Samizdata

The tone of an argument should not matter, I like to think, as much as the quality of the argument itself. I have been reading Charles Moore’s multi-book biography of Margaret Thatcher (he is working on volume three) and I am reminded of just how much a segment of the “chattering class” loathed her as much for what she sounded and looked like as what she said. To some extent, we try to rise above all this and point out the irrationality of disliking a view about X because of who is saying it, and so forth. Maggie was not the kind of person to pour a lot of oil on troubled waters (she was, however, more willing to temporize and compromise in certain cases than the standard narrative suggests). The accent, the emphasis, the Methodist-inspired approach, that “tone”, set a certain kind of person off the deep end. (To some extent, having wankers such as playwright Harold Pinter as your enemy is something to be quite proud of.) But even those who broadly agreed with a lot of what Maggie did and said might have to admit that it did put some quite otherwise rational people off.

And this leads me, to, yes, the Brexit vote this week. I cannot help but think that the very fact of Remainers often being the likes of the IMF, or Very Grand Economists, etc, is like the sensation for many of chalk scratching down a blackboard (I am giving my age away). When a EU Commissioner like Juncker attacks Brexiters, you can imagine how well, or badly, this goes down. And on the some of the interactions I have had on Facebook, much the same effect applies. I have been told, for instance, that the UK electorate has no excuse for whining about the undemocratic nature of the EU because British voters, by and large, don’t vote for MEPs and that the EU Parliament is chosen via proportional representation and therefore a fine and worthy body, and stop whining. The fact that MEPs cannot initiate, or repeal, legislation of any serious nature is ignored (MEPs do have blocking powers). And there have been a few outpourings of rage from a few of my acquaintances that a referendum is happening at all. What such folk don’t seem to realise is that such attitudes only make those of a EUsceptic strain even more annoyed, and more likely to vote Leave out of a “that’ll show you arrogant bastards” tone. In much the same that however logical a position of Mrs Thatcher in her heyday might have been, people, given the cussedness of human nature, disagreed.

The tone does matter, in other words. And although some of the vibe coming out of the Leave side is unsavory and foolish, the Remain side’s collective impersonation of 18th Century French aristocrats (just before the Bastille fell) is, in my view, even worse. It should not always matter, but it does.

I have spent the last few days in Geneva – I travel to Switzerland regularly as part of my job – and needless to say, the prospect of the UK leaving the European Union comes up a lot in the Alpine state. For good reason. Switzerland is not in the European Union (that country has more sense), is unlikely ever to want to do so, and has a broadly amicable relationship with its neighbours, apart from when they aggressively seek to break down Swiss bank secrecy laws. (Such laws are, for cross-border purposes, no longer effective, although within Switzerland, the laws remain on the statute book and there are no plans as far as I know for lawmakers in Berne to repeal them.) By and large, Switzerland’s financial services industry is still in good health, although like many other centres, onshore as well as offshore, has had to contend with mass of regulation, some of it home-grown. (Swiss banks operate under unusually severe capital adequacy rules and the country now has negative interest rates, which hits banks’ margins.)

The Swiss trip got me thinking about London’s position in the EU referendum. One regular argument you might read about in the financial pages of pro-EU papers such as the Financial Times, for example, is of how if Britain quits, this will hurt London’s financial sector (aka “The City”), because we will no longer be able to “passport” financial services run from London across the whole of the EU. This seems to be a greatly exaggerated worry. For example, in many cases with the fund management industry, fund structures known as UCITS (the acronym is for a long set of French words), which can be bought and sold across the EU – and beyond – and issued in different currency share classes, are typically registered in Luxembourg and Dublin. There are now Chinese yuan share classes in UCITS funds, and China is not, bless its cotton socks, in the EU. Many of the portfolios held in these pan-European structures are managed by investment whizzes in London, and indeed, Zurich, and Geneva, or Hong Kong. So it seems unlikely, to pick this one example, that leaving the EU means disaster. If the UK leaves the EU, then some non-EU member state banks, wealth managers and insurers might have to set up onshore, representative offices in the EU, which is irksome, but hardly seismic. Similarly, the European Union directive affecting hedge funds and private equity, called AIFMD, applies to the European Union, but non-EU jurisdictions such as Jersey and Guernsey have acquired the ability to be treated as “equivalent” for the purpose of this directive.

And that leads to a broader point about rules, treaties and standards. To trade, transact and interact, one doesn’t need to have centralised, top-down legal rules and a single political entity, such as the EU, but to have – and the is the crucial bit – mutual recognition of another’s standards. If the the UK quits the EU, then German carmakers will need to recognise and honour UK motor manufacture rules (which would be sensible for Germany to do, given it is a net exporter to the UK) and the UK would have to return the favour. And so on and so on. Australia has to acknowledge our rules, and we theirs. We see this sort of mutual recognition in all fields of life. Over time, of course, a wider set of rules can be adopted, rather as languages and standards around computer software do.

To trade with people living and working in the EU, it is not necessary to be married to an undemocratic, clunky structure in Brussels. Ending that misconception will not just help win the case for UK exit, it might also encourage people to think more clearly about the very structures of power that we assume are necessary for economic activity to happen. So regardless of what happens next week, I hope it might galvanise thinking about proper authority, and the role of transnational organisations.

On some specific issues around trade, the City, and so forth, this article by Conservative MP and former Cabinet minister, Peter Lilley, is simply excellent. The Adam Smith Institute has a good piece on the classical liberal case for leave.

There may be some specific consequences that are adverse – but within certain limits. For example, take those strange creatures, “non-doms” – persons who live for a period in the UK and enjoy freedom from UK tax on their worldwide income but who have to pay a levy to enjoy this status. Some of these non-doms live in the UK because it also gives them the freedom to roam around the EU. And there are people buying “investment visas” (a sort of market for passports) who want to get a British visa not because of our marvellous weather, but to roam around the EU. They may choose to get a “golden visa” in Spain or Malta instead.

But in the broad scheme of things, losing money from rich overseas investors using the UK as an entrepot doesn’t seem such a massive blow, given the overall balance. If we leave the EU, the City will not have the impost of a pan-European transaction tax (aka “Tobin tax”) on financial transactions that hits London disproportionately hard and which was imposed by qualified majority rule in the EU. The UK financial services sector might be spared the horrors of a massive lump of “investor protection” (sarcasm alert!) regulation due to hit the market, called MiFID II, or at the very least we will be able to haggle around whether we need to respect all of it to sell financial services into the EU. Some of this regulatory crap will still be a part of our lives, but there will be a better chance of getting changes to how the UK is affected via the democratic process, however imperfect that is.

Given how many treaties and transnational pacts are decided at a global, rather than purely European, level, it also worth noting that in or out of the EU, a good deal of what goes on will not change all that much. But one big benefit for me is that however foolish UK politicians continue to be, and however onerous certain rules are, UK lawmakers will not be able to use EU membership as a handy excuse for something they want to do anyway, such as “Dear constituent, I agree this rule is mad but we cannot do anything because it is in EU law number xxxxxx.” Instead, our elected representatives will need to advocate new laws, or advocate repealing laws, by appealing to the merits of a case. It might also improve the calibre of people who choose to go into UK politics in the first place.

I am voting Leave.

“One could hold pan-European elections, of course, with voters picking multi-national slates of candidates; but, then, one could also ask every person on the planet to vote for a world president. Such initiatives would ape democratic procedures, but would be a sham. They would be Orwellian takedowns of genuine democracy, not extensions of it. There would be no relationship or understanding between ruler and citizen, zero genuine popular control, nil real accountability; coalitions of big countries would impose their will on smaller nations, and elites would run riot. We would be back to imperial politics, albeit in a modernised form.”

– Allister Heath