Monday, July 04, 2016

Chicken Little or Little Red Hen?

Playing Chicken

In the fable of Chicken Little, the animal is hit on the head by a falling acorn.  Being a naive pessimist, he runs around shouting "The sky is falling!"  In different poultry-based story, Little Red Hen, despite the unwillingness of her neighbours to help, works hard and betters herself. I've been reminded of both fables by reactions in the last ten days to the Brexit referendum.

Some of the brightest and best UK voters supported Remain.  However, they lost and seem unable to comprehend that in a democracy the idiot's vote counts equally with the genius's.  Which is odd, given that these are genuinely some of the brightest and best.

(There is a suggestion going around that many Leavers did not understand what they were voting for.  I expect the same is true of many Remainiacs and will cover this in another post.)

What Now?

For a start, the UK stock market hasn't gone into melt-down.  Indeed, its first full week after the referendum was the best week in months years.  Partly this is driven by the drop in value of the pound against the dollar but in addition many are realising that things aren't really that bad.

Indeed, they could get better, not just for the UK but for the EU.

Already there is a list of countries saying they want to have a trade deal with a post-Brexit UK, including Australia, Mexico, New Zealand, South Korea and the USA.  This list can only get longer.  Many of these countries do not yet have trade deals with the EU and are frustrated by this; in a number of cases, deals have been bogged down for years. The complexity of having to negotiate with 28 (now 27) countries dramatically slows things down.

Meanwhile, the dismal, doleful, disconsolate Cecilia Malmstrom, the EU's top trade official, claims that EU trade negotiations with the UK cannot even begin until after Brexit.  It seems unlikely that EU businesses would allow this position to be maintained but if it were then a Brexit Britain would find itself with several trade agreements in place with fast-growing world economies and none with the slow-growing EU.

While George Osborne somewhat bizarrely seems to think that no matter who the next Prime Minister is, he will remain Chancellor, his proposal of a 15% business tax rate will make the UK more attractive to businesses.

So let's imagine for a moment a UK two or three years in the future with trade agreements in place with countries like Canada and Australia (and a host of smaller nations) and more agreements imminent with India, China and the USA.  Trade with the EU would continue to a huge extent, both for reasons of momentum and geographic proximity.  There will be vibrancy in the economy.  By 2020, the UK will be an optimistic place to be.

And how is this good for the EU?  Well, of course, it might not be should the nay-sayers like Maelstrom hold sway.  Most likely, however, there would be a halo effect in at least two areas:

  • The UK's agility in signing new trade deals would spur on the EU: petty reasons for holding up deals would no longer stand up.  A virtuous circle of trade would develop.
  • Being next door to one of the most thriving economies in the developed world could only be good for Europe.

... and Finally ...

There's determined despair about many wrinkles that need to be ironed out.  There shouldn't be.

  • UK citizens living in the EU and EU citizens living in the UK will clearly be allowed to stay, regardless of any Brexit position on immigration.  There is no credible alternative.
  • Academically, the UK will continue to be one of the leading lights in the world.  Money that used to go from the UK to the EU and thence to academia will now go directly from the UK to academia.  Research partnerships will continue.  Whatever the decision on immigration, academics will always be welcome in the UK.
  • There is gathering momentum on both sides of the channel to ensure that trade will thrive post-Brexit.  One example is here: there are many more.  Business people are realists: they may have largely campaigned for Remain, but will be working furiously to ensure trade continues after Leave.
For better or worse, the Brexit decision has been made.  You can wallow in gloom or build a prosperous future.  Are you a wallower or a builder?

Are you Chicken Little, who claimed the sky was falling, or Little Red Hen, the determined producer of goods?


Slim said...

You know I've been a Little Red Hen since the start. I voted leave with the expectation this would happen (obviously I'm one of the stupid ones who doesn't understand).

James said...


Do you mean to say that when President Obama said we'd be at the back of the queue for trade negotiations that he lied. Surely not - wasn't he in the Remain team ? Or is it just a short queue ?

And is Cecelia Malmstrom the Wicked Witch of the South ? or an Ugly Sister ?