The Left’s anti-Brexit hysteria is based on a mixture of bad economics, flawed understanding of the European Union, and lack of political imagination
By Thomas Fazi and William Mitchell and cross-posted from Jacobin Magazine
Nothing better reflects the muddled thinking of the mainstream European left than its stance on Brexit. Each week seems to produce a new chapter for the Brexit scare story: withdrawing from the EU will be an economic disaster for the UK; tens of thousands of jobs will be lost; human rights will be eviscerated; the principles of fair trials, free speech, and decent labor standards will all be compromised. In short, Brexit will transform Britain into a dystopia, a failed state — or worse, an international pariah — cut off from the civilized world. Against this backdrop it’s easy to see why Labour Party leader Jeremy Corbyn is often criticized for his unwillingness to adopt a pro-Remain agenda.
The Left’s anti-Brexit hysteria, however, is based on a mixture of bad economics, flawed understanding of the European Union, and lack of political imagination. Not only is there no reason to believe that Brexit would be an economic apocalypse; more importantly, abandoning the EU provides the British left — and the European left more generally — with a once-in-a-lifetime opportunity to show that a radical break with neoliberalism, and with the institutions that support it, is possible.
To understand why the anti-Brexit stance of most European progressives is unfounded and actually harmful, we should start by looking at the most pervasive Brexit-related myth of all: the idea that it will lead to an economic apocalypse. For many critics this is an open-and-shut case, proven simply by citing a much-publicized leaked report prepared by the British government’s own Department for Exiting the European Union (DExEU). The document concludes that all possible forms of Brexit, from remaining in the Single Market to a free-trade deal or no deal at all, would have a substantially negative impact on the UK’s GDP. Estimates range from a 2 percent lower GDP and 700,000 fewer jobs over the next fifteen years to an 8 percent lower GDP and as much as 2.8 million fewer jobs.
This line of argument can be found in a recent article by anti-Brexit commentator Will Denayer, which cites the fact that the report was produced by Britain’s “pro-Brexit government” as proof of its reliability. However, he fails to acknowledge that these forecasts suffer from a neoliberal bias embedded within the forecasting models themselves. The mathematical models used by the British government are highly complex and abstract, and their results are sensitive to the numerical calibration of the relationships in the models and the assumptions made about, for example, the effects of technology. The models are notoriously unreliable and easily manipulated to achieve whatever outcome one desires. The British government has refused to release the technical aspects of their modeling, which suggests they do not want independent analysts examining their “black box” assumptions.
The neoliberal biases built into these models include the assertion that markets are self-regulating and capable of delivering optimal outcomes so long as they are unhindered by government intervention; that “free trade” is unambiguously positive; that governments are financially constrained; that supply-side factors are much more important than demand-side ones; and that individuals base their decision on “rational expectations” about economic variables, among others. Many of the key assumptions used to construct these exercises bear no relation to reality. Simply put, the forecasting models — much like mainstream macroeconomics in general — are built on a sequence of interrelated myths. Paul Romer, who earned his PhD in economics in the 1980s at the University of Chicago, the temple of neoliberal economics, recently provided a scathing attack of his own profession in a paper titled “The Trouble With Macroeconomics.” Romer describes the standard modelling approaches used by mainstream economists — which he calls “post-real” — as the end point of a three-decade intellectual regression.
It is no surprise, then, that these models utterly failed to predict the financial crisis and Great Recession, and continuously fail today to produce reliable forecasts about anything. Brexit is an obvious example…