Published: March 3, 2016
On June 23, British citizens will participate in one of the most salient referendums in modern history. Britons have the option of siding with their Prime Minster, David Cameron, who has long advocated for European Union membership, or siding with a myriad of prominent members of parliment calling for Britain’s exit from the economic and political union it has been a part of since 1973. Cameron secured a deal for Britain on Feb. 20 that can be viewed as a victory or a capitulation, depending on the political lens you look through.
“Brexit,” a colloquial term that refers to Britain’s exit from the European Union, was seen as highly unlikely just one year ago, but a tumultuous year in Europe has engendered support for the move. The influx of refugees from Syria and other embattled countries has triggered a European migration crisis, but the United Kingdom is currently dealing with a different migration issue. One of the fundamental principles of the EU, the free movement of labor, has provided the subject matter for many diatribes. After the Soviet Union dissolved in the early 90s, a large number of the newly sovereign nations applied for, and were granted, EU membership. This membership meant that citizens of these former Soviet states, who are largely blue-collar workers, are now free to move across Europe. An exceptionally large number of these migrants subsequently moved to Britain, where they gleefully provided cheap labor at the expense of British blue-collar workers. This migration crisis, along with the Euro’s woes and the conception that Britain is surrendering its national sovereignty, has led to the rise of Euroscepticism in Britain. The manifestation of this Euroscepticism is seen in the meteoric rise of Nigel Farage’s U.K. Independepnce Party (UKIP), which advocates a United Kingdom free from the restraints of the European Union.
Support for Brexit has burgeoned in the past year, but recent polls show a majority of Britons still support staying in the EU. When David Cameron unveiled his deal with Brussels on Feb. 20, a number of prominent MP’s and a majority of his Cabinet backed him. Several members of Mr. Cameron’s cabinet, such as Justice Secretary Michael Gove and Culture Secretary John Whittingdale, have supported the “Vote Leave” campaign however. Boris Johnson, London’s influential and popular mayor, articulated his support for the “Vote Leave” campaign in a 2,000 word opinion piece that appeared in The Telegraph on February 22nd. Tristan Flood, a junior biochemistry, cell and molecular biology major with a minor in political science, believes that, “Britain still wants the unity they have now with the EU, but less economic regulations and more freedom for business.” Cameron and Johnson are arguably the two most influential politicians in the U.K., and the fact that they are on opposite sides of the issue provides a tangible example of the strife that currently grips the country. Advocates of the “Vote Leave” campaign contend that EU membership is costly and brings overregulation and excessive migration to the UK. Cameron and his supporters claim that EU membership helps Britain’s economy and helps bolster their national security.
The economic implications of a potential Brexit are already starting to manifest themselves. The pound sterling, the official currency of the U.K., fell below $1.40 for the first time since 2009 amid Brexit concerns. The pound is already down 3 percent since David Cameron announced the June 23 referendum, and Goldman Sachs predicts that the pound could fall by as much as 20 percent if Britain does leave the EU. This means that the British currency is depreciating against other currencies, leading to a decrease in the purchasing power of British citizens. Britons that like to travel to or buy goods from Europe or the United States will find these luxuries markedly more expensive. Dr. Jinghan Cai, a professor of finance, points out that, “Political turmoil adds more uncertainty in the asset pricing, since the unexpected policy decision may change the valuation of a local currency. This will further cause the exit of international investors, thus weakening the exchange rate of the country. Examples of political turmoil can be referred to Russia, Venezuela, Thailand, Pakistan, etc.”
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