Brexit – what next?
“A revolt against the political class”, according to commentators. Get real! Today’s primary problem is globalisation and increased inequality and instability.
The EU is one of globalisation’s more subtle tools, promising better government for the poorly governed and financial help for the less well off, but It’s a complex take-it-or-leave-it package. Most people have been happy to take the cheap debt and ignore future costs, but each crisis like this brings our day of reckoning closer.
So what exactly are the consequences of Brexit, Britain’s abandonment of Europe?
For Europe, lost income and scale, so lowered capacity to manage the debts created by the common currency in member-states with less developed economies.
For Britain, the lowered currency will hit consumers through higher import prices, while helping the (small) export sector. The larger finance sector took a big up-front hit after the last-minute voter turnaround, and two years of negotiations will add more uncertainty. Perhaps the escape from regulation will encourage Britain’s role as a tax haven, again not a path leading to economic stability.
The US Federal Reserve will again defer raising interest rates, boosting America’s economy and hurting the rest of the world.
British consequences (the Reuters summary):
Britain would no longer be subject to EU budget rules, which limit a government’s budget deficit to 3 percent of gross domestic product and public debt to 60 percent of GDP.
It could therefore run whatever budget shortfall it wants without admonishment from the European Commission and other EU ministers. It would also be free from the Commission’s monitoring and advice on future actions.
Financial services firms based in Britain, from banks to clearing houses and funds, could lose their money-spinning EU “passports”, which allows them to sell services across the 28-nation bloc with low costs and a single set of rules.
The passporting system has contributed to making London one of the world’s most important financial centers.
Some American, Japanese and other non-European banks that have European headquarters in London have said they would consider moving parts of their business inside the European Union, in the event of a Brexit.
The rest of the EU has a trade surplus in goods of about 100 billion euros ($110 billion) with Britain, while Britain exports some 20 billion euros in services than it imports, principally due to financial services.
Brexit campaigners say if would be in the EU’s interest to agree a free trade deal with Britain even if it leaves the bloc.
However, there tends to be more of a focus on goods than services in free trade deals. Switzerland, where financial services are a larger share of GDP than in Britain, has no general access to EU financial service markets and runs a financial services trade deficit with the bloc.
British companies acquiring EU peers would still need approval from the UK competition watchdog and the European Commission, resulting in more legal costs and the risk that each delivers a different ruling.
Britain will have a free hand to aid ailing companies or industries without fear of EU action but it will also not be able to oppose subsidies granted by EU governments to their own national champions.
Leaving the EU could make UK energy infrastructure investment costlier and delay new projects at a time when the country needs to plug a looming electricity supply gap.
The uncertainty after Brexit could make energy investors demand higher returns for the risk of less favourable conditions. Oil and gas majors BP and Shell are among energy companies who warned about the potential downside.
Britain is the second-largest emitter of greenhouse gases in Europe and its utilities are among the largest buyers of carbon permits in the EU Emission Trading System (ETS).
Although most analysts believe Britain will remain in the cap-and-trade scheme, the vote is viewed as bearish for the market as Britain would no longer be able to drive tough reforms to drive up the price.
Brexit would also disrupt the bloc’s plans to share out the burden of its Paris climate change pledge.
The environmentally minded also worry that EU climate targets would be less ambitious without British leadership to balance against more reluctant member states such as coal-dependent Poland.
A Brexit could call into question EU agreements on open airspace that have granted the region’s airlines unlimited access to the skies of fellow member states, benefiting both UK and EU airlines. It would also affect transatlantic routes because of the EU-U.S. Open Skies agreement, which gives British airlines unlimited flying rights to the United States.”
“Some of Europe’s top lenders, from France’s Societe Generale to Britain’s Lloyds, saw one fifth wiped off the value of their stock. Shares of elite wealth managers Schroders, Aberdeen Asset Management and St. James’s Place fell sharply.
The referendum outcome casts uncertainty over the future of Britain’s financial services industry and its ability to sell products into the European Union. All depends on the divorce between Europe and Britain, and the latter’s ability to retain access to the European free market.
European government officials had said UK-based firms could lose these privileges after Brexit, a move that could prompt banks to shift some of their operations to Frankfurt, Paris or Dublin if they want to serve EU clients.
Investment banks have already warned they could move thousands of jobs if Britain opts out of the EU, while the European Central Bank has signalled it could force euro trading out of London, the world’s largest foreign exchange market.”
Endnote: This website rewrites marxism to include feminist and green politics, and exclude the violence of the traditional left. Families, communities, politics, the environment – they each create their own inequalities, and we need to understand them better to build a fairer world. Some blog posts here are comprehensive, some have to be brief, as this is an after-work project. The permanent pages set out the general framework of Marx, exploring how the work of daily life creates inequality, but leaving out Marx’s jargon and historical blinkers.