The United Kingdom (UK) joined the European Union (EU) in 1973 and left in 2020. From the standpoint of Macro-Systems analysis (rather than Political Philosophy): (1) What were material economic conditions during the 1973-2020 EU period and (2) What would have happened if Britain had stayed in the EU (the primary counterfactual). In this post, I'm going to approach these two questions in terms of Hardship, Financialization and Overall Growth of the UK Economy as measured by indexes created using data from the World Development Indicators.
From the time plots above, during the EU Membership period (1972-2020) Hardship (HARD1) increased, Financialization (FINZ1) increased and Overall Economic Growth (UK1) increased. Had Britain not left the EU, Hardship would have been reduced below 1960 levels, Financialization would have peaked in 2030 and declined afterward and the a Steady-State Economy would have been reached around 2030.
In other words, Britain gave up on the EU Project before the benefits would have been realized, although there would have been intense debate about the benefits of a Steady-State Economy. The rest of this post explains how this Counterfactual Conclusion was reached.
Notes
Shefner et al. (2015) Austerity and Anti-Systemic Protest: Bringing Hardships Back In
Hardship Measurement Model (HARD)
Where data was available in the World Development Indicators (WDI), the variables above were used to construct three independent components that explain 97.7% of the variation in the indicators.
The first component, HARD1, explained 75% of the variation and was a relatively equal weighting of all the indicators. The second independent component, HARD2, explaining about 20% of the variation, was a, Inequality-Male Mortality-Unemployment, Household Expenditure-Unemployment historical controller. The third independent component, HARD3, was a Family Work-Inequality-Male Mortality historical controller that explained 3% of the remaining variation for a total of 97.7% of the variance explained using Principal Components Analysis (PCA).
From the time plots, all the components were stabilizing by 2014.
Financialization Measurement Model (FINZ)
Financialization (or financialisation in British English) is a term sometimes used to describe the development of financial capitalism during the period from 1980 to the present, in which debt-to-equity ratios increased and financial services accounted for an increasing share of national income relative to other sectors.
UKL20 Measurement Model
EUL20 Measurement Model
EUL20 TECHP Model
UKL20 EU Input
