Brexit: Britain’s Prohibition

Flip Chart Fairy Tales:

Prohibition was described as a ‘noble experiment‘ but it was, by and large, a disaster for America. Not only did it enable the rise of powerful crime syndicates, it also had many unintended economic consequences. As expected, breweries closed but so did restaurants, theatres and haulage firms. Many states were heavily dependent on liquor taxes. Around 75 percent of New York’s revenue came from taxes on alcohol. According to some estimates, prohibition cost the federal government a total of $11 billion in lost tax revenue while costing over $300 million to enforce. One of the reasons for the change of heart in government was the plummeting tax revenues during the depression. In the end, Congress wanted tax revenue more than it wanted people to stop drinking. The journalist H.L. Mencken remarked that the one good outcome from prohibition was that it had completely refuted all the arguments of the prohibitionists. After 14 years, America finally gave up on one of its worst ideas and prohibition was repealed.

The parallels with Brexit are striking. As with prohibition’s advocates, the success of the Leave campaign was in linking something people didn’t much care about to something that concerned them a lot. As the Economist noted last week, before the referendum, the UK’s membership of the EU was a non-issue for most people. Immigration, though, was something a lot of people had been concerned about for a long time. The two issues became conflated during the referendum campaign and, as this chart from Migration Observatory shows, the EU shot up in importance as the campaign progressed.

As with prohibition, support for Brexit was driven, at least in part, by a reaction against a changing world and a sense of being out of step both culturally and economically with the prevailing political climate. In England and Wales, rural areas and small towns tended to vote Leave while larger cities voted Remain. Like prohibition in the 1920s, Brexit became a lightening rod for various forms of discontent. The resentment crystallised around a single issue.

And once again, legislators were bamboozled into submission by the noise. Most MPs supported Remain yet placidly voted to leave the EU without asking many questions. Labour MPs allowed themselves to be convinced, on questionable evidence, that there was a mob of angry white working class voters ready to turf them out of their seats if they opposed the triggering of Article 50 in any way. Sure, there is a noisy sub-group of Brexit voters who call for the hardest Brexit and scream about betrayal at every opportunity but they are not representative of most Leave voters.

As the negotiations drag on, the economy starts to slow down and the drain on government resources prevents it taking much action on anything else, the enthusiasm for Brexit is likely to diminish. The FT’s Janan Ganesh perhaps echoed H.L. Mencken when he said, “Brexit is an idea whose only effective rebuttal is its own implementation.” As with America and prohibition, we will have to try it before we realise just how bad an idea it is.

Prohibition didn’t alleviate any of the grievances which led to its implementation and neither will Brexit. Already, the leading Brexiters in government are backtracking on immigration. It is likely that the Leave voting areas will be hit hardest by the economic disruption that follows Britain’s withdrawal from the EU. A few opportunistic carpetbaggers might get rich but the majority of us will be worse off.

Historians will study Brexit as they study prohibition, with bemusement that a nation can do something so massively disruptive but with so few benefits. What, they will wonder, made the British do something so pointless? Like prohibition, Brexit is another ‘noble experiment’ which will one day be judged as a spectacular mistake. The Americans, though, were able to reverse their reckless decision. We will not be so fortunate.

Fascinating observation about the parallels between Brexit and prohibition.