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Monday, June 20, 2016

Brexit - What the UK Vote on Leaving the EU is Really All About


It's hard to have missed in the news the recent discussions on 'Brexit' (British and Exit) - the referendum on the 23rd June by the UK population on whether the country should Remain in or Leave the European Union. This is a major issue determining the future of not just the UK, but potentially the EU itself as a British exit could start the same process in multiple other European countries. There are many factors that are driving this, and the ones that get highlighted most often are the "self determination" and "economic control", but what rarely is covered is the reality of why this is happening. In the end it comes down to the same old thing - money and power of the privileged few using the cry of "for the people" to line their own pockets.

First some background - skip down to 'The mechanism to make Brexit happen' if you're familiar with the history of the EU. The European Union was birthed in 1957, with West Germany, France, Italy, Luxembourg, Netherlands, and Belgium creating the European Economic Community (EEC) for the purpose of some economic integration. In 1961 the UK, Denmark, Norway, and Ireland applied to join, however France vetoed their entry nominally on the concern that they would increase US influence on the EC, but was suspected to simply be that France didn't want to be supplanted in importance in the organisation by the UK. Those countries joined in 1973, to be joined in the 1980's by Greece, Spain, and Portugal.

In 1993 the EEC became the European Union (EU) and the political and economic ties between the countries strengthened, with the member countries being subject to some amount of EU law, but also a large reduction in trade barriers and importantly was the right of all citizens of the EU to free travel - that is any EU citizen can travel, live, and work in any other EU country with no legal restrictions. This alone was a huge benefit to the citizens - normally capital is free to move across national boundaries, but labor is not, and this was a huge leveling of the playing field for the average citizen who suddenly had a much larger market in which to apply for work.

There was also monetary union for many of the member states, and in the early 2000's the Euro became available. This was a single currency for all the member states, and tied the interest rates of those countries to the European Central Bank rather than their own central banks. The UK elected not to join the single currency and kept the pound, as the UK's economy was more service oriented and didn't match the economic cycles of the rest of the EU, and to surrender interest rate policy would not be financially prudent. In 1992 there had also been a run on the pound and the UK had been forced to remove the pound from the European Exchange Rate Mechanism (ERM), and this was still in the minds of most politicians.

The last major expansions of the EU in 2004 and 2007 added many eastern European countries to the membership, and Hungary, Romania, Poland, and others gained all the benefits of membership, including the right of their citizens to travel and work in the EU. These were definitively poorer countries and there was a large migration of their workers to the richer EU countries, and the UK took a large share of them. Many of the lower paid jobs such as shop work, manual labor, cleaning services and so on were taken by these groups, as well as an influx of skilled trades such as joiners and plumbers. Like many immigrants, they would work harder, for less pay, and in worse living conditions that the natives and suddenly there was competition for these positions. Poorer locations in the UK started to become eastern European areas, and this change raised further ire among natives especially in times of recession and high unemployment. Basically, just what you see the world over when there's a large sudden immigration, such as when Italians or Irish emigrated to the USA.

The post 2007 financial crisis then highlighted flaws in the EU monetary union system - some of the countries that had been allowed to join the EU had done so when they weren't truly ready to do so, and when the crisis hit places such as Greece and Ireland, they had no way to control interest rates to benefit their population. Instead, they had to deal with policies essentially set by the larger countries of France and Germany who had no incentive to help at the expense of their own people. This led to severe austerity in these countries, and stressed relationships as it became clear that it was still far from a unified Europe when things got difficult. It's also worth noting that banks such as Goldman Sachs were behind the scenes, helping cook the books and in the end making things far worse for the ordinary citizen.

The UK had never been as committed to the EU as France or Germany, and in particular the Conservative party under Margaret Thatcher in the 1980's made it clear they weren't going to play nice. Over the years there has been some resentment between the UK and continental Europe, in part because the UK still acts in many ways like it runs an empire as in the pre-WWII days, partly because as one of the larger economies they contribute more in direct payments than they receive back, and that France in particular manipulates the system to benefit itself (as should any country, but there's just a certain animosity between the two). Much of it though was based on the populist press in the UK, the "Red Tops" like The Sun, who realised that headlines that enrage their readership always result in more sales. Unlike the US, these papers in the UK had great sway over the public, and their blessing could win elections for parties, or destroy politicians they disliked. 

The Conservative party have never been truly united on being in Europe, and have always had a wing of the party pushing for separation. The current Conservative Prime Minister, David Cameron, needed to placate his anti-Europe wing and called for a referendum as part of his manifesto last election cycle. Hence the vote.

Here endeth the history lesson...

The mechanism to make Brexit happen

So what fuels the real pressure for the Brexit vote? The mechanism by which it will happen is the voting public and the ballot box, and first we should look at the conditions that drive around 50% of the public to vote for leaving. First has been the diet of "faceless EU bureaucrats dictating your lives" stories in the press, but that has been going on for decades and is just a different faceless bureaucrat from one in London. What is really different now for most voters comes down to three things - globalization whereby jobs can be shipped offshore and productivity gains of those still working go to the already rich and not them, a growing distrust of major institutions and "politics as usual" (something seen the world over), and a sudden increase in immigration from poorer nations. These are perfect conditions for the rise of nationalism, and parties such as the UK Independence Party (UKIP) gain votes on thinly disguised xenophobia, while groups such as Britain First use the guise of "Taking Our Country Back" to cover their racism. They have good marketing departments, but these are essentially the modern version of the National Front, led by small people who take great pleasure in being able to manipulate the anger and resentment of others, but pretending to do it for the benefit of others. Sadly, as with Donald Trump's manipulation of a similar type of abandoned voter in the US, it can lead to aggression and violence, as was tragically seen in last Thursday's murder of a Member of Parliament, Jo Cox. These people are angry about the takeover of their country by certain groups, and are looking for someone 'to do something about it'. The best description of this I have heard is:

The UK is being brought down by an evil conspiracy of single mothers, poor people, and immigrants, trying to subvert her sovereignty. Fortunately the country can be saved by a plucky group of ex-Eton schoolboys, billionaires, and media moguls who are valiantly resisting them.

Any time the poor and powerless are being blamed for major issues, you know someone is trying to distract you - and so we turn our attention to the real cause of Brexit - the billionaires and media moguls.

The real causes of the Brexit referendum

As mentioned earlier, the UK is heavily influenced by the newspapers, in particular the Red Tops like The Sun, owned by Rupert Murdoch. He's used to having access to the highest levels of the UK government, acting as Kingmaker in elections, and influencing policy in his favour. He has little such access, however, across the rest of Europe, and fears that further integration in the EU will limit his influence. He has been quoted to have said

When I go into Downing Street they do what I say; when I go to Brussels they take no notice.

And that, in a sentence, is why one of the most powerful media moguls in the world is pushing for a reduced role of the EU in the UK. Not for the betterment of the UK, or for its people, or because of an injustice - it's power, influence, and the associated money, plain and simple. 

This also applies to many of the characters leading the Brexit 'Leave' campaign side such as Boris Johnson (ex-Eton schoolboy, former London Mayor, and leader of the Leave side) and Nigel Farage - men who are known and are of some importance in the UK, but somewhat meaningless in Europe. Too small to play on the big stage, these small fish would rather ensure the entirety of the UK remain in a small pond for their benefit. Perhaps they even believe their own publicity, but Martin Fletcher of The Times newspaper summarises Boris Johnson's history with the EU here, and points out his pettiness, willingness to fabricate negative stories of the EU, and his pleasure in the attention such lies brought him.

Johnson later confessed: “Everything I wrote from Brussels, I found was sort of chucking these rocks over the garden wall and I listened to this amazing crash from the greenhouse next door over in England as everything I wrote from Brussels was having this amazing, explosive effect on the Tory party, and it really gave me this I suppose rather weird sense of power."

Quite simply Boris Johnson is continuing the power trip he started nearly 30 years ago, but this time gambling with the future of a continent and even the world economy. It has led to a remarkable attack from former UK Prime Minister calling Johnson 'dishonest' and the Leave campaign 'deceitful'.

Finally we come to the billionaires. The UK has an outsized financial sector, contributing a large % of the overall economy, and dominating industry especially in the capital - Financial Services contributed around 12% of taxes in the UK in 2012. London is the financial capital of Europe, rivaling New York and in some ways exceeding it, with differing and some would say laxer regulations on what can go on. For many years it has been the recipient of money coming from all over the world, particularly from Russia and the middle east, with suspicions as to the legality of the source of much of it. As with all major financial centers, there is plenty of fraud going on - and the EU is more likely to place legal restrictions on this. Money hates feeling it is restricted, and regardless of the costs to others, believes that the influence it has on London and UK politics far outweighs what it can achieve in Europe as a whole. By ensuring a British exit from the EU, parts of the finance industry in London wants to make certain it can continue without restrictions it fears.

Interestingly, this desire to leave is not universal in the financial sector - many of the larger banks and financial institutions fear reduced access to EU markets and a diminished role in time. Jamie Dimon, CEO of JP Morgan warns of 'massive dislocation' should Brexit occur. The split in opinion seems, similar to the differences with the political characters, to be between the small and the large. To quote the Financial Times:

Smaller groups and the people who have spent their lives working in them are much more likely to want to leave; bigger, international institutions overwhelmingly favour remaining in the bloc.

It's not often I find myself agreeing with the large banks, often I use that as a warning sign, but in this case I agree with them. 

So to summarise - while you may hear the Brexit is all about self-determination, controlling immigration, or economic freedom for average citizens, remember that is simply the smoke screen and justification for the real agenda. It's for the oldest possible reasons - money, power, and ego.

6 comments:

  1. i did not know you were british!

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    1. Born and lived in the UK until I was 26, and then the last 17 years in the US, so I hold both British and American passports. My family are there, and I still do a lot of work with groups in the UK and Europe. This is an important issue for me.

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  2. Unfortunately you miss the even larger point: Germany is desperate to keep the UK in the EU because if the UK leaves, it will be the first of several to do so and THAT will impact on the Euro. The thing that frightens Merkel? Having to go go back to the Deutschmark knowing that it will have a massive negative impact on the German economy. Once they can no longer hide behind the failing Euro they will find the DM makes them uncompetitive as their exports cost too much elsewhere and their imports much cheaper. That is why floating exchange rates are so valuable: they bring stability, fairness and equilibrium by preventing the likes of Germany from dominating trade.
    When the Euro collapses, not if, we don't need to be tied to the structure. We can't affect anything that goes on in the EU, that's a ridiculous fallacy, made even more obvious by some of the comments coming from EU commissioners and finance ministers: "We will make Britain pay if they leave!" With friends like them, we have all the enemies we need.

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  3. Germany would prefer the UK in rather than out, but the UK keeps poking the EU in the eye, at some point they just have to say "On you go then".

    Now - you do realise that the UK has 10% of the votes in the EU, second only to Germany? We do actually have a say, so much so that it was the UK that was vocal in the push for the addition of the former Soviet bloc countries in the last decade, moreso than Germany or France. Not only that, the UK deliberately chose fewer working restrictions on those immigrants, unlike some other EU countries which only relaxed working rights to them 2 years ago. This led to one of the major issues claimed in the referendum - that immigration was being forced on the UK by the EU.

    http://www.bbc.com/news/world-europe-25565302

    http://www.ippr.org/files/images/media/files/publication/2013/12/in-transition_RomBulg_Dec2013_11688.pdf?noredirect=1

    The UK had so much say it caused the very problem the EU is being blamed for.

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