Brexit is a short term shock to the British economy and political system, but will have long term benefits that far outweigh the costs.
In a referendum last summer, the British people voted by a thin margin to leave the European Union. An apoplectic reaction from the European political and academic establishment ensued. Social screeds curse the “ignorant” Brits who voted to leave. Economists and politicians are aghast at nascent economic and political disaster. David Cameron resigned. The pound sterling is dropping to record lows. The situation, if the mainstream narrative is to be believed, looks quite grim.
Despite this short-term pain, the future will be much brighter for the UK after it invokes Article 50. By ridding itself of the shackles of a well-intentioned but dangerous political union, Britain will regain its ability to self-govern, pursue its global economic ambitions, and therefore avoid much of the growing economic and social instability plaguing Europe.
The most common argument against Brexit is that leaving the EU is equivalent to committing “economic suicide.” It is true that the cost of engaging in EU commerce may increase due to unfavorable trade policies and that some firms may leave London as a result. However, there is no reason to believe that London, with a GDP of over $800B (PPP adjusted), will not continue to prosper. London has been a global hub of commerce for hundreds of years. If the British move to a points-style immigration system and make it relatively easy for skilled Europeans to work in the city, there is still a tremendous benefit for international firms to remain in London.
It is also important to note that most economists agree that economic integration with Europe, starting with membership in the EEC in 1973, has been economically beneficial to the UK. However, It is possible for the UK to maintain many of the economic benefits of close ties to European markets without being an EU member. The UK potentially has the option to join its Nordic neighbors in the EFTA, which will maintain access to the single market while giving the UK the flexibility to negotiate third-party trade agreements – something it cannot do as an EU member. Unfortunately, joining the EFTA would require the UK to allow the free movement of labor and continue to obey some EU legislation. This scenario is definitely a compromise, but it gives the UK significantly more political autonomy.
More importantly, it is in the UK’s best interest to pursue closer ties to economies outside of Europe, which it is currently unable to do as an EU member. Brexit will give the UK the freedom and flexibility to negotiate free trade deals with countries like China, Australia and India – something the EU has failed to achieve. Additionally, these trade deals need only consider the interests of the UK and its trade partner, as opposed to EU-wide trade deals that are beholden to the disparate interests of twenty-eight member states. Now, it would be unfair to blame the EU for all of the economic problems in Europe. Negligent fiscal policy in the Mediterranean has caused much of this turmoil, but the nature of the EU burdens every member state with the problems of countries like Italy and Greece.
It is true that the Brexit may negatively impact the UK’s economy in the short term. However, the long-term social and economic benefits the UK will realize from this divorce outweigh this cost. Brexit affords the UK a chance to stay relatively insulated from future EU-caused turmoil on the continent, such as the ongoing migrant crisis.
The EU, as it is structured today, will inevitably lead to future social instability in Europe. The political restrictions that accompany EU membership significantly hinder each member state’s ability to self-govern. Under the promise of regulatory and economic efficiency, the EU establishes laws dictating a plethora of trade, tax, international and economic policies. Many of these laws, such as those covering immigration and energy policy, do not even require unanimous support from all member states in the European Council. While this unity creates many economic synergies, it disenfranchises the citizens of EU nations by removing much of their ability to write and influence national law. Regardless of its many benefits, EU-wide law disempowers the citizens of member states and empowers a continent-wide bureaucracy sitting above national governments that were often already out of touch. Over time, especially in periods of economic stagnation, this inability to self-govern leads to the rise of extremist political parties driven by a growing ideological divide between the ruling elite and the common people.
We are beginning to see this today in the increasingly nationalist and protectionist sentiments throughout Europe. Fueled by discontent with the EU’s economic stagnation and reckless immigration policies, far-right political parties like Marine Le Pen’s Front national in France, the Freedom Party in Austria, and the Party for Freedom in the Netherlands are on the rise. The EU has seen virtually no GDP growth since the financial crises of 2008 and 2010, and unemployment rates vary between 10-20% in the Mediterranean states. As if this weren’t enough, EU leaders have enabled millions of migrants from Africa and the Middle East to flood into Europe in recent years, threatening the national identity and cultural unity of every European state. It is healthy that people in Europe have become increasingly frustrated and are turning to the right. However, this political reaction causes societal fractures and turmoil that could have been avoided had the EU not caused these problems to begin with. The nationalist reactions stemming from feelings of economic hopelessness and lack of national control will continue.
The EU, fundamentally, is a recipe for social instability across the continent. By jumping ship, the UK is avoiding much of the pain of dealing with these growing problems. Brexit is hopefully the beginning of a shift towards a more decentralized, robust and healthy Europe.
The media, both in the UK and abroad, paints a skewed, myopic picture of Brexit and ignores the long-term economic and societal benefits it will provide. This divorce will help insulate the UK from social and economic strife within the EU and it will allow the British to develop stronger economic ties with rapidly growing economies in the developing world. This is a shining moment in British history. Long live Britannia.
Photo Credit: The Guardian