That is the question that many people in the UK are asking themselves, however what does it mean? It is given the name Brexit as the term is an abbreviation for British Exit from the EU. Held on Thursday 23rd of June, British voters (citizens in Britain and the Commonwealth of Nations aged 18+) can cast ballots in the referendum to choose if Britain should remain in the EU having joined for membership in 1972.
While, the Electoral Commission assigns an official remain campaign group and leave campaign group, of which all of their ten-week campaigning will be funded by taxpayer money. Additionally, even though the referendum result of the votes matter, the referendum result is not legally binding anyway. The government has the final vote to keep or disregard the outcome. Already has their been political sway on their part:
Monday: David Cameron, sharing a platform with David Miliband, said that Brexit would leave the world vulnerable to war. Wednesday: Gordon Brown made his case for an “outward looking” Britain. Thursday: Mark Carney, Governor of the Bank of England, injected a traditionally nonpartisan institution into electoral politics by saying that Brexit’s effects could include “a technical recession”. Friday: Sir John Major warned that the Leave campaign was dividing Britain. Christine Lagarde, managing director of the International Monetary Fund, also said that to abandon the EU would crash the stock market. (The Telegraph, 2016)
Politicians just don’t seem to understand the economic causes of the boom and bust cycle, and its similar correlation to monetary policy. If it is the case that the UK would go into a recession, then must the remain in the EU campaign itself cause a recession, as people would change their actions based on the predicted possibility for a recession. “The analysis will say that a vote in favor of a British exit from the EU, or Brexit, in a referendum scheduled for June 23 could trigger “an immediate and profound economic shock,” according to excerpts released by the Treasury in advance.” (Douglas & Flynn, 2016) However, the Bank of England has been careful and warned about its involvement surrounding whether it favors the Leave or Remain campaign.
There are even possible “shocks” to a resulting change in interest rates from the Bank of England. It is questioning whether the referendum has been a media cover for cutting the interest rates into negative territories. “A top Bank of England policymaker has floated the possibility of interest rates being cut below zero, meaning companies would pay to deposit their money with banks.” (Allen, 2016) Not that top of a policymaker if one is arguing for zero interest rates, additionally, “Jan Vlieghe, a member of the BoE’s nine-strong monetary policy committee, did not rule out the idea of following other central banks in taking interest rates negative […]” (Allen, 2016). See my article Interest Rates Are A Market Price Signal Not To Be Interfered With for more on zero and negative interest rates, here is an excerpt:
However, the radical and numerous schemes to lower or abolish interest by means of a banking reform have been teased, as a zero originary interest rate implies no action always being pushed into ones infinite future period of provision, and a negative originary interest rate implies one could undo action. Though, not rejected or refuted, in fact, it is now found necessary to find additional policy stimulus through cutting the gross market interest rate lower to the point of a zero gross market interest rate. Now, lenders/savers receive no discount of future goods relative to lending/saving present goods. Alternatively, another option is to move gross market interest rates into negative territories, of which the liquidity theory supports as a means to reduce risk, where lenders/savers pay a premium on future goods.
Arguments to Leave:
- The European Union imposes huge legislation on businesses, and suffering from the EU crisis.
- “Big corporations love the EU because it creates regulations that destroy their smaller rivals.” (McMaken, 2016)
- The EU is a conglomeration of bureaucrats and secretive commissions, and not transparent.
- Membership is costing the UK taxpayer millions, that could either go toward other things or decreases in taxes.
- “Swiss Model” alternative, keeping trade treaties and free trade agreements.
- UK can be independent and still trade internationally without restrictions.
- Can still remain member of Nato and UN Security Council, with nuclear power.
- UK not even powerful in EU and disagrees with EU Council’s agendas.
- UK could then have its own seat at the World Trade Organisation.
- Laws are made overseas by dictates and rulings upheld by the European Court of Justice.
- EU is not a free trade organisation, and trade barriers harm both consumers and producers, and “you don’t need trade agreements with a country to be able to trade with it.” (McMaken, 2016)
- No one really knows who the five presidents of the EU are.
- Britain could have to contribute to an EU Army.
- “[…] two of Europe’s wealthiest countries remain outside the EU: Switzerland and Norway” (McMaken, 2016)
- Brexit: The Animated Movie, & Brexit: The Movie, both explain the leaving argument further.
Arguments to Stay:
- EU membership has more security and less terrorism risk.
- Could cause UK recession to leave. “Falling property prices will hit stamp duty tax receipts and tighter immigration rules will limit GDP growth, according to NIESR’s predictions.” (Inman, 2016)
- Membership promotes migrant labour, whose taxes fund public services.
- Leaving would rid any influence in Brussels, Berlin, or Paris.
- Restricted travel: UK citizens have to pay for visas or permits to visit member states, current expats considered illegal immigrants, and overseas Britons in EU states have to return.
- Leaving would increase unemployment.
- Increased uncertainty.
- Better trade deals if stay in EU.
- Other countries interests say to stay.
- EU world’s biggest market.
- Roles in climate change.
- Exit would “[…] force ministers to extend austerity measures by up to two years to achieve a budget surplus.” (Inman, 2016)
The Telegraph. (2016). The establishment’s anti-brexit hysterics may alienate voters. The Telegraph. Retrieved [25/05/16] from <http://www.telegraph.co.uk/opinion/2016/05/14/the-establishments-anti-brexit-hysterics-may-alienate-voters/>.
Douglas, A. & Flynn, A. (2016). U.K. treasury says eu exit could cause recession. The Wall Street Journal. Retrieved [25/05/16] from <http://www.wsj.com/articles/u-k-treasury-says-eu-exit-could-cause-recession-1463958061>.
McMaken, R. (2016). Brexit: the movie makes the economic case against the eu. Alabama; the Mises Institute. Retrieved [25/05/2016] from <https://mises.org/blog/brexit-movie-makes-economic-case-against-eu>.
Inman, P. (2016). Ifs warns brexit would extend austerity for two more years. The Guardian. Retrieved [25/05/16] from <https://www.theguardian.com/business/2016/may/25/ifs-brexit-extend-austerity-budget-deficit-eu-referendum>.
Allen, K. (2016). Interest rates could go negative, bank of england’s vlieghe says. The Guardian. Retrieved [25/05/16] from <https://www.theguardian.com/business/2016/apr/22/interest-rates-could-go-negative-bank-of-england-vlieghe-says>.
Featured image supplied from Pixabay.
Copyright © 2016 Zoë-Marie Beesley
Licensed under a Creative Commons Attribution 4.0 International License.