EU Austerity Policies and Dim Economic Prospects Set Stage for UK's Brexit Vote

Posted June 29, 2016

MP3 Interview with Nina Eichacker, lecturer in economics at Bentley University and a member of the Dollars and Sense collective, conducted by Scott Harris

brexit

Great Britain upended the status quo across Europe when a slim majority of the nation’s voters cast ballots on June 23 to leave the European Union. Britain first joined the European Economic Community in 1973, which in 1993 was transformed into the European Union. Financial markets across the globe reacted to the Brexit vote with major losses and volatility, while the British pound fell to its lowest value in 31 years.

The vote that ended the United Kingdom’s membership in the EU, is a product of political expediency when British Prime Minister David Cameron proposed the referendum as a cynical ploy to temporarily unite his divided Conservative party and win the 2015 parliamentary election. Now Cameron, who lost his referendum gamble, has submitted his resignation. Politicians, including the leader of the right wing United Kingdom Independence Party or UKIP, swayed many in Britain to support leaving the EU by appealing to anti-immigrant sentiment and false promises to redirect billions of pounds now going to Brussels to the National Health Service.

Now after the Brexit vote Britain is more divided than ever, with a rise in racist and anti-immigrant attacks, millions signing pro-EU petitions and Scotland threating to hold a second referendum to break away from the UK. Between The Lines’ Scott Harris spoke with Nina Eichacker, a lecturer in economics at Bentley University and a member of the Dollars and Sense collective. Here she assesses the impact of EU austerity and de-regulation policies that are widely believed to have contributed to the underlying economic insecurity felt by many in Britain that led to the Brexit vote.

NINA EICHACKER: This could be seen in a large way, as a backlash, against not just austerity policies in Britain of the past five years, but also, the longer-term backlash against globalization dynamics that began back in the Reagan-Thatcher period. So, if we think about the consequences of privatization within the U.K. and elsewhere in the West and the world, and we think about the consequences of globalization that really didn't do anything to try to soften the landing for the people in the industries that were going to be most harshly affected by it. We see dynamics in the U.K. that are similar to the dynamics that I think we see here in the U.S. where we have – and I don't know if commiseration is the correct word – but we see this gradual worsening of conditions for a lot of people and we see a failure of the state to step in and help guide, if that is ultimately what is desired for the public at large.

So I think in a big way this vote was a response to those dynamics. And I think that the immigration side of things does certainly play in, I think, when people are in tenuous economic circumstances. You know, it can be tempting to think about migration patterns as a zero sum gain. While I don't necessarily think that's what was going on, I think that the leave campaign really drove those points home in a manipulative fashion. So I think there was a lot of those two factors playing off of each others.

BETWEEN THE LINES: After the Brexit vote, there was a lot of concern in Europe that other nation states may hold similar referendums and could break away from the Europe Union. There's a roiling, right-wing, anti-immigrant, nativist movement in many countries – certainly Marine Le Pen, in France, other nations that are currently in the European Union. Is it possible that the troika, as it's called, the policy-setting body, the European Commission, the European Central Bank and the IMF – Is it possible that in the wake of the Brexit vote, they may reassess the austerity policies that have certainly not gone down well in weaker economies like Greece, Portugal, Spain, Ireland, where those policies on the part of Brussels, have dramatically cut social spending, implemented a lot of unwanted privatization, deregulation seen as linked to very stubborn, high unemployment. Do you think the European Union as a whole will reassess its economic policies and the rejection by increasing numbers of Europeans to that system?

NINA EICHACKER: Well, I certainly hope so. It's strange to be in a moment where the IMF is, first of all, acknowledging that it was wrong about the value of austerity, that it oversold austerity policies as a root to growth. It's strange, but true, that we're in a moment where the IMF has actually acknowledged that provisions of its bailout policies worked out with the European Commission and the European Central Bank for countries like Ireland and Portugal were overly restrictive and benefited bondholder at the expense of the countries that were supposed to be given aid in those moments of crisis.

The question is whether European central banks' mandate to prevent inflation at all costs is so strong that European policymakers can perhaps work in tandem with the IMF in the context of the troika to promote better policy. I think in the absence of strong activist movements at the ground, that we may see worse to come. I certainly hope not. But without a strong human presence on the ground countering those separatist movements, I worry that we will see worse and more divisions to come. I think that without a fiscal union that explicitly protects the interests of people in these different countries as they go through recessions, as they try to improve social services and a provision of public good – without that, the union is doomed to fail, and what is good about it will be missed.

For more information about Nina Eichacker, lecturer in economics, Bentley University visit faculty.bentley.edu/details.asp?uname=neichacker and Dollars and Sense Collective and magazine at dollarsandsense.org.

Related Links:



Subscribe and get Between The Lines' Weekly Summary in your inbox!