Felix Salmon (3:10)

So what's the ideology? What, what, what is, does this ideology have a name? This kind of pro leave ideology?

Alex White (3:18)

No, but we could create one. I mean it's, it's Brexitism, it's a belief.

Emily Peck (3:24)

There's a little nationalism in there, a little. Maybe a little racism going on, a reaction to all the migrants coming in.

Alex White (3:31)

Yeah. So we've got to be careful. Right, because this is half the population. And it's not necessarily the case that half the British population is racist.

Felix Salmon (3:39)

But it's not the case.

Alex White (3:41)

It's not necessarily not the case, but there are different motivations for different parts of the Brexit crowd. And this is, it is a constituency of view that is made up of lots and lots of different little tribes. So there are the globalists, the global free marketeers who say, look, we want to go out into the world and trade.

Felix Salmon (4:03)

But that's like eight of those, right?

Alex White (4:04)

There's like eight of those.

Felix Salmon (4:05)

Yeah, the vast majority. I mean, I guess the two questions I have is, number one, the majority or the tiny slim majority who voted in favor of Brexit? Did they actually have a clue what they were voting for? And more Germanely right now? If they could have their druthers and do it all over again, would they vote the same way?

Alex White (4:27)

Well, let me take the second of those first and the first of those second. Right. On the second of those, would they vote the same way? Polling data at the moment says that Remain is narrowly ahead. Remain would win 53, 52 to 47, 48 if people voted now. But that's exactly what the polls were telling us before the referendum the first time round. So I think it's naive to suggest that there's been this great groundswell change of opinion. I mean, actually, one of the things that's really interesting is a hell of a lot has happened in the UK over the last couple of years. There's been high drama, there's been election, there's been all of the varying potential disasters of no deal coming into view now. But through all of that, public opinion has been more or less static. I mean, you have peaks and troughs, but basically people are pretty much still divided down the middle on whether they should go for it.

Anna Shymansky (5:23)

Isn't this part of the reason why it's so hard for May's government to come up with a solution that is Going to be acceptable to both the. Kind of. More the remainders as well as the Brexiters, as well as the eu.

Alex White (5:38)

Yeah. I mean, it's effectively impossible. I mean, I don't carry many cards for Mrs. May. I don't think she's a particularly fantastic politician, but it would take an incredible, talented politician. She is a good dancer. She's a great dancer. Best. Best dancer in the country, probably.

Felix Salmon (5:55)

She.

Alex White (5:56)

She's not a great politician, but it would have taken an amazing politician to be able to thread the needle between all of the different tribes on this issue. It's just not possible to satisfy all of the constituencies at all.

Felix Salmon (6:11)

So, in terms of the. The sort of hardcore Brexiteers in the Conservative Party who are the whole reason why the referendum was called in the first place and who need to be placated in one way or another, that, you know, the Davises and Johnsons and all these, like, random people.

Alex White (6:32)

Yeah.

Felix Salmon (6:34)

What would actually make them happy?

Alex White (6:37)

Well, it varies from character to character. Right. So Boris Johnson, what would make him happy is incredibly straightforward and easy. Just being Prime Minister, being Prime Minister, it's not necessarily so great for the rest of us, but, you know, that's what would make him happy. Davis is a more ideological character. He really believes in this. This is his project.

Emily Peck (6:55)

Wait, I'm sorry, who is Davis?

Alex White (6:58)

David Davis was the guy who was Brexit secretary for two years until he. A little under two years until he resign earlier this year.

Felix Salmon (7:06)

Basically, Theresa May try to cobble together a compromise, but he's one of these no compromise folks. So rather than go along with the Theresa May compromise, he resigned, which was extremely helpful.

Alex White (7:16)

Yeah. And then forced Johnson to resign because Johnson can't resist a headline. If somebody else is resigning, he's got to be resigning too.

Felix Salmon (7:24)

So. But, so Davis, you know, he was Brexit secretary, by all accounts, he's not a complete moron. So what does he actually want?

Alex White (7:33)

He wants the UK to leave the eu. And that is the kind of synchronon of all of this. I mean, I think there's an interesting debate that we should touch on a little bit here of what Brexit means. And this goes back to your question earlier of did people know what they were voting for? Did they know what they were going to get? So clearly nobody knew that we would be in this particular position. The vote for Brexit was a negative vote, it was an anti vote, it was a vote against something, it wasn't a vote for something. But if you are taking this transformational step and leaving the eu, you have to be going somewhere. It's not possible to be purely existing in a negative, in a vacuum of something that you're no longer part of. So the big problem for the Brexiteers collectively was that they never put forward a very clear vision of, okay, what replaces the UK's relationship with the EU beyond a sort of generic generalist, the UK will go out and trade with the world. And a bit of imperial nostalgia thrown into that. There was no positive vision. So for somebody like Davis, it's look, we want to leave the eu. Leave means leave, let's get out.

Felix Salmon (8:45)

You're saying there's been an ideological shift. And this is really weird to me because normally when there's an ideological shift, I mean, not only does this ideology not have a name, it doesn't even seem to have a vision, it doesn't seem to have anything that it wants. What kind of ideology is people going out and voting in their millions for a non thing?

Alex White (9:06)

Yeah, it's a very good question and maybe I'm jumping the Garmin a little bit and calling it an ideology, but the reason that I do is because I don't think it is subject to rational analysis about what people want in concrete terms and what the cost benefit trade offs are of it in a way that you would with a normal policy choice. So I think it is ideologically driven. Maybe I'm going too far in calling it an ideology itself. And you're right, you're right to ask the question of what it, what it's all about, but I don't think they.

Anna Shymansky (9:36)

Know, right, because it seems like it's, it seems like basically every option that is out there is going to be far worse than what they currently have. Whether it's a Norway style option where you still have to allow the free movement of people, or whether it's almost any of the other options where you're going to have to abide by all of the EU rules but not be allowed to vote on any in them.

Emily Peck (9:56)

It seems like the ideology at stake is the EU's ideology, right? I mean, the reason the EU doesn't like the solution that may put forward is because she wants to sort of have it both ways. As far as I understand it, she wants to have the good trade deal with the eu, but she wants more control over the free movement of people, right? So if the EU sort of gives into that, then it looks, it looks like anybody can have this deal. And the whole ideology of the eu, where it's like free movement of people and goods and services and whatnot is basically at stake. So the only people I see with an actual real ideology seem to be the Europeans. And isn't it more like the Brexiter's ideology is just like we want to be free or something, or we think sovereignty.

Felix Salmon (10:48)

I have an interview, Emily. I'm gonna bring in someone who can answer that question. Dun, dun, dun, dun, dun, dun. Okay, hold that thought. Okay, so I have actually someone who's going to answer Emily's question right here. Is Mr. Faisal Islam the grandest of British grandees? You are. You are currently the some grand political editor of Sky News, is that right?

Faisal Islam (11:16)

That's the official title.

Felix Salmon (11:16)

And you're previously all manner of even grander institutions. A bit like Alex here. You're going down in the world from treasury to some consultancy. Anyway, Faisal is. You're on top of the news cycle, sort of on an intraday basis, which is a good thing to be able to answer our question. And it's also a bad thing because this is a single podcast, which is like the one time that Slate listeners get to understand Brexit for, you know, four years. So without getting too much in the weeds of like, what happened yesterday, what's the sort of relationship here between Britain and Europe and what does Europe want and will they get it?

Faisal Islam (11:57)

So the problem is that in answering that, the fundamental fact, and I think it conditions the negotiation, is that the UK is split, and it's still split. And that's a political, demographic, familial thing within the parties, between the parties. And so when you ask me, what does the UK want, there's a separate answer for the UK government, but the EU seems to have cottoned on. There's a different answer potentially of the UK people. And where it gets extremely interesting is when you overlay syphology and voting demographics on that. And you have an older generation that voted, I think, as Emily was talking about, for freedoms from EU influence and institutions. An older generation disproportionately does not work, obviously, being more retired, being the asset owners of the United Kingdom. Fascinating politics to this. And then a younger generation. When I say young, I would say the under 45s. I don't think that count under 50s. Let's go the whole hog. 48.

Alex White (12:58)

Right.

Faisal Islam (12:59)

Who, who by and large disproportionately voted remain. And it gets very. It gets very interesting that, because if you think about the arguments about the economy, about the impact on jobs, the impact on sort of multinational companies, the impact on people that want to go and live and work in Europe didn't hit an impact upon an older generation that does not need to do that or does not want to do that. So I think when Europe looks at this, and this is down to prime ministerial level or leader level, Anglophiles. When I say Anglophiles, I mean people who appreciate Britain and its politics, like the French President, people won't admit that, but he has a keen, detailed knowledge for British politics of the centrist variety. Big fan of Tony Blair, obviously, or the Irish Prime Minister. They look at the United Kingdom and they think, yes, we have a vote which was to free the United Kingdom from the oversight of EU law, but you have a 50, 50 split and you have a government that put to the people only a year ago, let's have a pretty clean break, as they call it, hard Brexit, as it's referred to more pejoratively, and they lost their majority. So only the British people could give the most complicated challenge you could imagine in disentangling a country from 44 decades of EU law and then remove the majority of the Parliament in order to enact the laws to affect that. It's a classic British, I think we call it a middle finger to the elites of the United Kingdom that they do a complicated enough task and then remove the parliamentary majority. So if you're Europe, I think on the one hand you, you've got to take into account what you're being told by a government. On the other hand, you think. I think they do think we play the numbers game here. We get the United Kingdom into a kind of permanent Brexit in name only status for a few years and are they just going to try and wait it out as younger people? You don't even have to change anybody's mind. I mean, there's been some fairly sick demographic calculations.

Felix Salmon (15:23)

Old people just die, don't they?

Faisal Islam (15:24)

Well, you know, that's. No. Yes, basically. I mean, that's obviously. Well, everyone, Everyone does. Everyone does.

Felix Salmon (15:30)

Old people say more.

Faisal Islam (15:32)

So. So, so, I mean. Yeah, yeah. So there's the, there's no doubt the long, longer. So here's the, here's the really interesting question, which is older people become more conservative as they grow older. Do they become more Eurosceptic as they grow older? I think if you step back from all of this, actually there's a really fundamental thing about Brexit, which is it's not a normal set of political decisions that was made at that referendum. If you think about it, at core, it's 17 point, forget 6 million winning over 16.1, but the 16.1 losing, not just sort of losing an election and therefore having a government they don't want, but it's fundamental changes to the rights that they voted to continue.

Felix Salmon (16:19)

It's kind of the end of liberal democracy. Like you don't.

Faisal Islam (16:22)

I wouldn't say. Well, I wouldn't say that. And I think the Brexit would argue. No, not. It's the epitome. It's the apotheosis of. For them, of liberal democracy, because they feel like the EU centralizes too much power, is too much of a kind of corporate entity. There's. And what's often missed actually is. And this is, this is, this is one of the problems for the Brexit campaign is the Brexit campaign is led by libertarians. It's a product of the right intellectually. But the campaign they ran in 2016, I would argue was a left wing and statist campaign about taking back control, about 350 million pounds per week, which is basically chuck money at the NHS on a red bus designed to appeal to Labour voters. Literally the bus painted red. It is more of a left wing argument, I'll say this, than it is a right wing argument. This is a fundamental contradiction there. And when you think about it, in working out the shape of Brexit from a UK perspectives, leaving the customs union, the EU Customs Union has become this fundamental flag to wave for Brexit, which will prove the point of Brexit in the future. Why? Because it enables the freedom to sign your own trade deals. Yet as a left wing project, I would argue a status project that is profoundly unpopular, the idea of the sorts of quid pro quo and trade offs you'd have to make to get a trade deal with Donald Trump's America or China or Malaysia or whatever. It turns out, when you look at the polling numbers, as is the case across the Western world, doing the free trade deals for which Brexit creates the freedom for you to do it. Well, those free trade deals, well, they certainly. I'll just put it like this, they aren't as popular as people make out.

Felix Salmon (18:17)

Yeah, they're not popular at all. But I want to, I want to go back to.

Faisal Islam (18:19)

You put it quite bluntly, I want.

Felix Salmon (18:20)

To go back to this last. I want to go back to this last idea because I think it's. It's super. The number one question, which I've been sort of struggling with in my mind for the past two years, is it's basically what's worse, Trump or Brexit? And I think the answer to that question is entirely a function of the degree to which Brexit is either temporary or permanent. Because Trump will end at some point somehow. You know, it might be sooner, it might be later, and it's going to be bad while it happens, but then it will. Then he will be replaced by someone else. The question I have for Alex is, is Brexit going, You know, is it reversible and is it likely to ever be reversed? Can we ever go back to, you know, being in Europe if the young people don't change their minds when they get older?

Alex White (19:07)

Yeah. I mean, fundamentally, the question of the relationship between the UK and the rest of Europe is always going to be part of UK politics. It has been for the whole of living memory. It will continue to be whatever type of Brexit deal or non deal we get. There's going to be an incredibly tightly woven mesh of interrelationships at both personal and economic level and at governmental level. And it's, you know, the debate about the nature of those relationships, how tightly we want them to be held, how integrated we want to be, is going to continue under all conceivable scenarios.

Emily Peck (19:45)

Well, I was wondering, thinking about this from my American perspective, we just went through something here where, you know, Donald Trump went off on nafta and he wanted NAFTA so terrible and he wants to get rid of nafta, so he gets rid of nafta and he renegotiates a trade deal that is basically the same as nafta with some more modern updates. And that got me thinking.

Felix Salmon (20:06)

A little bit less pronounceable.

Emily Peck (20:07)

Yeah, yeah, exactly. Us. See, I'm. Whatever. It's the same thing. Everything's. And the bottom line is everything's fine. And as I'm looking at Brexit more and more, and I'm seeing stories about people hoarding food and the fear of supermarkets running out of things, and I'm thinking, that's not happening. The Brits are going to want stability, they're going to renegotiate something. And at the end of the day, it's just going to be like. It's just going to be like, nafta, everything is going to be fine. And I don't know if I'm just overly simplifying all of that.

Felix Salmon (20:42)

Faisal is grinning and shaking his head and he's like, yeah, we.

Faisal Islam (20:45)

Like.

Felix Salmon (20:46)

I saw this last week, actually, that Theresa May had this wonderful idea that Britain could be in a customs union with Northern Ireland and Northern Ireland could be in the customs union with the rest of Europe and then they wouldn't be in the customs union with each other. But it would all be one. It would just be like it would be a continuation under other terminology of Europe.

Anna Shymansky (21:04)

But the EU has absolutely no incentive to do that to anything that allows the UK to appear to be able to be out while still having all of the benefits. Right.

Emily Peck (21:13)

That's the trick of it. But that's just negotiations. And in my rosy, my rose colored Trump trade glasses, I'm thinking it'll probably happen, it'll be fine.

Faisal Islam (21:23)

I think the analogy that's maybe more apt. As regards certain things in terms of the United Kingdom's integration into just in time supply chains, not just for cars and aviation and avionics, but also just for food, is to consider the United Kingdom in an American context as one of the States of America. You know, we are, we get our tomatoes overnight from Spain. You know, we get the meat just flows freely, no checks whatsoever. So suddenly putting up a low, a tariff border, customs border checks for animal and plant health and those suddenly putting those up, which are the legally required checks that the EU applies and indeed the UK applies as an EU member to so called third countries. Well, the United Kingdom wants to be a third country. That is the government's policy, wants to leave the single market, wants to leave the customs union. It's not like the French and the Dutch, even the Irish have a choice on this. They have to apply these checks. Now how intensively they and pragmatic they are about them, whether they're able to is another question. But they do have to. And they're preparing an emergency degree law just to try and maybe be a bit reasonable about that. But they will apply them especially if there's no deal. And that some of the language amongst the UK government now has cottoned onto this and is already preemptively describing this as things like quote, an economic embargo of the United Kingdom. This is quite, this talk is, you know, serious stuff. I mean in the sort of Star wars, trade wars, this is the sort of stuff that you know, that you know, you get the rise of the Empire and then you get, you know, you get actual wars. I'm not saying that this is the.

Felix Salmon (23:08)

Original crawl of the original Star Wars. This is about a trade dispute.

Alex White (23:12)

Yes.

Faisal Islam (23:12)

No, no, exactly. Well, not exactly, but yes, that's the analogy I'm reaching towards, which is. But you do, when you do have the Brexit, you have the Brexit. Well, that you can flip it either way, I'm sure, depending on your perspective. But I think the point here is you have the Brexit secretary, Dominic Robb, using the two word phrase economic embargo to describe the application of EU law on March 29th. Now, this is quite interesting. If we go for no deal or if no deal, I don't think anyone actually wants to go for it. But if it's, if it's the end result of this and the blame game is they have done this to us and the Europeans are saying, no, you've done this to yourself. The politics of that are pretty tricky for everybody really, because the natural. All you can do is, is double up on. It's their fault. No, it's our fault, it's their fault. The tariffs are therefore and you start to get a trade war. You know, you get a trade war pretty quickly. Now, it's abundantly true that it's in everyone's mutual interest to avoid that. But the reason why I was nodding my head, shaking my head, I should say the reason why I was shaking my head and not nodding it was that the politics of this are pretty difficult. People are creating when they come up against negotiation difficulties. UK government is just drawing more red lines. And so the actual capacity to create compromise that can A, pass the Europeans and B, pass our own parliament is becoming thinner and thinner and thinner. And then you add the other layer on top of this, you're taught, you assume economic, rational, self interest as you assess it. We got rid of experts. It doesn't matter. It was to me that that interview with Michael Gove said the people of this country have had enough experts was to me, and I'm still slightly in shock about the interview two years ago, but when they say no deal is going to cause an 8% hit to GDP, people say, well, I don't believe in forecasts anymore. Some of the ways in which a sort of liberal democracy assesses what a consensus believes to be a bad idea. They aren't firing in the United Kingdom at the moment either. The civil service, the media, the economists, you know, it's not, don't, don't expect necessarily something that the economic consensus to perceive to be a very bad idea to naturally not happen.

Anna Shymansky (25:40)

Well, I just thought not.

Faisal Islam (25:41)

That's not the place the UK is in at the moment.

Felix Salmon (25:44)

Right.

Anna Shymansky (25:45)

But I would just, I would just think of like what's happened, like following say the Greek kind of drama for, you know, practically a decade and how what always happened was that you kind of went up to the last possible moment, because it's in no politicians best interest to appear to be kowtowing to anyone else. So they wait to the last possible moment and then some cobble together, not particularly great deal gets put together, they kick the can down the road and then a few years later we do it all over again. And I wonder if. I know, it's much more complicated in this particular instance, the UK is a.

Faisal Islam (26:15)

Big enough economy to be able to say we can trade with, we can sustain the damage. The damage will be mainly to those sectors of the economy that operate under EU law, I think, you know, and those are concentrated in quite high. So the.

Felix Salmon (26:31)

It's basically London.

Faisal Islam (26:32)

Well, it's not. Well, it's a bit more than, oh, it's the car industry, it's Airbus, it's the pharmaceutical industry, it's tech. Don't forget data. I mean, we've had Tim Cook over to Europe lauding EU privacy and data laws. If there's no deal, we don't even know if people with servers in the UK in this building are allowed to hold data on EU citizens or transfer it across the channel. I mean, it sounds. But literally, we don't even know. The Europeans have refused, and this is where there's blame on all sides. Europeans have refused any permission to people to negotiate in advance of us actually leaving. Whether or not our standards in the UK are equivalent to EU standards, they haven't even had a conversation about it yet. And then the same thing applies to car standards. The same thing applies to derivatives. Oh, my God, derivatives. Like tens of squillions of trillions of stuff. And people are like, okay, so I, I reckon down the line in, in New York, you're thinking, well, they just have to sort this out because there's no way they'll let this go pop. But then you flip it. There are some in the continent who want this to be a Lehman's moment for the United Kingdom. They want to crystallize that the great Anglo Saxon economy, you know, has gone mad politically and economically.

Anna Shymansky (27:53)

Right. But if you think about, if you look at the European continent right now, what is happening in so many countries with fears of nationalism and larger parties losing share to tiny, especially kind of far right, far left parties, it seems like the people who are really controlling power are going to really not want to have this just massive debacle with the uk.

Faisal Islam (28:14)

Well, or maybe they would. Maybe they would. Maybe it would show the superiority. Yeah, I mean, you can play that either way. I would say, I, I know, I know what you're saying, and it's a very fair argument, especially ahead of the European elections, which happen in May. On the other hand, if your President Macron sat in the Elise doing fairly controversial and unpopular Thatcherite policies for which the economic benefits will not be seen for five years, what better way then it's little spot of economic nationalism that you didn't want yourself repatriating car factories and the odd bank, the odd bank being in the English sense to Paris. They've got the European Banking Agency already. They, you know, it is in the interests of some in the French, for example, government having seen, you know, their best graduates from Paris just leave and come to London to just in their view, let the United Kingdom. Give the United Kingdom some rope.

Felix Salmon (29:13)

Does that mean that the United Kingdom, even if it wanted to, couldn't sort of call an emergency halt to the whole thing and say, look, no one wants a hard Brexit, no one wants no deal if we haven't got a deal together. Can we just like stay in past March 29th until we manage to cobble something together? Is that even possible?

Faisal Islam (29:34)

Well, I would look very carefully at what's going to happen with the Channel tunnel and the M20. And going back to some of the questions about the.

Felix Salmon (29:42)

Wait, what's the M20?

Faisal Islam (29:43)

The M20 is the motorway that goes to the Channel Tunnel, okay? So this is our fundamental trade link to Europe. And already our government is spending money turning a 13 mile stretch of that M20 and going towards the Channel Tunnel into a lorry park. They are hardening the hard shoulder so that it will carry the weight of parked lot, 5,000 parked lorries. And that's on one stretch of, of that motorway, there's another stretch of motorway, it's also being turned in, is being given the technology to turn into a car park and an airfield too.

Emily Peck (30:20)

Wait, I don't understand the point you're making, Faisal. I'm sorry.

Felix Salmon (30:22)

The point is that the Brits are already like hardly preparing for the embargo for like, you know, thousands and thousands of trucks to be lined up, you know, trying to get in and out of the country. Right.

Faisal Islam (30:34)

It's mainly out rather than in presuming that those checks that I talked about on the French side of the border do apply from, from March, so that those investments are already being applied. And if you get that moment, if on the first of, you know, and people are trying to avoid it. But my sense is, is that there are some, not necessarily the leaders of these countries who could do with a few Pictures of that being the symbol of Brexit. And they will try to blame that on the United Kingdom.

Anna Shymansky (31:07)

But doesn't it also seem like perhaps the United Kingdom even. Yes, they're obviously like, and you guys know far more than I do in terms of the differences, but it seems like the Conservatives, who definitely don't want there to be, you know, anything that would spur no confidence, a vote to trigger new elections. So then you could get Corbyn in power and then you have those in Remain who certainly aren't gonna want a no deal Brexit. It just seems like you would actually perhaps have incentives to at some point get something done. So you're not just gonna fall out.

Faisal Islam (31:33)

Of the eu, but you're talking about incentives. You're talking about. My point is that the incentives, the incentives are not firing, they're not working. They're working in different directions these days. And the incentives of the Conservative Party are stretched in different directions. Some people want a pure, clean Brexit. So the first thing they can do is go to the White House and try and sign a US trade deal. They want to sign that. We want to join the Trans Pacific Partnership. This is the number one trade aim of the United Kingdom right now. So wait, I want to join the Trans Pacific Partnership.

Felix Salmon (32:02)

I want to ask Alex about this. I want, because you're an economist, I want you to tell me about this concept called gravity, which is one of the most sort of powerful and ill understood concepts in economics because it doesn't make a huge amount of intuitive sense, but. So can you explain it?

Alex White (32:18)

Well, basically it's the geographic link between cities that are close together and have a lot of a high degree of economic interconnection. So for London, if you look at London and its economic connections to peer cities, Paris is far and away the most important partner city for London. UK cities are sort of in 3rd, 7th, 10th place on that list.

Felix Salmon (32:48)

And in general, what happens is in every country in the world, and as far as I know, there's not a single exception to this, is that the trade ties are strongest to the countries which are closest.

Alex White (32:59)

Yeah.

Felix Salmon (32:59)

And you know, Japan trades with Korea and you know, Argentina trace with Brazil. And there's this feeling in the UK that, well, Faisal was saying we can sign and trade deal with the Americans or Trans Pacific this or whatever. But the fact that is that you trade way more, you know, multiples more with Europe than you do with every other country in the world combined. And that's for sort of deep gravitational reasons, you know, which have, which have been in place for centuries and you can't sort of, you can't do anything about. And that's the thing which, like just annoys me more than anything else about Brexit is that it feels like a whole bunch of Brits were basically voting against gravity.

Alex White (33:48)

They're voting against geographic reality. But you look at.

Faisal Islam (33:50)

Well, that's for goods. I mean, they would argue that the service sector, that changes a bit.

Anna Shymansky (33:53)

It doesn't.

Felix Salmon (33:54)

Even in services it applies. Like empirically speaking, the trade in services is just as much subject to the rule of gravity.

Faisal Islam (34:02)

Well, do we not. Does the City of London not trade more in its accounting and legal and derivatives services, if such a things exist with Hong Kong, than it would do with.

Alex White (34:12)

No, it trades mainly with the rest of Europe.

Faisal Islam (34:15)

Yeah, I just thought I'd float that out.

Alex White (34:19)

But it's amazing watching these guys. So you have leading Brexiteers, people like Dan Hannan trotting around the world, going to Uganda saying, look, you know, here's this fantastic relationship that I just had with this guy in Uganda. You've got Liam Fox as Trade Secretary appearing in various far flung places and saying, look, you know, here's a, here's a yogurt export deal with the Philippines. And it's completely detached from reality. And that goes back to what I was saying before. This is.

Faisal Islam (34:50)

Well, they do, it's about trade offs and it's. To go back to Emily's original question, which was about sort of reality and the trade off is the perfect Brexit sweet spot for the people pushing it in government and in the Conservative Party is that both, you get to do these great free trading deals in the spirit of Cobden and you know, the 20th, 19th century great trade reformers, that's, that's where they see themselves. You get to do that with both developing countries and the United States and potentially China. But at the same time you maintain frictionless trade with Europe, which is in their interests because they have a good trade surplus with the United Kingdom. Where that's more challenging is that frictionless trade within, for 500 million people is a product of those same EU laws and single market laws that they don't like.

Emily Peck (35:50)

Can I, can I ask you, you mentioned this before and it's intriguing. I wonder if we could talk about it some more. But the idea that there are some over there that want to push the UK to a Lehman moment and sort of like, let Brexit go hard, let there be no deal. I'm wondering, like, we know what happened with our Lehman moment here. But what's the apocalyptic scenario going to look like if that happens over there?

Faisal Islam (36:17)

Yeah, well, there's two things to note about that. Firstly, the macro economists assert that this proportionally no deal hits, it's bad for everybody. But it will proportionally, you think the game theory of this hit the United Kingdom more than it will hit the EU27. That's just sort of basic percentages within that it will affect neighboring countries, Ireland, Calais ports and Rotterdam more Netherlands, Netherlands, but across the whole EU27. So if you, you accept that the Brexit don't accept that. But I think the EU27 do believe that on top of that preparedness for no deal better, you think better in the uk I've been to kind of road shows in Galway where they're preparing soft loans paid for by the EU so that they're changing SUPP supply chains. It's my favorite example, Irish cheddar exports, which normally would go to the uk they're being encouraged to change to make mozzarella to export directly to the EU27. Likewise in the Netherlands, you go on this website called Brexit Locket, you type in your business details and some AI thing pops out a personalized piece of consultancy and advice about all the changes you need to make as a small, medium sized business. Amazingly, there is no such service in the United Kingdom. So there are British businesses going to the Dutch and even getting loans from the Irish which are not available from the UK government itself. So you have both the macroeconomics that says if you believe it and many in Britain don't, this can be worse in the United Kingdom proportionally than everybody else. And you have some in the most affected European EU 27 nations saying actually we were more prepared than you as well. The Dutch Prime Minister told me that directly way more prepared than the United Kingdom, which is an extraordinary thing to say. So if that, then in terms of this Lehman's moment, the perception is, I think that a no deal on the EU side, a no deal would be so bad for the United Kingdom, it would be annoying for the eu, but so bad for the United Kingdom that it would only last a few weeks. Which is dangerous, dangerous talk. But this is what I mean about Lehman's moments. You're talking about supply chains to supermarkets being interrupted. And then you think about things like the BMW plant in Oxford. They've moved forward their shutdown. They rely on their just in time delivery of parts from the whole of Europe. They've pulled forward for the first time their annual shutdown to the first month after Brexit. So there will be no cars being made at the famous Oxford Mini plant for the first four or five weeks of Brexit, and that's because of Brexit. But they're presuming that no deal will only last four to five weeks because it can't last any longer.

Felix Salmon (38:56)

So who's got the bazooka?

Faisal Islam (39:00)

And then just think about this. The pharmaceutical industry stockpiling medicines. This is happening. They've been told to by the government for six weeks as well. And I believe that underlying that six week calculation is that a no deal would only last a couple of weeks.

Felix Salmon (39:12)

So that's my question. So like the reason why we started seeing the first semblance of like a bottom six weeks or so after Lehman was because Hank Paulson, the then Treasury Secretary, came out with his famous bazooka and he said, I have a trillion dollars to spend and I will spend it any way I can to fight this and to reverse this. And who is the equivalent in this part of the world? Who FA who, you know, staring down a hard Brexit with a disastrous, you know, pharmaceuticals and food and cars and derivatives and everything else. Who, who can do that? Who can say, I have a trillion dollars and I'm going to reverse this.

Faisal Islam (39:55)

So it's politics rather than economics. It's politics rather than a, you know, economic bazooka, isn't it? That would be the presumption that there would be a change in the, there.

Felix Salmon (40:06)

Would be like a new more pro European Prime Minister.

Alex White (40:09)

Somehow I, I personally, I don't see how that is possible in the four to five week period that you're talking about. I think we just need to be a little bit care and I'd be interested in your views on how that works out in practice, but I think we need to be a little bit careful about the US analogies. This is, the power dynamics are incredibly different. You know, the US can have, Trump can suffer or benefit through Trump, move on from it. It's the us, it will survive. The UK is in a very, very different position. The question of who's providing the bazooka, can any, I question whether any UK leader can come in and have enough influence and capacity to turn us around in the fortified.

Emily Peck (40:54)

Yeah, I'm hearing from both of you that there's no one in charge over there. It just sounds, the more you both talk, it just sounds like.

Felix Salmon (41:04)

But this is actually true as the sort of, of as the exile here, as the Brit who hasn't lived in Britain for more than 20 years. I, I can tell you that that's certainly the view I have from the outside looking in, I'm looking around at these midgets who are ostensibly in charge of the country and I'm saying I cannot remember a time when there was less leadership and less ability in the, in the Houses of Parliament.

Alex White (41:28)

So I, I think this is partly a, a long term trend. So I think my personal view is if you look at the caliber of parliamentarians and the caliber of people in politics over a long 20, 30 year time horizon, you've just effectively seen whatever your politics, left or right, the caliber of individuals being involved not being what it was 20, 30 years ago.

Faisal Islam (41:52)

I'm going to be more careful than Alex on that. As a working political journalist, most of my contacts are in the House of Commons. But then you overlay on top of that a binary yes or no question which in actual fact, in terms of executing the, the Leave vote injunction from the people of Britain, you do have an infinite number of actual landing points. And then you have an election that is unclear in terms of how you can interpret the will of the people. So you almost have two clashing mandates to interpret and interpolate. Now of course Brexit don't agree with that. They say, well, hang on, 80% of the countries backed Brexit. But when they say 80% of people back leaving the Customs Union in the single market, well that's much more debatable. And so suddenly you're having the same debates again. So this is in that, in those waters. That is why something which was totally unthinkable six months, nine months ago is now, I wouldn't overstate it, is now thinkable. We saw 700000 people on the streets of London protesting for another, another referendum. So you know, it's not, I could, well, let's put it like this. As an analyst of our politics, I can see the route to it. I can see the route to a general election, I can see the route to a no deal hard. I mean I can see the route to everything. But some of those routes were closed off six to nine months ago and they've now opened, they've now opened up. Public opinion is very interesting. It hasn't changed in headline terms. Hugely there's been a little bit of a shift towards Remain, but nothing that you would say was fundamental. What seems to have happened is that people didn't vote, are saying that if there was another referendum, and again, it's not the most Likely event, but it's not totally, it's not impossible. People who didn't vote, people maybe who were too young to vote at the time, are saying that they would come out and vote for Remain if there was another referendum. One little nugget that is quite interesting in this atmosphere where people don't believe experts, they don't believe journalists, don't believe politicians telling them that something might be bad for them. The unions that represented, the labor unions that represented factory areas that voted for Leave, they came out after very careful consultations with their members for another referendum. And what they claim on their internal polling numbers is big shifts in those factory, working class areas. Why? Because you don't believe the politicians and you don't believe even your union boss and you don't certainly don't believe journalists. But when you see the forge that makes the part for your particular bit of the Jaguar Land Rover supply chain being physically put on a truck and moved to Austria, as you'd expect it would need to be if it wants to guarantee that it can be part of the supply chain for factory on the continent, or if you want it to be part of an EU free trade deal, export to China to count as local content under the trade rules, this is happening right now. If the thing that literally gives you your job is literally being moved to Austria, it won't come up in the macro numbers, but it will certainly get round a community pretty quickly. And so there's certainly more than anecdotal evidence that some of those shifts are happening. And for people that were told and believed the idea that their jobs won't be affected, that is quite a shock. I wouldn't let it.

Alex White (45:16)

You.

Faisal Islam (45:16)

You don't. You don't see it in the macro polls, you don't see it in the macro numbers, but I'm told that that is why the unions felt confident to back what they call the people's vote. It's why Labour, the opposition party, have just opened up a little bit a route to another referendum. And it's why, from being very capable of ruling it out three to six months ago, you can now see how you get to it. And probably the stories I told you about the Channel Tunnel would be another staging post towards that being on the cards, even though it would be very strongly resisted, Obviously, by the 30% of the population who are avid Brexiters.

Emily Peck (45:56)

What's the next big signpost we need to watch on this or care about?

Faisal Islam (46:01)

So the next big signpost is, we're going to have a week's break because the government essentially is too scared to admit to what is likely to be thumping compromises in order to get a deal past Europe. It can't detail those in front of its own MPs until after its budget has passed. Because the rebels, the Brexit rebels, when the Conservative Party are trying to use any leverage they can, even totally unrelated, in order to try and force the Prime Minister to change her plan. Their last bit of leverage is the budget vote next Thursday, so you won't hear much. But then after that, I'd expect pretty quickly you'll get the details of the compromise that she has to do. The Prime Minister, in order to get a deal with the Europeans over Northern Ireland, that will upset her own backbenches and the multi billion euro pound sterling question is whether they can stomach that and vote for it when it comes to the House of Commons. So I think that she should be able to get a deal, although it would seem to go against some of the, some of the assurances she's given to her own MPs, just even in the past few couple of weeks. But then it would go to Parliament and I'm. And I, I could not tell you that that would pass through Parliament. But they'll. That will, I think, be a bit like. Was it the TARP vote, you know. Yeah, it'll be a little bit like that. And, and people will be threatened in two different ways. If you're a bit of a Remainer Tory mp, you'll be threatened. If you don't get this, you'll have no deal. If you're a Brexiter, you'll be. They'll be threatened the exact opposite. If you don't get this, you'll get no Brexit because we'll have a second referendum. So it's quite an unstable equilibrium that is literally impossible to predict.

Felix Salmon (47:50)

I have a question for a different question for Alex, which is, given how much of an omni chambles this is and is going to remain, given how damaging this is and is going to be for the uk, is there at least a silver lining for Europe that the rest of Europe, looking at the disaster that's happening to the uk, is going to be more coherent? It's not going to have the UK sitting at the table always being the sort of, you know, odd man out, voting against everything and that we could actually have the, you know, the other EU, 27 nations, be a stronger European Union without the UK than they were with it?

Alex White (48:36)

It's a good question. I mean, firstly, I think That's a little bit unfair to how the UK has engaged in Europe in the past. So the UK is, and actually interestingly at the moment on non Brexit related dossiers, the UK is running around Brussels being quite helpful and engaging with things and the uk, it's a slightly unfair characterisation to say that the UK has been an unengaged EU member. The other thing to bear in mind about the UK's role in the EU is that it's been part of a more socially and economically liberal free market open bloc that now will comprise Germany, the Benelux, Scandinavia. So the UK's departure changes, I think a little bit the balance of influence within Europe between the more dirigiste states and the more liberal, the more open market ones. In terms of the demonstration effect of the UK leaving, I mean, this goes back a little bit to the Deng Xiaoping quote about you kill the chicken to scare the monkey. There are some people around the continent who think that. But I think it's a very dangerous game to play because, you know, the uk, for all its perceived faults in the rest of Europe, is, you know, it's a member of the family. This is a little bit like the debate about Greece. Yes, you obviously have the Schauibler view that Greece needs to be made an example of. You need to demonstrate that there are particular things that are allowed and are not allowed in order to show the Italians and the Portuguese and the Spanish and everything else. It's a dangerous argument because it runs the risk of making people feel like the EU is an institution that punishes.

Faisal Islam (50:25)

But then the difficult line is this, is it punishing us to say we don't want to abide by the laws under which the car industry was re established in the uk? Or have we chosen that for ourselves? I mean this is, this is. Or have we chosen to eschew the completely frictionless supply chains that underpin our entire economy? Or are they punished? Or are they punishing? So this is a fundamental debate and you're already seeing a preemptive blame games. Alex is, Alex is totally right about that. But the politics of who's to blame.

Alex White (51:05)

Exactly is already happening to get worse.

Faisal Islam (51:09)

Well, I mean, I mean I, I, I must push back against you actually, Felix, because actually there, well, no, there are, I mean, clearly there are Brexiters who acknowledge that it might be a rough patch, shall we say, over the next few months, but then say the United Kingdom, for example, could essentially adopt us, essentially merge into the, into the US regulatory system and there'd be a, a boost from that there. I know you sounds. There's money to be saved from the EU subscription fees.

Alex White (51:49)

It's peanuts in the big scheme of things.

Faisal Islam (51:50)

Yeah, yeah, no, but we need to go through the. I mean, because, I mean, we don't want. We don't want Felix. We definitely don't want Felix, but. No, we don't want Felix to leave London thinking that there. There's still a significant body of political and public opinion that think that if there are sacrifices, that they're worth it.

Felix Salmon (52:07)

Yeah, but they're wrong.

Faisal Islam (52:11)

Well, no, then. Well, they might not be for you. Well, listen, I. Well, no, hang on a minute. I mean, let's just.

Felix Salmon (52:16)

I mean.

Faisal Islam (52:17)

Well, you would have said. You would have said. And no doubt that the China joining the WTO and its great boost to Western incomes was brilliant, but it wasn't brilliant for everybody. It wasn't brilliant. And Donald Trump's election in Michigan and the Rust Belt shows that the consequences of ultra free trade and the, what we call the dim sum between the US and the China didn't work out for everybody. So I, I just think that what matters is not. What Trump and Brexit do show is what matters is not macro level statistics. The distributional impact of these grand trade changes also matters. And the. For, you know, I can create, you know, that it's bad for the car industry. Well, the car, you know, the car industry. Here's one of the really interesting things in sun in Sunderland, where the Nissan factory, which is the epitome and symbol of frictionless single market, literally 80% of these cars get exported to the EU in that town. When I did a documentary and I expected to hear everybody say, I'm really worried about the Nissan factory, many of the people there thought that the Nissan workers were like the bankers of Sunderland. They're really rich, they've got good pensions, they get to buy all the nice houses. And so, you know, there was actually, there was some degree of resentment. So I just think there's so many sub stories here going on and running an economy and a country on macro. Numbers is what has brought publics in the US to vote for Trump and in the UK to vote for Brexit.

Felix Salmon (54:02)

Let's have a numbers round because there are many numbers we can have here. But Alex, did you bring a number 48? What's 48?

Alex White (54:13)

48 is the number of letters that need to go to something called the 1922 Committee from Tory backbench MPs to trigger a leadership contest and a leadership contest is possibly the last thing that the UK needs in the final closing stages of the negotiations. But it's not impossible. Personally, I think it's more likely after May has done the deal and her Brexiteer colleagues can then blame her for everything that goes wrong with it. I think a leadership contest is relatively likely next year, but it's not impossible that it happens in the relatively near future.

Felix Salmon (54:49)

Anna.

Anna Shymansky (54:51)

My number is £4 billion, so that's about an estimate of the medicine and non perishable food that the UK population would need for one month. And the entire budget of the no Deal planning commission is £3 billion. So just suggests that there essentially are no contingency plans.

Felix Salmon (55:13)

Faisal's GIGGLING.

Alex White (55:16)

Your cheering is up.

Faisal Islam (55:18)

Yeah, well, a similar one, mine is 20. For the M20, which is a motorway, you may. You may start to know a lot about. If things don't go the way that mutual self interest would suggest. And it's my ex. The M20 is the acid test of whether mutually advantageous interests actually functions as a way in which to determine or forecast where countries and economies go. Because when our helicopter with a camera goes up above that motorway. So I say to ministers, I'll say, are you going to be the minister that does the interviews on April 1? Because it is April 1, which is April Fool's Day. That will be the first working day after Brexit. And if it's no deal, you know, the sky copter is going to be busy.

Emily Peck (56:05)

Emily, I have an American number. It has nothing to do with Brexit, but I can try and tie it in at the end. The number is. But I won't probably. The number is $90 million. That is the amount of money that Google paid to Andy Rubin when he left the company. The reason he left the company. According to this really interesting New York Times piece that came out yesterday, the reason he left the company is because of sexual misconduct, which Google found was a credible allegation. So to summarize, again, he was accused of credibly of sexual misconduct and Google gave him $90 million to leave. And the piece is really interesting because.

Felix Salmon (56:48)

And then invested in his next company.

Emily Peck (56:50)

And invested in his next company. The piece is interesting because it shows how this company, Google, managed out all these male executives accused of just like a wide range of sexual misconduct and really treated these guys really well. Rubin got money, you know, the woman he dallied with got nothing. And there's a few other examples like that in the piece. I encourage people to read it and I guess the overall point is that these, these men are going to be okay, and probably a lot of elites in the UK will also be okay. That's how I tied it together.

Felix Salmon (57:27)

My number is 767 because my feeling is to try and turn this vaguely into a topical number, which it isn't. There's one way that you will be fine if you're a Brit or an American. And you know, the worst thing happens, and that is if you win the lottery, as one woman in South Carolina did. She won $1.6 billion in the mega Millions lottery last week. So that was a nice lottery jackpot for her. My number is 767, which is the annual per capita lotto spending in dollars in the state of Massachusetts.

Faisal Islam (58:06)

Wow.

Felix Salmon (58:07)

The average citizen of Massachusetts spends $767 per year on lottery tickets.

Faisal Islam (58:14)

Those all Harvard students?

Felix Salmon (58:16)

Almost certainly.

Faisal Islam (58:18)

I thought you meant 767. I was in the Boeing planes so that people might be able to. To fly stuff in.

Felix Salmon (58:25)

How long would it take to just to, you know, evacuate the British Isles?

Faisal Islam (58:30)

That's not a. Listen. I mean, people like to do manga, but I think. I think you may be going too far there. I think you may be going too far, but that's not going to happen. What was the film there was. It was 28 weeks later, wasn't it, where the Americans kind of come in and to an evacuated UK that's been ravaged by zombie virus. I think that's taking it too far.

Felix Salmon (58:54)

So Brexit. Brexit is bad. Brexit is bad, but not quite as.

Faisal Islam (59:01)

No, I didn't say it was bad. I'd say it's interesting from a journalistic perspective.

Felix Salmon (59:05)

So on the scale of one to zombie apocalypse, how bad is Brexit?

Faisal Islam (59:09)

It depends.

Felix Salmon (59:13)

So, okay. So, well, thank you for listening to Slate Money. If you're still. If your brains have not been eaten by zombies, tune in next week. And if on April 1st you have any friends in the United Kingdom, do give them a ring and say you're thinking about them because.

Faisal Islam (59:30)

Good time to invest.

Alex White (59:31)

Send food packages.

Faisal Islam (59:32)

Or invest.

Felix Salmon (59:33)

Or invest. I guess my number could have been A$28, which is how much we Americans are paying for your British pounds these days. Ah, it's not very much, you know. Anyway, I think that's all we have time for. Many thanks for listening. Do keep the emails coming on slatemoneylate.com thanks not only to Max Jacobs for producing this in New York, but also to Ryan Dilley here in London, who's managed to make it all sound wonderful. And we will talk to you next week on Sleep Money. It.