Our neognostic economists like to hide behind the smokescreen of recondite jargon, concealing that the economy is too simple for economists to understand.
Or else they utter deliberate falsehoods, designed as a means of self-perpetuation. True enough, most economists would be made redundant if people applied to economics the only faculty it takes: common sense.
Economists have failed to predict a single major development in world economies, from the 1929 stock market crash to the subsequent depression to the 2008 crisis. That, one would think, would force them to display some humility when making their doomsday prognoses.
Fat chance. With the arrogance of jumped-up ignoramuses, they extol the virtues of the single European market, predicting calamitous consequences should Britain be mad enough to leave it.
Now, let’s agree on the terms. No single European market, in the real sense of the word, exists. There’s only a protectionist bloc slapped together for purely political purposes. As such, it doesn’t function according to market laws, and Europeans are paying through the nose for this travesty.
It has been known at least since the time of Adam Smith and David Ricardo that protectionist tariffs, like those imposed by the EU, hurt one’s own consumers.
Smith wrote 240 years ago that “To give the monopoly of the home-market to the produce of domestic industry… must, in almost all cases, be either a useless or a hurtful regulation. If the produce of domestic can be brought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful.”
Hence belonging to a protectionist bloc hurts the domestic economy, and getting out of it is well-advised, provided it’s done right. This may sound theoretical, but it’s the kind of theory that has been amply proved in practice everywhere in the world.
According to David Ricardo (d. 1823), a free-trading nation will always do better than a protectionist contrivance even if the latter imposes unilateral tariffs on the former. But to do so, the free-trading nation must realise it’s dealing from a position of strength and act accordingly.
Too often Mrs May and her ministers sound like supplicants when dealing with the EU on Brexit. Too often they listen to the choir of economists bleating about losing foreign investment if, God forbid, we may be so silly as to leave the deified single market.
This is arrant nonsense. All we have to do is make real market laws work for us, and then we won’t have to issue specific guarantees to foreign investors, such as the one apparently given Nissan to keep up its Sunderland plant.
Investors are sensitive to the economic climate, and, when it’s beneficial, they need no special inducement to invest. Realising this, Britain can practise economic oneupmanship vis-à-vis the EU, which is shackled by its politicised anti-economics.
However, Britain can only capitalise on its competitive advantages by accentuating them. Certain measures that Mrs May uses only as bargaining chips in Brexit negotiations must be brought on stream immediately, irrespective of how the horse-trading is going.
For example, a couple of weeks ago she hinted at the threat of introducing a 10 per cent corporate tax rate should the EU bar us from the single ‘market’ (which is, in fact, closer to the Zollverein, the trick Prussia used in the nineteenth century to bring all German principalities under its sway).
This should be done anyway, single market or no single market. Foreign investment is the oxygen without which Britain, with her currency imbalance, will suffocate. And what better way to bring foreign companies in than making it cheaper for them to operate?
By 2020, Britain’s corporate tax rate of 20 per cent is set to fall to 17 per cent anyway, which already gives us a head start compared to Germany (29.72 per cent), France (33.33 per cent) and everybody else in the high-rent part of Europe.
Reducing it to 10 per cent would make the EU’s competitive position well-nigh untenable, and don’t think for a second the Eurocrats aren’t scared witless of the prospect. Coupled with our labour laws, already more liberal than on the continent and ripe for even more liberalisation, our generous tax policy is bound to act like a magnet.
By regaining our economic freedom, we could attract not only industrial investment but also the purely fiscal kind, taking advantage of the central position of the London Stock Exchange in the world of finance.
In the run-up to the Brexit referendum, France’s intellectually challenged finance minister Macron was threatening Britain with becoming like Jersey or, alternatively, Guernsey. That threat sounds more like an opportunity to me.
Britain should indeed take advantage of the political millstone around European economies by turning itself into a tax haven. If as a result we become as wealthy as the Channel Islands, not to mention as socially stable and crime-free, I for one wouldn’t shed any tears.
Bolstered by silly economists, the EU is bluffing, trying to conceal what a poor hand it holds in any Brexit negotiations. In response, Mrs May should change her language from ‘may we please?’ to ‘you shall’. She’s holding all the aces.
Bravissimo. Sage advice. Get on with it, missus!
Leaping the tariff wall (hard Brexit) seems to be the only real alternative to Bremain. Soft Brexit is like Bremain without voting rights. The common tariff wall makes people scared of leaving (one is tempted to think that is its main purpose). However, in planning a better way, we must beware of fashionable but untested nostrums.
Adam Smith was delightfully vague about laissez-faire economics and free trade. Whatever his motives, he left no detail and no instructions. Even if detailed, it would still have been merely a theory. In the vague form it was basically a thought experiment about the state having no role in regulating business, and it only yielded thought results. Things got rather scary when further thoughts occurred (such as the starvation theory of wages) so limits to laissez-faire and free trade were retained to varying degrees including cases of none at all – complete state control of everything.
This leads to Daniel’s irrefutable law of unintended consequences, which states that there is always a risk of such consequences but you can reduce that risk by having a good hard think about them.
Some 20th century economists (such as Hayek, Friedman and Harberger) had no qualms about complete deregulation and were canny enough to make it so technical that mere politicians tend not to think of any consequences that would be unpalatable to the voters but just blindly believe what they are told about the upside. The voters are having to find out the hard way and most of them are well on the way to being worse off than serfs (a fate that Hayek said that his theory would prevent). If progress down the road to serfdom continues (as with both socialist and Hayek systems) for the sake of public order, the public must be given no say (indeed punished for saying anything) and ruled with an iron fist. Thus the prospect of disenfranchisement and tyranny looms large whatever we do. So mind how you go, as they said when sweets came off the ration in the first flush of free trade after WW2.