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By Heiner Flassbeck. This article was first published on Flassbeck Economics.

  1. This mythological ‘sovereignty’

Everything is wrong about the Brexit. There is the fantasy that the UK government can send a letter to the Commission any time, invoking Art. 50 and that the UK, from that moment, will be out the EU. This is wrong. All by all, there are some 170.000 pages of legal texts. Most of these texts will have to be renegotiated. What will the final result be? Most probably, instead of all these treaties, conventions and pacts, multilateral treaties will come into place. What will eventually happen, except for the severe damage that is being done to UK economy (see below)? Pretty much nothing, except for restrictions on immigration.

The Brexit is something completely mythological  – a process with no end. If the final goal of the Brexit is for the UK to regain its ‘sovereignty,’ it’s time for someone to explain what this means. The UK is already the most deregulated country in the OECD. For the rest, forces are at work in the UK, just as anywhere else, but in the UK especially, over which the Brexit has no control. Instead of the daydreams of some for which there has never been a shred of evidence – the Keynesians will rise to power now at the Bank of England; austerity will be finished and the Brexit will give a boost to UK manufacturing, all “theses” (sic) which has been made by professors of economics – the Brexit is reducing the UK to a franchise of corporate capital, governed by head offices overseas.

The Brexiteers have of course a valid point: the malignant European economic governance. I came to understand that there is something fundamentally wrong with this argument. The problem is that for some of the pro-Brexiteers nothing else counts. That May would drop out of the EU Convention of Human Rights was not an issue. That there was the risk – which has in the meantime become a reality – of EU immigrants being uncertain about whether they can stay in the country or not was not an issue. May refuses to give any assurances. The same holds for non-EU immigrants. This means that, at the moment, millions of people live in uncertainty about their livelihoods, their jobs, their homes, even their relationships, their marriages, their pensions. When you mentioned this possibility to some pro-Brexiteers, it made no impression whatsoever.  What is a bit of suffering compared to regaining ‘sovereignty’? That is not serving people.

  1. The politics of anger

The parallel with what is happening nowadays in the USA is clear. Every day, you can read how Trump’s supporters are part of the class of low-educated whites on low incomes or on social welfare (as far as it exists). These people are angry and therefore support Trump’s authoritarianism. But this picture has been debunked a long time ago. Certainly, these people form a large part of Trump’s basis. But in New England for example, more of the highly educated and more of the higher incomes voted for Trump than either for Clinton or for Sanders. How is this possible? The answer is that these people are also angry and angriness makes blind. Angriness also explains the demographic and electoral basis of the Brexit. Just as in the USA, a lot of older people, landlords, the well-to-do and the rich supported the Brexit. Zoe Williams just wrote article on it (see here). It is far from only the old industrial class which lives in deprived areas in Wales and in the North. It is because they are angry too. And what were they angry at? First and foremost, they are angry at the immigrants – a fact which some have unsuccessfully been trying to dispute. It was blind anger – get us ‘out of the EU – the question what comes next is irrelevant, we do not care. Anger was alive in other quarters too – we are fed up with the EU. Whether this is for rational reasons or not (they are) is irrelevant. The result was as irrational as it could get – let’s ‘get out of the EU,’ we don’t care what happens next. Least of all we have a plan. That is not serving people either.

  1. Liam Fox, secretary of international trade

Look at what happened in the meantime. Liam Fox, of all people, is now the new secretary for international trade. Fox had to resign in disgrace in 2011 as defence secretary after his extracurricular interests were exposed. As George Monbiot explains, Fox assembled a group, a transatlantic conclave of people who wish to see public services privatised and corporations released from regulation (see here).

Just as we thought that it never could get worse than Cameron’s government – it was worse than Thatcher’s – it became much worse. Fox stands for a ‘systematic dismantling of universal benefits, turning them into tax cuts.’ He argues for a three to five year ‘holiday’ from capital gains tax. He wants to ‘freeze public spending for at least three years and probably more.’ He wants to deregulate the labour market and making it easier to fire workers. Housing benefits should be limited to people under 25. He wants a low-regulation trade and low-taxation environment. As Monbiot writes, the corporate army is already at the gates. GOP senator Tom Cotton proposes that Britain should join the North American Free Trade Agreement (NAFTA). Joining NAFTA and/or the TTIP will gravely undermine UK’s sovereignty, but none of the great Brexiteers – Farage, Johnson – care about that (see here). Let’s yell at Polish workers and immigrants in general instead.  Monbiot concludes:

“(T)he Conservative vision of sovereignty is highly selective. People such as Fox appear to hate much of what others love about this country: the NHS, our public broadcasters, our social safety net, the protection of the countryside, the notion that power resides in the people rather than in corporations and their shadowy lobbyists. There are traitors in our midst, who would rip down our most treasured institutions on behalf of the transnational elite and its offshore holdings. This, it seems, is what they mean by taking back control” (see here).

  1. The meaningless discussion of ‘access’ to the single market

According the Institute of Fiscal Studies, the daily discourse about ‘access’ to the single market is virtually meaningless, although this is, of course, what the Brexiteers – Farage, Johnson and their ilk – promised: ‘access’ to the single market without requirements of freedom of movement (see here). In early May, Boris Johnson said:

“We should get out of the empire of EU law making and what we should have instead is access to the single market.”

But this is nonsense. As the IFS says “Any country in the World Trade Organisation – from Afghanistan to Zimbabwe – has ‘access’ to the EU as an export destination (see here and here). Single market ‘membership’ by contrast involves elimination of barriers to trade in a way that no existing trade deal, customs union or free trade area achieves.” The IFS also rejects the notion that the UK would be able to secure a deal in which it retains membership of the single market while being able to impose limits on European immigration. “No large country currently enjoys membership of the single market without free movement of people alongside a financial contribution” (see here). Good, it shouldn’t.

The report goes on to map out the severe financial implications of leaving the single market and cast a downbeat assessment of the opportunities offered by non-EU trade deals. Britain currently runs a significant trade surplus in services, with the EU as its largest destination. It accounts for 44% of exports and 39% of service exports – these are worth £89bn – next to just 5% for services to Brazil, Russia, India and China combined. Without membership of the single market, so-called ‘passporting rights,’ which allow UK financial firms to directly access EU businesses and customers will be at risk (see here).

The IFS estimates that retaining single market membership could be potentially worth 4 per cent of GDP permanently to the UK economy relative to WTO terms  by 2030 – equal to two full years of trend growth. In today’s money that loss equates to roughly £75bn by 2030 (see here).

As Ben Chu explains in the Independent, the IFS bases this figure on long-term estimates from forecasting organisations such as the London School of Economics’ Centre for Economic Performance and the National Institute for Economic and Social Research (NIESR). In another IFS report (published before the referendum), it was said that lower growth and extra borrowing resulting from the Brexit could knock another £20bn to £40bn hole in the Government’s finances by 2020, potentially extending government austerity policies into the next decade (see here).

What is so crucial about membership of the single market compared to having access? Free trade agreements tackle trade tariffs, whereas the EU single market also aims to dismantle all non-tariff barriers to trade such as licensing. Dismantling non-tariff barriers are especially important to services firms, which make up 80 per cent of the UK’s output. Almost all economic forecasters expect the UK leaving the EU to have a long-term negative impact on the economy (see here).

  1. The Norway fantasy

Before the referendum some leading Brexiteers suggested that the UK could retain membership of the single market while being outside the EU in the manner of Norway. European politicians and officials have made it clear they will not accept this arrangement unless Britain continues to make a sizeable contribution to the EU budget and continues to allow the free movement of European workers into Britain  – as Norway does. May understands very well by now – if she ever believed in it to begin with – that the Norwegian option is impossible. So ministers are preparing the single markets and try to negotiate some sort of free trade agreement with the rest of the bloc.

  1. The Wall

Those who think that immigration was not pivotal in the Brexit campaign underestimate the degree to which the country has been poisoned by nationalism – a ‘return’ to the mythological England (with no immigrants) – xenophobia and racism. Those who despair about Trump’s insanity about building his wall with Mexico should have a look at what the UK is doing in Calais: it is building a wall (here, here and here). As the figure shows, of all European countries, the UK has the lowest number of applications of asylum seekers. The same noxious ideology lies behind the illusory desire ‘to get our sovereignty back.’ The pattern is age-old: divide and conquer. It’s not about employment, wages, redistribution of wealth, public investment, manufacturing, European imbalances, the NHS, rebuilding the welfare state or climate change. It’s about nebulous ‘sovereignty’ and the curse of immigrants – who are an asset to the country. We truly live in flabbergasting times.

Figure 1:  Number of first-time asylum seekers per country in 2015. Source: Pew Research Center.