Economic Impacts of European Union Membership to the United Kingdom
Since the UK joined the European Union in 1973, many things have changed and mostly it is on the economic situation of the UK. As it is well known, a good thing comes with advantages and disadvantages; if the advantages outweigh the disadvantages then it is worth the risk. Being an active member of the European Union, the UK has had to encounter both positive and negative economic impacts. In a general perspective, the positive economic impacts that the European Union membership has on UK’s economy are more compared to the negative impacts.
Looking at the overall economy of the UK, the policies in the European Union have greatly benefited them in one way or another. The main reason why the European Union was created in the first place was to promote trade among the member countries which would in turn help in uplifting the economies of the member countries. The way the EU membership influences the economy of the UK comes in many ways, but the most important effects arise through the single market across all the members of the EU.
Advantages and Disadvantages
The very first advantage that the UK enjoys by being a member of the EU is low prices of goods produced within the boundaries of the member countries. This is so because there exists a single market that is free of custom taxes to all member countries. Due to this, the prices of all the products is reduced greatly benefiting the consumers. The single market also creates a lot of competition among firms who produce similar products. This reduces the possibility of monopolies who charge high prices for their products. The benefit of this goes directly to the consumers who pay less for products that were quite expensive before.
The second advantage is that citizens from the member countries can freely move from one member country to another to trade, study, live or just explore. This promotes tourism which is a major source of revenue for many countries. The free movement of people to the place of their choice in Europe creates the possibilities of creating new businesses that in turn bring more revenue compared to before the movement was allowed. The creation of new businesses and new opportunities leads to the generation of job opportunities. Through the membership of the EU, approximately 3.5 million jobs have been generated over the years that it has been operational. This means a lot when it comes to the economies of the member countries. The EU also has what it terms as the European Structural Funds which are used to develop the regions that are economically deprived. Due to this, more market is created for products produced by member countries and thus more revenue is generated.
As much as it seems that there are more advantages than disadvantages of being an EU member, there are a number of disadvantages that are making European nations like the UK to lag behind when it comes to development. One major disadvantage is that it is costly to be a member of the EU, it is estimated that it costs around £300 to £870 per head. This is a steep cost that may outweigh the benefits (Hix, 2008). Another major disadvantage is that not all the policies formulated by the EU are efficient. For example we have the Common Agricultural Policy that failed and resulted high prices of goods and oversupply of goods. We also have the single currency problem. The EU emphasizes that all the member countries to use the Euro which is a major move to be adopted by all the member countries. It would be a costly move for all the member countries to adopt a single currency.
Finally, there is the problem of overcrowding that is making the cost of living to rise in major cities like London. Because of the free movement of people among the member countries, many people opt to move to bigger cities in pursuit of greener pastures. This instead leads to rise in cost for housing and it also leads to congestions on the major roads. There are still many problems that are arising over the years and some countries are contemplating to stop their membership.
Current Considerations
With the current rampant development in technology, the world is becoming a global village. Nearly all the countries can be able to conduct trade together despite the distance between them. When it comes to the EU, it tries to promote trade among the member countries and on the other hand, trying to restrict trade between the member countries and other countries in the world that are not affiliated to the EU. This reduces the opportunity of the member countries t trade with other countries in the world. This restriction is holding back many member countries like the UK from exploiting other opportunities outside the EU. This is becoming a major issue (Hix, 2008).
After the formation of the EU, a country like the UK was among the major beneficiaries especially after the great depression of World War 2. Many European nations were in economic turmoil and something had to be done to salvage the situation. Forming the EU was a great move as the policies helped many member countries like the UK to come out of the depression. Generally, it can be observed that things have gotten from worse to better for the UK by joining the EU.
UK’s Economy Compared to Other EU Members
Compared to other members of the EU, the UK is among the countries with a strong economy after Germany. The country has also managed to be among the world’s strongest economies. Other members of the EU like Germany, France and Italy, have also made it to the top ten strongest economies in the world. This indicates that the economy of the UK is way above many member countries of the EU except Germany.
EU’s Impacts on Specific Economic Sectors
The trade sector has also been impacted both positively and negatively. Before the policy of a single market, it was difficult and costly to trade with other countries because of the high custom duty imposed. After the policy of a single market was created, the movement of goods over the national boundaries of member countries was made free. Afterwards, this promoted trade in a great way as all the taxes were dropped making it simpler to move goods and services from one member country to another.
The Bottom Billion
According to Paul Collier, the bottom billion countries are those that have very weak economies to the extent that they cannot be able to produce enough for their citizens. Such countries depend on international aid from developed countries so as to sustain their economies. What greatly puzzles Collier is that, despite these countries receiving huge amounts of international aid and support, they still remain impoverished and poor. The gap between the rich and the poor for these countries continue to widen despite the aid and support they receive.
A good example of such a country is Liberia. It is a country in the West of Africa that is characterized by civil war. The country has a lot of internally displaced persons as well as refugees. Due to this, it is among the many African countries that receive foreign aid and support from other nations. For many years, the country has been receiving foreign aid but still over 80% of its citizens live below the poverty line (IMF, 2012). The gap between the rich and the poor is very wide. Many of the citizens live deplorable lives. Despite the country having vast natural resources and a small population, they are still not able to sustain themselves. It is like the international aid and support they receive is directed to specific individuals and not for the development of the whole country.
For 2015, the GDP of Liberia was forecasted to grow at a rate of 2 to 3% as it was viewed that the agricultural, construction, mining and general services will be fully revived. After some time, this was not the case (IMF, 2012). It turned out that the agricultural and mining sectors did not even contribute anything to the country’s GDP. This indicates that the GDP of the country is decreasing. Despite the natural resources bestowed to the country and the international aid they receive, the lives of the citizens still remains to be impoverished.
With more aid being channelled to the country after the Ebola outbreak, the country’s economy is still weakening. The country’s population is just 4.2 million people meaning that it would be very easy for such a country to strengthen its economic power. Since the country can now be termed as politically stable, it is supposed to be on the verge of recovery. Instead it still continues to lag behind in development despite the international aid and support they get. Liberia has an external debt of about $4.5 million which is 800% of its GDP, despite receiving such numerous amounts of money for her small economy, the country is still ranked among the poorest countries in the world (IMF, 2012).
Liberia has a long record of political instability that has led to several civil wars with the last civil war claiming the lives of about 250,000 people. The country has endured 14 years of brutal conflict which is the main reason why it is behind in terms of economic development. Corruption is also a major problem in the country as much of the aid received is embezzled by the few who hold leadership position. Many government officials have been dismissed following corruption allegations on them like the Auditor General Robert L. Kilby who was dismissed from office in 2012 following corruption allegations. Just like other developing countries in Africa, the major hindrance to development is the mismanagement of public funds that are meant to finance development projects.
The traps
Collier came up with various traps that hinder development in countries like Liberia. The major trap that has placed Liberia as a country in the position that it is today is the conflict trap. Bigger and powerful countries were also faced by conflict traps but they quickly came out of the traps before they could affect them in a bad way (Collier, 2007). The difference of the conflict traps in many countries that are now underdeveloped, like Liberia, is that they take a lot of time before getting out of the conflict trap. Their conflicts turn to deadly civil wars that completely disrupt the normal functioning of a country politically, economically and socially. Without law and order due to the civil wars, the countries cannot attain any significant development other than continue to fall apart. Liberia has been in civil wars for more than a decade. Before the civil war, the country was on the road to economic stability but the civil destroyed their economy.
Another major trap that is holding Liberia back when it comes to development is the natural resource trap (Collier, 2007). Liberia is endowed with vast natural resources but is still not reaping the full benefits of the resources. Instead, the natural resources are the ones that led to the conflict trap over their control. The country has a large forest cover which indicates that it has plenty of timber and they also have large iron ore deposits. Many of the civil wars were due to the control of such resources. Instead of the country reaping benefits from controlled exploitation and export of such resources, the resources are the ones causing underdevelopment as people are fighting to control them. According to Collier, the reason why he terms the endowment of natural resources a trap is because it has been seen in the bottom billion countries that most of them over depend on the natural resources and thus fail to exploit other economic activities like manufacturing and service exports that would greatly generate more revenue.
Liberia also falls into the trap of bad governance in a small country. With such a small population of 4.2 million people, Liberia is classified as a small country. The reason as to why there have been conflicts and civil wars is because there was no good governance that would help avert such things. On top of this all, better exploitation of natural resources is also made possible by good governance. But because Liberia has lacked good governance for many years, it explains why it has fallen to numerous traps as described by Collier.
Solutions
The best solutions to help Liberia get out of its traps is the use of laws and charters (Collier, 2007). Charters like the natural resource revenue, democracy, budget transparency, post conflict situations, investment. To implement such laws and charters, Liberia has to have a functioning government. With such charters in place, they can be able to minimize corruption and fully exploit the full potential of their natural resources in developing the country.
Since the major reason why Liberia continues to wallow in poverty, despite getting international aid, is civil wars; military intervention would be the best solution. There are still peacekeeping troops in Liberia to date in order to make sure another civil war does not break out. This way, many rebellions would fear to start a civil war because of the military presence.
Finally, good governance is what would ensure that the economy of Liberia flourishes. Good governance would see to it that international aid and support is used to better the whole Liberian economy other than going into the pockets of corrupt individuals. Good governance would also make sure that the natural resources are evenly distributed to every region of the country to aid in development. With good governance, it is certain that better economic policies would be adopted which would in turn create other economic ways to generate revenue instead of overly depending on natural resources only.
References
Giulietti, C., & Centre for Economic Policy Research (Great Britain). (2011).Unemployment benefits and immigration: Evidence from the EU. London: Centre for Economic Policy Research.
Hix, S. (2008). What's wrong with the European Union and how to fix it? Cambridge: Polity.
Collier, P. (2007). The bottom billion: Why the poorest countries are failing and what can be done about it. Oxford: Oxford University Press.
Liberia., United Nations Development Programme., & International Monetary Fund. (2012). Republic of Liberia: Life Liberia poverty reduction strategy : final report, a results-focused assessment (June 2008-December 2011). Washington, D.C: International Monetary Fund.
