Despite 2 years of Brexit vote, Britain remains as divided as ever, over the issue of leaving the EU. Demonstrations demanding a reconsideration of the issue and a new referendum have been aplenty on the streets of U.K. Contrarily; there have also been mobilisations by pro-leave lobby albeit in smaller numbers as things are already moving in their favour

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The clamour for Brexit:

• Economic reasons: The primary contention was that economically, Britain loses more than what it gains.
  • The first issue being that of membership fees paid – about 340 pounds per year per household
  • Secondly, it was said that EU’s policies were too protectionist and did not favour competitiveness to the extent that would be beneficial for the British economy
  • Post the Sovereign Debt Crisis, EU introduced Fiscal Compact and tighter control on national budgets. Britain was not comfortable with these ideas
  • Germany’s proposal to impose taxes on financial transactions (Tobin Tax) also did not find favour with London, which is an important financial hub
• Immigration issues:
  • Half of British legal migrants come from EU. There is this feeling that they have a negative impact on UK born workers. Adding credence to local fears was the fact that since 1997, 3/4th of jobs created are taken up by EU immigrants
  • EU’s obligation on its members to accommodate more refugees also did not find favour with UK. Especially at a time when the refugee influx in Europe is at an all time high in light of multiple crisis in Middle East and Africa
  • There is also this perception that immigrants pose a threat to national security
• Sovereignty Issue:
  • EU is a transformative idea in many senses. One of the things that it leads to is the weakening of national sovereignty.
  • EU has been pushing for creation of an Ever Closer Union which would accord greater decision making powers to European Parliament, while, limiting the authority of British Parliament.

Impacts on UK:

• Economic:
  • EU is a large market. 45% of British exports are directed towards EU. EU is the largest market for UK’s exports and one of the major sources of UK’s imports. Except Germany and Sweden, UK has a positive Balance of Trade with all other countries of EU. Post Brexit, access to EU markets would suffer for UK
  • Britain has emerged as a major financial hub. Post Brexit, the financial/services sector in UK would take a hit. We have already seen the London Exchange soaring down post Brexit
  • Immigrants to EU are better educated and skilled and offset the demograpaphic disadvantage. That advantage will be lost for UK
• Geopolitical:
  • It raises questions over the future of Scotland and Northern Ireland. Their desire to stay in UK was preconditioned on UK remaining a part of EU.
  • The Scots have already started demanding for a referendum on Scotland’s future in UK. Even in Northern Ireland violence erupted post the Brexit vote
  • In an interconnected world, being a part of multilateral organizations is key to influence policy matters.
  • No country can do it alone in a rapidly changing international environment.
  • Similarly UK would lose some of its leverage now that it has voted for Brexit. Pursuit of sovereignty in purist terms in an interconnected world is a utopian idea

Factors that would create misbalance and lead to unequal prosperity getting converted to collective poverty:

• As markets expand across political borders, participants prefer a common governance structure that eliminates annoying regulatory differences and transaction costs.
• As inter-regional trade and capital flows increased, demands for seamless regional borders and harmonized national regulation became louder. National governments, therefore, increased their powers and functions at the expense of regions and local communities.
• As fglobalization accelerated in recent decades, national governments acceded to international agreements and treaties that limited their sovereign powers. They have also ceded some powers to international bodies
• Disempowerment of the local communities causes further collateral damage. When opportunity leaves economically marginal communities, despair and social dysfunction typically set in. The number of broken families increases, as do rates of substance abuse and crime.
• Far from being a source of pride and social cohesion, the community becomes a repository of collective sorrow, if not shame. And its members look to alternative sources of identity and social solidarity, including nationalism.
• Populist nationalist leaders pledge to make their country “great again” by ridding it of the constraints imposed by international agreements.
• As they grab power back from the international arena, such leaders are tempted to resist the further devolution of power and funding to regions and communities.
• Instead, populist nationalists could turn more dangerously against the international system, presenting their supporters with a continuous parade of external villains to blame for their plight.

Way forward:

• As growth slows and their populations age, developed countries will need both export markets and some immigration—the first to support demand, and the second to pay for the pensions and health care of ageing populations.
• In this age of artificial intelligence, companies and traders can surely handle some national regulatory differences.
• We must bring the powers back to the country level, provided global markets remain open
• Local engagement and solutions, aided by national governments, are required as people are more adapted to globalization and technological changes.
• Political parties could play a constructive role in restoring powers, funding, and often health to many communities.
• Rebuilding a strong sense of positive community identity would likely make adversarial nationalism less appealing.

Conclusion:

To the extent that it weakens support for virulent nationalism, devolution may make the world a little more prosperous—and a lot safer.