Suppose there are two countries, 1 and 2, and two (mutually exclusive) policies, X and Y. In Country 1, the majority of people support X, and in Country 2, the majority support Y. Country 1 is more populous, so if the two countries form some sort of federation, and if this matter is decided centrally, Policy X will prevail. People living in Country 2 will also have to put up with X, even if most of them would prefer Y.

Scenario 1: Political preferences differ mainly across countries

Under those conditions, it would make perfect sense to split the federation, so that Country 1 can have X and Country 2 can have Y.

But now, assume that there is majority support for X in both regions, the only difference being that in Country 2, being pro-Y is a respectable minority opinion, while in Country 1, Y is considered beyond the pale.

Scenario 2: Political preferences differ mainly within countries

In both scenarios, political preferences differ both across countries and within them. But in Scenario 1, the main dividing line runs between countries, whereas in Scenario 2, the main dividing line runs between political camps.

Would it still make sense for Y-supporters in Country 2 to celebrate a successful secession from the federation? Possibly, yes. In Country 2, they have at least a small chance of becoming a majority one day, in the distant future. In the federation as a whole, they have no chance whatsoever. Smaller units might also drift more naturally towards Y, regardless of public opinion. But clearly, secession would not automatically deliver Y.

You can see what I’m driving at. Let’s say that Country 2 is the UK, and that Country 1 is the rest of the EU, while X is a set of interventionist policies, and Y is a set of free market policies. Throughout the EU Referendum debate, liberal Brexiteers have tended to assume that we are in Scenario 1: they have seen the referendum as a chance for liberal Britain to secede from statist Europe. Unfortunately, they are wrong.

The reality is that we are in Scenario 2. The main dividing lines run between political camps, not nations, and free-marketeers are a minority in both the UK and in the rest of the EU. Let’s look at a few surveys on issues which, while they don’t have a lot to do with the EU, are good proxies for public opinion on economic matters generally. 68% of the British public favour a renationalisation of energy companies, 67% want to renationalise Royal Mail, and 66% want to renationalise the railways. 74% support price controls for gas and electricity, 72% want the government to control transport fares, a relative majority (45%, with 12% answering ‘don’t know’) favours rent controls, and a significant minority (35%) want the full Venezuela model, with politicians setting food and grocery prices. 61% want to raise the minimum wage to £10, with only 19% opposing, and 52% want to raise the top rate of income tax to at least 60%. Note that we have not even mentioned sensitive issues like the NHS, the greenbelt, free childcare or pensioner benefits. Freedom-loving Britain is a romantic fantasy. At least on microeconomic issues, Joe Public stands somewhere between Owen Jones and Fidel Castro.

Sure, Brexit will open the door to a number of interesting opportunities for free-market reform: reducing labour market regulation, trimming back the costly green agenda, freeing financial services, ditching the wasteful Common Agricultural Policy, and signing free trade deals or simply introducing unilateral free trade. But will politicians dare to go anywhere near that? In the current, statist climate of opinion, such measures will be presented as slashing workers’ rights, riding roughshod over the environment, unleashing casino capitalism, making ourselves vulnerable by reducing food self-sufficiency (remember this?), and wiping out what remains of our manufacturing base.

But never mind improvements: there is a real possibility that Brexit could lead to less freedom, not more. Let’s assume the best for the upcoming negotiations about the future trading relationship between the EU and the UK. Let’s assume that German industry associations and other representatives of European exporters, who have a vested interest in maintaining close trade ties with the UK, side with the UK, thus strengthening its bargaining power. The EU then grudgingly offers the UK a favourable trade deal, let’s say EFTA membership on terms similar to those of Switzerland. Even under those conditions, the UK would, of course, have to accept freedom of movement within Europe. It could not apply a points-based immigration system, or anything like it, to European citizens. Free trade and free movement of people come together, as a package deal. You cannot have one without the other.

No problem, say liberal Brexiteers, let’s accept that package. But that decision will not be theirs to take. After a referendum campaign that focussed so heavily on ending freedom of movement, could a UK government really realistically agree to a deal that preserves it? Or would they have to reject it, and reject free trade with it? If so, we would end up with less freedom in both areas, less freedom to trade, and less freedom to move. We would have given up those aspects of EU membership that are actually desirable, without getting rid of its irritating aspects. There is a right kind of Brexit, and a wrong kind, and this would be the wrong kind.

If you are a liberal Leave voter, by all means, crack open the champagne. But I wouldn’t have more than half a glass if I were you, and I’d dilute even that with sparkling water. It is on the domestic front that we free-market liberals have, to put it mildly, work to do.

Kristian Niemietz

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Head of Political Economy

Dr Kristian Niemietz is the IEA's Editorial Director, and Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).