What does Brexit mean for the global economy? A question-and-answer session with Edward Price.


Edward Price benefited from a privileged perspective on major changes in the global economy. He was Britain’s man on Wall Street from the official start of the UK exit process in 2017 until his final departure from the European Union earlier this year. As a commercial officer at the consulate in New York, his job was to answer questions from hedge funds, banks and asset managers and relay that information to London. This position has placed him at the heart of the flow of information around one of the great drivers of global uncertainty.

Price resigned in March and agreed to report on his experience. The transcript of his interview has been condensed and edited for clarity.

Barrons: How did we get the specific Brexit that we have, which, especially in terms of financial servicesleft a lot of unresolved issues?

Edward Award: If you want to explain Brexit, you have to realize that there are at least two different ideas within the idea of ​​free trade. You can have an economy where economic size and jurisdictional size are the same. This seems to be the approach of the European Union. Or you can have an approach where jurisdictional size and economic size are not the same. And that’s the UK approach.

One could say that the development of The four freedoms of the EU– things that the Anglo-Saxon public would simply describe as markets – have, over time, emphasized the movement of people and goods rather than capital and services. If you look at the national specialties of the UK, it was the export of capital and services, and those are invisible.

What I’m trying to say here, politely, is that when the EU integrated, it focused on goods and the free movement of people, and it didn’t necessarily spend so many time to develop capital and services, and you can see that today. When we went to the referendum [in the U.K. in 2016], of course, aspects of the British political class and labor market have also taken notice. The visible aspects of European integration did not necessarily reflect what the British were doing.

Do you expect Europe to continue pushing in this direction now that the UK is out?

We wonder how the European Union is going to meet the number one challenge it faces, namely complete the euro. This means a kind of fiscal union and the completion of the banking union. And that means developing pan-European capital markets. To me, all of this suggests that the end game for Europe is an open financial system. But there is also a tradition of civil law in Europe. And by the way, they are rightly wary of post-crisis financial markets. So I think people in the United States will be watching closely for top-down legislation and onerous regulation. But personally, I think the eurozone will succeed.

Where else will the UK and EU diverge?

Much depends on your definition of financial stability. One definition seems to be that we will allow the financial system to go through a natural up cycle, even if later there is a crisis.

As far as I know, the European mindset has more interest in defining financial stability as the avoidance of crises, which makes sense. The euro crisis is still a fresh memory. But that mindset doesn’t necessarily lend itself to developing markets of depth and size because inherently you need to allow more of the unknown to happen for more risk to happen, to take more risk if you want this kind of financial system to develop. It’s kind of a puzzle.

If you want to complement the euro, which is a good thing, at some point you have to accept a little more market risk.

Does that mean we shouldn’t worry about economic instability?

Most of the time, overt worries about international economic instability are unnecessary or even a waste of time, because in a free market we don’t really seek predictability. What we want is for supply to be free to make mistakes, misallocate or overproduce. In a free society, this requires an element of ambiguity and uncertainty, and the production of asymmetric and imperfect information.

Economic theory deplores all of these things, especially asymmetric information. But that’s the heart of the market. I mean, you could of course look at the international economy today and say it’s a bit confusing. There seems to be choppy and shifting between policy from administration to administration. But I’m a little more optimistic than that. I think most of the time it’s just part of the organic process.

There seems to be some sort of idea that policy makers or government in general can snap their fingers and things can happen. I’m afraid that’s not how it works. There is always a part of improvisation. There is always an element of work in the dark. You just have to refer to your best instincts and be largely guided by what you define as the public good.

What I mean is that a free market and a free society don’t just deal well with uncertainty, they exploit it and encourage it when they do well.

As someone who has been involved in a key part of international economic policy-making over the past four years, what interests do you think the policy serves?

As economic policymakers, we promised three things after World War II: economic growth, stability, and some degree of internationalization. If you ask who makes international trade policy, most of the time it’s dead people. Their wisdom is being tested in real time today – the idea that if you create an integrated and growing global economy, you will avoid conflict.

I don’t know whether Bretton Woods and its successor systems avoided the worst-case scenarios or not. I think the problem is that, whatever the horizon, growth and stability end up opposing each other.

Thanks, Ed.

Write to Matt Peterson at matt.peterson@dowjones.com


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