Brexit : le référendum de tous les dangers

Mar 1, 2016 Harold James

PRINCETON – La récente annonce de la tenue du référendum sur le maintien de la Grande-Bretagne au sein de l'UE le 23 juin a été rapidement suivie d'une baisse marquée de la livre. La volatilité de la livre devrait perdurer jusqu'au référendum et connaître des pics aux moments où le Oui à la sortie, "le Brexit", sera donné gagnant. Il pourrait en résulter une prophétie auto-réalisatrice dans laquelle la volatilité des marchés et l'instabilité politique poussent les électeurs britanniques à rejeter l'UE – ce qui serait extrêmement dangereux pour eux et pour leurs partenaires européens.

Cette situation n'est pas sans rappeler ce qui s'est passé au cours du 20° siècle, quand le taux de change de la livre était une obsession nationale au Royaume-Uni et que des crises monétaires sapaient régulièrement la crédibilité des gouvernements successifs et engendraient le chaos dans la vie politique. Par exemple en août 1931 (au milieu de la Grande dépression), une crise financière et la ruée pour la vente de la livre ont contraint à la démission le gouvernement travailliste du Premier ministre Ramsay MacDonald. Il a été remplacé par un gouvernement de coalition et le parti travailliste a éclaté.

En 1967, un autre gouvernement travailliste mené par Harold Wilson a été ébranlé par une dévaluation liée à une attaque spéculative. Les travaillistes ont perdu les élections qui ont suivi. Ils sont revenus au pouvoir en 1974, mais moins de deux ans après la Grande-Bretagne était frappée par une nouvelle crise monétaire, d'une ampleur telle que le FMI a dû intervenir. Une fois de plus les travaillistes ont perdu les élections suivantes et le parti s'est divisé.

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Harold James

Writing for PS since 2001
177 Commentaries

Harold James is Professor of History and International Affairs at Princeton University and a senior fellow at the Center for International Governance Innovation. A specialist on German economic history and on globalization, he is a co-author of The Euro and The Battle of Ideas, and the author of The Creation and Destruction of Value: The Globalization Cycle, Krupp: A History of the Legendary German Firm, and Making the European Monetary Union.

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Ariel Tejera Mar 7, 2016

Professor H. James,
Maybe historians, after decades or centuries elapsed, will characterize our times and feel confident telling what were its substantial transformations. But certainly, for us right now, a verfy unfamiliar "future" is arriving. The "present" is quite unfamiliar. If Brexit happens soon, I don't thing the world gives a particular damn, so as to alter history. I think the world cares precious little right now , about everything. That the new normal.
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James Edwards Mar 7, 2016

One of the biggest problem I see from those who advocated Brexit is that they have the belief that they can do much better not being part of the EU and their currency will drive the economic growth. However, for the companies that have markets in EU will find that they will need the EU market to sell their goods will want to stay in.

It is more of a political problem that Cameron is driving in order to stay in power despite the budget cuts initiated and the resulting action tip the economy back to a recession. He's using that to drive the point of blaming EU when it should be himself for creating this in the first place.
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Joss Bolton Mar 4, 2016

The strength or otherwise of the pound is not determined by our membership or not of the EU. It is determined by the strength of the economy. The slide in the pound recently is based on growing signs of weakness, and the element linked to Brexit is merely speculation (who knows what the REAL outcome will be?). The speculators currently selling the pound will be the very ones who turn it round when they close their short positions. The long term weakness or strength will be determined through our ability to grow, and the Brexit issue needs to focus on whether being allied to an inflexible stuttering trade bloc is really better than being allowed to make our own decisions; since when has every decision been a good one? This is a highly partial and weak article.
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Jose araujo Mar 2, 2016

Harold James in denial....

Yes we have no inflation because of oil prices and commodities... Did you ever heard of the core inflation concept? And by the way, we had no inflation when the prices of oil and commodities was going up.

Someone who has no idea of the times and situation we are living, should just stay put until the situation makes sense to them, at peril of making themselves sound like fools.
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John Lipsius Mar 2, 2016

"... currency crises ... financial crisis, with all of its political repercussions" Huh? All hat, no cattle. Comparing history of U.K. independent vs. in a EU? What? A lot of negative pronouncement stated as fact. But no backup. A gathering storm of citizens don't want your globalization. And this blather n' spew won't change that. On the contrary, the long established repression on U.K. finance, sovereignty and economic flexibility IS fact. Long Live UKIP.
- Alex Leo Mar 3, 2016
  
  The article reads very factual to me unlike your response which prompted me to react. Why is it that UKIPers like you are such staunch Putinists? Are they deluded or stupid or just cannot help seeing the world as is?
  
  "Long established repression in the U.K. " - move to Russia to learn what repression is, in any and all forms.
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j. von Hettlingen Mar 2, 2016

Harold James believes that a "Brexit" would not only "break the pound," it could also unleash a series of "political repercussions," which could do irreparable damage to the Tory party. The day following London Mayor Boris Johnson's decision to campaign for a "Brexit," the pound fell sharply to a seven-year low, and suffered its biggest one-day fall since David Cameron came to office. It will continue to remain volatile and weak when it looks more likely that Britons vote to leave the EU. The problem with a referendum is that the outcome is highly unpredictable. Voters are mostly self-centred and stick to their own preferences, even though they realise that they are no good. However they hope that the others would be more sensible and make the right choice. Unfortunately it is the sum of the votes that counts, and often it becomes clear that there are many more self-centred voters than anticipated.
Looking back in history, James lists a number of currency crises in the 20th century, which had "destroyed the credibility of goverments and wreaked political havoc" in Britain.
The Labour government under Prime Minister Ramsay MacDonald struggled with a worldwide economic recession amid the Great Depression, for which it was not prepared. It cut public spending, including unemployment benefit. In August 1931 the government was forced to resign, after "a financial crisis and a run on the pound." It was "replaced by a coalition government, and the Labour Party split apart."
In 1967, "another Labour government under Harold Wilson," defended the devaluation of the pound, saying it had to tackle the root cause of Britain's economic problems. The government inherited an £800m deficit from the Conservatives when it was elected three years ago, and it lost the subsequent general election to them. The pound was already weak under the Tory government led by Edward Heath, which had to be floated in 1972. Heath's Chancellor Anthony Barber assured the finance ministers of the six Common Market countries that the pound would return to operating within fixed trading bands in time for Britain to join its European partners in 1973. Britain did join the European Common Market, but the economy went from bad to worse. The year 1973 saw more industrial action and petrol rationing as a result of a Middle East oil embargo. Heath was finally forced to call a snap election in February 1974 - which he lost to Harold Wilson. But the Labour government resigned in 1976, as it was "hit by another currency crisis – this one large enough to require support from the International Monetary Fund." It is an irony that it was economic hardships that drove Britain into the arms of Europe. Today it is the overrated self-esteem that urges Britons to leave, thinking "the UK is uniquely powerful" and seeing London as the world’s "greatest concentration of 'soft power'.”
The Tory government under John Major was forced out of the Exchange Rate Mechanism, a "percursor to the euro." Black Wednesday, as 16 September 1992 came to be known, went down in history as one of the most memorable failures of post-war British economic policy, when speculators sold the pound, because they didn't believe that the government would raise interest rates from 10% to 15% to try and attract investors looking for greater yield on their currency holdings. It was the defining failure of Major's government; a huge boost to Euro-scepticism; and it made currency traders like George Soros rich. The billionaire broke the Bank of England and made over $1 billion profit. This currency crisis "severely damaged the government’s credibility" and saw the deepening "internal fissure over European integration" among the Tories. They lost power to the Labour towards end of the 1990s, and remained in the opposition for a decade.
The "more likely outcome of Brexit would be the spread of financial crisis, with all of its political repercussions" like the breakup of the United Kingdom, as Scotland would have all reasons to leave the Union to join the EU. David Cameron would be remembered in history as the Kingdom's last prime minister.
- Jose araujo Mar 2, 2016
  
  If you can only point negative effects of the Brexit, and cannot make the case for the UK to stay on the EU, don't you think this is an argument in itself?
  
  You cannot argue against a country being a country, that's denying all your history in favor of an utopia that you have created, its also treason...
  
  Wouldn't England be economically better if it were part of the Reich, or staying out of the continental affairs in WWII?
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Odyssios Redux Mar 1, 2016

Reply to Jagjeet Sinha -

Thanks! I knew it wasn't quite the EU then, but in haste simply said 'EU'. Of course, you're right, and I agree with the other point.
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Odyssios Redux Mar 1, 2016

Reply to Steve Hurst -
Yes, the City is central - but wold have been best protected by not even risking Brexit. That it has been, seems to indicate that Cameron had issues other than protecting the City in mind. Which seem to me party political - providing a steam-valve for discontent which might otherwise have threatened his position as leader. Now, of course, with a referendum, the City is at arguable hazard. Confusion twice compounded - at least.
- Steve Hurst Mar 1, 2016
  
  @Odyssios
  I suspect the City is central to HMG thinking but is not promoted due to the public distate for all things bank related at the moment.
  
  There is some presentation about the City here on PS (link below).
  
  I did read an interesting assessment some time ago which said the UK without the City was somewhat like Portugal without the sunshine. Not that I have anything against Portugal, nice place
  https://www.project-syndicate.org/commentary/brexit-british-banks-european-rules-by-howard-davies-2016-02
  
  The issue for the UK public is more centred on the migration issue, impact on jobs, wages, healthcare, schooling, housing; ie more emotive. Both new building and services are struggling with the impact of 1/3 million pa inflow.
  
  To return to the City again. There is an assessment somewhere or other that points out that the Eurozone banking regulation and tax proposal is designed by German and French banks/guvnts to suit them and the City operates in a different market (FX) and it would damage the City operation
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Steve Hurst Mar 1, 2016

Yet another plaintive song from the minstrel gallery. Please learn another song guys, how about something more germane to the situation. You know a bit more original

Hey how about something about the ECB arbitarily lowering interest rates to allow reunification and it blowing bubbles. Maybe something about the Euro being lower than a free floating DMk. I'm forever blowing bubbles would be a good tune. Or tell me lies sweet litle lies.

Or the immigrant song. Very today

Perhaps its time for a re run of Fiddler on the Roof - There would be one long staircase just going up, And one even longer coming down, And one more leading nowhere, just for show. Very EU dont you think.

What you need to focus on is the labour reform needed by the big players in the continental EU and the Euro issue. The UK doesnt have the burden of the Euro and labour reform was enacted some time ago. I dont doubt Brexit if it occurs will have a downside, I dont doubt the EU unreformed will have a downside.

So will it be break dancing or line dancing. June will tell. Either way there will be dancing. It could always be raining men if bankers jump but somehow I doubt that, they have learnt the likes of Helicopter Ben will pick them up if the building is burning
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Odyssios Redux Mar 1, 2016

It seems to me that the entire 'Brexit' imbroglio stems from a decision on Cameron's part, to quell possible revolt by a number of his back-benchers. To these hounds he threw the bone of another referendum (the last one in '75 was for the UK to join the EU). so really quite serious national interests have been endangered for party political reasons. Cameron could be so insouciant in this because when he suggested it, it seemed clear to him that the outcome was a slam dunk for staying. That was then; this, famously, is now. The phrase 'criminal irresponsibility' occurs. In Europe, why should any nation use up political capital helping Cameron salvage his political career? Nothing in it for them. Unless they, too, come to demand 'special privileges' and exemptions from EU rules. At which point, the entire EU project risks running off the rails.

Cameron came quite close to 'losing Scotland' in 2014 by his blithe assumption that there was no possibility of a 'Get lost' vote from the Scots. When, aboujt aweek before the referendum, it became clear that he might actually lose his bet, he went into panic mode, promising the moon, and so far delivering little but moon-dust, to the Scots. But he has noting to offer Euroskeptics that they haven't already discounted 100%. The refugee crisis, and thenotion tha the UK might as part of an EU-wide plan to deal with it,be assigned a quota of refugees, is by itself enough to tip the balance against remaining.

One last point: how many referenda does it take to make a binding decision? Two is one too many. On wonders when the third will occur - should the UK decide to try to crawl back in after leaving ...
- a b Mar 2, 2016
  
  "so really quite serious national interests have been endangered for party political reasons."
  
  What an undemocratic bs. You probably like democracy only as long as the decisions are the same as your opinion. Democracy does not work like this. Asking the people EXACTLY those important questions (as here being in or out of the current EU) is democracy. And this is one thing (besides others) that Cameron did courageously and rightly so.
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- Steve Hurst Mar 1, 2016
  
  No, the entire Brexit thing is about protecting the City
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- jagjeet sinha Mar 1, 2016
  
  (THE LAST ONE WAS FOR THE UK TO JOIN THE EU)
  
  No no. Not the EU. But The EEC.
  Even today if there is a choice between EEC or EU - 99 % will be for EEC.
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