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Economists WERE NOT wrong about the Eurozone

username1204031

Exams this week so don't have time to debate much!! But I feel like this is an important point that needs to be made.

People keep saying they aren't listening to economists because they were wrong about the Eurozone - they said we'd be better off joining, but now the Eurozone is in economic crisis, so they were wrong.

That's *******s. Economists were predicting what would happen if we joined. They made their predictions for the future of the eurozone based on models in which Britain was a member.

Nobody knows what the eurozone would be like if we'd joined. It's possible that it could have been thriving. Economists weren't wrong. Nobody said "the eurozone will thrive even if the UK doesn't join it".

Reply 1

spasmodic

There certainly wasn't the concensus among economists for the Euro that we have now against Brexit. The Economist magazine did a survey of economists in 1999 and they were 2 to 1 in favour of us joining the Euro. It was a brand new thing then, so you could argue it's easier to get it wrong when supporting such a thing. Now it's more like 9 to 1 that Brexit will damage long term growth (even stronger concensus for damage in the near term).

Thankfully John Major opted us out of the Euro (as well as the Schengen passport free area). Gordon Brown and Ed Balls kept us out of the Euro (with a hat tip to William "save the pound" Hague) in the face of Blair's enthusiasm. Previously, the former chancellors Nigel Lawson and Norman Lamont had taken us into the Euro's precursor, the ERM (both of them now on the Brexit side).

The small band of pro brexit economists take inspiration from the work of Patrick Minford, who believes we should unilaterally remove our import tarifs for nothing in return, and take the WTO option for trade with the EU (the worst case scenario for all other economists who've examined brexit). Here's a brief critique of the Brexit economists' position http://globalbusinessoutlook.com/how-economists-for-brexit-manage-to-defy-the-laws-of-gravity/

Reply 2

MagicNMedicine

There was never an economic consensus in favour of the Eurozone as a project, even for the other countries that ended up joining the Euro.

The economic consensus about single currencies is the theory of an Optimal Currency Area which has to satisfy four tests:
- countries in the single currency have to have a large part of their trade with each other
- they need to have similar economic cycles, and shocks affect them in the same way
- there needs to be high degree of labour market mobility within the area
- there needs to be a system of risk sharing and institutions that can redistribute taxes from richer to poorer areas eg to deal with shocks

The Eurozone only satisfied the first of those.

So if you go back and look at the literature that was out at the time, the general consensus was that the Eurozone might be successful when things were going well but as soon as there was a recession in one or more European countries it would create problems.

Tony Blair was keen on joining, but the Treasury was always quite sceptical of the Euro as was Gordon Brown and Ed Balls, they devised a series of tests for entry that the UK was nowhere near meeting and it dropped off Blair's agenda. I remember a lot of the business community being quite pro the Euro though.

Also in the 2001 General Election when Hague was leader, the Conservatives fought the campaign virtually about the single issue "keep Britain out of the Euro", Hague was going round the country saying "7 days to save the pound", "24 hours to save the pound" etc. It was like the campaign against Sadiq Khan where they just picked the one issue "he has shared platforms with extremists" hoping that if they repeat the same message over and over again it sticks. But in the end it massively backfired as Blair was going round the country talking about the NHS, jobs, tackling crime and anti social behaviour, and Hague kept going on about Blair was going to take us in to the Euro.

Blair won by a landslide and we never heard about the Euro issue as Blair could never sell it to his own party never mind win a referendum on it (all the main parties had said that there would have to be a referendum if a PM proposed entry).

Reply 3

nulli tertius

Support for the Euro in Britain largely came from the fact that successive British chancellors had reversed their previous economic success by trashing the economy for political advantage. Most British Euro supporters believed that the economy was in safer hands with a German led committee of bankers rather than UK politicians. What killed the Euro as an issue was the success of Brown's finest idea, an independent Bank of England. That has withstood the shocks of 2008 and doesn't yet look like going wrong. It will probably only go wrong if a single ideology or a single figure or both come to dominate the Monetary Policy Committee as happened in the early 1930s.

Reply 4

TaipeiGhost

Pipe down young 'un.

You have no idea what you're talking about. Seriously, you are living proof that the voting age should be raised to 25 because the young 'uns haven't lived in the real world yet and have no actual life experience and so don't actually know what they are talking about.

Reply 5

username1204031

Original post by TaipeiGhost

You haven't disputed anything I've said, and you can't. Your smug sense of superiority is unwarranted.

Reply 6

IFoundWonderland

Original post by TaipeiGhost

As far as I've seen, it's been mostly old people with intolerant, ignorant, self-serving views.

Reply 7

TaipeiGhost

Original post by JordanL_

You haven't disputed anything I've said, and you can't. Your smug sense of superiority is unwarranted.

I don't need too, young 'un.

You clearly have no idea what you're talking about and have probably never worked a day in your life. Like most of the idiot, reality-TV obsessed millennials nowadays who base their political choice on whatever Kim Kardarian or Benedict Cumberland are saying.

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