The Sorry Story Comes to Pass

Brexit will be done, it will be over…  The sorry story of the last 3½ years will be at an end.and we will be able to move forward together… This is a time when we move on and discard the old labels of ‘leave’ and ‘remain’… Now is the time to act together as one reinvigorated nation. 

UK Prime Minister Boris Johnson on December 20^th.

Vladimir Putin celebrates two decades as Russia’s ambitious, mega-wealthy and totally authoritarian strongman. America’s populist rabble-rousing President will forever be remembered as the third American president to be impeached (with one resigning under threat of impeachment). Violent protests mark local resistance to nationalism and/or authoritarian rule in Iraq, Hong Kong and India. Israel faces the demise of its indicted and soon-to-be-former-prime minister and that chaos of yet another election. But if you live in Europe, there’s one story that consumes the headlines. Brexit.

On Friday, December 20^th, fresh from a Conservative parliamentary victory, UK PM Boris Johnson got the vote he has dreamed of: “The House of Commons voted 358 to 234 on Friday for the Withdrawal Agreement Bill. It will receive more scrutiny and possible amendment next month, and also has to be approved by Parliament’s upper chamber, the House of Lords.” Associated Press, December 21^st. With a clear parliamentary majority, Brexit is on. The above bill paved the way for implementation.

Many Americans believe that the recent UK parliamentary election gave Johnson a huge popular vote. Not exactly. The British election process, like the US version, is definitely not a straight-up popular vote. It would be more reflective of popular sentiments if the UK were a two-party system, but in each parliamentary district with a multi-party system, the leading vote-getter wins, even if the overall sentiment of the combined balance of the election slate is of the opposite persuasion. But the ultimate impact is unequivocal: Boris and his Conservatives rule.

Scotland is fuming, already pressing for another referendum for independence. Northern Ireland is terrified. Wales knows its fate is sealed. But like it or not, Brexit has arrived. On January 31, 2020, the UK will leave the European Union. The economic realities will not shift yet; the UK and the EU have a year to sort out their trade and border agreements. The ability further to delay the inevitable “face the music” economic separation has, however, been carefully removed from the relevant legislation. If 2021 comes without a closed UK-EU trade deal, effecting a very problematical hard Brexit, that possibility sends shudders through the UK business community. A “no deal” result is widely believed to cause a severe recession in the UK with lesser but still nasty results for continental Europe as well. 

There is a lot for Brexit worriers have to fear. “Johnson said Friday that passing the bill would end the ‘acrimony and anguish’ that has consumed the country since it voted in 2016 to leave the EU. Opponents argue that leaving will only trigger more uncertainty over Britain’s future trade relations with the bloc…

“For all Johnson’s talk of ‘getting Brexit done’ on Jan. 31, details of Britain’s negotiating stance — and even who will lead the trade talks — remain unknown… Armed with his 80-seat majority in the 650-seat House of Commons, Johnson has stripped out parts of the Brexit bill that gave lawmakers a role in negotiating a future trade deal with the EU and required ministers to provide regular updates to Parliament. The clauses were added earlier in the year in an attempt to win opposition lawmakers’ support for the Brexit bill — backing that Johnson no longer needs.

“A promise that workers’ rights will not be eroded after Brexit has also been removed from the bill, although the Conservative government says it will enshrine employment rights in separate legislation.” AP. Free-trade? What happens to EU residents from other countries who wish to remain in the UK, and vice-versa? Will the UK maintain a separate identity to allow a special trade agreement with the United States, stoking local fears that a Trump-led country will force an agreement that will erode some of Britain’s most cherished structures, like its universal healthcare cost structure? What happens at the Northern Irish border with Ireland?

Americans need to ask what’s the likely impact here? The world has been teetering on the brink of a downturn that, so far, has not materialized. Will Brexit push that economic decline over the edge? Is it simply time for markets to correct? Is general global instability the driver? A survey for business leaders (the Impact Council) by Fast Company reflects the instability that is still hovering: “About 4 in 10 respondents told us they expect the global economy in 2020 to perform about the same. But remarkably, nearly 45% predicted that the next 12 months would be worse for business. Only 16% said that the global economy would be better.

“Impact Council members were more like-minded about the timing of the next downturn. While 21% predicted a recession would hit in 2020, the majority (54%) said it would likely arrive in 2021, after the next presidential election. About 15% responded that the next recession would come in 2022. Only 1 in 10 said the economy would continue to grow until 2023 or later.” FastCompany.com, December 20^th. So, a hard Brexit could trigger that recession or, if it is already underway, make it much worse for us all. Sigh!

              I’m Peter Dekom, and the thigh bone is connected to the hip bone… and no matter how isolationist Donald Trump may want the United States to be, we are absolutely and totally connected to major global economic reality.