The June 23 Brexit referendum saw the UK vote to leave the European Union. The exit decision shocked the world with implications not only in the political and economic arenas of the UK and EU, but which also has far reaching repercussions beyond Europe. It is a historic event. The UK is one of the key pillar members of the EU and its exit not only significantly weakens the EU, it is also a signal to the end of the idea of pan European unionism and by extension, the idea of globalization.
A Close Vote and a Divided Nation
The Eurosceptics won in the referendum with 51.9 percent of the cast votes against 48.1 percent from the stay camp, with a voter turnout of 72.2 percent. Although the voter turnout was higher than the 66.1 percent in the 2015 general election, the 6 percent turnout increase did not reflect the historic significance of the referendum. Instead, the closeness of the vote and the not too significant increase in the voter turnout reflected a divided nation with serious repercussions for the future of the UK.
The blue areas represent the stay-EU regions and the red areas represent the exit-EU regions. The stay-EU regions were made up of Scotland, London, and Northern Ireland, while the exit-EU regions were made up of England and Wales. The referendum result seems to indicate a regional split in the UK.
Source: EU referendum results and maps: Full breakdown and find out how your area voted. (2016, June 24). The Telegraph. Retrieved from
Sixty-two percent of Scots voted to stay in the EU, and with the memory of Scottish Independence Referendum of 2014 still fresh in their minds, Scotland’s First Minister, Nicola Sturgeon, said it was “democratically unacceptable” for Scotland to face the prospect of being taken out of the EU against its will and a second independence referendum is “highly likely” after the UK’s vote to leave the EU. The prospect of Scotland breaking away from the United Kingdom and joining the EU on its own has long been discussed. In fact, it was the EU’s rejection of such an idea that in some way swung the 2014 Scottish independence referendum to a 62 percent to 38 percent stay in UK victory. As such, the Brexit result reopens this Pandora’s box, and if Scotland leaves the UK, it could set a very dangerous precedent for discontented minorities in many former British colonies whose nationhood is a result of colonization rather than natural statehood formation processes. There are already indications that Northern Ireland will follow the footsteps of Scotland if the latter chooses to hold a new referendum on independence. The chance of Great Britain becoming a much smaller England cannot be discounted.
Rationality vs Emotion
Two issues stood out in the Brexit debate: economics and immigration. There is almost a universal agreement on the negative impact of Brexit on the economy of the UK and the world. Internationally, almost all prominent figures ranging from President Obama of the US, to President Xi of China, to the Pope have openly called for the UK to stay in the EU. Within Britain itself, almost all noted religious, social, civic, and business leaders voiced their opposition to Brexit and there are numerous analyses citing the negative consequences of being cut off from the common market to the economic well-being of the country, many of them backed by hard analysis. In contrast, the Brexit camp was led by a rag-tag band of politicians and businessmen in a loose coalition led by Boris Johnson, the former mayor of London and Michael Gove, the conservative Secretary of State for Justice. The line-ups of the pro- and anti-Brexit camps reflected the establishment and anti-establishment nature of the debate.
Instead of concentrating on the objective analysis of the advantages of Brexit, the Brexit proponents appealed to the emotions of the electorate, arguing that British can only exert full control over its borders and budget by leaving the EU. The Brexit’s argument is akin to negative campaigning in an election; focus on the cons and never mention the pros. The alleged shooter of pro-EU MP Jo Cox, Thomas Mair, said at the magistrates’ court, “Death to traitors, freedom to Britain,” reminding many people of extremely nationalistic rhetoric in Europe during the 1920s. While the Cox murder on June 16 slowed the Brexit momentum, it failed to stop it and while people normally dislike negative campaigning and violence, and side with rationality, this time it was different.
The result is a rebuttal to the existing British establishment and reflects the majority’s dislike of the establishment’s intellectual foundation of pan-Europeanism and globalization.
The referendum result clearly shows that a majority of the British rejected the rational analysis on the perils of the exit by most of society’s leaders and they turned to the emotional side of the Brexit camp. How slim the majority was or how the turnover rate was did not reflect the importance of the issue, the result is a rebuttal to the existing British establishment and reflects the majority’s dislike of the establishment’s intellectual foundation of pan-Europeanism and globalization.
The ripples of Brexit will certainly be huge and move far beyond its shores. The result will fan speculation that other countries could withdraw from the EU and give a significant fillip to populist anti-establishment figures in the EU like Marine Le Pen of France and Geert Wilders of the Netherlands. These two extremist politicians have questioned the validity of the current notion that the EU is a symbol of Europe’s resurgence from World War II. They instead focus on immigration, high unemployment, weak economic growth, and the overbearing regulations of the EU. With forthcoming elections in France and the Netherlands next year, they are real threats to the EU as we know it today.
The Brexit referendum result on June 23 just adds to the scrutiny of the EU’s problems: Greece’s seemingly endless debt woes, sanctions on Russia, and the refugee crisis. The remaining anchors of the European Union, mainly the original six countries that formed the predecessor of EU: France, Germany, Italy, and the three Benelux countries, must demonstrate their commitment to the EU and resolve the unsettling issues that the community is facing today. In any case, there is general agreement that the rational choice of the EU is to focus more on the drive toward internal consolidation and forego globalization.
Looming Economic Headwinds for the World
The UK is the fifth largest economy in the world and the EU is the second largest economic bloc. So many interdependent economic relationships have been formed between the UK and other EU member countries in the 43 years since the UK joined the community in 1973. The negotiations to untangle the UK economy from the free trade area will create a lot of uncertainty for the currently fragile global economy and will likely last more than the two years stipulated in the Lisbon agreement on members exiting from the union. The prolonged uncertainty can easily plunge Europe into another recession, and a recession hitting Europe will be an economic headwind for all other countries.
While the Brexit camp had talked about the freedom of an independent UK to negotiate free trade agreements with other countries free from the shackles of EU regulations, the fact is that all of the UK’s free trade agreements in the last 43 years were negotiated under the EU umbrella and the size of a market is often the determinant of strength in trade negotiations. The prospects for the UK of quick negotiations with so many countries to build new external economic relations to replace the current EU free trade relations are not too bright. At the moment, the UK’s free trade with the EU accounts for 50-60 percent of its foreign trade. Besides, the UK was the first developed country to move into services in the last century and it is more known today for its finance and other service industries than its manufacturing. Free trade with other countries on goods is not too meaningful and the UK will lose its natural service base with the EU exit. It is unlikely that distant countries like the US, China, or former commonwealth countries can fill the EU void. The IMF has predicted a 5 percent drop in the UK’s GDP on its exit decision. The fifth largest economy sliding into such a deep recession will certainly be a headwind for the global economy.
Brexit on Asia
One should also watch the impact of Brexit on Asia. Even though Pax Britannica disappeared many decades ago, the country still holds significant ties in the areas of education, culture, law, and economics with many of its former colonies and many countries in the region. The fact that many Asian students still consider Britain as one of the most favored tertiary education destinations is a testament to such influence. It is not unreasonable to expect the extreme nationalism coming out of the referendum to replace the liberal order that this region has learnt from the British. And even worse, if the Scottish referendum is pushed through and the UK is not united anymore, the redefinition of minority nationalism could affect many existing countries whose boundaries are defined as a legacy of colonization, a situation manifested to some degree in Iraq and Syria today. Also, as Asia is the primary beneficiary of globalization and the associated liberal immigration regime, any rollback on globalization will affect Asia more than other regions.
There is little disagreement on the benefits of an open, globalized economic order. The main pushback in the current backlash in developed countries against globalization is really an issue of distribution of economic benefits. Most of the electorate just find the ideas that the benefits of a liberal global economic order are benefiting only a few elites, and that their livelihoods are threatened by better educated and more hardworking foreigners, are simply unbearable. Asian leaders should pay more attention to this emerging trend that started with Donald Trump winning the US Republican primary and which has blossomed with the Brexit.
A few hours into the Brexit poll before it closed, global financial markets rallied and predicted a narrow win for the stay camp. If the usually reliable financial markets and UK bookies can be so wrong just a few hours before the voting closed, then the current polls which show Hillary Clinton leading Donald Trump in the US could probably be the same. A massive turnout of disenchanted voters can easily tip the balance in favor of the minority and render any poll based on random sampling invalid. Brexit has shown that a populist anti-establishment campaign can win a general referendum anchored on emotion rather than rationality. One cannot underestimate the current underlying anti-establishment sentiments in both developing countries and developed world. Rodrigo Duterte won the Philippine election in May, Brexit prevailed on June 23, and if Donald Trump comes ahead in November, then the year 2016 will truly be a year of black swans for Asian countries and the world.