26 Jun '16     home | previous

Story of the Week: Brexit

The major story this week is the British leaving the European Union. Stunning the world were the 52 percent in Britain who voted to leave. Prime Minister David Cameron is not obliged by law to follow the will of this 52 percent. He favored staying in the EU. But Cameron's government will bend to the results of the election, and Cameron will exit as Prime Minister. The United Kingdom is one of the world's most mature (committed) democracies.

Those voting to leave have been described as being insular, like people from small towns. Some are calling them small-minded. They are described as fearing Britain being overrun by immigrants and as wanting to bolster their sovereignty against authority imposed by bureaucrats in Brussels, the capital of the EU. And those for leaving were heard separating themselves for the "financial elite" in Britain, who favored integration with the EU. Some are describing their fellow Brits as having "had enough of experts" – in other words, educated elitists.

Those favoring staying in the EU have spoken in favor of integration rather than isolationism. Prime Minister Cameron praised EU integration for having prevented another European war, or World War Three, a claim derided by those wanting to leave.

The immediate consequences of the vote according to the New York Times:

The British pound plummeted to its lowest level since 1985. Investors fled to the American dollar and the yen.

The U.S. market was down more than 3 percent at the close on Friday, with the Dow shedding over 600 points, after sell-offs overnight in Japan and Hong Kong. 

Britain will leave the world’s largest common market, separating the British from the EU's commitment to the free movement of labor, capital, goods and services. Some businesses are already planning to leave Britain to relocate on the continent. According to the New York Times:

London's role as a financial center could be imperiled, particularly if the trade in euro-denominated securities moves to rival cities like Paris and Frankfurt.

By the way: two other big European states not in the EU: Norway and Switzerland.

Copyright © 2016 by Frank E. Smitha. All rights reserved.