OPINION:
Boris Johnson now has a good shot at winning a workable majority in Parliament to pull the U.K. out of the EU. This will prove a turning point for Europe — rather than enabling consolidation of the continental bloc, Brexit will provide the contrast that blows it apart.
In the Dec. 12 elections, the Conservative Party is running on a platform to push through a transition agreement to leave the European Customs Union and accomplish simple free trade. They lead the Liberals by a substantial margin in the polls. Nigel Farage’s harder edge Brexit Party is not contesting the 317 seats the Conservatives won in 2017 — that raises prospects for a clear majority or a coalition to pull Britain out.
The Eurozone is stuck in economic paralysis. Growing about 1 percent annually, it has virtually no room for additional monetary stimulus after years of negative interest rates and massive European Central Banks government bond purchases. Eurozone restrictions on national budget deficits preclude additional fiscal stimulus in Spain, France, Italy and Greece, which average 12 percent unemployment.
If these economies had their own currencies — like the U.K. pound — they could devalue to boost exports and spend more on education and infrastructure to offset Germany’s perennially large budget and trade surpluses.
Europe lacks the building blocks for a common currency. This includes European taxing authority to transfer resources for social services, education and the like from richer to poorer states — as Washington does from New York to Mississippi. Germany will never indulge that.
It also lacks an integrated labor market that would enable greater migration from high unemployment regions to places like Germany, Austria and the Netherlands, because it lacks a common language and unified educational system.
Although the U.S. state education departments and universities control primary, secondary and college curriculums, broad consensus applies to what a third-grader should know or syllabus for freshman Economics. Europe patently lacks these, and national variations in the quality and emphasis are profound.
Sixty percent of French college students flunk out the first year. Traveling in Europe and talking with young people, I have been struck by how many college students in poorer countries major in subjects like tourism.
None of that will permit Europe to develop what it sorely needs — a Silicon Valley and startups that will one day rival Microsoft, Apple and other U.S. and Chinese technology behemoths. It simply lacks the university system to support them.
Germany and more broadly the Eurozone are terribly dependent on an automobile industry that substantially lags U.S., Japanese and Chinese competitors in the development of electric automobiles — those are forecasted to be 56 percent of vehicles produced in 2030. Economists and management experts believe continental systems of union and government participation in corporate decision-making greatly impede business and worker responses to the disruptions imposed by the movement to a carbon free and more digital economy.
In the near term, the U.K. needs free trade access with the continent to keep its manufacturing going, but it is not so invested in the internal combustion engine. Longer term, Britain’s future, like America’s, is tied to its formidable financial sector and high-tech activities.
Since the financial crisis, U.S. and U.K. banks have done very well in Europe — forcing Germany’s largest, Deutsche Bank, out of many investment banking activities. Even without privileged access to the continent, U.K. financial houses will prosper.
Britain’s natural alliances in high tech are with the U.S. Northeast and West Coast. The freedom to negotiate free trade with the United States will enable cooperation and competition — a critical advantage that the U.K. can’t have inside the EU. France’s agricultural protectionism and Germany’s mercantilism are blocking prospects for a meaningful U.S.-EU free-trade deal.
Europe will continue to endure cycles of anemic growth and recessions. It will emerge from downturns with ever more underemployment, poor quality jobs and disaffected nationalists like the Yellow Jackets burdened by high taxes and eroding real incomes.
That economic contrast with Britain will feed populism and disaffection in Southern and Eastern Europe and France beyond the Parisian Metropole. And that is not xenophobia as elites in Brussels, Paris and other centers of privilege in a failing continental society complain.
Either the French proletariat will revolt, or ordinary Italians will simply vote to bolt. Exit the euro and bring the whole European project down under the weight of its follies.
• Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.
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