Shorties-21

End of the Rope

The EU is unnecessary, there are better and less divisive ways to build a collaborative Continent (ref. Europe versus EU). It is also malign, just try leaving it.

BeneficiariesThere are beneficiaries of course, or it wouldn’t continue; they receive salaries, expenses, pensions, subsidies, favours or protection (for their products or jobs) which the rest of us pay for in one way or another. There are plenty who are willing to believe that a degree of compulsion (autocracy) is needed to get things done; some countries are accustomed to this and it has become culturally acceptable, Britain is not one of them which is why it is the first to break ranks though it is unlikely to be the last. There are also those who see the problems but believe they can be fixed from within but it’s unlikely to change until it’s too late.

The French used to enjoy running the show or at least sharing the lead with the Germans, it was largely modelled on their style of government and administration (perhaps that’s why they still have so many mini-revolutions). That lead is diminishing, they can’t keep up with their powerful neighbours who aren’t keen to join them in leading the EU into closer financial union given the state of the French economy. It’s been in violation of the Growth and Stability rules by running a deficit for a decade above the 3% of GDP maximum permitted and Macron’s concessions to the Yellow Gilets’ revolt will push it higher, higher than Italy’s proposed budget under its disobedient, popular government – sorry, populist.

Crashing outThe Greeks are going to need a fourth bailout to avoid “crashing out” of the eurozone (which would help them escape their never-ending recession). The Italians too are on the brink of a similar but far larger crisis. Meanwhile the Germans are working to send them both products they are ‘paying’ for with credit notes that can never be redeemed (ref. Italy Missing the Target), they’re going to be upset when they realise this so expect the ‘populist’ party Alternative for Germany to gather a lot more support.

Any debt forgiveness (which is unlikely anyway given the scale required) would encourage the Portuguese to ask for similar consideration, and so on. The ECB Governor, Mario Draghi, may try to continue doing “whatever it takes” but the Germans will stop him at some point. He is already reaching the end of the rope he was given now that QE has formally ended, he’ll be told to get knotted if he tries to continue. Germany and it’s wealthier neighbours in the North will not keep paying to bail out the suffering South but this is a terrible time to tighten financial policy, with growth in Germany, France, Italy and others low or on the edge of recession and the world economy slowing too.

The UK is doing remarkably well by comparison – high wage increases, high employment and tolerable growth – but cannot escape the maelstrom when it comes. It might have helped if we had already dug a wider channel separating our economy from the EU’s.

Unrepresentative Democracy

House of CommonsThe majority of UK voters’ representatives don’t represent what the majority of their voters want with regard to the EU. Although the Referendum was not organised around constituencies, estimates of the proportion of seats that would have been taken by Leave and Remain MPs is about 2:1; adjusted by the 2017 general election result it would still yield a good majority for Leave in the House, if MPs respected their citizens wishes.

MPs have always had the right to make up their minds about issues of the day, to do what they think is right on behalf of those who elected them; if they are wrong they stand to lose support at the next election. However, if they stand on an unambiguous promise they should stick by it or stand again at a by-election. Labour and Conservatives were elected on manifesto promises to leave the EU, including the Customs Union and Single Market – obviously they didn’t mean it.

How ‘European’ we’ve become: reversing referendums, taking orders from above, binding future administrations to a path they may not endorse – unless they abrogate an international treaty and damage Britain’s reputation for upholding the law.

On The Level

In economics there is little difference between a ‘level playing field’ and a monopoly, or rather an oligopoly. They all result in less innovation due to complacency – upstarts are discriminated against and discouraged. Supply is controlled, demand suffers and therefore growth is slowed; this can be demonstrated by the EU’s example.

In our home economy we like competition when it leads to keener prices or better service. The mobile phone market is an example but broadband is less so with BT Openreach as the main supplier that sets a base cost and service level with little room for flexibility on top. Economic competition between nations can also benefit consumers and even workers on the whole, though protected industries can hang on to less productive jobs for a while. Ireland’s development away from agricultural poverty was greatly helped by tax competition (as was Singapore’s) but that’s likely to end, which could make Varadkar look silly for so aggressively siding with the EU over Brexit for political reasons.

Barnier-noThe EU is worried the UK will become a low-tax and low-regulation haven. (Michel Barnier, July 2018 following the Chequers proposals): “If autonomous British trade independence is feasible how can we allow that? How can we allow UK companies to have a significant competitive edge against EU companies? These are the sorts of questions I put to the UK delegation yesterday.

Competition between governments is an engine of progress because it favours trial and error. You can’t argue with results, even if you can’t always explain them with theory.

 


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