Kristian Niemietz // 05 April 2017

My track record on Brexit-related predictions has so far been abysmal. I got it wrong at every turn.

For a start, I was sure that voter turnout would be low. I thought that after an initial campaign hype, most people would conclude that leaving the EU would be neither the end of the world, nor the solution to all our problems. They would simply lose interest.

Then, I never expected the immigration issue to take centre stage. This was due to availability bias: I had never met any of those Xenophobic Little Englander Eurosceptics that you always read about, and had come to assume that these people were a figment of the Europhiles’ imagination.

And, of course, I expected Remain to win. People enjoy a good grumble about ‘Brussels’, I thought. But when push comes to shove, they won’t have the guts to walk the talk.

Then after the referendum, I expected that we would quickly settle for a Norway-style arrangement. It seemed like an obvious response to such a close result: leave the EU, but do so in a way which addresses the Remainers’ main objections. It also seemed like a safe, quick-and-easy solution.

Nonetheless, I can’t help trying it one more time, although this time, I’ll play it safe by keeping my prediction conveniently vague, and concentrating on the more distant future. I’d predict that whatever happens, we will never agree on whether Brexit was a good idea or not. Many articles on Brexit end on notes like “…but it remains to be seen…” or “…only time will tell”. But time will not tell. These commentators seem to assume that at some point, it will have become ‘clear’ that Brexit was either a success, or a failure, or something in between. But that moment will never arrive.

Since the referendum, my social media feed has been providing a wonderful illustration of the dynamics of filter bubbles and motivated reasoning. I follow some ardent Leavers and some ardent Remainers. Whenever a positive piece of economic news comes up – even if it is just one company announcing their intention to create some jobs in Britain – the Leavers share it like mad, with comments like “Remember Project Fear? LOL!” or “What happened to all your dire predictions, Remoaners?”. Meanwhile, as soon as a negative piece of economic news comes up – and again, this can be just an announcement from one company to move some jobs abroad – the Remainers share it like mad, with comments like “How’s ‘Taking back control’ working out for you so far, Brexiteers?”. In the minds of many, the issue is already settled. ‘The facts’ are on our side. It’s the other side that’s being biased and ideological.

Time doesn’t always tell. In the 1980s, many commentators assumed that time would tell whether or not Thatcherism would be a success. It hasn’t. All the economic evidence is now on the table, but we continue to disagree fiercely. For some, Thatcherism will always stand for the destruction of the working classes, and the descent of a once-proud industrial power into a bargain basement economy. For others, it will always stand for a treatment that was tough and painful, but that ultimately restored the patient’s health.

And so it may be with Brexit, no matter how it turns out. Let’s take an optimistic scenario. Let’s assume that a UK-EU trade deal, which allows trading relationships to continue more or less like today, can be agreed upon in less than two years. Let’s also assume that the UK manages to secure attractive trade deals with emerging economies and the Commonwealth. A new migration policy vis-à-vis the EU-27 continues to attract net contributors, whilst keeping out people who would otherwise have become net transfer recipients. In addition, plenty of wasteful EU red tape is shed, the Common Agricultural Policy and the Common Fisheries Policy are replaced with market-based alternatives, and savings in EU budget contributions are split between tax cuts and additional NHS spending. The UK becomes a more attractive place to invest and create jobs, wages rise, and consumer prices fall. Even in this very positive scenario, in five years’ time or so, you will read articles arguing something like this:

“Make no mistake: recent economic improvements have nothing to do with Brexit. Austria and the Netherlands have achieved higher growth rates within the EU than we have achieved outside of it, which clearly demonstrates that EU membership is not an obstacle to growth. Denmark and Sweden have higher employment rates than we have, so how can the EU be a ‘job killer’? And don’t put too much stock in the new trade deals: Belgium and Germany are exporting more to these economies than we do, which shows that the deals are neither necessary nor sufficient for successful trading relationships.

Trade with Europe, however, has suffered. There are no official trade barriers between the UK and the EU-27, but companies routinely complain about complications and glitches in the new customs system, which disrupt trade and supply chains. There has been no huge drop in EU migration, but many EU citizens that had already settled here have left, because they no longer feel welcome in the more inward-looking, narrow-minded country that post-Brexit Britain has become.

Meanwhile, none of our home-grown problems have gone away. Our housing costs continue to be the highest in Europe. Public services continue to be overstretched. Our health outcomes continue to lag behind. Plenty of new problems have been added. Workers’ rights and environmental protections have been weakened. Our degree of food self-sufficiency has plummeted to its lowest level ever, a hugely dangerous situation given recent geopolitical developments.

All in all, it is safe to say that Brexit has been a colossal failure. Post-Brexit Britain is a more unequal, a more insecure, and a harsher country. Five years ago, the British people took a huge gamble. Five years on, it is now clear to anyone with eyes to see that they have lost it.”

Now let’s take a pessimistic scenario instead: After two years of unsuccessful negotiations, the UK crashes out of the single market without a proper replacement deal. Trade deals with non-EU countries are still a long way off. EU bureaucracy is simply replaced with Whitehall bureaucracy. The UK economy suffers hugely from the resulting disruption, without capitalising on the new opportunities that Brexit theoretically offers. Even in this pessimistic scenario, in five years’ time or so, you will still read articles sounding more or less like this:

“…and now they say that our economic woes are all due to Brexit. What nonsense. Brexit is not the problem. The problem is that Remoaners have been constantly talking this country down year after year. Of course, nobody wants to invest in a country when they are constantly being told that that country is going to hell in a handcart. With their incessant badmouthing of the British economy, Remoaners have created a climate of fear, in which consumers don’t want to spend, banks don’t want to lend, and employers don’t want to hire.

The breakdown of the Brexit negotiations was partly the fault of vengeful Eurocrats, who wanted to punish Britain just to make a point. But make no mistake: our own government was complicit in this. Too many senior figures wanted the negotiations to fail, to give them an excuse for taking Britain back into the EU via a second referendum.

But despite everything, we are better off out than in. Who exactly is it that Remoaners want to trade places with? Is it Greece or Spain, where youth unemployment is now soaring once again, after the recent relapse of the banking systems? Is it Sweden or Germany, which are now so overwhelmed with refugee inflows that even Green Party politicians are beginning to admit that there might be some slight problems? Is it France, where economic growth and job creation have become distant memories? Is it the Netherlands or Germany, which have recently had to hike taxes, in order to pay for the ongoing Eurozone bailout payments?

These are only some of the dangers that Brexit has saved us from. It is because of Brexit that the situation is merely bad, as opposed to terrible.”

Time will tell us something, but it will tell us so much that we can pick and choose what we want to see. In the case of Brexit, there will always be plenty of ambiguity, and thus scope for filtering. Which is why Brexit will always remain a divisive issue.

This blog post appeared first on the IEA’s blog.