For centuries the myth that the Earth was flat constrained exploration for fear that travelling too far in any one direction would result in a calamitous fall over the Earth's edge into a bottomless abyss. In similar fashion, there are those who would have us believe that a comparable fate awaits us in Wales in economic terms if we fail to adopt the euro and succumb to the monetary governance of the European Central Bank like the rest of the herd in the eurozone. This myth is based on the flimsiest of evidence, using unsound economic arguments but it is supported by a liberal use of scare tactics, including the false spectre of widespread job losses.
On their web site, "Wales in Europe" claim that our exclusion from the eurozone has cost 7,430 jobs in the principality. Where on Earth do they get this figure from? Presumably, every time an organisation has cut back its workforce in Wales and mentioned in passing the relative weakness of the euro against sterling, someone adds the job losses to some notional tally. What they conveniently ignore are the real reasons in many of these cases, as harsh as they are, being uncompetitive or badly managed businesses, long-term structural changes or the transfer of production to countries with lower costs, especially labour. They also ignore the many thousands of jobs that have been protected by the stable economic environment we have enjoyed because we are not in the eurozone and the still further thousands of jobs created because this stable and flexible working environment has attracted so much inward investment from outside the eurozone. All the evidence we have on job creation tells us that it is due to competitiveness which itself has nothing to do with short-term exchange rates but everything to do with tax rates, social costs and business practices.
Another myth that seems to be quite commonly believed is that if we join the eurozone, Wales will somehow secure a greater share of structural funding from Brussels which will enable it to emulate that (other) Celtic tiger, Ireland. This is complete nonsense. The allocation of EU structural funds has absolutely nothing at all to do with whether or not Britain joins the eurozone. In future rounds of structural funding allocation, the biggest impact is likely to result from the anticipated enlargement of the EU with new members qualifying ahead of Wales based upon their relatively low levels of economic activity. If we haven't joined the eurozone by then, no doubt that will be held to be the reason for any reduction in the share for Wales.
And if you want to learn more about that economic miracle that is Ireland, just ask a would-be first time house buyer in Dublin about what the euro has done to the cost of housing as well as the general cost of living. Ireland has ridden on a boom-and-bust big dipper as its interest rates were driven to 3% and its currency devalued by a quarter by joining the euro; this when it was already growing at around 8%. This culminated with growth of 11.5% in 2000 or three time the EU average but now that the IT bubble has burst, the bust may be following with nothing the European Central Bank can do to help, even if it cared. This of course has been thanks to the one-size-fits-all interest policy set by the ECB regardless of the inflationary effects on a smaller member such as Ireland. Does anyone seriously think they would stop to consider the interests of Wales?
Another dangerous myth is that joining the eurozone would be better for Wales because a little over 70% of the exports of goods from Wales go to the EU. This ignores the fact that Wales is not a sustainable independent economic unit but it is an inseparable part of Britain. Four fifths of Welsh output is either consumed in Wales or goes to the rest of the UK, so Wales is desperately dependent on what happens to the UK economy as a whole, which we know would be badly destabilised by the eurozone's one-size-fits-all interest rate. In 2000, the exports of goods, services and investment to the eurozone were well under half of the total for Britain as a whole. Even if one accepts that a higher proportion of Welsh exports go to the EU, it must be remembered that much of this produce is manufactured by companies with owners based outside the EU for whom the dollar is the more important currency. Also, the majority of businesses in Wales do not export to the EU at all, so why should they suffer the disadvantages of joining a currency area that has no relevance other than to expose them to cost and the risk of instability? In more general terms, what is bad for Britain, is bad for Wales.
Perhaps the most aggravating myth I encounter almost daily is that because the government supports our adoption of the euro, it is inevitable that it will happen, so why bother arguing against it? The reason is that each of us who is privileged to have a voice in a democratic society has a duty to use it and by so doing we can as individuals make a difference to the outcome. You need look no further than Denmark to see an example of what the voice of the people can achieve in this way. My voice is saying yes to Europe but no to the euro.
If you would like to learn more, visit the web site of the "no" campaign at www.no-euro.com. If you would like to join us and engage in the debate in Wales, send an e-mail to email@example.com.
Managing Director of The Carlyle Trust Limited and a member of the Welsh council of Business for Sterling and the "no" campaign.
23 October 2001