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Brexit: A Myopic Decision in Haste?

Brexit: A Myopic Decision in Haste?

By Jacob T. Levy

I’ve been dismayed to see that so many– not a majority, but a long way above “none”– of my libertarian friends on social media are either enthusiastic about British exit from the EU or indifferent-leaning-favorable.

(Note: this post is addressed to libertarians and market liberals, and it takes for granted libertarian policy preferences. I’m going to go ahead and use contestable conceptions of, say, economic liberty, without using scare quotes or offering justifications. This is “given the market-liberal conception of economic liberty, is there a case for Brexit?” not “how do I defend the market-liberal conception of economic liberty?)

The market-liberal case for Brexit blends together a view that eliminating a level of government is usually good. There is generalized skepticism of distant and central authority; and specific beliefs about the planning, socialist, or over regulatory propensities of the EU relative to the UK. For there to be a good market-liberal case for Brexit, the weight of these arguments had better be overwhelming, given the obvious goods of liberalized migration and trade across the EU.

“It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people…. As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market.” Adam Smith, WN.

In this post I’ll offer my reasons for doubting that there’s any such overwhelming case on the pro-market side to weigh against the losses in terms of extent of market and migration– and indeed for doubting that there’s any reason for confidence that there’s any significant gain in expected-value economic liberty to weigh against the losses.

There’s no reason for us to start with some enthusiastic assumption that secession is always better and that more-local, more-homogenous levels of government are friendlier to freedom than larger and more pluralistic ones.

Now, the “one less level of government/ distant bureaucrats” hunches should only ever be hunches. With Madison, Acton, and Hayek, I think there’s a great deal to be said for compound systems in which a relatively distant and unloved center exists to check the relatively local units that engender too much enthusiasm for state power, and that when “decentralization” means “vesting sole power in a Weberian nation-state,” the virtues of decentralization will be very hard to come by. The natural skepticism of a level of government like that found in Brussels gives way to considerable overconfidence in the level of government like that found in London. A system of both institutional checks and balances and popular vigilance against abuses of power is replaced by a system that has neither. Sometimes the particular character of the nation-state or of the transnational entity will be enough to outweigh those concerns; but as far as market liberals are concerned, I think at best these very general centralization/ decentralization concerns are a wash. There’s no reason for us to start with some enthusiastic assumption that secession is always better and that more-local, more-homogenous levels of government are friendlier to freedom than larger and more pluralistic ones. Nor is there any reason to assume that removing a level of government just makes its whole system of regulation stably disappear; we need to think about what’s likely to replace those regulations at the nation-state level.

The single-market rules and regulations have some genuinely market-friendly features. One of the most important of these is the set of policies that prohibit subsidies and trade distortions favoring national-champion firms. Think about the competition to lavish subsidies on professional sports teams in the United States… applied to much bigger and more important sectors of the economy. That kind of crony capitalism is ruled out by the EU. (This is why it especially galled me to see Gary Johnson hailing Brexit as a bow against crony capitalism.) And Brexit supporters are well aware of this. See this pro-Brexit editorial from an important British newspaper:

 We could support British companies in trouble. EU single market rules discourage governments from giving financial support to private companies, to make sure “national champions” do not have a commercial advantage over rivals. Those rules meant that ministers couldn’t directly bail out Tata Steel’s UK plants.

There’s a level of popular belief that the EU enforces illiberal and market-unfriendly policies on Britain. On the fiscal side, here’s a comparison of British public spending as a share of GDP just before entry into the EU, and just before the Brexit vote:

1971: 42.0
1972: 40.8

2014: 41.8
2015: 40.8

(source)

Britain's public spending as a percentage of its GDP has remained the same since its membership to the EU till Brexit

Britain’s public spending as a percentage of its GDP has remained the same since its membership to the EU till Brexit | Photo Courtesy: Pixabay

Even when you add in the <1% of GDP that is paid to Brussels, this is just not a picture of a system that has forced Britain to become a big-spending social democracy. (Neither, of course, is it a picture of a system that has forced Britain into neoliberal austerity, a charge one hears from the left.)

On the regulatory side– which is what the right-leaning British press talks about a lot– there’s the usual number of silly and micromanaging stories that emerge out of any regulatory system. Bananas and vacuum cleaners and light bulbs, oh my. But these are anecdata, and any regulatory system (public or private) that governs by rules will have some silly ones. (Any reader who works for a large bureaucratic private organization, whether a for-profit firm or a non-profit university, can easily come up with three silly policies from it, I’m sure.) We don’t have great aggregate measures of regulation, but we do have some that libertarians are generally willing to use.

According to the 2015 Economic Freedom of the World report’s overall measure for regulatory burden, Czech Republic, Denmark, Estonia, Lithuania, Sweden, Ireland, and Romania are all less regulated than the UK. The most recent Heritage index of “business freedom” ranks Denmark, Finland, Germany, and Sweden ahead of the UK; for labor freedom, Denmark, Austria, and Ireland. In all these cases, these relatively-liberal EU countries compare favorably with other developed countries in or out of the EU.

None of these measures are perfect, but they shouldn’t be systematically biased against the UK. And what they tell us is:

a) Membership in the EU is perfectly compatible with maintaining a light overall regulatory burden by developed country standards; and

b) the UK is not pushing the deregulatory envelope inside the EU, is not running into an EU constraint in its attempt to minimize the regulatory burden.

Once we move beyond anecdata about light bulbs, vacuum cleaners, and bananas, I don’t see any reason to think that there’s some tremendous unmet demand for deregulation in the British political system, or that overall leaving the EU will much lighten the total regulatory load when the UK is often above the EU floor anyway.

But for us evaluating matters from the outside, the effect on Britain shouldn’t be the only thing that matters. British withdrawal from the EU will, from a market liberal perspective, almost certainly change policies in the rump EU for the worse.

One final thought, since many of my indifferent-or-pro-Brexit libertarian friends are non-Brits. I can understand why British voters should think in British terms. But for us evaluating matters from the outside, the effect on Britain shouldn’t be the only thing that matters. British withdrawal from the EU will, from a market liberal perspective, almost certainly change policies in the rump EU for the worse. The UK has been an important part of the relatively liberal bloc (that includes the Low Countries, Denmark, Sweden, and some of the ex-Communist countries) to counterbalance what has often been a relatively dirigiste bloc led by France and Germany. And the desire to placate Britain has put brakes on some of the most statist tendencies in Brussels. (This is similar the kind of thing I argue about federalism in general. A pluralistic federation like Canada is probably freer with a skeptical Quebec on the inside and always threatening to leave than either rump-Canada or Quebec would be post-separation; see also my Rationalism, Pluralism, and Freedom.) For us North Americans, the balance of considerations should include not only what British policies will be like after separation, but what the rest of Europe’s policies will be like. Shared language and culture mean that sometimes anglophone North Americans imaginatively project ourselves into Britain– but as outsiders, our evaluation should be more disinterested than that. And from a market-liberal perspective, the likelihood is that overall economic freedom will decline even if there’s some increase in it in Britain— which, again, I don’t see any reason to expect.


Jacob Levy is Tomlinson Professor of Political Theory, Associate Professor of Political Science, affiliate faculty in the Department of Philosophy, and coordinator of the Research Group on Constitutional Studies at McGill University.  He holds an LL.M. from the University of Chicago Law School and a Ph.D. from Princeton

Footnote about the Economic Freedom of the World report and the Heritage index: I don’t trust these indices for global comparisons, or their aggregates much at all. But one dimension at a time– say, regulation– among comparable countries, I think they can be useful. “Jordan has more economic freedom overall than Britain” is an almost purely meaningless claim. But “Ireland has less burdensome regulation on starting new businesses than Britain” is meaningful. Anyway, I don’t see any reason to think that both the EFW and Heritage measures would be biased against Britain and in favor of the liberal EU countries.

This article was originally published on Bleeding Heart Libertarians

Featured Image Source: Unsplash

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