The UK without the EU — opportunity or suicide?

Buenos Aires Herald. 9 de julio de 2016.

Evidence suggests that those who voted ‘leave’ are not demanding more competition.

The result of the June 23 referendum, where support for leaving the European Union won over 52 percent of the vote against 48 percent of those who wanted to stay, can be seen as an innocent development or as a complex dilemma for the future.

In Argentina, advocates of the ideas of freedom with good intentions saw the result innocently, believing that this would bring about a new liberal spring in defense of greater economic freedoms against the impositions of Brussels on economic issues.

However, all that glitters is not gold. While there is a consensus that EU bureaucracy has gone astray in its commercial, tax, immigration and even monetary policies, it is not clear that this is what voters are seeking when voting “leave.”

The EU has turned into a region where economic growth is very difficult. Excessive regulations have generated incentives to produce and sell goods and services inefficiently.

On the other hand it has developed an inefficient welfare state that requires increasingly higher tax revenues to sustain it. The EU creates incentives to obtain subsidies and protection from the state.

The United Kingdom’s decision to abandon the agreements with the region is a risky move that could bring benefits or immerse the Kingdom in a kind of Postwar darkness.
It is not clear that “leave” voters are demanding more competition, less state and more freedom. On the contrary, analyzing the region, the result of the referendum and the relation with the economic situation, we can find some paradoxical results.

Looking at the work “UK regions, the European Union and manufacturing exports” (The University of Sheffield, May 2016) and making correlations with the Brexit map, we can find the following:

There are significant differences in the composition of local economies across the UK’s regions and nations, which gives rise to longstanding geographical inequalities (in employment, earnings, output and deprivation). We find that regions with less income per capita have voted “leave” when in net terms they are receivers of subsidies.

As such, any decision by the UK to leave the EU is bound to affect the UK’s regions and nations differently. This is not to suggest that Brexit would exacerbate regional inequalities nor improve the situation of the poorest regions. The losers under this circumstance are low income people who supported “leave.”

On the other hand, the coalition and the conservative governments have been committed ostensibly to rebalancing the UK economy in sectoral and geographical terms, in part seeking to boost manufacturing industries in the North of England, outside London and the South East in order to maintain income and prevent inequalities. The question is the following; do these regions and nations want to create an environment of competitiveness? The answer is no, because these regions and nations hate competitiveness.
Evidence suggests that those who voted “leave” do not demand more competition, less state and more freedom. On the contrary, it is possible to find a negative correlation between income and negative feedback, a positive correlation between subsidies and negative feedback.

In short, the regions that voted “leave” are those regions who at present gain from membership in the EU receiving positive net benefits. These regions are the lowest income per capita such as Central England, East England, South West England and London Neighborhood.

By contrast, Central London all of Scotland and Ireland, have negative subsidies in real terms and higher income per person, and voted “remain.” The situation is so complicated that there is a potential risk that the Scottish Parliament could decide to call a new referendum on its independence and on remaining in the EU.

Evidence suggests that the decision to leave EU doesn’t respond to economic reasons. The mistakes and failures in international policy regarding the EU and UK could have raised fears in the least educated and poorest sector of society. The continuing crisis with Islamic extremist groups might have awakened xenophobic and protectionist feelings.
By remaining in the European Union, less competitive sectors would be threatened by immigration and those medium- and low-skilled workers could lose their jobs. If leaving the EU is confirmed it would represent a setback in the defense of freedom and the beginning of a dark age for the UK.

However, all is not lost if the UK leaves the EU and signs a free trade agreement with the US and China, it could be the beginning of a new golden age for it.

The paradoxical situation would be that “leave” voters could lose their privileges and would have to compete.