There were dire warnings…..
Over and over, we heard it. We heard it from the great and good, all authoritative sources with impeccable credentials. Carney at the Bank of England, Chancellors of the Exchequer (present and past), IMF, London School of Economics, Institute of Directors, World Bank, not to mention hordes of eminent economists writing in the New York Times, Washington Post, Guardian, Economist, New Statesman; gratuitous forebodings from political has-beens like Blair, Major, Heseltine, Kenneth Clark, ex-President Obama, that ubiquitous know-all Branson and a few spoilt bourgeois brats like Gina Miller. Above all, we heard it from BBC presenters, interviewers and their inexhaustible supply of selectively invited bien pensant expert panels – night after night.
And what was it that we heard? These experts uniformly spouted their firmly held belief that Britain’s departure from the EU would trigger economic chaos in the shape of rising unemployment; disrupted supply chains; empty shelves in shops; frantic stockpiling; lorries gridlocked from London to Dover; medical shortages; a collapsed pound; industry in recession; soaring tax rates; NHS and social care in crisis; basic necessities of life rendered unaffordable.
The “expert” belief? We UK citizens, the voters, had no idea what the hell we were voting for in the referendum. We were gulled by false promises, conned by lies and extravagant, unsubstantiated claims, made by politicians whose only motive was personal aggrandisement. Worse, they claimed, was the referendum’s reinstatement of our right to control our own borders, considered to be a thinly veiled strategy to keep foreigners OUT and reflected our basest prejudices, steeped in instinctual xenophobia.
Wow! Confronted by such widespread miasma, these self-appointed arbiters believed it would be grossly unfair for them to stand by and allow this misbegotten referendum result to prevail. All right-minded parliamentarians, supported by the recently “confected” and conflicted Supreme Court, claimed a moral duty “to do whatever it takes” to reverse this plunge into the abyss – and sod such niceties as the constitution, or democracy.
Then, amid all this clamour, the election came and went. Its stunning outcome held a mirror to all the self-righteous bigots bleating about “unfairness”. Its message couldn’t have been simpler: “What is FAIR is that when the people give their politicians an instruction in a referendum, it should be obeyed”.
Or, somewhat more colloquially, “now piss off”.
The deep irony implicit in “concession” speeches made by stunned Labour candidates was that, even now, they were simply incapable of confronting the reality that it was they, not the electorate, who got it all so wrong. What could it mean? Such brutal thwarting of their deep desire for power could mean only that the actual wishes of electors got in the way. They still bleat about their “real” fear for the elderly, the ill, the hungry and the unemployed in their (former) constituencies, somehow blind to the fact that these poor wretches are the very voters who turfed them out.
Further, they are equally blind to the possibility that exercise of compassion is not the sole prerogative of the Labour Party; that people who are not part of Labour could conceivably care for, or devise policies to help, the disadvantaged souls in our midst.
But perhaps most insulting to the voting multitudes is the assumption that they couldn’t see that savagely Marxist policies would rob the economy’s capital base of its ability to create the wealth on which their future savings depend; and hence what they would do to the hard-won savings already built up from decades of average-income work, and on which they rely for a half-decent retirement.
Back to the great leveller – economics
Speaking of economics, perhaps the greatest myth now being propelled along the airwaves, again by die-hard Remainers, runs something like this:
“It’s all very well gloating that Brexit will be legislated at the end of next month, but this ignores the reality of what trade deals entail. It will be years before we get a trade deal with the USA, and even longer before we get one with the EU.”
So pervasive is this nonsense that we are forced to take a fresh look at how it works. Imagine two countries – any two countries.
No individual human being is economically self-sufficient in terms of possessions or abilities. By the same token, neither of these two countries is self-sufficient. Each produces goods that the other country wants, and so they need to trade.
So far so good – and so elementary.
Now adjust your picture slightly. The above description speaks of “countries”, obviously represented by their governments – but to be more exact we should be referring to people. It’s not the “other country” that wants to buy the goods produced by the “other country” – it’s their respective citizens who are doing the wanting and the producing – not their governments.
Allow the traders to trade
Left to their own free devices these respective groups of individuals and businesses in different countries will trade. They will import and they will export, and each trading entity will accept payment for its exports, and will expect to pay for its imports, in whatever form is mutually agreed. If their respective countries share a common currency, that’s the form payment will take. If their currencies differ, the importing entity must use its own resources to purchase a sufficient amount of its supplier’s currency to pay for its purchases.
Regardless of whether businesses pay for their imports (i) with their own currency, or (ii) by exchanging their currency for their suppliers’ currency through a bank, the supplying entities (or their banks) will finish up holding foreign currency; and the natural thing is to use it to buy goods produced in the other country. Even if you simply change it into your domestic currency, someone is left holding foreign money. For them to accumulate a pile of foreign currency, and not spend it on goods imported from those countries, is equivalent to receiving a cheque in payment for goods, and then sitting on it rather than banking it!
From this brief scenario we can understand the rudimentary principle that “we export in order to import”, a position that should have been obvious from my opening scene-setting observation: none of us is self-sufficient!
There’s no problem in any of this – provided the respective trading entities honour the obligation to pay for the goods they buy.
What, no role for government?
What is striking, however, is that so far we have had no need to mention government. That is because the only useful role for government in international trade is to act as facilitator – possibly hosting the odd trade fair at which respective importers and exporters can meet with a view to establishing a trading relationship. But from then on, it’s up to them – not their governments.
(Of course, governments have the secondary role of prohibiting the import of materials that are noxious and harmful to the lives and health of their citizens – but self-preservation normally dictates that citizens do this for themselves.)
Despite the essential simplicity that underlies international trade we are constantly barraged by misinformation concerning the critical intricacies of inter-governmental trade negotiations. The reality is that what those morons are really “negotiating” is barriers to trade – in the form of multi-tiered tariff schedules, quotas, subsidies, protected industries, quid-pro-quo preferential protection and regulatory alignment. All of which comprise the very antithesis of the free style of trading that businesses would instinctively agree between themselves – without any regulatory interference masquerading as assistance. In record time.
The type of nonsense we are confronted with is nothing but a sideshow. The truth is that a multitude of limited-scope trading agreements, such as aircraft landing rights, are already operational.
As for the big ones, you should understand that any government could, right now, do its citizens a huge favour by simply declaring unilateral free trade – a principle I have advocated many times. But meanwhile its noteworthy that outside the EU bloc our largest export market, at over $60 billion a year, is the USA – with whom we have never had a trade deal!
Why is such simple economics is so hard to understand?
Not everyone is able to resolve problems by the exercise of unalloyed reason. Some are bound by rigid quasi-political convictions, inculcated from childhood. Others are governed by “feelings” that instinctively recoil from the realities of economic life. There are also those who are not easily classifiable as “thinkers” or “feelers” but partake of both. Their lack of rigidity, if coupled with an ability to communicate alternative views, is a blessing to us all.
The Goodnight Vienna Audio file