The sky is falling and Europe is literally on fire. People are threatening to leave the country and move to remote islands they just Googled. An article posted by this esteemed newspaper blamed an entire generation for ruining the future. I mean, it is simply comedic when Millennials call the Baby Boomers selfish. Can we please calm down and get a hold of ourselves? I address this to the aforementioned article, written by my honourable colleague Oliver Claridge.
In stark contrast to the Armageddon that he portrays, the economy of the United Kingdom will survive, adapt and perhaps even thrive as is hoped without the limitations of the EU. A unified Europe, under the principle of collective bargaining, works more effectively if each nation is individually weak and has to compete in a saturated healthy market. However, that is not the case in reality, with the market today being fragile and tumultuous, gripped by quantitative tightening and the UK being the fifth largest economy in the world. The UK’s economy will not be as helpless as, say, Estonia on its own.
The UK will survive this transition. The world will not begin to ignore the UK as a key player just because it is no longer part of the EU. Yes, certain benefits of the EU are gone but realistically, the economy will be able to adapt and compensate for these changes. Treaties will be renegotiated, perhaps more custom tailored to the interests of the UK. Opportunity costs, the potential profits forgone, arising from compromises made in order to meet EU regulations will cease. Essentially, the country will finally have the ability to put saw dust in its sausages and have the right to call it sausages as well.
Instead of being blatantly angry and condescendingly labelling the result of a popular referendum as ignorance or ‘narrow-minded patriotism’, it is important to note that each voter acted according to what was rational to them. We must consider and understand the opposing argument. A major factor of the problem is that the EUconomy is part of the much larger issue of underlying socioeconomic unrest.
Today, we live in a dichotomous world. Where globalization and free trade are benefiting the upper and middle classes and antagonising the working class. With the flow of capital comes the flow of labour. Manufacturing employment in the UK has plummeted. For proof of this, look at the extant of division in the election result map, educational background demographic and the growing inequality in historical real income based per class. The truth is that as students, many of us, and I am guilty as well, live in a disconnected environment, one that is not truly exposed to the real hardship gripping the nation and the world.
The UK high street is suffering despite the monthly official economic data that paints a peachy picture. Everything is not alright for many people in the country. Prices are rising and income is falling; view the trend of growing political radicalism as indicative of a population frustrated at a broken system (Greece, uncontrolled mass migration, etc.). The rise and appeal of Donald Trump, unfathomable to some, is a very similar phenomenon in the United States. What we are witnessing now is a political rebalancing of power. It is the people’s angry backlash against perceived inefficient administrations and distant unresponsive legislators. Whether grounded in valid reasoning or not, voters have lost faith in the status quo and chosen to throw it out. A Brexit is not only a result of a failing EU but a lack of faith in the deteriorating establishment. It is not irrational panicking if you’re the first one out of the door of a burning building.
Short-term, the GDP and markets of the UK will suffer. Long-term, it will have the ability to recover. It might sound terrifying that the pound is at its lowest rate since 1985 but what are the actual implications of this? Macroeconomics teaches us the Marhsall-Lerner theorem that states that a depreciation of domestic currency leads to a drop in GDP as import costs rise. However, eventually a greater amount of export revenue will be stimulated and there will be greater GDP increase in the long term. The J-Curve theory provides yet more explanation.
The 3.5 per cent drop of the FTSE, the main stock index of the British economy, on Friday coincided with an understandable global sell-off as markets overreacted to the unexpected result of the referendum. Yet there are people running around in circles with their hair on fire pointing to the £100Bn loss on the market as foreshadowing that the economy is collapsing. But where were these people in August when the market wiped out over 10 per cent in a few weeks? They weren’t screaming bloody murder then. We will always choose and nit-pick facts that support our narrative. The current spike in volatility very well might subside as the broader market is able to recover from this scare just as it had done with the Greek debt crisis of last June.
Europe has always been cyclical in this manner, forming large nations and empires consisting of many smaller territories with distinct identities and then breaking apart into individual states. The past half a century since the Second World War has been about unifying Europe under a single banner while maintaining national borders. This ideology was given a go but in the end, it transpires that it does not quite satisfy everyone. We are heading into the dissolution phase of the cycle. We’re just living through its natural progression.
The world is 51 per cent wolves and 49 per cent sheep and instead of reaching solutions, we quarrel over determining who’s who. The campaigning strategy of both sides were reprehensible for their scaremongering and for creating a non-reconcilable divide within the public. The press were obviously biased to the point where even the BBC is embarrassingly losing credibility. While venting in long rambling statuses might lower blood pressure, it ultimately contributes to the polarizing sentiment sweeping the nation. Let us please keep the rhetoric civil and consider things in perspective. We can continue antagonising the other half till kingdom comes but it is in times like these that we must reflect on what it means to be unified as a people, beyond political and socioeconomic labels. What do we want the UK to resemble in twenty years’ time and how do our personal beliefs hinder this? How can we work towards a better future? What must be compromised for the greater good and prosperity of the nation?
In 2001, Tony Blair stated that, “This is a moment to seize. The kaleidoscope has been shaken. The pieces are in flux. Soon they will settle again. Before they do, let us re-order this world around us”. Let us do just that.
It’s not the end of the world. Civilisation will not crumble. Though a pint at Aikman’s might be cheaper to some than others.
Disclaimer: This piece is not advocating for Brexit or for a Brentrance neither is it for predicting the future. I mean, I know nothing. No one knows anything. They might think they know something, but they don’t. The only thing I know I know is that I know nothing. Of course the entire magnitude of the referendum’s result cannot be analysed in a single article. It is simply a piece attempting to bring a different perspective to the table in a rather homogeneous sea of angry social media posts and coming to terms with the results.
P.S.: International students should consider capitalising on the current market volatility and begin exchanging their respective domestic currency for British sterling in the coming week as there is a possibility that the pound will stabilise and appreciate after this temporary market correction before September. Food for thought.