Britain and Europe.

1. John Rentoul, 13 November 2011,
and Gavyn Davies, Financial Times, 29 November 2011.

In 1983 Bryan Gould and Peter Shore were Eurosceptic Labour politicians.
In 1992 Britain was ejected from the European exchange rate mechanism.
In 1993, with the Maastricht Treaty, John Major secured Britain’s right to opt out of the European Monetary Union.
In 1994 Bryan Gould left British politics and returned to New Zealand.
In 1999 the European Currency Unit, based on fixed amounts of national currencies, became the euro.

2. 22 August 2002,

Before the euro was launched, German policymakers worried that the European Central Bank would hold interest rates too low. The opposite has happened. Interest rates are currently too high for Germany’s economy. Corporate bankruptcies in Germany are higher than they were in the early 1990s. In France they are lower.

3. The Short View. James Mackintosh, Financial Times, 21 January 2011.

European Central Bank interest rate policy is influenced by problems in peripheral European countries.

The German economy has underperformed for two decades. But now Germany has its lowest inflation-adjusted interest rates since 1976, and last year it had its highest economic growth since 1991.

4. Gavin McCrone, The Scotsman, 28 October 2011.

Greece, Italy, Spain, Portugal and Ireland have become increasingly uncompetitive since they joined the European monetary union. They cannot devalue their currency, so have to cut wages and other production costs instead. The UK could have had the same problems if it had joined the Eurozone.

5. Martin Wolf, Financial Times, 7 December 2011,

Problems in the eurozone are more closely related to average current account deficits between 1999 and 2007 than to fiscal deficits or public debt.

Current account: Net flow of goods, services, and unilateral transactions (gifts) between countries.
Fiscal: relating to government finances, esp tax revenues.
Public debt: Issues of debt by governments to compensate for a lack of tax revenues.

6. Financial Times, 26 January 2015, Emiliano Brancaccio and Giuseppe Fontana.

The primary goal of the European Central Bank is price stability. The two per cent inflation target is seen as more important than growth, employment or financial stability.

7. Financial Times, 26 January 2015, Ferdinando Giugliano.

Greece’s public debt is about 175 per cent of gross domestic product. Lorenzo Bini Smaghi, a former executive board member of the European Central Bank, says that this is not important. The debt has a low interest rate and a maturity over 15 years.

8. What was good for Germany in 1953 is good for Greece in 2015.
Larry Elliott, 6 July 2015.

After the 1914-1918 war, the victorious Allied powers demanded heavy reparations from Germany. After the war in the 1940s, Germany received help through the Marshall plan. The granting of debt relief at a London conference in 1953 was more important than direct transfers of money.

Western Europe in the 1950s had debt/GDP ratios close to 200%, but for the new West German state, debt/GDP ratios were less than 20%.

9. Ferdinando Giugliano, Sam Fleming, Claire Jones. Financial Times, 9 November 2015. Data from the IMF.
Since 2007, by purchasing government bonds in “quantitative easing” schemes, central banks have increased their assets by 400 percent in the UK and the US, more than 200 percent in Japan, and more than 100 percent in Europe.

10. Independent (i). 24 June 2016.
Britain votes to leave the European Union. Sterling suffers its sharpest fall since the 2008 financial crisis.

11. Matt Ridley, The Times, 4 July 2016.
. . . despite the entreaties of virtually every authority . . . the government . . . Goldman Sachs . . . President Obama . . . Bob Geldof, more people voted for Brexit than for anything else in the history of British democracy.

12. Alison Marshall, 6 July 2016.
The EU is too big. If all the world became grouped into a few mega-states, there wouldn’t be enough independent experiments looking for better ways of doing things. Cooperation need not be imposed from the top down. See “Imperfection and Cooperation”, in “Evolution of Communication in Perfect and Imperfect Worlds”, .

13. Don’t Panic.
Alison Marshall, 12 February 2018.

In the headlines last week was the leaked government analysis of the economic impact of Brexit. On February 8 the Guardian reported the estimated drop in growth after 15 years for 12 regions and 3 kinds of Brexit:

With the single market, growth fell by 1 to 3 percent.
With free trade, the reduction was 2 to 11 percent.
With no deal, it was 3.5 to 16 percent.

I wondered what this story would look like if it was about GDP per capita (per person), instead of total GDP. I got some more details from the internet, but couldn’t find what assumptions had been made about immigration, or which GDP data had been analysed. So I assumed it wasn’t GDP per capita, and investigated zero population growth.

In 2008, when the House of Lords Economic Committee conducted the first major study of the overall impact of immigration on the UK economy, they reported that

“The overall conclusion from existing evidence is that immigration has very small impacts on GDP per capita, whether these impacts are positive or negative. This conclusion is in line with findings of studies of the economic impact of immigration in other countries, including the US.”

( and

In the March 2016 Budget, before the Brexit vote, predicted economic growth was 2.2 percent for 2017 and 2.1 percent for each of the next two years. ( ). If GDP grew by 2.1 percent per year for 15 years, the total increase would be 37 percent.

Also in 2016, the projected average annual increase in UK population between 2016 and 2026 was 0.5 percent per year. (from Wikipedia, Demography of the United Kingdom). At that rate, after 15 years the population would have increased by 7.8 percent.

So without Brexit, in 15 years the expected increase in GDP per capita was 27 percent. (137 /107.8 – 1) x 100. With Brexit, if there was zero population growth but GDP per capita increased by 27 percent anyway, total GDP also must have increased by 27 percent. That’s 10 percent less than what was expected before Brexit. That would explain the reduction in GDP growth after Brexit, between 1 and 16 percent in the regions, reported in the government analysis.

So the scare story about economic decline becomes a story about lower total GDP growth, but no change in GDP growth per person.

14. Alison Marshall, 13 February 2018.
Universal Basic Incomes should be distributed throughout any region which shares a currency, to compensate for the absence of tools like devaluation and interest rates to manage differences within the region.

15. Another scare story.
Alison Marshall, 29 November 2018.

The latest scare story from the Bank of England is about their worst-case estimate of a no-deal economy. There is contraction to a smaller economy, and an outflow of migrants.

These effects balance each other, to some extent. But no-one is talking about GDP per person. The discussion is all about total GDP growth.

16. Conventional wisdom.
Alison Marshall, 5 December 2018.

Mervyn King, who was governor of the Bank of England from 2003 to 2013, has criticised the Bank’s warnings last week of an economic shock if Britain left the EU without a deal.

He also criticised the proposed Brexit deal, likening it to the appeasement of the Nazis in the 1930s. He said the political elite was allowing the UK to become a vassal state, with a deal which hands over £39bn while giving the EU the right to impose laws on the UK indefinitely, and a veto on ending this state of fiefdom.

He outlined “three episodes in modern history” when the British political class had failed. “In the 1930s, with appeasement; in the 1970s, when the British economy was the ‘sick man’ of Europe and the government saw its role as managing decline; and now, in the turmoil that has followed the Brexit referendum. In all three cases, the conventional wisdom of the day was wrong”.

These three episodes occurred at forty-year intervals, as predicted by the Kondratiev theory of economic long waves.

17. Six-Month Delay.
29 March 2019

Mervyn King, governor of the Bank of England from 2003 to 2013, thinks that Britain should now say to Europe that ‘we have a clear strategy, which is we want to leave without a deal, but we would like to take six months to complete the preparations to avoid the dislocation’.

He doesn’t believe that the economic costs of leaving would be very different from those of staying in, if there is adequate preparation, or in the long term.

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