Much ado about nothing
From the August 2016 print edition
I’m certain you’re aware that William Shakespeare was an English poet and playwright who was born about 450 years ago. There is a general consensus that he’s the greatest writer in the English language. I’m not here to dispute that. Wild Bill penned some memorable tragedies: Corialanus is my favourite. Several others, particularly King Lear and Julius Caesar are terrific. But along the way he laid a bunch of eggs. Most of his comedies are not as funny as a really bad episode of the 1970’s sitcom, Three’s Company. And maybe the worst of all is Much Ado About Nothing.
I’m not going to write a dissertation about why it is so truly lousy. But I will give that devil Shakespeare his due: what a great title! And those four magic words came back to me with a vengeance in the wake of the recent vote by the people of Great Britain to leave the European Union. On June 23 in a referendum that saw the highest voter turnout in that nation since its 1982 election, 52 percent said “Hay-ho, we wanna go!” This surprised most observers and immediately after the votes were tallied, stock markets in the developed world swooned.
Hearing the commentary at the time, you would have thought civilization itself was coming to an end. Moreover, just when steady leadership and guidance was more important than ever, sitting Prime Minister David Cameron announced his resignation. Some commentators saw the Brexit vote as the first domino and wondered what would be next. Bond yields spiked in the anticipation that a global economic slowdown was just around the corner. American presidential hopeful, Donald Trump, opined that the people of England were taking their country back, begging the question: from whom?
It is now over a month later. The US stock market—the single best proxy there is for global economic confidence—is hitting new all-time highs almost daily. Even more surprisingly, if you look across the pond at the FTSE 100 (England’s most important bourse), it is also reaching never-before-seen levels. Yes, you read that correctly: stocks in the UK are valued higher than they’ve been, demonstrating that with the benefit of 20/20 hindsight, we can understand that the vote to leave the EU was much ado about nothing.
It’s important to remember that England embraced the idea of union somewhat reluctantly. It always maintained its own currency, which meant that it had an independent monetary policy. True, the nation enjoyed (or not) free trade, similar to the arrangement that Canada has with the US through NAFTA. But unlike NAFTA, the EU also allows labour mobility across the member nations, meaning it’s possible for an English waiter to serve tables in Greece. It is equally possible for Polish tradespeople to toil in England, and this seemed to be one of the key drivers for the Leave vote.
Labour mobility is a tricky issue. On one hand, I would love the chance to pursue teaching opportunities in the US. At the same time, I have to fear that the flood of qualified professionals heading north could depress my wages. GDP per capita in the UK is around US$41,000 while you can reverse the first two digits for Poland’s. It’s just a hair over $14,000. This means that when you compare apples with apples, the wage you have to pay a skilled Polish tradesmen working in the UK is a third of what a native would accept.
So what the people in the UK were saying by the slimmest of margins was that they were not fully satisfied with the current arrangement. The country isn’t physically going anywhere, which means that whatever is ultimately negotiated, Europe will still be its most important trading partner. Currently, over half the UK’s exports go there. No Brit wants to see this erode. Nor do consumers want to see the goods and services they import increase in price. This suggests that the negotiations for a new arrangement between the UK and its European neighbours will be both cordial and straightforward.
Mark my words: a treaty with the remaining members of the EU will be negotiated where there will be free trade in goods and services, just as there is now. There will be restrictions around labour mobility—it will be possible for Brits to work on the European mainland and vice-versa, but there will be additional paperwork required. The arc of European economic history will not have been impacted and if Shakespeare were alive today to chronicle what happened, it would be neither comedy nor tragedy, rather it would be…I think you can guess where this is going!