Wednesday, June 22, 2016

Britain, the EU and referendums: 1975 & 2016 (Part 1 note)

*  One word I remember from that 1975 Sunday Times article is "post-prandial". This more recent article is very interesting.

Forecasts can be wrong, and those from "experts"(at the IFS & IMF etc.) are reflexively rubbished by the Leave campaign, but hard historic facts are harder to argue with.

Economic Outlook: Britain whistled a happier tune after joining the EU - David Smith, 28 February 2016

While Europe was busy integrating, the world was Britain’s oyster. Where there had once been the Empire, on which the sun never set, now there was the Commonwealth. There was the special relationship with America. There were opportunities well beyond the narrow confines of the EEC.
The world, however, was not enough. Commonwealth countries such as Australia and South Africa, far from being happy to be easy markets for British exports, wanted to develop their own industries and imposed tariff barriers against the mother country. India was heavily protectionist from the time of independence in 1947. As a result of this and other factors, Europe’s grass started to look a lot greener. Britain’s economic performance in the 1950s and 1960s was poor in relation to the EEC pioneers. Germany and France had a lot more catching up to do after the devastation of the Second World War but, even allowing for this, they achieved growth well in excess of Britain’s.

In the years from 1950 to 1973, sometimes known as the golden age of growth, gross domestic product per head rose by an average of 2.4% a year in Britain, 4% in France and 5% in Germany. By 1960, Germany was once again producing more cars than Britain and had secured a bigger share of world trade.

Having sampled life outside the EEC, successive British governments wanted in, and desperately so. After trying a smaller alternative, the European Free Trade Association (EFTA), established in 1960, Britain was rejected for EEC membership in 1963 and 1967 before being finally admitted at the start of 1973. Envy of Europe ran deep. [ .. ]

 The politicians of the 1960s and early 1970s were not daft. Having lagged behind growth in the EEC prior to membership, Britain caught up and then outgrew the original six. Their growth became no longer a cause for envy. Growth rates slowed everywhere after the golden age, but Britain’s relative performance improved. Plainly not all of this was due to being in the EEC. Clearly, some of it was.

Joining the EEC was a considerable economic success, according to a new paper, The Growth Effects of EU Membership for the UK: A Review of the Evidence, by the noted economic historian Professor Nick Crafts of Warwick University. “Membership has raised UK income levels appreciably and by much more than 1970s proponents of EU entry predicted,” he writes. “Joining the EU raised the level of real GDP per person in the UK compared with the alternative of staying in EFTA. The deeper economic integration EU membership entailed increased trade substantially and this had positive effects on income.” His calculations suggest that the positive economic effects of membership have outweighed the cost of Britain’s EU contributions and red tape by a factor of about seven to one.

The world was different in 1973, when Britain joined the EEC, and 1975, when we had a referendum on whether to stay in. Many people who did have a vote in 1975, and some who did not, claim that the country was conned; that we voted to join a common market and ended up with ever closer union, migration and a single currency on our doorstep. It is true that at the time of the 1975 referendum the government chose to emphasise the trade aspects of membership to the exclusion of almost everything else. Freedom of movement and equal treatment of people were part of the Treaty of Rome, though in the 1970s most people expected the flows to be from Britain to the rest of Europe, not the other way around. The TV series Auf Wiedersehn, Pet, first shown in 1983, was about British migrant workers in Germany.

As for the single currency, when Ted Heath began his successful entry negotiations, the EEC was still officially on course for monetary union, the Werner Report of October 1970 having set the target of achieving it by 1980. It took a further two decades for the euro to arrive, but Europe’s intentions were pretty clear.

A stronger point is that Europe has changed in 40 years. No longer do we envy our European partners their growth, although many people I talk to still have a lot of envy for Germany and even France. The world has changed, too, with the rise of China and other emerging economies. Trade is freer, for goods if not yet enough for services. Britain is making great strides in the latter, though: service-sector exports doubled between 2006 and 2014. 

 The question I will address in coming weeks is whether things have changed enough for life to be better outside the EU. Does membership prevent us taking full advantage of the wider world, or is that an escapist fantasy? Germany has been a big success, from within the EU, in selling to the world. Only China and America, with much larger populations, export more.

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