A very brief comment on Brexit

I've been posting less frequently with the end of the school year. Will be going to the History of Economic Society Meeting this weekend. Posting will be even more limited. At any rate, hope to be able to say something more substantial on Brexit before the referendum. Let me say that I'm against Brexit, which is I suspect the view that Wynne Godley would take on the issue. He was firmly for Europe, but against the euro as it was shaped, but not in all circumstances. He correctly pointed out that a common currency requires a fiscal union.

It seems that more than a few heterodox Keynesians (post-Keynesians for the most part) have come in favor of Brexit. I think it is important to emphasize the difference between the common currency (the euro) and leaving it, for example, Grexit, and the European Union. Brexit, of course, refers to the last, since the UK has its own currency, the pound.

Mind you, I don't think that the problems with leaving the EU are essentially economic, and I think to emphasize these costs is a mistake. The real problem with Brexit is the political costs, associated to a more closed view of what Europe means. It would lend support to radical right wing views that reject a more culturally and ethnically diverse Europe, and it might, as Yanis Varoufakis suggested lead to the slow disintegration of the European project.

I have posted a few videos of 'Yes, Minister' before. The one below (h/t Ramanan) is apropos. Enjoy!

Brexit and Euroskepticism

British exit from the European Union (EU) is more radical than Grexit, which basically was exit from the eurozone (EZ), the currency area, but not the union. Wynne Godley, for example, was against the euro (see this), but he was not against the EU. Quite the opposite, he was pro-Europe, as were many progressive economists, several connected to Labor (Lord Eatwell being an example). The whole isue now became relevant, since David Cameron, the prime minister, set the date for a referendum on Brexit for June 23rd. Map below shows the degrees of euroskepticism (as in EU membership, not EZ) around Europe.

Note that in the UK there is a significant amount of euroskeptics, more than in the parts of Europe that have suffered from the problems with the monetary union (source here). The UK and the countries with more developed welfare systems in Northern Europe (Denmark, Sweden, Finland) tend to have a less favorable view of the European Union.

I'll discuss the pros and cons, from an economic perspective, of EU membership in another post. I do feel like Wynne that, while EZ membership is not necessarily good (at least with the current fiscal rules), EU membership is better than the alternative.

The Greeks Have Said No to Failed Policies, Not to Europe or the Euro

The referendum that just took place in Greece in which 61.3% of voters rejected the terms of an international ‘bailout’ package should not be read as a vote in favour of leaving the euro. The ‘No’ vote – όχι in Greek – is, as correctly pointed out by James K. Galbraith, the only hope for Europe. On the other hand, it may very well be used by the Troika – the European Union (EU), the European Central Bank (ECB), and the International Monetary Fund (IMF) – as an instrument for expelling Greece from the monetary union. If that happens, we have a Grexpulsion and not a Grexit, the more common name for the abandonment of the euro. After all, it is very clear that SYRIZA knows that the costs of leaving the euro may very well outweigh the advantages, and that Greece is not Argentina, as noted by its Finance Minister (as it turns ex) Yanis Varoufakis recently.

The relationship between West European powers and the Greek Left has been problematic for a long while. In the aftermath of World War II, the British and then the Americans, sided with collaborationists, rather than with the resistance, which had communist leanings, and was seen potentially allied to the Soviets. As Tony Judt says of Greece in Postwar: A History of Europe Since 1945, “despite a significant level of wartime collaboration among the bureaucratic and business elites, post-war purges were directed not at the Right but the Left. This was a unique case but a revealing one.” The British and Americans preferred a conservative government, even if it meant dealing with businessmen who had collaborated with Fascists, rather deal with a communist or socialist threat.

Read rest here.