One of the first things any student of macroeconomics learns is that trade protectionism is bad. You put up barriers ostensibly to protect your own industries from foreign competition, but it ultimately hurts everyone. The lack of competition slows down the pace of industrial improvement, and people end up paying too much for inferior goods and services. And exports are damaged by retaliatory barriers in any case.
No — completely open markets maximize competition and therefore efficiency, and everyone increasingly gets to enjoy better stuff at lower prices. And that is the one thing that the EU has done for us above all else — the freedom of movement of goods and services has led to a significantly better life than we’d have had if Fortress UK had remained in splendid isolation.
The Bank of England says so
And that’s not just my opinion — it’s one shared by the Bank of England, as revealed in its recent review of the impact of EU membership. The Bank has concluded that the 40 years the UK has been a member have seen increased investment in the UK, an environment better suited to the creation of businesses and jobs, and a big improvement in productivity.
In short, being in the EU has been a very good thing for British businesses, and for the owners of those businesses — and that, dear shareholder, is you!
It hasn’t all been a bed of roses, of course, and the tragedy of the eurozone’s common currency has harmed us here in the UK too, even though we are very wisely not a party to that monumentally stupid idea. But thanks to our long-standing policy of remaining in the EU but out of the euro, the effect here has been considerably lighter than it has across Europe, with the Bank of England having been free to pursue its own economic policies best suited to our own needs. (And booms and busts like we saw in Ireland would not have happened had the Bank of Ireland had the power to set the interest rates the country needed rather than having to kowtow to what the Germans wanted.)
Political worries?
What else might you be worried about? Immigration? Well, that can be addressed by the UK government without leaving the EU. Don’t want to be part of that ever-closer political integration? Fine, we don’t need to leave the EU for that either. Silly EU rules dictating the shapes of bananas or the names we have to use for sausages? Just stop reading the tabloid press that publishes those made-up ‘scare stories’.
Our businesses do need some protection heading into the future, and it’s essential that the eurozone does not slowly become a protectionist zone of its own — in the recent words of Chancellor George Osborne, the EU “should not discriminate against any business on the basis of the currency of the country in which they reside“.
And on that score, the economic crisis might actually act in our favour in our ongoing renegotiation — we can show Germany and France that our unencumbered economic freedom has given us a much faster recovery than within the zone, and that it’s silly trying to pretend that one size really does fit all.
We need to stay in
But in the end, our businesses, our stock market, and our success as investors will suffer should we end up leaving the EU — and it would be a tragedy if the past 40 years of progress were thrown out with the bathwater.