EU referendum: the invisible revolution

Richard North

Note by Sean Gabb Richard says: “The way we are governed has undergone a revolution – an invisible revolution.” This is a depressingly true observation. Getting us out of the current mess we are in will take more than a rearrangement of the bottoms on seats in Parliament. We need to consider something like a (non-violent) revolution, in which we shall spend many years under regulatory siege by the rest of the world. I suspect Richard is not that unhappy with much of the regulation we now suffer. His main wish is that we should leave the EU and move one step up the chain of authority, so we can have more direct influence. What we can learn from him, I suggest, is the enormity of what needs to be done to make this country free again, and how little intellectual preparation the well-funded policy institutes have made for this. SIG

EU referendum: the invisible revolution

The FUD continues unabated, as the Guardian reports that HSBC, Britain’s biggest bank, has issued “a stark warning about the economic risks of the UK pulling out of the European Union”, citing the economic uncertainty created by the risk of the UK going alone.

This comes as the bank has revealed it was threatening to move its headquarters out of London to another country, a threat that has not impressed Mark Gilbert of Bloomberg.

Writes Gilbert, there’s a saying used to call the bluff of someone who threatens to flounce out of the room during an argument: “Don’t let the door hit your backside on the way out”. That sums up, he says, how the UK should react to the bank’s threat to move its headquarters to a different country.

The real issue, we also learn from Gilbert, is nothing to do with the EU, but the increased bank levy. And threatening to leave in a fit of pique every time there’s a threat of increased regulation or a nudge in taxation smacks of teenagers threatening to run away from home because a curfew is too early or household chores are too tedious. HSBC is becoming a bore by regularly trying to blackmail the Treasury.

But, in terms of using blackmail, the Guardian and other media outlets which are running the EU meme are every bit as guilty, exploiting public ignorance and fear, to sell a false bill of goods.

The point that the likes of HSBC and their media fellow travellers choose to obscure is that the banking industry is global and so, increasingly, is its regulation. In fact, there has been what has been described as a “Cambrian explosion” in international regulatory co-operation which has transformed the regulatory environment.

Conveniently, the extent of this transformation has been charted by the OECD and by researcher from Arizona State University. And in their documents we see this helpful chart (below) which sets out the structure of global financial regulation.

Readers will observe the focal position of the Financial Stability Board (FSB) and the remarkable number of organisations that make rules, set standards and co-ordinate regulation within this crucial field. But they will also note the relatively inconsequential position of the EU, which is a downstream organisation when it comes to framing regulation.

But this is all part of a much bigger picture, which goes under the classification International Regulatory Co-operation (IRC), as charted by the OECD.

Not only has it recorded a staggering proliferation of organisations involved, the OECD has identified eleven “mechanisms” of IRC, ranging from the formal and comprehensive to the informal and partial.

These run to harmonisation through rule-making by supranational or joint institutions such as the EU, treaties between states, regulatory “umbrella” partnerships such as the Canada-US Regulatory Cooperation Council, and intergovernmental organisations such as the ILO, OECD and WTO.

The territory also includes regional agreements on regulation such as APEC and UNECE, mutual recognition agreements, transgovernmental networks such as the Basel Committee on Banking Supervision, national requirements to consider international standards, incorporation of international standards in national law, soft law instruments and dialogue/information exchange among regulators and stakeholders (see diagram below).

The UK government is fully involved, as is the US government, where IRC is subject to a Presidential Executive Order, with action directed through the Office of Management and Budget. And it drives trade relations between the US and Canada.

Yet, while writ of IRC is dominating the global regulatory environment, it is almost completely invisible to the media, to most politicians and commentators. This means that most of what we are told is superficial to the point of misleading. The way we are governed has undergone a revolution – an invisible revolution – and the media is not even close to putting us in the picture.