Why does Brexit have a big economic impact?
The latest vote by citizens of the UK to leave the European Union seems to have resulted in a lot of twisted panties, but I can’t figure out why an exit would have a big economic impact.
As I noted in a previous posting, if membership in the European Union is a sure path to economic prosperity, why don’t countries such as the U.S. seek to join? Telecommunications, shipping, and air travel costs have never been lower. Why wouldn’t Korea, Taiwan, Singapore, Canada, et al. seek to join? Or Switzerland, for that matter? If EU membership is not a surefire way to boost a country’s economic performance then why are people sure that leaving the EU will hurt the UK economically?
Can someone explain why there should be a big economic impact? The UK has two years to negotiate trade agreements with the EU. What would stop them from negotiating a tariff-free arrangement similar to what the U.S. has with Mexico and Canada?
As far as regulation is concerned, when there is a perceived need for uniformity, what stops the UK from adopting European regulations? Switzerland and Norway are not EU members, yet both participate in EASA, the over-arching European aviation regulators (each member country still has its full complement of FAA-style bureaucrats, but then EASA adds another layer of bureaucracy on top).
I can see that there would be a potentially significant impact on some individuals. The homeowner in the UK who wants to get repairs done will have a harder time finding skilled immigrant labor. The UK citizen who wants to work in Paris might encounter a wall of bureaucracy (though perhaps in the next two years the UK could negotiate streamlined reciprocal work permits). Workers who do jobs that can’t be outsourced electronically may get higher wages due to reduced competition from immigrants (e.g., women in the UK trying to earn money through legal prostitution or the unlimited child support that is available following out-of-wedlock pregnancies will enjoy reduced competition from attractive foreign women).
UK citizens should be happier, if we are to believe A Pattern Language:
. . . just as there is a best size for every animal, so the same is
true for every human institution. In the Greek type of democracy
all the citizens could listen to a series of orators and vote directly on
questions of legislation. Hence their philosophers held that a small
city was the largest possible democratic state. . . . (J. B. S Haldane,
“On Being the Right Size,” The World of Mathematics, Vol. II,
J. R. Newman, ed. New York: Simon and Schuster, 1956, pp. 962-
67).It is not hard to see why the government of a region becomes
less and less manageable with size. In a population of N persons,
there are of the order of N 2 person-to-person links needed to keep
channels of communication open. Naturally, when N goes beyond
a certain limit, the channels of communication needed for de-
mocracy and justice and information are simply too clogged, and
too complex; bureaucracy overwhelms human processes.And, of course, as N grows the number of levels in the hier-
archy of government increases too. In small countries like Den-
mark there are so few levels, that any private citizen can have
access to the Minister of Education. But this kind of direct access
is quite impossible in larger countries like England or the United
States.We believe the limits are reached when the population of a
region reaches some 2 to 10 million. Beyond this size, people be-
come remote from the large-scale processes of government. Our
estimate may seem extraordinary in the light of modern history:
the nation-states have grown mightily and their governments hold
power over tens of millions, sometimes hundreds of millions, of
people. But these huge powers cannot claim to have a natural size.They cannot claim to have struck the balance between the needs
of towns and communities, and the needs of the world community
as a whole. Indeed, their tendency has been to override local
needs and repress local culture, and at the same time aggrandize
themselves to the point where they are out of reach, their power
barely conceivable to the average citizen.
(emphasis added)
What am I missing? I don’t feel that a British-made Mini car has a different value today compared to yesterday. Nor do I see how the experience of watching a show in London has changed. And would investment banking move from London to Spain, for example?
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