The case for the EU

Lest I be thought of as a lily-livered Remainer, last week I wrote about Why the EU will collapse .

I said, “The EU is a greedy monster that’s going to try to keep growing forever, and there’s not much we can do to stop it.”

The gist of my argument was that the EU is eventually going to get too big for its boots, and the people will see it as illegitimate, and it will come apart. Brexit is the first such case.

But if the EU is so bad, why has it taken so long for any country to leave it?

It’s taken a long time because, like it or not, there are big benefits to EU membership. Leaving the club means losing the benefits.

Today in the interest of fairness, I want to talk about the benefits of EU membership. And why it’s hard to leave — even if there’s a lot not to like about the EU.

The 10,000 foot view

A lot of the analysis of Brexit focuses on the effect of Brexit on one or other thing — such as fisheries, car-making, tourism, or the food supply.

The problem with that approach is it’s so specific. It’s hard to tell the wood from the trees. Brexit is good for fishermen but bad for sheep farmers but good for curbing immigration but bad for carmakers…

By the end, people would be forgiven for giving up and going back to their corners. And sticking to what they believed in the first place.

1973 — the turning point

When you zoom out, this is the big picture: EU membership makes its members richer.

When it comes to the UK, the single most compelling piece of evidence for this is the UK’s performance before and after joining the EU.

The EU was founded in 1950, and the UK didn’t join until 1973. From 1950 to 1973, the six founding members of the EU — that’s Germany, The Netherlands, Belgium, Luxembourg, France and Italy — grew much faster than the UK.

The UK started out much richer than those countries. But by 1973, as a group they had caught up with the UK.

Then, when the UK joined the EU in 1973, its economic growth started to rev up. Ever since then, the UK has grown as fast as the six founder members.

The following chart depicts the turning point. The red line shows the GDP per capita of France, Germany, Italy, the Netherlands and Belgium relative to the UK.

As you can see the European countries start out behind the UK. They catch up from 1950 to 1973. And from 1973 onwards, the UK grows as quickly as they do.


Click image to enlarge

To be sure, the post-war period was a boom time for European economies. That accounts for part of the growth. But it doesn’t account for the UK’s growth spurt. And equally, you could construct a similar chart for other countries who joined the union.

That’s why countries want to join the EU. Joining the EU makes them richer.

Ricardian trade

Why is this? It’s basically down to free trade.

Instead of every small European country having its own carmakers, steel mills, fashion industry or whatever, the single market allows countries to specialise in what they do best.

So the UK can be the bankers and lawyers. The Germans can make the cars and chemicals. The Swedes can make furniture. And everyone can trade with everyone else.

When countries specialise in what they do best, and trade for everything else, they get more stuff than they would if they made everything themselves. That’s an old idea from a Brit called David Ricardo.

That’s why 75% of economists surveyed thought leaving the EU would make the UK poorer, versus 10% who thought it would make it richer.

And that’s what EU membership boils down to. On the one hand, the EU is remote and unaccountable and illegitimate, and makes stupid mistakes. On the other hand, the EU makes countries richer through the single market.

Unfortunately there’s no third option where the UK gets to be just as rich, and also leave the single market. The cold truth is that they come as a package. Single market, extra trade and rules from Brussels. Or freedom from Brussels, less trade, and lower living standards.

P.S. I know many of you will be thinking that overseas trade and new trade deals, could make up for lost trade with the EU. But that’s unlikely because countries don’t trade very much with countries far away from them. Thanks to transport costs and time zone differences, the overwhelming proportion of all countries’ trade is with their near neighbours.

P.P.S. I’ve gotten tonnes of thoughtful emails on the topic, many from people who disagree with me. Here’s one from Scott:

“No deal is not ‘incredibly unpopular’ with the public – see latest Daily Telegraph polls. No deal or better phrased as ‘clean brexit’ is only unpopular with a set of MPs who are mainly remain voters who refuse to honour the result of the referendum, and their elected mandate provided at the last election.”

Keep the emails coming! Do you agree with me that the single market makes its members richer? Sean@agora.co.uk

4 Comments
  1. Gabriel Konrad 2 months ago

    It’s not just about economic realities. It’s about us being willing to be givers because we’re rich and helping Slovenia Greece Estonia etc to get over their difficulties. And in a very unpredictable and insecure world giving up some sovereignty to be part of a world respected bloc who can have an influence on climate. migration nuclear weapons etc. Trouble is brexit is like a religion and the old Etonians don’t want their off-shore tax affairs probed by the EU. That’s the long and short.

  2. Alan Summerfield 2 months ago

    It’s all a bit like the Eurovision Song Contest. In the early days the good songs won (eg Abba & waterloo) but these days it seem to be any rubbish will win under the rule ‘anyone except the British’.
    We pay the piper but cannot call the tune so every time (mostly) if we want something the default is Non or Nein with a possible variation in the future of Nyet.
    The want a European army but look around you, where are the current armies? France and the UK. Do we really want the EU to commandeer our forces and run wars that we do not support (yes I also know that is what Tony Blair did but we did put him in charge).
    I note that many European countries tend to just ignore the EU rules that they do not like (France is good at that) but the British want to change the EU rules that they do not like legally and just get told ‘No’
    Every man and his dog want to come to the UK (worldwide, not just the EU), why? could it be the benefits that the EU say must be the same as the locals?
    Yes the EU has been good for many countries but it’s stranglehold is turning the people off. Note the anti EU factions growing in the UK, Italy Germany and more and the EU just ignore ‘the writing on the wall.
    I have spent two decades two decades working around the world and managed to get on very well and live with all Nationalities (African, Arab, Australian, American and European) but the EU is too much like 1984 in action and it is time to leave before it crumbles like the USSR did. No amount of throwing money at a problem solves the problem.

  3. Robert 2 months ago

    OK , I’ve listened to & read about every aspect of leaving/remaining in the EU, that came my way, political turmoil, cunning/stupidity, finance, etc,etc.

    I now have an amalgam of all this information in my mind & do not have to consider individual details point by point, of what the end result should be.

    To me it is obvious that we must just get out of the EU asap & find our own place in the World, no arguing, negotiating, politics, prejudice, just be us.
    We, the Island Race, (community) will survive & prosper as we have in the past.

  4. Ralph Clark 2 months ago

    Sean – We didn’t join the EU in 1973 we joined the Common Market and they were/are very different beasts. The British public were never invited to vote on us joining the EU – this was something Westminster decided for us. If you want to really look at the benefits of the UK joining the EU then you can only look from the date that the EU started and not before.

    IMO the British public are in favor of being part of an alliance of countries for trading purposes but are against the idea of control of our lives increasingly being taken away from us. Recent anecdotal evidence that’s building up all the time suggests that other member states in the EU are coming to very similar conclusions themselves.

    The only thing that the EU seems to be truly good for is politicians and that’s really why Westminster is so desperately keen to keep us locked in. Having said that it is surely only a matter of time before someone questions why an entity that costs an absolute fortune to run (Westminster) is so keen to pass all of its power and responsibilities on to another entity (the EU) that is even more expensive! As for Scotland – well God only knows how much their politicians (MSP/MPs/MEPs) draw from the public purse when you add up all of their combined costs.

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