Like most economists, I’m minded to oppose Brexit. This isn’t because I’m an admirer of the EU: it is an unlovely institution. I’m as unmoved by appeals to European ideals as I am by talk of sovereignty or British national identity. Instead, for me, this is merely a pocket-book issue – are we better off in or out? – and I’m unconvinced by the outers’ case.
If it could be shown convincingly that leaving the EU would lead to us being an open, free-trading country I’d be tempted. But I doubt this is the case. I doubt we’d get good free trade treaties, especially as these will be negotiated by men lacking competence or goodwill. More likely, as Paul says, such treaties will be distorted by lobbyists and special interests, so we’d end up with something worse than TTIP. Granted, free trade with the EU would be in everyone’s interests: but a glance at the euro zone’s macroeconomic policy suffices to show that the EU cannot be relied upon to act in its citizens’ interests.
But even if I’m wrong, the journey to being a liberal free-trading nation will be a choppy one. As Michael Emerson says, Brexit is “a very messy prospect, with years and years of negotiation lying ahead in a climate of uncertainty over the outcome”. Such uncertainty could dampen capital spending and investment in exporting activity sufficiently to offset for a very long time the benefits of freer trade – especially as those benefits will themselves take years to be reaped.
I agree with the outers that being in the EU ties us to a sclerotic and dysfunctional economy. Carl is right to deplore the EU’s fetish with austerity, and Andrew is right to say that there are risks to staying in. But I interpret these arguments differently. We are tied to the European economy not by mutable political agreements but by brute geography; all countries trade a lot with their near-neighbours. Even outside the EU, we would be vulnerable to its economic mismanagement. (I’m tempted to add that, in the EU, we have a chance of mitigating that mismanagement, but I fear this would be too optimistic.)
So far, I’ve assumed that the case for leaving is that it would be a step towards an open forward-looking economy. But I fear that this is not what many outers want. Let’s face it: at least some of them are reactionary bigots who see withdrawal from the EU as a means of imposing tougher immigration controls. Even leaving aside their illiberalism, these would probably be bad for the economy.
Similarly, Michael Gove’s hope that any government money saved by Brexit could be invested in science and technology seems to me naïve. For one thing, insofar as Brexit depresses GDP it would reduce tax revenue, which folk like him would regard as a reason to cut spending. And for another, I fear it’s more likely that, if there is a windfall, it would be used for tax cuts for the better off. Net, science funding might be jeopardized by Brexit.
I know I should dissociate the case for Brexit from some of the deeply unattractive personalities who support it – but I’m struggling to do so.
In saying this, I don’t mean to say that Brexit would be disastrous. It wouldn’t be. Even on the harshest calculations, it would probably cost less than austerity has cost us, and the immediate costs of heightened uncertainty could be offset by looser fiscal policy. On the spectrum from Neil Woodford’s view that the economic argument about Brexit is “completely bogus” to Cameron’s claim that Brexit would be the “gamble of the century”, I’m closer to Woodford. Our relationship with the EU is a big issue in the media because of the psychiatry of the Tory party, not because the economic stakes are large.
This raises the question: what might change my mind?
If it could be shown that EU membership were a binding constraint against liberal socialistic wealth-enhancing policies such as a citizens income, worker democracy or non-cretinous macroeconomic policy, I’d favour Brexit. For now, however, the obstacles to these policies are to be found nearer home.