No-deal Brexit would be ‘an epic level of idiocy,’ says Larry Summers
Former US treasury secretary advises best solution would be another referendum
Larry Summers, the former US treasury secretary under Bill Clinton and White House adviser to Barack Obama, was in Trinity College to receive an award from the university’s philosophical society. Photograph: Dara Mac Donaill
Speaking at an event in Trinity College Dublin, Prof Summers described Brexit as “a bad idea that’s looked worse with the passage of time”.
He said the UK’s decision to exit the world’s largest trading bloc would “disenfranchise” the British people, contrary to what Brexiteers have promised, as the UK would be forced to follow rules and regulations in which it had no say.
His comments come after the House of Commons voted on Wednesday to rule out the prospect of a no-deal Brexit.
However, the default position if no deal is agreed remains that Britain will exit without a transition arrangement on March 29th, a scenario that is expected to bring chaos to markets and business supply chains.
“Instead of having to comply with one set of regulations into which Britain has a substantial input, to be viable as the British market isn’t that big, it will now have to comply with two sets of regulations, a British set and a European set, only they lose voice and input in respect of the European set,” Prof Summers said.
“Fundamentally this is a blow to British business. In respect to the most important issue which is regulatory, it actually disenfranchises British people rather than enfranchises them,” he said.
“So the best thing that can happen is that they could work their way back to a some kind of referendum and exercise a reverse out,” the Harvard University economist said. “But there are degrees of bad and crashing out with no structure is a kind of epic level of idiocy,” he said.
The former US treasury secretary under Bill Clinton and White House adviser to Barack Obama was in Trinity College to receive an award from the university’s philosophical society for his work in the field of economics.
On the forthcoming US presidential primaries, Prof Summers, an outspoken critic of US president Donald Trump, said: “It would be a catastrophe for the idea of democratic governance; for stability, prosperity and peace in the world if president Trump is re-elected.
“The most important thing by far for the Democratic Party is to chose someone who can win,” he said.
Prof Summers believes the global economy has entered into a period of long-term decline, known as “secular stagnation”, where the age-old policy of boosting growth through lower interest rates no longer applies.
His thesis has gained traction in recent times with global indicators predicting a slowdown across advanced economies over the next two years.
While in favour of using more expansionary fiscal policy in a period of historically low interest rates, he is strongly critical of so-called deficit-friendly “Modern Monetary Theory”, a doctrine which suggests governments,who can borrow in their own currency, should print money to fund increased spending.
“Is it the case that you don’t need to calculate the budget deficit, don’t need to think about the budget deficit and you can spend as much as you want, because it’s impossible, as long as you borrow in your own currency, to default,” he said.
“The economic history of Argentina establishes definitively the absurdity of that proposition,” he said.