Brexit is a Portmanteau of British and Exit and it explains it all. The UK voted to leave the EU and the decision is causing much angst in the EU and in the UK. I have always thought that Brexit was, in the margin, an idea worth trying. Since the EU nations aren’t doing that well compared to China or the US perhaps it is time to try something else.
WWIT (What Was I Thinking) On June 23 2016 the UK voted to leave the European Union (EU). The vote was a populist display of frustration with the ruling elite and particularly with the open migration policy of the EU. Why they decided to have a popular vote on such a contentious issue will be debated for decades. Constitutional and republican governments were designed to tamp down the passions of the people.
In the three years since the vote to leave, the UK followed the EU constitution and filed the paperwork to leave and it has tried sporadically to negotiate an exit. A large majority of British politicians and all of the ruling powers in the EU have been foot dragging at best and obstructionist at worst. Last week the UK which has had three different Conservative Party Prime Ministers was heading toward a no deal exit when Parliament passed legislation saying that the UK can’t leave the EU until it has a deal.
In my opinion all this is all high drama about almost nothing. Trade will happen and will tend toward fair, finance will happen where contracts and money are safest and migration will continue to be a problem. There are some details about all three of these issues below but think about Y2K and how the world worked itself up into a massive fuss about the potential for all of the world’s accounting systems collapsing and then nothing happened. I generally predict that as with Y2K very little will happen when the UK (a small, but very nice, country) exits the EU.
Trade: The idea of trading blocs like NAFTA and the EU has been popular in recent decades but countries that aren’t members of any of these blocs have done surprisingly well. GATT and the WTO have allowed countries like South Korea, Singapore and China to successfully build their economies based on international trade as outlined by GATT. The UK outside the EU may thrive and between the EU and the UK tariffs will find the rational levels pretty fast. There will be some disruption at the borders but it will be a footnote in short order.
Finance: Some jobs in finance will move around and at least in the short run the UK will be the loser. But money is more fungible than Finance Ministers are willing to admit. How you treat capital will continue to be competitive area for nations and for blocs.
Migration Happens. Countries that are best at attracting and absorbing immigrants will thrive more than those who lose human capital.