Experts said that Brexit would wreck Britain’s economy. Instead, it is thriving. Sound familiar?
In the run up to Britain’s referendum on European Union membership in June 2016, a number of experts predicted that, in the event of a vote to Leave the EU, the British economy would collapse.
This week, it was announced that ‘UK employment at highest since 1971‘. Not only that, but the number of people in work rose by 222,000, the largest increase for years, unemployment is at a 44 year low, and wage growth, at 1.3%, has now outpaced inflation for a year. This job growth was driven by women, they account for 60% new jobs. Employment growth was also driven by growth in full-time jobs. And every region of the United Kingdom saw employment growth. All this while inflation is below target, British government borrowing is at its lowest level for 17 years, and GDP is growing at its fastest pace for two years.
After Brexit, none of this was supposed to happen.
Same old story
This may be a familiar story to Americans. In June 2016, Larry Summers, former chief economist to Presidents Clinton and Obama, wrote
“If Donald Trump is elected, I would expect a protracted recession to begin within 18 months. The damage would be felt far beyond the United States”
The day after the election, Nobel prize winning economist Paul Krugman wrote
It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?
… If the question is when markets will recover, a first-pass answer is never.
…So we are very probably looking at a global recession, with no end in sight.
Instead, as I wrote last week,
The Tax Cuts and Jobs Act, though not perfect, went some way towards reducing complexity and boosting competitiveness. The deregulatory drive has been truly impressive. America’s exports of crude oil have been hitting new peaks recently. It is early days, but the numbers, so far, are encouraging, as Figure 1 shows. In the last six quarters of the Obama presidency, real GDP growth averaged 1.6%. In the first six quarters of the Trump presidency, it has averaged 3.0%. This is a figure many experts had said was unattainable.
Figure 1: Real GDP percent change from preceding period (annualized)
Source: Bureau of Economic Analysis
“Don’t follow leaders”, as a great Minnesotan once sang. Certainly not without asking where it is they are leading you. The same questions must be asked of those who present themselves as ‘experts’.
To learn more about Brexit and its impact, don’t miss our Annual Dinner featuring Nigel Farage. Find tickets and more information here.
John Phelan is an economist at the Center of the American Experiment.