Brexit: Good or Bad?

Business, Corpus Christi, Front Page, Government and Politics, Opinion/Editorial

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     Donald E. Westlake was a supreme sensation when it came to writing the Comic Caper novel. His most famous work features a character by the name of John Dortmunder, a criminal mastermind, and the world’s unluckiest crook. In 1972, The Hot Rock, Westlake’s first novel in the Dortmunder series, was adapted for the big-screen with Robert Redford leading a team of lovable losers on the quest to steal a large diamond from an alarm-less museum. Dortmunder, fresh out of prison, is approached by his brother-in-law with his first opportunity to do what he does best: plan (and fumble) the big score. In the following quote, Dortmunder weighs the pros and cons in order to rationalize his inevitable acceptance.

Dortmunder
It’s good, and it’s bad. There’s a guaranteed return, and that’s good. But the guarantor is Amusa, and Amusa’s a rookie, and that’s bad. But it’s an easily transportable object, and that’s good. Only it’s in a rotten position in the museum, 30 steps to the quickest exit, and that’s bad. And the glass over the stone, that’s bad too, because that’s glass with metal mixed in it, bulletproof, shatterproof. But the locks don’t look impossible, 3, maybe 5 tumblers. But there’s no alarm system, and that’s the worst, because that means no one’s going to get lazy watching, knowing the alarm will pick up their mistakes. Which means the whole thing has got to be a diversion job, and that’s good and that’s bad, because if the diversion’s too big, it’ll draw pedestrians, and if the diversion’s not big enough, it won’t draw that watchman…

Kelp (the brother-in-law)
Dortmunder, I don’t know where the hell you are, or what the hell you’re saying. Just tell me, will you plan the job?

Dortmunder
[pauses, then smiles] It’s what I do.

    This article, however, is not about the fictional blunders of John Dortmunder, but rather, the Dortmunderesque rationale that may be applied to the recent panic surrounding the current state of affairs in the EU as it relates to Brexit. In the attempt to cover the pros and cons of this epic bit of world news, let us take a moment and compose a monologue channeling an inner-Dormunder as we assess the “good and the bad” of Brexit.

     First, we should retain a few important facts surrounding what seemed at first to be an otherwise unlikely departure. Ladbrokes.com, a gambling website, recorded the largest betting turnout for any political event in UK history in the days leading up to the vote. Odds landed at 4 to 1 in favor of Bremainers, meaning that a 100-dollar bet in favor of the UK remaining a part of the EU would trigger a mere 25-dollar profit. On the other hand, a 100-dollar bet on a successful Brexit would score 400 dollars. In other words, the money was on the wrong side of truth in lopsided fashion. Basically, few, including PM Cameron, believed that the democratic process would result in a majority of UK voters who no longer wanted to remain under the wide-spanning wing of the European Union. But why did people not foresee the outcome of the election? And more importantly, why did the majority vote as they did?  Certainly this is no black and white issue, and surely there must have been some sort of voter rationale, shouldn’t there?

     Back to John Dortmunder: In order to address a possible rationalization, let’s allow Dortmunder to be our voice of reason. It would go something like this:

Dortmunder

It’s good and it’s bad… There is a guaranteed immediate return in that we save 13 billion pounds per year in EU membership costs, and that’s good. But even though we currently split our profits, and more importantly, our losses with 27 other countries, we now will be forced to depend on our own economy, which means our losses will rest sorely on our own shoulders, and that’s bad.

But it’s a large shift away from the fear of globalization and the apocalyptic dread of those who foresee a trend toward one-world government, and that’s good. Only we are in the rotten position of being the first major nation to exit, which could possibly trigger others to follow suit, and while watching the dominoes fall seems like it could be good, it is risky. It is unclear how much resentment and general backlash we could endure from the countries who will inevitably blame us for starting the exodus… and that’s bad.  And the possibility of other countries voting themselves out, in the near-term, that’s bad, too, because the union as a whole could capsize, and then trade becomes as volatile as a pregnant woman in a salami shop.

Each country could, however, secure its borders in the waking onslaught of a refugee crisis and increasing terror strikes, and that’s good… But then international travel slows down in Europe with Customs clearance checks at every border. And right away, a general malaise and uncertainty will set in, and that’s the worst, because uncertainty causes panic, and panic will drive the market through the floor at a time when we need our currency to be at its strongest. Which ultimately means that in order to save 13 billion dollars per year, we will have to live with the hefty risk of a European domino-effect and the potential disarray that such an effect could have on the global economy – and moreover – the European banking system.  And if banks begin to fail, we will no doubt be staring down the barrel of an ensuing bailout which is sure to cost UK taxpayers far more than the 13 billion we will save by going it alone.

But, by ultimately going alone, we are choosing a path of freedom, which is also good and bad, because while we are free to forge our success in any way we see fit, we will also be free to fail, which is particularly scary because not only would we suffer, but we’d be forced to swallow our pride and turn back to the union for help.

Let’s face it: freedom costs, and only time can tell whether or not we as a people truly have the salt to absorb and endure such costs. After all, some find it easier to live under varying degrees of oppression in exchange for varying degrees of certainty.  

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     Now, did the voters really process the potential risks and rewards as Dortmunder would have? With a whopping 72% voter turnout, there is no way to tell for certain, but consider a few statistics and make of them what you will.

  • The average age of a person living in the UK is estimated to be around 40.
  • Of the 72%, 52% (17,410,742) voted for Brexit; 48% (16,141,241) voted against.
  • 36% of all 18-24 year olds voted; 64% stayed home.
  • 75% of the 18-24 year olds who voted, voted against Brexit.
  • 56% of 25-49 year olds voted against; 44% for.
  • 44% of 50-64 year olds voted against; 56% for.
  • 39% of those 65 and older voted against; 61% for.
  • 34% of voters with a high school education voted against; 66% for.
  • 71% of voters with a college degree voted against; 29% for.
  • 43% of The Conservative Party voted against; 57% for.
  • 69% of The Labour Party voted against; 31% for.
  • 73% of The Liberal Democratic Party voted against; 27% for.
  • 7% of The Independent Party voted against 93% for.
  • London led the way for regional Bremainers with 60% voting against Brexit.

      In the U.S., 75% of Republicans, 72% of Independents, and 59% of Democrats supported Brexit, a polling that is actually more lopsided than that of UK citizens. Now, I am not going to go to any great lengths to make heads or tails of all these statistics (readers will do that for themselves), but I will note two glaringly obvious trends:

1) The older the voters, the more likely it was that they supported Brexit.

2) The higher degree of education, the more likely it was that they supported Bremain.

     Furthermore, it is important to note that Brexit is a non-binding referendum that can only take effect 2 years after the announcement is made that they want to leave. In the time between now and then, there will be new elections, and of course, a potential retraction of the referendum. In the wake of the media firestorm and mass hysteria over Brexit, many are concerned as to how much of a global effect this will have on trade and the economy in general.

     In the first two market days after Brexit was voted in (6/24 and 6/27), the Dow dropped by a whopping 806 points, the global market declined by an estimated 3 trillion dollars, and the British pound declined in value by 10%. Why? Uncertainty. The market hates surprises, and those who invest in it, are notoriously unable to resist the temptation to act in response to their panic when events like Brexit occur.

     A financial advisor friend of mine in Corpus Christi who has made his living for well over a decade by following and predicting trends within both the national and global economic sphere had the following to say when asked about the effects we can expect to see following Brexit:   

“Brexit should affect European markets more than our own.  Globalization has created a flat and interconnected world, but Americans are not likely skipping their morning Starbucks because Britain decided to exit the European Union. The bigger risk lay in Europe.  Investors should pay particular attention to the European banks. These banks are the bobbers floating on the economic pond that offer the best glimpse of what may be lurking beneath the surface in Europe.  Stocks are leading economic indicators.  In other words, stocks usually change before the economy as a whole follows suit.  Major European bank stocks are trading at prices below the March 2009 low created by the US financial crisis.  By comparison, domestic stocks (S&P500) have rallied over 150% during the same time frame.  This disconnect between appreciating domestic markets and declining European bank valuations existed before Brexit.  The British vote did not cause the disconnect; it exacerbated it.  European bank stocks were among the hardest hit after the vote.  A week after Brexit, domestic stocks have rallied to previous highs.

“The European Union was born under the premise of reducing political tensions between countries that had been at war for the better part of the twentieth century.  The fundamental issue is that monetary union without political integration acts as a potent recipe for further political instability.  In the US, if one state experiences an economic downturn, it has the political (and monetary) support of the federal government.  By contrast, Greece is a member nation of the EU with unemployment nearing 25%.  When the country recently asked for monetary support from the EU to help the Greek government pay its sovereign debt, the EU required Greek austerity measures in exchange for its assistance.  German citizens decried publicly that their tax dollars were not collected to bail out Greek misfortunes.  Herein lies the problem.  Without substantial political power at its center to tax and control fiscal policy, the EU finds itself at an unenviable inflection point.  It can either evolve into an even closer union, where its leaders are voted into power to protect the interests of the European economy at-large.  Or, other nations can follow the British example and divert to the land of drachmas and francs and solid borders.  

“The European Union’s epitaph has yet to be chiseled into history.  Brexit represents the first shot across its bow.  Time will tell if this vote is a death knell to the union or a diagnoses that instills the necessary change for its survival.”

Matthew Thornton is an Austin-based artist and a history teacher. Originally from Corpus Christi, his wide-sweeping artistic interests range from writing and film-making to photography and painting. His work and studies explore patterns within the endless nuance of life as he remains constantly in search of the so-called, "big picture".
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