UK harmed by bizarre exceptionalism

I was planning to write a piece on the frankly bizarre British exceptionalism evident in Brexiteers’ cheery dismissal of the simple facts around the poor performance of the UK economy and its huge vulnerability to leaving the Single Market (which will inevitably send living standards crashing, particularly among the poorest).

It turns out I do not need to, the CER has done it for me here.

Anyone with a genuine interest in the UK’s future and the well-being of its people must read and grasp that linked article.

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3 thoughts on “UK harmed by bizarre exceptionalism

  1. korhomme says:

    Interesting linked article. Some of the comments are ‘interesting’.

    The origin of this exceptionalism? Anything to do with ‘public’ schools and Oxbridge?

    • Well, I suspect it simply all goes back to a huge empire and the underlying notion there must be something uniquely brilliant about us to have created it (and then, the national myth continues, to have sacrificed it). I find the exceptionalism as common in inner-city Romford and (Loyalist) Belfast as at Oxbridge.

  2. Colin says:

    I’m afraid the article lacks data to back up their case. I think in the interests of having a representative result in the referendum, Britain should have a SM-styled deal while leaving the bloc. However, the idea that the SM is utopian, or fully functional is foolish. The project, the market, the legislative background and formulation need fundamental reform to remain sustainable.

    Thevenot demonstrated at an aggregate level that prices, even within the Eurozone, remain dispersed. In the beginning the prices rapidly began to converge but then the pace slowed down until around 1999 when convergence stalled. During this process there were two forces leading to price convergence: first the catch-up effect, leading to a rise in price levels in the countries with lower standard of living, and second, increased competition, leading to lower price levels due to lower markups of prices over marginal costs.

    It is unrealistic to expect competition in the Single Market to cause price convergence. Inarguably, not all of the persistent price dispersion are a consequence of the lack of a Single Market. After all, companies mostly do not compete on price alone, which can be shown by the lack of convergence in prices even in what should be a relatively integrated EU market like cars. One example is network industries, such as electricity, gas and telecommunications where there are huge price dispersions. ECB Working Paper 2014: “We explain around 25% (or 5 percentage points of the 20 percentage points difference) of observed international price differences, and around 43% of the estimated border effect by differences in consumption intensities, per capita income and national tax rates. Quantitatively, value-added tax differences matter the most: they account for around 10% of the international price differences and 20% of the estimated border effects. We conclude that there are large international price differences left within the Eurozone that we are unable to explain.” Their words, not mine.

    The United States is often cited as the closest example of a perfect single market and, which I dispute as a sound economic model, but is a good example to gauge. For example, trade between individual U.S. states accounts for nearly 40% of GDP, whereas in the EU-27 it is 20% ish. Furthermore, the trade volume within a U.S. state is 2.6 times higher than that between U.S. states, but in the EU it is no less than 7.5 times higher. In the EU obstacles to full economic integration that persist and are less related to policy, language barriers and cultural differences are more prevalent. It’s a flawed idea and remains as such.

    The relationship between the Single Market, innovation and productivity also remains ambiguous. The Single Market and lower barriers to trade mean that firms face more competition, which encourages innovation and productivity. Increased interaction between competitors and easier exchange of ideas and methods should also promote innovation. Yet why does The Conference Board Total Economy Database (2015) find GDP per Capita of the EU15 as 80% of the US productivity level and has remained largely stagnant as this number since the formulation of the single market project?

    Brexit isn’t a basket of roses, but we are kidding ourselves if we think the EU is either.

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