Recently, the United Kingdom held a referendum on continued participation in the European Union. The option to leave, commonly called the Brexit (for British Exit), carried a slim majority. This means that the United Kingdom has 2 years to formalize a plan to leave the European Union. This was likely not a move in the best interest of the United Kingdom.[/dropcap]
Most of the support for the “leave” option centered on questions of immigration policy. Voters believed that continued participation in the European Union would result in more and more immigrants entering their country. They thought the Brexit option would give them more national control over their borders. It may do this, but it will do so at tremendous cost.
First, that tighter immigration control will eliminate the low-cost migrant labor that the United Kingdom needs to remain economically competitive in the agricultural sector. The cumbersome visa processes required to come to the United Kingdom to work will deter many from attempting to do so. This tightening of the labor market will inflate basic costs of living for most citizens.
A weaker pound will further magnify this increase in the cost of living. Fears over continued economic competitiveness will deter investors from buying the currency, meaning Britons will be able to buy less for their salary. Ideally, this weakening currency would allow for a more competitive export market, but the trade uncertainty will eliminate the possibility of a short-term recovery.
There’s a question as to whether or not normal trade relations will ever be restored. The EU now has to contend with possible separatist movements in other countries, which means it will need to take a hardline stance against free trade with Great Britain. This will raise the cost for other nations considering similar withdrawal plans, hopefully keeping the remaining EU intact.
Further, the British government may not be in a position to negotiate favorable terms with the rest of Europe. With the resignation of Prime Minister David Cameron, new elections will be held. Separatist groups, galvanized by their victory on the Brexit vote, may elect leadership that will alienate European leaders and prevent mutually beneficial compromise.
Finally, the Brexit vote may tear the United Kingdom apart from the inside. Both the Scottish Nationalist party and Sinn Fein, the Irish independence party, are likely to call for new referenda on their respective nations’ independence. These nations are likely to seek re-entry into the European Union, further weakening British negotiating power.
The Brexit vote is an example of what can happen when nationalism overwhelms economic planning. Britons, caught up in the patriotic fervor of independence, have sabotaged their nation’s economic future. One can only hope that the damage to the global economy will be contained.