A clueless American’s take on Brexit
Brexit, you now have our attention. For months, it seemed like a quaint English dust-up that would go away once the votes were counted.
Man O man did the media get this wrong? The vote was not all that close.
17.4 million Brexit (51.9%)
16.1 million stay (48.1%)
As a point of comparison, the vote difference was similar to the 2012 Obama trouncing of Mitt Romney. The vote was 51.1% Obama to 47.2% Romney.
Now that Brexit has been approved, I’ve done a 24 hour study cram to understand what the heck happened, and what this means.
Did the British voters get it wrong?
Stock markets, world leaders, economics experts opposed the Brexit. Stocks markets are unhappy, the pound is falling, and prognosticators are forecasting economic malaise for the UK.
How the media is framing Brexit
Brexit supporters are being cast as xenophobic, anti-intellectual, anti-immigration and racist by the pro EU factions. Brexit supporters are rallying behind the banner of nationalism, and claim to be champions of the working class. Brexit supporters point out a sovereignty issue with their EU membership. Essentially they are arguing that the UK does not have the ability to vote for their EU representatives, and therefore are being governed by the EU rules without proper representation.
The racist angle
Brexit supporters are being accused, right or wrongly, of being racist. According to EU supporters and the media, Brexit supporters are blaming Non-Christians, especially Muslims, and immigrants for the problems of the British economy.
The fluid work force of the EU
Apparently, any citizen of an EU nation can work freely throughout any of the 28 (soon to be 27) member nations. Brexit supporters are complaining about not just Syrian refugees burdening their social systems, but also workers from poorer EU nations like Poland taking up jobs and residence in the UK.
We won’t know till the divorce papers are signed
The UK’s breakup with the EU is going to take a couple of years to complete. A huge unknown is how the breakup is going to work out. If the EU wants to be vindictive, they could make trade with the UK more restrictive and cumbersome. This is a huge risk for the UK economy. The EU might try to cripple British exports to the 27 EU nations, and withhold or inflate the cost of critical imports to the UK. If the EU decides to let the UK go amicably, they could continue to trade freely with the UK, no harm, no foul.
British expats may need to go home, foreigners may need to get out
The UK and EU trade relationship is up in the air, but the free flow of British ex-pats working in EU nations, and citizens of EU nations working in the UK should slow down considerably. What will happen with the current Brits working in other EU nations and citizens of EU nations currently working in the UK? Will they be grandfathered in, or will they have to pack their bags? All up in the air and pending EU exit provisions.
The Eurozone (EU) currently looks like this:
The colored countries are in currently, the grey areas are not. So who’s not in?
- Iceland, and
- 17 or so other smaller nations (many former Soviet Bloc nations such as Moldova, Kazakastan, Albania).
The two biggest winners in terms of GDP per capita have come outside of the EU. Finland ranks #1, and Switzerland #2 in terms of GDP per capita (excepting tiny Luxembourg, population 556,000). Although it is hard to say for certain that Finland and Switzerland benefited from abstaining from joining the EU, their success does boost the Brexit case. See the appendix for charts and graphs on GDP per capita figures.
Another trend the data shows is that the weaker economic nations who joined the EU (mostly in 2004), have grown their GDP per capita at a faster rate than similar non-EU nations.
Could the benefits of the weaker EU nations have come at the expense of the wealthier EU nations? The data is limited. Proving that connection is difficult, but could be inferred.
If the UK can negotiate a deal similar to how the EU interacts with Finland and Switzerland, the Brexit might not have a major impact after all. If the UK can then match the economic success of Switzerland and Finland, the Brexiters may own the last laugh.
What we know is we don’t know
Way to early to tell how things will unfold. If Brexit turns out to be an economic win for the UK, other nations may want to follow their lead. That scenario could lead to the ultimate demise of the EU. The UK’s economy is heavily trade dependent. If the Brexit harms their ability to be a leading trade partner, their economy could falter. Another possible issue is if bright and talented foreign workers hurt Britain’s innovation and workforce and education competitiveness, they could fall behind other nations with more dynamic and diverse work forces. What nationalist proponents need to understand is that we are living in a global economy, and it will only become more so. If a nation cannot compete on an international level, no amount of protectionism and isolation will restore and provide its citizens with wealth and prosperity. Economies that are isolated include Cuba, North Korea and Venezuela. When China changed its isolationist economy and determined it needed to compete on an international level, their economy boomed. That being said, the UK is so integrated in the European and global economy, that Brexit should not significantly change their attitude toward international trade and competition. Time will tell, but after studying the data, I am less stressed out about Brexit than I was 19 hours ago.