Brexit offers lessons for policymakers

The one that I liked the most was from the Huffington Post.
“The decision to stay or leave the EU is a phenomenally complex mash-up of politics, geopolitics, economic and social entanglements with benefits from being part of a larger community [including retired Brits living in sunnier places]. Voting made the decision look simple. It was anything but. Media failed to communicate what was at stake, which opened up the ground for misinformation and more campaign style politics.”
It beautifully explained another report from the New York Times, highlighting the top two questions Brits asked Google: “What happens if we leave the EU?” and “What is the EU?”
On June 23, more than 30 million people voted in the referendum, leading to the high turnout of 72 per cent. But the Leave camp won marginally, widening the social divide in British society, leading to a petition to parliament for a second referendum.
Two days after the vote, there have been reports that some of those who had voted “Leave” now regretted their action, having done the deed without truly understanding how that would affect the country’s future. Youngsters who want to remain in the EU accused grey voters of robbing their future and freedom to move, study, work, live and be treated as equals in any European country. Some residents of London have launched a campaign on change.org, to separate London from the United Kingdom.
What happened in the UK puzzles me. The Leave and Remain campaigns were active for months before the vote. In his interview to BBC, a fruit vendor was confident that his Leave decision was right. Saying several products in his shop come from other European countries, he said that would continue to import. He did not seem to realise that the falling value of the pound sterling would make imports pricey and may scare away buyers and hurt his business. Notably, some banks expected the sterling to weaken against the US dollar by as much as 20 per cent from the June 23 level.
Why are some Leave supporters regretting their vote? Are they confessing that they were fed insufficient information or they had just vented their anger without considering the consequences?
The consequences are indeed grave and not limited to just the UK. In time, British exports to the EU could face higher tariffs. It remains unanswered whether Britons would need visas to cross the border into France. Brexit would sooner or later force foreign companies to set up shop in other European cities, as the “EU passporting” to the UK will be terminated. JP Morgan, which has 16,000 staff in London, is reportedly moving up to 4,000 possibly to Frankfurt and Paris.
The worries over the Brexit impact extend to as far as Kenya, a country that relies on workers’ remittances from the UK, amounting to US$21 billion per year.
Authorities in Asia have so far been firm in their belief that the Brexit impact would be temporary.
In my career, this is the first time that the Bank of Thailand has issued an “initial” impact assessment on any issue. The BOT assessment clearly stated that indirect impact from possible exits by other EU member states would disrupt global trade and investment as well as global economic recovery.
These are not unfounded fears. The UK has been a major pillar of the EU, the organisation that demonstrates the region’s solidarity after World War II. It remains to be seen if Germany and France will succeed in keeping the bloc together, even as Brexit stirs anti-EU sentiments and economic nationalism among citizens of other EU member states.
In the event of an EU disintegration, what will happen to the euro, the single currency created by the bloc, the world’s second most important reserve currency?
According to the International Monetary Fund, of total allocated foreign reserves held by central banks worldwide amounting to US$6.8 trillion at the end of 2015, the euro accounted for $1.35 trillion or 19.85 per cent while the US dollar accounted for $4.36 trillion or 64 per cent of the allocated reserves. In 2014, their shares were 22 and 63 per cent, respectively. Needless to say, without the euro, the US dollar’s dominance will heighten. This speaks volumes why a rate decision in the US could move the global financial market. My worst fears are what would happen if the euro disappears and these central banks have to switch to other currencies.
A referendum is a mechanism to answer a political question. The Brexit vote shows that an effective referendum should be meant to answer a very simple question, not something complicated that could stir social divide.
This should be a reminder to those holding the referendum on the new constitution in Thailand. Needless to say, the Thai referendum is not designed to get the answer to a simple question, given that the draft of Thailand’s 20th constitution is meant to reshape the country’s future, probably in the next 20 years when all involved with the design may not live to see it. Despite the complex objectives, free deliberation is still barred. Some youngsters have joined the movement to canvas for a No vote and their arrests have raised the UN’s eyebrows as it is proof that they were not allowed to express why they rejected the draft. If people go to the polling booths without truly understanding the implications of their vote, further social divide is assured, as in the case of the Brexit vote.
The Brexit referendum did answer one question but leaves many unanswered. Sometimes, referendums cannot answer all questions.