Tuesday, 14 June 2016

The verdict: the choice

Following a scoping exercise, the next thing to do is to choose an action.

The choice is between:
  • Vote for UKGov to stay in the European Union;
  • Vote for UKGov to leave the European Union;
  • Abstain (no vote).


Where abstention cannot be justified

There are many more significant policy choices that damage ordinary citizens around the world - 0% interest rates being foremost amongst them, along with the dead weight of the debt that they prop up, followed by climate change and adjusting to changes in demographics - than the subject of this referendum.  So this would tend towards abstention.

However, to take 0% interest rates as an example, the European Union has no direct contribution to this policy, but it has chosen to adopt the same policy via the European Central Bank, and thus brings interest rate policy into scope of the referendum (albeit indirectly).  The European Union could have picked a different monetary policy, to unpervert capital markets, but it has chosen to join the rest of the world in squandering private savings.

Therefore, on this fundamental issue, abstention cannot be justified.

The European Union does have a material impact on ordinary citizens via law, in all combinations of direct, indirect, primary, secondary and tertiary.  The European Union is a middleman for international regulation.

Therefore, on this second fundamental issue, abstention cannot be justified.

Economic consequences of policy choices are relevant to the referendum, because ultimately public choice of policy is what democracy is all about.  There are two major policy choices with major economic consequences nexus to the referendum:
  • Social protection law (aka employment law);
  • Monetary policy (the Eurozone).

Therefore, on these policy choices, abstention cannot be justified.

Historical perspective supports a vote, not abstention

The huge benefits that the European Union have brought to its peoples between 1958 and 1992 are historic, both in the senses that:
  • they were remarkable achievements and worthy of considerable praise; and
  • they are yesterday’s achievements.

Since 1992, the political, ideological objective of federalism for the sake of federalism has superseded (and undermined) all of this good work.  The imposition of the Eurozone was the tail deliberately introduced to wag the dog.  The Eurozone - a single currency - was always going to have massive, negative economic implications, because it screws up the valuable information of currency prices, exterminating the basic information of the price mechanism.  A common currency to last for ~100 years would have been a better idea, because it would have allowed for a very long period of transition.

But the European Union chose otherwise.  Immediately, painful structural reforms became necessary to make the Eurozone work.  And inevitably, the Europeans - particularly the southerners - fought hard against such economic gravity.  Members of the European Union chose instead to re-inforce protectionism (failure to widen the Single Market, failure to enforce the Single Market properly, restricting employment practices still further, and so on, so-called ‘solitarity’).

As a consequence, the European Union shows that it actively refuses to learn that bad politics results in bad economics, and that bad economics results in bad politics.

In other words, the referendum is all about governance and policy choices.

The European Union plays repeated rounds of Game Theory/Prisoners’ Dilemma/Red-and-Blue Game, and has yet to learn the optimal outcome of debunking emotionalism, debunking nationalism, banishing corruption and engaging in rational co-operation.

Instead, as with all things left-wing, solidarity tends to be invoked, becoming a toxic mix of denial, avoidance and nailing jelly to the ceiling.  Groupthink arises, vested interests (lobbyists, including government departments) exploit the opportunities that groupthink presents - typically, the gaps between the unjoined-up thinking - and policy choices becomes perverted and corrupted.

As a consequence of this archaic and self-obsessed policy making process, European member states tend to promote policies that they knows will damage others at least as much as the same policy damages itself.  Classic Game Theory!  The two policies of monetary union and social protection are both a classic examples of such tendency.  As a result, the European Union has evolved into a socialist Sovietesque apparatus, imposing illiberal socialist Sovietesque policy choices.  It is this current evolution of today’s European Union that aggrieves me the most.

This is an ugly political environment, which can only worsen over time, until each member state dismantles its social protections and adopts Anglo-Saxon individual liberty and a freer market in labour.  There’s no chance of that ever happening in the current European Union.

It seems that European governments actively choose:
  • not to learn from their own histories;
  • to wilfully evade accountability to the taxpayers who pay governmental salaries.

Pardon the melodrama, but I think the evolution of the European Union since the European Exchange Rate Mechanism has done more to propel Europeans back to war than anything the European Union has dreamt up since 1945.  

Vote EurIn?

Basic analysis

A EurIn vote is actually conditional upon European acceptance of Cameron’s ‘mid-air’ deal of 19Feb2016.  The deal exempts Britain from federalism in exchange for UKGov ceasing to obstruct federalism.

Given the realpolitik above, it hard to see what this part of the deal actually means.  UKGov would still need to fight damaging European Union policy choices, so either UKGov will renege on the deal immediately, or it will accept full membership of a federal Europe as the Treaty of Lisbon requires.  This fighting costs resources, which would be better deployed elsewhere (e.g. contributing to a proper energy policy, for example).

A EurIn vote will prompt the European Parliament to consider the Cameron deal of 19Feb2016.  I think the European Parliament would reject the Cameron deal because it basically breaks the Treaty of Lisbon.  I’m sure they try and botch it, but this means obeying an unwritten script in blatant conflict with the written rule (“a gentleman’s agreement”).  That’s a dangerous game to play.

Consequently, UKGov would ultimately see its ‘mid-air’ position vanish in front of its face.

UKGov shall ultimately need to choose between federalising with the rest of the European Union (which it says it doesn’t want), or invoking Article 50 to leave the European Union (contrary to a EurIn vote).

There is evidence to show that UKGov is more often in the losing minority of decisions than not.  In other words, UKGov has insufficient influence within the European Union as it is, and this little influence would continue to decline as the other European countries deepen their federal integration.

To stay stubbornly in the European Union after the European Parliament rejects the Cameron deal would simply waste British taxpayers’ money on pushing political mercury uphill with bare hands.  So invoking Article 50 and withdrawing from the European Union would then become the salient strategy: cut losses, and get out.  So much for a EurIn vote!

The Cameron deal of 19Feb2016 is so easy to side-step that the European Union will never accept a EurIn vote as a rejection of ideological federalism.

Are the European Union’s policy choices viable anyway?

A meaningful EurIn vote requires at least some consideration of how economically viable the European Union is likely to be as an entity, with or without UKGov.  But it is important to note that this analysis can only underpin a vote in favour of EurIn, it cannot justify a vote for EurIn.

Amongst the policy choices of a federal Europe, choices shall likely continue to be more social welfare, more social protection, more barriers to entering markets, more barriers to trade, more barriers to downsizing, more barriers to pooling risk, more inventive ways of making European citizens less and less employable.  This goes in precisely the opposite direction of what is objectively needed, and against even the rest of world, which recognises that social protection has a very high opportunity cost.

The Europeans have wanted to ‘protect’ their jobs by law, without economic support, and as a result will probably find themselves replaced by cheaper, more reliable, less strikey, less greedy robots.

A vote in favour of social protection is, in substance, a vote for economic suicide.  A vote for EurIn is therefore a vote in favour of a European Union that wrongly prioritises social protection over the ability to pay for it.  Financially and economically, the mathematics don’t stack up.  Yet, whenever governments offer their demos a choice of more welfare or less welfare, the demos always vote for more welfare, as if the money to fund it grows on trees.  Like spaghetti.  Do European governments expect bondholders to pay for welfare with zero chance of repayment?

This vicious circle compounds.  The European Union suffers a demographic time bomb: aging populations spend less than younger populations, so where economic growth is measured by the number of transactions, growth could be nearly zero for the next few decades.  0% interest base rates add to this pressure, because 0% interest base rates pervert investors away from meaningful investments and towards financial engineering, as a substitute for growth, or worse, simple protection of existing savings.  A crisis of confidence in fiat currencies - USD, GBP, EUR! - is arguably on the cards.

The sole short- and medium-term relief is likely to be mass, inward immigration from outside the European Union.  Or the rapid accession of Turkey into the European Union.  This might be Europe’s best chance of generating enough growth to fund today’s overdraft from yesterday’s welfare states, and might start towards funding tomorrow’s pensions for tomorrow’s welfare states.  But the immigration rate would need to be extraordinarily high within a relatively short period of time (less than, say, 10 years).

The longer-term relief is likely to be the use of intelligent robots to care for elderly western humans.

All three of these reliefs are going to be very unpopular.  Never underestimate the ability of the demo to vote in favour of economic suicide.  As Churchill said, the cure for democracy is five minutes with the average voter.

Therefore, I see no viable strategic, medium-term economic future for the current European Union, and a whole tonne of political pain as southern Europeans seek to defy economic gravity.

Outside the scope of this referendum, I believe that a better strategy for the European Union is to revert to its position of 1988, then divide into a northern European Union and a southern European Union.

Alternative, or side, arguments

Some arguments in favour of EurIn suggest that Europe needs Britain, if only to save the Europeans from themselves.  I have never understood that argument.  Aside from the ‘Game Theory’ realpolitik described above, why o why o why should one government ever need to persuade other governments to think rationally?

I have considered the “preservation of democracy” argument proposed by William Hague (amongst others).  Ultimately, Hague urges us to stay in Europe and reform from within.  Hague defends the ‘mid-air’ position as it if could preserve the status quo.  But the above analysis shows that the status quo depends upon the ‘mid-air’ position, and the ‘mid-air’ position simply cannot survive even in the short-term.  So the ‘preservation of democracy’ has no basis; to believe in it is akin to believing in ghosts.

Beyond Hague, Donald Tusk has claimed that a Brexit would destroy Western political civilisation.  On balance, I reject his contribution as the nonsense of Project Fear.  A Brexit might destroy today’s ruling elites, but I can’t see how it could destroy Western political civilisation.

I have considered the basic case for European foreign policy in preference to individual member nation foreign policy.  Here again, ‘solidarity’ causes Game Theory problems - promise to hold together, then break ranks while no-body’s looking, and rake in some cash - which in turn would, to take one example, play into the cunning of Russia, and leave America unable (or unwilling) to bail Europe out again.  It would be the same if the European Union didn’t exist, or were replaced by a non-treaty consortium of European governments.

A European foreign policy would be credible only if European economic growth were  environmentally, economically and financially sustainable.  As there is no evidence that Europe is making the necessary structural reforms - quashing socialism, dismantling the ‘entitlement state’ of job protectionism - there is therefore no prospect of any sustainability compatible with foreign policy strength.  Europe shall continue to be a wealthy group of nations in decline, with a growing propensity to hold out a begging bowl for more cheap debt to fund yesterday’s spending splurge on wasteful welfare.

I have considered the effect of UKGov becoming part of a federal Europe, and the possibilities that the European Union could offer us to make UK democracy more workable.  However, whilst there is merit in this argument for a former Soviet state in the east, I see only downside risk for older democratic states like UK, Ireland, Denmark and Sweden.  Were the EU ever to harmonise democracy within its federation, I expect it would be to extend the current German federalist structure with a thick layer of anti-democratic French-style technocracy, resulting in a significant gulf between the scope of the electoral mandate and the nitty-gritty of details that really matter in law.  The scope of abusive lobbying - by governments, by political parties, by corporations, by non-governmental organisations and so on - would widen still further.  Precisely what I don’t want to see.

I have considered the Common Agricultural and Fisheries Policies.  Objectively, there is no economic imperative for farm subsidies, as New Zealand proves hands-down.  NZ suffered a short-period of ‘cold turkey’ as NZ farmers came off the financial crack-cocaine of subsidy, but then woke up to how much more profitable life was without subsidy.  By contrast, the European Union - lobbied particularly by France - seeks to protect subsidies for the sake of short-term politics… short-term politics that has been dragging out for years.  The consequences include ‘social dumping’ of excess production onto world markets at below-cost prices, causing poverty to some parts of the world (most notably South America).  The Fisheries Policy has wiped out the British fishing industry and done too little, too late to conserve fishing stocks and to enable sustainable fishing.  The rationing of fishing rights appears to be thoroughly unjust and poorly implemented across the EU.

I have considered the chances of national governments of Europe realising how redundant they are in a European superstate.  I find this prospect tempting, but it won’t happen in my lifetime!  The process by which a federal Europe will render national governments to the equivalent of parish councils is widely embraced (most notably in UK by Kenneth Clarke), but it shall be very, very painful, and will trigger severe adverse reactions in some governments.

EurIn conclusion

Therefore, I see no sense in voting for UKGov to keep membership of the European Union.  Cut losses; get out.

Vote Brexit?

Basic short-term analysis

Voting Brexit means swallowing the short-term economic and political consequences of:
  • the Brexit result; and
  • trusting UKGov to time and plan its invocation of Article 50.  This’ll be the same UKGov that thinks a ‘mid-air’ position is sustainable.

There is no consensus about what a Brexit vote actually means.  Does it mean:
  • Out of the European Union, but in the Single Market?
  • Out of the European Union, and out of the Single Market?
  • Out of the European Union, out of the Single Market, and stay out of the European Economic Area?
  • Withdrawal from the European Convention of Human Rights (not part of the European Union, but some idiot will conflate it…)
  • A North Korean solution: a country ‘under the dome’?

UKGov would need to interpret the referendum result accordingly, and the chances are that UKGov will say, “Oh well, there’s nothing useful to interpret here, so we’ll just do what we wanted to do anyway.”  So a large turnout and a large Brexit vote could just be a complete waste of time and money.

I hope that a Brexited UKGov will implement the Flexcit plan, including phase six (constitutional reform in the UK).

However, in all probability, a Brexited UKGov would probably fudge its own position.  It would likely ask the European Union to honour the Cameron deal 19Feb2016 anyway to perpetuate its crazy ‘mid-air’ position.  How the European Union would react to this is speculation, but I’d would expect the response to be the same ultimatum as for a EurIn vote: either federate with us, or get out (Article 50).

However, because the European Union has allowed the Single Market to defer to sectional/national protectionism, the Single Market looks less attractive than it did years ago anyway.  It’s another reason why the issue of trade remains irrelevant to the referendum.  But, in the immediate short-term, existing trades will need to be completed, so maintaining British access to the Single Market - even via the European Economic Area - will be necessary, even if challenging, as Wolfgang Schäuble has foolishly suggested.

Nevertheless, Schäuble has again demonstrated his contempt for democracy, especially of foreigners (he said something of a similar disparaging magnitude to former Finance Minister of Greece Yanis Varoufakis).

Basic medium-term analysis

There is no basis for speculating about the medium-term consequences of Brexit, because much depends upon two things:
  • the short-term competence of UKGov to lay the foundation for a 50-year plan.  A Brexited UKGov needs to have the sense to follow the Flexcit plan.
  • The medium-term structural economic reforms and political reforms of the European Union, if any.

Based upon years of studying policy choices - both academically and in ‘real-life’ - I have insufficient confidence in UKGov in general, and Brexit makes me feel particularly nervous.  For all of the corruption I see in the European Union, I see it within Britain, too, wrapped up and hidden within a sinister political party system that we foolishly allowed to take root centuries ago.  To me, too many policy choices by UKGov exhibit clear evidence of politically convenient botches, resulting in dysfunctional policy.  These are the essence of “English compromises”, where everybody is disserviced in nearly equal measure, and nothing is ever solved.  Civil liberties - including human rights - would arguably be more at risk following a Brexit than otherwise.

That said, the UK’s democratic system might find the right people stepping forward at the right time to contribute to the effort to make Brexit work, and to retain civil liberties.  After Brexit, there would be an incentive to step forward (by contrast, there is no incentive for anybody to step forward if UKGov remained obliged to subservient by EU membership).

I accept that Brexit might result in a further reduction in Britain’s influence in the world.  So be it.

In between the short-term and medium-term, a Brexit could lead to political pressure inside the British Union to break-up.  This will be a distraction to UKGov, away from the interests of all component countries of the UK, but the end-result need not be disadvantageous to the four British regions upon their independence.

I accept that the European Union without Britain might get its house in order so well that the British might want to re-join it one day in the future.  We should cross that bridge if we get to it.

Brexit conclusion

Therefore, I accept in principle that there are many different possible outcomes to Britain’s interests following a vote for Brexit.  There are plainly more realistic outcomes following a Brexit than there would following EurIn.  But for Brexit, there are as many upside risks as there are downside risks.

It depends hugely on whether UKGov is sufficiently competent to negotiate the right deals with the right people at the right time.

On balance - and it is a balance, it’s not clear-cut - I believe that a UKGov independent of the federalist European Union is more in Britain’s interests than to remain within a federalist European Union.

Campaign influence?

I have sought to resist any influence from the official campaigns in UK relating to the referendum.  Throughout my blog, I fear to them rightfully as Project Fear and Project Fantasy.  Both campaigns have sought to mislead, manipulate and disinform the demos.

To give only a sole example, one of the campaign slogans of Project Fear was that Brexit was a “leap in the dark”.  This claim is wrong.  Having managed foreign subsidiaries both in and out of the European Union since 2007, I can confirm that most countries seem to follow the same basic rules.  Thus, I interpret the “leap into the dark” argument as fundamentally racist against the non-European world.

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