Was Europe ever worth it for the UK?

Was Europe ever worth it for the UK? by Robert Colvile.

This week’s mud-slinging between Westminster and Brussels was ultimately about one thing: money. Britain has it. Europe wants it. In fact, the only way for the European Union to meet its financial commitments — and to avoid an unholy row among its members — is to squeeze Britain for as much as it can get.

The key thing to understand, however, is that this doesn’t just apply to the so-called “Brexit bill”. Any deal between Britain and Europe is almost certainly going to include some sort of fee for access to the single market, or to the most important parts of it. It may be dressed up as an administration fee, but in reality it will be a straightforward greasing of the wheels.

The question, then, is what access to that market is worth. And a trio of academics have come up with a surprising answer. …

The authors scrutinised the performance of the British economy over the past 64 years, to find the factors that hampered or boosted growth. And EU membership was not one of them.

The three authors are, admittedly, political scientists rather than economists – and other experts have found differently (and will doubtless dispute these new findings). But no matter what variable or model they use, they say, they cannot see how joining the European Economic Community in 1973 made a lick of difference to growth rates.

UK GDP, adjusted for inflation.

This may be connected to another of their findings, which is that a greater volume of trade tends to be a symptom of growth rather than a cause. What really shifts the economic needle, they insist, is a nice, low pound (of precisely the kind that Brexit produced). …

For 20 out of 28 member countries, growth actually dipped after joining rather than rose. And with the exception of Ireland and Luxembourg, those eight exceptions were all post-Soviet economies with significant “catch-up” gains to make. …

These findings do suggest several important things. First, access to the Single Market may be worth quite a bit less than Europe will demand for it. Second, the “Project Fear” predictions that Brexit would depress household incomes over a period of decades were (as many said at the time) grotesquely exaggerated.

Good old British empiricism.

hat-tip Matthew