Will Brexit play slow poison for Global economy?
Brexit is giving many sleepless nights, especially to the working class who have been fighting the economic meltdown since 2008. Till now, prognosticators have been thinking of a local meltdown if Britain finally leaves the EU. However, the greater consequences have not yet met the eyes of common man, which may finally seep in the following years.
The factors that need to be discussed here include growing protectionism, anti-immigrant sentiment, the increasing ageing population and the miserable productivity, as these factors were greatly nullified when Britain entered the EU in 1973, its foundation year.
For the very reasons defined above, all the 28 countries that had joined the Union never left, except Greenland, a Danish territory, and Algeria, which ceased to be part of the EU upon independence from France.
Why Brexit is a bad idea
A simple reason would be withdrawing from a trade pact as big as this would be a very bad idea, unless there is access to a bigger and better one. Moreover, experts believe that a Brexit would interrupt nearly 60 years of expansion and for Britain, it would endanger the economic gains it has made since joining.
The market was open and had more competition that led to an economic boost. Even the governing elites had accepted the economic rationale for integration. The local firms are more exposed to the international market, which accelarates the dissemination of new ideas via foreign investment and immigration. The British economy was declining as compared to France and Germany until it joined EU in 1973.
[Read: Brexit: Will UK leave EU today? ]
The economy of the country witnessed a boost in 1979 when the then PM Margaret Thatcher began loosening the state's influence on the economy. There was no looking back thereafter.
Economy due to the immigration population would also be affected as the demand supply ratio of products would go haywire. The population of skilled labourers would also go down. EU immigrants are considered better workers than their British counterparts. They also pay taxes than they collect in benefits.
The transition from more open borders to less open borders will chip at the margin, thus affecting Britain's long-term growth plan. Britain cannot afford this right now as the productivity growth has recently averaged around zero. Now, if there is no serious short-term fallout from Brexit, political entities in France and Netherlands Netherlands, who are anti-EU may benefit of the political instability.
Protectionism will also be affected as revealed by a Global Trade Alert, a Geneva-based watchdog group. In order to protect one's entity in the global market, foreign companies are instructed to organise business around global market accessibility. Spreading production among more plants may protect a company from protectionist impulses, but it also hampers productivity and raises costs for its customers.
With the global meltdown since 2010, which is often blamed on protectionism, has brought down the world GDP by 2.7%. If Britain exits EU, the margin can grow.
Somethings to be considered
Economic gurus have always agreed to the fact that these international treaties like the EU and the WTO have had a long interference in British Affairs. They are undemocratic by nature and always have a say in the country's finances. In other words, they tie a particular country's hands for the sake of common good. EU firms may hate the EU meddling with the market, but are happy when they are benefitted when the barriers are diminished.
Time will decide whether Brexit is an option or not and millions of lives that depend on it have to brace themselves for all possible answers.