What's one word that can trigger global stock markets to lose $2 trillion dollars in one day, force the British prime minister to resign, and spread a concerning wave of nationalism throughout Europe? Leave.
Late on June 23, the United Kingdom voted to leave the European Union. As soon as the following morning after Brexit, the name given to the British exit, the results of the vote wrought massive political and economical shock waves throughout the world. The British Pound has tumbled downward, and many European countries are pondering their own exit.
For years, the European Union has built itself up as a strong coalition of European nations. It works kind of like a government above the governments. BBC has a nifty guide on the EU and the referendum, but for the sake of simplicity, I'll try to focus on the main arguments of Brexit. All EU members benefit from easy trade of goods and people between member states. This is known as the "single market", and is regarded as one of the EU's crowning achievements. It allows for its smaller members to gain stronger economic prowess, giving them more bargaining power against larger economies, such as China. Larger members, such as France, Germany, and now formerly the UK, contribute quite a lot of money in order to keep the EU running, but is a necessary measure in order to keep peace through the region, which was a main reason for the creation of the EU in the first place. This all sounds quite nice; big nations help the little nations, and everyone benefits from revenues due to ease of trade. What could be wrong with that?
For the "Leave" voters, quite a bit actually. Firstly, many feel that the membership fee outweighs any economic benefit of the EU. The UK is the third largest contributor to the EU, although they receive a partial rebate to their contribution. There are also many rules and "red tape" applied by the EU which the Brexiteers believe are difficult restraints to smaller businesses. They feel that the loss in trade deals and exports by leaving the EU are outweighed by the money freed up from membership contributions, and the gains made by businesses no longer held up by bureaucracy. Another issue is the "free movement" of people. With the crisis in the Middle East, migration has been a hot topic of discussion in Europe. Of course, through the EU, these migrants can move very easily, and the thought of what that could mean to the UK coupled with various terrorist attacks in the European mainland were definitely reasons for those who voted to leave.
So what happens to the UK now? At the moment, not much. The Parliament still has to officially vote to leave the EU, and deals must be made determining whether what the UK can keep or must give up in terms of benefits. According to the Economist, the UK stands to lose money, with the loss in EU trade deals overshadowing gains from not paying membership fees. There are also concerns that security may be at risk as the EU was a good way for countries to share intelligence.
What is more concerning in my opinion is the effect this will have on the rest of the world. Nationalism is on the rise. While it is fine to have pride in your country, the nationalism that is spreading is far more dangerous, almost poised to break apart Europe. BBC reports that parties in other EU members, such as France and the Netherlands are gaining more momentum in pushing for their own referendums. Surely Wall Street will survive the UK's fallout; it's survived depressions and recessions. But can it withstand France and Italy dropping out? Can it hold on if the euro itself dissolves? I just hope we don't have to find out.
