Source: Ben Garrison – Abandon Ship



In recent days the Brexit debate has suddenly gone from boring to interesting, with opinion polls swinging from a comfortable lead for Remain to a neck and neck race between staying in and leaving the EU. One of the most recent polls has even seen Leave take a ten percentage point lead over Remain, though it remains an outlier.

The major financial institutions now rate the chances of Brexit at 30%-40%, which is in sync with the odds given by prediction markets. (Quite the change from the start of this year, when it wasn’t even clear that the Brexit referendum would be held in the current year and I gave it a 10% total chance of happening).

What must be especially worrying for Bremain supporters is that polls have historically tended to have an anti-conservative bias in the UK, the most famous example being the 1992 elections (which saw the coining of the famous “Shy Tory” term) and continuing through to today in both the 2015 elections (Conservatives did much better than expected) and the Scottish referendum (rejection of independence, a primarily younger and more liberal position, by a much larger margin than the polls predicted).

There are two big reasons for the turn around in the past few weeks.

First, there are problems specific to the Remain campaign, whose strategy basically boils down to: (1) Threatening Britons with negative economic consequences for Brexit; (2) Trundling out a bevy of Very Respectable People such as Barack Obama, Angela Merkel, Tony Blair, Tony Blair’s spinmaster Alastair Campbell, Peter Sutherland, George Soros, etc., etc., to make the case for Remain; (3) Displaying a “compendium of tabloid poltergeists” such as Trump, Putin, Le Pen, and ISIS who are alleged to support Brexit. Unfortunately, fewer people are impressed by such hamfisted tactics than were presumably hoped for.

The second reason for the Leave surge is that it is part and parcel of the general disatisfaction with The Establishment sweeping the Western world, which has manifested itself in the good electoral performance of the Front National in France, the general swing towards nationalist parties throughout Europe, Corbyn’s successful takeover of the Labour Party in the UK, and the twin challenges of Bernie Sanders and Donald Trump to the old order in the US.

This sense of disillusionment extends to the EU. Although the EU enjoyed a small bump in support in 2015 once the effects of the 2012 double-dip recession faded away, anger has since returned with a vengeance in the wake of the recent European immigration crisis and the widespread perception that it was disastrously mishandled by a dangerously out of touch globalist elite. There are also broader concerns with the EU’s lack of democratic legitimacy, opposition to national sovereignty, straitjacket monetary policies, and unsolicited geopolitical adventurism in Ukraine and beyond.

Indeed, one of the most stunning findings of a recent PEW poll is that Britain, once the central bastion of Euroskepticism, may have actually been superceded in its dislike of the EU not just by a Greece understandably upset with Frankfurt’s diktats (so hardline that even the IMF balked) but by a France where a majority now want a Frexit referendum of their own.

The only places where the EU remains unambigiously favorable is amongst its newer eastern members, their contrarian yapping in opposition to mass immigration regardless (which is ultimately for show, since to be quite frank no refugee is going to be staying in Bucharest when he can move on to Budapest and then Berlin).

The reason for that essentially reduces to money:

Source – Reddit, OP’s per capita calculations based on EU data.

Basically, the Eastern Europeans get huge amounts of gibs from the West Europeans, especially the Germans and Scandis. Poland alone got €57bn in 2010-2014. These numbers are rarely mentioned but they are quite huge – in fact, in per capita terms, they are comparable to what the Russian budget gets from the entirety of its oil and gas sectors. Those much vaunted economies (“Polish economic miracle,” “Baltic tigers,” etc) would look much different without the huge capital transfers implicit in EU structural funds.

The EU has also been good for the northern countries who, unlike the Mediterranean states, have the discipline to keep labor costs down without resorting to devaluations: The Netherlands, Sweden, and of course Germany. In contrast to the stagnation in the peripheries, their economies have generally done well since 2010 and they have become labor magnets stripping the south and east of their human capital.

But for most of the rest of the EU these arrangements haven’t been working out, with the result that support for the EU there has generally plummeted.

These internal economics explain much of the panic behind Brexit, which from a certain perspective is admittedly altogether irrational. The exit of the UK alone would remove 10% of total EU contributions and 15% of net contributions (based on 2007-2013 figures). This would increase the funding strain on the other rich members. If more of the core countries then started to withdraw, it would conceivably lead a cascading collapse in which the last man out has to pay the utilities bills. No longer accruing benefits from its competitiveness advantage, Germany is the last major net funder to throw in the towel, and thus only the husk of the EU is left, stretching all the way from Lodz to Lemberg.