Expert comment: How Brexit might not make us all 'worse off'
Is GDP the best measure for predicting whether the UK will be better or worse off after Brexit? Loughborough economist Dr Jon Seaton says perhaps not...
There have been some stark warnings about Brexit from some of Europe’s most important figures, writes Dr Jon Seaton.
Today, Chancellor Phillip Hammond conceded that there is no future involving Brexit in which the UK will not be worse off economically.
But he’s not the first person to vocalise this concern.
The Governor of the Bank of England Mark Carney, the managing director of International Monetary Fund (IMF) Christine Lagarde and a whole host of economic groups, who all use surprisingly complex economic forecast models and simulations, all give the same clear message…
That any form of Brexit is bad, in some cases very bad.
What do they mean by 'bad'?
I sometimes buy an expensive item at the local village store rather than getting it cheaper at the supermarket in town which is bad, but overall it saves me time – so I’m financially worse off but time rich.
In the case of Brexit, economists focus on one simple concept ‘GDP’ or Gross Domestic Product, basically, it will be smaller under Brexit and will grow slower under Brexit.
We will be worse off monetarily – per capita, that is on average.
Money does not always make you happy
But GDP has been and will always be a one trick pony – it only measures total UK income.
It does not measure how happy you are, it does not measure your wellbeing, it does not measure welfare. But it is a start in that direction.
When GDP declines or does not grow fast, this is usually accompanied by higher unemployment, less spending on health services etc – so clearly it helps our society to have some growth at least.
Bake off or brake off: Cutting the cake
To those like me, who study and teach the subject in some detail, GDP – as a measure of economic welfare – has very many criticisms.
First, GDP per person does not represent your income or your expenditure, some people have higher incomes than others – how the UK GDP cake is split between citizens matters a lot but is hardly mentioned in these statistics.
Low growth can be good
Similarly, Brexit is not really the big bad thing at our door, threatening our families and generations to come, it's the mess humans have made of the environment – pollution.
GDP does not factor this massive failure of our markets to provide sustainable growth in a healthy world.
Indeed, rapid GDP increases have recently been associated with even higher levels of CO2 emissions.
The world is not on track with Co2 reduction – we may need to actually lower growth to stay in line with global agreements.
So lower GDP growth may be good for all concerned, as long as we structurally change over to renewables.
Not our fault?
Lastly, GDP growth was not the main argument for Brexit, rather it was a cry for independence and control – normal reactions for people living in a period of fear and adversity brought on by the financial crunch of 2007.
But the fear of people we can work with together to resolve world problems seems overdramatic.
But again, these fears and behaviours are not related to GDP, they are related to human behaviour and ultimately may be resolved by the short-term power play within the commons in a couple of weeks’ time or the saga will continue until the cliff edge in March next year.
Brexit above all is not an economic struggle, economics informs the debate, but does not resolve it.
Notes for editors
Press release reference number: 18/158
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