THE GROUCHO CLAUSE

Brexiters are making a dangerous mistake in their argument for leaving the EU

Obsession
Brexit
Obsession
Brexit

An essential claim of UK campaigners who want to leave the European Union is that the country could negotiate the same access to European markets from the outside as it now has from the inside.

This is a dangerous folly.

Any collective enterprise, be it a business, market or society, requires rules. Formulating and enforcing these rules requires the players to bear their costs–including sometimes capricious enforcement. These costs in turn also impel those who pay the dues to exclude those who don’t. For example, the citizens of lawless or war-torn countries cannot seek redress in a US or European court.

The costs can become especially oppressive in a large organization where standardized rules become absurdly out of sync with particular local circumstances, and where the rule makers and enforcers become a law unto themselves. The law, in short, can become an ass.

But rules and regulators cannot be scrapped without imperiling the benefits that large-scale operation provides. For example, human resources departments are widely reviled, but no large organization could exist without one.

The EU has provided a great boon to Europe by realizing the dream of common market alongside the more or less unfettered movement of goods and principle within its boundaries. Clearly this has come with a cost: sometimes overbearing and remote Eurocrats. The costs also encourage the EU to hang a “Keep Out” sign outside its doors—and to levy steep dues on outsiders such as Norway and Switzerland, requiring them to adhere to nearly all European rules as the price for access to the common European market. In order to ensure the collective good of a large market, free trade cannot be free for all.

Brexiters argue that the EU would have to cut a good trade deal because the UK imports more from the other members than it exports to them. Reduced trade would cost more European jobs than UK jobs. But Europe faces significant costs in maintaining a single market and difficulty in allocating the expense to its member states. The EU cannot therefore afford to offer lower rates to a large player like the UK. That would be intolerable for citizens of its other member countries.

 Routinely giving non-members access would stoke the resentment of members and undercut their willingness to pay annual dues. By way of analogy, think of an exclusive club that imposes steep membership dues. On the margin it would apparently behoove the club to open its dining rooms to non-members for the incremental revenue that would provide. But routinely giving non-members access would stoke the resentment of members and undercut their willingness to pay the annual dues necessary to maintain the club’s ambience and exclusivity.

Brexiters complain that they weren’t choosing to be ruled from Brussels when they voted to join the European community in 1975. And they say the encroachment of the EU on the powers and sovereignty of member governments has increased over the last 40 years, to an unforeseeable degree. Likewise, UK voters in the 1975 referendum could not have anticipated the influx of eastern European immigrants after the dramatic fall of the Soviet Union, or the membership bids of former Soviet satellites.

But unexpected changes in large political or economic entities are neither unusual nor illegitimate. Delegates who signed the United States constitution expected the then-thirteen states to maintain a high degree of sovereignty. How many could have imagined that the right to own slaves would be abrogated, that the federal government would use the commerce clause to regulate matters only tenuously connected to interstate commerce, or that unelected officials of the Federal Reserve, the Environmental Protection Agency, and the Securities and Exchange Commission would acquire sweeping powers?

In some ways, the unforeseen dilution of state sovereignty by the growing powers of the federal government has provided now un-controversial benefits. Slavery and segregation would have lasted much longer in the South without some federal curtailment of states’ rights. The Federal Highway Program has very likely helped knit local and regional markets into a large national market, providing a great boon to producers and consumers in the US. In other spheres however, the growth of the US federal government’s powers has been highly controversial.

But dissolution of the union or secession by disgruntled states is not a course that even the sternest critics of the federal government advocate today. Nor, in an ever-changing world, can we expect a once and for all resolution to the tension between centralization and decentralization. We can only aim for a civilized, dynamic and dialectical process.

Similarly, it is completely reasonable, essential even, for politicians in the UK and in other parts of Europe to resist the growing powers and budgets of the European bureaucracy and adherence to principles of subsidiarity in demanding “that decisions are taken as closely as possible to the citizen.” The value a club provides must continually be weighed against the costs its rules and dues impose on members. But exit or dissolution is not the answer.

More is at stake than simply the unraveling of a hard-won common market. Economic integration has provided the highly intended benefit of breaking with millennia of conflict between European nations, and offers a potential bulwark against a militant Russian resurgence. In the long run, therefore, the Brexit fantasy of access to a large market without the costs threatens peace as well as prosperity.

We welcome your comments at ideas@qz.com.

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