In all the talk and words about the UK Brexit vote last Thursday, a regular line is that the Leave side has been “misled”, and doesn’t know what it is doing, and it is going to have buyer’s remorse, etc, etc. Who knows, maybe that criticism is apt. However, it is a bit rich for those who, for example, favoured the creation of the European single currency, as many pro-Remainers did (they might hope we’d forget) to claim that those who wish to leave an entity with pretensions to be a superstate are not thinking of the risks. That is a bit rich.
The launch of the single currency is arguably one of the riskiest, most hubristic transnational projects of recent decades, and I still see very little sign of contrition for rolling out a new form of fiat money without creating the economic and political architecture to deal with life inside a one-size-fits-all interest rate.
One reason why remaining EU states are scared of what has happened is the fear that a eurozone member state, envious of how the UK has just voted, might have similar ideas.
“England has saved herself by her exertions, and will, as I trust, save Europe by her example.”
– William Pitt, the Younger
Socialists complain about jurisdictional competition as a “race to the bottom,” as more successful societies put pressure on the less-successful ones to lower taxes, relax irrational regulation, and terminate failed state boondoggles. This is seeing things from the perspective of the state. Viewed from the perspective of the individual, jurisdictional competition is a race to the top: a competition between jurisdictions to provide the better environment for starting or expanding a business, pursuing a meaningful personal goal, or merely living free from the ability of other people to force their views of how you should conduct your life. America benefited greatly from general jurisdictional competition in previous eras, and has suffered from the lack of it more recently. Gaining an attractive partner and a friendly competitor for the talent of citizens and other productive newcomers would significantly expand national and personal options in coming decades.
– James C. Bennett
It is rare at the moment to see an advocate for Remain come out openly and state that the lack of democracy is precisely what is good about the European Union. Most Remainers I encounter will bluster that there is nothing undemocratic about it, that MEPs have lots of powers, or that powers wielded by bureaucrats are okay because they are holding delegated powers, and stop moaning, shut up, etc. But Sam Bowman, of the Adam Smith Institute (broadly pro-leave as far as I know although there isn’t an official stance) has this to say from a FB posting he made the other day and which, he stresses, isn’t the official ASI view:
I like and respect many Leavers, but I’ve never shared their enthusiasm for democracy – I want liberty and prosperity, and I don’t want to trade that in just to give my stupid next-door neighbours more power over my life. To the extent that the EU does restrict democracy it is often for the best, preventing governments from doing nasty, illiberal things (like restricting immigration or subsidising domestic firms). There’s a small chance that a Jeremy Corbyn could be elected – if he is, under the British political system he would have basically unlimited power to do whatever he wants. The EU limits that power, and in my view that’s a good thing.
Of course, there are perhaps several reasons why you won’t read such a bracing critique of democracy from most Remainers. For a start, it would produce condemnation from all sides, including those on the Remain side who would be embarrassed that one of their side had spilled the beans, as it were. It is also brave to state a key issue of political theory, which is that, if you love liberty, then democracy can be as much a bug as a feature. The greatness of the United States, at least in terms of how it was conceived by the Founding Fathers, is that it is a constitutional republic, first and foremost, not a democracy. Democracy is the least-worst way we have of getting rid of governments; it is not a sure guardian of liberty, and there are examples of how democratically elected governments have trampled on property rights and other rights. Even if the UK does quit the EU – I personally suspect the Remain side will win this week – there is a real need to address how some of the checks and balances of the UK political order have been weakened dangerously by a succession of Conservative and Labour governments. The Common Law has been badly weakened and often this cannot be blamed on the evils of Brussels. We did this to ourselves. There aren’t a lot of Edward Cokes, Thomas Jeffersons, John Lockes or James Madisons on the Leave side, but we are going to need to do some clear thinking on the kind of country we want.
I personally think that Sam is wrong about the beneficial constraints, as he sees it, of the EU. It may be that some oppressive and foolish measures have been struck down by the EU, but there are also cases – such as a recent horrific example of the EU Arrest Warrant – where the illiberality of the EU is all too clear. Some dumbass British laws may have been struck down, but this is outweighed by outrages that haven’t been. The Leveson restrictions on the free UK press do not, as far as I know, face a challenge from Europe; the EU arguably is in favour of such a move. Quite a lot of the restrictions on freedom of speech in order to outlaw “hate crimes” haven’t been restricted by our being in the EU and the EU is pushing for moves in this area, in fact. Not many checks or balances there, I am afraid. I cannot think of any major “nanny state” restrictions pushed for at a UK level that have been beaten back by Brussels (I invite readers to give any cases if they exist). The regulatory upswing in the UK after the financial crisis has been made worse, not restricted, by the EU. The EU is pushing for additional layers of regulation on the City, and hasn’t as far as I know pushed in the reverse direction. In areas such as health and safety, the record of any constraint is non-existent.
Some subsidies and so on have been restricted by the Single Market, but that seems to be the main area where the EU might have been a net plus from a classical liberal point of view in keeping national lawmakers in check.
Sam’s other points are well made, but too much of it seems like he is against Leave because of that “tone” issue I mentioned the other day here. I am afraid I have long gone beyond the point where this matters to me one iota.
Addendum: Here is a nice item on James C Bennett, whom is known by some of us here, about the EU and the case for Brexit. Here is a link to his book, Time For Audacity.
The tone of an argument should not matter, I like to think, as much as the quality of the argument itself. I have been reading Charles Moore’s multi-book biography of Margaret Thatcher (he is working on volume three) and I am reminded of just how much a segment of the “chattering class” loathed her as much for what she sounded and looked like as what she said. To some extent, we try to rise above all this and point out the irrationality of disliking a view about X because of who is saying it, and so forth. Maggie was not the kind of person to pour a lot of oil on troubled waters (she was, however, more willing to temporize and compromise in certain cases than the standard narrative suggests). The accent, the emphasis, the Methodist-inspired approach, that “tone”, set a certain kind of person off the deep end. (To some extent, having wankers such as playwright Harold Pinter as your enemy is something to be quite proud of.) But even those who broadly agreed with a lot of what Maggie did and said might have to admit that it did put some quite otherwise rational people off.
And this leads me, to, yes, the Brexit vote this week. I cannot help but think that the very fact of Remainers often being the likes of the IMF, or Very Grand Economists, etc, is like the sensation for many of chalk scratching down a blackboard (I am giving my age away). When a EU Commissioner like Juncker attacks Brexiters, you can imagine how well, or badly, this goes down. And on the some of the interactions I have had on Facebook, much the same effect applies. I have been told, for instance, that the UK electorate has no excuse for whining about the undemocratic nature of the EU because British voters, by and large, don’t vote for MEPs and that the EU Parliament is chosen via proportional representation and therefore a fine and worthy body, and stop whining. The fact that MEPs cannot initiate, or repeal, legislation of any serious nature is ignored (MEPs do have blocking powers). And there have been a few outpourings of rage from a few of my acquaintances that a referendum is happening at all. What such folk don’t seem to realise is that such attitudes only make those of a EUsceptic strain even more annoyed, and more likely to vote Leave out of a “that’ll show you arrogant bastards” tone. In much the same that however logical a position of Mrs Thatcher in her heyday might have been, people, given the cussedness of human nature, disagreed.
The tone does matter, in other words. And although some of the vibe coming out of the Leave side is unsavory and foolish, the Remain side’s collective impersonation of 18th Century French aristocrats (just before the Bastille fell) is, in my view, even worse. It should not always matter, but it does.
One of the arguments of those wishing the UK to stay in the European Union is that if the UK decides to leave, it will still need to accept most, if not all, EU laws if the UK wants to continue to trade and interact with this bloc. (This is the position, for example, of Norway and Switzerland, or so the Remainers say.) It is all about keeping British “influence”.
The Remainers often don’t appear to realise where the logic of their argument leads. Surely it leads to the case for World government. Let’s look Westward for a moment. Consider the recent example of how the US uses a “worldwide system” of tax. Any American living abroad has to file an annual return to the Internal Revenue Service. The US recently enacted a thumpingly controversial and intrusive piece of legislation called the Foreign Account Taxation Compliance Act, or FATCA. This means any foreign financial institution must take all necessary steps to establish whether a client is American or not or, if it interacts with the US. If no such steps are taken, the FFI must pay a 30 per cent withholding tax. It means that the IRS and other branches of US government have been able to enforce a massive piece of extra-territorial legislation on the rest of the world. Many Americans can’t get access to accounts when they live abroad. The situation is a shambles. Do I hear Remain-type people arguing that we should join the US in political union to try and sort this out and “influence” the US? Of course not. In another case, that of the football organisation FIFA, it was the use of dollar-based transactions by the alleged crooks at FIFA that led to the US Department of Justice, rather than the Swiss or others, sending in the investigators to Zurich. I haven’t heard of Swiss people arguing that Switzerland should become part of the US so that the Swiss can gain “influence” in Washington over such powers.
In other words, countries that have the economic muscle to create a situation where dealing with it entails certain extensions of judicial power can have influence way beyond their borders and aren’t likely to want to have that power diluted by sharing it with others. The US is, despite the best efforts of its political class, the world’s largest economy, and likely to remain so for a while. Ironically, the US hasn’t actually signed up to many of the very cross-border tax compliance moves that it insists upon when applied in other lands. Rank hypocrisy, you might say. But what this also reveals is that when you hear a lot of fine words about “gaining influence”, what it really boils down to is brute economic wealth and power. China, for example, owns a lot of US Treasury debt, as do a number of other Asian jurisdictions, and I suspect that explains why the US hasn’t launched many noisy campaigns about evil expat “tax evaders” in that region. This isn’t edifying, but that’s reality.
The “influence” that the UK may have in the corridors of Brussels comes, if it exists at all, from the relative prosperity and hence economic power of the UK, rather than on anything else.
In fact, to gain the “influence” that involves going along with the Brussels machine as the Remainers see it requires the UK to operate under the Qualified Majority Voting system of the EU. So, on key issues, such as a proposed EU transaction tax on banks, the UK is likely to be outvoted, suffering damage to a key industry (the City). The UK is most likely to object to EU directives where the UK sees a key interest at risk, and by definition, most likely to be in a minority when a QMV process occurs. The “influence” is diluted, often in ways that hurt real UK interests. QMV may seem to benefit the larger countries, but in certain respects it means that the UK can lose key votes on issues that really matter, such as to financial services.
Competition between jurisdictions, with freedom, crucially, of citizens to be able to migrate and with open capital flows, represents arguably the best check on power that we have. A looser Europe, enjoying free trade and free capital flows, but without such centralised political power, is arguably the best outcome from a liberal (in the right sense) use of the word. World government is a deluded dream, but I fear the Remain camp is not willing to face up to where the logic of its argument is leading.
I have spent the last few days in Geneva – I travel to Switzerland regularly as part of my job – and needless to say, the prospect of the UK leaving the European Union comes up a lot in the Alpine state. For good reason. Switzerland is not in the European Union (that country has more sense), is unlikely ever to want to do so, and has a broadly amicable relationship with its neighbours, apart from when they aggressively seek to break down Swiss bank secrecy laws. (Such laws are, for cross-border purposes, no longer effective, although within Switzerland, the laws remain on the statute book and there are no plans as far as I know for lawmakers in Berne to repeal them.) By and large, Switzerland’s financial services industry is still in good health, although like many other centres, onshore as well as offshore, has had to contend with mass of regulation, some of it home-grown. (Swiss banks operate under unusually severe capital adequacy rules and the country now has negative interest rates, which hits banks’ margins.)
The Swiss trip got me thinking about London’s position in the EU referendum. One regular argument you might read about in the financial pages of pro-EU papers such as the Financial Times, for example, is of how if Britain quits, this will hurt London’s financial sector (aka “The City”), because we will no longer be able to “passport” financial services run from London across the whole of the EU. This seems to be a greatly exaggerated worry. For example, in many cases with the fund management industry, fund structures known as UCITS (the acronym is for a long set of French words), which can be bought and sold across the EU – and beyond – and issued in different currency share classes, are typically registered in Luxembourg and Dublin. There are now Chinese yuan share classes in UCITS funds, and China is not, bless its cotton socks, in the EU. Many of the portfolios held in these pan-European structures are managed by investment whizzes in London, and indeed, Zurich, and Geneva, or Hong Kong. So it seems unlikely, to pick this one example, that leaving the EU means disaster. If the UK leaves the EU, then some non-EU member state banks, wealth managers and insurers might have to set up onshore, representative offices in the EU, which is irksome, but hardly seismic. Similarly, the European Union directive affecting hedge funds and private equity, called AIFMD, applies to the European Union, but non-EU jurisdictions such as Jersey and Guernsey have acquired the ability to be treated as “equivalent” for the purpose of this directive.
And that leads to a broader point about rules, treaties and standards. To trade, transact and interact, one doesn’t need to have centralised, top-down legal rules and a single political entity, such as the EU, but to have – and the is the crucial bit – mutual recognition of another’s standards. If the the UK quits the EU, then German carmakers will need to recognise and honour UK motor manufacture rules (which would be sensible for Germany to do, given it is a net exporter to the UK) and the UK would have to return the favour. And so on and so on. Australia has to acknowledge our rules, and we theirs. We see this sort of mutual recognition in all fields of life. Over time, of course, a wider set of rules can be adopted, rather as languages and standards around computer software do.
To trade with people living and working in the EU, it is not necessary to be married to an undemocratic, clunky structure in Brussels. Ending that misconception will not just help win the case for UK exit, it might also encourage people to think more clearly about the very structures of power that we assume are necessary for economic activity to happen. So regardless of what happens next week, I hope it might galvanise thinking about proper authority, and the role of transnational organisations.
On some specific issues around trade, the City, and so forth, this article by Conservative MP and former Cabinet minister, Peter Lilley, is simply excellent. The Adam Smith Institute has a good piece on the classical liberal case for leave.
There may be some specific consequences that are adverse – but within certain limits. For example, take those strange creatures, “non-doms” – persons who live for a period in the UK and enjoy freedom from UK tax on their worldwide income but who have to pay a levy to enjoy this status. Some of these non-doms live in the UK because it also gives them the freedom to roam around the EU. And there are people buying “investment visas” (a sort of market for passports) who want to get a British visa not because of our marvellous weather, but to roam around the EU. They may choose to get a “golden visa” in Spain or Malta instead.
But in the broad scheme of things, losing money from rich overseas investors using the UK as an entrepot doesn’t seem such a massive blow, given the overall balance. If we leave the EU, the City will not have the impost of a pan-European transaction tax (aka “Tobin tax”) on financial transactions that hits London disproportionately hard and which was imposed by qualified majority rule in the EU. The UK financial services sector might be spared the horrors of a massive lump of “investor protection” (sarcasm alert!) regulation due to hit the market, called MiFID II, or at the very least we will be able to haggle around whether we need to respect all of it to sell financial services into the EU. Some of this regulatory crap will still be a part of our lives, but there will be a better chance of getting changes to how the UK is affected via the democratic process, however imperfect that is.
Given how many treaties and transnational pacts are decided at a global, rather than purely European, level, it also worth noting that in or out of the EU, a good deal of what goes on will not change all that much. But one big benefit for me is that however foolish UK politicians continue to be, and however onerous certain rules are, UK lawmakers will not be able to use EU membership as a handy excuse for something they want to do anyway, such as “Dear constituent, I agree this rule is mad but we cannot do anything because it is in EU law number xxxxxx.” Instead, our elected representatives will need to advocate new laws, or advocate repealing laws, by appealing to the merits of a case. It might also improve the calibre of people who choose to go into UK politics in the first place.
I am voting Leave.
Is it any wonder we that we find ourselves today without a means to measure greatness? To those in the know, the experts who understand the fight game, Ali earned his place among the true greats of boxing but fell a little short of the very top. He was perhaps the greatest heavyweight (though I find it hard to believe anybody could beat Mike Tyson at his youthful rampaging best) but heavyweight champions are a peculiar breed of fighter. Watching those great ‘Rumbles’ and ‘Thrillers’ now, they are characterised by tired lumbering men stumped on the hard breathing end of slow jabs. In terms of technique, you’d need to look to a lighter man (or at Ali at his peak before television made him a superstar). You would look to Sugar Ray Robinson who, more than any boxer, could claim to have been the best.
– David Waywell, writing at CapX.
“Liberalism was always counterintuitive. The less society is ordered, the more order emerges from the ground up. The freer people are permitted to be, the happier the people become and the more meaning they find in the course of life itself. The less power that is given to the ruling class, the more wealth is created and dispersed among everyone. The less a nation is directed by conscious design, the more it can provide a model of genuine greatness. Such teachings emerged from the liberal revolution of the previous two centuries. But some people (mostly academics and would-be rulers) weren’t having it. On the one hand, the socialists would not tolerate what they perceived to be the seeming inequality of the emergent commercial society. On the other hand, the advocates of old-fashioned ruling-class control, such as Carlyle and his proto-fascist contemporaries, longed for a restoration of pre-modern despotism, and devoted their writings to extolling a time before the ideal of universal freedom appeared in the world.”
– Jeffrey Tucker.
“Lootings are becoming a common occurrence in Venezuela, as the country’s food shortage resulted in yet another reported incident of violence in a supermarket—this time in the Luvebras Automarket located in the La Florida Province of Caracas. Videos posted to social media showed desperate people falling over each other trying to get bags of rice. One user claimed the looting occurred because it is difficult to get cereal, and so people ‘broke down the doors and damaged infrastructure.”
– Robert Tracinski
Indeed, one of the advantages of tax havens is that they help hold governments to account. They make it possible for businesses to avoid the worst excesses of government largesse and crazy tax systems – including the 39 per cent US corporation tax rate. They have other functions too: it is simply wrong to say that they have no useful purpose. It is also wrong to argue that, if only corrupt governments had more tax revenue, their people would be better served.
– Philip Booth
There are many, many reasons why the UK economy remains skittish and the global recovery extremely patchy – and almost all of them predate not only this referendum campaign but even the announcement the UK electorate was to be given its first say on our relationship with Europe since the mid-1970s. Yet, while real investors fret about the prospect of another sub-prime style meltdown, a lack of genuine banking reform, the implosion of the eurozone, the lunacy that is negative nominal interest rates and now, we’re told, “helicopter money” – a kind of quantitative easing on steroids – it suits a wide variety of political and financial interests to blame every blip in the British and broader European economy on “the prospect of Brexit”.
– Liam Halligan