World economy

Graph 1:

An important bonus is that the benefits of growth in Britain have been divided much more fairly than in the US. Statistics compiled by the Institute for New Economic Thinking show that Since 1974, median income in the UK grew by 79%, in contrast to 16% for the US. Thus, Britain has had the best of both worlds while a member of the EU -- not just strong growth, but more equal growth.

As the UK economy has grown, it has become more dependent on trade. Since 1973 the ratio of trade to economic output increased from 48% to 67%. At present 45% of the UK’s exports go to other EU member countries. In response to the concern that the EU might impose high tariffs or punitive measures if the UK leaves, some Brexiteers have said that we can “just trade with Australia and Canada”. These two countries, however, only account for a meagre 2.9% of British exports.

History is clear: things have gone very well for Britain as a member of the EU.

The following three visualisations illustrate our main points:

Firstly, since the year the UK joined the EU GDP per capita in the UK has grown faster than in the two other big EU economies France and Germany and also exceeded growth in the USA.

Secondly, growth in the UK was more equally shared than in the USA: Since 1974, median income in the UK grew by 79%, in contrast to 16% for the US. This is what research by INET researchers Professor Brian Nolan, Dr Stefan Thewissen and Dr Max Roser shows.

As briefly recall the context in which the referendum on British withdrawal came about. The referendum itself, whilst rooted in the immediate, specific context of the internal politics of David Cameron’s Conservative Party, was also the product of a more general discontent with the European project that stretches back decades. Indeed, Britain’s relationship to what is now the EU was never a straightforward one. When Winston Churchill championed the cause of European integration after World War II – in a speech delivered in Zurich – he did not envision the UK being a part of this new Europe, but rather its ‘friend and sponsor’. Indeed, when ‘the six’ European states – France, Germany, Italy, Belgium, Netherlands and Luxembourg – agreed to the creation of a European Coal and Steel Community (ECSC) in 1951, and to the subsequent European Economic Community (EEC) in 1957, Britain declined to participate in either venture. The UK also placed itself on the sidelines when the other West European states negotiated the abortive European Defence Community (EDC), agreeing only to an associated role in the proposed organisation.

Spurred on by changing political and economic circumstances, however, the UK twice applied to join the EEC in the 1960s. Politically, the disastrous Suez Campaign of October 1956 had demonstrated, to the world, that Britain’s claim to be a global  – rather than European or regional – power lacked credibility. Economically, moreover, it had become clear by this point that, outside the EEC, the UK would remain the ‘sick man of Europe’. And yet, Britain’s changing perceptions of the value of EEC membership coincided with the rise of Gaullism in France, and the corresponding rise of anti-American sentiment in the upper-echelons of French politics. Fearing British accession to the EEC as an Anglo-Saxon ‘trojan horse’, de Gaulle vetoed applications from Harold Macmillan’s Conservative government in 1963 and Harold Wilson’s Labour government in 1967. When de Gaulle lost power in 1969 – replaced by his more moderate successor, Georges Pompidou – Wilson once again made the case for joining the EEC, and the Labour government was on the verge of negotiating accession in 1970 when they lost the general election to the Conservatives. It was thus left to Conservative Prime Minister Edward Heath to take the UK through the accession process and ensure passage of the 1972 European Communities Act through Parliament, paving the way for British membership of the EEC on 1 January 1973.

The Labour Party, however, and to some extent the Conservative Party, remained deeply divided on the question of British membership of the Common Market. When Labour returned to power in 1974, Wilson made good on his pledge to renegotiate the terms of membership secured by Heath, and to put this to the British people in the form of an in–out referendum. While Wilson’s renegotiation was not substantial, and served principally to confuse and irritate other European leaders in Brussels, the result proved sufficient to secure the support of the Labour Cabinet and, subsequently, for Wilson to obtain a majority of 67.23 per cent in favour of remaining in the EEC in the referendum, held on 6 June 1975. The campaign itself demonstrated splits within both major parties, Labour and Conservative, although both party leaders – Harold Wilson and Margaret Thatcher – campaigned to remain in the Common Market. Whilst Labour opponents regarded the EEC as a capitalist project designed to weaken the bargaining power of labour and undermine domestic protection, Conservative sceptics emphasised the threat to national sovereignty and the challenge to British identity posed by European integration.

Labour lost power again in 1979, following a period of significant industrial unrest – the ‘Winter of Discontent’ – leading to a Conservative government under Prime Minister Margaret Thatcher. Thatcher regarded herself as a classical (Gladstonian) liberal, rather than a traditional Conservative as such, and her zealous belief in the free market and the removal of barriers to trade contributed to her general support for the European project (Van Parijs, Chapter 27). Thatcher was a proponent of further liberalisation of the EEC, supporting the Single European Act of 1986 – which introduced qualified majority voting (QMV) in the Council for the first time – in order to further this aim. Over the course of the late-1980s, however, Thatcher became increasingly hostile to developments in the EEC. Having supported further market integration, she vocally opposed the direction the Community was taking under the entrepreneurial leadership of Commission President Jacques Delors, famously arguing that the European Community should be a ‘willing and active cooperation between independent sovereign states’ (Thatcher 1988), and pitting herself against the dominant trend towards further integration. Thatcher’s hardening opposition to further integration – and in particular to the Exchange Rate Mechanism and the proposed single currency  – led directly to the resignation of Geoffrey Howe and the leadership challenge from Michael Heseltine that heralded her fall from power in November 1990 and resulted in John Major replacing her as Conservative leader and prime minister.

The passage of the Maastricht Treaty in 1992 occasioned a significant split in Conservative ranks between pro-Europeans and those who feared the (substantial) supranational elements of the Treaty (including proposals for a common currency and a Common Foreign and Security Policy (CFSP)). Major was able to head off opposition by tying the passing of the Treaty in Parliament to a vote of no confidence in the government (Huber 1996, 269), but the split between pro-Europeans and Eurosceptics remained (and festered), re-opening when David Cameron became prime minister in 2010 at the head of a Conservative– Liberal Democrat coalition. Seeking to settle the issue once and for all, and to head off opposition from the United Kingdom Independence Party (UKIP) which was threatening Conservative majorities in marginal constituencies, Cameron announced an in–out referendum on Britain’s EU membership in his Bloomberg Speech in January 2013, contingent on a Conservative victory in the 2015 general election. When Cameron received his majority he duly announced the referendum the following February, after negotiating a deal with the EU to reform the UK’s relationship to the Union, setting off the starting gun on four months of intense campaigning by both sides.

Events in British politics moved swiftly following the vote of 23 June 2016 and the 51.89 per cent majority for ‘Leave’ which resulted. David Cameron resigned the next day, triggering a leadership election in the Conservative Party, in which Theresa May beat sole challenger Andrea Leadsom to become party leader and prime minister. Cameron left it to his successor to trigger Article 50 – the paragraph in the Lisbon Treaty setting out the procedure for withdrawing from the Union – and the letter indicating the UK’s intention to leave was delivered on 29 March 2017 by the newly appointed Permanent Representative to the EU, Sir Tim Barrow. This followed the passage of the necessary legislation through Parliament on 13 March, the government having lost a legal challenge against its presumed right to trigger Article 50 by Royal Prerogative.3 May’s vision for Brexit, set out in a speech at Lancaster House in January 2017 and published shortly thereafter as a White Paper (HM Government 2017a), promised no ‘back door’ membership of the EU. Arguing that ‘Brexit means Brexit’, May defined her key objectives as access to – but not membership of – the Single Market, a bespoke agreement with the EU without membership of the Customs Union, an end to ‘free movement’, and an end to the jurisdiction of the European Court of Justice (CJEU). Following shortly after snap elections on 8 June 2017 – during which the Conservative Party lost its slim majority but remained in power thanks to an agreement with the Democratic Unionist Party (DUP) – negotiations between the UK and the EU began on 19 June 2017. With the EU represented by Commission chief negotiator Michel Barnier, on the basis of directives received from the Council, the negotiations are expected to comprise two distinct rounds (on settling outstanding issues, and on future arrangements), and to last until the end of March 2019, unless extended by the Council.