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Britain Can Leave The European Union

Politics / UK Politics Nov 10, 2014 - 02:19 PM GMT

By: Andrew_McKillop


It Can Also Leave the UK
Britain's mainstream and alternative political parties, including UKIP and Scotland's SNP are two powerful players responding and reacting to a host of factors changing the country. In the wake of the Scottish indepedendence referendum the problem, threat – or simple reality of regional and nationalist political forces breaking up the previous two-party (and already three-party) system of power in a united national state are unstoppable. Wales is pushing for more and further devolution of powers from Westminster and England. The northern regions of England are doing the same. Despite being beaten in the September referendum, the SNP now speaks and acts for Scotland and if recent opinion polls are right, it has a 20-point lead in voting intentions against the Labour party with its "traditional" 41 safe seats in Scotland, able to turn the UK Labour party into the English Labour party at the coming May 2103 general elections.

Also, the political dividing lines on staying in the EU, or quitting it are sharpening in the UK. Riven by plots and coups, the UK Labour party, while it still exists, is playing the "must stay in Europe" card. This has become the rallying cry for the party as it tries to close ranks behind its increasingly shaky leader, Ed Miliband but as already noted, its 41 safe seat MPs from Scorland in the Westminster parliament may be decimated next year. Miliband could disappear even sooner, and the chances of him ever becoming UK prime minister are realistically almost zero – but his unpopularity could be used after the polls by party rank and file as an alternative narrative for why Labour was beaten by a de facto Tory-UKIP coalition with a heavy bias towards quitting the EU in May next year. For the Tories, the problem is that David Cameron's faction in the party, despite Cameron's rhetoric, wants to stay inside the EU, like the Lib Dems, and ironically also the SNP hierarchy. Like the Labour party's stalwarts rallying round Miliband they are defending EU membership by calling the movement to leave it a "threat to future UK prosperity", For Cameron, there is “no option” - to staying in Europe.

The EU's 29 member states include minuscule city states and island republics such as Malta, Luxemburg and western Cyprus, so any argument for staying inside the EU "as a large and single united kingdom" is weak. Three of the highest GDP-per-capita member states of the Council of Europe are not members of the EU: Iceland, Norway and Switzerland. All of them are much smaller-population than the present UK.

Saying No to the UK
Labour leaders from the Tony Blair era have also joined the stay-in chorus with the Liberal Democrats, some English Tories and the almost invisible UK Green party to claim that Britain can only stay prosperous by staying in Europe, but the No campaign against the SNP in September's Scottish referendum has left indelible political sequels across the UK. Regional demands for larger autonomy, tax raising and spending powers, local lawmaking and enforcement - like the Northern Powerhouse concept and project, or outright separation from the UK in Scotland's case - are now daily political reality. Even Cornwall's tiny Mebyon Kernow separatist movement has sensed the change of mood and one key argument the devolutionists and separatists use, again ironically, is the same chorus line used by defenders of the "European federal  project" across the Channel on the continent: Think local. Act global.

As a free trade area and economic union the post-2008 performance of the 18-nation Eurozone is all we need to know about the "clear and massive benefits" of the initial and basic, purely economic "pillar" of the EU, in fact a tribute to the economic disbenefits of Ricardo's comparative advantage when the Ricardo principle of least-cost production is globalized – not just spread over the one continent, of Europe. The Eurozone and its single currency is a tribute to age old, even archaic human social urges. Once upon a time, you could barter for goods, or with far greater convenience, you could use tokens which self-evidently have to be rare and consequently valuable, like certain South Pacific cowrie shells shown today on the banknotes of several Pacific nations, or rare metals or other fetish-value objects can be used. Trade in these value objects, in and across the South Pacific most certainly preceded trade in consumable economic goods but when Ricardian principles are applied to physical commodities, industrial goods and services, saturation effects can drive the disbenefits far above the early economic benefits.

Plenty of economists today, not just grandstanding Nigel Farage of the UKIP party argue that Europe has choked itself and throttled its economy by over-intgeration. The confused mix-and-mingle of free market liberal capitalism and the free movement of capital, and an obsessional regulatory environment supposedly spreading jobs and growh across the continent has resulted in failure and economic gridlock. Europe's central planning obsession with especially transport and energy, its failed transitions from coal to nuclear power and then renewables, are a case in point of massive waste and economic disbenefits.

Pay the EU 2 Billion Euros?
Paying tribute to the EU in hard cash, to keep its Commission, law system and regulatory agencies going and growing is a complex business featuring the automatic transfer to Brussels of a part of all VAT receipts in each of the 29 member states. Even more complex processes are used to adjust semi-voluntary contributions, rebates and additional charges sometimes with years of delay. These include "solidarity provisions" related to increased member state VAT receipts when the economy grows, supposedly filtered by and through the Commission and its agencies to aid "structurally hindered" lower income states, and finance supposed key European initiatives such as new infrastructure building and EU convergence towards the "great single market". Sometimes years after any particular "reference year period", member states can either receive additional funds from the Union, or have to pay into it.

Mainstream UK media either through ignorance or by design, in heated editorials and endless TV news coverage transformed the question of "Britain's 2 billion euro bill" to the EU, and how much of this was a discount or rebate, and how much was backdated, and how much Britain like other EU28 countries pays to keep the European party going. These were lost in translation and political tomfoolery. Such was the trusting nature of the media herd, almost nothing was said about the Big Picture of how much money does filter by and through Brussels and its institutions and agencies. Probable ballpark figures for any recent reference year may be about 1000 billion euros or about 7.5% of the total GDP of the 29 member states – a lot of which is "lost in translation" ! In other words if the UK had to pay-in 2 billion euros (1.7 bn pounds), or only 1 billion euros this coming year, this is about as relevant to the future prosperity of the UK as hot dog sales in the Isle of Wight. Cowrie shell prospecting on the Island's beaches might be more interesting and relevant,

Long ago were the days when "the European economic project" was a vaguely credible story of old-fashioned mercantilism with the goal of running a continental and permanent German-style trade surplus to bolster a rock-hard European money – now as overvalued as a barrel of oil on the Nymex or ICE when you can buy one from ISIS or from the Kurds, like Genel Energy does, for less than $50. However it seems useful to the US and China for the euro to remain overvalued if only to permanently cripple any prospect of re-industrializing Europe. 

Whether the UK or the 3 or 4 nations and Super Regions which will supercede it stays in that club is rather unimportant for the Big Picture – if you have a central bank and can print money, and buy debt, you can pay for "permanent" trade deficits. This was the liberal default option or slippery slop for the Eurocrats and we live with the results.

Diversifying the Economy
English Labour politicians, the Tyr leadership, the Lib Dems and their strange bedfellow ally of Scotland's SNP are already telling the faithful or credulous that staying in Europe enriches us all by diversifying the economy. European Commission handouts on this can be downloaded at the click of a mouse and this propaganda datea trom as far back as the 1960s. Within a unified single-tariff trade area, with a single currency for 18 of the states, with the same high unemployment, industrial disinvestment and couched potato consumer society, "diversity"soon mutates to what Eurojargon calls "convergence". Strangely for the UK, defenders of "the European ideal" in continental Europe frankly admit to deep economic crisis with intensely convergent and negative results.

As the UK's CBI has admitted in its own way, calling for a major rise in pay for lower income workers and families, the British "ideal" of even greater income inequality than in continental Europe is wistfully envied by many well-heeled and well fed European talking heads – because cheap labour is the manna of latter day Ricardo theory. Sinee all the other factors of production including industrial technology are 100% mobile and go-anywhere th race to the bottom for take-home pay is the last card to play - even in the UK, low paid industrial workers with a screwdriver and a multi-million pound robot also made in Japan, can assemble Toyota cars made in Japan!

Britain is offshore Europe already. Greater European integration of the UK would remove its last surviving economic advantage of low wages, using Ricardian theory. Put another way, the European race to the bottom was provisionally won by the UK where the general public decided it was better to have a job and get pad nothing, rather than get even less from welfare. Easily linked to the immigration issue because opening the EU immigration floodgates wider to potential new member states such as Morocco, Egypt, Ukraine, Belarus and Turkey (for example) could help further cut wages in Europe and "improve competitiveness". The additional pressure on the housing stock, with the new economic immigrants sleeping five to a room could help mainstain house prices at their insane extremes, not only in the UK. With Eurostat official data showing about 27 million unemployeds in the present 29-country EU, making Unemployed Europe the sixth-biggest "nation" in the bloc, selling this to the public would be quite a political feat! Alongside the Tory leadership and the Lib Dems, and the SNP hierarchy, the English Labour party can tell the faithful about the marvlous potentials for part-time jobs as fast food servers, office cleaners,  garage forecourt workers and kirchen hands, a veritable "socialist" economic nirvana.

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2014 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

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