We are going to hear two constant refrains in what passes for economic debate in the UK. We will be told that our exports to the EU are crucial to our economy, and will be at risk in some unspecified way if we dare to demand a renegotiation of our position or a referendum. We will be told that the the UK economy is not growing quickly, owing to the cuts.
The EU lies are the easiest to rebut. There is not the slightest shred of evidence that if the UK seeks to better deal or a referendum on membership of the EU it will damage our trade with the EU. The trade is guaranteed by WTO rules. As the rest of the EU sells us a lot more than we sell them, they will not want to disrupt it in any way. They have more to lose than we do.
EU goods trade probably accounts for around £120 billion of our output. (EU exports adjusted for the entrepot factor) That’s around 8% of our total National Income. It’s important, but not nearly as important as the 92% that is not dependent on selling things on the continent. Since 2008 the government figures show that our exports to the rest of the EU have anyway fallen by 6%, whilst our exports to the rest of the world have risen by 4%. So the trend has been going against the EU before the crisis. Slowdown in the EU and collapse in the weaker EU economies will accelerate this process.
On the radio yesterday Lord Skidelsky was kicking off the ridiculous argument that the Uk economy has slowed down owing to large cuts in public spending. The interviewer and the other participant failed to point that that public spending is up in real terms according to the govenment’s own figures since 2010. No-one mentioned the planned borrowing of at least £122 billion this year, or the additional borrowing and spending announced in the March 2011 budget.
Why on earth do they want to debate something around a completely wrong version of the facts? The question they should have asked Lord S is “Why has the UK economy slowed when real public spending is up, and public borrowing remains at near record levels?”. Why can’t any of these commentators bother to read the numbers? Why does the BBC insist on suppressing the true numbers, so there can be no debate about what is going on as opposed to what is being spun?
Neo Keynsians love high levels of public spending and borrowing, and say they stimulate the economy. They need to be asked why public spending at nearly 50% of GDP, and borrowing of more than £10 billion a month, is not stimulus enough. They should be asked how much more borrowing would it take to get faster growth, and would anyone lend us the money? Could it be that spending more in a wasteful or less productive way, and borrowing more than the country can afford, could be a road to ruin rather than a welcome shot in the arm?