On the EU Referendum (or “Brexit”)
A referendum is always a good way for charged sections of the populace to express their sentiments and emotions. That a democracy in the 21st century, allows it’s population to vote on a matter of real national importance is something that is being celebrated across quarters. The exercise of democracy won today, and that is very heartening to note, albeit only to a certain level. Sometimes however, we must place reality in greater stead than abstract notions because abstract notions may be fulfilled through the conduct of an exercise but reality is the stereotypical remainder of that essentially simple problem of arithmetic which continues to define whether a student got his correct or wrong in many cases. The problem of abstraction was the referendum which was concluded today with hilariously pitiful consequences and remainder was the forced ouster of the people and potentially now, nations, who wanted to stay back and fight for a better Europe.
The binary has been stark and along deep fault lines of two campaigns which went on loggerheads about the future course of a country’s existence. The binary was however parallel on many grounds and this led to an undesirable confusion, which created the conditions for the United Kingdom’s exit from the European Union. For the past month, I was essentially sitting at home, rather idle and hence decided to immerse myself in a lot of literature about the EU referendum in the UK. The fundamental crux of the matter was a debate between National Identity vs Economic Prosperity.
How could a nation with such a rich heritage allow its citizens to be governed by sets of laws that are not framed by their own elected representatives inside the House of Commons? This was the essential question behind Farage and Johnson wanting to take a nation back (from whom? No one knows). Opposed to this were Cameron and Co. talking of the possible economic catastrophe that would strike the United Kingdom should the electorate or the body polity, decide to leave the European Union for good. If you want to construct a simple dinner time debate between you and your father tonight on this issue and both of you happen to take up either stance and stick rigidly to it, you will after fifteen minutes realize that the debate essentially goes nowhere because these two don’t contest each other on majority of the grounds. Britain found itself in exactly the same situation but only that it was not a dinner table conversation or a Prime Time Debate but a referendum to seal the fate of a nation.
Let me take you to India 2014. In the run up to 14th May, 2014 all of us wanted change from a government that was essentially running on a ventilator. There was almost zero confidence and hundred per cent despondence across the country. No one gave the incumbent government a chance to come back to power. What was however so unique about that campaign which made a man stand above everything else and single handedly lead his party to over 272 seats for the first time in three decades? It was the idea of starting afresh. The idea of change, freshness, renewed hopes and clean slates is an extremely powerful narrative to project to a country grappled with a combination of maladies. The narrative of a new start and a newly invigorated economy, seemed to have caught the electorate by storm so much so that past records, development models, communal outlooks and every other jibe fell flat in front of one towering rhetoric. Passion, impulse and hope drove for a vote then. A lot of the same happened today.
A narrative of a clean slate for an economy not doing extremely well because the ones it is dependent on majorly have not been able to handle their own houses is an attractive one. If I were a consumer, I would chose the opportunity to buy a new Hyundai i10 over a dilapidated i10 at a bargain price which I would have to fix on my own and incur significant time and costs on the same. As high school students we always wanted to buy the newest variants of pens available for display in front of our school gates by a the local and sweet “kaku” whose name I still don’t know, over the refill of a pen in our school bags which might have cost the same or slightly less of an amount. The point is that a new start and a clean slate is always an attractive option for people. But the difference between the conventional case and Britain here differs massively. To buy that one new pen or to buy that one new car, we would not have to live a significant baggage of generations being impacted by our decisions. Here the case was absolutely the opposite. The short term satisfaction of triggering an exit has to be counterbalanced by the long term impacts of such a decision that we take. That requisite counterbalancing did not take place over the past 36 hours among 52% of the electorate who took part in the referendum.
What would that counterbalancing have probably entailed? It could have entailed the fact that to negotiate amicably with a group of nations to offer close to same privileges after you showed them a proverbial middle finger is something that cannot be done. It could have entailed the fact that the people you want to rid yourself of, are the largest markets for your exports. It could have entailed the fact that you as a country enjoy a significant chunk of the economic growth thanks to exposure to a third of the world’s economies through some of the most advanced trade deals. It could have entailed the fact that you may not be able to get yourself close to such deals in the next few decades as a sole nation grappling with a major crisis in identity. It could have entailed a consideration about a significant chunk of your industries being dependent on supply chains which are based out of the countries you so hate at the moment. It could have entailed a consideration on the fact that you as an economy are now in the middle of nowhere with increasing doubts whether the people who really matter can play Courage the Cowardly Dog when you need them the most.
These are just a few pointers and the list is perhaps something that won’t be completed within the next few hours. There was so much that needed to be taken into consideration, and there was so little that was. Did the counterbalancing fail the electorate or was it the electorate who failed the counterbalancing to vent their frustration?
Of course scaremongering never works with a frustrated and embattled populace. If you tell people weeks before the vote of their lives that one wrong vote and the economy would be facing a 36 Billion GBP “Black Hole” is something that no one would take favorably. Although like many other pieces of literature, it may be accurate but would it be enough to negate the idea of a fresh hope for the future that we have been introduced to? I guess not.
Could the idea of a clean slate or a new hope come from a clarion call of reform within the EU framework? Although this was not a very discussed facet, the “remain” campaign did make attempts to stage this particular point of view but it failed miserably to stand up to the tide of popular frustration.
Just now, Boris Johnson asserted that nothing shall change in the short term. Having studied Economics, I tend to look at short, medium and long terms while I try my hand at analyzing situations. Well nothing may change in the short term and this pacifying appeal to the markets has been made by Cameron, Carney and now Johnson. However that is not the point of concern. The point of concern is reshaping the fifth largest economy in the world along lines no one knows. Secondly, it is to recognize the fact that much of legislation which was already existing may now be legislated afresh and every piece of legislation in it’s own right is a gargantuan task to pass in an increasingly bipartisan polity. The economic costs of restarting an economy is something which will take considerable amount of medium and long term considerations. Sorting out a Free Trade Agreement with all the countries that you lost out on, thanks to leaving the EU would take longer than a fortnight. Decades of hardwork, as part of a union have been undone, and while the British are unhappy about a flailing EU, their lives were in more ways than one accustomed to the benefits derived from this mega unison. Replacing that with renewed single handed efforts could take more than just the short term to negate.
The damage to the United Kingdom is not only in terms of it’s economy at the present juncture but also in terms of it’s identity. Scotland had voted to remain in the EU and there are already cries of a fresh Scottish Referendum with the threat that this time, it may not swing in the favor of the UK. Then there is Ireland, where the clamour for reunification between the North and the South has already begun in a few quarters as the newspapers report. If the British are entitled to an idea of fresh hope, so are the Scots and so are the Irish if the former doesn’t match with those of the latter. We can’t take those away from them. But in having those ideas and potentially seeing them into fruition you as a majority body of voters have initiated the fragmentation of an Economy which currently finds itself in doldrums. The pound may collapse further and the stock markets may plunge further. One never knows, but the hawks live on speculation and will continue to do so.
This referendum opens up a potential abyss for the global economy. The EU has trade deals with a third of the global economy and is under advanced stages of negotiations with many economies which would take the proportions upto almost three-fourths of the world economy. The leeway of redemption for the EU heads of state is slowly and steadily disappearing. It may not take an enthused Greece or an enthused Spain under potentially a new leadership much time to leave the EU. The fact that as a body politique it needs sweeping changes is something that is universally agreed upon except for the highest echelons. Some nations are trying to fix this undemocratic working from within the inside while some just become fed-up and leave. Leaving may be a gratifying outcome in the short run but it would not be systemically appealing to the global economy if the world’s largest trade bloc began to disintegrate (let me take the liberty to use the phrase “chip away” for visual accuracy). Change always comes at a cost and this brand of a change will be extremely costly to many economies. The UK has shown the door and soon within the next couple of years while the EU tries to get tighter and come out of this hangover, we may have another bold enough economy to do the very same thing, pushing down indices of economies even more. The casus belli of dissatisfaction has been thrown open by the United Kingdom and not to great consequences neither to itself nor to it’s European neighbours.
As a parting note for the time being, let me point out that a referendum like this reinforces three things: Firstly, Capturing the imagination and manipulating public pulse is extremely important. Whoever does so better, wins the bout. Additionally, it is not enough to just produce plain statistics however accurate they may be without placing them in context to the current and prospective situation with regards to a popular vote. Secondly, there is still an ocean-worth of disjunct between academia and policymakers on one hand and the public on the other which has proved to be potentially disastrous to the British Economy. Thirdly, when democracy hands Donald Trump a ticket, Nigel Farage a victory and an economy it’s death knell despite the gravest of warnings to the contrary, it is time you stop glorifying abstractions and meet the reality.
