Yesterday Mark Carney, the Governor of the Bank of England gave the Cairncross lecture at Oxford University on the topic of "The European Union, monetary and financial stability, and the Bank of England". This talk was a summary of the Bank of England paper: EU Membership and the Bank of England.
The paper raises many marginal effects and talks about them as if they were significant. However, to give the Report its due, it does stress that many of the changes that led to UK growth were global, not EU related. The report stresses that the EU increased "openness" but doesn't stress that this was necessarily good for the UK. The most important graph in the document is:
The graph demonstrates that countries such as Japan and the USA can be prosperous as a result of internal rather than international trading and that joining the EEC and creating the EU had little effect except to increase trade between EU members.
Which neatly echoes the graphs of World Bank GDP data:
Which also shows no large effect of the EEC and EU membership on the economy of the UK, global events in the 80s and 90s having by far the most influence.
The paper has a table of estimates of the "benefit" of the EU, the only truly independent estimate concurs with the graphs above - almost no effect:
Much of the rest of the Bank of England paper is devoted to the ideology of "openness" but, of course, if there is no effect of this openness on the GDP per capita or trade data it is just ideology.
The paper also gives a nice illustration of how the UK is using Foreign Direct Investment to avoid spending on its own R&D:
UK Employers and businesses know that they are avoiding R&D expenditure. Britain's increased openness has been accompanied by a drastic decline in R&D:
This allows business to get R&D and foreign scientists off-the-shelf from other EU countries and the world
in general and forces UK scientists to go abroad for jobs.
The Bank of England saves its worries about the EU to the end of the report (and the executive summary). The demotion of these concerns to the end suggests the report had been politically vetted:
"Participation in the single market means that the majority of the legislation and regulation applying to the financial sector in the UK is determined at EU level."
"The UK, along with many of its main international partners, lacked the institutions and tools for managing the build-up of risks from financial openness and for addressing them when they crystallised. As a result, when the crisis hit, global shocks were transmitted virulently across borders, doing great damage to the financial systems and real economies of many countries. The UK was particularly affected as its institutional framework and policy tools proved inadequate given its high degree of financial openness."
"Following the financial crisis, the EU has carried out a major legislative and regulatory programme which implemented and often exceeded the internationally agreed G20 post-crisis reform agenda. The Bank of England has contributed actively to this process. The resulting legislation has substantially raised the quality of regulation in the EU overall. The need for national regulators and supervisors to have the flexibility in applying EU rules to address the particular risks they face has in the main been respected. However, the general movement away from setting minimum standards in favour of ‘maximum harmonisation’, which prevents national authorities from strengthening regulation to meet particular risks in their jurisdiction, has in some instances been problematic."
Carney summed up his lecture with the words:
"Overall, EU membership has increased the openness of the UK economy, facilitating dynamism but also creating some monetary and financial stability challenges for the Bank of England to manage. Thus far, we have been able to meet these challenges."
23/10/15
The paper raises many marginal effects and talks about them as if they were significant. However, to give the Report its due, it does stress that many of the changes that led to UK growth were global, not EU related. The report stresses that the EU increased "openness" but doesn't stress that this was necessarily good for the UK. The most important graph in the document is:
Which neatly echoes the graphs of World Bank GDP data:
Which also shows no large effect of the EEC and EU membership on the economy of the UK, global events in the 80s and 90s having by far the most influence.
The paper has a table of estimates of the "benefit" of the EU, the only truly independent estimate concurs with the graphs above - almost no effect:
Much of the rest of the Bank of England paper is devoted to the ideology of "openness" but, of course, if there is no effect of this openness on the GDP per capita or trade data it is just ideology.
The paper also gives a nice illustration of how the UK is using Foreign Direct Investment to avoid spending on its own R&D:
The Bank of England saves its worries about the EU to the end of the report (and the executive summary). The demotion of these concerns to the end suggests the report had been politically vetted:
"Participation in the single market means that the majority of the legislation and regulation applying to the financial sector in the UK is determined at EU level."
"The UK, along with many of its main international partners, lacked the institutions and tools for managing the build-up of risks from financial openness and for addressing them when they crystallised. As a result, when the crisis hit, global shocks were transmitted virulently across borders, doing great damage to the financial systems and real economies of many countries. The UK was particularly affected as its institutional framework and policy tools proved inadequate given its high degree of financial openness."
"Following the financial crisis, the EU has carried out a major legislative and regulatory programme which implemented and often exceeded the internationally agreed G20 post-crisis reform agenda. The Bank of England has contributed actively to this process. The resulting legislation has substantially raised the quality of regulation in the EU overall. The need for national regulators and supervisors to have the flexibility in applying EU rules to address the particular risks they face has in the main been respected. However, the general movement away from setting minimum standards in favour of ‘maximum harmonisation’, which prevents national authorities from strengthening regulation to meet particular risks in their jurisdiction, has in some instances been problematic."
Carney summed up his lecture with the words:
"Overall, EU membership has increased the openness of the UK economy, facilitating dynamism but also creating some monetary and financial stability challenges for the Bank of England to manage. Thus far, we have been able to meet these challenges."
23/10/15
Comments