Many Americans awoke today to a significantly different world than the one they fell asleep in. The United Kingdom’s referendum vote to leave the European Union has passed and has triggered a series of responses that are having disastrous effects on the global economy. As global markets have responded by tanking the British Pound Sterling to the lowest levels since 1982.
Companies like ITV have seen their stock prices fall by 20% (based on smaller advertising budget projections), while British Airways has already announced a decreased profit projection for 2016. American markets have responded accordingly, seeing the DOW drop by 500 points. These effects are the exact setback that supporters of the “remain campaign” had warned about and are the first set of shockwaves to ripple across the global economy.
Now a new set of referendum votes are expected to take place in Scotland, Northern Ireland, and Wales. While this throws the existence and stability of the United Kingdom into question, the country will be faced to make a series of decisions with unknowable outcomes. Will the UK remain a member of the European Economic Area? How will this affect the existing trade deals in place with China and India? Who will govern Gibraltar? How will this affect the work status of millions of legal immigrants in the UK? Will Chelsea be able to make any big signings this summer?
The magnitude of importance of these questions varies, but each will require an answer. The uncertainty in the meantime may cause existing business agreements to be dissolved. It almost certainly makes the UK a more difficult place to do business over the short term. It may also prevent corporations from seeking long term investments in the country. The British Treasury has already declared that leaving the EU would make the British economy “permanently poorer” as a result.
What we do know is that this referendum vote had a historically high turnout of 72.2%. We also know that the current leading trending topic in the UK is “What is the EU?” We also know that working class voters went against their self interest, casting 58% of their ballots in favor of leaving the EU. The projected 6% shrinking of the GDP by 2030 will primarily affect the availability of middle class jobs.
The people that were the most heavily against leaving the EU will also have to live with it the longest. 75% of voters under the age of 24 voted in favor of Remain, but younger voters did not turnout in the same numbers as their older countrymen. The elderly, less educated, and low immigrant area populations of the UK voted greatly in favor of Leave. This is the trend that Americans can learn most from.
The current presidential election, while not quite as simple as a referendum vote, calls into question many of the same issues. Many middle class Donald Trump supporters are lining up to vote similarly against their interests. Trump has already said that he will renege on US participation in several free trade agreements, which would throw the US into a similar state of economic uncertainty. Will the United States pursue a path of economic isolationism and irrational self interest like what is being seen here in the UK?
While the global economy now faces the uncertainty of having one nation negotiating a series of bilateral trade agreements, the United States could be following just around the corner if Trump is elected. The global economy functions best when predictability and order allow business interests to make long-term decisions based on stable projections. Britain has in essence flipped over the chessboard, scattering the pieces across the globe and Donald Trump has threatened to do the same if elected president. If the warning of today’s financial panic can communicate anything to the public, it should be that this uncertainty is not in their interest.
The modicum of self-determination that the United Kingdom gained has come at the cost of potentially ruining the nation as we currently know it. The UK may be an entirely different nation both geographically and economically than the one prior to the Brexit vote. If the UK remains a part of the EEA, they will do so without being represented in discussions regarding the regulations they would be required to follow, undermining the right to self-determination that many Leave voters sought.
The Brexit vote represents what happens when people allow the politics of fear to govern their behavior. David Cameron sought to solidify his base and curtail the rise of the UKIP with the referendum vote, but has seen that roll of the dice explode in his face. He will now resign leaving the country with a leadership crisis amid the growing laundry list of concerns.
America has seen a ramping up of tensions between conservatives and those seeking to protect the rights of immigrants. The xenophobic and anti-intellectual ideations of Trump are remarkably similar to the dialogue heard in Britain prior to yesterday’s vote. If these fearful proposals are allowed to come to fruition, the calamity they cause will be unprecedented. Young and liberal voters must make themselves heard at the polls if America wants to avoid a similar fate.
Alex Schaffer 