A demonstrator for the "Leave" campaign holds a placard outside Houses of Parliament in London, U.K.Luke MacGregor/Bloomberg
It could be two years of recession, perhaps three, if Britain leaves the European Union. That was the reckoning of the fortysomething woman I encountered while canvassing for the referendum on our local high street in London. Then came the bombshell: "We would just have to stick it out because it would be worth it in the long run."
Brexit supporters are a minority in London, especially among middle-class professionals. My interlocutor said she worked for a hedge fund – the hedgies are an even smaller minority as the vast bulk of the banking, insurance and finance industry are solidly supportive of remaining in the EU. City workers know that Frankfurt and Paris are desperate to repatriate the euro currency and sovereign bond trading captured by London's banks. Once outside of the EU, London could be stripped of its entitlement to clear euro trades while Amsterdam and Dublin would delight in carving bits out of the City's fat but unprotected belly.
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The hedge fund managers couldn't care a fig about that; they just hate the European Commission, which views the hedgies as irresponsible pirates on the financial high seas who need to be brought to book with rules and regulations.
Curiously, the hedge fund managers see themselves in the same light. Their vision is libertarian – Britain as a lone, deregulated and opportunistic trader, seizing the advantage to make money in the world's far corners and devil take the hindmost. A similar dream inspires the Brexit leaders, including Boris Johnson, the former London mayor, and Nigel Farage, the UKIP leader who was once a metals trader.
It's a romantic idea of England returned to something like the 16th century; a world of unfettered adventure where privateers with letters of marque from the Queen would grab the gold from the dastardly French and Spaniards. Perhaps unsurprisingly, the Brexiteers don't talk much about what a deregulated libertarian Britain would look like. Such a world would probably frighten their many supporters among the unemployed, the elderly, the low-skilled and the poorly educated who just complain that Europeans are taking their jobs. The Brexit reality of a low-tax, low public-spending economy that rewarded only the fit and the risk-takers would be a terrible shock.
For anyone who still finds that vision compelling, the reality would probably be less entrancing. Instead of a new Elizabethan age, leaving the EU would likely usher in a lengthy period of stagnation, similar to the 1970s: low investment, a weak pound, poor competitiveness and high unemployment. There is even the outside chance of a currency crisis and the return of inflation and higher interest rates.
Too young to have known impoverished Britain in the 1970s, my female hedge fund Brexiteer doesn't understand that it is mainly because of the EU that Britain is prosperous today (and has such a successful financial sector). Margaret Thatcher avidly campaigned to join its precursor, the European Economic Community, notoriously sporting a hideous sweater with the nine national flags. But it was what followed that really mattered; a whirlwind of competition from Britain's neighbours in Europe that swept away huge swaths of inefficient British industry. Today, who remembers British Leyland or Imperial Chemical Industries (later ICI), businesses that traded with former colonies of the British Empire, their markets protected by tariffs.
Most people remember the late Lady Thatcher's battles with trade unions. She is widely hated by the Left for ripping the rug from under the unions but her really dramatic reform was not to labour but to capital. In supporting the Common Market, she exposed British business to an existential threat from more efficient competitors, notably the German and French industrial titans. An entire generation of business owners were financially destroyed, mill-owning families who had become indolent rentiers were wiped out in a great capitalist storm. The venerable ICI, once known as the bellwether of British industry, could not match the efficiency of a BASF, a Bayer or Hoechst; nor could Leyland put up even a token struggle against Volkswagen or Peugeot.
Even the City of London was not spared the hurricane: Famous merchant banks and broking houses threw in the towel, selling the family silver to German, French and American banks. And, of course, it was a good thing, opening the door. Capital flooded in and the country was transformed in the space of a decade, a small island that once made a living dumping shoddy goods on colonial dependents was forced to adapt to a market of almost 500 million. And it did succeed, growing faster than its European rivals.
Britain cannot go back to that fantasy world of a trading island empire. If the late Lady Thatcher taught any lesson, it was that shutting the door on foreigners and protecting your own is a strategy for losers. Isolation and protectionism may not be what the hedge fund Brexiteers have in mind but, unfortunately, protection is exactly what the millions of their supporters believe they have been promised. When they begin to understand that they have been betrayed, their rage will be terrible.
Carl Mortished is a Canadian financial journalist based in London.