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by Chandra K. Mittal
The morning of Friday, June 24, 2016, America woke up to find out that overnight the British voted to leave European Union – a politico-economic organization of 28 European States, and became politically “independent” to exert their full sovereignty. Some 52% of the British citizens expressed their will to take charge of their own political and economic destiny rather than be bound by the bureaucracy of an international Treaty that created European Union some seventy years ago after Second World War. Brexit, as it is being called represents a major policy departure for UK with serious geopolitical implications for not only Europe but the entire global economic village.
The news of “Brexit” spread quickly like a wild fire around the globe taking down with it the financial and equity markets. So much so that UK’s Prime Minister David Cameron resigned within few hours of Brexit vote as world leaders, politicians and economists scrambled to explain this “political” storm the heart of Europe. After all it is United Kingdom, one of the most significant geopolitical entities in the world for centuries and the center and bedrock of economic and political stability in the historically volatile Europe. UK’s move away from EU which it joined in 1973 for its economic integration among the industrialized nations also has implications for the rest of the EU members.
While all the repercussions of Brexit and the full impact of this “divorce” will unfold over the course of next few years as the process of separation takes effect, the immediate economic scenario does not appear favorable for UK as apparent from recent developments. Immediately following the Brexit vote, Standard and Poor downgraded the country’s sovereign rating from AAA to AA, projecting the event to lead to a less predictable, stable and effective policy framework that will not be conducive to investing and economic growth in UK. Similarly, German Chancellor Angela Merkel has warned UK not to expect benefits of membership without fulfilling its obligation toward EU and wants UK to speedily formalize the exit process to stabilize EU functioning.
not only Europe but other industrialized countries. Alan Greenspan, the former Chairman of US Federal Reserve recently called Brexit the “tip of the iceberg” with a potential to create a contagion effect on other EU members for the same underlying reasons as faced by UK. According to his diagnosis, it is primarily the fall in people’s real incomes over past decades which caused Brexit. Perhaps for same reasons the slogans like Fraxit, Nexit are being heard from nationalists in France, Netherland, Sweden, etc. Closer to home, England is hearing renewed voices for another referendum by Scotland to secede from UK. Expressions of such disintegrative sentiments in the European spectrum portend negativity for a large European economic block.
Most experts on Europe politics have attributed excessive globalization and indiscriminate immigration into UK as the primary trigger for vote in favor of Brexit. Globalization has been a controversial mixed blessing for all industrialized nations. Whereas it has created wealth for the investor class, the working class has taken the real beating by way of job losses and depressed incomes levels. For example, US has not seen real increases in wages for the past few decades despite “economic booms” on the Wall Street. The flight of capital from industrialized economies to low-cost manufacturing hubs has created serious wealth disparities and anger among citizens in developed societies.
Such economic scenario coupled with unregulated and indiscriminate immigration into the industrialized nations has added fuel to the fire and has further aggravated the wage situation because of the availability of large number of less educated and low-skilled migrants replacing national citizens. This can hardly harbor goodwill towards the immigrants in any country under economic distress.
All speculating and surmising about Brexit aside, a parallel economic scenario is developing in the United States with blind globalization and immigration except their larger dimensions. Although it is accepted universally that both economic globalization and immigration are the realities of modern times, so far, these have proven to be a double-edged economic sword for nations as characterized by Pundits and scholars including former US Treasury Secretary Lawrence Summers, an economist. The real challenge, however, lies in making this “double-edged” sword work for all citizens, and not just for the elite, the financiers and the investor class.
Brexit essentially represents the repudiation of status quo in UK and is simply symptomatic of popular anger and dissatisfaction with the present governing policies in industrialized nations. This is also the prototype for things to come in the future.
These times demand for leaders and political custodians of industrialized nations not to be beholden to investor class only but formulate responsible and equitable policies to affect both globalization and immigration. There is need to balance these with national domestic interest. Globalism and nationalism are not mutually exclusive pursuits as one is not at the expense of the other. In fact, both compliment to each other. After all globalization is only possible if supported by sound national economy.
Let the Brexit serve as a warning or wake up call for all the industrialized nations of the world to find political solutions that maintain their national integrity, honor and sovereignty while participation in globalization and immigration.
Chandra Mittal is Professor at Houston Community College, and Co-Founder of Indo-American Association, Houston. Contact: email@example.com or follow on Twitter @DrChandraMittal.