Friday, 1 July 2016

The Blowout from Brexit: Anarchy in the UK and the Decline of the EU.

'Few UK politicians – fearful of challenging the verdict of an already angry electorate – will articulate such an argument in public. But Jeremy Hunt, the health secretary, has boldly made the case for a second referendum or another general election on the negotiated terms of exit.'-The Guardian
The General Election option would be far more democratic than a second referendum which would simply make it appear all too clear that Parliament and the political elites would prefer to ignore the electorate. The problem is how a divided Conservative party can deliver that when many Tories are unenthusiastic.

The reality could be that the Conservatives will accept the verdict and rally together, especially if Corbyn refuses to budge or, indeed, wins another leadership election. The Labour membership reject the PLP and its a moot point whether even with a new leader they would actually win an election.

The Conservatives might not want an election and they were voted in again only a year ago, in 2015 and have till 2020 to sort out the terms of exit. Labour looks in an even worse position and its MPs look like sore losers who are intent on thwarting the electorates verdict in a referendum they never wanted.

The longer this political crisis drags on, the worse economically it could be for Britain but even more for the weaker Eurozone states and even the stronger ones led by other walking political corpses such as France's Hollande and Germany's discredited Angela Merkel. Hollande is unlikely to survive after 2017.

Other EU economies that had pulled out of the effects of the 2008 economic crisis could be plunged back into further economic instability in ways that could seriously affect political stability. Greece is the most obvious and Germany shows no sign of abandoning the folly of the Euro that is fueling political extremism via austerity.

Despite what pro-EU and Remain advocates argue, Britain does have a strong bargaining hand in demanding certain EU policies such as unlimited freedom of movement change or are altered. For all the talk of 'values', ultimately it is political and economic stability and power that will decide.

Economist Larry Summers made it clear that while there are indeed economic costs for Britain, there is far more politically at stake, which is not to suggest that over a longer period the political instability could not have further economic consequences for the rest of the EU, even Germany, Britain's biggest trade partner.

As Summers puts it,
'For Britain, the economic effects are two sided. On the one hand, a major jolt has been delivered to confidence, to future unity and down the road to trade. On the other, the currency has become more competitive, and liquidity will be in very ample supply...As suggested by the fact that stock markets in Italy and Spain are down almost twice as much as in the UK, the prospects for Europe may in some ways be worse than for the UK. There is the real risk of "populist exit contagion" in a number of countries. Brexit will rightly be taken as a signal that the political support for global integration is at best waning and at worst collapsing.'
Set against this prospect, the EU is going to have little time for the SNP's attempt to exploit Brexit to push for Scotland doing a deal without London which, in any case, has to agree to another referendum as Alex Salmond, the SNP's former leader clearly pointed out after Sturgeon demanded one.

Basically, the EU has to compromise of face further division and fragmentation. The political consequences of trying to stymie Brexit-and the EU has to show itself as democratic and accepting the verdict as well as needing fairly quick withdrawal to stop Brexit contagion-would be worse in drawing out the crisis in Britain.

If the EU were to do so, it would not only cause further instability in Britain but face the possibilities of further economic decline, greater crisis in the failing Eurozone, a rise in political radicalism from both the far left and right and even precipitate a global economic crisis in a world full of actual and potential wars and conflicts.

The outlook is bleak and Brexit may be the least concern as events start to unfold. There is simply going to be no return to the status quo of neoliberal globalisation, mass migration and the world that has existed since the end of the Cold War in 1989-1990. The quicker political elites deal with reality, the better.

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