Monnet’s Myth: European post-war economic growth

June 13, 2016

One of the persistent founding stories about the EU concerns the Coal & Steel Community. The tale goes like this: The Coal & Steel Community and subsequently the European Economic Community were the cause of not only the western European economic recovery after the Second World War but are also the cause of the German economic rise to greatness.

The Brexit dissidents, as I like to call them and here I include myself, call this constant attribution of prosperity and peace “myopia”. This is because these analyses rarely look at the wider picture, or in some cases, simply associate the European project with universal benevolence.

The simplest approach but one in which we can see the various changes in prosperity is by a comparative measure of GDP. In 1946, the British economy was almost twice as large at the French economy and more than twice as large as what was left of the German economy in the British, French and US Army zones of occupation.

By 1955, the West German economy had grown by 283% compared to 1946. Indeed by 1950, when the Coal & Steel pact was agreed, the West German economy had grown by 55% compared with 1946. It was already larger than the French economy before the first steps of Europeanist integration had taken place, which it had overtaken in size by 1948. From then on, at no point was the French economy to ever exceed in size the West German economy.

This should alert us to an essential fact in considering the economics of Western Europe: the German economy contained huge potential for economic expansion and continued to expand on the back of political stability, the excellent German school system and the existing expertise of German engineering and manufacturing. Another factor related to myself a long time before at university was that after the war with the major industrial cities and plants in ruins and with industrial machinery confiscated as part of the post-war settlement, West Germany replanned both its cities and the industrial plants. Sites were cleared and rationally laid out – this had long term benefits in creating smooth access to and from manufacturing sites.

Another aspect to consider is the international dimension. The post-war drive to facilitate trade and reduce tariff barriers under GATT also made it possible for international trade to flourish in a way not seen since the British trade expansion of the 19th Century.

The really damaged economy from the Second World War was that of France. The French economy in 1944 was 46% of the size it had been in 1939. It was not until 1949 that France returned to pre-war levels of prosperity.

Again, we can see that the economic recovery was well and dramatically under way before even the first steps of Jean Monnet’s project were adopted.

As we can see above, the West German economy had grown by 283% compared to 1946 but it had also exceeded the size of the British economy. By 1962, the West German economy was 28% larger than that of Britain. By 1981, it had become 54% larger than the British economy. Thereafter the British economy steady grew in size and reduced the gap with West Germany to 1989 and with the unified Germany in the years after until by 2008, the gap was 18%.

The French economy today is about 80% of the size of the German economy. The ratio has varied from 60% to 75% until the 1990s. This matches the ratios from the first half of the 20th Century with the exception of wartime figures.

What about the United Kingdom?

According to the story told by Europeanists, Britain struggled because it was locked out of the EEC until 1973. But the figures tell a different story.

The British economy shrank noticeably from 1944-1946 by 4% per year. Today this would be considered a major depression but this was the point at which the British government was gearing down from wartime spending levels.

By 1948, the economy recovered 3% on 1947, when it shrank by 1%. Thereafter until 1972, the British economy grew by an average of 3% per year. This was mild growth compared with French or German growth rates in the period, which were 7% and 6% respectively.

However, we should bear in mind that the problems with the British economy were a great deal more self-inflicted than due to geopolitical relationships. For much of the period into the 1950s for instance, the British government was spending heavily on defence. There were problems with industrial policy, increasingly with industrial unrest and the problem that British industry was not replaced or rebuilt as was German industry.

Yet, even with all the trouble and disruption of the 1970s, the economy still grew by 2% on average per year until 1980, when the economy entered a serious recession with the start of the liberalisation of the British economy and the closing of state-subsided industries. 2% per year was average growth until 2000 – 2008 which was 3% per year.

Compared to French and German growth rates in the 1980s & 1990s, Britain matched both countries and exceed both in the 2000-2008 period, where France experienced 2% average growth and Germany 1% average growth.

We cannot see in the data series any noticeable effect of EEC entry for Britain but we can see that Britain went from 7% growth in 1973 to -1% in 1974 and 0% in 1975 before returning to 2% growth in 1976. We could associate the return to growth with the end of EEC transition except that we also know this was the point at which Labour Party economic policy began to change with an reduction in subsidies, heavy cuts in welfare spending and the IMF Crisis.

Together with the Thatcher government of 1979-90’s supply side reforms and closure of inefficient industries, we can see that membership of the EC, as it was, was neither a noticeable help or hindrance to British economic performance. What was critical in Britain was the reintroduction of market economics and the end of the post-war economic consensus. Indeed, we can argue that Germany’s success was due much more to its effective labour and industrial policies and the economic stability and growth these enabled.

The last major recession in the British economy was partly caused by an overheated housing market (the result of market-liberalisation) but above all by the monetary dislocation of the ERM debaclé. Once the British currency floated again, the economy retuned in 1993 to 2% growth. On a side note, what is remarkable about the ERM is that the Europeanists attempted to return to a form of 1920s economics with exchange rate controls.

What this demonstrates is that economies have a “natural” size to which they return and from which they grow with the right policy mix from governments. What the Europeanists claim is the result of the European experiment is actually this natural tendency reasserting itself amidst political stability.

Links:
GDP Summary
Data Series as Analysed

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William Hague is fully committed to Cameron’s Fraud

February 22, 2016

The opinion piece in the Telegraph can be found here.

Few if any European leaders can any longer be under the illusion that Britain can be dragooned into a more centralised Union.

Hague is either lying or completely unaware of the paper-thin nature of this claim. The Prime Minister knows full well that the statement by the European Council of Ministers is only a statement of intent with regards to possible inclusion in the next treaty change.

The problem is that there is no treaty on the horizon. The French and Germans have both poured cold water on this idea.

The fact is that this statement of exemption from “ever closer union” without being included in the treaties is worthless. Every step towards “ever closer union” will involve and affect this country because the legal basis in located in the treaties, which have not been altered, nor will be altered.

The first of these is my strong belief that if the UK leaves the EU, Scotland is much more likely to leave the UK.

This statement is completely misleading. Hague is alluding to the threat by the Scots Nationalist leader, Nichola Sturgeon to call a snap referendum in the event of a Brexit vote.

The Scots would have no legal right to call such a referendum, any result would not be legally binding or valid and the Scots Nationalists would be guilty of sedition. The only way that the Scots could hold another referendum would be if they were granted on by act of Parliament.

Second, we need some kind of European Union to exist whether we are in it or not. Otherwise, Europe’s seething nationalisms and tensions will break loose again, as they did in the Balkans in the 1990s.

What happened in the Balkans was nothing to do with the European Union and everything to do with the suppression of religious and ethnic hatreds going back hundreds of years. This claim by the EU’s supporters for the EU to have been instrumental in securing peace is palpable nonsense. It could only apply to the former Yugoslavia, most of which is not even within the EU.

This is akin to the ludicrous claim that Russia fears the EU and desires its breakup. How many divisions does the EU have?

What Hague is claiming is that power has to be taken away from the populace into the hands of the enlightened pseudo-aristocracy of the EU in order to prevent the populace’s vile instincts from coming to the fore. His claim may even be attempting to refer to the silly argument that the EU is the reason why there has not been a militaristic Germany since 1945. Obviously nothing to do with NATO, the thorough-going reform of German culture and its constitution or the experience of two terrible wars which brought nothing but ruin to Germany. Obviously not.

If we leave the single market, the effect on business confidence and investment would be very damaging. But if we seek to stay in the single market, then that would certainly mean we would have to keep the rules, regulations, payments and freedom of movement of that market. The key difference would be we would no longer have any say over those things.

Here he is echoing his lying master. This is going to be the great refrain of the Europhiles – “in or out but take the consequences”. This sounds frightening until one realises that we’ve heard these lies for years.

Leaving the Single Market could be very foolish, even suicidal. That is why the sensible Eurosceptics have not advocated this “WTO”/”bi-lateral” route. The risks would be great. But even then, Britain would regain its position on the international bodies which draw up the regulatory agreements on trade and so forth. We would actually regain not just sovereignty but influence, contrary to the nostrum of being in a club of 28, where we have been outvoted 72 out of 72 times in twenty years.

This is why Flexcit has been advocated now for more than two years – this as a completed body of thought. If anyone would like a shorter copy, please read the thoughts of Owen Patterson on UK2020.

What we should do is rejoin the European Free Trade Association, from which we can negotiate membership of the European Economic Area. An agreement similar to that of Norway (the so-called Norway Option) would leave us both with access to the Single Market in terms of tariff barriers and technical trade barriers and give a crucial voice in how internationally agreed regulations (on whose councils the UK will sit) shall be implemented throughout the EEA, which includes the Single Market. We would be on the true councils of influence alongside Norway, Iceland and Switzerland and the EU itself as represented by the European Commission.

Better yet – we would not be obliged to accept EU regulations. We would have a right to refuse without penalty. The EU would cease to have influence or authority over the UK. We would regain, even with the EEA freedom of movement agreements, the right to block or halt immigration from the EU in the event that such movement placed an undue strain on national resources.

In the EEA, the UK would be a true partner state instead of a servile, subject state.

William Hague, like his lying master would rather remain in hoc to an autocratic, sclerotic institution with dreams of becoming a full state.

Leave Europe to its fantasies of reunion. Britain has a separate destiny.