Brexit and Beyond
The Blue Model and Brexit

The battle over the Brexit referendum has begun—and the ground both sides are fighting over right now is who can be more protectionist. Several steel plants in the UK owned by Tata are currently teetering on the brink of closure (due in large part to a legacy pension scheme from the former British Steel corporation that’s £2 billion in the red), and 40,000 jobs are on the line. Prominent Brexiteer Boris Johnson thinks he sees an opening. The Telegraph reports:

Boris Johnson, the Mayor of London, has said that the Government would be able “to rescue the British steel industry” in the event of a Brexit.

Mr Johnson said: “We can’t take emergency action against dumped Chinese steel, even with British industry on its knees. We can’t cut our own self-imposed energy costs.”

He added that it was “time to take back control of our country”, adding: “We would have more money, and more freedom to rescue the British steel industry – and we might even succeed.”

Business Secretary Sajid Javid pushed back, saying the UK’s “steel industry will be worse off” in the event of Brexit. But left unspoken is that both sides agree that preserving UK’s version of the blue model is the key to political success. (The government, for example, has been floating proposals that include taking on the staggering pension responsibilities in order to facilitate a sale that would keep the plant open.)

Nor is this the only blue model battlefront. The Bremain campaign has their own charge—that leaving the EU would gut the NHS:

[F]our former Labour health secretaries Alan Milburn, Patricia Hewitt, Andy Burnham and Alan Johnson have said leaving the EU would risk “frightening consequences for staffing, waiting times and levels of service care”. Writing in TheSunday Telegraph, Lord Darzi, the former health minister, argued: “Huge amounts of investment in research and innovation are being put at risk. The European Union is a scientific superpower; and we are its leading light.” And, in a letter to The Times, nearly 200 health professionals and researchers argue: “As health professionals and researchers we write to highlight the valuable benefits of continued EU membership to the NHS, medical innovation and UK public health.”

Once more, the underlying—and presumably correct—assumption is that the side that convinces the British people it will defend the niceties of the blue model UK is going to reap the political benefits.

This poses a real problem for the Brexit campaign. There is a prominent strain among Brexiteers that speaks of a post-referendum Britain, shorn of the shackles of Continental socialism, that would reclaim its historical position as the world’s foremost trading nation. It’s an appealing notion, and for a Brexit to make economic sense, the UK would indeed have to pull something like this off.

As one prominent Brexit advocate put it:

If the “Leave” side wins, it will indeed be necessary to negotiate a large number of trade deals at great speed. But why should that be impossible? We have become so used to Nanny in Brussels that we have become infantilised, incapable of imagining an independent future. We used to run the biggest empire the world has ever seen, and with a much smaller domestic population and a relatively tiny Civil Service. Are we really unable to do trade deals? We will have at least two years in which the existing treaties will be in force.[..]

This is the right moment to have a referendum, because as Europe changes, Britain is changing too. This is a truly great country that is now going places at extraordinary speed. We are the European, if not the world, leaders in so many sectors of the 21st-century economy; not just financial services, but business services, the media, biosciences, universities, the arts, technology of all kinds (of the 40 EU technology companies worth more than $1 billion, 17 are British); and we still have a dizzyingly fertile manufacturing sector.

Now is the time to spearhead the success of those products and services not just in Europe, but in growth markets beyond. This is a moment to be brave, to reach out – not to hug the skirts of Nurse in Brussels, and refer all decisions to someone else.

And who was this apostle of free trade, free market, and can-do? Why, Boris Johnson himself.

Sadly, his protectionist arguments since then (even if not made in entirely good faith) and the overall tenor of the debate in the UK indicate that the domestic constituency for a radical pivot to free trade and the deep structural reforms to the blue model it would take for an independent Britain to be competitive simply isn’t there. Nor do we think that the hard realities of life on the outside would convert the British public to Hayekians out of sheer necessity; there’s at least as good a chance that an independent Britain would double down on the NHS, protectionism, and all the rest.
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