If the UK Economy Tanks, Don’t Blame Brexit

Frank Shostak

Last Thursday, the people of Britain voted in a referendum to leave the European Union (EU). Most commentators view Britain’s exit (“Brexit”) from the European Union as bad news for economic growth in the UK and the eurozone. As a result, it is argued, the growth rate in the rest of the world will be also badly affected.  It is more likely that, whether the pace of real economic growth over time will weaken or strengthen is going to be set by the pace of expansion in the pool of real wealth.  A strengthening in the pace of economic growth implies a strengthening in the rate of growth of the pool of real wealth. Conversely, a weakening in the pace of economic growth implies a weakening in the rate of growth of the pool of real wealth.

The ability of an economy to generate a rising rate of growth of the pool of real wealth is determined by the ongoing expansion and the enhancement of the infrastructure. This permits the increase in the rate of growth of the production of goods and services to support people’s life and well-being.
The key for this is an ongoing allocation of some portions of real wealth toward the formation of capital goods (i.e., the enhancement and the expansion of the infrastructure)

NB: The allocation of real wealth here means that a portion of real wealth is channeled toward the activities that are engaged in the expansion and the enhancement of the infrastructure......To Read More......