I thought the eminently sensible British would vote Bremain but I got it wrong. It’s a perennial problem with referenda – people vote on emotions, half of those voting are of less than average intelligence, and a majority aren’t fully informed on the issue. In my opinion, that is what has happened here. While there were people on the Brexit side who analysed the situation and genuinely felt that was the best choice, a majority appear to have been motivated by fear of the unknown in the form of immigration and sucked in by false information. Further, the Bremain campaign often used a negative message to try to scare people into voting remain rather than producing a positive message of the benefits of belonging to the EU.
Harvard professor of Economics and Public Policy, Kenneth Rogoff, has written of his surprise that a simple majority was required for the referendum to succeed, rather than a much higher bar. He suggests 70%. And for something as far reaching as this decision, he has a point. With a voter turnout of 70%, only 36% of voters chose to leave. That’s still more than those who chose to remain of course, but it also means we don’t know what the 30% who didn’t vote want. Generally, if non-voters were forced to vote they would choose the status quo. This is why requiring a 70% result to trigger Brexit may actually have been a fairer result.
Professor Rogoff writes:
The real lunacy of the United Kingdom’s vote to leave the European Union was not that British leaders dared to ask their populace to weigh the benefits of membership against the immigration pressures it presents. Rather, it was the absurdly low bar for exit, requiring only a simple majority. Given voter turnout of 70%, this meant that the leave campaign won with only 36% of eligible voters backing it.
This isn’t democracy; it is Russian roulette for republics. A decision of enormous consequence – far greater even than amending a country’s constitution (of course, the United Kingdom lacks a written one) – has been made without any appropriate checks and balances.
Does the vote have to be repeated after a year to be sure? No. Does a majority in Parliament have to support Brexit? Apparently not. Did the UK’s population really know what they were voting on? Absolutely not. Indeed, no one has any idea of the consequences, both for the UK in the global trading system, or the effect on domestic political stability. I am afraid it is not going to be a pretty picture. …
For one thing, the Brexit decision may have looked simple on the ballot, but in truth no one knows what comes next after a leave vote. What we do know is that, in practice, most countries require a “supermajority” for nation-defining decisions, not a mere 51%. There is no universal figure like 60%, but the general principle is that, at a bare minimum, the majority ought to be demonstrably stable. A country should not be making fundamental, irreversible changes based on a razor-thin minority that might prevail only during a brief window of emotion. Even if the UK economy does not fall into outright recession after this vote (the pound’s decline might cushion the initial blow), there is every chance that the resulting economic and political disorder will give some who voted to leave “buyers’ remorse.”
The Buyers’ Remorse has already started. The odious Nigel Farage is already backing away from the biggest claim he made during the Brexit campaign – that the £350 million per week that (he says) goes to the EU will be re-invested in the NHS. Millions of people voted for Brexit on that basis alone. He’s already trying to say he never promised that despite the fact that much of the campaign’s advertising was based around the claim.
Of course, £350 million per week figure was always a lie – about half of that came back to Britain in rebates and other payments. Also, analysis shows that the problems with the NHS have nothing to do with immigrants. Immigrants fill a large proportion of NHS jobs – jobs that would be unable to be filled without them. Also, they use the health system at a lower rate than those born in Britain, and they pay more in taxes towards the system than they take out. Therefore, a Brexit vote will more likely have a negative effect on the NHS, and the country will still be required to rely on immigrants to staff it.
In fact, analysis by the Financial Times shows that those areas that rely the most on EU funding had the strongest leave vote:
The Cornwall Council, after voting for Brexit, is already seeking urgent confirmation that the funding they receive from the EU will continue via the government. They say that they were assured before the referendum that this would be the case. Does this mean that either Boris Johnson, Michael Gove, or Nigel Farage was making promises they were in no position to make? Here’s what the Cornwall Council has to say:
We note the result of the referendum on the UK’s membership of the European Union.
Prior to the referendum we were reassured by the ‘leave’ campaign that a decision to leave the EU would not affect the EU funding which has already been allocated to Cornwall and that Cornwall would not be worse off in terms of the investment we receive. We are seeking urgent confirmation from Ministers that this is the case.
We will now be studying the impact of this decision on Cornwall, both now and in the future. Because of Cornwall’s relatively weak economy, compared to the rest of Europe, Cornwall has received significant amounts of funding from the EU over the past 15 years and we will be seeking confirmation that this allocation, based on need, will continue in the future.
John Pollard, the Leader of Cornwall Council said “Now that we know the UK will be leaving the EU we will be taking urgent steps to ensure that the UK Government protects Cornwall’s position in any negotiations.
“We will be insisting that Cornwall receives investment equal to that provided by the EU programme which has averaged £60m per year over the last ten years.”
If Cornwall Council received this reassurance from the Leave campaign, did all the other areas that receive EU funding receive the same reassurance? If so, the Leave campaign was never in a position to also promise that money to the NHS, infrastructure projects, and all the other things they say it can now be used for.
And besides, it’s likely there won’t be any money anyway. The Telegraph reports that £40 billion has been wiped from the value of British banks in the wake of Brexit, and the pound has dropped to a 31-year-low against the US dollar. Searches for “buy gold” have increased 500% and the price of gold has risen; initially it jumped 8.1% before settling to a 4.5% rise.
The large drop in the value of the pound means that the cost of imports will increase. Everything that Britain doesn’t produce, or doesn’t produce enough of for her population, will increase in price. The price of many of the things they produce themselves will also go up because imported goods are part of the production chain. Thus, real wages will decrease. Britain is headed for a recession. And, as the fifth biggest economy in the world, the ripples will be felt everywhere. They will not be able to afford to buy as much as before so exporters across the globe will have reduced incomes unless they can find alternative markets for what they currently sell to the UK.
Worldwide, stock markets collectively had about US$2 trillion wiped of them in the day after the Brexit vote. The pan-European STOXX 600 index fell about 7%, the French CAC index was down 8%, Germany’s DAX index lost almost 7%, and Italy’s and Spain’s indices were both down 12%. All the US markets are down – the Dow by more than 600 points. All of us who have retirement savings lost a lot of money today as a result of this vote.
Also concerning is the state of property shares. The Telegraph says:
Housebuilders Crest Nicholson, Bellway and Bovis were all in the top ten fallers for the day, dropping more than 24pc, alongside property developers Derwent London and Great Portland Estates, which fell 24.6pc and 22.2pc respectively, as fears about a fall in house prices caused investors to offload their stocks.
As property values fall, people will be stuck with mortgages that are higher than the value of their houses. They will be unable to borrow, and unable to sell without losing significant amounts of money. Also, as house-builders are included in the property slump, it means new houses will not be built and so those struggling to get into the market still won’t be able to. Currently they’re blaming immigration – they’re about to find out that things could be worse and this time there’s no convenient immigrant to blame.
And by the way, to all those who are going on about Shengen and how anybody can just go to the UK and how terrible that must be to have no control over your borders (I’m looking at you Donald Trump and Fox News), Britain is NOT part of Shengen. She already has control of her borders.
The leave campaign call this financial mess “a period of adjustment.” It’s one we could do without and can’t afford. We’re still recovering from the Global Financial Crisis and we really don’t need this ignorant toy-throwing.
The next step is for the British parliament to pass laws requiring the country to leave the EU and repeal the 1972 European Communities Act. Then the government has to formally inform the European Union of their intention to leave by invoking Article 50 of the Lisbon Treaty. Following that is a two year process of negotiations with the remaining 27 members of the EU that will cost tens of millions of pounds. During that time all the current laws and regulations relating to EU membership remain intact. The UK’s membership will cease at the end of two years whether or not agreement has been reached. At that point, all new laws required because the EU laws have lapsed will need to be passed in the British parliament. This, of course, could mean a time when there is no law if parliament has not kept up with the law-making process getting ready for when the two years are up. Either way, there will likely be a great deal of confusion and a requirement for a very expensive public education campaign. And each time there will be people upset about the new laws.
The Telegraph reports on the EU’s position thus:
The EU’s leadership has demanded Britain activate Article 50 exit talks “as soon as possible” as they attempt to end the uncertainty over the bloc, “however painful that process may be”.
President Tusk, President Schulz and Prime Minister Rutte met this morning in Brussels upon the invitation of European Commission President Juncker.
“Any delay would unnecessarily prolong uncertainty. We have rules to deal with this in an orderly way. Article 50 of the Treaty on European Union sets out the procedure to be followed if a Member State decides to leave the European Union,” the official statement said. “We stand ready to launch negotiations swiftly with the United Kingdom regarding the terms and conditions of its withdrawal from the European Union.” …
[David Cameron] will be under intense pressure to activate Article 50 and commence exit negotiations. Leaders do not want to be drawn into months and years of haggling over Britain’s status: “Out is out,” Jean-Claude Juncker said on Wednesday.
However, the Leave campaign wants to have it’s cake and eat it to. They say “… there is no need to trigger Article 50 until informal negotiations have taken place – potentially lasting years.” If that’s what the Leave campaign does, it would be disastrous. Currently it’s possible to limit the damage to the economy by being decisive. The longer the uncertainty goes on, the more volatility there will be and the worse things will get. This is what they wanted, now they’ve got it, it’s time to make it work or at least try to limit the damage.
The economic consequences of this decision are major. In the next few days I will address the political consequences, which have the potential to be even more far reaching.