So British Prime Minister Theresa May finally announced that the UK will not only be leaving the European Union but that it will also, unequivocally, be leaving the single market too.
The millennials who have been protesting loudest are of course also the people who are most enthusiastic about so-called “disruptors” such as Uber, Airbnb and whatever other sharing platform they can find which rattles the established monolith. Although she doesn’t quite look the part, think of Mrs May as just another progressive disruptor.
If the “What about us?” generation had had its way the last time Europe had been united in a single, borderless market, we’d still be living in the Roman Empire. I grew up reading and loving Astérix the Gaul and yet it was, of all people, the French and President Francois “Qui? Moi?” Hollande who was first out of the blocks demanding that the British get on with it and get out as soon as possible. There is obviously no place in the Elysée Palace for the spirit of Astérix, Obélix and Panoramix.
Although originally a proponent of a “soft Brexit”, I think I get Mrs May’s thinking and it is very clear. You’re either in or you’re out and since Brussels was showing no sign of wanting to find a compromise – if it had done, there would have been no referendum in the first place – the only way to create clarity is to rip up the agreement and to start again. While the BBC was still busily trying to find interviewees who would declare the announcements to be terrible, CNBC and Sky were speaking to business people in Davos who seemed fairly impressed with the decisiveness and clarity and who are already working hard on new strategies. Not one of them spoke of packing up and leaving the UK. I remember my father’s company having a Lille-based subsidiary through which business was done in the Common Market and it was working there during half-term holidays that I first began to learn to speak fluent French. Maybe there’s an opportunity growing there for our monolingual children.
The EU, in its current form, has hit a wall. If it hadn’t, there would have been no need for a referendum. Its ossified structures belie many of the progressive thoughts it brought into the outgoing 20th and early 21st centuries. The foundations for many of these structures were laid during the Cold War and before the fall of the Soviet Union. They were laid when the Chinese were waving Chairman Mao’s little red book and exercising the Cultural Revolution. Many things in the world have changed, yet the grand European project ploughs on as though nothing had happened.
May made it clear that it would not be acceptable to be an associate member of the Union if Britain were to have to play by its rules with no say in their formulation. This had been one of the key arguments of the Remain camp in the run up to the referendum that it would be much better to be on the inside pissing out than on the outside pissing in. May has taken the same radical approach to that problem as Columbus did the legendary egg.
She appeared confident and said: “I know there are some voices calling for a punitive deal that punishes Britain and discourages other countries from taking the same path. That would be an act of calamitous self-harm for the countries of Europe. And it would not be the act of a friend.” It appears that she is suggesting that there is more than one way to skin a cat and that Britain is set to plough the furrow into which seeds will be planted for a new template on how Europe can remain a vast, open market without some of the social and political drift-anchors with which it has burdened itself in pursuit of an ever closer union.
Sprouts
Although Scotland’s Nicola Sturgeon was calling for a second referendum before the prime minister had even finished, she risks finding out too late that the British solution, yet to be defined, ends up being more progressive than what already exists.
There is no saying whether other countries will not opt one day to leave and if Brussels gets it right, it could create a platform which includes all that is best about the Union, namely the huge free-trade zone, while avoiding some of its pitfalls such a single currency which is, as we all know even if we don’t admit it, congenitally flawed and needs hundreds and hundreds of billions of euros pumped into it to keep an impossible dream alive.
Before the sun had even set, voices in Berlin were calling for a serious rethink of the funding model for the Union – not surprising when 10% of the net contributions is about to walk out of the door - although it has to be repeated that if this had been done 12 months ago as Cameron had ever so politely requested, there would probably never have been a UK referendum in the first place.
The initial response to the May speech was a 3% bounce in sterling. Whether this was a technical relief rally or the result of enthusiasm for what she had to say has yet to be seen. I think it was Jean-Paul Sartre who articulated the concept of man being faced with the uncertainty of infinite outcomes. Every time he takes a decision, and he takes thousands of those every day, he halves the number of outcomes which, however, remain infinite. Yesterday the prime minister halved the number of outcomes but even that does not tell us what we will end up with, which is where the negotiating begins. All we know so far is what it won’t be. On that basis, the weakness of sterling is highly unlikely to be over. On the other hand, the time has come to stop behaving as though triggering Article 50 is tantamount to switching the lights off in London and the rest of the UK.
Despite all the white noise from the pro-European liberals, last night’s Sky News poll found that, post speech, 51% of those questioned supported the UK leaving the single market, 39% opposed it and 10% didn’t know. But as May repeated, the UK is leaving the EU but not Europe.
Swiss cheese
Meanwhile, Davos rumbles on with Chinese President Xi Jinping taking to the rostrum and donning the mantle of champion of free trade. Talk about the fox guarding the henhouse. Talk about post-truth politics. Talk about do as we say, not as we do. Having the leader of the world’s second largest economy as a speaker is surely a significant coup for the organisers, especially in light of what is going on in the US, but have we really learnt anything? Barely. The real work, which is being done in the bars and cafés of Davos, will not be seen until later in the year when informal chats between chief executives turn into corporate action in the form of bids and offers in the mergers and acquisitions space.
Mutti Markel and Hollande have both opted not to go but Theresa May will be there on Thursday flying the flag but not until her predecessor, the Coward Cameron, has been paid handsomely to attend and give his penny’s worth.
Over the pond John Williams , the president of the San Francisco Fed, toed the company line in a speech in Sacramento. “In the context of a strong economy that has reached our maximum employment goal and with inflation nearing our price stability goal, it makes sense that the FOMC has undertaken a process of raising interest rates,” he said. “Looking ahead, further gradual increases in the target fed funds rate will likely be appropriate.” Yawn! “If the economy really accelerates faster, inflation really picks up, obviously we’ll have to adjust upward,” Double yawn. “History teaches us that an economy that runs too hot for too long can generate imbalances, eventually leading to excessive inflation, asset market bubbles, and ultimately economic correction and recession.” Economics 1.0.1. – double yawn again. Maybe Davos platitudes aren’t all that repetitive and boring after all.