The “Brexit” -a portmanteau of “Britain” and “exit”- is the discussion centering around the upcoming referendum, a vote on June 23rd wherein everyone of legal voting age can vote either “yes” or “no” on one single question: Should Britain leave the European Union?
The European Union is an economic and political partnership that began after WWII to foster co-operation in rebuilding and economic partnership, with the idea that countries who trade and work with one another are less inclined to go to war against them. There are 28 European countries in the EU, and the partnership has allowed markets, trade, and people to move around more freely, ideally as though the individual countries are states in one large country. The Euro, a currency unique to the EU, was introduced and used by 19 of the member countries.
Rumblings of Britain leaving the EU have been going on since the ‘80s. The concept of Global Governance is as touchy a subject as ever. No country wants to lose sovereignty, to feel like they can’t make the rules for their own people. The EU membership fees are steep, and the guidelines it imposes can feel restrictive. One of the main principles of the EU is residency and “free movement”, which means you don’t need a visa to live and work in a different country, as long as they are also in the EU. This lack of border and immigration control is a difficult pill for some to swallow, particularly in the current climate of refugee and migration emergency. The Financial Times says “George Osborne has warned of “tens of thousands” of potential job losses in the financial services industry if Britain leaves the EU, claiming that 285,000 jobs in the sector are linked to business with Europe’
What does it mean for the rest of the world? Britain is the EU’s second-largest economy, has a powerful military, and has long held much influence in global affairs. While proponents of the ‘Brexit’ are aiming for an “amicable divorce” and believe trade and international relations can remain on good terms after leaving the EU while retaining its influence, many don’t seem to agree. The EU is currently the UK’s main trading partner, and if things were to go sour with political and trade relations with the EU, it could leave Britain with difficulty in penetrating emerging markets in competition with the likes of the US, EU and China. Complete withdrawal from the EU comes along with trade barriers erected, and steep tariffs on trade introduced.
England has long been a conduit for American relations with the EU, being our friendly go-between and holding power in that relationship with us. But if Britain leaves the European Union, it would lose the influence of Brussels, Berlin, and Paris, and consequently could see US government in Washington D.C. less focused on them, and end up sidelined in the big transnational and global issues like trade, security, and environmental issues.
There is a possibility that the withdrawal of the UK from the EU would start a “domino effect” of other countries in the EU evaluating the efficacy of remaining in the union, which could make the organization unstable, and leaves certain larger countries with significantly more economic impact upon the smaller countries still within the EU. This instability could theoretically lead to a structural crisis of government in Europe.
The Financial Times issued a poll to more than 100 leading thinkers and Economists, and the answer was unanimous. Not one single economist thought that the ‘Brexit’ would enhance UK growth. “Adam Posen, president of the Peterson Institute for International Economics said the “huge self-inflicted wound” of a vote for Brexit “changes my views about 2016 and the medium term drastically for the worse. Business investment will dry up rapidly.”
Some believe that the uncertainty of the consequences of the move alone will hurt the economy of Britain, scaring the country into asset protection rather than spending. The Guardian writes about a worst-case scenario for Britain: “Another analysis by economists at the Centre for Economic Performance (CEP), part of the London School of Economics, calculated the UK could suffer income falls of between 6.3% to 9.5% of GDP, similar to the loss resulting from the global financial crisis of 2008-09.”
Keep up to date on the referendum over at The Economist, which is updated with vote intention numbers, as well as news and information. Time will tell which direction the UK will vote, and what the local and global economic consequences will be.