Brexit is actually boosting the UK economy
by Nicole Gelinas, Aug 29/16, New York Post
Two months ago, the world’s wise men were warning that if UK voters decided to “Brexit” from the European Union, they’d rain down economic crisis. Guess what? Today, Britain is fine — and has even seen a boost from its “Leave” vote.
The International Monetary Fund, central bank chiefs, academic economists — you know, the people who study the economy for a living — said Brexit would be a disaster.
Then-Prime Minister David Cameron warned that Britons who voted to leave would risk their Social Security-style pensions. President Obama said Britons would have to “go to the back of the queue” to ink trade deals with the United States.
Now, though, Britain is showing how real free-market economics can correct political mistakes — if, indeed, Brexit was a mistake.
After the vote, the British pound plummeted. Financial traders believed their government’s warnings and ditched the currency.
Before Brexit, one British pound was worth $1.48. Today, it’s worth $1.32. The pound has fallen against other currencies, too. That has meant record visitors to Britain this summer — and tourists spending record amounts of money, too.
In the month before Brexit, airline reservations to Britain were down compared to the previous year, the Guardian reported. After the Brexit vote, they jumped 4.3 percent — and wealthier tourists bought more jewelry and watches.
Other parts of the economy haven’t suffered, either. Consumer confidence and domestic spending are both up. “Retail sales smashed expectations in August,” the Daily Mail noted on Friday. Manufacturing and home-sales reports are well and good.
Of course, Britain hasn’t officially Brexited yet. Whatever trade and immigration agreements Britain eventually signs with Europe and the rest of the world will matter.
But Britain has an advantage: It is a huge buyer of other countries’ goods. Germany sells more stuff to Britain every year than to any other country except one (us).
Were Germany to stop doing business with Britain, it would lose $50 billion of its annual trade surplus — including $18 billion in car sales. The United States, too, is a huge British trade partner. We sell Britain $56 billion in goods and services a year, and buy $58 billion.
Despite Obama’s warning, America isn’t going to cut off trade.
What about migration? Anti-Brexiters are still warning that Britain has harmed its ability to attract top scientists, bankers and the like.
But there’s nothing stopping the United Kingdom from designing a migration policy to attract lots of skilled workers, and as few or as many lower-wage laborers as it likes.
Europe isn’t going to force Britain to take all the low-wage Eastern European workers who apply. France and Germany have too much to lose on trade to stick up quite that much for poorer EU countries’ voters.
Anti-Brexiters also warned of spending cuts, as the country loses EU subsidies on everything from farming to university research. But it’s an indisputable fact that Britain gives more money — $12 billion — than it gets back from the European Union each year.
After Brexit, Britain will be free to spend that money as it likes, including to replace farm and research subsidies.
Voters noticed, too, that being in Europe didn’t save people from Cameron’s illogical budget cuts of the past six years. Despite record-low interest rates, Britain cut back on libraries and raised taxes on consumer goods, adding pain to people who were suffering job and income losses.
Yes, Britain still has problems. Like the United States, it still depends on cheap credit to get people to buy houses and spend money. This — not Brexit — will cause another recession someday.
And workers’ retirement income is at risk — not because of Brexit, as Cameron said, but because private companies and the government have avoided making “required” contributions to pension funds for decades, leaving a $1 trillion-plus gap.
Britain needs better infrastructure. Its commuter trains are a mess — and more expensive — compared to Europe’s.
But these problems have nothing to do with Brexit.
Britain may be dropping out of Europe, but it didn’t drop out of the world. The world still needs Britain, and the airplane parts, pharmaceutical products and theatrical productions it creates.
And Britain still needs the world for the stuff it can’t make or do itself.
The shock of Brexit is that it won’t change much at all — except providing a warning to pols around the world that the voters are at, well, the brexiting point.
Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.
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