Wednesday, 27 April 2016

Brexit: heart v. head, migration v. economy

Economic growth in the UK slowed in the first quarter of this year - up 0.4% quarter-on-quarter, compared to 0.6% in the fourth quarter of last year. This slow-down in the growth of business activity was to be predicted. In the run-up to the referendum on continued EU membership, many investment decisions are on hold as businesses take a wait-and-see approach.

Apart from a handful of mavericks, hardly any economists or business organisations support Brexit. Most of the economic and financial calculations concerning the effects of Brexit point to a negative outcome. In particular, the debate about trade should be particularly convincing; outside the EU, the UK would have to renegotiate its trade agreements around the world. Countries - including Commonwealth members - will not be looking kindly at the prospect of having to sit round the negotiating table with Britain and haggle about issues that have already been settled (in trade agreements reached with the entire EU).

The question of whether a post-Brexit UK would be first or last in the queue to negotiate any future trade agreements seems spurious - when you're inside the shop, why rush to leave it so you can negotiate your way back in from the outside?

Trade means jobs, jobs are livelihoods for families. Trade also means investment. Many global corporations have invested in building factories in the UK to have a manufacturing base within the EU, with the benefits of a good business environment. Employers can see that. Economists can see that. It makes eminent economic sense for the UK to remain part of the world's richest trading bloc.

Norway and Switzerland have access to the EU single market, but without any say in determining the regulations that govern that market. The UK - a strong exporter of services - wants to complete (finally) the single European market in services. It is far less likely to do so outside the EU than within it.

Looking at the plethora of economic arguments around trade, investment, jobs and the economy, the Remain camp's warnings of the negative consequences of Brexit ring true.

Those in favour of Brexit are either comfortably well off - or indeed very wealthy. The mouthpieces for Brexit, the Daily Mail, the Daily Telegraph, the Daily Express, the Times and the Sun are owned by people who are not domiciled in the UK for tax reasons. These high net-worth individuals are insulated by any negative economic aftershocks of Brexit. "The economy is only growing by half a percent? Investors are pulling out and businesses are shedding labour? Welcome the bracing global economy!" I feel a visceral dislike for those who blithely promote Brexit knowing full well they will not be touched by its economic consequences.

But maybe it's not just about the economy? Sovereignty, taking back control of our borders, migration, I no longer recognise the land where I was born... 

Emotions. Feelings.

But back to the economy. Survey after survey has shown that the economic impact of EU migration to the UK is beneficial. EU migrants - and Poles are a significant part of that - generally come to the UK to work and pay taxes. [Once they find work here, they soon discover that generous tax-breaks - in-work benefits - mean they take home more than they expected, but that's another story.]

Non-EU migrants are more likely to be jobless, less likely to integrate with society at large. Non-EU migrants are not subject to EU rules, so if the UK wanted to 'take back control of its borders' - what's stopping it? Brexit will not make any difference.

Because EU migrants are a net contributor to the UK economy, any attempt to deny them access to the UK labour market will lead to a slow down in economic growth. The economy is not a zero-sum game; one job created here can create further, new, jobs elsewhere. Value added by a newcomer spreads around the economy.

Without access to a well-motivated and hard-working addition to the UK labour force, the economy will run out of steam. GDP growth will falter, and the UK will be increasingly hard-stretched to pay for its healthcare, social services, education and security.

The Brexiters are willing to accept that. For them, leaving the EU is the chance to embark on a Quixotic journey to seek the Lost Eldorado of a Golden Age, an age of politeness and deference, fair play and fair hair, a land where Everybody Knew Their Place. The Brexit campaign is led by the rich and privileged who would like to turn the UK into an offshore tax haven.

Scotland will no doubt secede from a post-Brexit United Kingdom, leaving a fragmented state drifting, friendless.

You cannot turn the clock back. The EU has proved amazingly successful at preventing war between its members. On the long march from barbarism to civilisation, the EU, an ongoing work in progress, has proved to be a step in the right direction. Stronger Together, Better In.

Finally, anyone comparing the EU to the USSR knows not what Katyń or Hlodomor or the Gulag mean.

This time last year:
Golf course update

This time three years ago:
Review of Krzysztof Osiejuk's latest book

This time four years ago:
The Shard changes London's skyline

This time five years ago:
In praise of Warsaw's trams

This time six years ago:
Plans for the railway line to Radom
[five and half years it took to go from plans to realisation]


Anonymous said...

Perhaps it's not about the economy. Possibly it's about quality of life: England population density (410 persons per sq. km 2nd highest in EU); pressure on public services; pressure on housing etc. Or maybe it's about being able to vote out decision makers we don't agree with. Or perhaps curbing the Brussels gravy train. Or, highly improbable, having the EU accounts audited and signed off for once. Or maybe even, heaven forfend, being able to deport convicted EU criminals to their home EU nations without being told that in fact their EU nations are not safe places. Which begs the question, why are these EU nations in the EU?

dr Marcin said...

Dear Michael,

It's absolutely vivid, I mean, intentions are vivid. This is. This is only bargaining between Downing Street 10 and Brussels and nothing more. Sayin' some more. This looks like a blackmail... whether you ease us some of the Member conditions or... you'd have a huge problem. And nothing more. Coz the UK feels that it constantly looses its post-imperial bonus, that possessed throughout of numbers of decades. It almost looks like the Britain suffered its vision and a backup plan in case of this losing of its post-imperial position. And it looks like a desperate yelling, "SOS, May-day, May-day, SOS". A kind of a Titanic with no leadership.

dr Marcin said...

P.S. Meaning leadership, think about such charismatic giants like John Paul II, Ronald Reagan, Margaret Thatcher, Helmut Kohl or Charles de Gaulle... not about most of those fine puppets being nowadays in charge of prime ministers, presidents or other top officials.

dr Marcin said...

anyone comparing the EU to the USSR knows not what Katyń or Hlodomor or the Gulag mean. I'm sorry Mike, but this irritated me. My Grandpa's brother, who served before the WWII at the Border's Army on Kresy Wschodnie in rank of captain in 1940 was imprisoned at the Ostaszków Isolation Camp and murdered in the Tver Citadel. COD was a shooting a back of a head. So, I know what Katyń was very well. And apart of that I recognize many of similarities between the EU and the USSR on a basis of ideological background, instrumentarium employed, centralist mentality, disgrace to the tradition and many more. What's a difference between eurocommunism and bolshevism? Though, eurocommunism is just only a soft and "polite" version of a rude, wild and in-sense Asian bolshevism. Most of that liberal mumble-jumble is gonna be a very well directed camouflage.

Michael Dembinski said...

Dr Marcin:

"eurocommunism is just only a soft and "polite" version of a rude, wild and in-sense Asian bolshevism."

If, by "eurocommunism" you mean the EU (rather than Eurocommunism which you can look up in Wikipedia), you could NOT, POSSIBLY, disagree with you more. It's like comparing a helping hand to a fist in the face.


Gravy train, audited accounts, EU criminals etc etc. Tendentious twaddle written in rags owned by tax exiles.

Anonymous said...

Is the issue of Scotland leaving UK after a possible Brexit important in the internal debate?
Is it, in your opinion, certain?
Is it something that is discussed?
What about Northern Ireland?
Could Brexit impact Northern Ireland balance as well?

Anonymous said...

"Tendentious twaddle written in rags owned by tax exiles."

Must include The Guardian then, one of the most vociferous pro EU papers.

"In 2011 Guido produced a video highlighting Guardian Media Group’s financial hypocrisies, provoking a rambling article from editor Alan Rusbridger and another self-justifying piece in the paper blaming the decision to place hundreds of millions in assets offshore on their investment partners Apax.

Rusbridger argued essentially that it is a tough world for his newspaper so they can’t be pure in their business practices. A transparently self-serving argument. It remains the case that despite the Guardian’s high-mindedness it has tax dodging in its DNA. The original trust structure was set up by CP Scott to avoid inheritance taxes. That was wound up in 2008 to exploit a loophole enabling them to pay zero capital gains tax on £307 million in profits."

Michael Dembinski said...

@ Anonymous...

Polling in Scotland consistently shows greater support for Remain campaign than in England. A Brexit vote would inevitably push the Scots to call for a second Independence referendum. As day follows night. And this time they would win.

Northern Ireland - wow! There's a powder-keg... One reason why the long animosity between Republic and the North has been eroded has been the impact of EU membership on both sides. Open borders, free trade - this would be jeopardised. Northern Ireland, post-Brexit, post split-up of UK, would be a bit like Transdnistria or South Ossetia.

@ Anonymous...

You're right - can't argue with you on that point. However, egregious corporate-tax dodging is easier to deal with multilaterally than on one's own. The appetite to clamp down on tax havens is increasing around the civilised world.

Could the Grauniad survive it were made to pay all its taxes?

Anonymous said...

Michal, appreciate your concern, but having flown the shores of this green sceptered isle why are you so concerned that those left behind might not want to stay IN. Or do I detect a bit of a conflict of interests here? Keep the net contributors in for the benefit of the net recipients.

Michael Dembinski said...

@ Anonymous:

Simple. I believe in the European project. Seven decades of peace between the countries that are in. Compare that with history. Compare that with what's going on on the EU's borders.

Net recipients? UK is getting 800,000 hard-working and entrepreneurial Poles, the more dynamic ones with the get-up-and-go, who are contributing massively to the UK economy.

Last time I was in an NHS hospital (with my dad, for his eye op) on one of the surgeons and a nurse were both from Poland.

The EU is NOT perfect. But it's a long way better than fragmented, scrapping nation-statelets at each others' throats.

Final thought in this comment - Scotland WILL leave the UK if UK goes ahead with Brexit. Brexiteers will have the disintegration of the United Kingdom to contend with.