Mervyn King, former governor of the Bank of England, has written the best article I have read on Britain’s exit from the European Union (EU). In an essay for The New York Review of Books he makes many excellent points, but one is of surpassing importance. It’s an obvious point, or ought to be, that nonetheless has been almost entirely ignored by other respectable commentators: Whether Britain should stay in the EU depends on where the EU is heading.
The EU is plainly in deep trouble with or without the UK, and its condition as a political project is anything but stable. Judging whether Britain is better off as a member therefore requires a judgement not only about what Britain has gained or lost from the membership up to now but also an assessment of the future character of the whole EU enterprise.
As King points out, the EU is structurally unsound. It has pressed political union both too far and not far enough. That is, it has created half a political union—with a single currency but without a collective fiscal policy or the political apparatus that would be necessary to legitimize it. King writes: “Putting the cart before the horse—setting up a monetary union before a political union—has led the European Central Bank (ECB) to become more and more vocal about the need to ‘complete the architecture’ of monetary union by proceeding quickly to create a Treasury and finance minister for the entire eurozone. The ability of such a new ministry to make transfers between member countries of the monetary union would reduce pressure on the ECB to find new ways of holding the monetary union together. But there is no democratic mandate for a new ministry to create such transfers or to have political union—voters do not want either.”
And voters aren’t the only ones who don’t want it. German officialdom (backed by popular opinion) is viscerally opposed to a “transfer union”, which is Germany’s name for fiscal policy as it operates in any normal country. Germany’s position is understandable, since Germans would give much more than they received in any such arrangement.
The most dangerous scenario of all, in fact, would be a political union forced by pressure of events onto electorates that didn’t want it. The hazards posed by discontented voters rebelling against deaf elites are already vividly apparent in Britain (the success of the Brexit campaign), in the rest of the EU (where far-right populist parties are gaining ground) and in the US (Donald Trump).
The closest Remain campaigners came to acknowledging this grim prospect was to say that Britain could help guide the EU in its efforts to address the union’s problems, such as they may be. Given the scale of the task, that would be far from reassuring even if it were true. King explains why it’s false.
Britain can’t guide the EU in solving this existential problem because it has already detached itself from the EU core. It chose not to join the single currency and didn’t participate in the Schengen plan for borderless travel. Britain isn’t, and isn’t seen as, a full member of the club. How then can it provide leadership?
The Remainers’ take on Britain’s semi-detachment was to say that Britain has the best of both worlds. It gets the benefits of membership, without the worry of living entirely inside a house whose roof might fall in—or, as Remainers might prefer to think, whose paintwork needs touching up. I applaud the sentiment: It’s good, whenever possible, to have the best of all worlds. But the question is whether Britain’s less-than-full-hearted commitment to the European adventure is best pursued as an increasingly anomalous member of a broken EU or as a concerned and friendly neighbour.
Granted, the answer to that question isn’t obvious. But what certainly ought to be obvious is that the question deserved to be asked—and that’s something the Remain campaign refused to acknowledge.
BLOOMBERG
Clive Crook is a Bloomberg View columnist.
Comments are welcome at otherviews@livemint.com
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess