13/05/2016
Yesterday, we saw Mark Carney, governor of the Bank of England run a press conference on the findings of the
May meeting of the Monetary Policy Committee.
According to the
Financial Times, Mark Carney "could not have been clearer". A vote on June 23 to leave the EU, he said,
would expose the UK to a "material slowdown in growth", a "notable rise in inflation", and as a result a more challenging trade-off for the BoE's task of setting interest rates.
However, we have the minutes of the meeting (link above) and, via the
Telegraph a video report of his statement. And at no time did Mr Carney use the word "would". Throughout the session, he was punctilious in using the word "could" to qualify his potential outcomes.
The change of one word makes a huge difference, amounting to misinformation. And even the
Telegraph doesn't get a clean bill of health. It tells us that Mr Carney said the economy faced a "material" slowdown that could even see the UK slip into "technical recession".
Here, context is important. The prospect of a recession does not appear in the minutes, and is referred to by Mr Carney only in response to a journalist's question. This is not, therefore, a full-blooded warning. In fact, the
BBC tells us that that the risks of leaving "could possibly include a technical recession" â making it a very diffident prediction.
And for all that, Mr Carney is playing games. He is anticipating these effects on the basis of an adverse market response to a Brexit vote. But the suggestion that there could be an adverse reaction is entirely speculation. As we point out in
Flexcit (p.30), this need not be the case.
As long as the government responds quickly to the vote, offering immediate reassurances as to its negotiating intentions and speaks of its determination to promote stability and to protect its trading position, there should be no great drama.
However, the
Financial Times is not wrong when it says that the BoE "uniquely combines the authority of a venerable government institution with a well-deserved reputation for independence and competence". To top it off, the governor said all the members of the Financial and Monetary Policy Committees agree that Brexit is the greatest risk to the bank's remit.
The Leave campaign, the paper says, will not be able to swat Mr Carney away as politically biased, as it attempted to do, with some success, with the Treasury's report on the long-term costs of Brexit to the UK economy last month.
With that, the
FT thinks that the debate on the economics has been won by the Remain side. The only thing Leavers can do, it says, "is to try to avoid fighting the campaign on economic issues at all".
But this is what we've been suggesting all along, with the whole idea of Flexcit being to make the first phase of withdrawal "economically neutral" â thereby taking economics out of the picture. We cannot afford to slug it out over this issue â it is one we can never win.
The same applies to the battle over the Single Market. For every report suggesting that it is damaging to UK interests, there could be a dozen or more
other reports affirming that we have benefitted from participation in it. We can
trade blows until the cows come home, but the net result will be a confused electorate, unable to judge between the completing claims.
Yet, just as the "leave" campaign has allowed itself to get bogged down in an unwinnable war of attrition on economics, we have the likes of
David Davis seeking to argue against the Single Market.
Similarly, we cannot afford endless arguments over whether we can get better trade deals inside or outside the EU. Outcomes cannot be proven one way or the other.
But, in the dreadful
Brexit the Movie, we see pundits lining up to say we can manage fine outside the EU, because we already trade with countries like the US and China, yet do not have trade deals with them. We don't need a trade deal with a country in order to trade with it, says
Alistair Heath, trotting out the mantra in an extraordinary display of collective ignorance.
Having got this completely wrong,
Durkin's film makes a complete hash of its analysis on regulation - not that we should be arguing the toss over this subject either. Instead, we need to go back to 1985 and the White Paper by Jacques Delors on
Completing the Internal Market to realise that the push towards harmonising regulation was a direct response to the need to remove technical barriers to trade.
It was the 1957 Treaty of Rome, starting off the Common Market, which dealt with tariffs and quotas â the physical barriers to trade â leaving the Single European Act of 1987 to address the technical barriers. This passage in the White Paper (page 5) sets out the position:
Originally it was assumed that such "non-tariff barriers" as they are commonly called, were of limited importance compared with actual duties. But during the recession they multiplied as each Member State endeavoured to protect what it thought was its short term interests - not only against third countries but against fellow Member States as well.
Member States also increasingly sought to protect national markets and industries through the use of public funds to aid and maintain non-viable companies. The provision in the EEC Treaty that restrictions on the freedom to provide services should "be progressively abolished during the transitional period" not only failed to be implemented during the transitional period, but over important areas failed to be implemented at all. Disgracefully, that remains the case.
As a result, we saw the "
new approach" to technical harmonisation and standards, which was to become a key factor in the development of the Single Market, triggering an explosion of regulatory and other measures.
Thirty years on, though, the "leave" campaign still hasn't got to grips with the fact that removing technical barriers to trade, rather than tariffs, is the key to expanding trade. And with the globalisation, we are looking at regulatory convergence on a global scale, rather than seeking a bonfire of regulations.
At another level, we still see "leavers" hankering after old-fashioned trade deals, not realising that trading mechanisms are undergoing revolutionary transformation. The talking heads are locked into their 18th Century free trade ideology, making no concessions to modernity.
Elsewhere, MEPs
are trying to prevent China acquiring full market economy status, suggesting to some that the EU is retreating from globalisation. But even this isn't happening. "The EU is sidestepping the old dinosaur trade deals and ceding trade authority to global institutions like the WTO", a "trade expert says. "They are doing it invisibly and under the wire. They remain globalization enthusiasts".
There lies one of the strongest possible reasons for Brexit. The very invisibility of the globalisation process means that it lacks transparency and accountability. We need to clear out the obstructions in Brussels and deal direct with global institutions, so that we have a better idea of what is being done in our name.
It would help considerably, though, if the "leaver" community had the first idea of what was going on. They are fighting the wrong battles over issues where they cannot prevail, as they chant their mantras and exclude themselves from the real world.
