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  • Cornerstone Team

Is the EU a bureaucratic basket case?

Bureaucracy in the EU is often accused of destroying innovation and hence productivity growth. If one assumes that Brexit would lead to less bureaucracy and more innovation, it is not entirely unthinkable to expect it to lead to higher productivity and hence accelerating economic growth. 

But, is EU bureaucracy really as bad as generally perceived? Niels Jensen, a Danish economist with 30 years London living doesn't think so. "Yes, the MEPs in Strasbourg do make some silly decisions every now and then, which have a habit of hitting the front pages, but what really matters when it comes to economic growth is not whether the European parliament decide that kettles for the 5 o’clock tea should be banned," he says.

Economic growth is largely dictated by labour market and product market regulations and, on that account, the EU isn’t doing too badly.

The seven most protective countries in a OECD study this year are indeed all members of the EU, but if the EU were that protective, the UK wouldn’t come out as the fourth least regulated market in the study – ahead of the likes of Norway, Switzerland and Finland. "The only conclusion I can reach is that it is the countries in question that are over-regulated – not the EU – but it is quite convenient to hide behind the perceived problem," Jensen argues.

Another example – product market regulations. Although EU countries do not fair quite as badly as they do with respect to labour market regulations, most EU member countries do significantly worse than the UK (at 2nd least heavily regulated). Again, one must assume that the EU is therefore not the culprit.

UK labour and product markets are already exceedingly competitive. Jensen's conslusion is that Brexit is not likely to meaningfully improve British competitiveness. "UK voters could be in for a major disappointment if they expect Brexit to lead to stronger economic growth."

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