Britain is better in Europe

Posted by ngi2 at Jun 17, 2016 02:40 PM |
Professor Ali al-Nowaihi from the Department of Economics attempts to address four fallacies surrounding Brexit

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The modern civilised world was invented by Britain. Britain was home of the industrial revolution. The two other comparably great events in human history were the control of fire, about 200,000 years ago, and the discovery of agriculture, about 10,000 years ago. But the industrial revolution was much more than that, it was also a scientific and liberal-democratic revolution. Ex-members of the British Empire that retained the British system, e.g., the USA and India, have done well. Those that have abandoned the British system, e.g., Burma, the Sudan and Zimbabwe, have done badly. Post 1945, Europe was remodelled along British lines. Britain’s help was crucial both as an example and through administrative help. The European Union is an idea that can be traced back to Winston Churchill, 1946. Since 1973, Britain has made a major contribution to the reform of the European Union. It is a great pity that Britain appears about to vote to leave the European Union. Europe will be weaker without Britain and Britain will suffer if it exits. Fallacies appear to have won! I will outline and attempt to rebut four main fallacies.

  1. Britain would be economically better off outside the European Union. The evidence is to the contrary. Bodies in possession of the evidence and who understand the complexity of the situation have all come out in support of Britain remaining in the European Union. These include the Treasury, the Bank of England and the Confederation of British Industry; the trade unions, the majority of economists, scientists and historians. The two most important politicians in Britain, both originally sceptical of the European Union, the Prime Minister David Cameron and the Leader of the Opposition Jeremy Corbyn, changed their minds in favour of the European Union, once they became aware of the evidence and the complexity of the situation. The main international bodies are also in support of Britain staying in the European Union. These include the International Monetary Fund and the World Bank. Basically, trade agreements between parties are asymmetric, reflecting the relative strengths of the parties. Through the European Union, member nations get much better trade deals with the outside world than do nations (such as Norway and Switzerland) that are not members of the European Union. See the advertisement in the Telegraph newspaper of 21 June 2016. An advertisement supported by leading economists including 12 Nobel Prize winners.
  2. The European Union is undemocratic. This is not true. Policy is adopted by the elected European parliament and by the Council of Ministers which consists of the elected national governments. To be sure, there is scope for deepening European democracy. But Britain exiting will not help that. On the contrary, to trade with the European Union Britain would then have to comply with European Union laws and regulations that Britain has no say in.
  3. Britain is hobbled by red tape imposed by the European Union. This is not true. Britain remains one of the least regulated and most efficiently regulated economies in the world. On regulation, Britain sided with the majority in 87% of European Union votes. To its credit, Britain led the push for tougher financial and environmental regulation. The costliest burdens are homegrown not European Union inspired, notably tight planning controls, the new living wage and the apprenticeship levy. Most European Union members, like Britain, want less red tape. As a result of Britain’s leadership, the European Union is proposing far fewer rules now. It is ironic that Britain should consider leaving just when the European Union has come round to a more competitive and less intrusive approach.
  4. Migrants steal our jobs. This is one of the strongest held and most enduring fallacies. It occurs among all nations. It relies on the assumption that there is a fixed pool of jobs. If an emigrant takes a job, then this is not available to a British worker. But in actuality the pool of jobs is not fixed, it expands with economic activity. The evidence is that immigration has had a positive net benefit on the British economy. As a whole, migrants pay far more in taxes than they take out in benefits. They also help to plug shortages in key areas. The most obvious example is the National Health Service, which has hugely benefited from a large pool of nurses and doctors who have been trained in their countries of origin, saving British taxpayers a lot of money. One unsettling aspect is that many in the out campaign blame migrants for the aftermath of the financial crisis. A crisis they did not cause nor did they benefit from the boom that preceded it.

For an able, fair, accessible and much more detailed discussion of these issues, see the recent coverage in the Economist paper from 27 February 2016 to 18 June (collected in EconomistBrexitBriefs16.pdf, downloadable free from the internet). The Economist is politically conservative, socially liberal, pro free markets and against excessive government regulation. On every issue, the Economist has come out strongly in favour of Britain remaining in the European Union.

I leave it to colleagues in the other social sciences to explain why some leading newspapers and politicians have opted to pander to strongly and widely held prejudices rather than combat them.

Professor Ali al-Nowaihi, Department of Economics, University of Leicester

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