Wednesday, 20 April 2016

'Leave' Has Just Lost its Economic Argument

Michael Gove, who is likely to be the person most responsible for setting the parameters of Britain's negotiation with the EU after a leave vote,  indicated on the BBC Today programme the UK will not stay in the common market. We would seek a free trade agreement like Albania, or Iceland.

This means the risks of #brexit have gone up. The prospects of a risk-free slip into the EEA have gone. We must therefore run the risk of the foreign investors on whom we rely to cover are triple deficit (current account, fiscal and trade) going on strike.

Where this to happen, In order to tempt them back, the Bank of England would need to raise interest rates , which slows growth. The UK may not be a default risk , but as a country with I need for constant inflows of foreign capital we may need to print more money to cover the bills . Investors will therefore need a higher return to compensate for the risk.

This is one mechanism by which leaving the EU could slow growth. There are others. The UK may become a less attractive place for foreign companies to invest. And not just because of access to the single market. For all its faults, the EU has been consistent in its application of laws surrounding state intervention in business and preventing government's interfering too much in markets. Leaving risks that benign business environment.

The risk therefore of a catastrophic cycle of interest rate hikes and currency issues has to be set against the sheer paucity of the potential benefits from leaving the EU . Just what are we hoping to achieve? Why are we risking prosperity in this way?

An honest answer would make use of Gandhi's aphorism " it is better to be governed badly by oneself, than well by other people." If it is simply about democracy, then supporters of brexit will need to be honest about the potential economic costs.

The post EU UK could become the free market prosperous business-friendly place of brexit fantasy, but it could equally become a paranoid insular protectionist hell hole of UKIPpery, or worse yet, the Labour Party could nationalise everything in sight. These are both outcomes European Union protects us from.

The problem is brexit becomes a tabula rasa on to which everyone can paint their own ideal post EU UK . Then arguing against brexit becomes an argument against everything that person holds dear. Many have spent decades seeking confirmation for a prior belief that the EU is behind all the bad things. Nothing can persuade these people that leaving the EU isn't a panacea to solve all the UK's ills. It's a peculiar Mania.

The lesson of the ERM debacle is not that the EU is evil, but that the UK should not have joined the euro, and we didn't. It doesn't follow we should leave the EU too. The EU is not the enemy. The UK is not going to join the euro. EU is not going to Force the UK into a superstate, a European army, or a single currency.

The European Union is a collection of some the freest, most prosperous and happiest democracies on Earth. The Euro project has impoverished half the continent on the altar of political vanity. But that is not the question we are asking in this referendum. We are asking specifically whether the UK should leave the European Union.

What are the benefits of leaving the EU? If they aren't economic, they seem mostly to accrue to politicians who gain greater freedom to interfere in our lives. And what do we the people gain, to offset the probability of a negative economic outcome?

Will we lose the right to live, work and travel at will from Helsinki to Lisbon and from Warsaw to Dublin? Probably not, but it's a risk. Will UK be better off economically speaking speaking? Probably not. That means people will lose jobs.

The risks are real, the benefits seem ephemeral. And very fact that we are having this referendum now means should the EU develop in a way that is an anathema to British interests, for example if  as I am told is "inevitably" going to happen,  the Euro is forced upon the UK, we can always leave another time. The very fact of this referendum undermines fatally the sovereignty argument.

Thankfully the polling seems to indicate the remain campaign is winning.



11 comments:

Anonymous said...

Jackart as usual you're full of shit.

Stuart Rose said post Brexit wages will rise.

Yesterday another pro Eu muppet said food prices will fall.

Just fuck off you disseminating cunt.

Antisthenes said...

It is all assumptions some of which can never be tested because what ever we decide there will not be alternatives to measure their veracity by. Some of course are undeniable sovereignty and self determination will certainly be lost if we remain in. If we remain in we will never know if economically we would have been better off if we had not. Some other assumptions of course we will and my assumption is we will regret our decision to remain in. If we leave then yes we will be able to see if your predictions become true. My assumption has to be that you are believing the wrong set of assumptions so your predictions are wrong. The assumptions we make now none of which are worth a fig can be discounted. So choose which you prefer serfdom or freedom.

Simon Jester said...

In amongst the usual Project Fear drivel, you've inadvertently contradicted one of your favourite talking points, Jackart: the notion that the EU doesn't really control us that much -

"a paranoid insular protectionist hell hole of UKIPpery, or worse yet, the Labour Party could nationalise everything in sight. These are both outcomes European Union protects us from."

Jackart said...

Anonymong at 9:15. Wow. That's me persuaded.
Simon Jester: It doesn't directly control us, but it does make some of the things idiot governments have been wont to do, noticeably subsidy and protectionism, much much harder. This is a good thing. Free trade works, but has rarely been popular.

Dr Evil said...

No economic argument is important. It is a price worth paying regardless for the people to take back control of this country via their democratically elected government. Economic arguments on both sides are irrelevant.

Jackart said...

Yes, Dr Evil, that is what I suspect and I thank you for your honesty. Now if you'd just accept that Brexit will cost everyone some money (because it will), then we can get on with winning the Referendum for remain...

westcoast2 said...

"The European Union is a collection of some the freest, most prosperous and happiest democracies on Earth. The Euro project has impoverished half the continent on the altar of political vanity."

Can you explain this and how the Euro stands apart from the European Union?

My understanding is that any new member of the EU is obliged to use the Euro as are any current non-Euro members. Only the UK and Denmark have opt outs. This would imply that the Euro is the currency of the EU and therefore remaining in the EU is acceptance of this. Is the "political vanity" referred to a design feature with bugs?

The Euro was created following the Maastricht Treaty which also created the basis for the EU. If the Euro project is just 'vanity', are you suggesting an alternative for an EU member without treaty change? This is in essence the Greek question.

Since the Euro was designed to bring financial discipline to EU members, the members and hence the EU itself have failed. This has led to the impoverishment you describe.

Of course the UK has an opt out. However, if we are posing hypotheticals, at some point the convergence criteria outlined in the Maastricht Treaty could be met. There would almost certainly be pressure for the UK to give up the pound at that time.

To divorce the EU, its members and the Euro doesn't seem to reflect the current situation.

Jackart said...

Thanks for your comment, westcoast2. The Euro is distinct from the EU,as UK and Denmark have secured an opt out written into the treaty, Sweden ignores their "obligation" to prepare for accepting the Euro, and few of the other non-Euro EU nations seem that fussed about joining the single currency. If you think the UK could be "forced" into the Euro, you're a paranoid twat, who's fixated on this as a rather feeble post-hoc justification for an emotional desire to leave the EU.

Jackart said...

Thanks for your comment, westcoast2. The Euro is distinct from the EU,as UK and Denmark have secured an opt out written into the treaty, Sweden ignores their "obligation" to prepare for accepting the Euro, and few of the other non-Euro EU nations seem that fussed about joining the single currency. If you think the UK could be "forced" into the Euro, you're a paranoid twat, who's fixated on this as a rather feeble post-hoc justification for an emotional desire to leave the EU.

westcoast2 said...

"If you think the UK could be "forced" into the Euro, you're a paranoid twat, who's fixated on this as a rather feeble post-hoc justification for an emotional desire to leave the EU."

Thank you for your reply. I was asking for your thoughts to help clarify my understanding. I am glad you recognise that I am not a 'Paranoid Twat', since I do not believe, nor suggested, the UK could be "forced" into the Euro.

I am curious though, how is what I have said a post-hoc jusitification to leave? As you have indicated, this is an unresolved on-going situation. I was seeking clarification, from someone who seems to have a strong grasp of the matter, before coming to a conclusion on this particular issue.

Ashley said...

I enjoy reading your blog Jackart, not least because I suspect on most topics aside this referendum (which is slowly driving me nuts, not least the long bloody lead in time. Should have been done and dusted inside 8 weeks, max) we agree on pretty much most things.

But I am curious about your assessment of the EEA option, which is something I am attracted to.

I read online in several sources that since a large part of regulation that comes into being nowadays actually is manifested from multiple global forums and not the EU (which merely serves as a repackaging implementation agency) Brexit actually enhances our influence on matters of trade and commerce.

For example, I understand the Norwegians are nominally excluded from the voting stage of EU single market regs, but are never truly out of the loop and since they actually have a vote and a voice at the global level (something we do not, having the EU represent us) before it filters down to the EU level they are not negatively affected by the supposed idea they have to pay but yet no say. Since they were involved at the very original stage of creation and formulation.

Indeed, many commentators assure readers that a global single market is in process of being built slowly making the EU redundant. In that case, why not vote to leave, take the EEA option, assume our seat as a non-EU nation at many of these global standards bodies and over the medium to long term (2-10 years) negotiate an array of trade arrangements with allies and friends Including the EU?

Seems very sensible to me. It certainly takes a lot of the sting out of Brexit potential downsides and reasserts a UK role at a global level. While of course revitalising our democratic governance at home.

There was an error in this gadget