Mises Wire

Brexit: The Movie Makes the Economic Case Against The EU

Released on May 12, the new film Brexit: The Movie makes the case for the “Leave” campaign in significant detail. At an hour and 11 minutes, the film sticks to the economic debate behind the Brexit campaign. This is wise since, as the vote approaches, the “Remain” campaign is likely to become increasingly hysterical with claims that leaving the UN will spell an economic apocalypse for Britain. Moreover, recent polling data has shown that support for Brexit is waning, and that the primary cause of waning support is likely caused by the fact that many have believed the anti-Brexit claims that the economic viability of the UK depends on continued membership inside the EU. 

On the other hand, perhaps most damaging to the pro-EU cause in general, and not just in the British context, is the fact that two of Europe’s wealthiest countries remain outside the EU: Switzerland and Norway. The film barely mentions Norway, but focuses heavily on Switzerland. 

The Swiss, of course, are engaged in widespread international trade and enjoy a standard of living that regularly puts it in the world’s top three nations. As the film notes, the Swiss enjoy large amounts of trade with the EU in spite of not being members. But, since the EU is largely based on protecting European industries from non-European competitors, the Swiss are in a much better position overall in terms of global trade by being on the outside.

Politically, as well, the Swiss offer a very interesting dichotomy with the EU. The EU, of course, is an anti-democratic organization, which one speaker in the film notes is designed to be nearly totally insulated from the will of the voters in the member countries. The EU is run not by political appointees and the unelected European Commission. The European Parliament is powerless to stop or repeal the acts of the Commission. A conglomeration of dozens of faceless, secretive commissions, offices, and ministries, the EU is a bureaucrat’s paradise where powerful people remain largely anonymous and safe to carry out their endless array of schemes without any fear of retribution from the voters anywhere. Virtually no one can name any of the most powerful people in the EU, whether one of the EU’s five presidents, or other powerful members of the EU organizations. As one observer asks: “Would it help if you knew who they were? You don’t have any power over them, so what’s the point?” 

The film contrasts this with the Swiss political system which is heavily localized, decentralized, and dependent on locally-based democratic referendums and subject to vetoes by the voters. Suspicion of centralized power is built into the Swiss system. The EU system, on the other hand, is very nearly the opposite. 

The economics of Brexit: the Movie is largely sound. Some of the more economically questionable sections suggest that governments have an essential role in natural resource management, but for the most part, a central criticism of the EU in the film is not that the EU is a “free trade” organization — which of course it is not. The central problem of the EU, the film notes, is that it is so knee-jerk anti-trade. 

Anyone familiar with the history of the “Common Market” or the “European Economic Community” — as it used to be called — in Europe knows that it has always been a scheme to protect certain favored interests in Europe. Chief among them has long been agricultural interests, especially in France. But, of course, the regulation, protection, and general crony capitalism for powerful interest groups has only grown as the EEC has morphed into the EU. 

This has long been promoted under a patina of “free trade” because, allegedly, membership in the EU opens up trade for member states to all other member states. This comes at the expense of trade with other parts of the world, however, as the elevated levels of regulation and protectionism forwarded by the EU in Brussels ties the hands of many member states when it comes to trading with Asia and the Americas. Generally correct free-trade theory is used throughout Brexit: The Movie which notes that trade barriers harm both consumers and producers. Consumers, of course, face a higher cost of living thanks to trade barriers, but producers also face higher input prices, such as firms that use steel in an environment with tariffs on steel. This makes producers less competitive, and ultimately, less innovative as well. “You only create a trade barrier because somebody else has a better, cheaper product,” the film observes, stating what should be obvious to everyone.

The highly regulatory nature of the EU has taken its toll on trade and industry within member states as well. It should surprise few that opening a small business in the UK is more difficult than ever following a few decades of membership in the common market. The relentless onslaught of regulations and laws from Brussels makes innovation and entrepreneurship for small firms incredibly difficult, with the result, of course, being an economy that favors the major incumbent firms which are more than happy to have bureaucrats in Brussels crush any competition that might arise. As the film notes: “Big corporations love the EU because it creates regulations that destroy their smaller rivals.”

Also universally applicable is the film’s recognition tat “you don’t need trade agreements with a country to be able to trade with it.” This has always been true, of course, which is why early free-trade liberals, such as Cobden and Chevalier, opposed trade agreements. All that is needed for free trade is inaction on the part of the state. State inaction, however, is contrary to the very DNA of the EU. 

Will the film make any difference? After two week following its release, the film still has only about half a million view in its YouTube form, and its unclear that economic arguments will ultimately win the voting population over. Support for the EU still brings with it enormous social cache, as incessant refrain of the intellectual elites in Europe is that pro-EU people are highly civilized and humane while opponents of the EU are essentially troglodytes. 

But of course, it won’t be surprising if the EU wins this match up. For a place that likes the lecture the rest of the world about democracy, Europeans certainly appear quite comfortable with turning over their governments to an unelected oligarchy. At least the Americans occasionally insist on having elected oligarchs. This contempt for having any check on government power in Europe is matched only by the continent’s rising disdain for free speech and freedom of the press. The German regime threatens to jail comedians for making fun of Turkish dictators, while in the UK, the police arrest people for rude Facebook posts. The French, of course, enthusiastically jail people for saying politically-incorrect things. This is all to say nothing of attacks on basic civil liberties in response to terrorism that make the Patriot Act in the US look almost restrained in comparison. 

With such contempt for even the most basic freedoms, who can expect any significant revolt in Europe against rule by an untouchable ruling class in Brussels? 

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Image Source: D Smith www.flickr.com/photos/dfsmith/
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