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By Dr. Jim Leontiades
Cyprus International Institute of Management
In a historic referendum, Britain has voted to leave the European Union. This, despite the fact that remaining in the European Union was backed by the entire British establishment, including the leaders of all political parties, the Bank of England, major firms across British industry, the Archbishop of Canterbury, leading economists, international financiers, as well as US President Barack Obama and various other heads of state.
This referendum will go down in history, not only because of the result itself, but also as further evidence of a popular movement against elites which has become obvious recently in many democracies, not excluding Cyprus. The leadership of British society obviously was clearly rejected. When it came to the vote, British leaders went one way and the supposed followers another. A post referendum analysis of voting patterns indicates that the more affluent and better educated parts of society voted to stay while the “man on the street” opted to leave.
What brought about such a historic split on a vote of vital importance to the nation? Hints and suggestions on the issues behind the split emerged from the many interviews and comments which preceded the referendum. These made clear that the vote to “remain” would have been a clear winner if the referendum were about the original EU, the EU that Britain joined and which was largely a customs union devoted to free trade between members. The critical issues persuading many to vote “leave” were related to legislation in more recent EU treaties which moved that organisation toward more integration and “More Europe”. Some of these are indicated below.
THE ISSUES
Immigration: Perhaps the most obvious misinterpretation of the public mood had to do with immigration and refugees. The sensitivity of this issue was evident long before the referendum, and not only in Britain. Angela Merkel found her popularity ratings plunge in Germany shortly after she admitted 1 million refugees into her country. Its impact was nevertheless greatly underestimated.
Is this because elites lead lives quite different from many of their less well-off constituents? Ordinary citizens interviewed before the referendum voiced concerns about difficulties in finding places for their children at school, delayed medical treatment, neighbourhoods that have changed and made unrecognisable under the impact of immigration. Perhaps, another contributing factor is the practice of making politicians who send their children to private schools and visit private doctors responsible for managing public schools and national health systems.
An Undemocratic EU: The EU’s democratic deficit was mentioned repeatedly during the referendum as a major “leave” issue. Despite changes made by the European Union to bolster the democratic aspects of its governing structure, there is still a long way to go. The closest thing to an executive is the EU Commission of 28 officials who are basically selected rather than elected. They are responsible for initiating all legislation affecting EU citizens. Yet, few know who they are or what they stand for. This is in contrast to national democracies where the executive is the head of state, elected by popular vote on a platform setting out what he/she stands for.
Sovereignty and control: When a nation joins a multi country organisation, some loss of sovereignty is inevitable. The “remain” camp emphasised the importance of staying within the EU in order to be able to influence its decisions. Others pointed out that the UK, already in the EU, has been noticeably unsuccessful in this. With the establishment of the Eurozone, which includes most EU members, Britain has been increasingly less effective in influencing EU decisions. Present legislation makes it clear that eventually all EU members will be within the Eurozone, except for Britain and Denmark.
Economic Performance: Europe’s lacklustre economic performance was also in the forefront of concerns. Whether measured in terms of unemployment and/or growth, Britain has outperformed the EU. There is little doubt that a more economically vigorous and successful EU would have been a powerful argument for the “remain” side.
Globalisation and Trade: This is not an issue specific to the EU, although it played a major role in the decision to leave. Economists have repeatedly pointed out that trade is not a zero sum game. All countries stand to gain from agreements freeing up trade. Correct. The prospect of such gain has been the incentive for political leaders to enter into new trade agreements. What they do not say is who within these countries stands to gain (and possibly lose). At one time, low-skilled workers in developing counties working with traditional tools were not considered a major threat to workers in developed countries. These, equipped with better technology and capital equipment, were much more productive. The world has changed. Today, many workers in developing countries (e.g. China) are equipped with sophisticated machine tools and technology supplied by western firms. With these, local workers can be just as productive as workers in the West – but with much lower wages.
A WAKE-UP CALL
Brexit has served as a wake-up call for both Britain and the EU. The day after the referendum, British political leaders found themselves in a deeply divided country. Both major political parties are in disarray, their leadership and even perhaps the future of the parties themselves in question. The new leaders will face a herculean task in managing an unprecedented exit from literally thousands of EU regulations, some clearly good, others less acceptable. They will also have to face the possibility of Sexit, the exit of Scotland from the United Kingdom.
For its part, the EU faces issues hardly less daunting. There were previous messages of disaffection, but hardly on the scale of the referendum result. Following this, some EU officials have already commented on the need to address what is seen as the EU’s increasing loss of popular approval. Major political parties in France, Italy, Holland, Denmark and the Czech Republic have already issued calls for their own referendum.
Present indications are that there is little convergence of views within the EU on how to address the issues raised by the British referendum. Meetings between EU members to assess future direction will likely be split between those favouring “more Europe” and those for “less Europe”. We live in interesting times.
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