The dividing lines on Brexit run not just between but also within political camps in Britain, including free-market liberaIs. Why? Because it is so hard to predict how the process will play out. Brexit could become a great free-market success story, or a retrograde step, or anything in between. It depends entirely on what domestic policies and what international arrangements the UK will adopt post-Brexit.
A free-market Brexit would mean freer trade with the rest of the world, continued free trade with the EU-27, a shedding of EU-derived red tape, and a replacement of the Common Agricultural Policy and the Common Fisheries Policies with market-based alternatives. But we could also imagine an overhasty, overly hard Brexit, which prioritises erecting barriers to EU immigration above everything else, even if this means torpedoing trade negotiations.
What’s wrong with staying in the EEA for a few years after Brexit?
For a while, it looked suspiciously as if we were heading for the latter. However, according to Politico Europe, the so-called “Norway option’” is now back on the table as a Plan B. If Brexit negotiations cannot be concluded within two years, Britain could, as an interim option, stay in the European Economic Area (EEA) after leaving the EU and the Customs Union. This would greatly reduce the risk of a cliff-edge Brexit, which would disrupt trade and integrated supply chains.
“Hard Brexit” advocates are hostile to the Norway option, especially because it involves continued free movement of labour. But let’s remember: the traditional Eurosceptic argument has always been that the UK originally signed up for a common market, not a political union. That common-market-only vision of Europe has never completely gone away. It has morphed into what is now the EEA. So what’s wrong with staying in it for a few more years after Brexit? The UK could still seek a more distant relationship with the rest of Europe in the long term, but it would do so from a more comfortable starting position.
Free-marketeers tend to be suspicious of regulatory agencies, even the ones whose raison d’être they accept in principle. Such agencies have a vested interest in their own growth, and are easily captured by the special interests they are supposed to regulate.
But there are exceptions. America’s Federal Communications Commission (FCC) is currently pushing for a repeal of a spate of regulations brought in by the Obama administration. Under those “net neutrality” regulations, internet service providers are not allowed to discriminate between different content providers. They cannot, for example, selectively slow down some websites, and speed up others (such as those with whom they have a special deal, or which are operated by the same company).
“Neutrality” and “non-discrimination” sound good – or they would, in a world of unlimited telecommunication data capacity. But, given that capacity is constrained, it has to be managed somehow; otherwise, internet connections just become slower and/or more expensive across the board.
To use an analogy, we don’t have “retail neutrality” either. Supermarkets pre-select products for us, and then discriminate in favour of some of them, by placing them where they are most visible or accessible. They can even discriminate in favour of their own in-house brand. Does that give them undue “power” over us? No. If we don’t like the selection they make, we can go to a different retailer. The same is true for internet providers. If the FCC gets its way, the US would return to the period of light-touch internet regulation, a period during which the sector witnessed fast growth and steadily falling prices.
American free-marketeers have been unusually pessimistic of late, and who can blame them, given Donald Trump’s protectionist and corporatist credentials. But Trump seems to be abandoning some of the economic policies he campaigned on: his plan to take the US out of the North American Free Trade Agreement (Nafta) is off the table for now. A year ago, that would hardly have been considered good news – why would anyone even contemplate leaving Nafta? – but it is now, relative to expectations. Nafta seeks economic cooperation without harmonisation or political integration. It is, as Daniel Hannan points out in his book What Next?, “the last classical free-trade area […] built on the principles of mutual recognition and open competition”. An end to Nafta would not just have been bad news for the economies directly affected; it would also have been a blow for advocates of that liberal variant of trade agreements.
Brazil has also been in the news a lot recently, in connection with violent strikes and protests. While clearly not good news in its own right, those protests are a response to the country’s attempts to come to grips with some of its deep structural problems. Above all, President Michel Temer’s government is raising the retirement age to 65, a step which is long overdue. Brazil’s population is ageing rapidly. As recently as in 1980, the birth rate still stood at four children per woman of childbearing age. It has now fallen to less than two. Over the same period, average life expectancy rose by about 12 years. And yet most people continue to retire in their mid-50s. This is clearly unsustainable, and you ultimately cannot win a strike against basic arithmetic.
Granted: Neither of these are spectacular success stories. They are more about reversals of previous bad decisions. But given the global backlash against free markets from Left-wing (and sometimes Right-wing) populists, maybe this is as good as it gets for now