Brexit

Brexit Introduction On June 23, 2016, a referendum was held in the United Kingdom, where voters were asked to decide between remaining in the European Union or leaving it. The vote was close – 51.9% voted to leave and 48.1% voted to stay, and the turnout was 71.8% (Hunt & Wheeler, 2018).

The terms of the vote were that the UK was to leave the EU by March 29, 2019, and at present the EU is in a transition period leading up to what is known as "Brexit." Why Brexit? There are a few issues worth unpacking with respect to why the UK is leaving the EU. The short answer is that a referendum was held, and the vote was to leave, so the politicians in charge believe that they are obligated to leave.

The long answer is quite a bit more complex. The UK was not part of the original European Economic Community, and only gained entry in 1975, and even then there were longstanding challenges, many of which relating to the tradition of staunch independence that the UK felt with respect to continental Europe (Wilson, 2014). The independence that Britain felt was manifested in a less than enthusiastic tone to membership both in politics and among the public. While there was general support, there were always strong opinions against membership.

Right wing Britons took more of a realist view of international relations, as opposed to the neoliberal view – the latter of which would have supported membership the former of which would oppose it. There are many instances of Britain seeking to maintain at least some degree of independence from the EU. It did not join the common currency, the euro, when other European powers like France, Germany and Italy did. The UK maintained its own currency, and still does to this day.

Further, the EU did not join the Schengen Zone, which is the system in Europe by which people can travel freely across borders. While EU citizens still have specific rights to live and work in Britain (for now), the UK maintained its border controls where the rest of Europe did away with them. There are other issues as well, but the bottom line is that the UK was always a soft member of the EU.

So why leave? That's more a matter of letting people vote on an issue they don't really understand – over 30 million people voted and there are not 30 million trained economists and political scientists in the UK. So people voted based on racism, xenophobia, ignorance, and in some cases genuine opposition.

Demographically, it was older Britons who voted to exit – the same generations who were more steadfast about Britain's independence from Europe in general, voting for a future they won't live to see, whereas younger generations who actually had some skin in the game voted to stay. The demographics are rather blunt on the matter – the person who voted to leave was generally older, less educated, from areas with low levels of ethnic diversity, not Irish or Scottish, and rural.

In other words, old, white, rural and ignorant. The precise demographic whose values lean more towards xenophobia, racism, and a poor ability to grasp the actual real world consequences of Brexit (McGill, 2016). What is the European Union? The European Union is a supranational governmental body. It is a collection of institutions ostensibly run by its member states for their benefit. The EU grew out of the European Economic Community, which was a trade bloc of Western European nations.

Over time, its mandate expanded beyond trade and its membership across Europe, stretching today from the Atlantic Ocean to the Black Sea. The EU mandate covers a wide range of issues, trade remaining a major one, but also the movement of people within the member states, and the European Central Bank, which provides central bank function for the countries within the Eurozone. Impacts of Brexit on the Global Economy Globally, Brexit will weaken both the EU and the UK, as both will have lower bargaining power in trade negotiations.

Together they were stronger. Both still have the ability to sign trade deals. In that sense, the UK will probably be hurt a bit more, as it is smaller, but most countries would want deals with both regardless, because of the sizes of their respective economies. The cost of doing business will be higher in Europe because now companies will need to duplicate a lot of efforts in the UK and EU, where they might previously have been able to function in Europe as if it was one country.

Increased transaction costs are an inevitable consequence of introducing a second trading system where once there was one. For example, Canada signed a trade deal with the EU. Obviously, it will sign a deal with the UK as well, but that represents a couple more years of negotiating a complex trade deal – a significant increase in transaction costs. Another impact is going to be the reduction in efficiency that results from the UK going solo.

First, it will lose some members of its labor pool, resulting in a reduction in the efficiency dispersion of labor throughout Europe – people who should be working in the UK will work in some other country for less money, and the UK will have to pay more for labor as supply of labor decreases. Similar transaction cost effects will occur with things like banking costs, capital movements and trade flows. This is not to speak of the threat of Scotland leaving the UK.

If the English were hesitant members of the EU, the Scots have been so of the UK, only being part of the country due to being conquered. The Northern Irish voted against Brexit but are a much lower threat to leave. If Scotland decides to exit the UK and rejoin the EU, that will create further reverberations in the UK economy, not the least of which is because all of the UK's oil is off the Scottish coast of the North Sea.

That's a pretty huge blow for the UK to absorb, and Brexit against the wishes of the Scottish people makes it much more likely. US Corporations Most major US corporations are affected by Brexit, because most have operations in the EU and UK. A US corporation doing business in the UK can typically move goods, capital and labor freely, but this will no longer be the case after Brexit.

Tax burdens will increase, especially given how many US companies were registered in Luxembourg and offshored their UK profits there – that loophole won't be available after Brexit. There are also the increased transaction costs associated with the stiffening of the UK-EU border to include potential tariffs and other trade barriers.

Most US corporations would have set up their European operations on the assumption that the UK was going to be part of the UK, so any new change to just about anything – and many changes are expected – will increase the burden to American companies that arises from Brexit. Some of the issues that US and.