Wonder if UKIP read this blog?

UKIP are too stupid to even understand why we went into Europe, let alone why it’s economic suicide to leave. UKIP = “a misinformed attempt to educate pork”

A poll by Angus Reid earlier this month showed 48 per cent of the public want to sever ties with the EU.

Delighted to see LibCon support the views of big business ahead of the plebs.

@ 3

“Delighted to see LibCon support the views of big business ahead of the plebs.”

Predictable straw man. Eurosceptics often claim that EU membership is bad for British businesses and the economy; this information challenges that.

Being pro free market does not equal being pro big business. These people are just as self-interested as the Unions.

@1 Don’t forget, UKIP thought the solution to the economic crisis was to completely deregulate the banks.

I never understand this argument that you have to be *in* the EU to trade with countries in Europe, as if no one ever traded with Europe before 1954. Business likes the EU at the moment because they can cash in on cheap labour created by the admission of basket case economies, and the weak Euro stimulates exports.

@ 2 We originally went into Europe to mitigate future European conflict (a reaction to WW2) and to protect European food supplies through collectivisation (A left wing reaction to the food shortages that followed WW2).
The EU has never been effective at meeting either of those goals, both of which are in any event utterly redundant in a 21st Century globalised economy, which is why it has slid inexorably into a bloated, pointless beurocracy.

There are many nutty aspects to the EU and the Euro but the fundamental question is whether it will be easier or not to protect and promote Britain’s interests if Britain remains a member of the EU.

It’s not as though EU regulations won’t apply to British exports to EU markets, including services, especially financial services, when Britain is the largest global exporter of services after the US.

And I count myself as a Eurosceptic.

Britain lost out enormously by failing to join the EU at the very start, which is why I, in the later sixties and early seventies, grew up in a country that was fast turning into a basket case. British people rushed to Germany for work after we joined, just as the Poles came here when they came in much later.

And Matt Munro – we didn’t trade with Europe before the EU. We couldn’t. Our products were overpriced and they couldn’t compete in continental markets. Our big industries disintegrated while we sat in splendid isolation dreaming of what used to be our empire.

No-one in their right mind wants to leave the EU. We’d be finished. That’s why Cameron has used the LibDems to silence the entryists from UKIP. Anti-Europeanism is a massive vote loser in Britain. Michael Foot and William Hague both demonstrated it beautifully.

Isn’t a/the solution to Vodafone-style tax avoidance for the UK to leave the EU?

@ 10 “Britain lost out enormously by failing to join the EU at the very start, which is why I, in the later sixties and early seventies, grew up in a country that was fast turning into a basket case”

A very selective view of History. Leaving the ERM in the early 90s and *not* joining the Euro paved the way for 2 decades of economic growth in the UK whilst most of Europe grew big states and then stagnated on borrowed money, which is why Eire, Greece, Portugal, France and probably Spain are now facing at least a decade of recession

“Anti-Europeanism is a massive vote loser in Britain”

Er, Mrs T ?

“Our big industries disintegrated while we sat in splendid isolation dreaming of what used to be our empire.”

Ignoring the socialist revisionism, competition from the East, mainly Japan, finished off UK industry in the 1970s, not Europe.

“No-one in their right mind wants to leave the EU. We’d be finished.”

In what sense would we be finished, in a way that we not already finished ? The EU is poweless against the BRIC economies which are the real threat. Europe just imposes regulation and costs whilst distributing wealth away from sucessfull economies towards unsucesfull ones, with the end result that all European economies become unsucesfull. In purely economic terms it makes no sense to be in Europe, we pay in more than we will ever get back.

@10: “Britain lost out enormously by failing to join the EU at the very start, which is why I, in the later sixties and early seventies, grew up in a country that was fast turning into a basket case.”

There were many reasons why Britain had a basket case economy during the 1960s and 1970s (*) of which being outside the then European Economic Community or the Common Market was only one part of a complicated narrative.

(*) Britain’s Economic Prospects, ed. by R Caves et al, Brookings Institution (1968) and Britain’s Economic Prospects Reconsidered, ed, by Alec Cairncross (1971) or, better still, try Alec Cairncross: The British Economy Since 1945 (1995).

At the end of WW2, only 4pc of Britain’s workforce was engaged in agriculture as compared with c. 25pc in the case of France and West Germany.

West Europeans knew that it was necessary to shrink their farming and expand their manufacturing sectors, which wouldn’t be feasible if west European countries each maintained its own ramshackle collection of trade barriers inherited from the 1930s when beggar-thy-neighbour trade policies were fashionable.

Part of Britain’s problem was that our export markets were locked into traditional but slower growing Commonwealth and empire markets. Another important part of the story was the bad management of indigenous British companies – hence the boom in company takeovers and asset stripping. It’s grossly simplistic to claim all would have been for the better if only we had participated in European integration from the start. The fact is that we and they had very different sets of fundamental problems to resolve.

Macmillan, as PM, announced an aspiration to join the Common Market in 1961 but that was vetoed by De Gaulle in 1963. Wilson, as PM, revived the application in 1964 but that was also vetoed.

I am not surprised that business would express overwhelming support for EU membership. Although I’ve got a bit more sceptical about the wilder claims about membership. The argument that we would now be better off leaving has never convinced me. Too much downside with limited upside as far as I can see. I would have preferred us not to have joined as full members but to have full access to the markets as members of the EEA like Switzerland and Norway. However, that ship has sailed and we just have to make the best of the fate our shortsighted forebears landed us with. Hitched to a low-growth basket case rapidly turning into a geriatric ward.

7. Matt Munro

“…and the weak Euro stimulates exports. ”

The weak euro harms our exports.

“And I count myself as a Eurosceptic.”

That’s because you’re using the literal definition of the term to mean something like “someone who is not convinced of the inherent merits of the EU, but who bases their attitudes to it on the available evidence”.

The definition that applies to most self-identified Eurosceptics is something more like “nursing a frankly perplexing, evidence-free hatred towards everything EU and Europe-related, deliberately lying about the evidence, deliberately conflating all European institutions with each other, and falling for every stupid myth someone else tells them about NOW EVIL EUROPE WILL STEAL YOUR FIRSTBORN”.

“Hitched to a low-growth basket case rapidly turning into a geriatric ward.”

In bizarro-world, yes.

In sane world, no: the German and French economies are recovering very well from a short recession; Scandia’s doing OK, and the CEE and Iberian economies’ amazing years of growth following the end of Rule By Totalitarian Stupidity is a far more important point than the short-run impact of property-bubble-bursting. The last point probably applies to Ireland as well (cue: enraged Catholics).

Italy and Greece are the only basket cases, but they don’t account for much of Europe.

Bob B – agree with your analysis although there is an argument to be made that had we joined the EEC at the start we would have exposed our industries to European competition which would have gone some way to shaking them up. Of course we could also have done this by simply pulling down our tariffs, although it is unlikely that the EEC countries would have reciprocated.

And the demographics, John b?

Germany are doing well. France not so well. Although I did notice today they have declared a data processing firm subject to takeover speculation as a strategic industry. Another one to add to the strategic yoghurt makers. Obviously parts of the EU will do OK in the future. However, as a whole it is heading for a low-growth model that will struggle to attract capital. Moreover, the intractable problems of the euro zone periphery will eventually draw down even the strongest core nations. There is already pressure on French yields and it is far from inconceivable that the periphery will cost even Germany and France their triple A ratings before the decade is out.

@Matt Munro – Yeah, but… isn’t the point that, despite the fact you might believe Britain would be better off economically outside the EU – 74% of business leaders disagree with you?

@17: “Bob B – agree with your analysis although there is an argument to be made that had we joined the EEC at the start we would have exposed our industries to European competition which would have gone some way to shaking them up.”

In 1950, the Attlee government turned down flat the option of participating in the Schumann Plan, which eventually lead to the Treaty of Paris 1953 and the creation of the European Coal and Steel Community (ECSC). The incoming Conservative government of 1951 also wanted no part of the Schumann Plan or the ECSC and took a lead in the creation of the European Free Trade Area (EFTA) as an alternative to the Treaty of Rome of 1957, which created the European Economic Community.

Debates among economists in the early 1960s certainly identified additional competition as a potential benefit of Britain joining the faster growing EEC market but that view wasn’t universally endorsed. Gaitskell, as Labout leader, was notably sceptical about Macmillan’s announcement in 1961 of an intention to apply to sign up to the Treaty of Rome:

“In a speech to the party conference in October 1962 Gaitskell claimed that Britain’s participation in a Federal Europe would mean ‘the end of Britain as an independent European state, the end of a thousand years of history!’ He added: ‘You may say, all right! Let it end! But, my goodness, it’s a decision that needs a little care and thought.’”
http://en.wikipedia.org/wiki/Hugh_Gaitskell

IMO it’s become important to sort out this history since some now present the European Union as an evil socialist conspiracy. In fact, the EU follows a long-standing dirigiste tradition which is deeply embedded in mainland European politics.

“Edouard Balladur, the former French [Gaullist] prime minister [1993-5], memorably once asked: ‘What is the market? It is the law of the jungle, the law of nature. And what is civilisation? It is the struggle against nature.’”
http://www.wired.com/wired/archive/3.05/culture.html

De Gaulle’s motive for votoing Britain’s application to join the EEC in 1963 was that he believed we were too wedded to the Anglo-American special relationship and Anglo-Saxon economics.

This 1997 article from Krugman who himself is no raving right-winger about the attitude of the unmitigated Gauls is quite funny.

http://www.slate.com/id/1921/

There is already pressure on French yields and it is far from inconceivable that the periphery will cost even Germany and France their triple A ratings before the decade is out.

If by “far from inconceivable” you mean “absolutely certain not to happen”, then yes, I agree 100%.

What about EFTA? Or more accurately, why join EFTA when your country will have to abide by EU rules without having any input to their formation?

Famously, Anglo-Saxon economics has little resonance with the French but then why should it when they have their own heritage of economics: Quesnay, Dupuit, Cournot, Bertrand, Walras, Bachelier . . ?

How many indigenous motor manufacturing companies do we now have left to compare with the like of Renault and Peugeot?

When we finally realise that we won’t be able to meet carbon targets without going for nuclear power, we’ll invite in EDF, a French state company, to build nuclear power plants in Britain like those in France which supply nearly 80 pc of electricity there relatively cheaply.

How many indigenous electronics companies do we have left after Simpson broke Marconi?
http://news.bbc.co.uk/1/hi/in_depth/uk/2000/newsmakers/1527551.stm

Are Switzerland and Norway “finished”?

Switzerland and Norway are not “finished” because they’re both de facto part of the EU. Both adopt significant amounts of EU legislation without having any part in the making of these laws. In the case of Switzerland, the situation is even worse because there is a “guillotine clause” written into their bilateral trade agreements, threatening them with the dissolution of the entire bilateral framework if Switzerland ever fails to sign up to further EU legislation. We really don’t want to copy Switzerland…

But, again, 74% of UK business leaders understand this. I tend to agree with the people actually DOING business with Europe.

11 ukliberty

“Isn’t a/the solution to Vodafone-style tax avoidance for the UK to leave the EU?”

Not necessarily. You could equally argue that we should promote a common approach to corporate taxation, to avoid companies “shopping around” for the lowest rate; the logical extension of a common economic area would be corporate taxation which was “harmonised” if not actually totally “common”.

Absent some totally new approach, such as abolishing corporate taxation on profits altogether, the aim should be to ensure that large corporations are held to their corporate social responsibility to contribute a reasonable and proportionate amount in the countries they trade in and benefit from. How that is achieved is another matter.

“Are Switzerland and Norway “finished”?”

Compared with the UK, both are relatively small countries.

Switzerland has its famed neutrality, a status which enables it to host several international institutions (ILO, ICRC, BIS ) and it has its flourishing confidential banking services as well as the head offices of several internationally successful non-financial companies like Nestles and Roche. Even the Nazis saw benefit in respecting the neutrality of Switzerland. BTW Switzerland also has the most unequal distribution of income in western Europe.

Norway has substantial reserves of oil and gas with lots of opportunities of generating hydro-electric power and a very small population of about 4 million people.

The EU has good reasons for negotiating reciprocal trade deals with both countries, both of which are relatively small compared with the size of the EU economy. But that’s not true of the UK and the UK is the second largest global exporter of services in the world. EU regulations can hugely damage – or facilitate – access of UK service industries to EU markets. In the event of international trade disputes, EU clout will matter a great deal more than the UK standing alone.

Get real.

Just the one point:

This survey is of “business leaders”, i.e. people running large established business’. One thing people in this position are known to approve of, (sweeping generalisation, I’m sure there are some honourable exceptions), is making life more difficult for new entrants trying to challenge their established positions. A particulary common method of causing difficulties for new, smaller firms, is raising the regulatory barriers to the point that only large firms can compete.

Is it therefore any suprise that so many “business leaders” support the EU?

“Is it therefore any suprise that so many ‘business leaders’ support the EU?”

But large EU multinational compnies usually need to compete in international markets with large American and Japanese multinationals – and in prospect – Chinese and Indian multinationals, most of which will not be hampered by EU regulations. Unfortunately, this is something which the EU Parliament is apt to overlook.

@ Bob B – I’m not entirely sure what you’re getting at there but certainly the EU works as a protectionist block on a worldwide scale, sheltering native companies from the full forces of competion, (and keeping prices artificially high).

“@ Bob B – I’m not entirely sure what you’re getting at there but certainly the EU works as a protectionist block on a worldwide scale, sheltering native companies from the full forces of competion, (and keeping prices artificially high).”

That’s often true but the issue is whether the interests of business in Britain are better protected and promoted by Britain remaining a member of the EU or by British governments heckling the EU from outside. Understandably IMO, business in Britain mostly believes we are better off negotiating from the inside.

@Matt Munro

Mrs T forced through the single market and the single European act. She did more to unify Europe than any other British prime minister.

There is a simple explanation as to why UK business leaders are more pro-EU than the general public. The former are daily involved in dealings with other businesses in the EU and in selling to people of the EU: and they have an understanding of the reality of the EU. What the general public in the UK seem to get (I note from my occasional visits there) is a narrow, warped commentary – if anything.

My local and national daily newspapers (in France) have at least one EU story per day – real news items as well as comment. I feel better informed for that. But then, I appreciate not having to change currencies when I travel throughout the Schengen and other Euro countries. And I know a little more about what we hold in common.

@34: ” I appreciate not having to change currencies when I travel throughout the Schengen and other Euro countries.”

Recent and current financial crises in the Eurozone area are powerful evidence that the zone is emphatically not an optimum currency area.

A successful monetary union requires that its constituent member states can more or less comfortably live with the set of interest rates set by the central bank of the union to target the average inflation rate across the union. That was not the case for the Eurozone – hence the differentially large property price bubbles in Ireland and Spain. For internal stability, both those countries needed to have set higher interest rates than the rates set by the European Central Bank.

Walter Eltis, sometime chief economic adviser in the DTI to Michael Heseltine in the early 1990s, is very clear in his book about the inhibiting factors for Britain to consider joining the Eurozone: Britain, Europe and EMU (Palgrave, 2000) chp.9. The huge problem is divergent rates of convergence among the economies of EU countries, which means that loss of national autonomy in setting monetary policy instruments, such as interest rates, to address national conditions is a threat to maintaining internal economic stability. Quoting Eltis:

“An independant committee . . reported in May 1997 that: ‘Simulations on macroeconomic models run by national central banks suggest that, for the UK, the impact of an interest rate change on domestic demand after two years is four times the EU average.’” [p.186]

Try this illuminating piece from Martin Feldstein in 2003 on why the Eurozone is not an optimum currency area while the US is:
http://econlog.econlib.org/archives/2003/04/optimum_currenc.html

Bob B said: “A successful monetary union requires that its constituent member states can more or less comfortably live with the set of interest rates set by the central bank of the union to target the average inflation rate across the union.”

Ah, yes. Because California was so easily able to live comfortably within the set of interest rates set by the central bank of the union. Actually – if it wasn’t for the federal government, California would have defaulted – http://blogs.reuters.com/felix-salmon/2009/04/24/a-california-default/

The most important point in the Feldstein piece is that “the US has a federal fiscal system that directly offsets about 40 per cent of the relative decline in any state’s gross domestic product by a lower outflow of taxes to Washington and a higher inflow of transfer payments.”

Transfer union is an ugly phrase in the EU. However, Wolgang Munchau has made the case for a fiscal union “lite”

http://www.eurointelligence.com/index.php?id=581&tx_ttnewstt_news=2989&tx_ttnewsbackPid=897&cHash=549f84b41b

@ Bob B: The problems of Ireland and Spain owe more (much more) to national economic policies than to the euro.

In each of these countries (as in the UK) getting a property mortgage was too easy: few regulations over banks and mortgage institutions, and few controls by those institutions over customer loans. Just try getting a mortgage in France or Germany. The interest rates may be low but there are strict controls on how much you can borrow: eg you have to account for (ie show statements for) all outstanding debts such as credit cards, bank overdrafts, etc. Even getting a bank overdraft is tough going. Fiscal policies are still up to nation states. But that looks as if it’s likely to change in euroland.

@38″@ Bob B: The problems of Ireland and Spain owe more (much more) to national economic policies than to the euro.”

Ireland’s problems were not fiscal indiscipline by the government there but a problem created by excessive lending by the private sector banks – see Martin Wolf in Wednesday’s FT:

The eurozone needs more than discipline from Germany
http://www.ft.com/cms/s/0/8453024e-0d3e-11e0-82ff-00144feabdc0.html?ftcamp=rss&ftcamp=crm/email/20101222/nbe/Comment/product#axzz18p7wXrRP

Had Ireland not lost national monetary autonomy by joining the Eurozone, Ireland’s central bank would have been free to raise interest rates to curb bank lending and the property price bubble there.

I agree that financial services in the UK were under-regulated but the house price boom here would have been much worse if the Bank of England had been unable to raise interest rates to target the inflation rate here. It was a mistake in early 2004 to switch the inflation target to the CPI, which takes no account of housing costs or house prices,

The decision for Britain to stay out of the Eurozone was and remains the sensible policy option. European monetary union in Europe is entirely premature and won’t work without much greater political integration, which is not a route most in Britain want to take.

The fact is that on the Maastricht criteria, only Luxembourg was strictly eligible to join the Eurozone when it was launched at the end of 1999 – the UK would have been eligible except that the Pound had not been part of the European Exchange Rate Mechanism (ERM) continuously for the two previous years.

For the UK to join now, the Pound would have to first rejoin the ERM and maintain a stable exchange rate for two years, which means the Bank of England in setting interest rates would need to target the exchange rate instead of inflation – which is not a good idea.

@ Bob B: clearly you believe – as dogma almost(?) – that euro membership is the root of Irish and Spanish woes. I believe they are due to their own economic policies. Let’s leave it at that.

NB I agree that the UK should not join the euro – yet. They don’t meet the entry rules; But right now there are very few nations, inside and outside the euro that could satisfy the membership rules; especially after the “euro-gatekeepers” were so badly bitten by Greece.

Earlier you replied to Matt Munro #7 when he opined that leaving the EU and joining Norway and Switzerland might be a better option for the UK. And I agree with much of what you say. But, who has the whip-hand?

Apart from having to adopt all EU trading-related rules into their own national law (with no possibility of negotiation), they are now being pressed to “promote economic and social cohesion” (ie adopt EU policies in these areas). Since this is one area where I read that the UK is not in accord with the rest of the EU, that’s a stiff price to pay?

Equally, Switzerland is being pressured to adopt and implement new EU legislation into their own law more quickly and more transparently.

The latest EU Council report on dealings with EFTA and EEA countries explains this in more detail.

@40: “@ Bob B: clearly you believe – as dogma almost(?) – that euro membership is the root of Irish and Spanish woes. I believe they are due to their own economic policies. Let’s leave it at that.”

It’s not a question of “dogma” – and I note again how quickly Europhiles resort to personal abuse. It’s just like around c. 2000 in online forums when I was said to be senile and stupid for saying then that it was not in Britain’s interests to join the Euro.

What focused me then was reading this enlightening article in Foreign Affairs in 1996 : Euro Fantasies, by the late Rudi Dornbusch of the MIT (sorry, subscription barrier):
http://www.foreignaffairs.com/articles/52431/rudiger-dornbusch/euro-fantasies-common-currency-as-panacea

Re: Ireland and Spain – loss of national monetary autonomy on joining a currency union carries clear policy implications: the central banks of union member countries lose the option to set interest rates to maintain internal stability. And that is what happened in the respect of both Ireland and Spain. Both countries experienced property price bubbles.

To maintain internal stability, both countries needed to have set higher interest rates than those set by the European Central Bank which were intended to target the average inflation rate across the whole Eurozone. But both Spain and Ireland had higher inflation rates. Monetary union was premature – there was insufficient convergence among the national economies of the Eurozone comprising the union to it to constitute an optimum currency area.

“Earlier you replied to Matt Munro #7 when he opined that leaving the EU and joining Norway and Switzerland might be a better option for the UK. And I agree with much of what you say. But, who has the whip-hand?”

My long-held position has been that Britain should stay a member of the EU to better defend and promote Briatin’s trading interests but remain outside the Eurozone. It happens that I actively campaigned for a “Yes” vote in the national referendum in 1975 on Britain’s continued membership of, as then, the EEC to the extent where I was an official observer in the local count.

@ Bob B: apologies. I had meant the “dogma” as a comment aginst both of us, not as a personal slight. And, my mention of the EU Council reports on Norway and Switzerland were more for the attention of Matt Munro and others who believe it in the best interests of the UK to leave the EU.

Clearly I’ll have to take more care over my comments.

I am not convinced by the argument that Central Banks should be the guardians of internal economic stability. That is up to governments, via their fiscal and other policies (eg banking regulation) policies. It was too loose fiscal and other policies that brought Greece, Ireland and Spain to their present state. And it is via tighter fiscal policies that Ireland and Spain should regain stability (though each have bank regulation problems still); I’m les sure about Greece.

The key element that was missing from the creation of the euro was the need for integrated fiscal policies between member nations. This could not happen at the EU level (there are too many national interests at stake) but it may yet happen as a result of the tighter policies now being pursued throughout the eurozone nations (and in the UK too I read).