Economics

Free Trade - Still a Good Idea?

Back in the far off days when I was studying Janet and John economics (actually An Introduction to Positive Economics, by Richard Lipsey, followed by various others) there were several standard subjects that students had to write essays on. One was the effect of changes in exchange rates on the UK economy, and one of the others was a discussion about Free Trade and the theory of Comparative Advantage. Comparative Advantage is one of the fundamental arguments for Free Trade, so let me explain. At it simplest, suppose Janet and John both produce widgets and floggle-toggles. If Janet is more efficient at producing widgets, and John better at floggle-toggles, then it makes sense for Janet to concentrate on widgets, and John floggle-toggles, selling them to each other. The theory is that each is cheaper, they all make more of them, and everyone is happy. Taken to it’s limit, Free Trade between countries should result in everyone being better off and more prosperous. Of course, Janet and John are countries, and it’s a lot more complicated than that (it always is!).

BRexit - What Now?

Well, the dust has settled a bit. As I feared, we’ve voted to leave the EU. Also, the idea that the money saved will be ploughed into the NHS, and that immigration will be greatly reduced because of this have already been denied. Apparently they were only suggestions. Our credit rating is down and our exchange rates are down too - as just about every expert predicted. I will be charitable, and assume that the country took this all into consideration when they voted, and are getting what they wished for.

The question now is what is likely to happen in the future, and how can we take advantage of it all. Bear in mind that our treaties with the EU (and everyone else) have not actually changed yet. And it unlikely to until at least September 2018, depending on when the UK gives official notification that it is leaving.