summary
  • Brexit Goes From Worse To Woeful
  • The American Labor Market’s Long Run
  • Economic Sanctions: Modern Day Weaponry

Sunshine is said to be the best deodorant for shady backroom dealings, and live coverage of legislative proceedings is typically a good thing. But the telecast of events in the British Parliament this week did little to disperse the malodor coming from Westminster.

The Brexit referendum happened more than three years ago, but there are still deep divisions within the U.K. about the type of relationship the country should share with the European Union. The failure to reconcile competing visions tortured former Prime Minister Theresa May, who stepped down earlier this summer.

Her successor, Boris Johnson, has made a bad situation worse. In an effort to strengthen his hand, he prevailed on the Queen to suspend Parliament for a month, hoping to force brinksmanship with the Europeans. Johnson’s public hope was to strengthen his negotiating stance, but many suspect his true goal was an abrupt departure on October 31 (the current Brexit deadline).


Weekly Economic Commentary - 09/06/19 - Chart 1

While the specter of Brexit has already taken a terrible toll on the U.K. economy, a “no deal” scenario would be catastrophic. Over the Prime Minister’s objections, Parliament took steps this week to avoid this outcome. Stung by the loss, Johnson expelled 21 members of his Conservative Party from Parliament and proposed new elections. At very least, elections would introduce additional chaos and delay. Should an election shift the balance of power, future outcomes would be even less certain.

The added uncertainty, and the manner in which Johnson is conducting his business, are not playing well in the court of the financial markets. The British pound touched another multi-year low this week. Confidence in the U.K. as a business destination has taken another body blow.

Brexit remains an ominous case study of what happens when a country tries to disengage itself from international associations. There will undoubtedly be more plot twists to come in the weeks ahead, and we’ll cover them closely. But it might be better if upcoming deliberations retreated to the shadows from the light.