Reading the media coverage about Brexit, the one conclusion that you can draw conclusively is that there are no thoughtful writers left in the media. No one who thinks Brexit is a good idea can even mention there might be a downside, and no one who thinks Brexit is a bad idea can even mention there might be an upside. Perhaps a little sanity is in order here.
Let's be clear that the nominal justification for Brexit -- to close the open border and bring an end to immigration of people who are "not like us" -- will be more successful at keeping out innovative hard-working job-creating entrepreneurs than it will be at keeping out lunatic jihadists, as I discuss in my writeup comparing Trump and Clinton. Both Britain and America became superpowers, not by building walls, but by building bridges. Walls are for Soviet dictators and Chinese emperors, both discarded in the dustbin of history.
But there are some real upsides to escaping the EU. The EU not only costs money directly (over $10B for Britain, after the Brits negotiated a discount), it also adds yet another layer of job-killing Nanny State regulatory bureaucrats throwing more obstacles in the path of people who'd like to start up a new business or found a new industry. The Uber-Nannies of the EU throw out a frightful and delightful stream of regulatory abuse of citizenry, from the ridiculous to the sublime. Three and a half examples deserve mention:
The most popular media example of EU regulatory silliness was a rule about how much curvature bananas were allowed to have. In fact, this is only a half of an example because it is untrue, a comically disingenuous version of an actual EU rule, widely reported in the part of the British media that delighted in inventing news to acquire and enrage readers. More true, and just as ridiculous, was the EU recommendation to member states that bottled water manufacturers be prohibited from advertising that their product prevents dehydration.
More serious, to the point of killing people, is the EU ban on sale of snus. Yeah, snus, I'd never heard of them either. It is a tobacco product that everyone agrees is less dangerous than cigarettes. Some people who smoke cigarettes were turning to snus as a safer substitute. But the EU, being wiser than the people, made the Decision of Enlightenment that you would be better off dying from cigarettes than using snus. Serious analysis is largely missing on this matter, but it seems possible that some thousands of people have died as a result.
The most popular media example of EU regulatory silliness was a rule about how much curvature bananas were allowed to have. In fact, this is only a half of an example because it is untrue, a comically disingenuous version of an actual EU rule, widely reported in the part of the British media that delighted in inventing news to acquire and enrage readers. More true, and just as ridiculous, was the EU recommendation to member states that bottled water manufacturers be prohibited from advertising that their product prevents dehydration.
More serious, to the point of killing people, is the EU ban on sale of snus. Yeah, snus, I'd never heard of them either. It is a tobacco product that everyone agrees is less dangerous than cigarettes. Some people who smoke cigarettes were turning to snus as a safer substitute. But the EU, being wiser than the people, made the Decision of Enlightenment that you would be better off dying from cigarettes than using snus. Serious analysis is largely missing on this matter, but it seems possible that some thousands of people have died as a result.
My favorite example of the All Wise EU Uber Nanny is the "Consultation of Employees" regulation of 2004. This law nominally requires a 50-person company to set up a formal worker's council. The practical result is, your 51st employee needs to be a bureaucrat who will interfere with everyone's work to make sure the regulation is followed.
I once worked for a startup company with more than 50 employees. We were in a mad dash to bring a product to market, burning money at a rate that would frighten most millionaires. Everyone was in a frenzy. Since everyone was a stockholder who had the possibility of becoming rich if we succeeded, there was no shortage of proposals for how to get things done better. We were consulting with each other almost as much as we were working like madmen. We were all experts in our various fields, and could better be compared to a football team (each person is a specialist, all are respected) than to a shoe factory. Having this law imposed on us would have eaten the hours of our day and lowered our chances of success.
I once worked for a startup company with more than 50 employees. We were in a mad dash to bring a product to market, burning money at a rate that would frighten most millionaires. Everyone was in a frenzy. Since everyone was a stockholder who had the possibility of becoming rich if we succeeded, there was no shortage of proposals for how to get things done better. We were consulting with each other almost as much as we were working like madmen. We were all experts in our various fields, and could better be compared to a football team (each person is a specialist, all are respected) than to a shoe factory. Having this law imposed on us would have eaten the hours of our day and lowered our chances of success.
"Ah," I hear you cry, "Your company was a special case. The law was designed to help the shoe factory worker who isn't a well respected member of a team". Congratulations, you have just proven my point. When a Nanny Bureaucrat writes a One Size Fits All solution, he is performing heart surgery with a sledge hammer. A rule like this clobbers the smart companies in a futile effort to improve the quality of stupid companies.
Now, the "Consultation of Employees" law all by itself is not enough to kill all startup businesses. But a couple hundred laws that have similarly good intentions and comparably bad side effects is enough to kill innovation through the classic "death of a thousand cuts" process. So getting rid of the EU Uber Nanny is a necessary, though not sufficient, condition of bringing back the entrepreneurial spirit that once made England the center of the Industrial Revolution.
Now, the "Consultation of Employees" law all by itself is not enough to kill all startup businesses. But a couple hundred laws that have similarly good intentions and comparably bad side effects is enough to kill innovation through the classic "death of a thousand cuts" process. So getting rid of the EU Uber Nanny is a necessary, though not sufficient, condition of bringing back the entrepreneurial spirit that once made England the center of the Industrial Revolution.
So much for the upside. Let's talk downside ... the whopping big downside. Britain has many companies that were created specifically to take advantage of the open market. All those companies must consider moving. The most frightening from the perspective of Britain's future is the London Stock Exchange. This is the third largest stock exchange in the world behind NYSE and NASDAQ. The Exchange enables trading on trillions of dollars of stocks (yes, trillions with a T). Currently London is the financial center of Europe. It is a sweet industry because stock exchanges have the power of natural monopoly. Everyone knows that everyone else knows that this is the place to go to buy and sell, so it is almost impossible to lose such an industry once you have successfully taken it. Only an enormously idiotic attack on such a business can cause you to lose it. Alas, Brexit is such an enormous attack. Today everyone knows that everyone knows that London is not going to be the place to buy and sell any more. This industry is so big that losing it is probably enough, all by itself, to drive Britain into a very long recession indeed.
Can the burgeoning explosion of innovation that will follow the casting off of the EU bureaucracy create so many jobs that it compensates for the loss of the financial industry? Alas, not a chance. Understand that the Brits are past masters of creating their own job-killing regulatory bureaucracies. Consider that after WWII, Britain was at least a decade ahead of us in the development of jet engines. They were in position to snatch up the entire aviation industry. But their first jet-propelled passenger plane crashed on takeoff. A media frenzy ensued; more government intervention was demanded. The Britain regulators promised that there would be no more such crashes.
Realizing that the only way to really really guarantee no more crashes was to never certify another airplane for flight, they created a regulatory regime that effectively prohibited new aircraft designs. Boeing, Lockheed, and other American aircraft vendors filled the void, with Boeing eventually taking the position once held by the Brits. Britain's loss was Seattle's gain. Today, Britain is so incapable of advanced tech development that they have turned to the Chinese to build nuclear reactors for them -- a comical turn of events, since the Brits were once able to build nuclear submarines and the Chinese still can't.
So there won't be a flowering of new businesses after throwing out the EU. For this reason, if I had been in Britain, I would have voted against Brexit.
The most entertaining possible outcome is that Scotland secedes from Britain, joins the EU , and the London Stock Exchange moves to Edinburgh (really: one big trading house in London is already scouting prime real estate as a contingency plan). This would work out great for the Scots ... not so great for the English. But there would be some justice to it, since the Scots voted by a large majority to stay in the EU.
Oddly enough, there could be a best-of-all-worlds outcome for Britain. The British pols understand that they need the open market. The EU leaders have already asserted categorically that Britain will not be allowed to have an open market unless they accept an open border. So it is barely conceivable that the new deal, once negotiated, will have an open market and an open border, and no EU bureaucrats imposing new laws. This would give Britain all the good parts of EU membership while stripping off the absurdist parts.
But to get to this nirvana, the Brits will probably need the luck of the Irish.
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Realizing that the only way to really really guarantee no more crashes was to never certify another airplane for flight, they created a regulatory regime that effectively prohibited new aircraft designs. Boeing, Lockheed, and other American aircraft vendors filled the void, with Boeing eventually taking the position once held by the Brits. Britain's loss was Seattle's gain. Today, Britain is so incapable of advanced tech development that they have turned to the Chinese to build nuclear reactors for them -- a comical turn of events, since the Brits were once able to build nuclear submarines and the Chinese still can't.
So there won't be a flowering of new businesses after throwing out the EU. For this reason, if I had been in Britain, I would have voted against Brexit.
The most entertaining possible outcome is that Scotland secedes from Britain, joins the EU , and the London Stock Exchange moves to Edinburgh (really: one big trading house in London is already scouting prime real estate as a contingency plan). This would work out great for the Scots ... not so great for the English. But there would be some justice to it, since the Scots voted by a large majority to stay in the EU.
Oddly enough, there could be a best-of-all-worlds outcome for Britain. The British pols understand that they need the open market. The EU leaders have already asserted categorically that Britain will not be allowed to have an open market unless they accept an open border. So it is barely conceivable that the new deal, once negotiated, will have an open market and an open border, and no EU bureaucrats imposing new laws. This would give Britain all the good parts of EU membership while stripping off the absurdist parts.
But to get to this nirvana, the Brits will probably need the luck of the Irish.
<< Hillary Clinton versus Donald Trump, for my Daughter <<
>> Trump: An Artifact of Flawed Voting Algorithms >>