A look at Brexit, part 1: why?

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We live in, politically speaking, very volatile times: the presidential race, the socio-political unrest in Latin America and Spain, terrorism, Syria, the refugee crisis… there are so many different big news that many people haven’t noticed what is commonly known in Europe as Brexit.

For those of you who may have heard the name but don’t know what it is, Brexit is what they

David Cameron, Prime Minister
of the United Kingdom

call the request of a bunch of British citizens that the United Kingdom leave the European Union. They want out. It’s something that was grumbled for many years but that with time has become such an intense debate that they have forced their Prime Minister David Cameron to call for a referendum and ask everyone what they want. That will take place on Thursday June 23rd.

Money and Stuff is not a political blog. However in order to put into context the origin and possible consequences of Brexit becoming a reality, I have to talk about politics. Here are the reasons why so many brits want the UK to leave the EU:

Red tape

The EU nations have a series of common regulations that are decided in Brussels, seat of

the Union’s central government; once accorded, all EU nations must implement those regulations at home. Small and medium businesses in the UK are tired of what they see as Brussels overregulating and changing rules on them. These regulatory changes often lead to higher costs, lower income, and a rise in prices without any actual benefit to these businesses. They have communicated this to their government in a recently-released signed open letter, indicating they will vote yes on Brexit.

Money

UK is one of the greater contributors to the European Union’s common fund and it is true that while seen by itself, the country contributes more than what they get in return on quotas and aids. Many economists argue that the benefit of trade and benefits that they receive in exchange far outweighs what they give, but there are no definite figures that I have seen to support conclusively either of these stances.

More money

It’s the opinion of many that belonging to the European Union actually stops Britain from engaging into open trade with nations and trade unions outside the euro zone. They want to be able to engage in foreign trade with whomever, bypassing EU quotas and trade regulations. If this were true they would be able to increase imports and exports by mains of individually crafted trade agreements.

However, others argue that the EU is not to blame for the United Kingdom’s decline in trade

but rather that they should look at the slow stagnation of the manufacturing sector over the past 4 decades. They indicate that trade agreements won’t mean anything if the country cannot supply the exports. Figures do seem to support these claims, but defenders and detractors of Brexit don’t seem to agree whether the cause of the decline is the EU or the limited expectations with regards to future profits due to the high cost of raw materials and labor.

Immigration

Under the Schengen Agreement that exists among all EU nations, they allow the free movement and flow of EU citizens between countries. There’s a growing feeling in the United Kingdom that there are citizens of other countries (mostly Poland) that live off their social welfare system. The actual numbers contradict this: the social benefits that United Kingdom citizens receive while living in other countries of the EU are far greater than the benefits that these foreigners living in the United Kingdom receive from the UK government. To put it more simply: if all the foreigners went home and all the Brits abroad returned home, the British government would be paying far, far more on state aid to them. Furthermore, the unemployment rate among foreigners in the UK is higher than among British citizens (although the overall unemployment rate in Britain is very low, 5.2%), yet the working foreigners provide more in taxes than they receive in state aid. So, they are paying for their share and more.

Legal issues

Decisions have been made in the European Union that the UK didn’t agree with but they were outvoted, especially rules set by the European Court of Human Rights regarding the deportation rules for criminals born abroad.

In general the United Kingdom wants more control over its borders –they aren’t the first

country in the euro zone to want this, but this wish clashes directly with Schengen. Other countries have had to back down but to the British this is now a matter of sovereignity.

Additionally, since the beginning of the economic crisis in 2008 there has been an increase in economic controls and fiscal measures among all member states. Countries that are in the EU but aren’t part of the Euro, the United Kingdom, Sweden and Denmark, have been losing deciding power on votes about these measures that those using the euro want in place. 

As you can see, there are many arguments in favor. In the next article I will speak of the arguments against Brexit and the economic consequences for everyone if it did indeed happen in the end.