Lessons from Brexit

Brexit means “Britain’s Exit “ from the European Union. A week ago, the British decided, in a referendum that their country should resign as a member of the European Union. The economic consequences resulted in stock markets plunging all over the world and the British pound has reached the lowest level in the past three to four decades.

According to economists of most financial institutions, like Nomura, the Philippines will be one of the least economically affected by Brexit. This country has very strong economic fundamentals including one of the highest economic growth rate in the world, low inflation rate, sufficient foreign exchange reserves and a positive balance of payments.

However, there are predictions that the United Kingdom will suffer an economic recession and that the economic growth of the European Union will slow down. This will ultimately affect every country in the world, including the Philippines because the United Kingdom is the world’s fifth largest economy and the European Union, which includes 27 countries, including Germany and France, is one of the three economic superpowers in the world aside from the United States and China. If trade and investments slow down from these countries, the whole world will feel the impact and another global recession could happen again.

It is also important for us to understand why the British voted to “Leave” the European Union. The economic chaos that is now happening from their exit was predicted by almost all economists and academicians. Almost every world leader – Obama. Xi Jinping, Abe, Merkel – publicly urged the British people to stay in the European Union. The only known global personalities that supported Brexit were Putin and Trump.

The leaders of all the major political parties in the UK – Cameron of the Conservative Party and Coebyn of the Labor Party – opposed Brexit. The only known political party that supported Brexit was the United Kingdom Independence Party (UKIP) headed by Farrage. This party was considered a far right party and espoused anti immigration views bordering on racism. Farrage is considered a demagogue much like Trump.

Cameron and those who wanted the UK to remain in the European Union presented very cogent and logical economic reasons for staying in the Union. They also warned about the economic consequences. Those who advocated to “Leave” the Union did not have any economic arguments. Their campaign was based on their anti-immigration theme. They claimed that immigrants were depriving British citizens of jobs by their willingness to work for lower wages. They also claimed that the increase in immigrants was changing the “British” way of life.

End of capitalism?

The victory of those advocating that the UK “leave” the European Union in the face of negative economic effects must be seen as a worldwide trend that the elites and the upper class seemingly refuse to accept.

For the past century, the world has seen two economic systems challenging each other – Communism and Capitalism. With the fall of the Soviet Union and the economic transformation of Maoist China into a semi-market economy, it seems that capitalism and the “free market” advocates have won. It seems clear that the best system for economic growth is capitalism. It was accepted that “market forces” would be the best mechanism for economic development. Even major political leaders adopted this mantra.

In 1992, when Bill Clinton ran for president of the United States his now famous slogan was: “It’s the economy, stupid.” Even Deng and China’s leaders who succeeded him believed that economic growth was the best way to maintain the power of the Communist Party. So they introduced market forces into the economy and soon China had more billionaires than almost any country in the world.

Today, the world has more billionaires than at any time in its history. And there are billionaires that are so fabulously rich that the 60 richest billionaires have as much wealth as the bottom 3.5 billion people or 50% of the world’s population.

In spite of global economic growth, social unrest is spreading all over the world even in countries that are considered economic powers or emerging powers. Countries like Brazil, Mexico, Turkey and Greece were once considered rising economic tigers. Now, they are undergoing massive social unrest. Thailand is considered the manufacturing hub of the ASEAN and a progressive nation. But, the party supported by the elites and the royal family have consistently lost elections until martial law was declared. Thailand is now run by a military dictatorship. In the United, the most exciting candidates were Bernie Sanders and Donald Trump who both gained supporters by attacking the establishment. And last week, the British people voted to leave the European in spite of warnings about economic effects.

What happened to the “golden promises” of capitalism and economic growth. The best answer was articulated  – believe it or not – by Pope Francis. In November 2013, in his papal encyclical Evangelii Gaudium – he wrote in paragraph # 54:

“ ..., some people continue to defend trickle down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naive trust of those wielding economic power and in the sacralised workings of the prevailing economic system. Meantime, the excluded are still waiting...The culture of prosperity deadens us, we are thrilled if the market offers us something new to purchase. In the meantime all those whose lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.”

According to Pope Francis capitalism has made income inequality worse.

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Young Writers’ Hangout on July 2 (10:30am-12nn) & July 23 (1:30-3 p,) at Fully Booked Bonifacio High Street.  For registration and fee details, 0917-6240196/[email protected].

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