Blog: What's in a number?
How our lives are dominated by numbers yet we somehow get it wrong
13. Misleading statistics and the EU Referendum
This is my postal vote: I cannot be persuaded to vote for the EU on the basis of the extreme statistics presented by the "remain" camp.
I have just sent off my EU referendum postal vote. The campaign so far has been an example of politics at its worst. With party political gain potentially at its minimum one would have thought that UK politicians would have wanted to provide a balanced view of the pros and cons of leaving or staying. Instead, we have received a barrage of statistics, all disputable, supporting one case or another. A recent parliamentary committee have said as much.
I think the rot began when Cameron went on his gastronomic tour of Europe. At least I suppose it was a tour for the pleasure of fine dining. If I recall correctly, the menues at all the locations he visited were described by the newspapers in full. He also took part in some trivial discussions at the same time, and one is reminded of the late Charles de Gaul's remark "Non!", for British entry into the EU in the first place. Cameron emerged from that tour with almost nothing. The EU were not then taking us seriously. Britain has a significant immigration problem which is unique to our country. If EU leaders fail to see that, then we are better off out.
The Free Flow of Labour and a Common Language
It is a very laudable aim to have a free flow of labour, as we have in the EU. But I think that it was the economist Adam Smith who understood that a free flow of labour requires a common language to work properly. This is probably a contentious issue in Europe as the continentals would not like to admit that such a common language would likely be English. English is a already a de facto 2nd language for most people in the world. It makes the British very lazy at learning a foreign language much to our shame. The USA is in a similar position as the EU in that it is a federal collection of states. However, in the USA it works because there is a nominal common language. I know some people only speak Spanish and I suppose there might be a few Native Americans that only speak their own language. Some Canadians joke that the remaining Americans can't even speak one language!
Both the USA and Britain are low down the international performance table for English, and non-native English speakers can take advantage of that, even outperforming some of the locals. So, to think of an example, if you're a Romanian plumber you will probably speak Romanian and will likely have had to learn English to understand your text books. If things are economically grim at home, why not come to the UK? I expect there are plenty of other people in all the countries of the EU which don't necessarily have an important skill, but they can speak English. They are not going to go to France or Germany to try their luck as they can't speak the language. In any case would you want to go to a strike-happy country like France? So Britain will get most of the economic migrants because of the strength of our economy and the fact that we speak English.
In terms of flow the other way, UK professionals can relatively easily move to the continent, as serious business is often conducted in English anyway. Such professionals can then become fluent in the local language, beit French, German etc. once they arrive. By contrast, non-professionals from Britain would struggle in France unless they were already fluent in French, as they would be required to speak the local language from day 1. The net result is that we tend to import professionals and non-professionals, but only export professionals.
The Effects on Immigration
Of course Britain benefits from this in getting a full range of skills and so I don't think that many people want to put a stop to immigration entirely. We just need to balance it with all countries in the world. With the population currently increasing at 3 million per decade (5% per decade) this is a phenomenally high rate for a small island nation. If EU policies were working there would be no net immigration from other EU countries, but the absence of a common language would prevent that even if the other EU economies were buoyant.
I'm not of course suggesting that we have a common language, I'm just pointing out the weaknesses of EU policies because of it. It is a simple enough problem to resolve. Cameron himself raised a ridiculous smokescreen about immigrants claiming benefits. People coming here do so to find work (and they can because on the whole they speak English as a second language) not to claim benefits. So the special agreement he "negotiated", regarding the waiting period before benefits could be claimed, will likely have absolutely zero effect on the numbers of people wanting to come here. The EU leaders should have recognised this and made Britain a special case, but this would have required them to admit that English is the second language of many of their people.
In principle, Ireland could soon be subjected to increased immigration, because of course they speak English there as well. While they have the space to accommodate a lot more people, the GDP of Ireland is still far too small to cope with large influxes. So the interesting thing is that if we vote for Brexit, Ireland could get a serious immigration problem next. I'm guessing that this is behind their "encouragement" for Britain to reman in the EU.
The EU leaders have chosen not to understand these points and have started a campaign of scare tactics aimed at people's wallets. Economic forecasts critically depend on the assumptions built into them, so without knowing the assumptions the forecasts are meaningless. Our chancellor's headline figure of "every family worse off by £4300" by 2030 is therefore quite worthless. One of the issues is that with a growing population if we stay in the EU, we need increased public spending on the infrastructure (schools, hospitals). So without knowing how those will be costed, we cannot know what the net effect on our pockets will be if we stay in the EU, especially on such long timescales.
Another "prediction" from the chancellor is that house prices would drop by up to 18% after Brexit, presumably on a similar timescale and relative to the price under "remain". This seems to me like shooting yourself in the foot: due to induced immigration amongst other things, there has certainly been upward pressure on house prices, but hardly any young people can afford to buy their first home. So is the chancellor saying to young voters: don't worry, stay in the EU and live with Mum and Dad until they die? His policies also seem a bit inconsistent. He has just increased stamp duty, the primary purpose of which is to lower house prices. Does he want house prices to go up or down? Of course if 300,000 people are coming into the country every year, but the country only builds 140,000 new houses (2014 figure), demand for housing will exceed supply (after taking account of other demographics: people living longer, more single households, old houses knocked down). The increased demand over supply leads to price increases. So the country as a whole would benefit by a reduction in house prices.
The scare tactics began with Cameron and the "remain" camp. Having negotiated almost nothing, he then switched from saying that Britain could be strong outside Europe (in an address to the CBI) to saying that we would be subject to increased security risk. Being in the EU didn't help the French or the Belgians much recently, did it? That was followed by Osborne's ridiculous financial figures. To make matters worse, the government funded a pamphlet explaining the benefits of remaining in the EU without mentioning any of the benefits of leaving. This expense of government propaganda would have exceeded the amount allowed for electioneering if it had been spent a few days later. This cynical manipulation of the electoral rules seems to be a current Conservative forte which reputably extended to the general election last year. Not so very long ago, Cameron also criticised the new mayor of London as cavorting with terrorists while he is now a great politician.
Faced with this sort of scare tactics the "leave" campaign had also to exaggerate their numbers, such as the cost of EU membership. The headline figure is certainly £350 million per week (a figure that is likely to be increased after our EU referendum). A lot of this comes back in various ways, but it is certainly true that we could spend all of it on what we want, but other costs would go up. In the end, what is left is probably lost in the noise of government expenditure. The remain campaign has unfairly attacked the leave campaign for not proper accounting. However, the leave campaign have been fighting an unfair battle, with the government machinery available to the remain campaign but not the leave campaign. As a result, if we were to vote for Brexit, there would inevitably be a lot of uncertainty in the first few years. In that time a proper budget could be established.
International economists and politicians have been trying to bully us into voting for "remain". Obama has confirmed that the "special relationship" only exists when the USA wants us to bomb some country. Otherwise, it seems that we will "go to the back of the queue" in trade negotiations. This was an absurd remark, probably supplied by Cameron. We are the 5th largest GDP in the world, and the USA doesn't want to negotiate trade with us? Then a few days ago, the Dutch PM came up with the comment that if Britain were to impose immigration limits, the rest of Europe would follow suit. This really isn't a problem at all. Whereas almost anyone on the continent can come here, relatively few British people want to go to the continent because generally we can't understand the locals! This is back to the earlier remark about a free flow of labour needing a common language.
The most recent hysteria has been propagated by the OECD who "predict" that our GDP could drop 3% as a result of Brexit and that of the EU by 1%. To believe these numbers, you have to accept that a number of unlikely events may have to take place and none of it adds up to me. If EU politicians really thought a European recession was likely, why didn't they offer Britain some significant concessions, particularly on the immigration front. That may have swayed some minds and wouldn't have cost anything. Instead they were too bone idle and too busy following their own self-interested agendas, and of course too interested in fine dining.
It seems more reasonable to suppose these GDP numbers are an invention. In principle, hardly anything need change as a result of Brexit. We could trade exactly as we are at the moment and everybody would continue to benefit or not as they do at the moment. About the only differences are that Britain would not be able to negotiate terms of trade (we have almost no say at the moment anyway) and the EU would not get the net budget contributions from Britain to support the overpaid Brussels Eurocrats and assorted hangers-on. It is certainly most insulting for the current EU president to say that the EU would likely make things difficult for Britain after Brexit. What is this: the politics of the school playground? Do they not know what international bullies they are? The best way to stand up to bullies is to ignore them.
Is there any Truth in the Economic Forecasts?
Of course the economic predictions may have an element of truth in them. In the end, it is up to the International community to allow a world recession or not. If recessions occur as a result of Brexit and politicians "punish Britain", they will all soon enough be punished by their own electorate. Take the strength of the pound. It is widely predicted to fall under Brexit, but the amount of the fall is not predicted. There will inevitably be some short term volatility, as the financial markets try to take advantage of the political uncertainty. Once fundamentals become reestablished, though, the pound will probably return to its former value. After a year or two I would expect the pound to be back to about $1.50, roughly the value it was a year ago before Brexit became a serious possibility. The reason is that other countries cannot allow the pound to become too weak because our industry will undercut foreign imports at the expense of other countries.
Political manipulation of currency levels happen all the time. China's currency is probably undervalued by a factor of 2 or 3. When you go to the country you see how far your foreign currency goes. In a natural world, the currency would strengthen to create a balance between imports and exports. There is a worldwide "conspiracy" to keep the Renminbi low so that Chinese exports are cheap. That way the West can keep inflation low by importing goods from China. A currency imbalancy couldn't exist without political interference. A weakening of the pound would probably be a good thing for Britain as a whole, because it would improve our balance of payments, but it won't happen in the long term because the countries we buy goods from (EU, USA) would see a negative impact on their finances.
Often countries increase interest rates when the currency weakens, as the Bank of England is expecting to. However, the BoE has very little room for manoeuvre; an increase in interest rates would trigger a recession which nobody wants. It should be recognised that even with interest rates as low as they are, the BoE is failing to deliver on inflation. Whereas a few decades ago, high inflation was the threat, now low inflation is the threat, as it tends to discourage people from buying goods. Accordingly, the target inflation rate is 2% per annum, but we are almost exactly at 0, and deflation is a risk. So some controlled inflation in the system would not actually be a bad thing.
The Debate so Far
A lot of these points are contestable, which is fair enough. But I see no thorough, balanced debate by the political establishment. As a scientist I regularly had to try to understand complex situations to try to assess the balance of probabilities in for example "Do humans cause climate change?". That particularly question is clear cut, but others such as "Do increases in greenhouse gases cause increased extreme weather?" are more contestable and require significantly more evidencde and debate. All the climate change information has been put on the table by the IPCC in an unprejudiced manner. Similarly, the evidence for or against the EU should have been collected and put on the table for debate.
It has been said that you can use statistics to prove anything, but I do believe this is unfair on a branch of information theory. I think quoting of different numbers just shows that politicians will distort the information to suit the prejudices of their sponsors. MPs are (presumably) reasonably intelligent people. What Britain needed was an all-party group of representatives to give the facts to the people, not a set of black-white descriptions of the different scenarios. I am frustrated that presumably civil servants in various government departments have costed the risks and benefits of leaving the EU but that these balanced studies have not reached the light of day. This is not a party-political issue so MPs have no excuse for behaving so despicably.
In the end, I can only assume that the government is being economical with the truth. Apart from all the dubious financial arguments, there is the uncontestable point about loss of sovereignty. I feel as if I have no control over what happens in Brussels, and that in itself must be worth sacrificing a few % of our GDP.
Website revised by John Austin, 4/6/2016. © Enigma Scientific Publishing, 2016.