The big lesson is that complex issues like joining or leaving a trading bloc should not be decided by referendum.
By giving voters only a yes/no option, and not ‘yes, but’ or ‘no, but’ options, referendums become reductive exercises.That’s the pity.
But, overall, Britons probably voted right. Countries are accountable to their voters, and staying in a Union where the voters have no choice makes little sense.
Now that Brexit – Britain’s exit from the European Union - is a reality, it is worth looking closely at what has happened and what this could lead to.
Looking briefly at how the vote went in Britain’s referendum, England and Wales voted to get out, while Scotland, Northern Ireland and the city of London voted to stay in.
Even though the ‘Leave’ campaign won, Britain is split down the middle in a way that will be difficult to heal. It would have been different if 60 percent had voted for or against Brexit. Since the vote split is likely to be closer to a 52/48, it cannot be said that either side won decisively.
This has huge implications both for Britain and the world, not to speak of the European Union (EU) itself. Here are some answers from the crystal-ball as it looks now.
First, since Prime Minister David Cameron backed ‘Remain’, this is his defeat. No surprises then that Cameron has announced that he will quit by October and would attempt to ‘steady the ship’ in the meanwhile. More distant possibilities are a split in the Conservative party and another general election.
Second, Scotland, which voted to stay, will call for a new referendum on independence. And the Catholics of Northern Ireland will call for unification with Ireland – though they may not get it, since Protestants are in a majority. Scots may have called for another referendum even if Britain had stayed in, but now the calls will reach a crescendo.
Third, Britain will probably spend another year or more trying to negotiate the exit, and the resultant uncertainty is likely to damage growth, dent the pound sterling, and slow down investment decisions in Britain. The Tata Group, which owns Jaguar Land Rover (JLR) and Tata Steel (former Corus Steel), will be affected by higher tariffs imposed by the EU against British imports, and the steel company, which is on the block in the UK, will now have to figure out what Brexit means for them.
Fourth, Brexit will empower Euro-sceptics in other parts of the EU, which is now seen as a supra-state that is simply too big to manage on the basis of a consensus. France, for one, could seek a better deal from the EU, and the far right led by Marine le Pen is actually calling for a Frexit. Greece may wonder if it too should default on its loans and exit. Southern Europe, which is hurting from German-imposed austerity, may also begin to re-examine its premises. The trading union will probably stay, but countries may want more powers to be shifted back to national governments in areas like immigration.
Fifth, Brexit is a negative vote by the hinterland against London. As one of the world’s biggest financial centres, London is as international as they come, and it voted to stay. But the fatcats of finance are probably disliked by the rest of the country, which worries more about issues like British manufacturing decline and immigration. The ‘Leave’ vote shows how far the financial sector is from understanding what the real sector and real people feel. We saw that in America after 2008, and we are now seeing it in Britain.
Sixth, immigration is going to become an issue everywhere in Europe. With terrorism already becoming a big issue – Germany had a gunman shooting indiscriminately in a cinema theatre on the day of the Brexit vote – and with a major influx coming in from war-torn Syria, most EU countries are worried about Muslim immigration. The EU’s own rules that allow any citizen in a member country to work anywhere may have to be tweaked. In Britain, the huge influx has been from Poland. Ironically, Britain entered the Second World War when Germany invaded Poland; Britain is leaving the EU partly because it has been invaded by Poles in search of a better life.
Seventh, Brexit proves that the forces of nationalism and sub-nationalism do not die out just because of the creation of free trading unions and common markets. Economic gains do not always trump social and cultural concerns. Trade does not erase xenophobia and bigotry, which lie just below the surface. Political correctness keeps these feelings in check, but when growth is down, they surface. This is the case all across Europe and America. At the end of the day, no one sees his nationality as European; they still remain Brits, Germans, or even Scots or Irish.
Eighth, while the vote is not against free trade, the idea of the common currency will certainly come under the scanner all across Europe. The fact is countries prefer to change at their own pace, but a common currency forces deeper changes faster. If Greece had had its own currency, it could have let it depreciate against the euro, thus giving itself time to adjust to its lack of competitiveness.
Ninth, Brexit is also a vote against elitism, where ordinary citizens feel the national parties and busybody bureaucrats fail to understand what matters to them. The Narendra Modi election in 2014 was also a similar revolt against the English language elite who thought they knew what was good for the country. The message is politicians must listen before they lead.
Tenth, the biggest lesson, however, is that complex issues like joining or leaving a trading bloc should not be decided by referendum. At the end of the day, the ‘Leave’ campaign may have won by playing on fears over one single issue - immigration. It did not win the vote by thinking through the more complex issues involved, including the economic gains and losses. Logically, a third option should have been a mandate for renegotiating the rules of the EU, failing which Britain could leave. By giving voters only a yes/no option, and not ‘yes, but’ or ‘no, but’ options, referendums become reductive exercises.
That’s the pity. But, overall, Britons probably voted right. Countries are accountable to their voters, and staying in a Union where the voters have no choice makes little sense.
This piece has been updated with respect to Mr David Cameron’s statement