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The 'Brexit' crisis from the ground up: Will Britain really leave the EU — and should it?

The 'Brexit' crisis from the ground up: Will Britain really leave the EU — and should it?
Pro-Europe demonstrators rally in front of the Houses of Parliament in London on Saturday. (AFP/Getty Images)

Nearly two weeks after a majority of Britons voted to split from the European Union, some consequences of  "Brexit" are becoming  clear.

Clear as mud.

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All that has come into focus since the June 23 referendum are the issues that must be resolved, now that the people ostensibly have spoken. These boil down to two questions:  Will Britain leave the European Union? And should it?

No one knows the answer to the first question. Don't believe anyone who says he does.  Not even the British know what will happen.

Referendums are snapshots of sentiment at a given point in time. Government by referendum is government by crowd acclamation: not democracy but ochlocracy.


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The one thing about Brexit that does seem irrefutable is that, even assuming it's in Britain's interest to leave the EU, the referendum was the wrong way to do it. The vote was designed by Conservative Prime Minister David Cameron to silence the anti-EU wing of his party by showing that the public remained foursquare behind the arrangement. Cameron was so confident of a "Remain" vote that he provided no relief valves.

The referendum was a straight majority vote on the all-encompassing question of stay or leave. In retrospect, a wiser course would have been to require a supermajority vote to leave, with additional requirements that voters in Britain's component nations of Scotland, Wales and Northern Ireland all agree. In that case, the Leave side would have lost, as only 52% of all voters opted to leave and majorities in Scotland and Northern Ireland voted to stay.

The aftermath has been even more devastating politically than economically. The leaderships of both major parties are in shambles. The day after the vote, Cameron, who supported staying in the EU, announced his intention to resign. Labor Party leader Jeremy Corbyn is hanging on to his job by a thread following a no-confidence vote by his Parliamentary colleagues angered by his lackluster support for the EU during the referendum campaign. Scottish nationalists are agitating for a referendum on Scottish independence, after losing by 55-45 in 2014. With Scotland irate over Brexit and determined to staying in the EU, this time they may win – spelling the end of the United Kingdom.

The formal process of divorce from the EU will begin with Britain's invocation of Article 50 of the 2007 Lisbon Treaty. At the moment, no one in government can say when or if that will happen, for the simple reason that there is no functioning government. The ruling Conservative Party is locked in a leadership contest set off the day after the vote when Cameron, who backed remaining in the union, announced  his plans to resign.

The increasingly acrid race to succeed Cameron as Conservative leader, and therefore Prime Minister, won't end until the first week of September. Both of the leading candidates —  Justice Secretary Michael Gove, a leader of the Leave campaign, and Home Secretary Theresa May, a "Remain" backer — have said that Article 50 is unlikely to be invoked until early next year.

In other words, no one has the will, or even the authority, to implement a Brexit just now. The longer Britain waits to pull the trigger, the more fraught that moment will be. That's the point at which Britain's divorce from the EU becomes irreversible. Last week's financial market turmoil, much of which reversed itself by the end of the week, was only a foretaste of what will happen when it becomes crystal clear that the split will happen.

In the meantime, Britons will be debating the true meaning of the June 23 vote. They'll be contemplating the political chaos that followed the referendum, and feeling the first pinches of the economic uncertainty that ensues. In the days since the vote, much of the country seemed to be stuck in suspended animation, as if hoping that clocks would run backward to the period before the vote, or that lightning would strike to make the results go away.

The leaders of both the Leave and Remain camps seemed unprepared to deal with the results, as though they expected the public to voice strong discontent about the nation's relationship with the EU, but not actually vote to leave. Certainly none had a plan in place to execute the people's will by launching exit negotiations. The offshoot: an eruption of pure contempt for members of the governing class.

Sarah Gordon, business editor of the Financial Times, put it in British journalism's bluntly retrograde terms: "Many could be uncharitably described as, frankly, girlie. Prime Minister David Cameron nearly cried as he resigned; George Osborne, chancellor of the exchequer, hid; and Out campaigners Michael Gove and Boris Johnson looked shamefaced at their 'victory' press conference."

The final punchline came Monday, when Nigel Farage, the noxious right-wing politician whose campaign style lent the Leave movement a racist tone, resigned as leader of the UK Independence Party, or UKIP. With the referendum, he declared, "my political ambition has been achieved." It seemed a curious claim, given that  UKIP has one seat in Parliament.

Even though a formal Brexit won't begin until 2017 at the earliest, and the ultimate split might not occur until 2020 (following at least two years of exit negotiations with the EU), the British public might begin feeling the pinch very soon. The pound sterling lost 11% in value against the U.S. dollar and 9% against the euro in the week after the referendum and hasn't recovered. That means higher prices for imports, such as gasoline and consumer products including clothing and widescreen televisions.

This is gonna hurt: The pound sterling's post-"Brexit" tumble against foreign currencies, including the dollar, will drive up prices of oil and other imports for British consumers.
This is gonna hurt: The pound sterling's post-"Brexit" tumble against foreign currencies, including the dollar, will drive up prices of oil and other imports for British consumers. (XE.com)

Economists and bankers foresee an immediate slowdown in the economy as investment goes into hibernation, awaiting a resolution of divorce terms. "That pause you hear is the sound of people waiting before they make irreversible investment plans," Toby Nangle, a portfolio manager at Columbia Threadneedle Investments, said at a financial conference last week.

An economic downturn will intensify the political debate over whether the country should honor the referendum result by actually leaving the EU. The referendum was only advisory, and Parliament — which remains heavily pro-EU — still has the last word. Gripes are widespread among Remainers about how the Leave campaign was conducted and whether the voters really understood what they were voting for.

"There was a great deal of misinformation, distortion, and false promises, much of it quickly revealed in the immediate aftermath of the vote," declared philosopher A.C. Grayling, one of Britain's leading public intellectuals, in an open letter to Parliament last week. For example, the prospect of stemming the flow of immigration by EU nationals, a centerpiece of the Leave platform, looks more like chimera every day. Theresa May, the current front-runner for Conservative Party leader— a Remain supporter but a hawk on cutting immigration, has said that even with a full Brexit, cutting EU immigration will "take time."

Britain does not normally legislate by referendum, Grayling added: "Referendums are snapshots of sentiment at a given point in time. Government by referendum is government by crowd acclamation: not democracy, but ochlocracy. That is exactly why we have representative democracy." (Leave it to a British don to revert to the classics: "Ochlocracy" is from the Greek for "mob rule.")

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The real question that needs to be settled is whether a split from the EU truly is in Britain's economic interest.

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Nearly half of Britain's $473 billion in 2014 exports went to EU and other European countries; replacing that trade with increased exports to Asia and the U.S. will be a challenge.
Nearly half of Britain's $473 billion in 2014 exports went to EU and other European countries; replacing that trade with increased exports to Asia and the U.S. will be a challenge. (Data visualization by MIT Media Lab)

One aspect of Brexit that may come as a surprise to those whose image of the Leave campaign derives from its supporters' misrepresentations and Farage's appeals to xenophobia and racism: Discontent with the EU runs deep, even among economists, business executives and intellectuals who are otherwise fully alive to the virtues of membership.

Those virtues are real. About 41% of Britain's exports go to EU countries, and an additional 10% or so to countries that are part of the European single market but not the EU; more than half of Britain's imports come from those same European sources. British traders and Euroskeptics talk bravely of making up the loss of tariff-free trading by looking outward to markets in Asia and North America. Boris Johnson declared over the weekend, for instance, that "we can do free-trade deals with economies round the world, many of which are already applying."

That might be easier said than done, even with a cheaper pound. Less than 8% of Britain's exports go to Hong Kong and mainland China, and less than 13% to the U.S. and Canada. Britain ranks seventh in exports to the U.S., well behind China, Canada, Mexico, Japan and Britain's EU partner (for now) Germany, as well as South Korea.

Critics of the EU point to its  bureaucratic rules and regulations, which they say affect more than business standards. "The EU system, because it's top-down, has become anti-innovative," said Matt Ridley, a businessman and science writer who sits in Parliament as a Conservative member of the House of Lords. "Where are the European companies to rival Google, Amazon, Apple and Facebook?"

Some EU initiatives on technology have drawn particular fire, including a 2001 directive on clinical trials that was designed to standardize drug development rules and ensure informed consent from patients. Some researchers complain that it dried up funding for research and development.

It's not always easy to determine whether the culprit in such cases is the EU, or member countries following its directives haphazardly. EU supporters note, for instance, that the British government implemented the clinical trials directive stringently,  while Italy, Spain and others allowed researchers more latitude. The result is that pharmaceutical R&D didn't disappear from the EU so much as move to the more liberal states.

The difficulty facing  British Europhiles and Euroskeptics is that addressing the shortcomings of the EU, though difficult under any circumstance, is bound to be easier from the inside than as a nonmember. "The U.K. was part of the team in designing academic standards and research policy," said Michael Galsworthy, a leader of the Remain campaign in the scientific community. "If we pull out, we're pulling out our voice, and that's a major tragedy."

Keep up to date with Michael Hiltzik. Follow @hiltzikm on Twitter, see his Facebook page, or email michael.hiltzik@latimes.com.

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