How to critically analyse pro union biased reports is an essential skill for the independence movement; in fact, it is crucial for everyone to learn.
Earlier this week, I had one of my irregular Twitter conversations with @JohnFerry, a regular contributor to the Spectator and the Press and Journal, and the Scottish Liberal Democrats Finance Spokesman. I know that everyone thinks their Twitter exchanges are “riveting”, but I think this short exchange was important. Before we go any further, it’s important to say that we have offered John his own live episode on SCOTONOMICS to put forward his view of Scotland’s economy as part of the UK. He has refused. John obviously has his reasons, and this shouldn’t undermine his views.
During our exchange, John linked to this report from the Centre for Economic Performance at the London School of Economics and Political Science, attaching a screenshot of its conclusions:
The independence movement should consider reports like these important. They should also scrutinise them.
There are various academic ways to scrutinise a report like this. The first is always to ask what peer-reviewed journal did this come from? If a paper has been peer-reviewed and published, it is of more robust scientific merit than one that has not. It wasn’t from a peer-reviewed journal. It was a publication from the Centre for Economic Performance.
If you find a report like this, the next thing to do is to find out the organisation or the authors. It is an excellent guide to get a feel for the organisation by looking at its policy committee and its funding.
Policy committee members The Centre for Economic Performance:
Tera Allas, CBE, Senior Fellow, McKinsey Center for Government, Dame Kate Barker, Commissioner at the National Infrastructure Commission, Sir Robert Chote, former Chairman of the Office for Budget Responsibility, Mike Emmerich, Founding Director, Metro Dynamics, Chris Giles, Economics Editor, Financial Times, Sir Nicholas Macpherson, Chair, Visiting Professor, Kings College London, Rain Newton-Smith, Chief Economist, CBI, Sir Stephen Nickell, Honorary Fellow Nuffield College, Oxford, Bridget Rosewell, Chair, VolterraPartners LLP, Sushil Wadhwani, CEO, Wadhwani Asset Management and Linda Yueh, Chair, LSE Economic Diplomacy Commission
If you have the time, you can do some research on individuals, or you can look at the list and think: what type of result do these people expect/hope to see when they support research? Is it likely that a CBE, Dame and three Sirs support the break up of a union in which they have done so well? To the best of their knowledge and abilities, the people who work and direct organisations like this are fair and balanced. But they can not shake their inherent biases. It would be tough to argue against a pro-Union bias looking at this organisation. This is not to say any research should be dismissed if it is biased, it absolutely should not, but it should be considered.
The next area is funding.
“Work at the Centre is also funded by the European Research Council, UK government departments, UK and US research foundations, including the British Academy, Nuffield Foundation, Education Endowment Foundation, Leverhulme Trust, Alan Turing Institute, and alumni donations.”
And then ask yourself a similar question. What type of research is supported by these organisations, including the UK Government and a fund set up by Viscount Nuffield? Is it one that is likely to support the breakup of the UK?
After taking these few steps, you are likely to be better informed about a piece of research.
The next thing is to scrutinise the actual report. And this should come in two stages.
The first is to see if the summary or the things likely to be shared actually pass what Professor Steve Keen calls “the bullshit test” Do the findings pass simple tests like, as Steve often quotes, obeying the rules of thermal dynamics? The second is then to get stuck into the methodology that led to these results.
The central argument in the paper is that when Scotland is independent trade with the rUK (pop 62 million) will always cost more than the benefits of trading with the EU (population 447 million). When asked to clarify this position one of the authors of the report said:
Joining the eu would have a positive effect; but the cost of doing so is putting a trade barrier up with the rest of the uk, with a negative effect. We find the net effect would be negative.
So does that make sense? Models are one thing, but what has actually happened when countries refocus to the EU is another. Let’s look at Ireland.
One of the main features of our membership of the European Union has been free and open access to a large European market. This access has also been one of the main reasons for attracting foreign direct investment. Prior to 1973 Ireland was largely dependent on our nearest neighbour, the UK, as our main trading partner. Since then this dependence has declined. (1)
55% of the total value of exports went to Great Britain or Northern Ireland
Other EU 21%
Rest of World 14%
and the US 10%.
18% to UK
Other EU to 43% or €35.5 billion
The United States 20% of exports has overtaken the UK in terms of importance as a trading partner (1)
Trade thrives the bigger the network. In 1960 Indian exports to the UK were 30%. They are now close to 3% (2). This one of the reasons why there are 27 countries in the EU. Ireland’s trade has naturally gravitated to bigger markets. Every country does this. And so would Scotland. Trade patterns are dynamic. They move to avoid costs. If there is a high cost of exporting to UK and a lower cost of exporting to the EU guess what happens? Governments and businesses refocus. Patterns change.
So let’s get break down the quote that John linked to:
Two or three times is a significant margin. These types of statements are common in reports like this, but the range is essential to note.
As the centre for European reform says, separating the impact of Brexit and the pandemic is challenging (3). Its research suggests that looking at the final quarter of 2021 shows that “the cost of Brexit” as expressed by GDP finds that it is 5.2 per cent smaller than a model looking at the UK as part of the EU.
Perhaps the sentence that most stands out to me is that “regardless of whether an independent Scotland rejoins the EU or maintained a common economic market with the UK” does not, as Steven Keen would say, pass the “bullshit test”. It is saying that if Scotland joins the world’s largest single market, it will have NO positive impact on its economy. According to UK Government figures (4), a GDP boost occurred when the UK joined – which of course included Scotland – in 1973. (I have deliberately used a source that you would in no way expect to be in favour of EU membership!) here is what the document says:
The observable impact of EU membership shows a significant and positive impact on the UK’s trade – membership initially boosted UK trade with the EU by 7%, outweighing trade diversion. The Single Market was seen to boost intra-EU trade by a further 9% (although this may be an under-estimate)
The Dutch Government come to this conclusion:
The EU has reduced trade costs. This has led to more trade within the EU, which has increased the GDP of the Netherlands by 3.1%, making the country one of those that benefit the most from EU trade (5).
The Netherlands is three times the size and has a very different economy from Scotland, but it is undoubtedly no outlier regarding the success of GDP growth via trade with the EU. The report suggests that newer countries have benefited the most from EU membership in terms of an increase in GDP.
The Social Market Foundation summarise its research by saying:
Membership (of the EU) has raised UK income levels appreciably and by much more than 1970s’ proponents of EU entry predicted. These positive effects stem from the EU’s success in increasing trade and the impact of stronger competition on UK productivity (6).
A peer-reviewed article in Applied Economics (7) says this:
The length of EU membership is found to have a significant positive effect on economic growth
It is simply not credible to argue that membership of the EU would not have ANY impact on Scotland’s GDP. It is not credible to say that membership wouldn’t positively impact Scotland’s GDP.
Often you can stop reading a paper if it is clearly saying something that is very easy to disprove and appears as an outlier. The LSE paper in this regard is not, in my view, credible, as I have tried to evidence above.
The final thing to do, if you have the time, is to look at the methodology. What data did they use to get to their conclusions? What assumptions did they make? What time frame did they use? How many metrics were involved? These are just some of the questions an academic asks when reviewing a report like this.
Often this is included under the Methodology section in a paper. It is covered before the introduction in the Disunited Kingdom? paper.
It uses figures from 2017 (later statistics were available) it says: “Scotland’s trade with the rest of the UK is around four times larger than its EU trade.” It is actually only three times larger, 3.17 to be exact (8) UK trade: 52 billion v EU trade: 16.4 billion. But no one denies that Scotland’s current most important trading partner is the UK.
Next, we have this:
“We estimate there is around six times more trade between Scotland and the rest of the UK than predicted by a standard gravity trade model. Alternative methods imply there is from 2.6 to 7.8 times more Scotland-rest of UK trade than predicted”
A common approach is to use a medium of models, which would be around 4.5 times. But they have used their model that says six times. This will lead to a more significant modelled figure for current UK trade.
Here is another one:
“Independence would create a new international border between Scotland and the rest of the UK, leading to higher trade costs…. We do not consider other effects of independence, such as changes in investment flows, fiscal arrangements or Scotland’s currency.”
“Independence would create a new international border between Scotland and the rest of the UK” This won’t happen when Scotland becomes independent. Trade is likely to continue precisely the same UNTIL Scotland joins a formal customs union with the rest of Europe. That may be 3 to 10 years! So this is a huge assumption. Undeniably, trade barriers (not borders) increase costs, so it should be more explicit.
Finally, trade is measured after it is separated from all the other economic factors of becoming independent. Effectively it looks at trade Ceteris paribus. Economists acknowledge that their models are not sophisticated enough to take everything into account, so they miss things out. In this case: “changes in investment flows, fiscal arrangements or Scotland’s currency”: the things that WOULD change after independence. So if the Scottish Government spent 3 billion on a new mega port in Scotland, it would not be accounted for. These are the things that are simply not modelled. Doing so is too complicated, but these models are still used to predict the future. That’s the fundamental issue with Economic models.
I could go on, but I will stop after this one as it is a perfect example of how assumptions alter the results.
“We analyse an optimistic scenario where trade costs between Scotland and the rest of the UK increase by 15% after independence and a pessimistic scenario with a 30% increase”
The Office for Budgetary Responsibility predicts that Brexit will “eventually reduce UK imports and exports by 15 per cent” (9) So the “optimistic figure” used by the LSE is the ACTUAL eventual figure that OBS predict for the UK. An honest modeller would use a 10% optimistic figure and a 20% pessimistic figure that would likely increase to those levels over the years. This would, of course, significantly alter the impact on Scotland’s GDP.
There is much more to the report, but I hope I have demonstrated a process of how you can look that little bit deeper when you see questionable reports or links to those reports. If only people who linked to them did the same.
And my final point, I promise, is that this scientific process scares the bejesus out of Unionists. They scamper to find tropes like this….
As soon as we start to question, scrutinise and analyse reports from institutions, think tanks, and government departments, that are always affected by bias (10), we are slated as Luddites.
It takes time to look at reports like this, but I believe it is something worth doing. Please share the article and subscribe to our mailing list if you do too.
I need to get back to finishing my Green Economy Masters. We need more experts.
To critically analyse pro union biased reports (can and should also be used to analyse pro-indy reports):
- Always ask, what peer-reviewed journal does it appear in?
- Check out the organisation, its board of directors and crucially, if you can see who funds it
- Scrutinise the report. Firstly, give it the “bullshit test”, and then if you have the time, look into the methodology.
- Irish Central Statistical Office available here: https://www.cso.ie/en/media/csoie/releasespublications/documents/statisticalyearbook/2004/ireland&theeu.pdf
- The FT available here https://www.ft.com/content/96ae970f-ce36-3217-8c08-5f17f194d144
- Centre for European Reform: Available here: https://www.cer.org.uk/publications/archive/policy-brief/2022/cost-brexit-so-far
- UK Government, FOI request: available here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/220968/foi_eumembership_trade.pdf
- Dutch Government: available here: https://www.cpb.nl/sites/default/files/omnidownload/CPB-Communication-Trade-benefits-of-the-EU-and-the-Internal-Market.pdf
- Social market foundation, available here: http://www.smf.co.uk/wp-content/uploads/2016/04/SMF-CAGE-The-Growth-Effects-of-EU-Membership-for-the-UK-a-Review-of-the-Evidence-.pdf
- (2008) Growth, convergence and EU membership, Applied Economics, 40:5, 643-656,
- Scottish Government: https://www.gov.scot/binaries/content/documents/govscot/publications/statistics/2021/10/export-statistics-scotland-2019/documents/export-statistics-scotland-2019—publication/export-statistics-scotland-2019—publication/govscot%3Adocument/Export%2BStatistics%2BScotland%2B2019%2B-%2BPublication.pdf
- The Office for budgetary responsibility: available here: https://obr.uk/box/the-initial-impact-of-brexit-on-uk-trade-with-the-eu/
- Royal Society, available here: https://royalsociety.org/-/media/policy/Publications/2015/unconscious-bias-briefing-2015.pdf