Will she pursue revenge or enlightened self-interest?

Photographer: Carsten Koall

How Europe Should Move On Without Britain

Clive Crook is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was chief Washington commentator for the Financial Times, a correspondent and editor for the Economist and a senior editor at the Atlantic. He previously served as an official in the British finance ministry and the Government Economic Service.
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To say that the U.K. will be tested over the coming months would be an understatement even by British standards. The next prime minister, leading a deeply divided country, must negotiate a complex new relationship with the European Union and arrange trade pacts from scratch with non-EU countries -- while dealing with economic and financial stress, new uncertainty over Scotland's independence, and the sensitive issue of Northern Ireland's border.

That's daunting enough, but there's more. What happens next could be difficult or downright disastrous, depending in large part on Europe's response to Britain's choice. That's disturbing, because the rest of Europe is hardly rooting for Brexit to succeed. But for the sake of argument, let's assume an EU leadership acting not to punish Britain but to pursue its enlightened self-interest. What might it do?

It would see Britain's departure from the EU as the most dangerous setback in the union's history, and consider the need for a proportionately bold rethink. Brexit is a British failure, to be sure: a failure of leadership; a failure to come to terms with declining power and the demands of close collaboration with international partners. It's also an EU failure, however, and the proof is surging anti-EU sentiment across much of the union. According to one recent poll, the European project is less popular in France, the country that drove it forward from the outset, than it is in Britain.

QuickTake Why Britain Voted to Leave the EU

This discontent blends many grievances, and reflects, as well, a broader loss of confidence in mainstream political leaders -- a sense that the people in charge just aren't listening. Donald Trump's success shows that this phenomenon is not just European. One ingredient in the mix has been especially toxic: fear of uncontrolled immigration. What makes this fear so dangerous is that it unites outright racists and xenophobes with a significant number of decent commonsense voters, thus bringing far-right populism closer to power.

Wise leaders would aim to deal with this by trying to divide the racists from the anxious centrists, a process that would start with acknowledging the centrists' concerns. Less wise is ignoring those concerns and hoping they go away. Downright reckless is telling the centrists that they are no better than bigots and have no place in civilized politics. This is how you get a Nigel Farage, or a Marine Le Pen, or a Donald Trump, elected.

The EU has enshrined free movement of people within its borders as a core constitutional principle. Britain agreed to it. But a proximate cause of the British referendum result was Cameron's collision with that idea. He was told he could do next to nothing to regulate the scale of immigration from the rest of the EU.

If the EU's leaders were wise, they'd see that this so-called fourth freedom -- allowing people, as well as goods, services and capital, to move without hindrance across the union -- needs to be modified.

It isn't absurd to believe that a country unable to control the flow of people across its borders is no longer a country. You might say that's the point: The EU aspires, ultimately, to dissolve its separate nations. One day, that might be achievable. Today, it isn't -- not, at any rate, if the union's citizens continue to be allowed to vote.

For years EU leaders have driven political integration faster than their voters wanted. Europe's half-baked single-currency system, with all its subsequent collateral damage, was one result. Now borderless migration has come to symbolize the same ambition. British voters rebelled against it, and they're unlikely to be the last.

How much of a setback for the EU would it be to put the fourth freedom on indefinite hold? Except for the loss of political capital that the current leaders have invested in the idea, I think not much. A liberal regime for internal migration would still be possible. The idea that offends many centrist voters, pushing them into alliance with hardline anti-immigrants, is that they no longer have any say in the matter. Policy on migration can and should be liberal, but it needs to be restored to the realm of democratic political choice.

A popular line of argument against this view is that Britain or any other country seeking to join Europe's single market for goods, services and capital without the fourth freedom is cheating, or trying to have it both ways: If you want the benefits of EU membership, you accept the obligations that go with it. This mischaracterization has somehow achieved the status of accepted truth.

It would be one thing for Britain to say, "Our citizens must be free to go where they like but yours can't come here," or "There must be no tariffs on our exports, but we'll put tariffs on yours." Demands of that sort would be absurd. But in the case of migration, that kind of asymmetric treatment hasn't been the issue. Restoring the right to restrict migration would infringe the mobility of emigrants from every EU country, including Britain.

Furthermore, the case for freedom of movement is not that it's the price you have to pay, as a matter of fairness or logic, for the other three freedoms. It's that freedom of movement is a good thing in itself -- for migrants and for the countries receiving them. On this view, which I regard as essentially correct, countries that want to restrict immigration are hurting themselves, not stealing an unfair advantage at others' expense.

Allowing countries to harm themselves in this way would seem to be punishment enough. Perhaps when they see the cost to their economies, they might think again. The European Council likes to say that the four freedoms are indivisible, but the incantation is never explained. There's simply no need to insist on open borders as the non-negotiable price of the other freedoms. Indeed, given the strength of popular resistance to the idea, such insistence is foolish. And when you adhere to that principle even under extreme pressure of events, such as the current refugee crisis, you compound the error.

Relenting on the fourth freedom wouldn't have fixed everything that's wrong with the EU -- not by a long chalk. But the narrow margin of support for Brexit might not have materialized. If the EU relented now, it would surely weaken the anti-union forces that are building across Europe. If it did so promptly, I could even imagine a second U.K. referendum on membership of a reformed EU, and the country voting to stay.

How likely is any of this to happen? Desirable as constitutional reform might be, not just for the U.K. but for Europe too, I can't see EU leaders embarking on it in a way that seems to reward the Brits for their uprising. The desire to see Britain reap what it has sown is palpable in many of the early comments on the referendum. The likelihood of treaty revisions designed to help Remain win a new referendum seems vanishingly small.

Somewhat more likely, I'd say, is a policy of punishing Britain with a hard exit settlement, while moving to adjust the freedom-of-movement rule for the rest of the EU. The idea would be to mollify anti-EU forces outside the U.K., while demonstrating the consequences for those who refuse to be mollified. Britain, in this case, will have forced a needed reform on the union, and will be rewarded for its effrontery with as much economic damage as the EU feels it can safely inflict.

The problem with even this scenario, however, is that modifying freedom of movement to the necessary extent would require a new EU treaty, in turn necessitating unanimous agreement of member countries, and ratification votes in national parliaments and/or referendums. Europe's leaders would dread to contemplate this prospect -- especially now. The pattern here is firmly established and something even worse than Brexit might be needed to change it: The more Europe's citizens complain, the less inclined their leaders are to listen.

So I'm worried that the likeliest scenario is bad for the EU and extremely bad for the U.K. -- a combination of frantic paralysis, hoping for the best, and drawing what comfort may be found in the unraveling of Britain. The European project may be in mortal danger, but at least its leaders will be able to say, "It's all Britain's fault, and the Brits got what they deserved."

I suppose that's something.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Clive Crook at ccrook5@bloomberg.net

To contact the editor responsible for this story:
James Gibney at jgibney5@bloomberg.net