The Best Things to Read on Brexit

You’re recommending books and other readings on Brexit—a topic it seems a good time to get well informed about. Could you start by saying how you went about making your selections?

Choosing books on Brexit is obviously quite difficult, at this point, because there aren’t many books about it. There are a few that have been rushed out as blow-by-blow accounts of the campaign that are not necessarily particularly interesting.

What I wanted to do was have both some books that illustrated where Brexit was coming from—some of the underlying analysis of the broader social and political trends in the UK that underlie Brexit—at the same time as having some with a forward-looking perspective—on what Brexit might actually mean in terms of economics and the UK’s future relationship with the EU.

“Lots of people who voted didn’t necessarily feel that strongly either way.”

Also, some sense of the broader social/cultural impact of Brexit which, of course, is far too early to say. It will, in any case, vary a lot by person and, therefore, I included a novel. A novel is just one person’s very subjective account of how Brexit affects some fictional characters, indirectly rather than directly. But I think that’s the best that you can do at the moment.

You’re an economist. According to one MORI poll—conducted before the referendum—just under 90 percent of UK economists think that Brexit will be bad for the economy. Given how hard it is to predict the future, how can economists be so sure that it’s a bad move?

Essentially, economists are basing their predictions about Brexit on the record of history. We know both from economic theory—going back to Adam Smith and David Ricardo—and from empirical evidence, that increased openness to trade and increased trade is, generally, associated with stronger economic growth, stronger growth in productivity and greater prosperity.

We also know, again both from theory and particularly from empirical evidence, that participation in free trade areas and, even more than free trade areas, very deep integrated economic and trading relationships like the European Union, tends to promote trade. These are the sort of things we know from history and data.

“If you say, in response to an opinion pollster, that you feel European, the chances that you support the death penalty are close to zero.”

What economists are saying is that leaving the European Union is very likely going to lead to a reduction in the UK’s trade, and that that reduction in trade is very likely to make us less prosperous than we otherwise would have been.

Now, we cannot be certain about that for two reasons. One is a logical one which is that the past can’t, by definition, tell you for certain what will happen in the future in the social sciences. It’s not like testing a drug on an illness. There is some uncertainty about whether the future will be like the past. That’s true of almost all economic predictions. But there is a fair amount of historical record to go on.

The second is that the UK may be able to make new trading agreements with other countries that somehow make up for the loss of our membership of the European Union and the single market. Here there is an element of political judgement. I think most economists think it’s very unlikely we’re going to have deep, lasting and integrated trading relationships with India, China, and the US, the way that we have with the European Union. It’s not impossible and it’s not a purely economic judgement, but it seems a reasonable one, to most of us.

There are no certainties here. It is not certain that leaving the EU will make us worse off than we otherwise would have been. But, based on the data and the historical record and what seems a plausible set of outcomes for the UK’s future in economic trading relationships—both with the remaining EU and the rest of the world—it does seem the most probable outcome is that we will be somewhat poorer.

Now, I should say that although economists produce a lot of numerical estimates of what that would mean, even the people who produce those estimates would emphasise that there is a very large amount of uncertainty. Although the nature of the models that we use to make these predictions means that you get numbers coming out of them, one should definitely not place too much weight on the numbers themselves.

Talking about the opportunities for global trade after Brexit, let’s turn to the first book on your list, which is Daniel Hannan’s What Next: How to get the best from Brexit. He has visions of the UK becoming like Singapore or Hong Kong and entering a new era of free trade and prosperity. Why have you chosen this as a good book to read on Brexit?

I want to emphasise that I was neutral, during the campaign, between Remain and Leave. I have very strong views on some of the economic aspects, particularly relating to free movement and immigration. But I do think that there are arguments on both sides. I try to be as objective as I can in weighing them up.

Daniel Hannan’s book illustrates the naïve and fact-free approach, of some people on the Brexit side, to our future outside the EU. As you say, he’s quite good at painting this picture of the UK as a very globalized free trading nation, trading with other countries of the world with very low tariffs—while not being part of any particular economic union itself. But it really fails to engage with the realities of the UK economy—both how the UK economy actually works and how international trade actually works.

He has this blithe disregard for any actual facts, so he does have this tendency to simply make things up, which I think is an illustration of what we got from some on the Brexit side. They said things and the fact that they weren’t actually true didn’t really seem to matter. By the time anybody pulled them up on their factual inaccuracies, they were onto the next thing. Hannan epitomises that disregard for facts.

But it’s a very appealing vision, isn’t it? Also, I got the sense from the book that he means it: he is a true believer.

It’s entirely sincere. What I think is interesting is that Hannan is clearly an intelligent person. He’s lucid, he’s sincere and he believes in it. And yet, as soon as you start to apply any depth of knowledge into any of the things he’s talking about, it becomes clear that what he’s saying doesn’t add up. He combines intelligence, vision, and honesty with a complete superficiality about how trading arrangements work.

Give me an example of something he gets wrong in the book.

For example, he talks about how the EU is this rigid, protectionist organisation that imposes huge tariffs on things from outside the EU—like a 32% tariff on wine. To bring that back to reality—when you were last at the supermarket, did you notice that there was only French and Italian wine and none from Australia and Chile? I suspect you probably didn’t notice the absence of wine from Australia and Chile, because there is wine from Australia and Chile in our supermarkets, despite our membership of the EU. Why is that? Well, as it happens, as members of the EU, we have a free trade agreement with Chile which means that there is no tariff on Chilean wine.

Dan Hannan, in fact, tweeted his outrage at the 32% tariff on Chilean wine. One of the nice things about social media is there are all sorts of people—expert and non-expert—who immediately spot people who are talking nonsense. So this was immediately pointed out.

“It is not certain that leaving the EU will make us worse off than we otherwise would have been.”

He then said, ‘Well, what about the 32% tariff on Australian wine?’ And it turns out that while there is a tariff on Australian wine, it isn’t 32%, again, otherwise it wouldn’t be in the shops.

It’s quite interesting because Hannan has been a member of the European Parliament for a long time. He sits on the committees which supposedly discuss free trade agreements and all this detailed stuff that the EU does when making trade agreements with other countries. And, yet, when it comes to these very simple things, he just makes things up. It’s just not true. I find that very odd.

He’s clearly given a lot of thought to this stuff, but you don’t have to be a trade expert to find out that the EU doesn’t have a tariff on Chilean wine, and that the tariff on Australian wine isn’t 32%. You’d think that a member of the European Parliament would know that, but you’d be wrong, in this case.

He seems to be very exercised about the EU’s ban on some vitamins and herbal remedies. It comes up twice in the book. I thought it was quite funny, in terms of the bigger picture, that this should be viewed as a key issue.

There are a few people out there who think it’s awful, and others who don’t. I think, again, it illustrates the superficiality. Suppose you do think it’s a bad thing that the EU over-regulates herbal medicine. The big issue here, in terms of leaving the EU, is that the European Medicines Agency or EMA, which regulates whether pharmaceuticals are safe to sell in the EU, is actually based in London. That’s one of the reasons—though by no means the only reason—the UK has such a large pharmaceutical industry.

After we leave the EU, the EMA will not be able to be in London anymore because we won’t be in the EU. It will go off to Dublin or Rome or somewhere else. We are then faced with a choice. How are we going to regulate drugs in this country, including herbal medicines, for that matter? Are we going to set up a British Medicines Agency that will have to approve every drug that’s sold here?

“The European Medicines Agency, which regulates whether pharmaceuticals are safe to sell in the EU, is actually based in London. That’s one of the reasons—though by no means the only reason—the UK has such a large pharmaceutical industry.”

There are a bunch of problems with this. First of all, it’s going to take a while. It’s going to be expensive and messy, and it’s not something you can do overnight.

Secondly, and more seriously, there are two really big pharmaceutical regulators in the world: the Food and Drug Administration or FDA in the United States and the EMA for the European Union. Will drug companies even bother to submit their medicines for approval to the British Medicines Agency?

Certainly for the big drug companies based here—AstraZeneca and Glaxo—their priority will be with the EMA and the FDA, because that’s where their big markets are. In the end, what does that mean? Are we just going to say that drugs that have been approved by the EMA are safe to sell here? Well, we might well do that.

And Hannan would be happy with that, according to his book. He wants less regulation—and argues that if something is good enough for the US and the EU or indeed Australia, then it’ll be good enough for us.

The net result of the changes is that the EMA has gone off somewhere else, our drugs are still approved by the EMA—except that we no longer have any vote or voice or influence on how the EMA is run, or what procedures it follows. We’ve gone from a situation where there are a bunch of rules that apply to us, which we have a voice in—sometimes we win the arguments and sometimes we lose them and most of the time there’s some sort of half-baked compromise—to a situation where we have no voice and just say, ‘Well, OK. That’s alright with us!’

It’s not clear what exactly we’ve gained. We haven’t become less regulated. We’ve just accepted that we don’t have a say in the regulations that apply to us. And AstraZeneca and other pharmaceutical companies want regulatory approval. They might not like what the regulators do but they need regulators. They’ll tell you that.

What about his argument about Volkswagen and the emissions scandal, that it was successful EU lobbying from the German car company that made everyone turn to diesel, with disastrous results for our air quality?

It was clearly an appalling outcome and reflects very badly on VW and very badly on European regulators. But it’s not clear, to me, how it would necessarily have been different if the UK had been doing the regulation. Certainly, it was the UK political process that was responsible for the tax privileges that diesel has had in the UK. That’s the main reason we have an air pollution crisis in London now that is killing thousands of people a year. For the last 25 years, we’ve got tax policy on diesel wrong and it’s had very, very damaging consequences. But those decisions were taken in the UK Treasury—they weren’t taken in Brussels. Will we do better if we do this sort of thing in the UK? Maybe, maybe not. We just don’t know.

“Daniel Hannan’s book illustrates the naïve and fact-free approach, of some people on the Brexit side, to our future outside the EU.”

What is certain, though, is that just as with pharmaceuticals, the thing that will change is that decisions will be made without our input. We’ll still have emission standards made in Brussels but without our voice or vote. Alternatively, we could have emissions standards made in the UK. In that case, are we going to stop exporting cars to the rest of Europe? That’s not a particularly attractive outcome for the UK car industry.

One of the key things that comes out of the book is that Hannan—and many others in the UK—never wanted to be part of this political union, this ever closer integration of the EU. When he looks at the history, he argues that Britain would have been more comfortable with a European Free Trade Association or EFTA-type arrangement. Don’t you sympathise with that Brexiteer sentiment, that they never bought into the European project in the first place and are much happier on the periphery?

It clearly is the case that there is a much larger political constituency in this country against deep political integration and for detachment than there is in any other member state in the EU. That’s absolutely right and we wouldn’t be here if there wasn’t. I’m not an expert on the history, but the UK’s very conflicted relationship with European integration has indeed been obvious since the start, since we decided not to participate in the original Treaty of Rome.

“It was clearly an appalling outcome and reflects very badly on VW and on European regulators.”

And there clearly is a good argument for saying that both we and the rest of Europe would have been much better off if we had been able to come to some sort of arrangement that had a large degree of economic integration without the degree of political integration.

It is interesting and, to be fair to Dan Hannan and some of the people on his side of the Brexit camp, that was what they were arguing for before the vote. Things have changed rather now. Currently, the government is pursuing a type of Brexit which does not envisage that degree of economic integration and people like Mr Hannan have largely gone along with that. There does not seem to be much of a contingent calling, for example, for us to remain in the European Economic Area.

On that note, let’s go to your next book. This is Brexit Beckons: Thinking Ahead by Leading Economists, which includes 19 essays by different economists. It’s available as a free eBook. In the introduction, the editor, Richard Baldwin, notes that, in terms of the future, the alternative that seems most sensible for the UK, from an economic perspective, is the Norway option.

Indeed and, going back to what we were just saying, there were some people on the Brexit side who before and immediately after the vote were advocating some form of the Norway option. As Richard says, most economists think that the Norway option would be optimal. It’s not obvious to me, because the Norway option still has some of the disadvantages that I was just talking about—that you have to accept the rules while having a significantly lesser voice in how those rules are constructed.

“It’s not obvious, once you’ve taken the decision to Brexit, that you shouldn’t go the whole hog.”

There is a counterargument to that, which is to say, ‘Well, actually, even if you thought Brexit was not the right thing to do from an economic perspective, if you’re going to do it then maybe you should do it properly.’ ‘Properly’ meaning making your own regulations, making your own trade deals—although Norway can, to a certain extent, make its own trade deals—and setting your own immigration policy. Norway cannot set its own immigration policy with respect to citizens from other EU and EEA countries. It’s not obvious, once you’ve taken the decision to Brexit, that you shouldn’t go the whole hog.

Are there any articles in there that you particularly want to highlight as illustrating something important about Brexit?

There are some interesting ones on what caused the Leave vote, from an economic perspective. To what extent was it immigration? To what extent was it economic decline? Diane Coyle’s essay on that is very interesting. She is very much a believer that technological and globalisation have, on the whole, improved our economic outcomes. But she also feels—very strongly—that the policy response, in the 80s and 90s, to deindustrialisation in the parts of the UK that were left behind by globalisation, was very badly lacking. There’s this idea that it was a failure of previous governments to have anything that looked like an industrial or regional development strategy.

There’s also an essay by Kevin O’Rourke, a highly respected economic historian, drawing on the work of Dani Rodrik, arguing that too much market and too little state invites a backlash.

Exactly. Diane and Kevin’s pieces are complementary.

The other important chapters are those that are looking forward and deal with the UK’s future trade relationships both with the EU and the rest of the world. There’s an incredibly good line-up of trade economists—including Alan Winters and Jim Rollo—who have been doing this stuff for decades. Richard Baldwin is also a very eminent trade economist. Their moment has now come. Trade economics is back in fashion.

“Free trade in cars is not just a matter of having zero tariffs—it’s a lot more complicated.”

The important thing that comes from looking at all their chapters together is the extent to which free trade is not just about abolishing tariffs. There are a number of different aspects to that. First of all, even trade in goods is much more influenced by regulation than it used to be. Cars are the classic example. Parts shuffle back and forth across borders before being assembled. Regulation matters a lot: We have emissions standards, safety standards, and all the rest of it. Free trade in cars is not just a matter of having zero tariffs—it’s a lot more complicated.

Then, when you get to trade in services and movement of capital, and the role of the City, things get even more complicated. Just the sheer complexity of the issues that are involved both in reshaping our trade relationship with the EU, and in working out what our relationships with other countries in the future will be, is just fascinating.

And getting all sorts of people up to speed on these complexities is going to be expensive.

Expensive and complicated. We’re a very, very long way off. We don’t even know what we want yet.

Let’s move on to number three on your reading list. This is a blog post by Dominic Cummings, who was the campaign director of Vote Leave.

Dominic is an absolutely fascinating character and has often been described as the ‘brains’ of the Vote Leave campaign. I’ve chosen this as an illustration of how the campaign was won on the Leave side. What I really like about this is that, in contrast to Dan Hannan, Dominic is very frank and honest. He’s quite prepared to say, ‘We did this, and we think it works, we weren’t so sure about that but we did it anyway. This is what we know, this is what we don’t know, this is what I think.’ He’s very dispassionate and there’s a degree of scientific method and rigour in his approach that you rarely see. At the same time, he’s very entertaining.

“When I first saw the slogan “Vote Leave, take back control” I thought, ‘Really? What does that even mean? Is that going to work?’”

It’s very revealing. I don’t think Dominic would claim that he won it himself or that he necessarily knows which of these particular things won it, but it’s a very good insight into how they were thinking. And I do think that there was a contrast with the Remain campaign which was very old-fashioned and did not apply this sort of rigour in analysis that Dominic and his team did.

Having read the blog post, his overall conclusion seems to be that there were two things that won it for them. One was the “Let’s give our NHS the £350 million the EU takes every week” slogan, and the other was keeping Nigel Farage out of sight as much as possible. Those seemed to be two tactics he is particularly proud of.

Yes, the other side is that Dominic is pretty cynical and ruthless about his approach to campaigning. The £350 million figure was, of course, simply untrue. Everyone knows that and I think pretty much everyone on both sides will admit it, at least privately. With Farage, Dominic was quite ruthless. But politics is a ruthless business. It’s quite reasonable, I suppose, for Nigel Farage to say, ‘We’d have never got the referendum without me.’ Equally, Dominic’s priority was winning and his view —and I think he had some pretty good evidence for it—was that the right way to win was to approach Farage in the way that he did. By and large, I find that convincing.

“Dominic is an absolutely fascinating character and has often been described as the ‘brains’ of the Vote Leave campaign.”

I have to say, when I first saw the slogan “Vote Leave, take back control” I thought, ‘Really? What does that even mean? Is that going to work?’ I was completely wrong. I’m not just saying that because Leave won, I think there is enough evidence—some of which is here and some of which is elsewhere—that that did genuinely resonate with people. That was Dominic and he was right.

So, I think he has a pretty good case to make. He doesn’t oversell himself too much in this post, at least. He admits somewhere that the result was over-determined in that, if you have a very close result like 52-48, there’s a lot of different things that could have won it. You can’t point to any one single factor. And you can’t say that it was inevitable. He’s quite clear that it wasn’t inevitable.

He seems to have read a few behavioural economics books—or looked at that type of psychological study.

Yes. Again, I think one of the impressive things about Dominic—whether or not you agree with his objectives—is that he takes proper scientific evidence in the social sciences seriously and tries to apply it. Again, I think this was in contrast to the Remain campaign, which was a much more traditional election campaign by PR professionals and special advisors.

Book number 4 on your list is Brexit: Why Britain Voted to Leave the European Union. This isn’t coming out until April, but you’re familiar with the research it’s based on. So, tell me, why did Britain vote to leave the EU?

This is written by my friend and colleague Matthew Goodwin and co-authors. Matt is an expert on the rise of UKIP. The underlying cause is this sense that people felt left behind by rapid economic change and adrift from the global economy or the modern economy of London and the southeast.

In terms of voting for Leave, distance from London was a factor, communities which had lower skill levels was a factor, and people who were older. There was this combination of economic and social disconnection from the global economy in some areas, and the perceived contrast with London and other more prosperous areas like Oxford and Cambridge, York, and so on, that appeared to be doing relatively well.

“In terms of voting for Leave, distance from London was a factor, communities which had lower skill levels was a factor, and people who were older.”

The point that’s important is that this was not just about immigration. In some areas—say Lincolnshire and East Anglia—it related very much to immigration from the EU. But in lots of other areas that was not the case. These are places that have been economically depressed since the deindustrialisation and decline of the manufacturing industry in the 1980s and 1990s, i.e. well before the current wave of immigration from eastern Europe. It’s much more deeply rooted. It relates not just to the social impact of immigration but also of deindustrialisation, trade, technological progress, and so on.

But there’s a bit of immigration in there, isn’t there?

There is, but it came on top of these broader and more well-established economic drivers. Immigration, for some people, has become a symbol of something that was there already—the fact that some communities were being left behind, the fact that people with lower skills or qualifications are relatively very disadvantaged in the UK labour market.

Now, the fact that there has been a recent arrival of quite large numbers of people from Europe who are more skilled and better qualified and yet willing to work in low skilled jobs for relatively low wages has provided a visible focus and intensification for those feelings. The evidence suggests it hasn’t really made things any worse for those people—things were bad already—but it has provided a visible focus for things which may have been happening anyway in a more invisible way because of changes to technology in the labour market.

Which means, I suppose, that the EU is a kind of scapegoat for problems that were already there and Brexit a huge distraction from dealing with the underlying issues. Presumably, these can only be solved by focusing on education and developing people’s skills—that kind of thing?

That’s the real challenge going forward, because it’s far from clear that Brexit will solve any of these problems. It depends on a lot of things we don’t know yet but, still, I think that most economists would say that Brexit will not lead to an immediate improvement for people who have been suffering from these broader forces.

It is almost a truism, certainly among economists, that the big structural problems in the UK—to do with the labour market position of the low-skilled, the education system and the housing market—actually have little or nothing to do with the UK’s membership of the EU one way or the other. The EU has not messed up our housing market, we did that for ourselves. And, equally, leaving the EU won’t solve it.

Then there’s a political economy question—whether leaving the EU will, in some ways, make it easier to solve some of these issues or whether it will make it more difficult. That, we don’t know.

The other thing—and I’ll be interested to see what Matt’s book says about this—is that these economic factors also overlap very considerably with people’s social attitudes. As well as people being more likely to vote Leave if they were poorer, or lived in areas that were left behind, people were also much more likely to vote Leave if they had socially conservative attitudes—including on issues that have nothing to do with Brexit, like gay marriage and the death penalty.

“Most people do not live in big cities or remote rural villages. They live in greater suburbia/small-to-medium sized towns. ”

So there is this sense that a vote for Brexit was a reaction against a trend of social liberalism in the country as a whole which is, again, associated with the EU but of which the EU is not really the main driver. Although there are issues relating to the European Court of Human Rights, no one believes that leaving the EU means we’re going to roll back gay marriage or reintroduce the death penalty. And yet, views on these things were very strongly correlated with how people voted on Brexit.

This ties in with a much wider social science literature which people are also looking at in the context of Trump. It’s very important to say that Trump and Brexit are different in all sorts of very important ways, but there is a common strand. Social scientists—like the authors of the book but also authors on the other side of the Atlantic—are looking at this divide between an authoritarian view of the world and a liberal one. David Goodhart’s new book talks about people from ‘somewhere’ versus people from ‘anywhere.’ I think that’s a bit of an oversimplification, to say the least. But there is clearly this dichotomy that is not based on purely economic grounds but is also about social attitudes.

So, just to summarize, this book is very much data driven?

Yes, it’s data-driven analysis looking in more detail at what drove the vote to Leave.

Lastly, we have the novel Autumn by Ali Smith. It’s been described in The New York Times as, “the first great Brexit novel.”

Yes. That sounds slightly damning with faint praise because, how many Brexit novels have there been? But, that said, I do think Ali Smith is a wonderful writer. This is perhaps more of a novella than a novel—it’s quite short, and I think it’s intended to be the first of four. It’s called Autumn so I think we can guess what the others will be called in due course.

It’s wonderfully written and it does capture this atmosphere of a society not in chaos but unsure of itself, not clear where it’s going—and of a young woman who feels disorientated by what our society is doing or doing to itself, and trying to work out where she’s going.

I like the way it starts with a play on the opening lines of Dickens’s A Tale of Two Cities, about the French Revolution: “It was the best of times, it was the worst of times.” There is this feeling that Brexit is quite momentous, isn’t there?

Yes, absolutely. As I say, one might guess from the tone that Ali Smith didn’t vote to leave but it’s not an attack on Brexit, or politicised in any particular way. It’s more that it conveys the atmosphere of what the UK and, particularly, England feels like now. It’s not a London book. It’s a book set somewhere in the sort of England that most people actually live in. Statistically that is—I’m speaking as a social scientist here, this is not what the book says—most people do not live in big cities or remote rural villages. They live in greater suburbia/small-to-medium sized towns.

It’s not set in somewhere that’s particularly left behind. It’s not set in a decaying, northern ex-mill town or somewhere like that. It’s set in a moderately prosperous part of the country. Statistically (going back to the previous book) you could probably guess that the place that it’s set probably voted to leave by not much—maybe 55-45—so is reasonably reflective of the country as a whole.

At one point, her mother says that one half of the town is not talking to the other half. Have you come across big divisions between families or friends over which way they voted?

There is some of that. I think it’s possibly a bit exaggerated in the sense that lots of people who voted didn’t necessarily feel that strongly either way. But there are a lot of people who did. Certainly, on Twitter you see people getting very, very upset.

At least two people I know who voted Brexit said they did so because they’d always felt more English than European. That seemed to be about all there was to it.

Yes, but that does symbolise something and ties in with what I was saying before about values. If you say, in response to an opinion pollster, that you feel European, the chances that you support the death penalty are close to zero, and the chance you support gay marriage is very, very high. If you say you feel English, it’s not entirely the reverse but the figures are very, very different. It’s quite a strong correlation.