Comparing the UK and France: Economic Foundations and Philosophies

Introduction

The economies of the United Kingdom (UK) and France present distinct characteristics and philosophies that have shaped their positions in the global market. This article delves into some of the core differences, focusing on banking practices and the underlying economic philosophies of the two nations.

Banking and Monetary Policies

UK: The Freedom of Banking

The UK has an exceptionally flexible banking system where the country's banks are not subject to mandated reserve requirements. Furthermore, the process of creating newly created money is simplified through the act of loaning, where an increase in a bank’s assets simultaneously increases its equity due to the reserve requirement, allowing banks to create liquidity through the issuance of loans.

According to some experts, this capability for UK banks to create money without the need for reserves means that:

Banks in the UK can essentially "create phantom reserves" by simply loaning themselves money, which in turn generates new deposits and hence, new liquidity in the economy.

In contrast, France has stricter regulations with banks having to meet reserve requirements, making the creation of new money through loans more cumbersome and less flexible.

Philosophical Differences in Economic Approaches

British and French Perspectives

The economic philosophies of the British and French populations reveal significant differences in how they perceive and interact with their respective economic systems. A British friend described to me the mindset of the British as:

"If an English man jumps the queue in a rail station and vaults the ticket barrier, everyone tuts and disapproves. If a Frenchman does it in Paris, the crowd cheers, despite being the ones being cheated."

This illustrative anecdote highlights the differing attitudes towards fair competition and economic norms. The French believe that their standard of living, ranging from healthcare to pensions, is an inalienable right, expecting others to bear the financial burden. Conversely, the British approach is marked by a more individualistic and competitive attitude.

Post-Brexit Economic Implications

The Cost of Trade and Independence

One significant consequence of the Brexit decision is the potential economic restructuring, particularly in terms of trade dynamics between the UK and France. Post-Brexit, France may face a severe economic impact, especially regarding its revenue from food and fishing exports to the UK. These products, such as cheese and cider, which are highly valued in the UK, may see an increase in domestic production and competition, potentially leading to lower quality standards.

The shift in trade dynamics could also have implications for imports and exports. For instance, the UK relies on imports like salt from Denmark and rail ballast from France. Post-Brexit, these imports could become unavailable, forcing the UK to either find alternative suppliers or satisfy the demand with domestically produced goods. This transition could be costly and disruptive, underscoring the complexities of economic independence.

Furthermore, the discussion on post-Brexit services, particularly in banking and design industries, raises the question of what the UK will export in the absence of a comprehensive trade agreement. As a "mad professor" quoted by 'lunatic leavers' has suggested, many British industries might face severe destruction without a deal. This highlights the uncertainty and potential challenges the UK faces in maintaining its economic prowess independently.

Conclusion: The diverse economic structures and philosophies of the UK and France signify a rich tapestry of national identity and economic strategy. Understanding these nuances is crucial for both national and global economic stakeholders.