Monday, June 27, 2016

Business Recorder column June 27, 2016

Brexit fallout Rashed Rahman The shock result of the British referendum to leave the European Union (EU) has had immediate effects and fallouts for Britain, the EU and the world. Uncertainty has gripped the markets ($ 2.1 trillion shaved off worldwide), exposed fissures in the western alliance, and deepened the regional, generational and occupational divide in British society. All these are obviously unhelpful for managing the ongoing global recession and hopes for economic recovery. Whether these are long term effects that could exacerbate the global economic crisis, only time will tell, but there are deeper long term implications of this development that mirror these short term trends and bear introspection. Three profound impacts can be determined even at this early stage: 1) implications for the unity of the United Kingdom (UK); 2) effects on the western alliance, including NATO; 3) the fallout for a world wedded since the end of the Cold War to integration, opening up of trade and borders and globalisation (of which the first three are an integral part. The UK now faces calls from Scotland for a new referendum on independence from Britain, a question asked and rejected by 55 percent of the Scottish electorate just two years ago. Scotland, unlike the overall countrywide result of 52 percent for leaving the EU as opposed to 48 percent voting to stay, overwhelmingly elected to remain within the EU. The Scottish Nationalists are already arguing that the UK they voted to stay in two years ago no longer exists. Northern Ireland too voted overwhelmingly to stay, and is now chafing at the bit. However, this sentiment is negated by the pro-UK Protestant majority in that province. Cosmopolitan London and the young throughout the country voted to stay, while ‘angry old men’, those feeling left behind by globalisation, fearing immigration taking away jobs and lowering wages (fears played on to the hilt by the Leave campaign), voted to depart. These regional, generational and occupational differences promise more strife to come. The US is clearly disappointed by the outcome. It reiterated its commitment to the special relationship with Britain and close ties with Europe (particularly NATO), but questions now hover over whether the western alliance will be able to function with quite the same cohesion and common purpose as it has since 1945. Any such weakening of the western alliance will bring benefits to China’s emergence as a global power and Russia’s revival from the ashes of the Soviet Union. The post-World War II world changed profoundly in 1991 with the collapse of the Soviet Union and the end of the Cold War. But this brave new world had its own nasty surprises lurking. The horizontal expansion of capitalism into the former socialist bloc, vertical effects in terms of unequal worldwide income and wealth distribution globally, the increasing dominance of finance capital over the real economy, all these factors fed into the global recession that began in 2007. The world has yet to discover how this system can be nudged forward out of the present crisis. The fallout does not end here. Internal British politics (apart from Scotland and Northern Ireland) has been roiled. The Conservative Party faces a bitter leadership struggle after Prime Minister David Cameron announced his decision to leave by October, while the Labour Party faces a revolt by a significant section of the leadership against its leader, Jeremy Corbyn. Arguably, Cameron could have done without calling the referendum. It was an attempt to quell the Eurosceptic right within his party, as well as counter the rise of the EU-hating (and baiting) UK Independence Party (UKIP). But the move badly backfired. The Leave camp played on irrational fears and insecurities (as the ‘morning after’ revelations of the hollowness of its claims and promises indicate), which triumphed over good sense and Britain’s own interests. Both Cameron’s government and the opposition Labour Party (particularly its leader Corbyn) ran a weak and lacklustre Remain campaign that could not match the emotionally charged notions of the Leave campaign to recover so-called independence from a distant, bureaucratic rule by Brussels (the EU capital). The British media too was heavily skewed in favour of leaving, and failed to frame the debate in a manner that would inform, educate and enlighten its audience. There are lessons here for us in Pakistan regarding how an irresponsible media can wreak havoc to a country’s future and intrinsic interests. The outcome of the referendum therefore can be regarded as a protest vote fuelled by fear, anger and ignorance. Now that some of the wild claims and promises of the Leave campaign are being punctured, causing the leading lights of that side of the divide to retreat on their most extreme positions, afterthoughts seem to be creeping into the public sphere, including a petition signed by over two million people for another Brexit referendum. Whether the result can be reversed is highly unlikely, especially since European leaders are impatient and angry with Britain and want the exit process speeded up. Britain may well, in the wake of Brexit, be facing a fresh election by next year. Brexit will obviously be at the heart of all parties’ campaigns, whether for or against, and may well strengthen the forces of the right that successfully exploited paranoia, hate and preconceived notions to mislead the public and win. British politics may therefore be heading for a polarisation that would erode the positions of centrist parties like the Conservative and Labour Parties at the hands of rightist and leftist challengers from within and without. Whether the world will come out of the slough of despond it seems to have fallen into post-Brexit remains in the realm of conjecture. But certainly there are questions regarding the architecture of a post-Brexit new world. Meantime it would not be remiss to ponder how Britain, the great historic ‘divide and rule’ practitioner, appears to have been hoist on its own petard.

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