With the victory of the Conservatives in last week’s British election, the future of both the European Union and the United Kingdom looks more doubtful. Newly re-elected Conservative Prime Minister David Cameron, in order to please anti-EU constituents who were essential to his re-election, promised a referendum on EU membership by 2017, although it could come sooner than that.
At the same time, the promised referendum is again inflaming secessionist sentiment among Scottish nationalists and separatists who wish to remain a part of the EU.
Naturally, it would be highly simplistic to point to the EU issue as the only major issue behind the Conservative victory. As Louis Rouanet points out here, the British economy in recent years has performed relatively well — with an emphasis on the word “relatively” — and has done so by eschewing the French model of tax hikes and increased interventionism. Whether deserved or not, Cameron was probably able to convince more than a few voters that he deserved some credit for this.
A Gain for Euroskepticism
Nevertheless, the election was a good sign for the euroskeptics, even in the face of the United Kingdom Independence Party (UKIP)’s inability to deliver much in the way of electoral success to its members. CNBC explains:
Yes, [UKIP] got one MP — but 3.5 million people (in a country of around 62.5 million) voted for the anti-EU party. If there is a low turnout for the EU referendum, and you add the number of people who voted UKIP to those who voted for other parties but aren’t keen on the EU, there might be a real risk of exit.
So, the Cons were able to peel a lot of people out of the UKIP camp, but there remains a real core of anti-EU voters out there whom Cameron (who is a Europhile) can’t simply ignore in the face of his razor-thin victory.
Cameron’s promised referendum has caused the term “Brexit” — with obvious allusions to the possible Greek exit or “Grexit” — to enter the international lexicon. But of course a British exit would be a totally different matter than a Greek exit. For one, Greece is part of the eurozone, while Britain is not, but more importantly, Greece is a net receiver of EU welfare while Britain is a net payer.
In other words, Britain, like Germany and France, are the larger productive economies in the EU that pay the EU’s bills, give it economic influence, and produce the wealth that gets spread around to the less-productive countries like Greece and Ireland.
It’s not difficult to see why some Brits might tire of paying Portugal’s bills when Britain has plenty of economic challenges of its own.
Scotland Looks to the EU and Secession
Of course, I use the term “Brits” loosely. “The English” would be a more accurate term in this case since the Scots, knowing how their bread is buttered, continue to look to secession and the EU as a possible escape plan if the Conservatives deliver at all on their promises to slash government spending or withdraw from the EU.
This would make perfect sense for the Scots, of course, since the EU might indeed offer more generous welfare benefits than the Tories in England. Scotland only has to look next door to Ireland — which benefited mightily from EU largesse during the 1990s — to see how a small relatively poor country can do quite well as an EU receiver state. The Irish state still brags about being a net receiver of EU funds.
Thus, we find that if the British manage to leave the EU, the Scots would be likely to seek secession soon after. Rather than living largely off the forced generosity of taxpayers in England, though, the burden would be passed over to German and French taxpayers, among other northern Europeans.
The biggest loser in this whole reshuffling would be members of the Labour Party in England, who would still be subject to the edicts of London, but who — without reliable left-wing Scottish votes on their side — would be relegated to a political party with little hope of gaining a majority in Parliament in the near term.
(This analysis of course ignores all the non-financial repercussions of a more Conservative British state such as the decline of civil liberties, a strengthened surveillance state, and possibly a more belligerent foreign policy.)
Meanwhile, Back on the Continent
At the other end of the equation, the balance of power in the EU would shift dramatically as well. With the departure of the UK, the productive economic base — the “net tax payer states” of the EU, such as Germany — would be depleted even more, and the balance of power would shift even more to the more numerous net tax receiver states. Would this accelerate a German exit in a scenario similar to that imagined by Patrick Barron? Possibly, although it’s hard to predict how long the Europeans can keep using Nazi war guilt to keep the gravy train flowing out of Germany to the rest of Europe.
In addition to promising an EU referendum, Cameron has said that he will seek to renegotiate the terms of the UK’s relationship with the EU. With recent floods of refugees and migrants to Europe, the pressure on Cameron for successful renegotiation has increased. EU politicians have proposed spreading out migrants in a resettlement plan across numerous European countries. Naturally, British nationalists aren’t fond of that idea, since new migrants would place additional pressure on the British welfare state. But even if no migrants ended up in the UK at all, the British would end up at least partially funding resettlement through their EU taxes. A partial answer to it all can be had by simply leaving the EU.
As a final note, it might be worth remembering that back in America, the land of the free, the net tax payer states face few legal options if they grow weary of funding welfare programs and government projects in other states. If Colorado and Texas and Minnesota tire of being made to throw money at Mississippi, South Carolina, and Vermont, it’s just too bad for them. In Europe, wanting to break off from the centralized political structure is often called “skepticism.” In America, it’s usually called “treason.”
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.