December 12’s U.K. election is essentially a referendum on Brexit, with much of the population fearing its outcome. The post-Brexit future is unclear. However, we can say more about the past than the future, even a past depending on an event that did not happen, since most other variables are known. Hence it is worthwhile to look at the potential trajectory for Britain since 1963, had it taken “No” for an answer after President Charles de Gaulle’s veto of Britain’s entry to the Common Market. The exercise is strangely reassuring.

De Gaulle’s veto message on January 14, 1963 was perfectly clear and succinct as to why Britain was a poor fit within the future EU: “England in effect is insular, she is maritime, she is linked through her exchanges, her markets, her supply lines to the most diverse and often the most distant countries; she pursues essentially industrial and commercial activities, and only slight agricultural ones. She has in all her doings very marked and very original habits and traditions. In short, the nature, the structure, the very situation (conjuncture) that are England’s differ profoundly from those of the continentals.”

I really could not have put it better myself. The folly beggars belief of Britain’s Lilliputian statesmen Harold Macmillan, Harold Wilson and Edward Heath in completely ignoring de Gaulle’s wise words and battering at the EU’s portals until, ten years later, Britain was allowed in to a European Union in which she was from the start an extremely awkward fit. It is now abundantly clear that de Gaulle was wiser than any of them, with a much firmer grasp of Britain’s underlying economic, political and cultural realities.

In January 1963, Britain had nearly completed Macmillan’s program of de-colonization, an enterprise to which he brought the same haste and lack of quality control that he did to the council house building program when he was Housing Minister in 1951-55. Thus, many otherwise viable African countries were landed with Marxist autocracies representative only of the tiny slice of the local elite who had absorbed their foolish politics and even more foolish economic principles at the London School of Economics. In real life, this was to lead to a 40-year period of African decline and misery, which only began to turn around after 2000, when a new generation of African leaders succeeded the failed Marxist kleptocrats.

Outside Africa, Britain still had excellent trading relationships on preferential terms with its ex-colonies, not only the settlement colonies of Canada, Australia and New Zealand, but also the more recently independent countries of India, Pakistan, Malaysia and Singapore, as well as continuing colonial and semi-colonial relationships in the Middle East. Much of Britain’s food and raw materials came from Canada, Australia and New Zealand at prices very much lower than those available in continental Europe, without a major resource base and wedded to expensive and inefficient agriculture.

To consider what would have happened to a Britain that rejected the EU in 1963, we must first consider the quality of British government at that time. Until 1979, Britain was governed by a socialist “postwar consensus” that condemned the country to economic decline and spiraling inflation. It is not therefore realistic to postulate a Britain engaging in a Singapore-like bonfire of controls and take-off into economic growth, even though that possibility would have been available.

There was however one constraint on the economy whose removal had been postulated only a decade before and rejected at that time by the narrowest of margins. Britain’s fixed dollar exchange rate, set by the Bretton Woods Agreement of 1944, was a constraint on faster economic growth throughout the 1950s and 1960s. Every time growth began to accelerate, Britain’s balance of payments swung into deficit and the government had to slam on the brakes.

The problem was partly one of Britain’s overseas commitments and its domestic expenditure on welfare and the National Health Service. With a fixed dollar parity, Britain’s balance of payments was never sufficiently robust to allow the faster growth that would have allowed Britain to finance its commitments easily. Britain’s competitors, without such a huge burden of debt, welfare and health costs, were at that time enjoying much faster growth. In addition, the fixed exchange rate forced Britain to maintain tight exchange controls, both a monstrous affront to freedom in peacetime and imposing a massive additional cost on domestic companies and institutional investors.

The Treasury had come up with a recommendation to float the pound as early as 1952, which had been supported by Rab Butler as Chancellor of the Exchequer, but it had been defeated by the leftist anti-market coalition of Winston Churchill, Anthony Eden and Macmillan. While Britain was begging to enter the EU, leaving the Bretton Woods arrangement was politically impossible, because it would have infuriated the continental powers, especially Germany. However, if Britain had abandoned the goal of EU entry, then once Macmillan resigned in October 1963 and was succeeded by the more free-market Alec Douglas-Home, an opportunity for Bretton Woods liberation would have presented itself. Home was mocked at the time for using matchsticks to help him understand economics; since other politicians used Keynesian professors for this, he was at a considerable advantage over them.

In October 1963 Reginald Maudling as Chancellor of the Exchequer was already pushing the British economy onto a growth trajectory. For both Home and Maudling an abandonment of Bretton Woods, abolition of exchange controls and re-orientation of Britain’s tariff structure towards its past trading partners in the Commonwealth and its future trading partners worldwide, would have been an attractive “go for growth” alternative to Bretton Woods stagnation in the year before the 1964 election. They would have been strongly supported by Lord Cromer, Governor of the Bank of England, who favored abandoning Bretton Woods. Since this policy would have caused the pound to fall, perhaps to around the $2.40 to which it was to be devalued three years later, the change is unlikely to have won Home the October 1964 election, which in real life he narrowly lost, but it would have given Britain the opportunity for a faster growth trajectory thereafter.

Harold Wilson, who won in October 1964, was himself a considerable professional economist of the Keynesian variety, and a believer in economic planning. However, he won election by promising a “white heat of the technological revolution” and was smart enough to see that the departure from Bretton Woods had freed the economy from the otherwise inevitable balance-of-payments-driven stagnation. Hence, he would not have reversed the Home/Maudling reforms. His National Plan of 1965 would not only have promised a 4% economic growth rate, but would actually have achieved it, although by the latter years of Wilson’s term his government’s overspending would doubtless have led to a surge in inflation. On the other hand, the 1968-70 retreat from “East of Suez,” abandoning political and trading links in fast-growing Asian markets, would have been unnecessary.

The Conservative election victory of 1970 might still have occurred, but it would not have been led by Edward Heath, since an un-discredited Maudling would have beaten him in the 1965 Tory leadership election. Hence there would have been no return to the EU, and a genuinely expansive policy after 1970. Maudling would however still have been forced to resign in 1972 because of the Poulson affair; he would probably have been replaced by Willie Whitelaw.

Without the frantic monetary expansion of 1970-73 and Heath’s ineptitude in negotiating with the miners, Wilson’s return in 1974-75 would have been less traumatic, and accompanied only by the mild recession inevitable after the 1973 Arab oil embargo. The British economy by this stage would have been gaining major additional strength from its worldwide links, and there would have been no financial crisis of 1973-74 forcing another retreat from world markets. Jim Slater, with powerful operations in Asia, would have remained Britain’s leading entrepreneur, becoming the country’s richest billionaire instead of an author of children’s books.

Margaret Thatcher would still have become prime minister, probably rather later than in our world, after Whitelaw’s retirement. However, with Britain’s economy already strong her role would have been more limited, streamlining and modernizing an economy that was already becoming more Singaporean, albeit with a high-end manufacturing capability that it never lost. Britain would today be the major Western economy most oriented to global trade and finance (which naturally go together), probably around a quarter richer than it is currently, and with the countries of the current EU representing only a quarter of its international business.

Without Britain, the EU’s trajectory would also have been different. There would have been no Margaret Thatcher in the 1980s, forcing it to make limited moves towards an open Single Market. Thus, Europe’s slow growth period after 1973 would have seen a sharp increase in protectionism and national regulation. At the same time, the central impetus towards “ever closer union” would have remained, so something like the 1992 Maastricht Treaty would have been signed and the euro would probably have come into existence.

The main difference to the EU’s trajectory would have occurred after 1990. Without Britain pushing the EU to expand to Eastern Europe, and with growth constrained by the lack of a true Single Market, only East Germany, absorbed by West Germany, would have entered the EU from Eastern Europe (the earlier Iberian, Scandinavian and Austrian expansions would have presented less of a problem to existing members and special interests.) Consequently, the EU would have lacked the faster growth, free market environments and entrepreneurship of its East European members. Even today, those members provide most of the EU’s economic growth, so without them it would have entered outright economic decline after 2010.

East European countries’ fates would also have been less happy. Without access to major Western markets, finance and technology, their economic trajectories would have resembled that of Ukraine in our world. By this stage, however, Britain with its strong economy might well be offering them membership in a Britain-centered free trade zone, brightening their long-term prospects considerably.

Had it respected De Gaulle’s 1963 veto, Britain could have carved out a prosperous position as one of the world’s most successful large economies, with a unique portfolio of global capabilities. To achieve that, good economic policy (abandoning Bretton Woods) would have been necessary to set it on the right path. While Britain through EU membership gave away much of its unique portfolio of global linkages, it should still be possible to rebuild them over time. Again, however, sound initial free-market-oriented policy will be the essential key.

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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.)