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What are the economic effects of Britain leaving the EU? There is wide agreement among economists that Britain would suffer economically, while the gains could prove negligible or non-existent. A Brexit would hit the country by lowering gains from trade, driving away foreign investment and threatening London’s position as a financial centre. It is said that the rest of Europe would lose out as well. Studies trying to quantify these effects abound. But their magnitude remain highly uncertain, which is reflected in the wide range of prevailing estimates.

Does the exact magnitude matter? I believe it does not, for the direct economic costs, large as they may be, pale in comparison to the broader costs of Brexit, which would result from the changing nature of the EU and the shifts in the political landscape.

One such cost would be the political shift within the EU towards more protectionist, more interventionist and less market-friendly forces. This is likely to make it even harder to implement badly needed structural reforms. It would rather strengthen those in favour of expanding public subsidisation, introducing protectionist measures shielding domestic companies from competition, and intervening directly in the markets’ price-setting mechanisms. This could harm not only the growth potential of the remaining EU countries. It would also affect Britain. In attempting to maintain access to the common European market, the UK may even be forced into new regulations, offsetting the new freedoms enjoyed outside the union.

A second threat is that Brexit would set in motion a process of further disintegration. There could be a stronger nationalisation, inducing other countries to consider leaving the EU as well, especially in the presence of strong populist political movements. A complete break-up of the union would not be an impossible outcome. Conversely, there could also be stronger regionalisation, so that secessionist movements within countries in the EU would gain momentum.

Even if a majority in the UK favour Brexit, the vote may turn out differently in different parts of the UK, with Scotland, Wales, or Northern Ireland being more likely to be on the Bremain side. Regional divides would raise difficult issues regarding the possibility of these regions remaining in the EU; more importantly, it may also fuel the desire of others, such as Catalonia or Flanders, to leave their nation states. A fragmentation within the EU could make it even harder to bring forward important European projects, such as the energy and capital markets union, or a digital single market.

Even if total disintegration can be avoided, a third cost is the loss of a strong, united European voice on the world stage. This is essential in order to represent the continent’s interests in international negotiations, especially with the US and China. The EU could no longer rely on the UK’s diplomatic skills, and the UK would lose political weight. This also matters when it comes to safeguarding human rights, fostering democracy, or achieving environmental goals across the globe. And it would play into the hands of countries like Russia, whose position would undoubtedly strengthen in the face of a less united Europe. A truly common foreign and security policy would become even less feasible than today.

Finally, and indisputably most importantly, the European idea has been a guarantee for peace over the past 70 years. We tend to forget that this peace dividend is likely to outweigh other arguments by a large margin.

The EU stands at a crossroads. The threat to European unity was not imposed upon Europe from the outside. It rather is a matter of choice for the British people. Populist arguments should not obscure the immense benefits that Europe has provided for all of us, including the UK.

The process leading up to the referendum has already done some damage. It included political concessions to the UK, suggesting that any member state can negotiate the terms of its being in the union as it pleases. Other countries may follow suit. The resulting increase in uncertainty about the future of the EU already now has the potential to undermine investment and weaken the growth outlook in Europe. But the break-up can still be avoided. And it should — not just for the narrowly defined economic benefits, but in order to preserve liberal values, safeguard European unity and guarantee peace in Europe. After all, these ensure the UK’s wellbeing as much as the continent’s.

The writer is professor of financial economics at the University of Bonn and is a member of the German Council of Economic Experts

Copyright The Financial Times Limited 2017. All rights reserved.
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