Brexit: D-Day Minus One

After months of a heated campaign, British voters will head to the polls Thursday to vote on whether their country should remain a member of the European Union, a decision which could have widespread economic implications.

Polls remain divided on Britain’s future, which could be a result of the nature of a campaign that has been defined by warnings of economic devastation if Britain leaves and of uncontrolled immigration if it stays in the EU.

Carmen M. Reinhart, a professor of the International Financial System at Harvard University’s Kennedy School of Government, believes that regardless of how Britons vote, the fact that the question has been posed marks a turning point in the globalization debate.

Reinhart, who believes the financial markets are poised and prepared for the eventuality of Britain leaving or staying, says the vote is a “blow” to globalization.

The first blow came with the financial deglobalization which began after the 2007 financial crisis.

He notes trade among advanced economies has shrunk from its 2007 peak at about 41 percent of gross domestic product to about 35 percent now and that average annual growth in the volume of trade has declined by 50 percent since then.

“But possibly the most contagious effect of a Brexit would be the precedent it sets for other countries to exit and for those with rising nationalist tendencies to close their borders to immigrants and international agreements. The world is already coping with subpar growth, a referendum outcome that feeds the tendencies of the past few years of more inward looking policies is not a ticket to prosperity,” he writes.

Another op-ed echoes the assertion that the geopolitical future of Europe has changed no matter the outcome.

“The referendum, at a minimum, has delivered a shock to Europe’s political classes, calling into question what some had once regarded as an inevitable march toward a federal EU,” reports The Wall Street Journal.

While not as definitive about the impact on globalization, Morgan Ortagus and Matthew Swift of Fox Business News make the case that policymakers have to address concerns raised during the Brexit campaign and the current election in the U.S.

“[T]he larger question of the future of 21st century geopolitical power structures has now surfaced.  Policy experts must begin to contemplate and strategize what the world order will look like post-2016. To be successful, they should include policies that assuage the anxieties of British and American citizens who feel left behind by globalization and the ensuing waves of immigration,” they suggest.

Matt Ridley, a member of the House of Lords, counters that argument on one level – that the EU is an entirely different organization than other alliances of which Britain is an integral partner.

“The European Union is quite unlike any of today’s international organizations and has never been emulated elsewhere. Britain has no desire to withdraw from NATO, the United Nations, the International Monetary Fund, the Council of Europe or, for that matter, the Olympics. These bodies are agreements between governments. The EU is a supranational government run in a fundamentally undemocratic, indeed antidemocratic, way. It has four presidents, none of them elected. Power to initiate legislation rests entirely with an unelected commission. Its court can overrule our Parliament,” Ridley says, adding that British businesses will flourish, not flounder, if Leave wins.

Much remains unclear about what happens on Brexit +1, so the BBC has laid out some of the possible consequences of the vote.

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