The EU saved Britain from itself

I don’t really like the EU, but then I don’t really like hierarchies at all, so there’s no surprises there. But I am of the opinion, along with Nosemonkey, that eurosceptics rarely offer anything like a realistic alternative, so we should stick with the EU.

One regular trope is that the UK should leave the EU and join Iceland, Switzerland and Norway in the European Free Trade Area and avoid all the nasty Continental dirigiste regulations. As Nosemonkey points out being in the EU means the UK gets to exert influence on how regulations are drafted, whereas if we joined the EEA we would still have to follow the regulations and have to pay for the privilege too.

 Tim’s alternative suggestion is less logically flawed, but touchingly naive.

Hang the bureaucrats, shoot the politicians and declare unilateral free trade. Immediate 3% boost to GDP.

Ultraviolence notwithstanding, we have run a historical experiment testing what works better for Britain. We used to not be in the EU, and now we are. Not perfect, but all we have to work with. If we compare post war Britains, one of the EU and the one before we, in fact, see much greater openness in the EU regulated Britain, than the one which preceeded it.

Nick Crafts of LSE, of which both Tim and I are alumni [1], has looked at what helped to cure the “British Disease,” that slow relative decline of Britain from imperial pomp to the sickman of europe through the middle of the 20th century.

Bolshy labour unions played a part, but self-indulgent management were also a problem. But crucially, there as was a lack of competition, a hangover from the protectionism of the 1930s. This sapped experimentation, and productivity and left Britain a poorer place than it should have been.

Thatcher played a role in inducing more domestic competition, but international competition and trade also played a large role, and EU membership helped push Britain towards freer trade than would otherwise have obtained.

Early postwar Britain was notable for cartelisation, nationalisation, weak competition policy, and protectionism. Table 2 reports the relatively slow reduction in trade costs for the UK compared with founder members of the European Economic Community and not until the late 1970s was something approaching free trade restored.

Left to our own devices, Britain didn’t choose free trade, we chose protectionism and decline. The EU may not be a free trade nirvana, far from it, but it offers a realistic amount of trade openness, something like Dani Rodrik’s idea of having enough globalisation to not provoke a backlash against it. Unilateral free trade is a pipe dream, while the benefits of the EU are visible in the productivity data.

I’ll finish off with a note of advice to rightwingers. If you want to convert people to the benefits of competition, then stop talking about competition so much. When most people think of competition they think of zero sum games. When blues beat the reds, the blues win at the expense of the reds. Economic competition is not like that, competition is there to allow new better processes to replace older, less efficient, processes.

So instead of talking about competition, use the phrase “introducing more experimentation.” Firstly it is a more accurate description of the growth process, of people unpredictably groping towards improvements in idiosyncratic ways across a number of firms. Secondly, it emphasises that winning this game is about creating something new or better, rather than just jostling for position. It will help win round that large section of the population who are upset by the idea of cut throat competition. I place this advice in the public domain.

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[1] Edit: Actually, I’m not an LSE alumni, I’m a very naughty boy, they haven’t given me a masters yet, so Tim’s an alumni, I’m just a student.

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