An economic historian offers her initial reaction to the Prime Minister's address

To the rest of the world, Britain is not leading the way with free trade, as it did centuries ago, it’s doing precisely the opposite

Victoria Bateman

Hard Brexit. Clean Brexit. Full Brexit. Naked Brexit. Whatever you want to call it, we now know what Brexit really means. Or do we? Theresa May's long awaited speech isn't quite as clear cut as it seems. There are, in fact, four very different ways to interpret the Prime Minister's carefully crafted words, underpinned by what could be seen as the four motivating factors behind what would now appear to be Britain’s hard Brexit stance: the economy, politics, society and the art of negotiation.

Firstly, it could be a matter of “it’s the economy, stupid". Whilst economists are well known for predicting economic calamity as a result of the referendum decision, and the latest research suggests that, if anything, they were too optimistic - that factoring in the adverse effects of reduced immigration doubles the economic losses - there are those who argue that a clean break could bring economic benefits in the longer run. According to Shanker Singham, Chairman of the Special Trade Commission at the Legtaum Institute, these benefits arise from the potential for Britain to become more global: to, for example, eradicate the agricultural protectionism associated with the Common Agricultural Policy, and to make independent trade deals with the wider world. According to Singham, this can only be achieved by a "full Brexit". Whilst I have myself identified a number of issues with this type of "globalising Brexiteer" story, it may be that it has nevertheless persuaded the Prime Minister. 

Of course, even if such hoped for economic benefits really are on offer, there is still a rather big fly in the ointment: the leap of faith that is required to read the Brexit vote as a vote for more - rather than less - globalisation. As I’ve argued elsewhere, Brexit supporters span the whole spectrum of economic views from the left-leaning to the free-market right. Global Britain might satisfy some not all, leading us down a yellow brick road of disappointment. And, even if the majority really are in support of a more global Britain, Theresa May’s strategy seems to involve pressing the de-globalisation button alongside the button for globalisation. To the rest of the world, Britain is not leading the way with free trade, as it did centuries ago, it’s doing precisely the opposite.

Having been a Remainer herself, the Prime Minister is likely to be well aware of the possible economic fallout of Brexit (even if she won’t admit it). In that case, her speech is more a matter of "it's politics, stupid" than it is of "the economy, stupid". To date, Europe has made it clear that Britain can't have its cake and eat it, leaving May with a choice: remain in the single market for the benefit of the economy, thereby accepting freedom of movement, or aim instead for a little England, with control over migration, whatever the economic cost. May's speech will be widely interpreted as prioritising the issue of immigration whilst minimising the economic trade-off involved – or suggesting that we will be peddling hard globally to do whatever we can to compensate for losses associated with reduced European trade. Even if that peddling does get us somewhere, we cannot assume that more trade will mean a stronger economy. The reality is that it takes a stronger economy to create more trade, not vice-versa.

Aside from the economic and the political interpretations, there is, however, a third interpretation of May's speech: that society is being brought in from the cold. Over the last hundred years, a battle has been raging between the state and the market. On the left and the right, politicians and economists have imagined the economic pie as being divided into two pieces: the slice that represents government and the slice that represents market activity. The idea of a direct trade-off between the two naturally follows - more of one must mean less of the other. However, many of the concerns expressed by voters, whether in the U.K. Brexit vote or the U.S.A. election, don't fit neatly into this two-slice division of the economic pie. That's because there is a third slice of the pie that economists and politicians have been neglecting and, here, it is a matter of "it's society, stupid". 

Only by bringing society into our picture can we truly understand the Brexit (and Trump) vote: why, for example, so many Conservatives (or Republicans) who would normally be pro-market and anti-state are in favour of the state “regaining” control over immigration, and why some on the Left are in favour of remaining in what is a free-trade zone, despite not exactly being enamored with free markets. Such apparent inconsistencies require us to think about peoples fears and hopes for society, beyond either the frontiers of the market or the state. 

Perhaps the Prime Minister understands that concerns about society are one of the key drivers of dissatisfaction amongst voters: that what we have experienced is not simply a backlash against markets and a desire for the state to do more, but, rightly or wrongly, worries about social breakdown. If that is the case, then her speech falls short. What we desperately need is a wider public debate that engages with two big questions: firstly, to what extent has society really deteriorated, and, secondly, to what extent have globalisation and the free market model – including free movement - really been bad for society.

However, this third interpretation might be giving the Prime Minister too much credit, which brings me to my fourth and some might say most likely interpretation of May's hard Brexit tactics - that they are nothing more than a negotiation strategy. That this is a game of asking Europe for more than the government is truly happy to accept. If that's really the case, we need to take what May says with a pinch of salt. Perhaps we can’t infer much at all.

Economics first, politics first, society first, or the art of negotiation. There are four distinct ways to interpret May's hard Brexit stance. Between all four, you could be left wondering whether we really are any the wiser about Britain’s future. However, whatever happens, May’s image of a stronger, richer and more global Britain cannot yet be taken for granted. 

Dr Victoria Bateman is a Fellow in Economics and economic historian, Gonville & Caius College

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