Brexit: Predictions of Economic Doom Show Why People Ignore “Experts”
The headline was unambiguous: “Brexit Is Done: The U.K. Has Left the European Union.” As of January 31, the European Union (Withdrawal) Act of 2018 has become law and the United Kingdom has begun the withdrawal process from the European Union. The transition process will continue throughout 2020 as the UK and EU governments negotiate the nature of the future relationship between the UK and the EU.
Now that the British exit from the European Union is a legal reality, the economic situation in the UK has been surprisingly sedate.
This will be a surprise for those who believed the assurances of media pundits and economic experts that the UK’s economy would become every more crippled as Brexit edged closer.
Yet economic turmoil has been sparse. Certainly, markets and companies have moved to adapt to the new coming reality of the UK as largely outside the EU’s common market. But it is hardly clear that the country is poised on the edge of a Brexit-caused economic disaster. This is true even though Brexit has clearly been all but inevitable since December’s general election.
Predictions of Doom
It wasn’t supposed to happen this way.
Opponents of a British exit—and the economists they employed—insisted that not only would the eventual withdrawal be disastrous for the UK economy, but that even the market uncertainty associated with an eventual withdrawal would cripple the British economy.
For example, the UK Treasury released a report in May 2016 stating:
A vote to leave would cause a profound economic shock creating instability and uncertainty which would be compounded by the complex and interdependent negotiations that would follow. The central conclusion of the analysis is that the effect of this profound shock would be to push the UK into recession and lead to a sharp rise in unemployment.
According to the report, this economic disaster didn’t require a completed exit from the EU. The mere act of voting in favor of leaving, Brits were told, would trigger enormous economic problems.
Meanwhile, the Organisation for Economic Co-operation and Development (OECD) in an April 2016 report predicted that Brexit would cost Britain the equivalent of more then three thousand pounds per household and “would be a major negative shock to the UK economy, with economic fallout in the rest of the OECD.”
More nuanced analyses debated the effects of “no-deal Brexit” as opposed to a more “soft” Brexit. But in the lead-up to the election—and in the years following—the message was clear: Brexit is going to make Britain significantly poorer.
Yet investors, entrepreneurs, and consumers, appear unconvinced that the barriers to international trade raised by Brexit will be sufficient to send the UK economy into a tailspin. Investors have not abandoned UK investment opportunities, and entrepreneurs are not anticipating a crushing tariff burden. Even
Article from Mises Wire