Why startups should ignore the EU debate

Mattermark recently published an excellent post “A more perfect union” by Nic Brisbourne. It sets out the reasons why startups should be worried about the coming EU referendum in the UK. In case you are not aware, the UK will vote on 23 June on whether to leave the EU or remain.

Leaving has acquired an ugly nickname — Brexit. On both sides the campaign has been marred by rhetoric — sorry strike that out — puerile posturing (better but still flattering) of the most abject nature. The whole thing just makes me angry. So this column departs from my usual calm analysis of business issues.

Let me be clear, I agree with Nic’s conclusion 100%. The UK should remain in the EU. His article is also distinguished by being rational and relevant. Two things that cannot be said often in this campaign. I am generally a believer in being a part of the political process. But if you are running a startup you should vote remain and pay no more attention to it. Feel free to ignore the rest of this article!

The problem is that the arguments on both sides are false. Based on misleading and dangerous premises. Exaggerated beyond belief. And nasty, parochial and small minded to boot. Followers of the US Presidential primaries may have a sense of deja vu at this point.

I don’t have the time or the patience to go through this stuff in detail. So I will just summarise why the economics of the debate are so wrong.

The lump fallacy

​There is a concept in economics called the lump of labour fallacy. In essence its a version of a zero sum game. One which assumes the workforce is a static entity rather than a dynamic system. Much of the debate centres on what I will shorten to the Lump Fallacy. It treats everything as a static and immutable lump.

To be specific, UK public services are viewed as a lump. Finance, tax, health, education, agriculture. The lot. Once you start from this the conclusions reached are just rubbish.

For example the NHS is treated as it has a fixed level of resource. Therefore it is struggling to cope. Because the British public has inconveniently allowed its health needs to grow. Add one person to the population and that becomes an extra strain. To be avoided at all costs. (See how immigration scares mingle with these sham economics).

The truth is that UK economic growth today depends on an increasing population. Our productivity is flat or falling. And our population growth arises either from direct migration or from the children of recent migrants. So immigration is driving the increase in tax receipts. Which in turn is the means by which the resources available to the NHS are increased.

On top of this, by increasing the working age population we also change the demographics. And many of the new arrivals also fill vital jobs in health and social care. In truth immigration is saving the NHS. Not imposing an additional burden.

The trade agreement fallacy

​The other dimension of the economic debate is just as dangerous. There is much talk of trade consequences and trade agreements. Nic refers to this at length in his article. Other elements of Government economic policy are also given over prominent positions.

All the squabbling is founded on a false premise. That the actions and influence of Government are the primary determinants of trade.

This is also rubbish. Trade goes on everywhere. With or without agreements. There was an explosion of noise when President Obama entered the debate. It obscured the fact that neither the EU nor the UK have ever had a free trade deal with the US. Yet I still seem to be able to buy an iPhone, watch an American movie and the rest.

Of course this is because there is a large section of the remain campaign don’t believe in free trade anyway. They are just using this as an economic fig leaf. Once the campaign is over attention will turn to the proposed TTIP agreement between the EU and the US. Expect many In campaigners to be among the most vocal opponents of this deal.

Focus and frustration

​Anyone in a startup, no matter how early stage, has a much more powerful set of levers in their hands. Innovation, passion and the dedication of the human spirit are the true drivers of the economy. Founders, investors and advisors in the startup ecosystem are dedicated to harnessing this power.

Government sits at the margins. The real economic outcome of leaving or remaining in the EU is impossible to predict. And of minor consequence. Not even worth a discussion.

I will be voting Remain because I believe in working together. Co-operation and team work beats striking adversarial attitudes every day. You should vote as you choose. My only advice is to ignore the debate. Your time is valuable and you have far better things to do. Like focus on building a great business.