A Better Britain Outside the EU

Brexit—a British exit from the European Union—would give the U.K. self-determination and free it from the dysfunctional European project

By Tim Montgomerie
Margaret Thatcher predicted that it would end in tears. She described “the drive to create a European superstate” as “perhaps the greatest folly of the modern era.” The late British prime minister knew the lesson of the past: When politicians try to impose grand designs on peoples of different histories, languages and cultural allegiances, the edifice totters and collapses.

Once devoutly pro-European, Thatcher had come to worry by the late 1980s that grand projects emerging from Brussels, like the effort to create a single European currency, would centralize power and create a vast bureaucracy. She saw that democratic accountability would be impossible across a wildly polyglot European Union. And she feared that the sort of cronyism and collusion among big business and politicians that she had dismantled in the U.K. would re-emerge in Brussels. Almost every one of her fears has been vindicated.

Britain will soon have the opportunity to decide whether or not to remain a part of the European project that it joined in 1973. After EU leaders agreed late Friday to several key British demands, including a so-called emergency brake to let the U.K. restrict welfare benefits for EU migrants, a nationwide referendum is likely to be held in June, fulfilling a promise made by Prime Minister David Cameron at the last general election. Polls suggest that the outcome of the vote is too close to call, but a British exit—or “Brexit”—is a real possibility. It would also be a wise choice, for the U.K., for Europe and for the U.S.

Prominent Conservative politicians, including Iain Duncan Smith and Michael Gove, are expected to campaign for Brexit, endangering the unity of the government. But Mr. Cameron, most of his top ministers, the leader of the opposition Labour Party and the country’s largest businesses will hold firm with the EU. They will argue that Britain should not walk away but should remain at the EU’s highest table, helping to fix the continent’s problems. They worry that if Britain leaves the EU, London won’t be able to influence the rules that govern the world’s richest single market, with more than 500 million people.

In normal times, this alliance of powerful businesses and politicians would be enough to guarantee victory for the pro-EU cause. But as the U.S. presidential race continues to prove, these are not normal times, and having the establishment on your side can be more of a burden than a blessing. Donald Trump and Bernie Sanders have amplified the hunger for change of an electorate that is angry at big business, concerned about rising immigration and anxious over economic insecurity. In Britain, the EU gets much of the blame for such ills. It was the anti-EU camp, not the backers of European unity, that celebrated when Goldman Sachs recently announced its support for having the U.K. stay put.

The problems produced by the EU are not hard to see. The single currency helps to explain why the European economy remains in the doldrums long after the U.S. recovery has begun. The rise of China and emerging markets inevitably meant that the developed world’s share of world trade would decline, but the EU’s share is declining twice as quickly as America’s. Youth unemployment stands at 49% in Greece, 46% in Spain and 38% in Italy, and millions of young lives will never fully recover from these extended rates of joblessness. This economic weakness has brought extremist parties to the fore, whether it is radical parties of the left like Spain’s Podemos and Greece’s Syriza or the illiberal nationalist parties of the right in Poland and Hungary.

The British public remains skeptical of the EU. Mr. Cameron had hoped to steer them away from the exit door by delivering substantial changes to the terms of the country’s membership. He has spent much of the past year touring European capitals to try to fulfill a reform agenda that he first set out in a 2013 speech that called for Europe to become a much more economically liberal continent. He has also sought—without great success—to limit the welfare benefits that EU citizens can claim if they come to the U.K. under the EU’s freedom-of-movement regime.

The mixed results of Mr. Cameron’s renegotiation reflect the mixed nature of today’s European politics. A socialist is president of France, but he is widely disliked. A conservative is chancellor of Germany, but the migrant crisis has pulled down her popularity. Spain’s conservative prime minister has lost his majority and is clinging to power. An assertive new nationalist administration governs Poland. Italy’s bright, young Blairite prime minister, Matteo Renzi, is full of promise but has yet to deliver much.

Trying to unify such a diverse group of politicians, some of whom will soon face tough re-election battles, was always going to be a tall order. It has been especially hard to get Europe’s leaders to focus on Britain’s renegotiation demands amid the flood of migrants and the Greek crisis. In his talks over the past few days in Brussels with other European leaders, Mr. Cameron finally won support for the limited reforms that he has proposed—reforms that, in any event, have seemed entirely inadequate to the British public, according to all opinion polls.

But the campaign for keeping Britain in the EU still has some cards to play. The pro-EU camp will seek to exploit the natural conservatism of British voters wary of changing the status quo. We can expect the same kind of fear-based campaign that helped to keep Scotland in the U.K. during its 2014 referendum on independence. There will be dire warnings that Brexit would leave Britain shut out of key European markets and suggestions that the City of London, the business and financial center so important to the British economy, would lose market share. With the world economy already experiencing uncertainty, many undecided Britons may decide that this isn’t the time to add to it.

The pro-EU camp will also emphasize the protracted divorce negotiations that would likely follow a vote for Brexit. For a period that could well last two years, many global businesses may decide to suspend investment decisions until they know what kind of access the U.K. will have to EU markets. Britain has a substantial trade deficit with the rest of Europe, so supporters of Brexit argue that Germany’s car manufacturers, Spain’s hoteliers, France’s winemakers and other industries that profit from trading with the U.K. will help ensure a good free-trade deal if Britain chooses to go—but a period of uncertainty is inevitable.

Another danger: Scotland might reconsider its membership in the U.K. after Brexit. The restless, post-referendum Scots are much less euroskeptical than the English and might vote to stay in the EU even if the U.K. as a whole votes to leave. Nicola Sturgeon, the separatist first minister of Scotland, has already suggested that she might hold a second vote on independence under these circumstances, raising the possibility that the U.K. might break apart if Britain decides to break away from the EU.

All of these risks are real. But so are the risks of remaining part of a politically dysfunctional and economically declining EU. There is a strong economic case for British independence and a strong pragmatic case for believing that a Europe of such different political cultures cannot work, but the real reason why British voters should support Brexit is that we want our country to have what the U.S., Australia, Switzerland, Canada, Japan and other free nations already have: self-determination.

Britain is a shriveled power today. It cannot stop 430 million other Europeans from coming into its territory any time they like under the EU’s freedom-of-movement rules. It is regularly overruled by EU courts. It cannot form its own trade deals. Some 65% of U.K. laws since 1993 bear the direct or indirect imprint of the EU, according to research by one pro-business group.

When President Barack Obama called Mr. Cameron on Feb. 3 to relay “continued U.S. support for a strong United Kingdom in a strong European Union,” he was recommending something that Americans would not accept for themselves. Polling by YouGov suggests that less than a third of Americans would support open borders with Mexico, a joint U.S.-Canadian-Mexican supreme court to decide human-rights questions or a pan-American environmental agency to govern fishing policy. But as an EU member, Britain has to endure the equivalent of these policies—which is why Republican presidential candidates such as Ted Cruz, Marco Rubio and Jeb Bush have all expressed varying degrees of sympathy for Brexit.

The greatest fear of the pro-EU camp is that Brexit will start a chain of events that plunges Europe back to the dark years of the past. But these fears are overstated. NATO and the deployment of 250,000 U.S. troops in West Germany during the Cold War were the real foundation of stability in postwar Europe.

It wasn’t today’s EU that helped to ensure order, peace and prosperity but the European Coal and Steel Community that began in 1952 and the parallel, free-trading European Economic Community that was formed in 1957. Both of these bodies fulfilled the ambitions for free trade that the 19th-century Manchester industrialist Richard Cobden always sought for Europe. “I would not step across the street just now to increase our trade for the mere sake of commercial gain,” Cobden wrote. “But to improve moral and political relations of France and England, by bringing them into greater intercourse and greater dependence, I would walk barefoot from Calais to Paris.”

When the countries of Europe became integrated in trade after World War II, they fulfilled the dictum often attributed to the French economist Frédéric Bastiat: “If goods don’t cross borders, armies will.” But sadly, many in Europe weren’t content with mere trade. Many of the EU’s founders always intended to build something grander—a United States of Europe—and tried to build it too quickly on sandy foundations.

It should now be clear that it’s impossible to have a successful single currency without a genuine fiscal union—that is, unified authority and decision making on taxing and spending. America’s single currency works because more than 60% of all taxes are given to the federal government, which then gives much more back to poorer states hurt by the economic cycle.

The EU has no such mechanism to produce equivalent social solidarity, and the Germans are unlikely ever to agree to be taxed heavily to bail out the Greeks or the Finns to help out the Portuguese in the same way that Americans in wealthier states are willing to be taxed to help out fellow citizens in poorer ones. Europe’s union simply lacks the necessary ties of history, language and kinship.

It will be a while before the EU decides its overall direction. Will it retreat from the grand plans that Thatcher criticized and return to something like the trade-focused model it had for most of the postwar years? Will it try to build a United States of Europe that would give Brussels the same kind of powers as Washington, D.C., to send financial aid to distressed parts of the EU economy or order European soldiers to stop refugees from entering the continent? Or, most likely, will it simply muddle through—facing periodic crises and chronic dysfunction but somehow keeping the show on the road?

Ideally, Europe would take the first course, but it is unlikely: Scaling down the union’s ambitions would repudiate the work of this generation of European politicians and their predecessors too. That is why Britain should choose independence in the coming referendum—and why, for at least two reasons, the U.S. should welcome that choice.

Brexit might be the shock that Europe needs to undergo serious reform. Neither today’s immigration crisis nor the prolonged economic hardships caused by the single currency have provoked reform, but seeing Europe lose its fastest-growing major economy might prove to be the proverbial straw.

Once outside the EU and disentangled from the red tape of Brussels, Britain also will be able to form its own free-trade agreements and to implement a points-based immigration system, choosing only the talented, skilled immigrants that the U.K.’s economy needs. Britain after Brexit, in other words, will be a stronger Britain—and the U.S. should want strength for its most steadfast global ally.

Even if Brexit doesn’t shock the EU as a whole into reform, it may encourage other EU members to break free on their own, which is all to the good. The U.S. needs allies that are as nimble and fast-moving as global events. Multinational bodies like the EU and the U.N. only ever move as quickly as the slowest country in the convoy. The U.S. needs its allies to be strong and independent—not submerged within a clunky, clumsy EU that idly declares its distant hope for a unified front in matters of defense and foreign policy.

Yes, for two or three years, a post-Brexit Europe will be bumpier and more acrimonious. But the temporary upset will be worth it if it transforms the continent from a collection of unhappy tenants of a would-be superstate into vigorous, happy neighbors, cooperating where it matters most but otherwise operating as free, self-determined nations.

 

http://www.wsj.com

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