You’ve heard the news – it’s across the internet and in all the newsrooms – Brexit; Britains’ push to separate from the European Union went to a referendum and Thursday night passed with a decisive vote of 52/48.
Overnight, the British Pound dropped almost 10% to its lowest value in the last 30 years, and news outlets worldwide are touting financial market losses of over $2,000,000,000,000. David Cameron, the British Prime Minister, also resigned today, causing further drama. Meanwhile, the Bank of England, the European Central Bank, and the Federal Reserve have all pledged to flood the markets with cash, preventing a major collapse.
There is a lot of talk especially given Cameron’s resignation as Prime Minister that Boris Johnson (previous London Mayor) will take over that top role in the country.
Here is a video of Mr. Johnson attempting to assuage the public earlier today (Friday):
So, as expats and/or non-Europeans, what does all this mean for us? Maybe nothing, maybe a lot. There are plenty of variables and it’s unfortunately still too early to tell what the indicators we see now really mean. Moreover, it really depends on your home country what degree of impact you can expect.
Nevertheless, here are the pros and cons for separation, and an unbiased look at what this monumental decision could mean for Britain, Europe and the rest of the world. But first off, there are probably many people who are unsure what the EU is and what it represents. If you already know, skip a few paragraphs, otherwise, here’s all you need to know to understand what has happened…
What is the EU? Within a decade of the last shot of World War Two, France and Germany drafted a plan to prevent future war with each other and to solidify regional economics. They built a trade community called the EEC (the European Economic Community) and in short order, four additional states signed on. In the 1970s the EEC acquired several new trading partners including the UK. In the 1990s, the EEC became the EU. Now there are 28 nations involved with around half a billion citizens.
What does the EU do? Member states have unfettered access to each other’s markets for trade distribution. The EU also promotes fair competition by eliminating monopolies and opening new markets, and they support the job market by regulating industries and creating positions. They also permit residents to move throughout connected states to find work. In short, they are a multinational government and are concerned with the health and welfare of their common economies and workers.
That all sounds great – so what’s the problem? Well, that depends on your perception of the issues. The vote was almost a 50/50 split so it’s unlikely everyone in a room will reach a consensus.
Here are the issues people identified as being most important.
With the 2008 financial crisis and the post-2008 recession in short-term memory, trust in the Euro, and in everything related to Euromarkets, has fallen. Unlike the USA, which reacted somewhat forcefully, increasing the money supply to slow the economic downturn in 2008, the EU enacted the opposite, raising interest rates in an unheard-of financial break – a move which had disastrous consequences, plunging the EU market far below international levels. For a while, economic forecasters were predicting a complete Euro-market failure. With this less-than-stellar financial record, many Britons feel it is just a matter of time before another major economic collapse occurs – and when it does, they want to be far from the EU.
Meanwhile, one of the key arguments for staying in the EU is also financial stability. As a trade union, EU’s primary purpose is breaking down customs and tariff barriers and growing stable markets. Indeed, after 43 years in the EU, the UK has certainly benefitted financially. Overall GDP has risen substantially with a 4% growth per capita. What’s not clear is whether the UK could have performed just as well, or better, on their own.
Another point of contention on both sides is the membership fee each member state must pay to be part of the union – according to Nigel Farage, it’s costing the country some 55 million pounds per day which sums up to over 20 billion pounds per year. However, that number is grossly inflated. In 1984, then Prime Minister Margaret Thatcher secured a rebate for the country, bringing the annual fee down to 18 billion. When you calculate transfers paid to the UK from the EU, the number falls much further.
Last year, the UK transferred 13 billion to the EU and the EU gave back 4.5B in regional aid and another 1.4B for the private sector. In the end, the net payment was just 7 billion pounds, or 0.5% of national income.
In a democratic nation, citizens vote for an elect a leader whose party has the power to affect change for the betterment of the citizens. Theoretically, there’s a circle of power. When voters are unhappy with a leader’s performance, they can vote another leader into power. In the EU, it doesn’t quite work that way; citizens have no connection whatsoever to the leaders within the EU and whether they are happy or not is irrelevant.
In recent years, politicians have been claiming to have had their hands tied by the EU on all sorts of issues. For example, Boris Johnson is a solid supporter of the Brexit movement. Explaining why leaving is the best option, he stated:
“The more the EU does, the less room there is for national decision-making. Sometimes these EU rules sound utterly ludicrous, like the rule that you can’t recycle a teabag, or that children under eight cannot blow up balloons, or the limits on the power of vacuum cleaners. Sometimes they can be truly infuriating – like the time I discovered, in 2013, that there was nothing we could do to bring in better-designed cab windows for trucks, to stop cyclists being crushed. It had to be done at a European level, and the French were opposed.”
Additionally, while the EU began as a trade organization, they have become much more and their tentacles are far reaching. At this point, they have regulations in place covering labour laws, taxation, environmental law, public services, copywriting, company law, competition law, human rights, natural resources, foreign policy, data management, criminal law, obligations, and property, etc.
Depending on your point of view, far-reaching access could be positive or negative. From the perspective of a socialist, the EU is working to create a fair, just society where everyone can prosper. A capitalist on the other hand may feel like they have lost control of their ability to be successful.
EU Migration Regulations
Certainly the biggest and most electric topic is that of immigration. Citizens of EU member states are free to go anywhere within the EU to find work, medical care, assistance, etc. With the recent massive influx of refugees across Europe from Syria, many Britons were up in arms at what they perceived to be uneducated, under-qualified migrant workers coming into “their country” and taking their jobs, using their health care, etc. It’s easy to make correlations between this fight and that of the United States where Donald Trump is spreading the same jam. Nevertheless, labor leaders such as Nigel Farage took the opportunity to sing from the rooftops the need to exit the EU and regain control of their own borders and lock down immigration.
However, actual statistics tell a different story. In 2015, 270,000 EU citizens immigrated into the UK. In that same time frame, 277,000 non-EU citizens immigrated from abroad. To suggest that the EU is somehow at fault for high immigration to the UK is misleading.
Additionally, 78% of working-age non-UK EU citizens currently in the UK have jobs and are working – versus only 76% UK natives. To suggest that people come to the UK to get on social welfare is also misleading.
What’s next? Before anything happens, Britons will need to invoke Article 50 of the EU constitution, covering termination, after which the EU and the UK will have 2 years in which to define their new relationship. If they fail to reach an agreement inside that window, membership will automatically be revoked. Invoking article 50 could happen as far as a year from now.
On a humorous note, on the heels of Brexit, Google Trends has highlighted a rash of Britains and Americans typing “move to Canada” in their browsers.