June 30, 2016    7 minute read

A Cup Of Tea With A Spoon Of Perspective On UK’s Vote

Changing Perspectives    June 30, 2016    7 minute read

A Cup Of Tea With A Spoon Of Perspective On UK’s Vote

In the largest democratic exercise in recent history, a slim majority of the UK public has voted to leave the European Union (EU). This has left us with a disgruntled group of young, educated, middle-class British citizens who are now lamenting the “drawbacks of democracy”. Social media exploded on Friday morning with Remain campaigners fearing the worst and prophesying the future of the ‘Disunited Kingdom’. I am not going to go into the pros and cons of either side of the Leave/Remain debate. What I am going to do is put things in perspective, given the decision to leave the EU.

Here’s my pick of the most popular comments on Facebook and Twitter over the past few days:

“Get the foreigners out!” and “If you voted Leave, you are xenophobic.”

Whether you voted Leave or Remain, you must be aware that leaving the EU is not going to lead to an exodus of foreigners from the UK. And if you’re part of the Remain camp, you simply cannot label all Leave campaigners as xenophobic. Stalin was xenophobic. Hitler was xenophobic. The Ku Klux Klan was xenophobic. But voting to leave an economic union is most certainly not xenophobic. If everyone in the Leave camp really were xenophobic, they would have proposed a complete ban on all foreigners. The whole migration argument is not about eradicating immigrants from the UK. It is not a Trumpesque stance of “no foreigners in the UK”. It is a step towards strengthening border controls. With better control of its borders, the UK will be better equipped to manage the flow of immigrants and refugees. Yes, refugees! We will still have them too.

“The youth won’t have the opportunity to work in Europe anymore.”

This is factually incorrect. Of course, they can still work in Europe. The only difference now is that they would need a working visa. This is a win-win situation for the UK. It is undoubtedly easier for highly skilled workers to be granted a working visa compared to low-skilled workers. Hence, the highly skilled youth from the UK will still be able to work abroad. Similarly, the UK can control the quality of individuals who enter the UK by granting visas only to those who plan to pursue careers in industries with a growth capacity greater than the UK’s ability to fuel it with the labour force. This will inevitably lower the unemployment rate within the country, as well as provide international opportunities for the ‘young and hungry’.

“There is going to be a domino effect that disintegrates the European Union.”

I agree. There is tremendous potential for referendums in other EU states and the possible disintegration of the EU. However, I don’t see how this is a bad thing for the UK, given that they have decided to leave. In fact, as the second largest economy in the EU, this would make the UK one of the top options for trade partnerships with other European countries that leave the EU.

“Dear Europe, we still love you. Warmest regards, the 48 percent.”

The UK is still part of Europe, just as Russia, Switzerland, and Norway are part of the continent of Europe. The UK has voted to leave the European Union, but it is still geographically part of Europe. So it is not just the 48 percent that loves Europe. Any citizen of the UK can still call himself or herself a proud European.

“We have ruined 70 years of peace in Europe.”

Really? 70 years of peace? I may not be an expert in European history, but I am pretty sure that the Berlin Wall (1961) was not a symbol of peace. The proliferation of nuclear weapons during the decades of the Cold War was probably not the greatest peace effort either. Even though direct conflict was avoided on European soil, this does not mean it did not occur at all. The Europeans on the west of the Iron Curtain fought a war of ideologies with their Soviet counterparts in Iran, Afghanistan, and Egypt, not forgetting the oil crisis of 1974. More recently, events in Crimea showed us that nothing much has changed since the collapse of the Soviet Union. Conflict was, is, and always will be present amongst European nations.

“We are now more prone to threat from a resurgent Russia.”

Membership of the European Union did not provide the UK with military protection from Russia. The EU is not a military pact. The North Atlantic Treaty Organisation (NATO) is, and the UK is still a leading member of NATO.

“The economy has been ruined.”

In the short-term, there will undeniably be problems with the economy. But leaving the EU gives the UK the chance to pursue global growth that it was unable to achieve within the EU. The EU is the world’s worst performing trading bloc, with overregulation and protectionism encouraging inefficiency and the demise of innovation. Opening its borders to trade outside the EU without a common external tariff, similar to the Swiss model, would be ideal for the UK (the second largest economy in the EU). A global market would bring the UK better returns on exports. Some 78% of its exports are services, which require no transport cost regardless the destination. So give it time. It’s been barely a week, and the UK’s economy was not at its best before the referendum anyway.

“No more French wine, Italian cheese, and German cars.”

Everything I said in my previous point may have led you to believe that the UK will no longer trade with the EU. Not true. The global market I referred to includes countries within the EU as well. In fact, you may even get a good deal on products from the EU. For example, the UK is one of the largest importers of German cars in the world. If Germany halts trade with the UK, it could lead to severe unemployment in the automotive industry in Germany. So don’t fret. You aren’t stuck with baked beans and shepherd’s pie. You will still have your wine, cheese, and car.

“We are going to have a recession.”

Paul Samuelson, one of the greatest economists of our time, once said, “Wall Street indices predicted nine of the last five recessions”. I mentioned this earlier, but once again, it is far too early to guarantee the fate of the UK’s economy. The UK may face a recession, or it may not. We simply can’t form a logical conclusion until the recession begins to take shape.

“Rating agencies downgraded the economic outlook for the UK.”

Moody’s cut the UK’s credit rating outlook to negative, while Standard & Poor (S&P) downgraded the UK’s rating from AAA to AA. Given this response from the ‘experts’, the general public fears the worst. Once again, to put things into perspective, credit rating agencies did not always get it right. In fact, Moody’s, S&P, Fitch, and other rating agencies have to assume partial responsibility for the 2008-09 financial crisis. In the build-up to the crisis, they rated mortgage-backed securities (MBS) as a safe investment. Mortgage-backed securities were the primary trigger for the greatest financial crisis the world has seen since the Great Depression. I’m not saying that they were always wrong. But their track record has not been superb when it comes to vital decisions.

What should one do now? Don’t listen to the odd radical xenophobe in your neighbourhood. Don’t fall into the trap of believing the exaggerations by some groups. And please don’t start a new wave of fearmongering (we’ve had enough of that from the Brexit debates). All you can do is sit back, relax, and have a cup of tea as the UK’s fate unfolds.

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