Why Should Americans Care About 'Brexit?'
It’s easy for Americans to see the Brexit debate as a British issue. But the personal finance website Bankrate.com says if Britons vote tomorrow to exit the European Union, European vacations will likely be cheaper, mortgage rates might fall, the stock market could drop, and it would be harder to find a job in Britain.
Here & Now’s Lisa Mullins talks to economist Diane Swonk about the impact of Brexit on Americans.
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Interview Highlights: Diane Swonk
On why the U.S. Federal Reserve is closely watching the vote
“They’re watching it closely because of what could be the domino effect. It’s not only the UK, which is 2.4 percent of the global economy. It’s what would happen if the UK opts out, and that then triggers a lot of other European countries to consider opting out. That would obstruct trade, diminish economic flows and hurt the overall global economy along with our own. What we’ve learned is that there is no Las Vegas in the global economy. Anything that happens abroad can wash up on our own shores, sometimes with a vengeance.”
On what the US has to lose or gain if the “Brexit” vote passes
“What the US has to lose, is the UK will not be as strong of a trading partner as it once was and it’s also played a critical role in diplomatic ties because they do speak English, and we have a lot of similarities. They’ve been very influential in the rest of Europe with us diplomatically, and then breaking their ties with the rest of Europe would also diminish our ties with the rest of Europe.”
On the potential diplomatic ramifications of “Brexit” for the U.S.
“That is one of the concerns is that if Britain doesn’t have the same role that it does by severing its ties with the rest of the European Union, what we would do is we would lose some of our strength because it is funneled through Britain.
In the wake of the Great Depression, it was these kinds of policies where everyone was for themselves that led to World War II. What the fear is is that we will leave everyone worse off economically by breaking apart, that we’re stronger together, the economies are stronger together, and that that will increase tensions across the globe.”
On how the EU has kept potential divisions at bay
“We’ve seen since Britain has become a part of this, not only has Britain’s standing as a major financial center risen. London is a major financial center, which would be challenged dramatically. We do a lot of business with London that would hurt us as well. It’d likely move to Frankfurt and then we’d have to see from there where would it go. Centralizing some of these things makes it easier, more efficient for the global economy.
Of course, there’s also been problems with globalization. The backlash we’re seeing in the UK today is no different than the backlash we’re seeing in the United States from immigration to trade. It’s a very hard political sell, even though of all the countries out there, the UK has benefited more from immigration boosting its productivity growth with more educated immigrants. There’s a lot of questions for economists if Britain can’t stay in and deal with immigration that has actually boosted their growth, then who in Europe can?”
On the potential economic benefits of “Brexit” for Americans
Any boosts we get to our ability to travel abroad is really temporary, and let’s face it, interest rates are already low in the United States going lower hasn’t exactly been having the payoff it once did.
On long term effects of a potential “Brexit”
“What we would see is less trade, increased tariffs, reduced profits for US firms and ultimately reduced wages, and that’s where the pain is. Right in the wallet.”
On how the United States fared before the EU was created
“Actually the United States did extremely well in the 1960s and then in the 1950s and 1960s after World War II because we didn’t have infrastructure to rebuild. We were the only industrialized economy that was still intact. So I think it’s bit of a false positive to say, ‘Oh things were great back then.’ They were great at the expense of the world.”
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