Our New York Magazine Article is Up! “We’re Headed for a Brexit Crashout”

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Our piece on Brexit was a bit long in coming because New York Magazine had some delays with the expansion of their site, which in turn led to editing delays, which kicked this piece back into that overly dynamic period right before the October summit, which meant retweaking it to look sufficiently current. But hopefully you’ll approve of the final result.

It was a challenge to boil such a big topic down into a relatively compact space. Clive, PlutoniumKun, and vlade gave enormously helpful comments, to the degree that Clive joked: “It’s had so many of us waffling on at you. I think this poor little article should have had a human rights attorney assigned to it, with so many of us trying to torture it.”

New York Magazine lets me excerpt a big chuck which you see below, and then you need to proceed to their site. I hope those of you who are game to provide comments will go the extra trouble of leaving them there and here.

Thanks again for your help, and particularly for all the very insightful and informative comments we’ve received over he course of our Brexit coverage.

Worried by gyrating stock markets? Spooked by the ten year anniversary of Lehman’s collapse? Time to stop fixating on emerging economies like Turkey, or Trump’s trade wars hurting global growth, and turn your focus to the U.K. — which is even now, after last week’s summit, on a path to the worst sort of Brexit, a disorderly “no deal” in which the U.K. leaves the European Union with no agreement at all on March 29. That means no plan and no disruption-reducing transition period — which in turn means chaos at U.K. and E.U. ports, food and medication shortages, and, if we’re unlucky, an eventual U.K. financial crisis for which we’re extremely unprepared. And there isn’t a scenario that has a decent chance of changing that trajectory.

Brexit was always going to be a messy divorce, but there are better and worse settlements. Best would be an agreement with a transition period, which would hit the pause button on the U.K.’s departure from the E.U., while allowing it to negotiate new treaties with other countries like the U.S. and South Korea. This would amount to a two-stage exit, allowing the U.K more time to untangle itself from the E.U. and both sides more runway to adapt to a U.K outside the so-called Single Market of borderless trade.

But with five months before the Brexit deadline, the “best-case” version of Brexit seems far away indeed, and none of the recent attempts to salvage it have succeeded. In September, the E.U. let U.K. Prime Minister Theresa May pitch her so-called Chequers plan to the national leaders at an informal session at Salzburg, but the plan — named for the site where her ministers agreed to it in July — was dead on arrival, because it crossed clearly and repeatedly stated E.U. red lines.

A mid-October European Council meeting, where heads of member states convene, was then set as a make-or-break moment for Brexit. A flurry of negotiations before the summit came to naught; May rejected draft terms the E.U. negotiators thought had been settled. She gave a short speech before a Wednesday dinner but had no ideas on how to resolve the most stubborn sticking point, how to handle the Irish border.

And then the Council decided not to proceed with a possible November special session, penciled in earlier in case the U.K. and E.U. were on the road to an agreement. They’re not.

The European side tried to put the best face possible on the breakdown in talks, pointing to the goodwill on both sides. Later reports suggest the mood among officials was sober, as they are helpless to solve the fact that there is no consensus in May’s ruling coalition or across parties in Parliament on what sort of Brexit the U.K. should have. And the one change in position that May voiced in her talk — that the U.K. might consider a longer transition period — demonstrated how hard it will be to settle the open questions: May came home to a firestorm of criticism as every faction of the Tories and her coalition partner, the Democratic Unionist Party (DUP) called for her head, and important Labour MPs also savaged the proposal. With no meeting in November, unless something radical changes, the U.K. is now committed to the default option: a Brexit with no deal whatsoever — and no desperately needed transition period.

What are the impediments? Theresa May claimed in Parliament this week that 95 percent of the Final Withdrawal Agreement has been completed. Items like a financial settlement (the so-called “Brexit bill”), the rights of E.U. and U.K. citizens, and even the once-heated issue of Gibraltar have been sorted out. But just as it’s possible to drown in six inches of water, the intractable 5 percent is enough to produce an impasse.

One sticking point is the fate of what the Irish call the British border in Ireland, and the U.K calls “Irish border….

Story continues here. Enjoy!

Any suggestions on what to write about next appreciated. I have a second piece that I’m staring on soon, but more ideas in the hopper always helps.

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  1. Tom67

    Thank you for all the Brexit coverage. To my mind you are the best! Lived in Mongolia when you published Econned and had it send all the way there. What a book! Fervently hope you are wrong for once. Afraid you are not.

  2. John Zelnicker

    Yves – You might want to separate the article from your intro with indents, or something more than a regular paragraph break.

  3. John Zelnicker

    Yves – Just finished the article.

    Excellent! Kudos!

    I think you achieved your goal of getting a lot of information into a relatively compact format.

    In fact, even though I have read almost every Brexit post you have written, I still learned a couple of things that I had not picked up before.

  4. ChiGal in Carolina

    FanTASTic, will see if I can go to NYM if only to plug NC. I don’t really comment on Brexit cuz you’ve made clear the basic takeaway and the details are above my pay grade.

    CONGRATULATIONS, Yves, so glad to see you reaching a wider audience.

  5. Ignacio

    Excellent article Yves! I have just linked it to groups that I consider should be interested.
    In spanish i would say “¡de lujo!” and I really mean it.

    The trickiest thing is to come up with some kind of prediction of what migth happen next and I think you nailed it. My thanks are extensive for vlade, Clive and PlutoniumKun as well as other commenters here that I don’t mention by their name just in case I forget some I appreciate.

    I promise to register myself next time on the magazine which is required to comment.

  6. Jeremy Grimm

    I have not followed BREXIT and when it first came up I didn’t understand how it could become so complicated. I was wandering through Adam Tooze’s blog site and ran across a couple of charts in one of the posts that gave me pause. Charts #2 and #4 show China’s role in the global trade network and in the global banking system respectively. BUT my takeaway was a sense of the disproportionate size of the United Kingdom particularly in its role in global banking [https://adamtooze.com/2018/06/23/framing-crashed-1-trade-and-finance-two-different-visions-of-the-twenty-first-century-global-condition/]. These charts gave me an entirely different impression of BREXIT and its potential impacts — especially a BREXIT crashout.

    Separate question — Does the New York Magazine have any special offers for readers of NakedCapitalism?

  7. Michael Walsh

    Kudos on the article!

    The full article is a very comprehensive overview – very difficult to do without getting stuck in the weeds of a/the customs union and regulatory alignment.

    Other topics worth considering for future articles:
    – Algorithms – The GIGO blindspot and how it will affect everything you do in the future.
    – The Gig Economy – A covert demolishing of workers rights?
    – QE – Asset prices went to the moon, wages stagnated and that’s why we’re all screwed.
    – WTO – What happens if Trump says he doesn’t want to play anymore?
    – Climate Change – The economic case for saving the planet.

    1. ChrisPacific

      My top pick would be “How Private Equity destroys businesses, communities and careers for profit (and is celebrated for it).”

      Given the audience, it might be worth waiting until a solid track record is established there before tackling that one.

      1. OpenThePodBayDoorsHAL

        Huh? PE denizens are capitalist heroes. The 175,000 Sears employees were just takers, with their meaningless duties (keeping the stores running) and their ridiculous demands (wages). Now they’re free to get with the program: find an asset, borrow the max to buy it, strip it of value, and then walk away with the cash. #Winning!

    2. Jack

      I think a great article would be one on health care and what a true single provider source would cost. Many polls show health care is the number one issue now in the upcoming election. And Lambert has already done a lot of heavy lifting on that subject. There is way too much disinformation out there about universal health care, just like Brexit. NC and now you Yves individually have been a true fount of truth on the Brexit issue.

  8. Jim

    One thing is clear: the Naked Capitalism commentariat is far more nuanced and understanding of the dynamics driving Brexit, Trump’s defeat of Hillary Clinton, etc, than will be found over at New York Magazine. The comments posted below Yves’ wonderful article are overwhelming from the “Blue Bubble,” with a dose of “Russia, Russia, Russia” accompanying the main course of deplorables-bashing. Let’s hope at least a few readers of the magazine piece will be curious enough to venture over to Naked Capitalism itself.

    1. Yves Smith Post author

      That is in large measure due to the considerable input of PlutoniumKun, Clive, vlade, David, Colonel Smithers, and other readers who I am no doubt neglecting and apologize for that.

      I see RBHoughton just now tried doing some re-education. If any readers could pipe up at New York Magazine to help that process, it would be very much appreciated. The comment about “the UK is too smart to do this” was particularly comical.

      1. Lambert Strether

        Logging in at New York magazine is not onerous. You don’t have to use social media, though you do have to give an email address, which is validated (I have several :-)

        Somebody at New York Magazine is probably checking the comments for numbers and quality, so it couldn’t hurt to improve the shining hour by going over there and adding your voice (though I’d try to be as brief and sunny as possible, since we don’t know that community, or even if it is a community (and don’t want to be a pain to their moderators, either)).

        Also, I’m happy about New York Magazine, because I think that, despite the presence of the pawky Jonathon Chait, it’s the best of the New York glossies. Better than the snooty and uber-10%-ey New Yorker, which is so not what it once was, or Vanity Fair, which is what is is. It strikes me that I don’t even know who New York Magazine’s editor is, which I view as a very good thing, since editors should be all about centering writers and vanishing into the background (***cough*** Tina Brown ***cough***). I also confess to a guilty pleasure: The Strategist, which is all about shopping, and taking a great deal of pleasure in it, too. But there are times when I need to shop for kit or gear!

      2. Science Officer Smirnoff

        I’m a “general reader”, and Yves’ NY magazine writing is superb.

        P. S. Again, see Eric Levitz for that magazine’s best writing (nominee by me).

  9. VietnamVet

    Great article. This finally made it clear to me why an open Irish border and the “backstop” can’t work. It the UK crashes out of the EU; the Good Friday Agreement is null and void. Until the customs system is setup and enforced, all goods imported into the UK will be illegal. International Service Contracts with the UK won’t be worth the paper they are written on. Crooks and smugglers will have a field day. This will take years to sort out with unspeakable damage to England which can spread across the world if the City of London collapses.

    Our fundamental problem is that the New World Order was created (hidden in plain view) by propaganda and misdirection. This is a global supranational economic system of legal treaties that control world trade that works in conjunction with just-in-time logistics, US dollar hegemony, and fossil fuel. On purpose, the global economic system is separated from the mankind’s political systems. NAFTA, TPP, WTO and the EU are all superior to sovereign states. Shutting down the banks for two weeks and the subjugation of Greece shows its power. Brexit and Donald Trump’s election and his imposition of tariffs are a direct response to globalism and rising inequality. The problem is that the nation states, the politicians and especially the people have no clue about what the real problem is. It is the wealthy exploiting little people and the world’s resources to get even richer. Rather than surrender economic power, uppity nation states are destroyed. The only way to avoid the spreading chaos is the return of government by and for the people.

    I recommend “Quinn Slobodian – Globalists: The End of Empire and the Birth of Neoliberalism” that was cited here in the comments last week.

    NC is priceless.

    1. Dominique Vidrine

      Great insight, it does seem like corporations have more power that actual elected governments and especially how capital manages to skirt local laws and taxation, and now I think everyone is on to their game.. hopefully. Time will tell…

  10. The Rev Kev

    Let me offer you my own congratulations on yet another feather in your cap. I have just finished the article and found it a good estimate of the situation and lets people know the various factors having an effect on the Brexit calculations. As the New York Magazine is an ongoing commitment, may I suggest that a space be made for your articles in the Topics List? Be easier to look for them if they were all in one place for easy access that way.

  11. Sir Tim

    Hi there,

    Recently found Naked Capitalism thanks to some link or another in the Jacobin-TheBaffler-CurrentAffairs leftosphere. I love it. I’m an American living in France and doing a master’s in the Social and Solidarity Economy. NC is quickly becoming my #1 resource for getting in good natured debates with my professors and harsher ones with the students from the traditional economics master’s program, so thanks for that.

    As to the article, it was excellent on all fronts. I only have one quibble: it seems like a Labour government could theoretically cut the gordian knot for the simple reason that they would not depend on the DUP to keep the PM seat if they were in power. To my mind, needing DUP support is the fundamental and unavoidable reason that the Tories were never going to be able to solve the Brexit riddle. The only border acceptable to the EU is the sea, and that is the border that the DUP cannot accept. All of the Labour Brexit requirements have fudge room and can be negotiated, but there is no fudge in the Irish Sea.

    In my own humble and ridiculously unimportant opinion the only path toward a non crash-out Brexit would be a Corbyn government. And frankly I’m surprised the Tories haven’t put that together. Why not stick the hated socialist with having to administer a period of hard economics and bad politics and let the red flag get caked in mud? Then again, if we accept that DUP support made this an unsolvable problem from day 1, it was precisely May’s bad judgement in calling the snap election that got us here. All of which flows from Cameron’s world-historic unforced error of calling the referendum in the first place. I guess what I’m coming around to is that the Tories are either massive nitwits or would rather rule in hell than serve in heaven. Maybe both. Luckily for all of us, the brutally effective political party of Thatcher seems to be dead and buried.

    Just my 2 centimes d’euro. You’ve all been thinking about this much more than I have, so take my opinions for whatever they’re worth.

    Thanks for doing what you do. I’ll be sure to donate once I have an income.

    1. emorej a hong kong

      surprised the Tories haven’t put that together. Why not stick the hated socialist with having to administer a period of hard economics and bad politics and let the red flag get caked in mud?

      I have wondered the same thing since the day after the snap election results.

      it was precisely May’s bad judgement in calling the snap election that got us here.

      –The world record for bad judgement was triggering Article 50 without having given in more than a cursory read.

    2. Reg

      > All of which flows from Cameron’s world-historic unforced
      > error of calling the referendum in the first place.

      I believe one of the commenters at NYMag made this point as well. However, as I recall, the promise of a referendum was part of the Tories’ manifesto for the 2015 general election. So it wasn’t just a bone-headed idea DC came up with one day and said to himself ‘why not?’

    3. The Pale Scot

      Labour’s core consists of over 50 yr old unionists in the north that voted for Brexit, antagonize them and you don’t have a majority. Then you end up doing things like allying with DUP.

      Mention needed about transport and production insurance. All these policies require standards and certificates from organizations that UK is leaving. Planes, food safety etc standards are not part of the WTO. Uk has to have negotiated and signed onto these conventions. Currently they are parties to them thru the EU. 3/29 they aren’t. And they haven’t done a thing about it yet. Doing an EFTA/EEA thing still means this needs to be dealt with. There is no majority in the UK for any of the four options, leave, stay, Norway agreement or Canada agreement (which ain’t diddly). So a hard Brexit it’s gonna be. Art 50 doesn’t have a we were just kidding exception. UK pushed the button and they are on the conveyer belt out. Unless all 26 EU members agree to it. I don’t think that’s going to happen,. The Europeans are sick of the Brits, if they stay in they are going to be required to join the Euro and lose their hard fought “exceptions”

      Yves, someone is tracking me and labeling my comments about this as spam. It Isn’t, right?

      1. Yves Smith Post author

        I don’t know what you are talking about. We don’t have the capacity to do that. We do use a plug in called Akismet that filters spam comments to a spam folder (and we get thousands a day, so this necessary) but that operates only with the site and has no impact beyond that.

    4. Irrational

      More important to be in power, obviously.
      What astonishes me is that both Tories and Labour spend their time on party infighting rather than leading the country.
      Finally, congrats to Yves on the article and the wider reach.

  12. peter m.

    I very much appreciate your articles especially those about the Brexit, and I am glad for you that a more mainstream media organization is willing to publish those.
    Regarding Brexit, there are other possibilities opening up that might avoid a crash-out:


    On 21 September, the Scottish Court of Session – the highest court in Scotland –
    overturned an earlier decision and permitted a group of cross-party politicians to
    refer a question to the European Court of Justice (ECJ) as to the revocability of an
    Article 50 notification (Wightman v Secretary of State for Exiting the European
    Union). The poor reaction to Theresa May’s proposed Chequers plan, from the
    public and from EU leaders at the Salzburg Summit, make the full hearing to
    answer this question, scheduled for 27 November, all the more relevant.

    1. Yves Smith Post author

      Scotland is not sovereign. Even if the ruling is favorable, only Parliament is sovereign and only Parliament could revoke the Article 50 notice.

  13. peter m.

    I am glad for you a “mainstream” media is willing to publish your article about the Brexit, of of which I found extremely enlightening as to the intricacies of the topic, and the consequences of a crash-out.
    But there seems another possibility to avoid one, if the Scottish courts of Session application to the ECJ gets approved:

    On 21 September, the Scottish Court of Session – the highest court in Scotland –
    overturned an earlier decision and permitted a group of cross-party politicians to
    refer a question to the European Court of Justice (ECJ) as to the revocability of an
    Article 50 notification (Wightman v Secretary of State for Exiting the European
    Union). The poor reaction to Theresa May’s proposed Chequers plan, from the
    public and from EU leaders at the Salzburg Summit, make the full hearing to
    answer this question, scheduled for 27 November, all the more relevant.


    1. Yves Smith Post author

      The article did acknowledge that there was a case before the ECJ that if the plaintiffs won, would allow the UK to renounce Brexit unilaterally. But those plaintiffs cannot withdraw an Article 50 notice. Parliament is sovereign and only Parliament could instruct the Prime Minister to do so. Since the EU has pretty much said it would accept a UK effort to back out of Brexit, even at the very last minute, I don’t see that the case has any practical impact.

      1. disillusionized

        It will have some impact – the uk gov is the process of appealing it to the uk supreme Court.
        Which while eminently sound from a legal perspective is plainly stupid from a unionist perspective.

        1. Yves Smith Post author

          Please tell me what practical impact it has in light of the EU making clear they’d honor a revocation by the UK anyhow. You have not addressed the basic issue. The only thing it might do is bring more attention to the fact that revoking Article 50 is an option.

          1. disillusionized

            Oh no it will have no impact on Brexit (apart from maybe publicity).
            What it might do though is give the SNP yet another thing to talk about in the next independence referendum – the optics of the uk supreme court telling the Scottish court go away is problematic.
            And as you say for no good reason whatsoever, since whatever conclusion the ecj reaches it won’t impact the legal situation. Since uk parl is the only entity that can revoke anyway.
            It’s pretty classic tory unionism, tactless and pointless.

  14. William Hunter Duncan

    I am a news junkie and a long time connoisseur of economic collapse scenarios, but I admit I have been perplexed from the beginning about Brexit. I sympathize with those who want not be subject to EU technocratic overlords, and Brexit seems the only way to regain some sense of autonomy and self-determination, (if in the sense that the local overlord is easier to deal with than the untouchably distant.)

    A few things are perplexing to me, namely, I imagine the Torries generally were the greatest beneficiaries of the one market, and yet they seem to be leading the movement to separate. Labor I would have thought, specifically working people, would have been harmed the most by labor arbitrage embedded in EU labor law, but seem to be ok with being ruled by unelected mainlanders.

    At the same time I would have assumed the instant a Brexit vote was assured, would have been the time to start negotiating one-off trade agreements. I would assume too that if you are going to divorce yourself from such a large market and labor pool, you would want to focus internally on how to fill basic needs, which could be very good for working people, if Labor stands for anything.

    It all seems like a residue of Imperial Britain and the financialization of the City of London, chafing at the loss of sovereignty but functionally useless outside any neo-colonial, high tech domineering context. It sort of reminds me of what Kunstler has long said about Japan, they will be first to return to a pre-industrial existence. After Brexit, after North Sea oil goes into terminal decline, where Britian will find the energy to maintain the banks and financial status quo, I have no idea.

    1. Yves Smith Post author

      The UK is not allowed as a member of the EU to negotiate new trade agreements until it is no longer an EU member. That’s in the treaties. Now it could perhaps have preliminary discussions, but trade agreements take years to negotiate even in the best of circumstances. The only exception is deals with the US because the US dictates terms.

      1. William Hunter Duncan

        So there really is no leaving the EU without being effectively exiled from the global economy? Joining the EU under such terms, betting the future of your nation on unelected technocrats and the ECB? Sounds like a bad bet to begin with. Much too late now to question; it sounds to me like there was never any alternative but a disorderly, hard Brexit, depending on the pluck and plumb of ordinary Britain’s.

        1. disillusionized

          You can depart slowly and maintain your position in the eea to reduce the impact (as well as have some luck in rolling over third country deals).
          Also the EU is run by the council, not “unelected technocrats”.

Comments are closed.