BREXIT a Cautionary Tale For America

The United Kingdom just voted by a slim margin, 51.9% to 48.1%, to leave the European Union. The British exit ("BREXIT") stung world markets immediately, with an over $2 trillion plunge in stock values, with investors racing to get to "Home Base," i.e. gold, the Yen, governments bonds, etc. Major markets took the expected big hits as well, with Japan down 8.7%, Germany down 7.4%, France 8.8%, and the Euro dropping 3.8% in value amid fears of the monetary unit's stability. The hits are especially damaging because they come on the cusp of market rallies in recent days, in expectation of the UK likely remaining in the EU. These market effects are partly an overreaction. If investors hadn't rallied the markets like they did, they would not have exposed themselves too much, and feel the need to go hard in the other direction to compensate. Now, recession is an almost near certainty, and global banks have had to guarantee liquidity, The Bank of England included, across the EU to try to maintain stability.

The UK itself is reeling, obviously. London's major banks are down upwards of 30%, the British pound and sterling both plummeted 10%. Yields on 10-year bonds dropped .27%. S&P had already threatened to downgrade Britain's AAA credit rating. With the huge effects in evidence, that downgrade now appears all the more likely. And there will assuredly be interest rate cuts to come, as well as more quantitative easing, both of which will impact markets further. And this is just the beginning. Scottish First Minister and National Party leader, Nicola Sturgeon, has said she will call for another referendum on Scottish independence from the UK, especially since Scottish citizens overwhelmingly supported remaining in the EU. This British betrayal will almost certainly boost the odds of a Scottish exit when the next referendum comes into play. And this is nothing compared to the possibility of more EU member countries following suit. After all, Britain was one of the anchor members of the EU, many countries became members because of the strength of Britain as a member. And if one wonders why this whole situation is a cautionary tale for America, the reason of why it happened at all is particularly important to us.

The UK Independence Party (UKIP), headed since 2010 by Nigel Farage, is a Eurosceptic wing of Britain's Conservative Party (aka the Tories) that had been applying intense pressure on David Cameron to introduce a referendum on exiting the EU. UKIP's main reasoning was immigration. The influx of immigrants has increased substantially in recent years (330,000 last year), severely straining financial resources of a UK that is still not fully recovered from the 2008 recession. Many in Britain want to be able to close the borders and curb the influx, but Britain is constrained by border regulations set and maintained by the EU. The only way to gain the ability to take control of the borders is to reestablish sovereignty, which means they needed to resign membership in the EU. That pressure was applied publicly, in the form of xenophobia, Islamophobia, nativism, racism, fear-mongering, etc. (sound familiar?) Ahead of the 2015 elections this pressure was coming to a boil. To appease UKIP voters and bolster his re-election, Cameron promised an In-or-Out referendum on remaining in the EU if he won. If he had been like most American politicians and simply turned his back on a campaign promise, the referendum would not have happened so soon. Make no mistake, it would have happened anyway, as UKIP would have seen to it that Cameron was run out of office in the next election. But there would have been more time and opportunity for something to change, for cooler heads to prevail. Instead, Cameron fulfilled his promise and introduced the referendum, splitting his party, turning supporters and friends against him, and increasing volatility in Parliament.

On June 16, 2016, Labor Party member Jo Cox was assassinated, shot 3 times and stabbed several more, as she was about to meet with constituents in Birdstall, West Yorkshire. 77-year old Bernard Kenny was stabbed trying to protect her. Cox founded and chaired Friends of Syria, a group dedicated to aiding Syrian rebels in fighting ISIS. Member countries include Egypt, France, Germany, Italy, Jordan, Qatar, Saudi Arabia, Turkey, the United Arab Emirates and the United States. Cox was a supporter of fighting Syrian President Bashar al-Assad, and for Britain providing safe-haven for Syrian refugees. 52-year old Thomas Mair was arrested on terrorist charges for her murder, during which witnesses said he kept shouting, "Britain first!" Upon appearing before a magistrate on June 18, Mair stated his name as, "Death to traitors, freedom for Britain."

This event punctuated the divisiveness and extreme attitudes exhibited and exacerbated by UKIP members leading up to the referendum. Cameron presumably thought winning a vote to remain in the EU to not be difficult, a drastic underestimation, otherwise he might have considered going back on his campaign promise in order to buy more time or, the smarter move, not making the promise at all. But in doing so, Cameron sealed his own fate. Just flirting with this disaster painted him as weak, and he was losing support by the week. But to enable it to such an extent not only cost them the EU, but probably Scotland as well. It's difficult to imagine a way in which Cameron could have screwed this up more. In addition to his now nonexistent future, he has virtually guaranteed defeats in future elections for anyone in Parliament who supported him, especially those who pushed him for the referendum under the presumption that winning a vote to stay in the EU would be easier to pull off with Cameron and his party in power, than if another party was in charge. Naturally, Cameron resigned, because there was really nothing else he could do. He wasn't even a lame duck, he simply became an invisible leader instantly - his credibility vanished, and his legacy will tar the British history books for the next century.

While a referendum would have likely happened at some point, what David Cameron did is an absolute cautionary tale for Americans. When an extreme wing of a party becomes powerful enough to manipulate and force the hand of politicians too weak and consumed with their own job security to stand their ground, really stupid things can happen. The xenophobia, Islamophobia, racism, nativism displayed by the UKIP is not unlike what we have been seeing from the Tea Party and Donald Trump peddling to his supporters. We are not in any comparable position with the UK from a union standpoint, but we definitely have been watching the erosion of 1st Amendment, 4th Amendment, and 15th Amendment rights, states doing everything possible to circumvent 14th Amendment rights for LGBTQ, and Roe v. Wade, and politicians glorifying the fact that they flat out refuse to do their jobs - all of these pushed by the extreme wing of a major political party. There is much familiarity to see in what has happened in the UK. Just because union considerations are not something we have to deal with does not mean we are not ripe for the same type of extreme stupidity by politicians couldn't happen to us.