10 December 2018

Brexit: How We Got Here

By George Friedman

The referendum happened over two years ago, but there’s still debate over how to implement the result.

The British Parliament is set to vote next week on the exit deal Prime Minister Theresa May negotiated with the European Union. The prime minister has faced much criticism from members of parliament who don’t like the terms of the deal or who don’t want Britain to leave the EU at all. Indeed, many MPs, as well as David Cameron, the prime minister who agreed to hold the referendum in the first place, were shocked by the outcome of the vote in 2016. Though they had authorized the referendum, they expected that it would be soundly defeated. But their expectation proved false, putting an end to the nonsensical claim that only a small minority of the British public wanted to leave. Nearly 52 percent, in fact, voted in favor of Brexit.

As the shock wore off among the political and financial establishment, two arguments emerged. The first was that a small majority should not decide such an important matter. There may be power in this argument, but parliament could have decreed that a certain threshold would be needed to make the result valid. It didn’t, expecting that this would be a non-issue once Brexit was defeated. (I strongly doubt that if a majority voted in favor of staying by the same margin the establishment would have doubted the vote’s legitimacy.)

The second argument was more telling and potentially destabilizing. It was that the voters who supported Brexit didn’t understand what they were voting for. Indeed, some pointed out that the base of support for Brexit came from poor and less educated people, in an attempt to delegitimize the outcome. Given Britain’s history of being ruled by nobility that saw itself as entitled to power, this argument was tasteless. But it wasn’t the aristocracy that made the argument; it was bankers and hedge fund managers who feared being forced to leave London and move their business to Frankfurt.

There were powerful arguments for and against remaining in the EU, but these arguments got lost in the noise. One side charged, and continues to charge, that leaving the EU would lead to economic calamity. The other side charged that staying in the EU would cost Britain its sovereignty. Both these points could have been seriously argued, but for the most part, they were hand grenades being launched by one group against another.

What turned a contentious national decision into a deepening nightmare was the reaction of the EU itself. The contrast with the Velvet Divorce of Slovakia and the Czech Republic couldn’t be more stark. The EU wanted Britain to stay in the bloc, as it was the second-largest economy in the EU and an avid consumer of European products. Germany’s fourth-largest customer could not simply be left to walk away.

But more important, the EU bureaucracy was afraid that a velvet divorce with Britain would set a precedent, one that would allow other EU members to regard secession as an option. The EU, therefore, made the negotiations difficult, refusing systematically to accommodate British needs and staying firm on the Irish matter, which is indeed impossible to solve, save with the use of good will and common sense – neither of which were possible given the realities the EU was facing and fearing.

There was a second reason that the EU imposed an increasing amount of complexities on the negotiations. It was hoping to reverse the result of the referendum. Here, it had support from the establishment, of course, but also from the large number of voters who voted against leaving. By being as rigid as possible, it both raised the possibility that a negotiated exit wasn’t possible and also created a sense that the entire enterprise was overly complicated and led into uncharted territory. The idea that Britain, rather old by American standards, could withstand the Blitz and the Spanish Armada but could not execute a withdrawal from what was merely a treaty without collapse was farfetched.

There is a broader danger for the U.K. in all this. Parliament authorized the referendum, and if it were to claim now that an exit is impossible, it would mean that the British government had maneuvered the country into a treaty from which it could not leave. This could create a crisis of confidence as well as a class crisis. Much of the support for Brexit came from lower income groups. To change the rules to allow for a second vote, or to simply abandon the idea of withdrawing altogether, would be perceived as contempt for those who voted for it, many of whom already see themselves as treated with indifference. If the vote to leave the EU was part of a wave of populism in the U.K., then disregarding the outcome would generate another powerful wave of populism by those who were held to be too ignorant to know what they were doing.

The EU is also playing with fire. It has been engaged in confrontations with Italy over its budget, Poland over judges, Hungary over human rights and Romania over corruption. If we include Britain in this list, it would mean the EU is embroiled in conflicts of varying kinds with six out of its 28 members. For most treaties, this would seem to be approaching the threshold of dissolution. The attempt to make it seem impossible for Britain to withdraw is intended to drive home the message that membership is permanent.

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