More and more commentators are coming around to the point of view that a crash out Brexit is likely. As we’ll discuss below, it appears to be very probable. Even though most people tend to think of politics as a realm where positions can and do change and parties regularly makes strained compromises, as we’ll explain, there are boundary conditions that at this juncture make it very difficult not to have a hard Brexit.
One reason that the high odds of a no-deal Brexit are not being more widely recognized is that the consequences, not just for the UK but also for the EU, are sufficiently dire that many observers, particularly those that have not gotten into the weeds, assume that Sense Will Prevail and the Brexit train will therefore not be allowed to plunge off a cliff. Another reason is the Ultras are telling baldface lies of the “This is all Project Fear intended to deny you the benefits of a glorious Brexit!” sort. Sadly, they are getting far more press than they deserve and not enough effective pushback.
In the runup to the crisis, Richard Bookstaber published A Demon of Our Own Design, in which he described how “tight coupling” produced financial crises. “Tight coupling” occurs when a systems are too tightly integrated and processes can move too quickly to be halted, resulting in the system spinning out of control. His examples included how portfolio insurance led to automated selling in a large market drop, producing the 1987 crash, and Three Mile Island. One of his observations was that in a tightly coupled system, emergency measures to reduce risk generally wind up making matters worse.
Another Bookstaber case study was the start of World War I. He took the Barbara Tuchman Guns of August view, that treaty obligations and demands of loyalty and honor forced key countries to declare war when the state of communications of the day prevented them from speaking to each other and finding other responses.1
Even if Bookstaber’s World War I illustration is arguably strained, he is still getting at a larger truth: political events can develop a momentum that in combination with deadlines look an awful lot like tight coupling. There isn’t enough time to create the needed room to maneuver to stop or divert a rush to action.
Readers may beg to differ, but here is why a crash out Brexit looks awfully close to inevitable.
The Brexit Date Is Rigid, and Any Concessions Won’t Be Given to Help the UK
The EU will let the UK back out of a Brexit, but that’s a non-starter on the UK end. Barnier and some EU national leaders have said they’d welcome the UK doing an Emily Litella “Never mind” with respect to Brexit, even up to the very 11th hour. Accepting a petition to nullify the invocation of Article 50 would presumably take a unanimous vote of the EU27, but it is hard to see why any country would oppose it. The hardlines would welcome the spectacle of the UK admitting it needed the EU. The countries that are more friendly to the UK are the ones that have strong trade exchange, and they would be relieved not to be taking a large economic hit.
One possible stumbling block even if the UK were to grovel would be the EU would be within its rights to demand some concessions for being put through the nonsense of the last two years, like having the UK agree not to invoke Article 50 for at least X years.
The EU has been discouraging the idea that the UK might get an extension of the Article 50 deadline with no deal in place. Privately, EU officials have signaled that they might be able to push out the drop dead date if both parties were negotiating in good faith and needed a bit of time to get all the points nailed down. Even then it would presumably take a vote of the EU27, which is a high bar. And those sources have also indicated that the EU will be receptive to the idea of an extension only if it is in the EU’s interest.
Another reason why an extension wouldn’t be the break for the UK that it might otherwise appear to be is that the EU is not likely to push out the drop dead date for the transition period, now set for December 31, 2020, just because the UK didn’t get serious about negotiating until very late. The EU has been hardnosed about the 2020 limit because going beyond that would mess up EU budgeting and Parliamentary representation.
The EU Is Not Going to Cut the UK Any Slack
The fact that chief negotiator Michel Barnier regularly strains to appear to be polite to UK counterparts who would drive most sentient beings mad is not the same as making concessions, misinformed UK commentary to the contrary.
European leaders have said to the English language press that they regard Brexit as yesterday’s business when the EU has more pressing matters. They are not sympathetic to what they regard as UK stunts. The UK had virtually no friends in the EU when the UK invoked Article 50, and UK’s conduct since then has only served to harden opinion against them.
Even more important, there is close to no European press coverage of Brexit. There is no upside for being generous to the UK. The very morning after Brexit was announced, and consistently since then EU leaders have said that they expect that they will suffer as a result of the UK’s divorce, so in their minds they have already marked this trade to market. And EU business leaders supported the decision to prioritize preserving the integrity of the EU over economic considerations.
Now as the Brexit drop-dead date approaches, EU corporate executives are sounding alarms, in part because many of them discounted the possibility of a crash out. And Eurocrats and politicians are also likely to be underestimating the GDP hit of a disorderly Brexit. But there does not seem to be much willingness to change course on the EU side, in large measure because the UK, to the extent it is negotiating at all, has been negotiating in bad faith.
The UK Is and Will Remain Incapable of Getting Out of Its Own Way
I hate to tell you, this part of the equation is not hard to parse, despite all the noise in the UK press.
The Government has painted itself in a corner. Unless something very radical happens in the next few months, the UK has assured a “no deal” outcome through its position on the Irish border. For a whole host of reasons, a land border is not workable. The UK’s attempts at technology and regulatory fudges will not work. It is absolutely unacceptable for any EU country that regards its agricultural sector as important to allow Ireland to serve as a channel for smuggling in non-complaint products. The only viable option is a sea border, which was the backstop plan in the so-called December Agreement.
As Brexit followers recall, Theresa May rejected the existing version of the backstop over the summer, and has yet to propose a new one, even though the EU requires that there be a backstop of some form.
The EU has also made clear that coming up with an Irish border solution is a preliminary to concluding the Withdrawal Agreement.
A couple of weeks ago, DW gave a good recap of the state of play:
The UK’s Brexit negotiations with the European Union are at an impasse — that’s according to Prime Minister Theresa May. In a letter to her own divided Conservative party, she admits that, surrounded by red lines she is not allowed to cross, she can neither push ahead nor turn back…
Brussels has rejected May’s latest proposal, which would have meant negotiating a kind of free trade area only for goods. Just 11 percent of UK citizens liked that plan, according to opinion polls…
There are no viable proposals either on trade issues or the border between Northern Ireland and Ireland. The British government is set on a vague statement about its future relationship with the EU. However, Brussels is insisting on a concrete exit treaty that would at least finalize essential questions regarding finances, borders and civil rights. It is clear that time is getting short…
Up until now, the British have negotiated by playing dead and only coming up with something substantial and concrete at the very last moment, but that is not likely to work this time around. May’s attempt to split the EU with charm offensives in Paris and Berlin has failed. The UK’s negotiating position is growing weaker by the day.
There is not remotely enough support in the UK for undoing Brexit for that to be a viable political position. No party is pumping to exit Brexit. And if the Guardian is to be believed, Labour is in the process of tearing itself apart.
Richard North highlighted a new poll in The Sun that found that 59% of the respondents said “I’m really bored by Brexit”. 55% oppose a second referendum and 40% think the UK should stick to the original March 29 Brexit date, deal or no deal.
And to add to the direction of political energy to useless ends, the latest distraction are the calls for a second referendum. A referendum is silly because it was only advisory in the first place. If sentiment towards Brexit had really changed, so that polls were consistently showing 60%+ now opposed, there’d be no need for such a nicety. A second referendum is merely a means of providing political cover.
We have already pointed out that there is too little time between now and March 29 to complete an referendum. There is also not enough time to legislate new procedures, and the Ultras are guaranteed to contest any referendum that did not adhere to the legal requirements, and they’d be correct to do so.
While the Independent cites a YouGov poll commissioned by People’s Vote with markedly different findings, that 45% of respondents support a second vote versus 30% who don’t, and 53% now say they’d vote Remain, that is not a give enough change to embolden politicians to stick their necks out and change their positions on Brexit much, if at all. And that’s before factoring in that there is a contingent of Leave voters who are fervent in their belief in Brexit, which is not matched by similar passions for Remain. Clive highlighted this section of a Guardian story earlier this month:
It would be comforting to think that what George Orwell called “the gentleness of the English civilisation” would mean that an overturning of 2016’s outcome would be grudgingly swallowed by the vast majority of leave voters, but I would not be so sure. Ukip is back in the polls, and has newly strengthened links to the far right.
A couple of weeks ago, I was in Boston in Lincolnshire, the town whose 75.6% vote for Brexit made it the most leave-supporting place in the UK. Many of the people I spoke to were already convinced that Brexit was doomed, and full of talk of betrayal. Some of what I heard was undeniably ugly, though much of it was based on an undeniable set of facts. People were asked to make a decision, and they did. The referendum was the one meaningful political event in millions of voters’ lifetimes, and we were all assured that its result would be respected. Whatever the noise about a second referendum, this is the fundamental reason why the likelihood of Brexitinterrupted remains dim.
If we take that as a given, anyone involved in progressive politics ought to focus on one imperative above all others: the defeat of the zealots who saw the dismay and disaffection of so many potential leave voters, opportunistically seized on it – and now want to pilot the country into a post-Brexit future that is completely inimical to their future.
In other words, despite growing awareness of and anxiety about the lasting damage that would be caused by a crash-out Brexit, it is difficult to find any channel for changing the trajectory of the course that Theresa May set in motion by invoking Article 50, and further restricted by her decision to nix the Irish backstop with no acceptable alternative in hand. It is possible to change public opinion in surprisingly short order with a concerted propaganda campaign, but there isn’t enough unanimity of elite opinion to set an effective program in motion.
It would be better if I were wrong, but Brexit has all the makings of Lehman-level event, although the knock-on effects would probably not unfold as quickly as they did in September and October of 2008. Not only would there be considerable disruption to some key EU ports, but the near-impossiblity of coming up with aviation agreements would lead to considerable dislocation of flights.2 And that is before getting to the scenario that Willem Buiter thought was a real risk for the UK in 2008: that of becoming Reykjavik on the Thames, of suffering banking crisis that would lead to a sovereign debt and currency crisis. And if anything Seriously Bad were to happen to UK banks while the EU economy was taking it on the chin, it’s not hard to see EU banks starting to go wobbly.
As Bette Davis once said, “Fasten your seat belts. It’s going to be a bumpy night.”
1 Later studies of the start of World War I, such as Christopher Clark’s The Sleepwalkers, describe how bureaucrats and pols in many of the key countries were hawkish, but the monarchs less so. It’s very hard to judge counterfactuals, but a key element in the start of World War I was that Kaiser Wilhelm was inaccessible on his steam yacht when the Archduke was assassinated. Had he been part of the mix, it is not out of the question that the ruling families would have played a bigger role in decisionmaking and produced a different outcome.
2 Reactions to this issue too often fall in the “This is so terrible, of course it will not be permitted to happen.” The wee problem is that commercial airlines are heavily regulated and the operators accept the importance of regulations for safety reasons. No airline would violate the rules. Experts have also said it would take five to ten years for the UK to negotiate replacements to the agreements in which it participates via the EU. I haven’t seen anything that suggests that the UK is even remotely on track to solving this problem.