‘Britons seem relatively relaxed in the face of Brexit apocalypse.’ So runs the headline on a recent piece by Larry Elliott, Economics Editor of The Guardian, who observes in a pleasantly deadpan tone that people
“haven’t spent the bank holiday weekend stripping supermarket shelves of baked beans and bottled water. While opinion polls show that voters think – rightly – that the government is making a pig’s ear of the Brexit negotiations, the state of the economy suggests they are taking what Carney and Hammond say with a pinch of salt.
Last week’s survey of manufacturing and retail sales from the CBI were both solid, unemployment was last lower in early 1975, and the public finances smashed expectations last month with the biggest July surplus in almost two decades. If nothing else, the thought that he will have more money to play with in the autumn budget should cheer the chancellor up a bit.
While not exactly booming, the UK grew faster than the eurozone in the second quarter and is doing a lot better than the Treasury predicted before the EU referendum. There has been no collapse in house prices, no 500,000 increase in unemployment, no two-year recession.
The poor track record of the Treasury (and the Bank of England, for that matter) is one reason consumers and businesses do not appear to be hunkering down for a catastrophic recession next year. What’s more, the scepticism about official forecasting is entirely justified. Neither the Bank nor the Treasury spotted the financial crisis coming and both wildly underestimated the damage it would cause.”
All this is music to the ears of Leavers. The predictions of immediate disaster made by Remainers during the referendum campaign, and supported by Treasury forecasts, have turned out to be ludicrously wide of the mark. I remember, on the day after the referendum result, being assured in a solemn tone by an eminent Remainer that “the economy will be in recession by October”. He plainly believed this, and was plainly wrong.
There is, however, a trap here for Leavers. The business cycle has not been abolished. Or to put it another way, there has been no end to boom and bust.
Triumphalism, of the kind in which Gordon Brown engaged as the economy went on growing for year after year, should be avoided. What goes up will, one day, come down.
Knowing when that day will dawn is impossible. When I returned to London from Berlin in 2000, and was able for a short time to see our largest city through German eyes as an exemplar of anarchic, shockingly irresponsible, Anglo-American casino capitalism, I predicted that the Brown boom, which far exceeded even the Lawson boom, would soon burst.
That prediction, perhaps more accurately described as a guess, was wrong. The boom continued for another seven years, and one of the strangest features of it is that it has never, in some respects, burst. Many a shoddy London house is still worth over a million pounds. Such prices are impossible for most people who need somewhere to live, and Jeremy Corbyn benefits from the resulting despair.
Leavers must be careful not to imply that as we depart from the European Union, we shall enter a paradise where slumps, crashes and other nasty surprises no longer occur. On the contrary, we shall find they do still occur. But we should also find ourselves with more freedom to learn from whatever mistakes we make, or to respond to mistakes made by other people.