Among inside-the-box commentators it is currently fashionable to claim that it is nowadays a no brainer that Brexit was a mistake. It is not hard to suspect that the ultimate purpose behind this claim is to prepare voters for a return to closer EU ties. Trash talking of both UK achievements and UK prospects play a key part of the push. So does the pretend notion that things are a lot peachier elsewhere. Inside-the-box modelers line up to provide supposed evidence immediately trumped up into “breaking news” gloating opportunities.
The recent IMF predictions — and the handling of these predictions — can be used as a textbook example. Going through the IMF numbers it turns out that the 2022 UK economy, yet again, did significantly better than the IMF had expected (4.1 per cent growth). Simultaneously the UK outperformed the EU economy (3.6 per cent growth).
The IMF dishing out predictions about the UK economy that in the end proved too dismal has become the rule rather than an exception. This problem is not likely to go away for two reasons. First, it is no secret that Brexit Britain has challenged both the IMF mindset and IMF forecasting credibility. Notoriously its forecasters never provided a proper mea culpa after arguing, in no uncertain terms, that UK recession would swiftly follow if the electorate chose Brexit. Instead its modelers now claim they will be belatedly vindicated. IMF economists are now strongly incentivized to jump on every piece of evidence that can be used to suggest that the UK economy is about to sink down into the sea, a bit like Atlantis. Numerous media outlets have proven eager to always bury the positive bits and drum up the negative prophecies.
The second key reason the IMF is so keen on backing the Brexit-disaster storyline? Its modelers genuinely believe it to be true. Part of that problem is related to the fact that economic models are heavily biased towards considering easily understood in-your-face numbers while ignoring factors that are harder to quantify. It is, for example, easy to acknowledge that it is not ideal to neighbor a big power, the EU, bent on punishing Brexit Britain for demanding a divorce. So here we are. Vast internal market versus smaller internal market. Tariffs. A cross border trading situation Brussels pretends to be as complex as rocket science — so that special case Northern Ireland can remain partial hostage within the EU economic area. Meaning the UK would have been better off without Brexit, right? Well, an economic model that fails to pay heed to any Brexit upsides will certainly have to arrive at such a conclusion.
So are there really no Brexit positives? Oh yes, even if it seems like IMF modelers would swallow their own tongues before acknowledging as much. Examples? Well, the UK is now freed from economic and political sinkholes such as EU monetary policies that suit Italian banks, EU agricultural policies that suit French farmers, the EU lobbyist circus that suits Europe’s oligopolists, the ticking bomb Euro project that suits EU public servants and EU energy policies that suit the German energy sector — and until five minutes ago also Vladimir Putin and a number of Russian oligarchs. Thanks to Brexit the UK avoids all the distortions involved as well as paying the early multibillion pound net contribution. The UK has avoided paying into bureaucratic waste projects, including the “corona recovery package”. It is an €800 billion project (now renamed “EUNextGeneration”) that has almost nothing to do with the pandemic.
By far the most important Brexit dividend, certainly not part of any IMF model, is that democracy has been recaptured. This is so immense — and yet underdiscussed — that at times it comes across as even underestimated among Leavers. Despite the fact that the strong correlation between grassroots democracy and economic long term growth is indisputable (grassroots democracy correlates just as strongly with political stability).
Democratic vigor is nothing less than the key reason it has for a long time been a big win in the lottery of life to be born in the world’s most traditionally democratic countries — countries like the UK, the US, the Nordic Countries, Switzerland, the Netherlands, Australia, New Zealand and Canada. Ultimately the collective brain power of democratic nations is much superior to societies in which democracy has not been eroded. This is why the history of real grassroots democracy is also strongly correlated with innovation and entrepreneurship, more push-back against cartels and political vanity projects, a freer press as well as governments more responsive to public concerns than in countries dominated by the top-down mindset.
This is not a political argument in the traditional sense because the value of real “people power” has been manifested both in societies with a so called capitalist tradition (such as the UK and the US) and in countries with a strong social democratic tradition ( the Nordics). Europe will be more dynamic if its people can elect and oust its top dogs rather than if it is ruled by unelected commissioners. In the real world neither political nor economic progress is ever achieved through power centralisers operating behind shiny but usually closed palace doors while claiming to know better than the people what is best for the people.
Progress is achieved through political tribes and vested interests openly pushing against each other, one nanometer at a time, until a mutually tolerated power equilibrium is established. Fairness is achieved only when all groups receive a fair hearing. The EU set up is decidedly unfair while structurally favoring the always vocal top-down forces: career politicians, bureaucrats and the lobbyocracy. Less organized groups — including not only the Somewheres of society but also (smallish) entrepreneurs, taxpayers and even consumers — with fewer and less influential mouthpieces are treated as uneducated throwbacks if showing the audacity to raise concerns against their “betters”. So it is yet another massive Brexit dividend that the political class is forced to take the valid concerns of red wall voters more seriously, including fears about the economically detrimental effects of “Blob” rule.
Brexit has safeguarded the fact that the British press remains less influenced by top-down thinking than that of any other country in Europe. Yes, a freer press guarantees a messy public conversation but also that both political and economic challenges are aired more rigorously. The strength of a society in which a journalist can shout “Hey, Prime Minister..” and then make him or her squirm is a beautiful thing. Contrast this with Ursula von der Leyen who rarely faces the press unless the events are so carefully and pompously choreographed that they resemble 19Th century monarchs granting their subordinates an audience. EU correspondents tend to offer critical analysis of the critics of those in power rather than of those actually in power.
Typically modelers and EU journalists do not even register that the eurozone is turning ever more into an economic museum, that London remains the unicorn capital of Europe and that the UK, since Brexit, has been the only major country in Europe without a party of discontent . Only with gritted teeth will they possibly acknowledge that the UK, thanks to Brexit, developed Europe’s fastest vaccine program as well as offered Ukraine swift moral and military support during a crucial time when Germany and France vacillated. It is never admitted that the British press corps is the only press corps in Europe that is even close to doing what it is supposed to do: speak truth to both political and economic power. Sure, the economic effect of a free press is hard to quantify but nobody should doubt that its value, in the long run, dwarfs all kinds of tariff costs — especially when the UK is now, again thanks to Brexit, free to negotiate partnerships involving high growth trading areas such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
So how are those of us tackled who make an effort to comprehensively answer the Brexit dividend question? “Absolutely nothing to see here. Now let us return to our economic models, they clarify the Brexit mistake, right? You still cannot present one single argument that explains why Brexit is a good thing, can you!”
Nevertheless, the Brexit dividends are both real and ridiculously underestimated. It still cannot be expected that the UK political class will make quick and wise decisions but it can be expected that the UK will continue to make quicker and wiser decisions. Over time the difference will be gigantic in monetary terms. So far from Brexit Britain sinking into the sea it is destined to outpace the EU27 in a major way. So what about the economic models, like those pushed by the IMF, de facto betting against democracy? Now as always such models are worth nothing besides puff pieces for the latest bunch of power centralisers promising glory and delivering discord and stagnation.