Brexit's Brunt and Causes

Britain’s commitment to leaving the European Union (EU) was concretized today, legitimized by the democratic process. Having put the decision of whether to Leave or Remain to a referendum, the voting of which was held yesterday on the 23^rdof June, British Prime Minister David Cameron inadvertently opened the path to a British ‘secession’ from the EU; now the shockwaves of that decision are rocking the economies the world over, with Cameron announcing his resignation. A few minutes after the US markets opened, the DOW dropped 500 points, although the descent was arrested. The DOW Futures went down 700 points, and bank stocks have almost universally been adversely affected. There is no point in disputing the seriousness or the monumental nature of the ‘Brexit’. All the fears that accompanied the ‘Grexit’ scare attend to the current crisis as well, and perhaps even more, given Britain’s ostensibly more pivotal role on the international stage, at least in relation to Greece. There are fears of a ‘Domino Effect’, in which other countries might increasingly articulate (and, it is feared, execute) aspirations to leave the EU. With every country that chooses to leave, the EU becomes more defunct in economic and political terms, further emasculating it in terms of international credibility and clout. This conception of the EU will hurt the world economy as investors lose faith in Europe and its markets, giving rise to volatile capital flows. Yet it is worth asking if all the consequences are bad, even for the United Kingdom.

The European Union comprises 28 countries (including the soon-to-leave United Kingdom) and was first constituted as the European Coal and Steel Community in 1951. The ‘Inner Six’ countries (Belgium, France, Italy, Luxembourg, Netherlands and West Germany) were brought together again in another iteration of the Pan-European organization as the European Economic Community (EEC) in 1958, as stipulated in the Treaty of Rome. Subsequently in 1993, the Maastricht Treaty established the organization in its current name, the EU being the successor to the EEC. It can be seen that the original motivations for the establishment of the EU were very much economic in nature: its primary goal had been the elimination of internal tariffs, the facilitation of free trade and the freedom of movement of labour and capital between the European members.

However, the idea of a European Union morphed over time into something more than an economic grouping – some harboured aspirations for a closer Union in which the sovereignty of the individual European countries would be subsumed under the overarching penumbra of a centralized European government. It is clear that conceptions of a European superstate are based loosely on the possible evolution of the current EU.

This thus brings us to the cause of the imminent Brexit. Europeans are a nationalistic sort: above all, they prize their distinctive cultures and tongues and would be loath to forfeit these in any circumstances. Nationalism had its roots in Europe, where many wars, from the Napoleonic Wars to the German Wars of Reunification, had been fought to assert not only the political hegemony of one power over another, but also the self-determination of one’s country and culture as superior and thus worthy of overlord-ship. No one wants a ‘United States of Europe’ – it would infringe far too much on the individual cultures and sovereignties that European nations have historically fought so hard to secure. It is precisely this idea of personal autonomy that had been infringed upon by the EU policies of freedom of labor movement, which allowed migrants to go to the UK in search of jobs, thus diluting its cultural milieu. So it is that leaving the EU would finally bring back a greater measure of autonomy to the UK, especially in its formulation of immigration policies. Add to that the fact that UK need not continue its annual contributions to the EU’s budget, which amounted to up to £8.5 million annually, and the case for a Brexit becomes, if not justified, at least understandable.

However, many of the benefits that once accrued to the UK as an EU member are no longer applicable to the UK as an outsider. While Britain is negotiating a trade deal with the EU, a negotiation that will be long, laborious, fraught with disagreement and met with obstinacy, it will have to accept import duties slapped on its exports by other European countries. Furthermore, there will be no more subsidies provided by the EU to UK producers of agricultural products, which were admittedly substantial. Yet voters have apparently chosen their pride as British citizens over the pragmatic designation of European members with all its perquisites. Whether this will prove to be a mistake, however, is unclear. Those who supported the Leave campaign are still too caught up in the euphoria of victory, and those who would rather Remain are still too shocked to react. The British have their sovereignty, but it have been at the cost of their financial health.

A depression is not a foregone conclusion, and the effects on the international markets might best be seen as a panicked, but temporal and fleeting, response by short term capital investors. After all, the restructuring of the European political constellation hardly augurs something so drastic as a war: in fact, there is likely to be, as Kishore Mahbubani asserts, zero prospect of war between the European countries. What follows might be some painful economic adjustment, perhaps even some traces of a recession, but definitely not circumstances too dire to resolve. However, the real danger lies with relations outside Europe, in relation to the currently beleaguered region.

If this restructuring runs its full course, and by that I mean the destruction of the EU as members leave one by one, following the lead of the UK, then there will be certain consequences, all of them detrimental to European power taken as a whole. Europe will lose political clout, especially with respect to its belligerent neighbor Russia, and it will become more difficult to coordinate foreign policy and economic agreements. If the ultimate result of Brexit is the dissolution of the EU, then tough times may lie ahead for the European countries. It would be the epilogue of the story of the rise and fall of Europe’s power. 

With so little prospect of material gain to be had by leaving, one wonders why Britain took that step. It could be that voters were enthused more by the rhetoric of nationalism than the reasoned argument of the economist or the policy advisor. History has shown that blind commitment to nationalism has fueled war and grave conflict, as has been exemplified by Prussia. In the 1860s, Prussia waged wars against Sweden, Austria and France in the name of a Pan-German Nationalism. Its ultimate victory put it at the head of a German order with the Prussian Hohenzollern Monarch proclaimed as the German Emperor. Its nationalism would thus bestow upon it a hubris that would take it to World War I, whose end spelled the beginning of its end. In such a way, the undercurrent of nationalism that seems to be behind the Brexit might likewise imbue the British with a hubris that will cause it to make foolish decisions. Its arrogance might lead it to make great stumbles, perhaps provoking reprise (though I would not go so far as to say it would result in war) from its European neighbors.

Seething extremism and opportunistic authoritarianism lies to the East of Europe. At such a time, the perennial particularistic nationalism of Europe has once again bared its teeth – but now, unlike in the past, its teeth are dull and flimsy. In the days ahead, the world will watch with interest at the stubbornness of Britain and its travails as it embarks on a new journey. Whether that journey will be steeped in the virtue of democracy or whether it will devolve into abject ochlocracy is anybody’s guess.

Yorck