The original six nations that led formation of the European Economic Community (EEC) in 1963, then blocked Britain’s entry as led by France, again refused Britain in 1967. U.K. membership began in 1973 after de Gaulle left power in France, and the EEC evolved into the European Union (EU) in 1993 after the Maastricht Treaty.
Today, the EU has 26 member nations. However, with world economic recession and Europe hardest hit (especially since 2008), a rising tide of discontent concluded with British exit (Brexit) from the EU June 23. What Americans do not understand, but must now accommodate, is that business and government people in EU industrial nations have been increasingly disenchanted with the EU bureaucracy located in Brussels, which imposes economically stultifying regulations, allows the rise of uncontrolled immigration and terrorism, and attempts to control market forces for social objectives.
With less room for national decision-making due to “rules,” the British population voted 52% to leave the EU, in part because: citizens cannot recycle teabags; children under 8 cannot blow up a balloon; and there is a limit on the power of home vacuum cleaners. You think I’m joking, but these are facts.
A meddlesome, undemocratic and unaccountable-to-the-public EU bureaucracy just became too much for British citizens, and a similar tide is rising in other EU countries (Denmark, France, the Netherlands and Sweden). Public skepticism about the EU has only grown with poor performance of EU nations’ economies. Only Norway, which is not a member, has agreed to uphold “most of the rules” and gets most of the trade benefits (tariff-free export/import sales within the EU) allowed to members in exchange.
The Brussels bureaucracy is now frightened and may try to impede Britain’s departure and has lobbied member-nation citizens to revisit and revote on the Brexit process. (If you don’t like the answer, vote again.) There is a two-year window to negotiate the “exit process” with amiable terms, but that window seems to be fast closing. Being real about it, EU bureaucrats cannot declare war and cannot levy taxes, but they do annoy citizens to the extent that they revert to their 1-of-28 nationalities first before being EU citizens. The world is in a “curiously watching” posture to see whether the EU unravels in the coming months.
It is likely, according to economists, that the U.K. will have a period of adjustment upon leaving the EU. They also agree that it can be short-lived. Consequences to U.S. industry should be much smaller than the financial and political establishment in America would have everyone believe. At the end of 2014, American investments in Europe were $2.78 trillion (57% of $4.92 trillion worldwide), of which $588 billion was in the U.K. For perspective, this 12% America allocated to U.K. corporate acquisitions and infrastructure investments over recent years was nine times what Americans invested in mainland China. U.S. industry is not going to suffer due to bureaucracy “dibby-dabbies.” Fair assessment is that Brexit will have minimal effects in England and even less in the U.S.
Britain still has the fifth-largest national economy in the world and nominally supports free-market economics. Also, the EU has another problem infrequently mentioned by supporters: the Euro has failed. Britain wisely never adopted the currency, but the 19 nation states of the EU that did are paying dearly. The strong economies (e.g., Germany) benefit in export dealings due to the weak Euro, and all stable EU nations could strengthen their outlook by avoiding the debilitating financial obligations supporting non-performers like Greece.
Regardless of what is offered as a thinly veiled sales campaign by bankers and liberal politicians, a plurality of economists now acknowledge that Brexit harkens realignment of the world political landscapes. Britain’s vote may be seen, we hope, as starting a new age of freer global commerce. As an aside, the U.S.-EU deal (Transatlantic Trade and Investment Partnership) that looks dead in the water could be resurrected as a U.S.-with- U.K. trade pact. Make lemonade out of lemons.
Readers should view this unusual Brexit event as a harbinger of hope.