To understand BREXIT better, lets start with the word globalization. “Globalization is a process of interaction and integration among the people, companies, culture, ideas and governments of different nations, a process driven by international trade and investment and aided by information technology.”
Therefore, it is no question that BREXIT will have along-term effect on the world’s economy. After the BREXIT vote the U.S. market shed about $800 billion as the major exchanges declined in the 3-4% range; worldwide nearly $2 trillion was lost. Equity and currency markets fell sharply. The London FTSE index fell 3.2%; the Sterling fell to its lowest level in 31 years, while the exchanges dropped 7-8%, the Italian and Spanish suffered the most, with double digit loses. This trend continued on the next trading day with all sectors posting solid losses. To recover with four solid days of gains. This volatility is clearly a sign of fear destabilizing the market and a degree of soberness re-stabilizing it. However, this does not mean that we are completely out of the woods.
BREXIT will have a lasting effect on the world’s markets from a financial, economic and political perspective. In a global economy, these types of events do not occur in a vacuum. Where there is a cause there will always be an effect. BREXIT has and will have a financial, economic and political global effect. Let's examine each.
"Financial globalization is the integration of global markets by the reduction of trade barriers, improved communication, foreign direct investment, and other means. Globalization allows a multinational corporation to make a product in one country and sell it in another. This provides jobs in one country and less expensive goods in the other. "Economic globalization is the increasing economic integration and interdependence of national, regional, and local economies across the world through an intensification of cross-border movement of goods, services, technologies and capital. Political globalization can take place above the state through political integration schemes such as the European Union and through intergovernmental organizations such as the International Monetary Fund, the World Bank and the World Trade Organization. Political activity can also transcend national borders through global movements and NGOs. Civil society organizations act globally by forming alliances with organizations in other countries, using global communications systems, and lobbying international organizations and other actors directly, instead of working through their national governments. "
This brings us to monetary and fiscal policy. Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency. Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply. Monetary policy is often use to manage financial stability. Fiscal policy is often used to manage economic stability. In this scenario, politics is the lens that an individual or a group would view the world through. An event like BREXIT shakes the world financial markets, it's creates concerns in the world’s economy and sounds alarms to all democratic based governments. This creates an environment of instability which all markets hate, and causes many to revisit their ideals of globalization. This manifest itself through discontent and frustration in large segments of the world’s population. In essence, it creates a hostile political environment where each segments fears are often stoked to the level of rage. Where true dialogue cannot and will not take place until cooler heads prevail. This take us to the crux of the problem. Lets look at some quotes about globalization.
FEDERAL RESERVE Photo: Forbes
“Globalization has produced a new level of interdependence among us. The economy and multinational supply chains do not abide by political boundaries. A computer ordered in Brazil is designed in California and assembled in several other countries. Economic integration was the first strong evidence of a new era.” Eduardo Paes, Mayor of RIO de Janeiro
“Globalization and free trade do spur economic growth, and they lead to lower prices on many goods.” Robert Reich, Former Secretary of labor
“I stated that I'm a libertarian Republican, which means I believe in a series of issues, such as smaller government, constraint on budget deficits, free markets, globalization,and a whole series of other things, including welfare reform.” Alan Greenspan Former Chairman of the Federal Reserve.
“NAFTA recognizes the reality of today's economy - globalization and technology. Our future is not in competing at the low-level wage job; it is in creating high-wage, new technology jobs based on our skills and our productivity.” John F. Kerry, Secretary of State
“We must ensure that the global market is embedded in broadly shared values and practices that reflect global social needs,and that all the world's people share the benefits of globalization.” Kofi Annan, Former Secretary General of the United Nations
“What globalization means,as it so often does, that the rich and powerful now have new means to further enrich and empower themselves at the cost of the poorer and weaker, we have a responsibility to protest in the name of universal freedom.” Nelson Mandela, Former President of South Africa
The above quotes show the different perspective in how globalization is perceived. These different viewpoints is why and how BREXIT took place. It is a smoldering anger that is consuming many people around the world. In most countries the middle class is shrinking while the rich and poor are expanding at alarming rates, creating a great divide. The size of the divide has created a new group who is frustrated and truly desire a change in the status quo. They are willing to wreck the system, for them anything different is better than what we currently have. The group I am speaking of, is the working poor. They have recently fallen from the middle class and have been under attack for 30 years. They are watching their jobs being shipped away, losing much of their retirement to market shifts, their pay has not increase in 25 years and in some cases it has been reduced; battling rising education cost for their kids, suffering from increasing healthcare cost, while their coverage is steadily being reduced. Most of all, they feel unsafe due to appearances that terrorists are winning the battle against the free world. They are angry and they should be. They have seen over the years a real deficit in leadership and often wonder whether they have been forgotten or replaced by some corporate entity. The government responds to these entities yet ignores us, they believe. In their minds globalization has left behind the people they should have been helping the most, the masses. Politicians, corporations and bankers are the focal points of their blame, and the government and its policies are the vehicle used by the former to inflict pain on the masses. They feel the deck is stacked against them. This is why we see the rise of personalities and political perspectives like Donald Trump and Bernie Sanders. The frustration is very real for many, and this is the source of the BREXIT vote. Anger is driving the bus, however, I believe we must pause.
Are government, globalization, politicians, bankers, and corporations really the blame? Could it be that globalization is the natural way for governments and societies to progress? Perhaps, politicians, and bankers have forgotten, they exist because of the people and should do what is in the people's best interest, instead of their own? Maybe, the solutions to the problems that have been created by globalization can be solved. However, it must be addressed through vigorous discussion, not by blaming or emotional outburst that exacerbate the problem and do nothing to solve it?
“The 1 to 2 billion poorest in the world, who don't have food for the day, suffer from the worst disease: globalization deficiency. The way globalization is occurring could be much better, but the worst thing is not being part of it. For those people, we need to support good civil societies and governments.” Hans Rosling, Founder of Gap minder Foundation
“The benefits and consequences of globalization have a great deal to do with whether we're intelligent and thoughtful about how we approach globalization, or whether we're blindly accepting... or blindly resistant.” Ethan Zuckerman, Director of MIT Center for Civic Media
“We must create a kind of globalization that works for everyone... and not just for a few.” Nestor Kirchner, Former President of Argentina
“We cannot wait for governments to do it all. Globalization operates on Internet time. Governments tend to be slow moving by nature, because they have to build political support for every step.” Kofi Annan, Former Secretary General of theUnited Nations
“Masterpieces of art possess immense potential to advance a worldview that could help assuage the societal terrors posed by globalization, the most thorough going socioeconomic upheaval since the Industrial Revolution, which has set off a pandemic of retrogressive nationalism, regional separatism, and religious extremism.” Martin Filler, Architecture Critic
I don’t believe there is one person that has all the answers, neither do I know whether globalization is more good than bad or more bad than good. What I do know is to find the right answers we must not participate in anger, hate or division. We must have an open dialogue about our systems and government. We must ask for assistance from our creator to direct us to the right solutions. In our Declaration of Independence it states “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” We must ensure that all unalienable rights for each person are not encroached upon, that globalization provides every human being access.
AUTHORS: MARCUS TURNER
EDITED BY: THOMAS GOINES, PATRICK MCELYA
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