absolute bespoke deal that includes a wishlist of everything the Leavers want, and why would they?

It's fairly clear that the customs union depends on a common set of regulations - otherwise it is an excuse to ship substandard product into the common market, and country of origin rules - otherwise the UK effectively becomes a beach-head for the rest of the world to do the same. Similarly common market for services relies on freedom of movement to avoid a outsourcing race to the bottom.

Besides, none of the politicians in charge have any interest in actually negotiating a soft Brexit, because it would give lie to the breezy reassurances that 'They need us more than we need them' and 'Britain will not be a supplicant'. So their own political expediency is driving the hardest Brexit possible - while using the idiocy of blaming the EU as cover.

[Chris S]

"What's wrong with freedom of movement for Russians? they should let the Russians in, and allow Russia to influence policy in their countries. Or is it a case of one rule for the UK and one rule for the Europeans?"

This is a false comparison - the UK is perfectly at liberty to leave the EU, what it can't do is then expect the benefits of membership post leaving the EU.

[Dipper]

thanks Chris S. So basically what you are saying is that hard Brexit is the inevitable result of leaving the EU, its not a choice for us to make.

[Chris S]

"thanks Chris S. So basically what you are saying is that hard Brexit is the inevitable result of leaving the EU, its not a choice for us to make."

Not really no, or rather only if you take a zero sum approach.

Any trade deal will require compromises, if your initial negotiating stance is that no compromise is possible you won't get a trade deal.

[Chris S]

What you can't do is what you are doing above; imagine an ideal trade deal, demand you get it and when you don't, blame the EU.

[gastro george]

"To meekly accept our position as a nation in Europe that has no say in policy, has to abide by rules that others dictate, and has a head of state who openly despises us?"

Because we have so much say in how we are governed. Touching faith in democracy in the UK.

[Boursin]

"Why are the intellectual classes not denouncing the behaviour of the EU as unacceptable aggression to a free country?"

Because the free country wanted so ardently to throw in its lot with its aggressor that it voted in three governments in a row that, in the space of less than a decade, made three applications to join?

Anyone can pick any metaphor and make it do what they want. Thus a counter-question to yours: Why should buyer's remorse constitute legal grounds for declaring a purchase null and void?

[Dipper]

"Why should buyer's remorse constitute legal grounds for declaring a purchase null and void?"

the terms under which we entered were a trade deal only. We were told that all laws would continue to be made in the UK. The people never consented to transfer of sovereignty and at the first opportunity have demanded it back.

[Luis Enrique]

"To meekly accept our position as a nation in Europe that has no say in policy"

Dipper where do you get this idea from? I have personally sat down with European directly involved in EU legislation who have told me that the UK was amazingly influential, often responsible for more or less drafting legislation, and rather than having "no say" had and outsized say in a collective decision making process.

[Dipper]

Luis - well specifically over immigration. Just to reiterate according to the EC's own projections we are due to get an increase of 16M people between 2013 and 2050. Between a third and a half of that is growth of population already here but the rest is immigration.

16M is greater than the populations of Belgium, Sweden, Greece, Portugal, Czech, Slovakia etc. Its 2 Londons. It completely changes the nature of the UK, and there is no possibility to control it. Its about he size of the Netherlands, and so will require the infrastructure of the Netherlands predominantly in a country which is (in England) already very densely populated.

The UK has closed our coal-fired power stations and mines laying off lots of UK workers whilst Germany are opening them. Some outstanding bargaining ability there.

[Mpc]

It's strikes me that in leaving the EU, parliament seems to have less power now. Brexit seems to have concentrated power to just three minsters.
It's great European leaders are more aware of our countries bargaining than the British people. We are all being kept in the dark and made powerless.
Parliament seems to have become superfluous now with no power. I say we should now have regular referendums as this seems to be what the government now uses for instructions. Better than power being held by the few in London.

[gastro george]

"It completely changes the nature of the UK ..."

No, it doesn't.

"... there is no possibility to control it."

Yes, there is.

"... so will require the infrastructure of the Netherlands ... "

And, yay, there will be more people and more money to build it.

Builder in the world according to Dipper: "I had a hundred workers last year and built a hundred houses. I've got a hundred and twenty workers this year, but I'll still only build a hundred houses, because twenty are immigrants and don't contribute anything."

[Dipper]

but gastro george why would you do this? London is the biggest city in Europe. And we are going to build another two? Probably within touching distance of London as that's where the demand is?

If a party stood for election and said "we are planing to have immigration to augment our population growth to the tune of 16 million in 35 years, and to accommodate this we are going to build two massive cities to give us the three largest cities in Europe" and the people had voted for it then there would be no point in arguing. But that has never happened.

[Chris S]

"The UK has closed our coal-fired power stations and mines laying off lots of UK workers whilst Germany are opening them. Some outstanding bargaining ability there."

Has very little to do with the EU (insofar as the UK set the CFP higher than the Emissions Trading System in the EU).

Even absent the emissions, it's not a great idea to rely on imported fuel (especially when your currency is falling), and the closure of the mines have absolutely nothing to do with the EU, and everything to do with the UK.

[gastro george]

I'm just as interested in how you're going to keep the current population from growing. According to you that's still another London. I guess starting a war might keep the population down, some seem quite keen on that ATM. Or killing the first born.

[Dipper]

gastro george - well it isn't going to stop growing. its worth having a look at the report from the EC in conjunction with birth-rates and death rates from say the CIA fact book.

The UK's population is growing as is France's, so we need to do some building. Germany's population is falling significantly. On EC projections the UK becomes the most populous country in the EU.

Germany's declining population is a big number - 12% down in 35 years. What will they do with all those empty houses?

http://ec.europa.eu/economy_finance/structural_reforms/ageing/demography/index_en.htm

[Churm Rincewind]

I'm in agreement with CD that that today's FT article by Janen Ganesh (a writer I normally respect) is extremely weak, and that if "Brexit leads to slower growth in trade and productivity as Remainers claim...Leavers will find it easy to show other reasons for this."

In the latter context I was much amused a couple of days ago by Ian Duncan Smith telling Andrew Neil that the pound has not in fact fallen against the dollar. Instead, he explained, the dollar has risen against the pound.

So that's all right then.

[TowerBridge]

Dipper - I need to stamp on this myth that the people in 1975 were voting for a trade deal.

1) A trade deal is NEVER just a trade deal. It has tax ramifications just for starters.

2) As I have said previously, the treaty we signed up to clearly has this section marked SOCIAL POLICY.

So stop arguing this myth.

[Dipper]

TowerBridge - the 1975 pamphlet states " The Minister representing Britain can veto any proposal for a new law or a new tax if he considers it to be against British interests. Ministers from the other Governments have the same right to veto."

http://www.harvard-digital.co.uk/euro/pamphlet.htm#11

one argument frequently put (e.g. Chris S above) is that the UK did not use its opt-out, or agreed, or could have avoided passing the laws into UK law etc. I'm sure these are valid arguments, but the option of remaining in the EU with a government which fought hard for UK interests wasn't on my ballet paper.

[Bob]

What is the problem? If the economy goes tits up the Tories lose power and we can also implement reasonable policy with immigration policy. They take the hit...

The idea of the magical power of private capital over state power, over state money used for public purpose is something Marx and earlier generations of Marxists laughed at. And "the capitalists", as opposed to their propaganda, propagandists and dupes like those modern "Marxists" have of course always agreed with Marx & effectively MMT.

The hardest thing in chess is to win a won game. The first thing you need to do to win is to recognize when you have a won game. But the "left" response these days when confronted with an obviously won game is usually - "I resign".

[Bob]

"This experiment risks imposing real costs on real people – lower wages and unemployment."

As does *anything* that harms 'corporate confidence.' But we can control them.

[Bob]

""This experiment risks imposing real costs on real people – lower wages and unemployment."

As does *anything* that harms 'corporate confidence.' But we can control them."

To put another way, the experiment is capitalism/corporatism. Lets not change anything and do exactly as they say so we don't get hurt!

[Bob]

The Left needs to get over its Trotskyism in the service of capitalism rather than socialism. That's neoconservatism and liberal interventionism. Why in the world should "progressives" be supporting this?

https://yanisvaroufakis.eu/2016/10/11/to-prevent-brexit-from-turning-nasty-progressive-internationalists-must-come-close-to-winning-10-downing-street/

[rogerh]

Seems to me there is a fundamental problem with the Brexit story. Brexit runs up against a wall - the EU will not play ball - why should they. The alternative is to run the UK like some mega economy - but to do so requires concreting over Surrey and Hampshire plus a load of changes to education, roads, rails etc etc. All stuff the Tory heartlands detest. So we are screwed, their hubris will not allow them to abandon this stupid idea and their supporters will never allow the project to succeed (if indeed it could). Meanwhile everyone's petrol, gas and leccy is going to cost a load more to say nothing of holidays in the sun.

Of course to abandon Brexit is go back to sleep along with the EU. Slow improvement may come along. But worse for the politicians - we might ask why we need so many. Why we cannot outsource education policy to the Germans say. That fear may underlie the Brexiteers passion, we might wake up and discover Parliament is an expensive rip off.

[gastro george]

"... but to do so requires concreting over Surrey and Hampshire ..."

IIRC, UK cities and large towns have one of the lowest housing densities in the developed world - it's part of our suburban obsession. So we could just build more urban apartments/flats like they do in Europe. That, however, requires both the will to do so, and planning.

[Richard McKean]

Somewhat silly and completely off topic but why is the reference to Owen Jones the familiar "Owen" while all other references get their full name, christian and surname? Even Adam Smith. Is Jones so well known by British politicos that only his first name is needed?

(BTW I really like your blog.)

[Dipper]

gastro george - you still have to build the schools, hospitals, transport, and get the water and electricity from somewhere.

I quite like the possibilities that a new city from scratch offers. But I doubt any major party, or even the Lib Dems, will be adopting a new London as a policy any time soon.

[gastro george]

"you still have to build the schools, hospitals, transport, and get the water and electricity from somewhere"

I wonder where we got the ones we have today ...

[Dipper]

gastro george - we had a big plan to build them at various stages in our history. Staying in the EU would result in an increase in our population of 25% in 35 years. That's huge. I never saw the plan. I don't think that's honest from Remainer politicians.

[Dipper]

okay Remainers here's another thing. Cameron goes off to Europe and comes back with The Big Agreement, the centre piece of which is the UK has been given special permission to halt benefits for people from other eU countries, but only under some heavy conditions.
https://www.theguardian.com/world/2016/feb/19/camerons-eu-deal-what-he-wanted-and-what-he-got

Now Merkel has just unilaterally awarded Germany rights going beyond Cameron's.

https://www.theguardian.com/world/2016/oct/12/german-government-approves-bill-to-stop-eu-migrants-claiming-benefits

What? Seriously? Is this how the EU operates? We have to beg for the things Germany just awards itself without negotiation?

[gastro george]

The inevitable conclusion to draw is that Cameron is both a shit negotiator and a shit politician.