Tuesday, December 11, 2012

The Economist on the UK exiting Europe

The Economist's 2012 take on Britain leaving the EU

This week's cover article on the Economist was on a possible EU exit by the UK, "Making the break", December 08 - 14th, 2012. It is not an example of impressive journalism.

Apart from the pretty visuals, reminiscent of oil paintings of a bygone era, the article does not offer very many perceptive insights into Britain’s prospects of exiting the EU.  It does make for a laundry list of many factors which are relevant, e.g. the opinion of the media (and the Economist is part of that estate), the stances of various political parties, public opinion, the case of Switzerland and Norway, the significance of London’s financial industry, relations with NATO, access to EU-wide talent etc.. It ignores, however, some other points, e.g. examining the extent of Britain’s trade with the (rest of the) EU compared with non-EU partners, the non-financial benefits of EU-membership (such as freedoms, security, stability, cultural exchanges etc.), a look into precisely which areas in the UK receive EU aid (and whether the same areas and functions may count on the same extent of UK aid, once EU funds are blocked), a possible Greek exit from the Eurozone, access to the EU-wide job-market etc.. And there is little financial analyis, for an economics publication.

Prejudice against Poles
> "Britons have come to associate the EU with the uncontrolled immigration of Poles and other east Europeans, seemingly to every village."

This is fascinating. Note that the anonymous author (or authors) of this article does not make any attempt to reveal how he or she gained this insight into the opinions of Britons. Of course, the language suggests that it could be four Britons who have this opinion – easy enough to obtain that confirmation in most pubs at around half past nine in the evening. Of almost any opinion, that is.

The author therefore seeks to establish a prejudice by treating it as being universal, by making it passé. If everyone already uses the word Lonky to refer to a disabled Irishman, surely it is acceptable to do so?

The author's own opinion comes through, of course – when one examines the use of the definite article in the assertion: "...the uncontrolled immigration...", which suggests that the immigration of Poles etc. is definitely uncontrolled (out of control, implying deleterious), as compared to the mere association of that phenomenon with the EU, or as compared to the mere appearance of Poles in every single village (i.e. it may not be quite the case that the Pole stands in every village, but it appears to be, as compared to the certain uncontrolled immigration of said Poles and their neighbors).

The will of the people as accident
The article goes on to suggest that the British exit could be "almost by accident". Which is peculiar, given that the article quotes a poll which suggests that overwhelmingly more Britons would like to leave (49%), than would like to stay (32%). A decision to exit would, therefore, appear to reflect the will of the people. We are asked to ignore the fact that the article, as is typical for the Economist, does not really (“...latest YouGov poll...”) describe where the reader may find out more about the scope and rigor of the poll.

The abuse of statistics
The article claims that Britain would be GBP 8 billion better off each year. Let us examine this number. The UK's total national contribution in 2011 was EUR 11273.4 million. That includes the rebate of EUR 3595.9 million (from the UK correction, which, incidentally, is not mentioned anywhere in the Economist article). The operating budgetary balance for the UK in 2011 was EUR -5565.6 million. If we use the EU's year-end exchange rate of 1 EUR = 0.8353 GBP, the UK forked out around GBP 4.65 billion in 2011.

(2011 exchange rate taken from the consolidated annual accounts of the EU, available at

All this from the EU's latest annual financial report, available freely online. None of this "Treasury figures suggest...." skullduggery – where may we find these figures, which year do these figures refer to, is that a figure published by the Treasury or is it derived from Treasury sources?

Now, this EU figure of GBP 4.65 billion is off by the Economist's by a huge margin, of a few billion pounds – where does the difference come from? Alas, we are not privileged to know, for the Economist does not reveal its sources.

A clumsy look at EU-driven legislation
The article picks the Solvency II legislation, as an example of an advantage to be had by Britain no longer having to follow an EU directive, suggesting that its burden would become less onerous. Given that Solvency II is widely welcomed – and also shaped – by the insurance industry, this does not appear to be very relevant. Also, given the schedule of that Directive's enforcement, one assumes that a significant part of the compliance effort has already been made, in terms of the one-off changes to systems, organizations and processes.

Not saying much at all
The article concludes with the pedestrian, "And one certainty: that having once departed, it would be all but impossible to get back in again". The phrase "all but impossible" suggests that it is not quite a certainty.

Why would it be almost impossible to get in again? The article-writer does not deign to state his or her reasons. Now, there is a bunch of people paid to explore ways in which to expand the EU – surely they would be excited about gaining a country so closely linked to the history of Europe, representing a large market and having a fundamentally sound economy?

What about the Scotland exit?
Interestingly, the Economist article does not once mention the upcoming referendum on Scotland exiting the United Kingdom, and how that could influence Britain's exit. Indeed, the BBC, in an article published at the same time, asserts that “Scotland's membership of the EU has been a key to the independence debate”.


What if the UK exits the EU, Scotland exits the UK, and the EU accepts Scotland as a full-fledged member?

Generally, the article leads one to conclude that the research the Economist quotes suggests that the UK would like to exit, but the Economist does not wish that to happen. The Economist, in this article, has chosen to label the lobby representing British farmers as being "noisy", which comes across as not particularly complementary. It would be interesting to see what impact a British exit from the EU would have on the Economist, and on the business interests of those who own the Economist. Indeed, a sense of fair play ought to have led it to make clear whether this organization has a vested financial interest.

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