Thoughts on the Brexit
This morning’s news that the Great Britain’s voters chose to leave the European Union, a decision that caught the money people of the world by surprise, sent markets tumbling, shocked politicians and prognosticators, and will have rippling effects around the world, should be welcomed by lovers of liberty.
Most of us understand the basics of the concept of feedback. Do something, wait to see its effects, adjust what you’re doing based on that information. In engineering school, a classic example is a factory that passes material through a pair of rollers to form a sheet: Think steel mill or aluminum foil. As the final product comes out of the rollers, something measures the thickness of that product, and somebody or some thing adjusts the spacing of the rollers to ensure the thickness is what the manufacturers want it to be. That’s a feedback mechanism.
Feedback works best when the feedback information is closest to the process. If you measure the thickness of the rolled product an inch from the rollers, you’ll get better results than if you measure it ten feet away. All sorts of bad things can happen when the separation between process and information gets big. Apart from resulting in useless product, the remote measurement may inaccurate, and result in corrections that are unnecessary or harmful.
So it goes with economic matters, and it’s why central economies do not and cannot work as well as market economies. Information is time-sensitive, and when it has to be aggregated at the local, regional and state levels before reaching the national level, it gets old and therefore less relevant. The converse is true – when instructions have to filter down through various levels, they, too, can get “old.” Then there’s the handling of the disparate wants and needs of millions of independent economic actors at the national level. One size does not fit all.
And so it goes with political matters. Something that can be managed at the local level will be managed better than if it is managed at the state level, and something that can be managed at the state level will be managed better than if it is managed at the national level. Local politicians are more apt to be connected and responsive to their constituents than state level politicians, and so forth. Thus, we should leave for the state only that which the local government cannot handle, and leave for the federal government only that which the states cannot handle.
It doesn’t work that way nowadays, of course. Power accretes ever upward, and control continues to be centralized. Concurrently, government seems to be getting ever more unwieldy and ever less responsive, despite technology making information ever easier to collect and move. Coincidence? Only starry-eyed dreamers who cling to the fantasy that socialism can work think so.
America’s government is big, bloated, bureaucratic, and woefully unresponsive. Imagine, though, if there were an additional level of bureaucracy and control, if there existed a political structure above the Congress, the Presidency and the Supreme Court, and if that structure itself had multiple entities and represented not just America, but a couple dozen other nations that had different native languages, different social customs, and different histories. How responsive could such a government be? At what point does the feedback loop become so tenuous that it simply breaks?
The Brexit should be viewed first and foremost from this perspective. In choosing to break from a multi-national governing body, Britain’s voters are asserting greater control over the politicians that run their lives. They’re bringing control a bit closer to home, they’re tightening the feedback loop.
There will be difficulties along the way, and as we’re seeing, the short term will be uncertain and in many ways painful. Stock market indices have dropped precipitously, and as I type this on the morning after, the NYSE and NASDAQ are set to open down 3-4%. The short-sighted pessimist will see that as a sign that the Brits chose poorly, and there’s no guarantee that the UK politicians will get things “right,” but history and economics tell us that there’s a better chance they will, and we should celebrate the fact that the people of Great Britain will be in greater control of their lives going forward.
Theres an old adage that goes:
Keep your friends close and your enemies closer.
Centuries of political history should make it clear that we should add a third part:
Keep your politicians closest.
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