Former International Monetary Fund (IMF) director Ashoka Mody has poured scorn on the anti-Brexit forecasts produced by officials recently, suggesting they are “making up the numbers”.
The Indian-born economist and Princeton University professor savaged the extreme, negative “No Deal” Brexit scenarios which have been pushed out by the Bank of England, led by Goldman Sachs alumnus Mark Carney, and Her Majesty’s Treasury, led by Chancellor Philip “Remainer Phil” Hammond, as having “no basis in economic theory or empirical findings.”
“The Bank of England’s prediction that civilisation will end with Brexit is merely an effort to outdo in shrillness similar analyses by the Treasury and the IMF,” he mocked in an article published on the Independent website.
“All official agencies, trapped in an echo chamber, are competing to paint the grimmest picture of economic consequences of a British exit from the European Union.”
Mody dismissed the outlandish claims of an 8 percent drop in GDP in a single year if Britain moves to trade with the EU on standard World Trade Organization (WTO) terms — “No Deal” — and noted that the erection of tariffs between the United Kingdom and the European Union would mean little beyond a slight shift in sales, with British producers selling slightly less to the EU and slightly more to British and non-EU consumers.
In fact, he goes on to cite “Scholars associated with the Federal Reserve Bank of Minneapolis, uncontaminated by motivated reasoning” who believe such an outcome could actually be a boon to the UK, with “stepped-up trade and investment with more dynamic economies outside the EU [giving] British producers greater access to cutting-edge technology and forc[ing] them to become more productive.”
“Such gains,” he suggests, “will likely offset the costs of lost trade with the EU.”
Mody also described at length the disaster of the euro, the official currency of the European Union which all member-states except Denmark and the United Kingdom are committed to joining eventually, and recalled the former mania of “top academic economists”, the Confederation of British Industry (CBI), and much of the British political class for adopting it, as an example of the establishment’s tendency to form ideas about the European economy which turn out to be spectacularly wrong.
He also highlighted research by Harvard economist Dani Rodrik on how trade agreements and blocs like the EU tend to benefit big business disproportionately, and noted that “Well-heeled lobbyists representing business interests influence nearly 75 percent of EU laws” — perhaps explaining why bodies like the CBI are so keen on EU membership.
“British leaders must pull themselves out from the spell of storytelling and focus on their urgent responsibilities,” Mody concluded.
“[Politicians] must heed the real message of the Brexit vote: citizens being left behind by globalisation are clamouring for more protection… Failure to protect the most vulnerable at home and redirect the Brexit debate to a higher purpose will leave underlying tensions simmering.”