As the title of this post would suggest, I’m solely interested in listing and summarising the views of the different sides of the public debate. This post is divided in 5 sections:
- What Remain says will happen if there’s a Brexit
- What Leave thinks about all these views
- The View from those who foresaw the Financial Crisis of 2007/8
- What Leave says will happen if there’s a Brexit
- What Leave says will happen if there’s no Brexit
What Remain says will happen if there’s a Brexit
The Centre for Economics and Business Research (CEBR) argued that Brexit would threaten 800,000 jobs through the impact it would have on trade. According to the study having left the EU, the UK’s international trade in goods and services would become guided only by WTO standards, which impose tariffs on 90 per cent of UK exports.
A March 2016 survey by tbe Confederation of British Industry (CBI) showed that 80% of its members favoured remaining in the EU. The same organisation also discussed a macroeconomic study and found that
- “in 10 years’ time the EU will still be the UK’s biggest export market”
- “if the UK followed the Norway model and joined the EEA, it would keep nearly 95% of the most costly regulations already in place. And – like Norway – which adopts 75% of EU law, the UK would be required to adopt new EU law.”
- “The UK is the biggest beneficiary of EU FDI”, which represents about half of all FDI into the UK.
- The automotive industry, the financial services industry and the food & beverages industry would be the main sectors affected given their integration with other European countries.
- The macroeconomic forecasts suggest a 16% fall in investment that would cause GDP to be 1% to 3% lower by 2030 than if the UK was to remain in the EU.
According to the Institute for Fiscal Studies (IFS), the UK could face an extra two years of austerity measures if it votes to leave the EU. The logic is that Brexit causes GDP to fall, which causes the tax base to contract, forcing government to increase taxes and lower spending.
The UK Treasury, forecasts a 6.2% fall in UK GDP by 2030. A second report was published subsequently focusing on short term effects. The analysis has been heavily criticised.
- The Economist wondered why call a referendum at all if the risks from a leave vote were so high: “if the government believes its own predictions, it was the utmost folly to risk calling a referendum in the first place”. It also cleverly pointed out that if the Treasury’s report was accurate, then Brexit would actually satisfy the main wish of the Leave side: Brexit would so tank the economy that immigration would fall substancially.
- The Financial Times criticised the methodology heavily, going as far as calling it biased and reverse engineering results.
- Open Europe thoroughly reviews the report and also criticises the methodology, while also high-lighting its positive contributions.
However, all sides agree. How much GDP would fall may be arguable, but GDP will fall.
The OECD described the potential effects of Brexit as a tax on the British people, due to the fact that it would decrease their spending power. It forecasts Brexit causing a 3% drop in UK GDP by 2020 and by 5% in the long term.
In a report published in June 2016, the IMF concluded that Brexit could spark a stock market crash and a steep fall in house prices. In Saturday’s report to conclude its annual assessment of Britain’s economy, it added that a leave vote would tie the UK up in trade negotiations that could drag on for years. Uncertainty would cause GDP to fall. By how much depends on whether the UK adopts a Norway-like relationship with the EU, in which case it will fall by 1.5% by 2019, or if long negotiations force it to adopt the default rules of the OECD in which case GDP would appear to fall by 5.5% by 2019.
What Leave thinks about all these views
A predominant attitude among “leavers” has been to dismiss experts, either out of pure confirmation bias, like Michael Gove, or by questioning experts’ “expertise”.
Although he seems to subsequently have retracted the comment, Gove seems to really dislike the antagonism of experts to his position and ended up comparing economists to Nazis. It wasn’t as bad as people made it out to sound, but it was still a pretty weird comment.
While the first attitude is ridiculously transparent in its display of irrationality, the second is a little more difficult to dismiss. The comment section of the FT is filled with arguments about the fact that the experts’ consensus was that the 2007/8 financial crisis should not happen, they argue.
The View from those who foresaw the Financial Crisis of 2007/8
A constructive approach to this criticism requires me to (at least temporarily attempt to) put aside my own confirmation bias for the remain-side of the argument in favour of the seeking to falsify my own hypothesis. While it is impossible to artificially create a counterfactual universe that does this, I can seek economists that might argue the leave case. In light of the argument that the “experts” did not predict the financial crisis, I thought about starting with the economists that actually did predict the financial crisis. What is their view on Brexit?
Nouriel Roubini, who in 2006 predicted that the US would be in a recession in 2007 due to a collapse in housing prices, predicts similar effects for Brexit. Not an endorsement for the Leave campaign.
Raguram Rajan who in 2005 for the IMF identified some the “fault lines” that came to play a vital role in the financial crisis 2 years later is now the governor of the Federal Reserve Bank of India (FRBI), the country’s central bank. He recently say that Brexit could be “quite damaging” and that the FRBI is prepared to intervene in the markets in case the expected volatility materialises. Not an endorsement for the Leave campaign.
Dean Baker, co-director of the Centre for Economic and Policy Research, predicted a housing bubble in 2002.He does not appear to have expressed an opinion on the matter, taking a column by Krugman criticising Brexit as an opportunity to discuss how unaccountable (monetary) policy makers in the USA and in the EU are. Not an endorsement for the Leave campaign, even if his criticisms of EU bureaucrats sound like it.
Peter Schiff, CEO and chief policy strategist at Euro Pacific Capital, predicted the financial crisis in August 2006. There’s one youtube video (audio actually) from him about it and two comments from John Browne at Euro Pacific Capital about it:
- In the video, Schiff focuses on
- The first one of Browne’s articles discusses the implications and international effects, with a focus on the erosion to the Euro rather than any concern about the UK.
- The He also does discuss how “It has been kept remarkably quiet, for instance, that the EU intends to divide the UK into eleven administrative regions, all reporting directly to Brussels”, which should appeal to Leavers. If it sounds like he got his news from the Daily Mail is because, superficially at least, he shares their interpretation of this. In fact, this refers to an innocuous programme of the European Commission called Inter-Reg aimed at stimulating cross border cooperation between close sub-national local authorities from different countries. It’s effectively a sub-national application of the gravity model of trade. Hardly a master conspiracy, if you ask me. However the post’s title does clearly argue that “Brexit Fears are Deliberately Overblown”. This does very much sound like an endorsement of Brexit.
Steve Keen, head of the School of Economics, History and Politics, Kingston University predicted the financial crisis when he set up the debtdeflation website in 2002. He has this video on RT (Russia Today) about Brexit. He argues for Brexit and, nicely enough, points to other economists who support his view.
Ann Pettifor, director of Policy Research in Macroeconomics (PRIME), predicted the 2007/8 financial crisis in 2 books published in 2003 (“Coming soon: the new poor”) and 2006 (“The coming first world debt crisis”). She wants to stay in to oppose right wing conservative policies, racism and to build a Europe of solidarity.
So what’s the taly?
- 4/6 for Remain
- 2/6 for Leave
Another way to look at this and try to find ways in which I (and the Remain camp, by association) can be identified as being wrong might be to look at what the Brexit side says.
What Leave says will happen if there’s a Brexit
No better way to find out what the Leave side wants than to ask them. There seem to be 3 leave campaigns: Labour Leave, Conservatives for Britain and Business for Britain. There is also Leave.eu and of course the UKIP’s website.
Leave.eu in particular has a Brexit FAQ page that is quite good. According to them, Brexit will
- Not cause EU citizens from outside of the UK to be deported.
- British citizens’ access to healthcare abroad will not be affected.
- allow the UK to not just control its borders but to also control immigration from the EU, which the present situation does not allow.
- make the UK safer from international terrorism, according to Ex-chiefs of MI6 and the CIA
- not cause violence to flare up in Northern Ireland. – “The assumption that borders [between Northern Ireland and the Republic of Ireland] would be restricted is false. An open border would be legally permissible with the UK outside of the EU and also desireable.”
- not undermine the ability of British citizens to travel around freely in the EU, post-Brexit.
- “Given how dependent the rest of Europe is on British business travel and tourism, a question of visas should not arise.” (emphasis added because it is hilariously delusional and arrogant… You can almost hear them sing “Rule Britannia“)
- “The UK will get a visa-free agreement with the EU shortly after leaving(There are 50 countries in the world that have visa free access to the European Union – these range from Australia to Venezuela. Why would the EU make it difficult for the second largest economy in Europe to travel to the continent for business or leisure?”
- “Expect an agreement ensuring that UK nationals will continue to travel to mainland Europe hassle free and vice versa, enabling EU nationals to visit London – Europe’s most frequented tourist destination – and other tourist destinations across the United Kingdom.”
- increase the UK’s influence in world politics.
- not increase taxes
- allow Britain to trade more freely with the rest of the world. – “As a country which traditionally embraces trade, the UK could add a range of other emerging markets such as China, Indonesia and the UAE – again ones which the EU is yet to agree terms with – and offer the UK businesses a real competitive advantage over their rivals in mainland Europe and beyond.”
Basically, all the concerns expressed by experts on the leave side are wrong. Crucial to this Leave argument however, is the notion that for some reason, the UK will continue to access to the EU’s single market. This is normally wrapped up in some logic that the EU would lose too much if it suddenly stopped selling to the UK.
However, there are very specific things that the leave side expects will happen after a Brexit. Primarily, there’s what it wants to do directly
- A decrease in immigration, particularly in regards to migrants from Europe.
- Admittedly, the prejudices are about Poles and Romanians I guess, whose hordes reactionary conservatives and UKIP have been warning the country against for years.
- But in practice, everyone would be affected.
- More qualified immigration.
- Decreased regulation
- A refocus of the UK economy towards emerging markets.
Then, there’s the sort of indirect positive effect that these measures are meant to have:
- More spending on the NHS
- A decrease in government aggregate expenditure
- A decrease in the government’s budget deficit
- Increase international competitiveness
- Appreciate the pound
Ultimately, all these elements would conspire to:
- Increase in GDP growth
- Make people happier in general.
What Leave says will happen if there’s no Brexit
For this part I’m not just going to confine myself to what the Leave side says will happen. Because some of their claims are outright inaccurate, I’m going to take them with a pinch of salt and instead of treating them as the statements of fact that they are supposed to be, I’m going to discount them as fears for a dystopian future. Coincidentally, this makes their arguments a little bit more palatable for me, even if not all these things are quite so dystopian in my opinion…
- The EU (will) become increasingly centralised, as a result of which:
- The UK (will) be forced to implement regulation it does not want.
- The UK will be forced to join a EU army and contribute to a EU defence budget.
- The UK will be taken over by an increasingly undemocratic EU and its commissars.
- British identity will be diluted.