UNIDENTIFIED PERSON: NPR.
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STACEY VANEK SMITH, HOST:
Brexit - Great Britain's exit from the European Union. Brits voted to do this back in 2016, and since then, Brexit has basically evolved into the longest, slowest, most confusing breakup in history. Over the weekend, Parliament voted to request to delay the Brexit deadline again, which had been set for Halloween. Prime Minister Boris Johnson was not happy about the delay. He's been pledging to get Brexit done.
Brexit, of course, has enormous economic implications. The European Union essentially functioned as one country, with one set of immigration laws, trade deals and rules for business. Brexit changes all that. It will probably mean the U.K. has to negotiate hundreds of trade deals and international business deals and immigration rules, probably because the U.K. and the EU still have to agree to the terms of Brexit.
The U.K. Parliament has already rejected a number of Brexit plans, and tomorrow they'll vote on the latest put forward by Prime Minister Boris Johnson. The vote is shaping up to be very tight, and Brexit could end up back at square one.
This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith. Brexit - it is definitely complicated. Today on the show, what's going on, what's at stake and what is the economic impact of all the delays.
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TIM HARFORD: My name is Tim Harford. I am a columnist at the Financial Times and the presenter of a new podcast called "Cautionary Tales."
VANEK SMITH: And an economist.
HARFORD: Oh, yeah, that.
VANEK SMITH: (Laughter) Well, it's relevant to our purposes. And so Brexit - there was a big vote. And what happened?
HARFORD: Yeah. Well, yeah, we're still asking ourselves that question.
VANEK SMITH: (Laughter).
HARFORD: I mean, where do you want to start?
VANEK SMITH: Well, let's start with - I mean, it seemed like this might be - there have been lots and lots and lots of delays. And it seemed like this vote - I mean, Boris Johnson's whole thing - the Prime Minister Boris Johnson's whole thing was no more delays. We're going to do this thing, rip the Band-Aid off and Brexit's going to happen. I think he said over his dead body would there be another delay.
HARFORD: He said over his dead body. He said he would rather die in a ditch than send a letter to the European Commission asking for a delay. He has sent a letter to the European Commission asking for a delay, so...
VANEK SMITH: (Laughter).
HARFORD: I mean, that's not the first time the prime minister said something that turned out not to be true. I mean, there are just a lot of different people who want different things. There are hard-line Brexiters who would just be delighted to have the most catastrophic and disruptive exit possible, although they don't seem to think it would be catastrophic and destructive, but it clearly, obviously would. There are people who would like a very soft Brexit because that would respect the will of the people but would not be too economically damaging. There are people who...
VANEK SMITH: So that would keep some of the trade relationships in place with...
VANEK SMITH: ...European countries and allow maybe some of the businesses that are kind of operating across countries to continue.
HARFORD: Absolutely. I mean, there are two moving parts to that. There's a customs union, and there's the single market. They sound like the same thing, but the customs union is more about frictionless trade in goods and no border checks for goods. And the single market is more about common standards for services like banking, media, insurance and the free movement of people.
And so there are proposals to stay in the European customs union, and there was proposals to stay in the European single market. And there are proposals to stay in both, and there are proposals to leave both. And just to complicate all of this, it also interacts with the situation in Northern Ireland.
VANEK SMITH: Right.
HARFORD: So north - yeah, and Northern Ireland is part of the United Kingdom. But there are communities in Northern Ireland who would rather that it was part of the Irish Republic. And up until recently - I mean, people were - people got killed quite a lot. And not just the border but - I mean, there were bombs in London. There were - I - there was a bomb threat in my old Oxford College when I was there, bombs in Manchester, bombs in Birmingham. People got killed.
But more recently, there's been a peace, and the peace has been based on the fact that, well, look; the U.K. is in the European Union, and the Republic of Ireland is in the European Union. And now that nice, convenient situation - that's going away. And so these negotiations between the U.K. and the European Union have been heavily influenced by the question of what's going to happen on the border between Northern Ireland and the Republic of Ireland. But that's where we are.
VANEK SMITH: Why do you think the delays keep happening? I mean, it's been, like, three years. It's been a long time.
HARFORD: It's partly that the timetable was never terribly realistic. I mean, even if we agree a deal now, it's not that anything's going to be done. We just move to the next stage of the negotiations. We agree the legal basis for leaving the EU, but then we have to negotiate the future trade relationship. So there's a whole - there's - this is never going to stop. So yeah, that's been slightly frustrating, but - yeah.
VANEK SMITH: What are the economic - like, I would love to look at the pros and cons of the extensions. Like, what are the pros of continuing to kind of extend the - or to continue to delay?
HARFORD: Well, it very much depends on your point of view. I think, clearly, the advantage of delaying is that if you don't like what's been agreed, you might be able to get something that you prefer. So a lot of this is strategic.
But purely from the point of view of ordinary citizens and businesses, you do, at some stage, want to know what is likely to happen. So let's say you're thinking, oh, I want to make some decision. I want to make some investments. I want to maybe build a factory. And as I contemplate my decision, I might think to myself, you know, it would be better to wait. Why would I commit to that decision when I'm going to know more in due course? And that's true for all kinds of decisions that people make, from booking holidays to studying for a degree to building a factory.
And the trouble with the Brexit vote - we originally voted in June 2016. And of course, there was uncertainty about what the vote would be. Then once we had the vote, there was uncertainty about what would happen next. There was uncertainty about who was going to be the next prime minister. And it just goes on and on and on. Meanwhile, lots of people who could postpone decisions while they wait to find out more do postpone decisions while they wait to find out more.
So that's the theory of it, but there's lots of good empirical evidence, as well, that uncertainty does slow down economic activity. It does depress investment. And if you look, for example, at investment in the British economy relative to investment in the American economy, in the German economy, it - it's not a pretty picture. No one's investing. Everyone is just waiting, waiting, waiting.
VANEK SMITH: This seems like an emotional thing for you.
HARFORD: Well, I'm trying not to be emotional because people are very, very emotional about this. It's very polarized.
VANEK SMITH: Yeah.
HARFORD: I know we're not the only country in the world that's polarized, but people take it very personally. People find it really hard to see any good in the opposing point of view. The leavers, you know, think of the remainers as betraying the country. The remainers think the leavers are just a bunch of idiots and racists. I mean, my wife is a portrait photographer, and she has a new project of trying to get people who disagree with each other to hug on camera. So far, she has not managed to get any leavers and remainers to hug each other.
VANEK SMITH: At all.
HARFORD: It's gotten really personal. And that's - and that is - it's very worrying because in the end, I don't think this deal is great for the country, but what is more damaging than any particular deal is the bitterness and the distrust that the whole argument has brought.
VANEK SMITH: Yeah. Yeah. Well, Tim, thank you so much for talking Brexit. I appreciate it.
HARFORD: Oh, it's a delight. And you know, I'll be back tomorrow, if you like, to explain what's happened next 'cause it's...
VANEK SMITH: (Laughter).
HARFORD: It's a fast-moving story. I mean...
VANEK SMITH: It is a fast...
HARFORD: It's weird...
VANEK SMITH: It's a - both fast-moving and incredibly slow-moving.
VANEK SMITH: This episode of THE INDICATOR was produced by Darius Rafieyan. Our intern is Nadia Lewis. Our editor is Paddy Hirsch. And THE INDICATOR is a production of NPR.
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