By Professor Richard A. Werner and cross-posted from Zero Hedge
EU Basics – Your Guide to the Referendum
The British people should be clear about just what they will be voting on at the EU referendum this Thursday. What does it actually mean to stay in the EU? What does it mean to exit?
Concerning the second question, the dominant issue in the debate has been the question whether there will be a significant negative economic impact on the UK from exiting the EU. Prime Minister David Cameron, together with the heads of the IMF, the OECD and various EU agencies have given dire warnings that economic growth will drop, the fiscal position will deteriorate, the currency will weaken and UK exports will decline precipitously. George Osborne, the chancellor of the exchequer has threatened to cut pensions if pensioners dare to vote for exit. But what are the facts?
I have been trained in international and monetary economics at the London School of Economics and have a doctorate from the University of Oxford in economics. I have studied such issues for several decades. I have also recently tested, using advanced quantitative techniques, the question of the size of impact on GDP from entry to or exit from the EU or the eurozone. The conclusion is that this makes no difference to economic growth, and everyone who claims the opposite is not guided by the facts.
The reason is that economic growth and national income are almost entirely determined by a factor that is decided at home, namely the amount of bank credit created for productive purposes. This has sadly been very small in the UK in recent decades, thus much greater economic growth is possible as soon as steps are taken to boost bank credit for productive purposes – irrespective of whether the UK stays in the EU or not (although Brexit will make it much easier to take such policy steps).
We should also remember that a much smaller economy like Norway – thought more dependent on international trade – fared extremely well after its people rejected EU membership in a referendum in 1995 (which happened against the dire warnings and threats from its cross-party elites, most of its media and the united chorus of the heads of international organisations). Besides, Japan, Korea, Taiwan and China never needed EU membership to move from developing economy status to top industrialised nations within about half a century. The argument of dire economic consequences of Brexit is bogus.
As for the first question, namely what it means to stay inside the EU, we should consult the EU itself. Happily, the EU released a major official report about its key policies and what it plans to achieve in the near future in October 2015. This report was issued in the names of the “Five Presidents“ of the EU. In case you had not been aware that there was even a single, let alone five presidents of the EU, these are: The unelected president of the European Central Bank, Goldman Sachs alumnus Mario Draghi, the unelected president of the European Commission, Jean-Claude Juncker, the unelected Brussels Commissar and “president of the Eurogroup“, Jeroen Dijsselbloem, the “president of the Euro Summit“, Donald Tusk, and the president of the European Parliament, Martin Schulz.
What is the message of this not negligible number of EU presidents concerning the question of where the EU is going? The title of their joint report is a give-away: “The Five President’s (sic) Report: Completing Europe’s Economic and Monetary Union“.https://ec.europa.eu/priorities/publications/five-presidents-report-completing-europes-economic-and-monetary-union_en
The report starts with the frank admission that “with 18 million unemployed in the euro area, a lot more needs to be done to improve economic policies” in the EU. Well said. But what exactly needs to be done?
“Europe’s Economic and Monetary Union (EMU) today is like a house that was built over decades but only partially finished. When the storm hit, its walls and roof had to be stabilised quickly. It is now high time to reinforce its foundations and turn it into what EMU was meant to be…“
“ we will need to take further steps to complete EMU.”
The central planners in Brussels and at the ECB in Frankfurt are not unaware that under their command, a historically unprecedented economic dislocation has taken place in the EU during the past ten years, including massive asset and property bubbles, banking crises and large-scale unemployment in all the periphery countries – with over 50% youth unemployment in Greece, Spain and Portugal, as well as the lack of any serious controls of the EU external borders to prevent an influx of unparalleled numbers of illegal immigrants and economic migrants.
However, the EU central planners are in denial about the fact that these problems have been caused entirely by their own misguided and disastrous policies. As a result, they argue that the solution to such problems can only be further concentration of powers into their hands: “We need more Europe“, as Mrs Merkel put it (source: please read these Merkel claims about the EU http://www.euractiv.com/section/eu-priorities-2020/news/merkel-calls-for-political-union-to-save-the-euro/) This is what they propose to implement in the coming years, by turning all EU members into one single country.
So the Five Presidents‘ Report makes clear that the EU is not simply a free trade area. That project had been left behind with the 1992 Maastricht Treaty and a very different kind of Europe has become enshrined with the 2007 European Constitution (called ‘Lisbon Treaty‘, since the people of Europe in several referenda rejected it. Source: please read what the author of the rejected European Constitution says:http://www.independent.co.uk/voices/commentators/valeacutery-giscard-destaing-the-eu-treaty-is-the-same-as-the-constitution-398286.html ).
Instead, the EU is the project to abandon all national sovereignty and borders within and melt away all European nations that don’t succeed in exiting in time, into a merged, joint new single country, with one central European government, centralised European monetary policy, centralised European fiscal policy, centralised European foreign policy, and centralised European regulation, including of financial markets and banking. This United States of Europe, an undemocratic leviathan that the European peoples never wanted, is the culmination of the much repeated mantra of “ever closer union“…