An important moment of the 21st century is going to occur by Friday. That it revolves around the British plebiscite is an open secret. Either Britain will remain in the European Union (EU) or exit from the 28-member single customs area and single market. The run-up to that crucial referendum has been anything but peaceful. Sadly, it has claimed a precious life, that of Jo Cox, a secular and progressive member of Parliament. It has also exposed the underbelly of ugly passions driving it, including the biggest threat posed by the rising tsunami of ultra right-wing forces.
In normal times, a vote to remain in the EU ought to have been an easy choice for the people of Britain. Unlike other EU members, Britain has managed to secure special terms since joining the Union in 1973. There were palpable murmurs about the creamy terms that London received. Consider the arrangements Britain chose to opt out from the EU architecture despite being a vocal member. It is not a member of the Euro and the Schengen zone of passport-free travel. Britain is also not burdened by the EU justice and home affairs oversight.
Earlier this year, it managed to negotiate a special deal in the European Council. London could apply an emergency brake to restrict EU migrants claiming in-work benefits for seven years. Prime Minister David Cameron negotiated an unequal opt-out, stating that EU treaty “references to ever close union do not apply to the United Kingdom”—thereby opting out of political integration. Britain has catered little to the war-torn refugees stemming from its joint actions with the US in the Middle East.
For many years, Brits held important posts in the EU, particularly the trade department. Leon Brittan, who was Brussels’ chief negotiator during the Uruguay Round of talks on multilateral trade, Peter Mandelson, known as the prince of darkness, and Catherine Margaret Ashton were trade commissioners.
“Competition policy, the single market and enlargement to the east were all championed by Britain,” says a leader,Divided we fall, in The Economist magazine.
Yet, those seeking an exit from the EU because of the “faceless bureaucrats” that rule from Brussels have an upper hand. Notwithstanding the flood of warnings of dire consequences, the Brexiters are battling it out every inch. Britain will remain “in the back of the queue” if it were to negotiate a trade deal with the US after leaving the EU, US President Barack Obama warned. “I don’t want to scare you but there will be consequences in many areas,” French President Francois Hollande cautioned. Yes, it has to renegotiate the terms of trade deals with members at the World Trade Organization and its biggest trading partners.
The heads of the Bank of England, the International Monetary Fund and leading private banks, among others have issued incessant warnings—of capital flight, a collapsing currency and costly terms for bilateral and multilateral trade arrangements—due to the possible Brexit. Ten Nobel prize winning economists have written to The Guardian newspaper that “Brexit would create major uncertainty about Britain’s alternative future trading arrangements, both with the rest of the Europe and with import markets like the USA, Canada, and China. And these effects, though one-off, would persist for many years. Thus the economic arguments are clearly in favour of remaining in the EU”, the economists say in the letter.
“Vote to leave the EU could have material economic effects—on the exchange rate, on demand and on the economy’s supply potential—that could affect the appropriate setting of monetary policy,” says Mark Carney, the governor of the Bank of England. Britain’s economic growth has already begun to drop this year to 2% due to the ongoing referendum campaign.
Brexit is going to be a “big economic shock and not just for the UK”, according to Martin Wolf, chief economic commentator at the Financial Times. “This is largely because of the fragility that precedes it and the many uncertainties that would follow it,” he has argued. “The referendum is irresponsible … The outcome might well prove devastating,” Wolf prophesied.
Over the years, Britain has become a bubble economy with rapid de-industrialization. Although it is a leader in some areas of technology and industry such as aerospace, pharmaceuticals and defence, Britain is facing the prospect of major closedowns in steel and metallurgical industries.
The UK treasury has rightly acknowledged that “a shock to sterling might cause a sudden contraction in foreign currency lending to UK banks”, which depend on wholesale funding. It does not require rocket science to understand that Britain’s current account deficit, which reached 7% of gross domestic product (GDP) in the last quarter of 2015, is dependent on the “kindness of strangers”.
But why are these warnings about the beleaguered fiscal position and loss of 3 million jobs that depend on trade not taken seriously by those who cast their preference to remain with or leave the EU? Why are people fed up with the claims of political leaders and the best economists? Otherwise, it is difficult to explain the rabid demonization of immigrants, whether in Assam in India or in the US of Donald Trump or Cameron’s UK.
Perhaps, the current economic model, based on market fundamentalism and finance and trade liberalization, that has underpinned globalization since the fall of the Soviet empire in the late 1980s has gone astray. Of course, Britain and the US are entitled to claim credit for their leadership in the globalization project that may have provided “unprecedented free movement of goods, people, and ideas; the unbounded cyber space”.
But it is also difficult to dispute the black hole created by that globalization—which is being filled with ultra-right-wing nationalist forces in various countries.
“Chauvinism and the most narrowly nativist definitions of the nation are agitating popular furies in Russia, Austria, Hungary, France, where Marine Le Pen looks to be the next president,” the historian Simon Schama has suggested.
The deadly cocktail of financial globalization on the one side and xenophobic nationalists forces on the other seem to have tipped the scales. Unsurprisingly, they seem to be the order of the day. Hence, a win for the Brexiters should not be ruled out.
