Stability vs Prosperity and Sovereignty

It appears that Mark Carney, Bank of England Governor, prefers stability at the expense of British prosperity and national sovereignty. He said last Tuesday that

uncertainty surrounding the outcome of the coming referendum on Britain’s future in Europe is already being felt in financial markets, and that a vote in favor of leaving could cause a short-term hit to the wider economy.

A possible departure represents “the biggest domestic risk to financial stability,” Mr. Carney said, with potential consequences for Britain’s balance of payments with the rest of the world, its housing market, foreign investment and its banks.

“It is a risk to domestic financial stability, and it has some potential to amplify pre-existing risks to financial stability[.]”

Of course things will be turbulent during the transition from EU member, subject to lots of EU regulation that runs contrary to British law or what the Brits would prefer to be British law (things like being required to spend British taxpayer money as benefits to non-citizens and to non-citizen family members not even resident in Great Britain—Prime Minister David Cameron’s tentative agreement with the EU is only a temporary measure).

Don’t want the uncertainty of the outcome of the referendum? Then Carney should get behind the exit and reduce the uncertainty.

What would the British get from leaving the EU? Quite a lot. London’s financial district would be free to operate on free market principles, not EU rules. Great Britain’s tax laws would be set according to what’s good for Brits and British business and for attracting foreign businesses and investment, not according to protecting precious continental jurisdictions from the evils of tax competition. Great Britain’s private enterprises would be free to operate in accordance with British law and not EU regulation.

What would the British lose from leaving the EU? Those impediments. Not much else.

Staying in the EU would provide a strong measure of economic stability; those rules are established and well understood. But that stability is only intermediate; the EU will dissolve in the foreseeable future. The current refugee flow crisis is not the threat, though, for all the press it’s getting. No, the threat is exactly what the British would be avoiding if they succeed in leaving: economic dissolution. That threat was made manifest by the Panic of 2008 and emphasized by the Greek default crisis. These exposed the utterly differing and irreconcilable economic philosophies of the constituent members.

The transition ensuing from that dissolution will be far more destructive than any sneezes from a Brexit in the next couple of years.

Leave a Reply

Your email address will not be published. Required fields are marked *