Brexit, Shmexit, Who Cares?

The British vote to withdraw from the European Union came as a shock to many. How could something so sensible (large common market, larger than the US) appear to so many Brits as a curse to be ended. To be sure the EU brought some unpleasant aspect to Britain but the benefits to a country, now a shadow of what it once was, would seem easy for politicians to communicate. Hmmm.

The EU can motor on as if nothing has happened while the unintended consequences descend upon Britain… that is unless other member States loose control to nationalistic elements. It is not a wild and crazy idea that the EU could unravel and return the continent to a group of competing States prone to local skirmishes. One would hope not but 500 years of history do not lie.

Briton’s unwise decision can be traced not to immigrants or Brussel’s eager legislators, but to the mainstream British politicians who have chosen short term expedient solutions to systemic national problems like the loss of mining or manufacturing jobs.  Where has been honest assessments and workable plans to over come?  Instead Britons politicians have tried to distract voters with hollow promises, past soccer victories, and glorification of the King and Queen.

Globalization, like in America, has made so many manufacturing jobs redundant. Any attempt to repatriate these jobs, as opposed to replacing them with higher skill or technology based ones, must fail because of simple economics.

Soon the Brexit supporters will learn the hard way that immigrants were not the problem as well as globalization cannot be turned on or off.

The big question is whether US mainstream politicians can learn this lesson or whether they too will fall victim to convincing voters to vote a certain way, like to Make America Great Again, only to find they have selected an even poorer alternative?

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The Greek Tragedy, Version 2.1?

Over the weekend Greek voters elected the “radical leftist” party, Syriza, to try and lead Greece out of the austerity induced deep economic rut Greece has been stuck in. Alexis Tsipras, Syriza’s leader began immediately to form a government by agreeing to form a coalition with Anel, a populous right wing party. Hmmm.

Greece has been laboring under austerity economic measures which it was forced to accept as conditions for the EU to bail out. With 25% unemployment, austerity coupled with vanishing hope that the economy would suddenly get better, Greek voters decided they had waited long enough. It was time for a new approach.

The options open to Syriza are not many. Tsipras campaigned on the promise to “renegotiate” the terms of the EU bailout. Without more government spending on jobs, there is little hope on seeing the unemployment figure drop. And without the ability to borrow more or pay out less in repayments there is no money for Greece to spend.

The EU might now be more sympathetic to less austerity since it finds EU’s own economy stagnating and has found it necessary to pursue quantitative easing via new ECB policies. But these are the Greeks Germany is reminding the EU.

Greece got into this hole by years of wholesale tax dogging and wasteful government spending. These foolish policies seemed necessary at the time to placate the Greek society (we won’t complain about taxes if the government does not prosecute when we don’t pay them). Wasteful government spending was spread around (somewhat like the US defense budget) so why would anyone complain?

Pundits have predicted that Greece will exit the “Euro” and begin printing their own currency again. Simply printing money, however, will do nothing to solve Greece’s underlying economic realities long term. While there may be a return to the “drachma”, there must be increased tax revenue and wiser government expenditures.

EU officials will be viewing this abrupt change in Greece with a wider lenses. Spain also sports high unemployment and is bound to similar austerity EU conditions. And Italy can’t be far behind. Allowing Greece to withdraw from the Euro, without serious negotiations, would only encourage other countries to follow.

This new left-right government should offer a novel way to reform the underlying Greek tendencies to wait until tomorrow. We shall see.