What Everyone Got Wrong on Brexit

There’s an old carpenter’s maxim that goes, measure twice, cut once.  The meaning is obvious: It’s more efficient to think before you act. Impetuousness can be costly to repair. Brexit or Bremain
Investors could learn a thing or two from a sage carpenter. This past Friday and Monday, many investors acted first and deferred thinking for later.  How else can you explain the rout in equity markets across the globe?
I’m sure much of the selling was headline-driven.
Consider this ominous headline from Yahoo Finance: “Jim Rogers on Brexit: ‘Worse than any bear market you’ve seen in your lifetime.’ ” And there’s this bit of Nostradamus-esqe soothsaying from BusinessInsider: “ANALYSTS: Brexit Will Bring Recession… and Contagion.” The UK Express predicts, “BREXIT Threat: Germany Will Cut Britain Off From the EU Single Market if We Vote to Leave.”  The UK Telegraphs warns, “English Language Could Be Dropped From European Unit After Brexit.”
Many, many headlines proffered similar negative sea changes.

The Scourge of Bureaucrats

But what did the UK citizenry really do by voting itself out of the European Union? Most important, it untethered itself from boundless bureaucratic overreach.
One piece of legislative overreach prohibits bottled-water manufacturers from claiming that water consumption PREVENTS dehydration. That’s no misprint. The EU hegemony claims scientists have found no evidence to suggest drinking water prevents dehydration.
And if your ambitious EU bureaucrat is anything, he or she is a prohibitionist. If you think prohibiting bottled-water manufacturers from claiming water prevents dehydration is idiotic, consider these equally idiotic prohibitions.

The EU and One Dozen Eggs

It is illegal to sell eggs by the dozen in the EU. You can sell a dozen eggs, but the price must be based on weight, not quantity. Care to maintain deep-cleaned carpet? Forget it. It’s illegal for an EU vacuum cleaner motor to exceed 1,600 watts of power. Forget about passing through an airport with alacrity. EU rules oblige members to treat all EU nationals equally. After an international sojourn, UK citizens come home to queue up with their fellow EU nationals instead of with their fellow UK citizens only.
In 2010, the UK government estimated that 50% of UK legislation with “significant economic impact” originates from EU legislation.
But will the threats by EU bureaucrats to send the UK citizenry to Coventry (the English idiom “send to Coventry” means to deliberately ostracize) come to pass?
Highly unlikely. In the world today, international trade isn’t a luxury, it’s a necessity.
The economic fact is that Continental European companies trade with British-based companies not because they want to but because they have to. To do otherwise would result in economic auto-asphyxiation.
The British bring marketable skill sets that other people value. This is evinced by the British ability to sell its goods and services on a world market. It’s also evinced in the $2.8-trillion UK economy – the fifth-largest in the world.
And what does it mean for a product to be produced in the UK, the EU, or any other politicized land mass? Not much. Any product above a pure commodity will be composed of an amalgam of international inputs.
A Mercedes Benz is labeled “German” only because of historical association. Its steel might originate in Brazil, its plastics in the UK, its rubber in Indonesia, its electronics in the United States. The world is too intricately integrated to be undone by bureaucratic edict. The UK will continue to trade freely with the EU; it will, because there is no other choice for either the EU or the UK.
What of the threat to regulate English language out of international markets?
The threat, forwarded by Danuta Huebner, head of the European Parliament’s Constitutional Affairs Committee, is laughable. Any international traveler knows English is the lingua franca of business. (For instance, all international air travel is conducted in English.)  I’ve traveled through most of the continental European countries; I can assure you that my travels were never impeded by my mono-linguicism.

Brexit is Much Ado About Nothing

Lost on Ms Huebner et al. is the notion that English was never elevated to the No. 1 “international” language by edict; it was elevated by custom and acceptance. English’s unique standing on the world stage is attributable to the global reach and influence of two English-speaking countries: the United Kingdom and the United States. That English is the most nuanced and expressive language of them all further elevates its status.
So, threats to marginalize the UK will come to naught. Indeed, German officials have already throttled back the retaliatory rhetoric.  I expect that in a few months the ridiculous portmanteau “Brexit” and its wildly exaggerated implications will be as forgotten as the long-dead acronym Y2K.
That said, the fallout from the equally ridiculous investor reaction to the Brexit vote will likely linger a bit longer. A lot of cutting occurred that was devoid of much thinking.

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