Brexit Effect: Productivity and Investment – politicalbetting.com
Brexit Effect: Productivity and Investment – politicalbetting.com
This is the third in a series of articles analysing the oft-cited NBER paper, which estimates that Brexit has reduced the UK’s GDP by 6-8%, usually shortened to 8%, over the past eight years. In the first two threads (here and here), I argued that the estimated macro (6-8%) and employment (3-4%) effects seemed overstated. I now turn to its projections on those perennial British weaknesses, pro…
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Therein lies the issue for both parties.
The final part to this series will be finished on Saturday.
US could drop backing of UK claim to Falklands
The US could review its position on Britain’s claim to the Falklands Islands as part of a broader move to punish Nato allies the Trump Administration believes failed to support the war with Iran, according to a report.
An internal Pentagon email outlines options for the US to respond to the perceived lack of support, including suspending Spain from the alliance and reassessing American diplomatic support for longstanding European “imperial possessions,” such as the Falkland Islands near Argentina.
The policy options are detailed in a note expressing frustration at some allies’ reluctance or refusal to grant the United States access, basing and overflight rights — known as ABO — for the Iran war, an official told Reuters, who spoke on condition of anonymity to describe the email.
The email stated that ABO is “just the absolute baseline for Nato,” according to the official, who added that the options were circulating at high levels in the Pentagon.
Britain and Argentina fought a war in 1982 over the Falklands, after Argentinian forces staged an invasion. Some 650 Argentine soldiers and 255 British troops died before Argentina surrendered.
https://www.thetimes.com/world/middle-east/israel-iran/article/iran-war-trump-ceasefire-israel-lebanon-latest-news-9p9p8mzf3#08bddc51-41fb-4800-a353-d8699a4c3ced
Labour and the Tories have lost their USP, “the only game in town” under FPTP. Both are now a wasted vote.
Good morning, everyone.
It is a well argued piece, but ultimately with so many moving parts, the best comparator is how far have we fallen short of productivity and investment gains in Germany, France, Italy and Spain since leaving the EU? A graph against them plotted say every five years will have some validity. With Germany, for example, a bigger issue for them will be how the rebalancing of energy supply away from Russia will have impacted the economy. It may be an important spur to growth over the next ten years, to have greater security of supply; or a constrainst as alternative energy costs rise.
It was commented at the time of the Referendum by some analysts that voting to leave the EU would at least force Britain to confront our woeful record on productivity and investment. Perhaps one takeaway we can assess is that it does not seem to have happened.
In four fifths of the country, Vote Lib Dem isn't the answer.
So “XYZ polls are push polls to ramp the Monster Lunt Party for financial gain” is right out.
But “XYZ polls have a flawed methodology, because of the following reasons…” is fine.
Orthodox economic theory suggests we should have a slightly worse economy outside the EU and that feels reasonable to me. No-one can prove or disprove it though, so what does it matter?
Absolutely unforgivable that the Tories in the exit agreement expended more time and energy on fish than they did on financial servicesl
A majority of those polled are not choosing either of the "new" parties.
"The reduction in UK productivity is attributed to several "within-firm" and "between-firm" factors:
* Diversion of Resources: A primary driver was the diversion of management time. Approximately three-quarters of firms reported spending time planning for Brexit, with 10% of CFOs dedicating six or more hours per week to preparations
. This diverted resources away from productivity-enhancing activities
*Reduced Innovation: Uncertainty and reduced demand led to lower investment in intangibles, such as research and development (R&D), software, and employee training
. Micro-data suggests that firms more exposed to the EU became relatively less likely to apply for patents after 2016
*Resource Misallocation: Between-firm productivity suffered because more productive, internationally exposed firms were more negatively impacted than less productive, domestic-focused firms
. This reallocation of economic activity away from high-productivity firms is estimated to have lowered aggregate productivity by roughly 0.4%
*Increased Costs: Firms faced higher unit costs (roughly 4%) and many were forced to increase stock levels to mitigate potential trade barriers, which acted as a further drag on efficiency"
- irritation that it was taken so seriously by so many people obviously who wanted to believe it
- a desire to work out for myself how intelligent people (and the academics who wrote it certainly have credible CVs) came up with something I thought was so implausible.
Having worked at the interface of academic economics and the public sector in the UK and overseas for decades, I know that even the most credible papers and the academics who write them can get things wildly wrong, so I'm always unimpressed by intellectual pedigree. I have always found that running simple sense checks using accumulated experience and common sense can often be better than a huge economic model in producing actionable impact analysis and policy recommendations.
But for the former in economics, you need some real world experience in business or finance, or ideally both, which I think so many (though far from all) academics often get things badly wrong.
How willing Green inclined voters are to vote for Starmerism over Faragism is not known, but a considerable minority of voters do not see much difference.
Vanilla thinks you're a bot and then takes appropriate action.
To take an obvious example, we ran a consistent and large trade deficit with the EU for a couple of decades or more. In what way was the SM and free trade benefiting us? You can see the benefits to car workers in Munich, for example, but the reality is that this trade deficit was reducing employment (and tax revenues) in the UK by the low hundreds of thousands. I am not arguing for some autarky nor, it is obvious, has withdrawing from the EU removed this detriment. But the lazy assertion that free trade is good without consideration of good for whom is frustrating. Good for City traders certainly. Good for UK manufacturing? Clearly not.
Both Labour and the Conservatives need to come up with plans for steadying the economy. The Tories at least seem to be accepting this with a visible return to being the Sensible Party. Labour are in need of a more urgent programme though, as they are in power and looking woeful under the current PM and yet risk being the Slightly Silly Party under any new leader.
* AD = Artificial Drivel.
The interesting juxtaposition is his demand for Rayner's resignation for something far less egregious than his current tax affair issues.
I suspect the rules don't apply.
I think you concede that there was probably a short term impact on investment, productivity etc. Even if we assume that it really was only short term, that impact leaves a permanent gap (which is what the paper is measuring) unless we experience subsequent above trend investment. That hasn’t happened so we are still feeling it today.
We need to build stronger alliances with the middle powers.
https://www.bbc.co.uk/news/articles/cgk0vz5e2zxo
Manufacturing is gone as an industry - forget it. It's gone to China now and it isn't going to a great friend of theirs as AI and robotics takes over.
https://www.bbc.co.uk/news/articles/cn0ep28drllo
For instance, if I live in a constituency that I suspect will likely be a Labour/Green battle on current polling. I don’t want the Greens to win, so what do I do? Logically - I vote Labour. But I don’t like this government and I don’t think it’s doing a good job. So can I bring myself to effectively endorse it for another term?
There is also, I feel, a rather unsaid and nebulous “vote share mandate” that whilst contributing nothing to who forms the next government does, I think, bestow an element of wider legitimacy. I think the current Labour government had the wind knocked out of its sails on day one because of the very low percentage share of the vote it received, in proportion to the majority it enjoyed. I think that did knock its confidence somewhat, and contributed to the sense of drift that characterised its first years in office. So maybe we should be thinking about that when we cast our votes too. It is all a murky picture, and makes the outcome of the next GE from where we’re all standing, incredibly difficult to predict.
It will be determined by their own experience of travelling the UK and EU. Visibly the UK is falling further and further behind our European neighbours, apart from the core Remania parts of London and SE England.
One of the Brexit paradoxes is that the places in the UK that are doing relatively well economically are those that voted to Remain. Leave was voted for by pensioners and areas in economic decline and those areas have continued and even accelerated that decline.
Britain needs to start talking about reversing Brexit, the civil servant who led Britain’s preparations for leaving the European Union has said.
In a highly unusual intervention, Philip Rycroft, former permanent secretary at the Department for Exiting the European Union, said life outside the EU had failed to live up to the expectations and there now needed to be a “clear-headed appraisal of what is in the country’s best interests”.
https://www.thetimes.com/article/a01c5b6a-9e1c-45aa-a9f9-beb88c1aa2e0
My fundamental problem with the Tories is their position on the EU and closer ties and the ECHR .
Indeed I think Sunak was much more pragmatic at least on the EU and I think in time he could have been a decent PM.
If the only two choices were Reform or the Tories I would have no hesitation in voting for the latter . This really isn’t the time for a purity test .
We should remember what the purity martyrs delivered in the USA in 2016 !
My view is under the Tories our democracy will survive under Reform I see an Orban/Trump attempt to dismantle it .
People might think I’m being hyperbolic but that’s where I’m at .
At least we can make an informed counter-argument to those who trot out the glib "8% cost of Brexit" claims. Which has to be worth its weight in gold...
Legacy NATO: Trump, Rutte
Euro NATO: Everyone else in NATO
Its simply a statement of fact that NATO as it was no longer functions, but it still exists. As Euro NATO decouples itself from America what's left of the legacy organisation withers further...
Brexit was mostly about feelz. If we rejoin or similar, it will mostly be about feelz.
We clearly need our financial services industry to reduce the deficits (the books haven't balanced for a very long time) but the sector does not provide mass employment now and is even less likely to do so in the future.
*Much underestimated.
Please excuse my highly unusual intervention.
To do so would be to de facto leave NATO.
Pillocks.
Reform are tanking. Labour and Tory have an identical interest with Reform - to get them continuing to decline in the polls. This common aim mixed with Labour's problem of being in government and being a bit useless aids the Tories most.
As a GE approaches lots of people will begin to think about who is moderate and competent enough to form a government. The punters already think (see current odds) that probably Reform won't get most seats and probably won't get a majority. I think the punters are right. There is over 3 years to go.
The business investment graph is a bit better than I'd assumed, though.
I ran the NBER paper through Google's NotebookLM. Would be interested in your opinion as you analysed the paper, whether the AI did a good summary, a poor summary or one in between.
That is the challenge for Badenoch. The answer at the moment is broadly “no”. To stand any chance, it needs to become broadly “yes”.
People have beliefs that they stay loyal to far longer than they should.
1) It was about what is better in popular issues, short term stuff, retail politics of migration and whatever.
2) It was about a fundamental idea (whether right or wrong) about sovereignty, or who is in charge.
The obvious parallel is with Scotland, divided over independence just as UK was over EU in 2016. The argument that Scottish independence may be problematic about currency, defence, economics or whatever is one thing. But for lots of Scots the real issue is in fact the basic one of 'who runs Scotland'.
An irony is that 'Scotland should run Scotland' is generally seen as a progressive cause. 'UK should run UK' is generally seen as a luddite one.
A further irony is that pro Scottish independence people mostly want to be firmly outside the UK Union, but (if they can) firmly inside the EU Union.
And the paper itself says there's evidence of an acceleration of investment growth as the uncertainty has diminished.
Incidentally, this is not my opinion alone - see Paul Krugman - no friend to Brexit or the liberal right - on the subject in the NYT:
https://archive.nytimes.com/krugman.blogs.nytimes.com/2016/07/12/still-confused-about-brexit-macroeconomics/
He thought there might be a recession the year after we voted to leave (there wasn't) but also that investment would catch up once uncertainty disappeared.
Hence productivity performance.
Certainly both the UK and the EU have been dramatically affected by Chinese competition, but both retain significant strengths (the EU rather more than us).
But it does raise an aspect of Brexit the header has ignored, in that the removal of single market access killed investment into the UK for industries like car manufacturing.
You only have to look at the numbers for UK versus EU car manufacturing to realise that.
There's a not dissimilar story in pharmaceuticals.
Not sure Guernsey has AD yet, IOM does but I seem to remember they have a 5 year residency requirement.
The Scots can quite reasonably take the view that they would have considerably more sovereignty as a nation state member of the EU than they have as a subordinate part of the UK.
And would be more prosperous inside the EU than outside of it.
I appreciate an awful lot had happened during the subsequent period so impossible to guess what could have happened without COVID, Ukraine etc. but I can just as easily assert that Brexit has had a permanent impact as you can assert it hasn’t.
I think the anecdotal evidence from a small manufacturing firm in my extended family backs this up. Brexit caused a great deal of problems for many years, but it just about survived them and is now growing well. But there is no doubt that without Brexit they are 5 years behind where it could have been.
Things will change,
I get the impression that the pharmaceutical industry was in relative decline in Britain before Brexit, but perhaps Brexit made it a lot worse.