Britain Failing

[kaima]

Opinion There’s a remedy for Britain’s problems: Rejoin the E.U.

By Fareed Zakaria
Columnist
|

February 2, 2023 at 6:33 p.m. EST

The E.U. and British flags behind broken glass in an illustration. (Reuters/Dado Ruvic)


This week marked the third anniversary of Brexit, and it coincided with a grim verdict from the International Monetary Fund: This year, the British economy will do worse than all of the world’s major economies — including Russia. The 2016 vote to leave the European Union marked the symbolic start of the wave of populism that has been coursing through much of the Western world ever since. It was a conscious choice by a major country to have poorer economic relations with its largest market. (In 2021, the European Union took in around 42 percent of British exports.) British voters thus put nationalism and politics above economics.

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On virtually every measure, from business investment to exports to employment, Britain is falling behind its peers. Think tank scholar John Springford put it simply: “If you impose barriers to trade, investment and migration with your biggest trading partner (EU), then you’re going to have quite a big hit to trade volumes, and to investment and to GDP.” Everywhere you look, Britain is feeling the pinch, from a shortage of workers to small companies struggling to send their goods into Europe to reduced traffic on the Eurostar train between Britain and Europe. Bloomberg Economics estimates that British GDP would be 4 percent higher had it stayed in the European Union.


Britons know they were conned. According to one survey, a clear majority now believe that leaving the European Union was a bad idea, and almost two-thirds want a future referendum on rejoining. The current prime minister, Rishi Sunak, was a Brexiteer himself and continues to mouth platitudes about its virtues — while he faces a series of crises that has in part been generated by Brexit. Even now, Britain has not resolved how it will handle the border between itself and European Union member Ireland — which could further derail economic growth.

Brexit was part of a broader collapse of British confidence. After the global financial crisis of 2008, British productivity turned downward sharply and has never recovered. Austerity policies made things worse as Tory governments slashed public spending, widening inequality and heightening general anxiety. As always, when times get tough, it is easy to blame foreigners, and opportunistic politicians such as Boris Johnson did just that, promising that Brexit would cure all the evils that faced the country and lying about the costs and benefits. Johnson’s fantasies of a lean and productive “Global Britain” that, once unshackled by Brexit, would become a kind of Singapore-on-Thames have gone nowhere. In fact, Britain now spends more on its welfare state, faces strikes across many crucial sectors and is experiencing deepening wage stagnation. According to Financial Times reporter John Burn-Murdoch, if things continue this way, the average British family will be poorer than the average Slovenian family by the end of next year.

The effects go beyond economics. Over the years, I have listened to every prime minister from Margaret Thatcher through David Cameron. They varied in political philosophy but all had an ambitious conception of Britain’s role in the world. Though they acknowledged that Britain would never be a superpower like the United States or China, they envisioned it as an energetic, engaged global player that cared deeply about the world. Britain had a powerful voice in the European Union as one of its three biggest economies; it also enjoyed special status thanks to its U.N. veto, its close relations with Washington, and its impressive armed forces. Most important, it had a long tradition of generating ideas and agendas on global issues — rooted in its legacy as a liberal, free-trading country with deep historical ties around the world. It had a voice that was heard everywhere and listened to seriously.

But over the past decade, defense spending has stagnated while funds for the foreign service, foreign aid and even the BBC have been cut in real terms. With Brexit, even the rhetoric about a larger role collapsed, as politicians ran away from anything that seemed too global. Now British prime ministers rarely speak to the international media — and when they do, they have nothing to say. Britain has become a middling island nation isolated off the coast of Europe, without the heft to matter on its own or to set the agenda in its partnerships. Even Washington has little time for a country that is not even part of the E.U. As journalist Neal Ascherson once feared, Great Britain has become Little England.

There is a remedy that would restore British growth, enlarge the country’s ambitions and return it to a central place in shaping a new world of great power competition. It would, of course, require that Britain return to the European Union.

Rishi Sunak is looking for a way to make a mark and turn Britain’s fortunes around. He has the solution staring him in the face. He just needs the courage to grab it.

www.washingtonpost.com/opinions/2023/02/02/britain-brexit-economy-collapse/

[pieter]

Ron,

If people only act emotionally, impulsive, ethnocentric, with an Island mentality, nationalistically and from Britishness, they forget rational, analytical, logical, realistic, practical and pragmatic reasons to stay in the EU. But they made their decision and I have to respect that. Today in staid of one trade relationship and treaty with the EU they have to make 27 different trade treaties with 27 different EU countries which makes it difficult for them. Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. A lot of countries.







In 2017, exports to the European Union amounted to £274 billion out of £616 billion in total exports for the UK. The proportion of UK export to the European Union has been noted to be in decline, since exports to non-EU countries have increased at a faster rate.

On the European side, according to Eurostat, exports from the EU 27 to the UK have increased from 316 euro billions in 2015 to 319 euro billions in 2019. In the same time, according to Eurostat, imports from the UK to the EU-27 have increased from 184 euro billions in 2015 to 194 euro billions in 2019.

United Kingdom–European Union relations trace back to the foundation of the European Communities, the European Union's predecessor, in 1957. The UK was a member state of the bloc after joining it in 1973 (which was confirmed in a referendum on membership in 1975) until it became the first country to voluntarily end its membership on 31 January 2020 after a second referendum on membership was held in 2016 which resulted in 51.9% of voters opting to leave. The history of the UK membership in the bloc could be outlined as one of "mutual dissatisfaction", with the British stances often hindering steps towards the deepening of European integration.

The Brexit withdrawal agreement now plays a significant role in relations between the two entities, especially for Northern Ireland (which continues to apply EU rules relating to goods, VAT in respect of goods, excise, agricultural and fisheries product and electricity, as well as applying the EU customs code and effectively acting as the EU customs border with Great Britain while legally remaining in the UK's customs territory), and during the transition period which lasted until 31 December 2020. The United Kingdom shares a land border with EU member state Ireland.



Reluctant EU members in the past

The United Kingdom retains links with parts of its former empire through the Commonwealth. It also benefits from historical and cultural links with the United States and is a member of the North Atlantic Treaty Organization (NATO). Moreover, the United Kingdom became a member of the European Union in 1973. Many Britons, however, were sometimes reluctant EU members, holding to the sentiments of the great wartime prime minister Winston Churchill, who sonorously remarked, “We see nothing but good and hope in a richer, freer, more contented European commonalty. But we have our own dream and our own task. We are with Europe, but not of it. We are linked, but not comprised. We are interested and associated, but not absorbed.” Indeed, in June 2016, in a referendum on whether the United Kingdom should remain in the EU, 52 percent of British voters chose to leave. After much negotiation, several deadline extensions, prolonged domestic political discord, and two changes of prime minister, an agreement on “Brexit” (British exit from the EU) was reached that satisfied both the EU and the majority of Parliament. Thus, on January 31, 2020, the United Kingdom would become the first country to withdraw from the EU.

The British Economy

The United Kingdom’s chief trading ties shifted from its former empire to other members of the EU, which came to account for more than half its trade in tangible goods. The United States remained a major investment and trading partner, and Japan also became a significant investor in local production. American and Japanese companies have often chosen the United Kingdom as their European base. In addition, other fast-developing East Asian countries with export-oriented economies included the United Kingdom’s open market among their important outlets.

During the 1980s the Conservative government of Margaret Thatcher pursued the privatization, or denationalization, of publicly owned corporations that had been nationalized by previous governments. Privatization, accompanied by widespread labour unrest, resulted in the loss of tens of thousands of jobs in the coal-mining and heavy industrial sectors. Although there was some improvement in the standard of living nationally, in general there was greater prosperity in the South East, including London, than in the heavily industrialized regions of the West Midlands, northern England, Clydeside, and Belfast, whose economies suffered during the 1980s. During the 1980s and ’90s, income disparity also increased. Unemployment and inflation rates were gradually reduced but remained high until the late 1990s. The country’s role as a major world financial centre remained a source of economic strength. Moreover, its exploitation of offshore natural gas since 1967 and oil since 1975 in the North Sea has reduced dependence on coal and imported oil and provided a further economic boost.

Finance

The United Kingdom, particularly London, has traditionally been a world financial centre. Restructuring and deregulation transformed the sector during the 1980s and ’90s, with important changes in banking, insurance, the London Stock Exchange, shipping, and commodity markets. Some long-standing distinctions between financial institutions have become less clear-cut. For example, housing loans used to be primarily the responsibility of building societies, but increasingly banks and insurance companies have entered this area of lending. Two related developments have occurred: the transformation of building-society branch offices into virtual banks with personal cashing facilities and the diversification of all three of these types of institutions into real estate services. Building societies also participate to a limited extent in investment services, insurance, trusteeship, executorship, and land services.

A variety of institutions, including insurance companies, pension funds, and investment and unit trusts, channel individual savings into investments. Finance houses are the primary providers of home mortgages and corporate lending and leasing. There are also companies that finance the leasing of business equipment; factoring companies that provide immediate cash to creditors and subsequently collect the corporate debts owed; and finance corporations that provide venture capital funding for innovations or high-risk companies and that supplement the medium- and long-term capital markets, otherwise supplied by the banks or the Stock Market.

The United Kingdom has a number of organized financial markets. The securities markets comprise the International Stock Exchange, which deals in officially listed stocks and shares (including government issues, traded options, stock index options, and currency options); the Unlisted Securities Market, for smaller companies; and the Third Market, for small unlisted companies. Money market activities include the trading of bills, certificates of deposit, short-term deposits, and, increasingly, sterling commercial paper. Other markets are those dealing in Eurocurrency, Eurobonds, foreign exchange, financial futures, gold, ship brokerage, freight futures, and agricultural and other commodity futures.

The share of invisible trade (receipts and payments from financial services; interest, profits, and dividends; and transfers between the United Kingdom and other countries) has been rising steadily since the 1960s—from about one-third to one-half of the country’s total foreign earnings. Within this area, service transactions have grown rapidly, and financial services have grown the fastest.

Trade of the United Kingdom

Trade has long been pivotal to the United Kingdom’s economy. The total value of imports and exports represents nearly half the country’s GDP. (By comparison, the value of foreign trade amounts to about one-fifth of the GDP of the United States.) The volume of both the exports and the imports of the United Kingdom has grown steadily in recent years. Principal British exports include machinery, automobiles and other transport equipment, electrical and electronic equipment (including computers), chemicals, and oil. Services, particularly financial services, are another major export and contribute positively to Britain’s trade balance. The country imports about one-tenth of its foodstuffs and about one-third of its machinery and transport equipment.



An increasing share of the United Kingdom’s trade is with other developed countries. Joining the European Economic Community caused a major reorientation of trade flows. At the beginning of the 21st century, about half of all trade was with the United Kingdom’s partners in the European Union, although the United States remained the United Kingdom’s single largest export market and a major supplier. Germany was the leading supplier and the second most important export market. Whether the United Kingdom’s trading partners would change dramatically as a result of Brexit (Britain’s exit from the European Union) remained an open question, as the country entered a period of economic transition in 2020.



The United Kingdom’s current overall balance of payments (including trade in services and transfer payments), which historically had been generally favourable, fell into deficit from the mid-1980s until the late 1990s because visible imports (i.e., tangible goods imported) exceeded visible exports. Meanwhile there was considerable overseas investment, and foreign earnings grew. The government has supported trade liberalization and participated in international trade organizations. By the late 1990s the steady growth in exports of goods and services and in foreign earnings had produced the first balance-of-payments surplus in more than a decade.

Services

The most remarkable economic development in the United Kingdom has been the growth of service industries, which now provide about two-thirds of the GDP and three-fourths of total employment. This reflects the rise in real personal incomes, changes in patterns of consumer expenditure, and the elaboration and increasing outsourcing of business services. Although some services—for example, public transportation, laundries, and movie theatres—have declined in favour of privately owned goods—such as automobiles, washing machines, and television sets—this has stimulated increased demand for the related services that distribute, maintain, and repair such products. Other growing service industries include hotels and catering, air travel and other leisure-related activities, distribution (particularly retailing), and finance. Especially rapid growth has occurred in other business-support services, including computing systems and software, management consultancy, advertising, and market research, as well as the provision of exhibition and conference facilities. Britain is also the base for some of the world’s leading art auction houses.

The United Kingdom’s many cultural treasures—e.g., its historic castles, museums, and theatres—make it a popular tourist destination. The tourism industry is a leading sector in the British economy, and each year more than 25 million tourists visit the country. London is among the world’s most-visited cities.

Labour and taxation

Just under half the total population is in the labour force, including a small but expanding proportion who are self-employed. About three-tenths of workers are members of a trade union, a share that dropped significantly with the adoption of legislation restricting trade union rights in the last two decades of the 20th century. Among the various influential trade organizations are the public-sector union UNISON and the general-services unions Unite and GMB. Although manufacturing once dominated employment, it now involves less than one-sixth of all workers. In contrast, the service sector employs more than two-thirds of employees, with financial services and distribution the two largest components.

Sources: Britannica/Wikipedia

[Jaga]

yes, I worry about Britain also. We have some good friends from GB and they are for EU