Brexit: What it means to S.C. and you
Brexit = Britain Exit #1 What it is? Brexit was the vote last week by the United Kingdom to leave the European Union. While this one sentence is true, it’s a little like saying “the South lost the Civil War” – true, but there is a whole lot more to the story. Let me explain. Culminating with World War II, for the past few hundred years the countries of Europe periodically chose up sides and killed each other with frightening regularity.
After 70 million people died in World War II, the politicians of Europe decided that they did not want to do this again and they began a long process of tying the counties of Europe together with ever increasing economic, social and political agreements. Over time, these agreements created the European Union or EU. The theory was that if the countries were so closely connected, then another war would be impossible.
This process continued and expanded until today the European Union is made up of 28 countries with a population of over 500 million. They essentially have open borders, free trade and exchange of good and (with the exception of UK and eight other countries) a common currency called the Euro. #2 What happened? Over the years, many people in Europe (and especially in the UK) became increasingly resentful of the political elites and the EU government in Brussels “telling us what to do.” Think about all the bad things that Donald Trump says about Washington and substitute the word “Brussels” and that pretty much sums up how lots of people feel about the EU.
In time this gave rise to a new political party, the UK Independence Party (or UKIP for short) who fiercely opposed immigration and most everything that the EU did. UKIP largely drew their support from segments of the Conservative Party (think Republican Party) voters who were white, older, non-urban, lower education and lower income (think Trump voters). Supporters of the “stay” campaign were more racially diverse, young, urban, well educated, higher income voters.
Although he personally supported the EU membership and led the campaign to stay, UK Prime Minister David Cameron’s Conservative Party has been deeply divided on the EU issue for years. So, in 2013 in hopes of placating the right wing of his party and stopping the defections of his party’s voters to UKIP, Cameron promised an up or down national referendum on staying in the EU. In the last year or so came the immigration crisis that swamped Europe (sound familiar) and increasingly people became fed up and said it’s time to leave the EU.
Last week all these anti-EU chickens came home to roost, and by a margin of 52%, UK voters decided to leave. To most observers, it was a shock. #3 Why it matters? Well, let’s start with what happened the day after the vote – stock markets in the U.S. and pretty much everywhere else in the world, took a huge nose dive. No, not a nose dive, they fell off a cliff. The Dow dropped 610 points or 3.4% and the other markets in the U.S. and around the world were about the same or worse. In the first few days after the vote, over $2 trillion in wealth evaporated in the global stock markets.
If there is one thing that businesses, from global corporations to the corner store, dislike it’s uncertainty and right now everything is uncertain. The question everyone is asking is “what now?” and the truth is that no one knows. In the short terms at least, most of what is being discussed is mostly bad. Not “board up the house get your gun and head for the hills” bad but, still not good. What we will have to do is all that we can do – wait and see. #4 Why it matters to S.C.? It matters a lot to South Carolina; arguably it matters more to South Carolina than to any other state.
Yes, really. South Carolina has more direct foreign investment per capita than any other state and of the eight countries with the most investment in South Carolina six of them are in the EU. It’s about the 1,200+ facilities of international business that are located in our state and the tens of thousands of jobs of South Carolinians who work in these places. Does this mean that lots of these folks will immediately lose their jobs? No, probably not, but the Brexit vote will have an impact.
Don’t expect to see any UK or EU companies announce any new large investments or expansions in South Carolina any time soon i.e. see business uncertainty above. #5 Why it matters to YOU? Well first, check your 401k or stock account today and see how far it dropped — and it did drop, the only question is by how much and for how long. The same thing applies to your pension fund at your company and the state retirement fund that covers 200,000 South Carolinians.
If you work at any of the 1,200 foreign owned facilities – talk with your boss. Some will try and tell you otherwise, but no one really knows what the short, medium or long term impact will be — but I’m pretty sure ‘no impact’ is not the right answers. #6 What can you do? In one sense, there is not a lot any of us can do on the individual level. The global forces at work are beyond any of our individual control. This sense of helplessness against “them” is a big part of the frustration that fueled the anti-EU (and Trump) vote.
These feelings – on the part of UKIP and Trump voters – are real, justified and valid and critics should not dismiss them as otherwise. People are afraid, uncertain and have much to worry about. But, there is something that we can do: we cannot give in to the voices of those demagogic politicians that blindly rant against “them” – the immigrants, the Muslims, the media and the political establishment. Yes, there is a lot to be frustrated about (with Washington, Columbia or Brussels) but the answer is not to be found in simplistic sound bites and appeals to our fears and prejudices.