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Magna Carta 2.0: Good for Freedom, Good for Growth
The original Magna Carta was a charter agreed to by King John of England in 1215. It just celebrated its 801st anniversary. So no, I wasn’t there. But that charter has become part of an important, iconic, political myth that the deal between an unpopular king and rebellious barons marked the beginning of individual English freedoms, personal liberties, and due-process protection of individuals under the law. Magna Carta has also been cited as providing the essential foundation for the contemporary powers of Parliament and legal principles such as habeas corpus.
That’s the mythology, and it’s an important one.
So while I understand that describing the Brexit victory as Magna Carta 2.0 is inexact, I think it makes a key point: Britain will regain its political freedom, its autonomous self-government, and its independence from an EU that is spinning out of control under the power of establishment elites, unelected and unaccountable socialist bureaucrats, and a judicial court that is increasingly making legal decisions that replace Britain’s powerful common law.
The EU’s tax and regulatory policies, climate-change and welfare spending, and free immigration even in wartime are gradually ruining Europe. That’s why I believe Brexit is good for British freedom, political autonomy, and the survival of democratic capitalism.
The business elites told British voters that leaving the EU would lead to economic catastrophe. Well, in England, Main Street defeated the establishment elites by sending a populist message.
And there need be no economic catastrophe. The EU needs Britain more than Britain needs the EU. The London Stock Exchange is one of the most powerful financial centers in the world. Frankfurt will never replace it.
Trade is the key to the economic outlook in Britain and the EU. Many corporate chieftains joined large bank CEOs and the fearmongering IMF to suggest that the EU will deal harshly with Britain if it leaves and stop all trade. That’s mutually assured destruction — MAD. A tariff-driven trade war would destroy both power centers.
Not only does the EU need Britain’s financial capabilities, Britain itself is major importer of EU goods and services. If sanity prevails, there’s no reason why the EU and Britain can’t hammer out a free-trade agreement in the two years allotted by the Lisbon Treaty.
And if the EU wants to go with MAD, the whole set up will burn in flames.
Yes, there’s a lot of disagreement about the economic consequences of Brexit. But remember that Britain is still a member of the IMF, the World Bank, G-7, G-20, the WTO, NATO, and so on.
Veteran Wall Street economist Robert Sinche wrote a note to clients in the early evening of the vote that there was a high probability that Brexit would win. He wrote: “most analysts have overestimated the negative impact of a leave vote as the UK has been a marginal member of the EU on/off for many decades.” Brave chap. But I agree.
And we should also remember that the Bank of England — a better operation than the European Central Bank — will still be in business, as will the British pound sterling.
My advice to investors is to ride out the short-term market volatility, which may last several months, and look instead at the long-term positives of political and economic freedom.
It will now be up to Boris Johnson, the likely new British prime minster, and the Tory party, perhaps with bipartisan help, to negotiate a good trade deal and move more aggressively on the pro-growth path of free-market supply-side policies.
There’s already talk about abolishing the 5 percent VAT on household energy. Good. Taxes need to be reduced across-the-board, heavy regulations need to be rolled back, and government spending needs to be restrained.
This is Britain’s opportunity. It’s kind of a Thatcher moment.
If you look under the hood of the populist revolt in Britain, and the budding revolts in larger Europe and America, the anger is in good part rooted in the lack of economic, job, and wage growth. Worldwide, growth has been missing. All the major countries have been operating under big-government spending, heavy regulations, and the insane central-bank policies of QE and zero (now negative) interest rates. It hasn’t worked. Middle-income wage earners have had enough.
Plus, wartime immigration policies have been too easy. And the major countries, including America, have not destroyed ISIS. So this popular revolt is also aimed at national-security failures.
The American election in November may parallel the British story. Barack Obama, who insulted British voters by campaigning in London against Brexit, is a huge loser. Hillary will suffer from this. Donald Trump will benefit.
So I’ll end where I began: Brexit is good for freedom, growth, and Britain. Ride out short-term financial and economic volatility. And watch for a full populist revolt in America this fall.
Published in Economics, Foreign Policy
Well said. The same failed economic and immigration policies, and the stagnation they’ve created, have spurred both Brexit and Trump’s populist insurgency. I expect Trump to win in a landslide and I hope European socialist welfare states are forced to move toward lower tax, free market policies.
Hooray for Great Britain! May she prosper in freedom.
On this side of the pond and looking back over the past 8 years, we see that O has batted .000. He’s been on the wrong side of every issue, beginning with Nicaragua and onward. May this last one bode ill for
St. Hill as Mr. Kudlow predicts.
Dead on, Larry. But it isn’t freedom (the right to participate fully in society) but liberty (the right to live the life you choose). The Founders understood the difference; we’ve largely forgotten. The Brits all-but invented Liberty with Magna Carta — then nearly forgot it in the name of freedom (and its driving force, equality). But in the end — bless ’em — they remembered. With luck, they’ll now find a balance between the two.
It’s time we Americans started remembering as well. And putting Liberty back into our vocabulary.
Amen, whoever takes over.
Right on Larry. I believe the British have had it with bureaucrats of unknown name and origin giving away their country, their heritage to immigrants with no desire to integrate nor assimilate. Quite the contrary, new arrivals from Muslim lands actually wish to conquer without even having to fight. And they were winning, until now. The British people can once again look into the eyes of those who are making decisions affecting their lives…and vote them out if they wish. To me, this was as clear a choice as one could have. And thank God they still had a choice and made a correct one.
Good to hear you come out against the central bank policies of the US and EU. Not sure why, but I used to suspect you were on the wrong side of those issues.
You’re absolutely correct – and mea culpas for failing to use the proper term…
How will this affect the price of Scotch in the short run? Maybe a short run decline and increased volatility will act as a brake on the upward trending in foreign high market whiskies, e.g. Japanese.
Brexit is a sharp rebuke of globalism. Very proud of the British.
I cannot figure this one out. I understand liberal economics and the impact of globalism. I buy a lawn mower for less than it might othersise cost, I can select from dozens of auto company brands making dozens of models each, and my flat screen TV is so cheap, I buy a new one, use it, and throw it away.
People get hurt; People are helped.
But, authoritarianism and globalism are not that compatible in the economic realm. Authoritarianism needs walls, limits, and control – which all come more easily when dealing with smaller and smaller units. It is hard to control large, divergent populations and expanses – as the Soviets and Chinese know well.
And, there is something analogous to the idea that if I can chose which dishwasher I want to buy from dozens of shapes, sizes, makes, features, and colors, why can’t I choose between Chou Xilai and Fu Manchu to sit on my village enterprise board – oh, wait… I can. And if I can vote on that why can’t I vote for whether the town removes the farmers from the land.
Free markets (free trade) and freedom are really intertwined. Neither works well without the other (see Chinese economy) and both elicit comparisons in the minds of people. Voting with money is similar to voting with ballots, no?
Working our way through dissociation, diffusion, or dismemberment seems a good thing, for now. But, where does this all lead? Cooperatives? Communes? Barter? Keven Costner and The Postman?
I was told today that the Brexit vote might not be honored by Britain actually leaving the EU. Is this true?
I’m told the referendum is not legally binding, even if Scotland, Wales, and Northern Ireland don’t manage to “block parliamentary authority to activate Article 50 of the Treaty.” The referendum advises Parliament, which may decide (at great political peril, supposedly) to reject that demand.
Aaron, I received a commentary on Brexit from Morgan Stanley on Friday. I won’t copy the entire memorandum. But this one paragraph stood out brightly in my mind, even without physical highlight: “In fact, yesterday’s referendum was ‘non-binding’, though UK policy makers have pledged to follow the will of the people and follow through with the decision – Prime Minister David Cameron has offered his resignation, and a new leadership will be formed in the fall”
So you were told correctly. Even more similarities to our current election here in the States with Trump, heh?
If you wish to read the whole thing, let me know.