No Economic Benefit

Many believe that EU membership significantly benefits a nations economic growth. Unfortunately when we look at charts of GDP growth we find little evidence for this claim.

GDP per capita is traditionally regarded as the measure of economic growth but this does not take into account the benefit a nation gains from population growth. This would rule out all the labour many nations have taken from overseas that supporters of Freedom of Movement believe are so vital for economic performance. So we need to look at a nations overall GDP growth. We must also use real GDP, not nominal, as real GDP is adjusted for inflation.

Any study into the effect of EU membership must include a nations economic performance before joining so we can see if there has been any substantial change from previous performance.

We must also show what was going on outside of the EU to gain an understanding of how our economy may have fared had we not joined the EU.

The graph below shows real GDP going back to 1951 which saw the start of the EU as we know it today with the signing of the Paris Treaty. The graph shows the economic growth of the United States, Australia and Japan, (three non EU members), Germany and France, (two of the founding members) and the UK who joined in 1973.

The first thing we notice is that the overall trend is much the same for all six nations, suggesting that EU member states have gained no significant advantage over non-EU states.

If we look at growth for the UK after 1973, when we joined the EU, we see no change to the overall trend until about 1995, so if there was no change in the growth trend for 22 years after joining the EU, there is little foundation to claim that our EU membership has significantly benefited our economy.

Graph showing real GDP growth of the United States, Germany, France, Japan, United Kingdom and Australia since 1951.

At the same time that the UK joined the EU, so did Ireland and Denmark. Graphs of their GDP growth are shown below.

Graph showing real GDP growth of the United Kingdom, Denmark and Ireland since 1951.

As you can see Ireland’s growth has been meteoric and this has been put down to the benefits of it’s EU membership. Good luck to them. Denmark, on the other hand, has seen the same general trend of growth as the nations shown in the previous graph, so there is no evidence here to suggest any significant benefit to it’s economy as a result of EU membership.

Next to join the EU were Greece in 1981 and Spain and Portugal in 1986.

Graph showing real GDP growth of the United Kingdom, Greece, Spain, Italy and Portugal since 1951.

Greece saw growth gradually increase after 1983 so this may have been down to it’s EU membership. On the other hand it’s trend line is very similar to that of the UK up until it’s debt crisis in 2008. As we have seen in the first graph the UK’s growth trend is very similar to that of the non-EU nations shown, so is Greece’s economic growth due to the effects of it’s EU membership or due to the wider global economy? Or both?

Prior to Spain and Portugal joining the EU in 1986 Italy’s economy grew faster than to other two, which may well have been a benefit of Italy’s EU membership. Italy, Spain and Portugal all show a dip in growth between 1980 and 1984 as they were badly hit by the European recession at that time. Their subsequent joining of the EU in 1986 may have helped pull them out of that recession.

On the other hand, the growth trend is still similar to that of the UK and leading non-EU nations so it is not clear if EU membership has been a significant driver of growth.

Austria, Sweden and Finland joined in 1995.

By this time Sweden and Finland had already pulled themselves out of the recession caused by the Swedish banking crisis in 1991 and saw decent growth till the 2008 crisis. But again, the growth was not that different than that experienced by developed non-EU nations so we cannot argue that EU membership gave them significant economic benefits.

Brexit No Shame

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