Listen to this article
Britain is a week away from its historic economic decision on EU membership. Economists have never been more united in supporting a vote to remain, yet the profession increasingly appears incapable of persuading the public of Britain’s national interest.
Economic history is clear. The UK’s growth of national income per head has been the fastest in the G7 since joining in 1973, having been the slowest between 1950 and 1973. EU membership has served Britain well and has not prevented domestic economic renewal.
A battery of evidence shows the EU creates trade rather than diverts it. All other relationships with the EU and others throw up greater tariff or non-tariff barriers. Trade enhances competition and productivity growth, the elixir of prosperity. Britain is not burdened by EU red tape; its most damaging regulations are home grown. Although EU immigration is unlikely to make the British-born much better off, there is no evidence migrants take jobs and precious little that they harm wages or public services.
The economic assessment is rounded off by the concern that the uncertainty associated with Brexit is highly likely to depress economic activity in the short term, ensuring a much greater hit to the public finances than any possible savings in membership fee sent to Brussels.
Though they do not come to precisely the same assessment of harm, the consensus is striking. While George Osborne’s warning of an immediate tax-raising Budget might be jumping the gun, economists agree higher taxes or lower spending would be necessary. Although economists stand to gain from Brexit — economics does well in a crisis — their lives will not be sweet after a Leave vote for three reasons.
First, good economists know the difference between big and small; they know what is true and fair, and they can put economic claims in the correct context. Such knowledge should be celebrated, but Michael Gove, the leading Brexiter, scorns serious economic research because “people in this country have had enough of experts”.
The Leave campaign has delighted in being the enemy of good economics and shows every sign of continuing after a victory, when it will surely get its fingers on the levers of power. Instead of addressing the arguments, the Leave campaign invariably plays the man not the ball, accuses independent research bodies of being hired hands of European funders, and incorrectly states that authors of many reports were in favour of the UK’s euro membership. A particular low was the insinuation by Steve Baker MP that Mark Carney, the Bank of England governor, was still acting as the mouthpiece of his former employer Goldman Sachs.
Second, some economic officials have been granted constrained powers to take decisions for the public good. The BoE controls interest rates. The Office for Budget Responsibility produces the official forecast that underpins tax and spending decisions. Competition authorities help arrange the playing field on which companies compete. Parliament’s ultimate sovereignty comes in the ability to remove these powers. But that is not enough for many Leave campaigners such as Jacob Rees-Mogg MP, who sought to bully the BoE into silence and called for Mr Carney’s head. Such threats will impede vital economic truth-telling after the referendum.
Third, economics itself is on the line. If leaving the EU turns out to be beneficial, the profession will enter a crisis that will dwarf its inability to see the global financial crisis coming. More likely, if economists are right but had insufficient influence, few will find satisfaction in saying, “we told you so”.
This is a pivotal moment for Britain. It is also a crucial time for economics. For once Britain’s economists have spoken with one voice. Britain should not leave the EU, they say. You have been warned.
Letters in response to this column:
Get alerts on Brexit when a new story is published