What might Adam Smith think?

The Adam Smith Institute has a detailed review of the EU, and the case for leaving, here.


The author, Roland Smith (no relation?), dislikes the cases made by both the Leave and the Remain campaigns. He offers “a liberal case for Leave”, which is sufficiently general to be applied to any member state.

In mapping out where this country should go to, one should first consider where it came from and why. We are, after all, a member of the EU so one might ask the question: If it was so awful, why did we join in the first place and why is there still a significant lobby supporting it?”

He goes into the history of Britain joining the EU at a time when “nagging economic problems were coming to a head”. He then offers a short and idiosyncratic ramble over the history, claiming that issues and attitudes have been turned upside down:

That narrative has largely stuck ever since: Of Pro-EU people being more enlightened, younger, more liberal and largely more educated than their anti-EU counterparts. That’s despite some very dramatic changes that have subsequently happened in the EU and in the world, sometimes behind the scenes. It is the contention of this paper that the backdrop has changed so markedly that those old assumptions have been turned on their heads.”

He gives us a chart showing that the global share of GDP attributable to the EU has fallen from about 31% in 1960 to 16% in 2010. A second chart shows how trade tariffs have fallen on average across the world from about 14% in the mid-1960s to about 4% today. This results from agreements reached under the GATT and its successor the WTO. (The image is not from the article but from the IMF: it shows the same figures.) 


He then quotes a paper from the Institute of Economic Affairs:

Now suppose trade barriers are reduced. This shifts the equilibrium: it is now possible for people to be part of the same economic area, without having to be part of the same political entity. They are able to trade with one another without having to agree on politics. This means the economic benefits of large markets can now be reaped without incurring the political cost of heterogeneity. Consequently, the optimal size of a political entity falls.

This is an exact reversal of the conventional rationale for EU-federalism, which holds that globalisation makes larger political entities necessary. Au contraire: it is the very globalisation that makes smaller political entities viable.”

His interpretation of these events leads him to challeeu-ideologynge the political nature of the EU Project:

Unseen and barely discussed in the 1990s, globalisation was beginning to eat into the logic of a political European Union at the very point it was striding towards statehood with a single euro currency.

Looking back, the EU was (and is) an old ideology in a hurry.”

He argues that the European single market is being overtaken by globalisation.

A large and growing body of single market law is now made at global level and handed down to the EU which in turn hands it down to the member states.”

At the global level, regulations are made on a consensus basis and sometimes involve other non-state actors and NGOs. It is not done by crude majority voting. The final agreements then percolate into national (non-EU) law and also into EU Directives and regulations.”

The EU is therefore increasingly becoming a pointless middleman as a vast new global single market takes over.”

A brief discussion of Norway’s position, via the EEA, follows and the author argues that Norway sits at global top tables while “the UK is effectively neutered on many global bodies courtesy of the EU’s common position.”

He has an optimistic take on Brexit:

We would likely first move to a single market position outside the EU using the EEA framework as a model. In other words, still in economic union but not in political union. That would create a trade-based counterweight to the EU in Europe and may well draw other EU member states out to that position. The journey would continue from there, ending in a position as a regional player in the global single market, leveraging our historic connections around the world.”

The article was written before the referendum (in March 2016) but largely focuses on the consequences of a Leave vote:

one-size-fits-allSo there is an inevitability about all this. The issue is not going to go away, even if the UK votes to remain in the EU in June. The forces of globalisation alongside the EU’s
internal issues born from its “one-size-fits-all” mentality mean the stresses in the EU-UK relationship will only increase. It may become a simple case of leave now or leave later. But leaving later just defers the inevitable and may well be worse when it comes

The author reviews the issue of immigration, largely in the context of globalisation:

“…if one accepts increasing globalisation, one must accept the corollary of a high degree of migration. And manage it. If we as country regain the power to decide these matters, we can at least start having a grown-up debate about it which would be a major advance on where we are now. Immigration has brought great benefits to this country, but that is one side of an argument and a decision that should be openly debated by the people of this country, without the fact of EU membership infantilising the debate by prohibiting a large part of that decision.”

And he leaves us, before the vote, with a fundamental contrast:

The crux of the matter is that we in Britain want trade and cooperation; our EU partners want merger and a leashed hinterland. Are we prepared to spend another generation or more dancing around this basic fact while the rest of the world moves on?”


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