American Nobel prizewinning economist Professor Joseph Stiglitz is one of the great advocates of a progressive approach to global issues. As a former chief economic adviser in President Bill Clinton’s White House, an adviser to Hillary and an ex- World Bank chief economist, one might have expected Stiglitz to oppose Brexit.
But when I interviewed him in London recently on his new book, The Euro and its Threat to the Future of Europe,’ it became apparent that unlike so many liberal-minded and middle-of-the-road citizens in Britain, Brexit is no mystery to him. In his view, when you see what the EU and, in particular, the euro, has done for great swathes of Europe, you can understand why this is a club to which the UK (or the majority of it) no longer wants to belong.
Amid all the distortions, untruths and scaremongering accompanying the Brexit campaign, the appalling state of the euroland economy barely registered, possibly for two reasons. First, the economics of currency unions are too hard to grasp. Second, because of the belief that it is better to fight from inside the tent than outside.
Stiglitz provides a clarity on the European project that has been largely lacking until now, except possibly from former governor of the Bank of England Lord Mervyn King. During the referendum campaign, the public was constantly told by ‘remain’ that abandoning a market of 500 million people would be some kind of disaster.
As Stiglitz lays out in detail, the euro area – 19 of 27 EU countries – is far from an idyllic economic block. What has happened follows an old economic precept: bad money seeks out the good. The result has been years of huge capital flight from Europe’s poorer southern tier to Germany.
In Greece, gross national product, the total output of the economy, has plummeted by 25 percent since the onset of the euro crisis in 2010. Adult unemployment is 23.5 percent of the workforce (against 4.9 percent in the UK) and youth unemployment stands at close to 50 percent. Similar levels of youth unemployment exit right across Europe’s southern tier.
In Italy, the third largest eurozone economy, youth unemployment is still rising, reaching 39 percent according to the latest data. Stiglitz also shows that despite the fact Germany has been a beneficiary of the euro, its economy has barely grown since 2010, while other industrial economies, including those of Britain and the US, have recovered strongly.
It is the consequences of this economic dislocation that causes Stiglitz and others such anxiety. It is generally argued that the rise of right-wing, semi-fascist parties on the continent has largely been caused by waves upon waves of immigration from the Syrian civil war and other conflicts. But the truth is that, as in the 1930s, the principle cause of the rise of extreme parties – on the right and left – has been unconscionable levels of joblessness.
Immigration has added a layer to the rise of extremism, leading to the building of razor wire fences along the Hungarian border, the use of guard dogs and brutal border guards. In Germany, immigration has given fuel to the extremist Alternative Party for Germany, which gave Angela Merkel’s CDU such a beating in the Mecklenburg regional elections. In France, terrorism has unleashed anti-Muslim emotions that have added to disquiet over a stagnating economy, heavy unemployment and given fuel to Marine Le Pen’s presidential campaign.
Many of those who voted remain argue it would be better to fight these destructive forces from within the EU, but fighting from inside is a struggle.
The views of the UK – a country outside the euro group – on the economic condition of Europe have been excluded. Moreover, the euro group could take decisions on issues, such as banking regulation, directly at odds with the UK’s vital interests.
Britain has a huge tradition and history of tolerance, which doesn’t exist in the EU. It is among the reasons French Jews, for instance, have chosen to make Britain their home for home.
Research by the late Professor David Cesarani demonstrated that right-wing, fascist parties, with anti-Semitic leanings, have never been able to gain an electoral foothold in the UK.
Outside of the EU, Britain has the opportunity to fight openly for the moderation for which the country is renowned. Indeed, it can lead the journey from the extremism now endemic in the EU.
• The Euro and its Threat to the Future of Europe by Joseph E Stiglitz is published by Allen Lane and priced £20.