Ishan Institute of Management & Technology, one of the top PGDM colleges in Delhi NCR had last week brought to you a detailed account of the history of Great Britain and a summary of the economic achievements of the country. In this week we look straight at the economics of BREXIT, the run up to the divorce of Great Britain from European Union, the mistakes committed by European Union leaders, the corrective measures that governments in Great Britain and European Union can take in the short and long run and finally the winners and losers of BREXIT. The analysis is based on extensive data collection from the best sources that have critical acclaim and are known for unbiased research in the fields of macroeconomic policy thought and international finance. Take a look.
The Road to BREXIT; Mistakes that Piled up Misery on EU
European Union has not succeeded in reaching this sorry state of fate in one day. Rome was not built in a day. Neither was Rome destroyed in a day. There has been a series of judgmental, governance and policy errors that has led to this fate. First, Great Britain did not have a strategy in place to address issues of global economic imbalances that arise out of trade deficit. Great Britain had long ago lost its competitive advantage in international trade and could not keep up with Joneses in verticals like Information technology, software, ecommerce and outsourcing when emerging economies began their dominance. Second, Great Britain has used some of the most shocking austerity measures in the recent past. These austerity measures that have been hailed by British policy makers as recovery packages are essentially reflections on the British political economy and harsh treatment meted out to British citizens in the forms of wage cuts; salary cuts end even job cuts. The result is there for everyone to see. Third, bailout packages and golden parachutes for corporations have been used randomly at the expense of the British ex-chequer. The iron hand of law has been active with citizens engaged in retail crimes and surprisingly conspicuous by absence in the case of defaulting corporations and private banks. Umair Haque, the Director of Havas Media Labs and one of the top management gurus to be put up on the Harvard Thinkers 50 list has put it brilliantly as social splintering. We at Ishan Institute of Management & Technology, one of the top PGDM colleges in Delhi NCR could agree no less with him.
The Fallout of BREXIT on Global Political Economy
It makes enormous good sense to use the language of Nobel laureate Paul Samuelson of Massachusetts Institute of Technology, “the importance of being unimportant.” Unfortunately the phrase is apt for Great Britain in the aftermath of BREXIT. There was an article in Harvard Business Review a few days back that put up the global political economy in context very neatly. United States of America has had a very warm and cosy relationship with Great Britain in the aftermath of the Second World War. All through the Cold War time and in the last two decades through the trials and tribulations of the War on Terrorism, Great Britain has been a great ally for United States of America overtly and covertly. In the aftermath of the BREXIT referendum, Great Britain runs the risk of turning obsolete in world politics and economy for the first time.
With the BREXIT referendum, one can unfortunately expect that the worst is yet to come. The worst that we are referring to is the complete dissolution of the United Kingdom of Great Britain with an impending referendum on Scottish independence. All the 32 members of Scottish Council voted “remain” in the BREXIT referendum meaning that the probability of Scotland separating from Great Britain gets higher. The reason is simple. The next choice for Scottish voters shall be between remaining in European Union Vs remaining in the United Kingdom of Great Britain. Whenever the referendum happens the results shall be just too easy to predict. No bookie will place his bets on this one. The disintegration of Great Britain shall come at a great price. It shall set in motion a process of relocating resources, population and offices, reorganizing the economic establishment and even the defence systems. Let us not forget that a large chunk of Great Britain’s nuclear deterrence is stationed in Scotland. A Great Britain with reduced military and nuclear capabilities is likely to spin off the U.S-U.K. foreign relation like a non-performing asset. With Donald Trump doing the rounds in the U.S. Presidential campaigns with a crystal clear, unambiguous and unapologetic “USA First” is unlikely to invest time, efforts and thoughts into a lost diplomacy asset. Moreover with financial regulations to follow on the caps of FDI and FII, it is expected that many banks, insurance companies, brokerage firms, investment banks are likely to shift base from London to Dublin. Yes, this is an audacious statement on our part at Ishan Institute of Management & Technology, one of the top PGDM colleges in Delhi NCR but we choose to go with this prediction.
In the final diagnosis, it is only an understatement to lament the state of affairs that Great Britain finds itself in. From here and onwards, only a British parliamentary Veto can cross swords against the results of the REXIT referendum to ensure that Great Britain stays in the EU. Even if that happens the democratic institutions of Great Britain shall be made a laughing stock and reduced to shambles. It is not fashionable to bring Karl Marx on the platter for academicians of a business school, not even for the sake of satire or plain humour. But the truth remains that Marx had once said “History repeats itself once as tragedy then as farce.” Is BREXIT the farce after the tragedy of the disintegration of erstwhile USSR? We end it with the words of the legendary American poet Ogden Nash: “hoping against hope”.