The Global Order After Brexit – courtesy of Stratfor

by Marilou Long on June 29, 2016

in Foreign Markets,Geopolitical

The past few days have seen foreign and domestic markets in turmoil as the British public voted to leave the European Union.  While the full consequences will not be known or understood for many months or even years, we believe at this juncture it represents more of a political crisis than a financial one.  Great Britain had not fully committed to the EU as evidenced by the fact that they had kept their own currency, the British pound, and over the weekend a number of EU leaders were already making concessions acknowledging that member nations may want to have more autonomy in deciding the terms of their membership.

We have found the research from Stratfor particularly helpful in sorting through the long term implications of Brexit.  From their article titled “The Global Order After Brexit”:

Buyer’s remorse was the refrain in the wake of the June 23 Brexit vote. A narrow 52 percent of British citizens voted to leave the European Union. That is to say 48 percent of the 33 million British citizens who felt compelled to vote believed they were better off staying in the European Union. Such a close vote on such a fateful decision with such global impact naturally yielded disbelief on the island and beyond.

Champions of the status quo quickly seized on maps and scatter graphs of the voter breakdown to argue their position: “Of course,” several remarked, “it was the uneducated working class that dragged us into this mess.” Or, “It was those old baby boomers with their fat pensions who are gambling on the future of the young.” Perhaps most interesting is the spreading belief among “remain” voters that enough Brits will come to rue their decision and that, one way or another, British Prime Minister David Cameron’s eventual successor will find a way to avoid heeding the call of the nonbinding vote. Then, calm would be restored to financial markets and maybe, just maybe, everything could go back to normal. 

Many of us (especially those on the outside looking in) see the vote as something of a democratic marvel. With a high voter turnout of 72 percent, the plebiscite empowered the people to decide the fate of the island, and the resulting rancorous debate is a riveting accompaniment to an honest vote. Still, many are flatly uninterested in the democratic virtues of the vote. They argue that people who voted with their emotions, hoping to shun immigrants or to reclaim British sovereignty, will surely rethink their choice once they realize its painful economic ramifications. Given the current state of chaos in British politics, there may well be a political turn of events over these next few months that triggers early elections and widens the divide between the “leave” and “remain” camps before the government begins signing the divorce papers.

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