Wrapping Your Head Around Brexit

Everybody and their naani knows that Britain’s voted to leave the European Union. Everybody also knows that most people think this was a bad thing. This blog post attempts to explain why most people think this was a bad thing.

Three questions we need to answer in order to make sense of this particular brouhaha. One, what exactly is the European Union? Second, why exactly does Britain want to leave it? Third, from an Indian perspective: what my father goes?

First question ka jawaab: The European Union is an association of countries that try to pretend as if they’re really one big country. They all have a common currency, exactly the same way the states of Maharashtra and Orissa have a common currency, along with all the other states in India.

They also allow capital to move freely across their countries. Remember how Mr. Tata was able to move his Nano factory from West Bengal to Gujarat? In theory, the European Union makes it easy to move capital from Austria to France. They also allow labor to move freely across their countries. Notwithstanding Mr. Raj Thackeray and his attempts, most Indians are free to move  and work wherever they want across the country, and in principle, Europe was supposed to be the same thing.

However, and this is the fatal flaw in the way the European Union is structured, it’s not a fiscal union. Do you know, for example, what percentage of your income taxes went towards the construction of a road between Kanpur and Lucknow? No, you don’t, and nor should you know. We’re one country, and one of the reasons we elect our government is precisely because we expect those guys to handle issues like that. But German citizens care deeply about whether their income taxes are being used to fund unemployment benefits for Greek citizens. Remember how we said the EU is an association of countries that try to pretend as if they’re one country? Well, unfortunately it has turned out to be a bit of a halfway job. They’re more than separate countries, but less than a unified nation.

And that’s caused problems.

Second, why does Britain want to say sayonara. Well, the people who were in support of Brexit in Britain give out a lot of reasons, but it ultimately boils down to three. One, the Mr. Raj Thackeray effect. They really don’t want “other” people to come in to their nation. And that makes no sense for the same reason in EU as it does in India. Second, they think that Britain and its money should be separate, and it shouldn’t have to give any money to the Europeans. And third, they think Britain’s kinda culturally separate and removed from the mess that is the European Union today and don’t want anything to do with it.

If you ask us though, we get the impression it’s mostly reason no. 1.

Third, why should we care? Today, in the sixteenth year of the twenty-first century, the global economy is like a single organism. If Brexit is going to cause a slowdown in business between themselves and Europe (and you can bet that is going to happen), then you can expect our business with both Britain and Europe to suffer. Here’s a useful way to think about it: if the world was like the human body, it’s liver is now doing really badly. Saying that shouldn’t affect our overall health just doesn’t make sense, now does it?

How much will it affect us, and for how long, and when will the liver get better are all questions the patient really wants to get answers for – and we’re about to find out over time.

I don’t know about you, but hospital waiting rooms always kinda depress me.

10 thoughts on “Wrapping Your Head Around Brexit

  1. As simply put as can be… Though personally I feel there is a security angle to Brexit which you have overlooked…perhaps on purpose?

  2. Superb write up! Simple and easy to understand for someone like me who doesn’t understand even the ‘E’ in economics! Cheers!

  3. Hi Ashish Sir. Nice post. i was wondering, as im sure a lot many are about the immediate consequences of Brexit globally and in the Indian context.

    From the first look of it, to me, it seems that a lot could go in India’s favor. The Rs rises against the GBP and since we are a net importer from Britain, we will give less to get more. Prices of education in britain goes down which opens up wider opportunities for aspiring Indian students. India will now be free to form new trade pacts with britain which might not have been possible with the eu.

    I also have a feeling that Bregret might actually gain traction.

    Im barely scratching the surface here and my grasp on the implications might be myopic.
    Would love to hear your thoughts.

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