Almost three months have passed since the brave British voters voted for an exit from the European Union, yet Britain is no closer to actually exiting. Civil servants have been hired, but no firm timetable has been set for delivering an “Article 50” notice to the EU. Now Britain’s major foreign investors are demanding that Britain execute a “soft” EU exit, changing very little. With the permanent bureaucracy almost uniformly having voted “Remain” the chances of British voters getting stiffed are rising. Economically as well as politically, that would be a great pity.

One of the valid criticisms of the Brexit campaign led by Boris Johnson, Michael Gove and Nigel Farage was that it was amateurish, and had no solid strategy for what to do if the voters ruled in its favor. In retrospect, that seems a fair criticism, even though the Brexit campaigners probably did not expect to win. The shambles between Johnson and Gove in the week after the vote, when Gove’s wife played Lady Macbeth seeking to undermine Johnson, resulting in both of them losing out to Theresa May, would make a Shakespeare play – but a knockabout comedy, not a tragedy, such was the ineptitude displayed.

Nevertheless, the result was that even after May emerged as the new Prime Minister, nobody had a clear idea of what a British exit from the EU would entail. May reassured Brexit voters that “Brexit means Brexit” but since nobody had properly defined that term in the first place, we were not much the wiser.

At one extreme, the City of London and Japanese and U.S. foreign investors in Britain want a minimalist Brexit. The City of London worries that some of its functions, such as being the center of euro-denominated FX trading, would be lost if Britain undertook any more than a minimal exit from the EU. The “passport” by which City institutions can do domestic business in other EU countries is also at risk, although the reality is that the City has never figured out how to do such business and make any money at it — EU domestic markets are too competitive and City market shares in foreign markets are too small.

As for foreign investors, they came to Britain as the easiest and least protectionist and xenophobic place to do business in the EU, through which they could sell throughout the EU without tariffs and excessive paperwork. The idea that British manufacturing standards might not be accepted by the EU, or that tariffs, even modest ones, might be imposed fills them with horror.

There is thus a real risk of a minimalist Brexit being implemented, something like the Norway position but even more tied into the EU. Britain would still be subject to all the EU rules and regulations, and would still pay a full contribution into the bottomless maw of the EU budget. In return, the EU would allow continued access to the single market, but since Britain would have no EU Commissioners, it would be unable to avoid a steady erosion of its access, as “passport” rights in financial services would be restricted, and Euro trading was over time shifted to Paris or Frankfurt.

In this situation, Britain would also have to retain full access for EU residents. The problem here is not the Poles, Bulgarians and Romanians – most of those who want to do so have already settled in the U.K. and by and large are playing an increasingly positive role in British life and its economy. There is little cultural problem with immigrants from Eastern Europe, and they are unlikely to form terrorist cells, except for money (Bulgarians in particular are remarkably commercial and hard-headed in what they will undertake for cold cash.)

However, the EU has proved itself unable to control its borders, and Germany has proved unable to get rid of Mrs. Merkel, who has made the refugee/potential terrorist problem much worse. Like it or not, this was undoubtedly a major factor in the Brexit vote, and the voters’ wishes need to be respected. Hence the “Norway plus” solution does not work politically. I will argue that it is also suboptimal economically.

There is no question that many of the elite “Remain” voters fantasize about holding a second referendum, so that the allegedly stupid and racist British voters can reverse their foolish decision. This is the kind of thinking, common in the EU bureaucracy, which caused the results of two referenda on EU treaties to be ignored. It was also the thinking behind John Major’s decision not to give the British people a vote on the Maastricht Treaty of 1992, which fundamentally changed the nature of the EU from a single market to which British voters had agreed in 1975 into a super-state leviathan which was clearly contrary to British interests and the wish of its people.

David Cameron, by giving the British people the Brexit referendum, restored the democracy that Major stole away with his weak and foolish decision in 1992; if for that reason alone Cameron should be respected as among the better British leaders and Major should be reviled forever. Remainers who don’t like what has happened can reflect on the fact that, if Major had held the referendum he should have, the single market would have remained and the super-state would have been consigned into the eternal darkness where it deserved to go.

The problem is that many of the political class, and almost certainly a large majority of the Whitehall mandarins, are Remainers, often fanatic Remainers. They go on holidays to the Continent, they have friends in the EU leviathan, they love European culture and tolerate the public sector arrogance and corruption that goes with it. Hence, if given the chance, they will either produce a minimalist Brexit that fails to satisfy the wishes of the electorate, or worse still, delay the whole process beyond the 2020 election, in the hope that some half-baked coalition of Lib Dems, Scottish Nationalists and the remnants of Labour can abandon it altogether. This must not be allowed to happen; it would destroy British democracy. It would also fail to bring Britain the huge economic advantages from a true Brexit, which gave Britain back its freedom.

Those blessings are twofold (apart from the moderate economic gains from controlling its own borders properly.) First, a true Brexit will allow Britain to negotiate its own trade treaties (the new department Liam Fox is setting up is a complete waste of money if this does not happen.) That is a huge advantage, because Britain is both less protectionist than other EU members and also has a very different economy, which has historically always been oriented to openness with the world as a whole – much of Britain’s capability is in acting as an entrepot, like Singapore.

The EU, on the other hand, with 28 members, many of them protectionist and sheltering low-wage businesses that should not still exist, finds it very difficult to negotiate any kind of trade agreement. The U.S./EU treaty appears to be dead. Canada negotiated an agreement, but is having great difficulty getting it ratified. India has been trying to negotiate an agreement for over a decade, but has made no progress – India is a very awkward trade partner for many of the low-wage manufacturing sectors of southern and eastern Europe, but a very attractive one for the service-strong U.K.

Britain should never have joined the fledgling EU; its skills are much more complementary to the trading partners it already had, in the former Commonwealth. It will benefit hugely from regaining full freedom to negotiate trade deals and align itself with attractive trading partners throughout the world.

The other freedom that Britain needs is from EU regulation. I have suggested in the past that regulation bears much of the blame for the decline in U.S. productivity growth since the 1970s (though not that of the last five years, which owes more to the Fed’s cuckoo monetary policies.) The same is true in Europe, which was always overregulated. A few European regulations, such as the German rules on beer purity dating back to 1516, have enabled quality standards to be used as a marketing tool, but in general they act as a drag on progress, especially as they are drafted with manic enthusiasm to satisfy the protectionist whims of 28 countries.

Britain historically has been a fairly low-regulation country, gaining hugely from deregulation in 1660-1832, although it certainly went too far the other way in the mid-20th Century. However, as Lord Lawson said last weekend in the FT, leaving the EU properly allows Britain to complete the Thatcherite deregulatory project, and reap very substantial economic gains thereby.

The benefits of Brexit will be lost if Britain keeps its current monetary policy, which is damaging productivity, as are similar artificial policies elsewhere in the rich world. However, a government that leaves the EU properly will presumably also have the sense to retire Mark Carney and return to market-driven interest rates and rising productivity. Hopefully it will also keep the pound low and make serious progress on reducing the budget deficit.

With that proviso, a full Brexit has potentially huge economic benefits for Britain, and is what the British people voted for. It should be implemented as quickly as possible.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)
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