Brexit's follies

Even if the reaction of the global financial markets were considered extreme, the United Kingdom’s impending disengagement from the 28-nation European Union (EU) should be viewed with deep concern not just because of the dangers to one of the most remarkable economic projects in modern history but also for its influence on the tone and direction of global politics. Already, the demands for exit from other EU nations – France, Italy, the Netherlands, Denmark, Sweden – are becoming increasingly strident. The fact that these calls are being made by the right-wing elements underlines the single-minded xenophobia that motivated the pro-Brexit voters — specifically on the critical “free movement of labour” clause that created the illusion that Balkan and Polish people were appropriating low-level jobs and the issue of participating in the EU’s controversial deal to accommodate West Asian refugees. It is worth noting that exit talks in the Eurozone were muted even at the height of the badly managed debt crisis when the weaknesses of the 19-country monetary union within the EU - an ill-judged project for sure - were starkly on display. If the world’s largest economy (with a gross domestic product of $18.5 trillion in 2014) can potentially split on such narrow concerns, the signals to countries like the United States, on the brink of a presidential election, are scarcely encouraging. The dire probability of Donald Trump, whose anti-immigrant ideology lies at the heart of his absurd “Make America Great Again” campaign, being elected to the world’s most powerful office has just edged up a notch.

The 51.9 per cent who voted for Brexit were well aware of the economic and political consequences of the decision. It was well bruited about that the EU accounts for 40 per cent of the UK’s exports, and an exit would remove the benefits of tariff and non-tariff barriers and many of the subsidies it receives from Brussels. Now, the UK will have to renegotiate these pacts over the two-year disengagement process. The prospect of Scotland seceding from its three-centuries-old union with the British crown was also anticipated, as was the renewed calls for Irish unity once the “hard border” between Northern Ireland and the Republic of Ireland was reinstated. These remain the “known unknowns”.

The devastation of the pound may have added an unwelcome dimension since the UK runs a trade deficit with the EU and imports much of its food and necessities. EU membership also bolstered the UK’s diminished post-war status. As an English-speaking nation it enjoyed the best of both worlds. With a foot in a major economic bloc without suffering many of its downsides (such as monetary union) and its “special relationship” with the US, the UK enjoyed the unique power of being a business and cultural entrepot to one of the world’s largest markets. The discomfort of Indian companies that leveraged their British headquarters to sell to the continent – from the Tata group to infotech majors – mirrors a problem for many global conglomerates. After 2019, the Square Mile of the City may yet remain a global financial centre. But the rest of Britain could well become the small island separated from the world by a ditch and a pond of popular caricature. Brexit’s triumph of ill-informed populism over the saner counsels of the democratic process has sent a poor signal to a divided world polity.