Soros on my side, but economists I respect say LEAVE

Spookily,  a couple of day after I claimed on this blog that it would be economically foolish to leave the EU,  George Soros claims the same, citing pretty much the same reasons to my own, in the same order.

  1. UK currency could fall in value, making it poorer
  2. huge current account deficit means UK is in weak position
  3. manufacturing sector is unable to prosper following Brexit

On the other hand, some economists and economic commentators whose opinions I generally like and trust all suggest to vote for Leave.

Yesterday Professor Richard Werner stated his reasons, pointing out Norway and South Korea can prosper, and that the EU is a part of the USA’s sphere of influence which is likes to control and also covertly finance. The EU’s have recently, under the influence of the USA, led to economically counter-productive sanctions on Russia.  And the EU has not learned from the Eurocrisis which it was barely able to resolve.  The EU thinks future integration is the answer. The five Presidents’ report makes that clear – the wrong recipe, thinks Werner.

Professor Steve Keen also states his reasons for leave, citing the problematic Euro currency area and undemocratic nature of the EU, and the Eurozone’s insistence on budget surpluses , which cannot work.

Larry Elliot in the Guardian sees the treatment of Greece and the unflexible Eurozone elite as problems, and does not believe a democratisation, as envisaged by Varoufakis would work.

And finally, Ambrose Evans-Pritchard, from the Daily Telegraph, who, albeit only reluctantly voting for Leave,  cites a democratic deficit, and a abrogation of national law to the European system and European Court of Justice as his reasons.

So all of these commentators list valid and thoughtful reasons why the EU is not working well. It is irredeemable, and people should vote for Leave. I disagree, although the deficits of the EU are blatantly obvious.

As I said before, for me the inability to tackle unemployment is the over-whelming indicator of the EU’s failure. (The critics above also see that as a big problem). The ECB currently prints money, Euro 80 billion a month. Instead of using it fight unemployment, it buys bonds from governments and corporates.

The EU Juncker fund, a Euro 315 billion investment fund launched in November 2014, to spend that money to fight unemployment seems to have been singularly ineffective. The money was to be spent by the end of 2017. Where is it? Unemployment rates of 20% in the South of Europe, with youth unemployment at up to 50% remain a symbol for the failure of economic policy within the EU.

If you think that this will always stay that way, and there is little to no chance of redemption, as the critics of the EU above might think, vote for Leave.

If you believe, as I do that, eventually, the right policies will be taken to tackle unemployment (more balanced trade and less balanced budgets and employment programs) vote Remain.

Voting Remain will not endorse the draw-backs highlighted by the critics above. It will give us a chance to influence the EU (by influencing our government which influences others) and change them.










3 thoughts on “Soros on my side, but economists I respect say LEAVE

  1. Voting to remain, given the reservations you have seem to embody the triumph of (false) hope over experience! One factor that very few commentators seem to mention is the inexorable enrichment of Germany due to their locational advantage in an ever larger single market. Without a mechanism to re-distribute this wealth to the periphery in a true fiscal union, this process will lead to ever growing discontent at the margin. Given the ideological narrative of hard work and discipline and budget surplus in Germany, what are the chances of that?


    • The criticism of Germany is justified. Would there be more internal demand in Germany, through higher government spending, resources would shift the huge export orientated industries. The German trade surplus would fall, the other countries around it would do better.

      The problem is that the Germany has a powerful finance minister who does not see things this way. But at 73 he will not be there forever. And infrastructure is dilapidated in Germany, and needs renewing.

      German unemployment is low now, so wages should rise. As they go up, it will make other countries more competitive. So the next German factory will be build in Spain or Greece, perhaps.

      Germans keeps taking issues decided by the the EU to the German constitutional court, and keep losing. They complain about non-existent interest rates for their savings. Banks think of hoarding cash as reserves, rather than pay penalties to the ECB. So they are unhappy, but the ECB rightly says it is insufficient demand which is the problem. So Geramns do not think they always get their own way in the EU.

      Can enough money be sent to the margins of the EU to make sure people have jobs and decent income? It is working in general.

      Here is the surprising stats:

      From 1998 (year which Euro was decided upon) to 2014, the economic GDP/head in the EU has grown as follows:

      Eurozone (EU 19) 93% growth
      Germany 85%
      Total of EU (EU 28) 62%

      for comparison:

      UK 65%
      Greece 52%.

      So in general, it has been working, the Eurozone grew more than the rest of Germany. Although Greece has been the worst performer, it is not that much worse than EU average or the UK.

      Currently all countries, apart from Greece, are growing.

      I think the problems of the Eurozone have overshadowed the fact that the Euro is still a success in general. The poorer countries are generally catching up and hopefully we see the periphery outperforming Germany again, but this time financed by some more permanent equity capital from the centre, or some version of helicopter money, or more equitable (wealth) taxation.


  2. As you say, EU membership is a bit of a mixed bag. The best parts (in my mind) are the increased mobility and trade within the participating countries. I’m American and I can’t pretend to be particularly well informed on this, but why does it seem unthinkable to people that Britain could dissolve its political associations with the EU but not divorce itself economically?
    The United States, for example, has NAFTA, which eliminates or reduces many tariffs between trading partners in our region. Why wouldn’t Europe and Britain seek a similar arrangement, given that imposing trade barriers would be detrimental to either party? Of course nations aren’t always rational actors.


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