Generation Brexit

Paul Krugman Op-Ed on BoE Report

World renowned economist Paul Krugman recently released an op-ed piece on the New York Times analyzing the Bank of England report on Brexit’s economic impact. This report predicts the long-term effects of the different possible deals on England’s GDP for the next decade using a ‘computable general equilibrium’ (CGE) model. (continued in comments)

 

Martin Adnet 2 weeks ago

continued idea + source:
The results are frightening. The report estimates a worst-case scenario with no deal costing over 10% of total GDP, a shockingly high amount compared to other economic predictions. Paul Krugman estimates a 2% hit to British GDP, mainly due to invisible barriers to trade after ending open borders with the EU. While other estimates vary wildly they tend to average around 3-4%, which makes the Bank of England’s analysis all the more surprising.
The BoE’s main explanation for these disastrous predictions are the new frictions slowing down imports and export with the EU. England has to set up a much larger infrastructure to regulate the new customs and tariffs. This will take time and money, as well as regular upkeep after construction. Until the system is set up, England might suffer from slower trade as their customs infrastructure is overloaded. The Bank predicts these costs will be greater than the benefits of opening trade agreements with third-party nations, ultimately hurting England’s GDP and future economic growth. However, the prediction assumes British customs infrastructure will adapt very little to the changing circumstances. It is safe to assume that a developed and advanced country like Britain has the resources and motivation to bolster their infrastructure should it proved inefficient.
One possible fix is relaxing border enforcement to clear bottlenecks and streamline the process. While this runs the risk of increased fraud and illegal activities, it might be worth it in the long run to handle the increased trade. Paul Krugman also debunks the theory that liberalizing trade leads to immediate economic growth, an idea Brexit supporters have been using to reinforce their argument. Whether the ultimate impact for a worst-case scenario is 2% or 10%, either way Britain’s economy will be feeling the weight of its decision for a while to come.

Source:
Krugman, Paul. “Brexit, Borders, and the Bank of England (Wonkish).” The New York Times, The New York Times, 30 Nov. 2018, www.nytimes.com/2018/11/30/opinion/brexit-bor...nd-wonkish.html.

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Eduardo Scheuren 1 week ago

Do you think the UK can recover and experience steady growth after the expected economic hardships following Brexit through establishing favorable trade deals with powerful countries like the US and China and perhaps joining the EEA?

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