The Telegraph: Black Wednesday shows that a no-deal Brexit would be a blessed release for Britain’s economy

Ihadn’t meant to write about that subject again for fear that readers are suffering from a severe bout of B-fatigue. But the events of last week were extraordinary and this week could prove to be even more dramatic. We must be prepared for anything and everything – including a no-deal exit, if not this Friday, then later. Given the awfulness of Theresa May’s “deal” and the EU’s intransigence, a “no-deal” outcome remains a serious possibility. Its merits are still under-estimated. So, sorry about your Brexit fatigue, but needs must.

The expression “no-deal” is misleading. It refers to the absence of an over-arching agreement between the parties. But it does not mean that there cannot be deals on anything. In fact, there have already been umpteen deals with various European bodies in order to promote a smooth transition. And there can be many more.

It is often claimed by Remainers that no one wanted a “no-deal” Brexit. Yet, from the beginning, quite a few leading Brexiteers believed that we should go for a no-deal departure. For some, this was a matter of tactics. They believed that if we embraced and prepared properly for the no-deal option then the EU would come to us, keen to do a deal. So, paradoxically, the best way to get a good deal was to aim to leave without one.

But others embraced no-deal because they didn’t think that the EU would be very obliging and that we would therefore be hitting our heads against a brick wall, getting nowhere and losing time. We might as well get out and realise the benefits of Brexit as soon as possible.

Admittedly, many Brexit supporters, myself included, did not initially regard a no-deal outcome as first-best. We believed that the UK might secure something like Mrs May’s “deep and special partnership”. At least we should try. Yet once it became clear that this was not going to be achieved and that Mrs May had sold out British interests for a mess of pottage, then the no-deal option was best.

This doesn’t mean, however, that a no-deal exit would be painless. Although I believe that the initial economic disruption would be minor and comparatively short-lived, there would be some. And I expect that there would be political repercussions of a high order. But these would prove to be positive. The great economist Mancur Olsen argued in his book ‘The Rise and Decline of Nations’ that countries’ growth performance was strongly influenced by how well their institutional structures promoted the national interest as opposed to entrenched sectional interests.

Moreover, he argued that in order to sustain good governance, there had to be periodic upsets of the institutional structure. Without this, institutions would become ossified and countries would never be radical enough in pursuit of their own interests.

The Second World War forced the defeated countries, Germany and Japan, to reshape their institutions. By contrast, we in the UK suffered from the winner’s curse. We needed to make radical changes too but victory was a powerful force for continuity and inertia. Our institutional revolution only came 35 years later with the arrival of Mrs Thatcher.

Radical though her governments were, they didn’t put an end to the need for reform. We remain seriously in need of it now. Post-Brexit Britain has a chance to deliver another revolution, affecting both the economy and our political institutions.

So if we find ourselves outside the EU without a deal, what should we expect? First of all, “despite Brexit”, as the BBC likes to say, life would go on much the same. Exports to the EU account for only about 12pc of the UK’s GDP. In other words, 88pc of our economy is not accounted for by them.

Nevertheless, initially the news agenda would doubtless be dominated by negative stories. Before long, though, I would expect the balance to shift, as we realised that the sky hadn’t fallen in and we heard about the signing of Free Trade Agreements. Moreover, at a stroke, our departure would put an end to the baleful influence of Brexit uncertainty. At long last, we would know where we stood. And we wouldn’t have to hand over £39bn to stand there.

There is an interesting precedent to keep in the forefront of your mind. On September 16 1992, we fell out of the European Exchange Rate Mechanism (ERM), despite all the efforts of the British Government to keep us in. The whole establishment, including the civil service, the CBI, the BBC, the Financial Times and all the usual suspects thought that this was a national disaster and humiliation. On the day of our enforced departure, it was as though they had gone into mourning.

In fact, our enforced departure was a lucky escape from a system that had held the UK economy in a vice. Once we were out, the economy recovered strongly. September 16 was initially referred to as “Black Wednesday”. After a few months, though, as the economic recovery became obvious, its nickname was changed to White Wednesday and, after a bit longer, to Golden Wednesday.

If we leave the EU without a deal, just like our ERM exit in 1992, it will not be because the Government or the House of Commons have wanted this outcome, even though it remains the legal default position. If it becomes reality it will be by political accident, or because the EU has provoked it, or left us with no other viable option.

Yet, as before, this does not mean that such an outturn would be a bad thing. Just like some individuals, malfunctioning institutions sometimes cling to the very thing that is stifling them. They need to be ripped away from it – and then be surprised by the improvement. Before a year was out it would become clear that a no-deal Brexit was not a disaster but rather a lucky escape and a blessed release.

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