KATHERINE HARINE
Great Britain’s decision to leave the European Union has many implications for maritime.
Clearly the important effects on the world economy will be if Brexit breeds further contagion and a breakup of the EU. This breakup could be very positive if it provides a basis for a better union, or several regional unions, of nations that benefits all economic levels of society, not just the upper classes.
Without a doubt standardised regulations, freedom of movement of people, and fewer trade barriers benefit shipping. These issues will not be examined here. The key factors discussed here are those which have resulted in decreased global economic growth: wealth inequality, dominance of the banking sector, euro issues, austerity. Some of these issues are not the result of the creation of the European Union but they feed discontent with the EU. And the major problem affecting shipping today is a lackluster global economy.
The fact that working people have been left behind during the last 40 years is probably the greatest issue leading to the vote to leave the EU by Britain. Wages have been depressed by the introduction of workers from Eastern Europe and refugees from the Middle East and Northern Africa. In a vicious cycle, the depressed wages have resulted in lower spending by workers. And workers constitute the economic class that spends the highest proportion of its income. The European Union had exacerbated the situation by expanding membership to include Eastern Europe and by taking a moral position to welcome refugees.
What has been missed is that the elites and the upper middle class who favour these policies do not have their own economic status affected while factory workers have seen theirs greatly diminished. The misery of economic deprivation is a breeding ground for prejudice against foreign immigrants and their cultures. The cycle worsens because bigotry is a symptom of hard economic times. The bigotry then often ushers right-wing governments which do not decrease the income inequality. They often make it worse.
But not all of the factors leading to income inequality have involved globalisation directly. The increased dominance of financial institutions in the economy has shifted income from middle class manufacturing jobs to higher paying banking and finance positions. These fewer higher paid professionals spend less of their income than did the factory workers. Hence growth is limited.
And it gets worse. Many businesses are not reinvesting their profits into research or capital improvements which would create more jobs. Instead they are using profits for financial transactions which are not relevant to conducting the business. For example, companies are using profits to buy back their own stock. This does not create jobs. It raises the company’s stock price which of course greatly increases the value of options in upper management’s compensation package. Also mergers and acquisitions are undertaken which often leave a company with a greater debt burden and no real business benefit.
Even though this financialisation of industries is not directly a result of the EU, it has added to the misery of the working class which drove the vote to leave the EU.
The other problem, not directly related to Great Britain, is the non-equilibrium of the euro. The German insistence on austerity has resulted in problems for southern European countries. This diminished growth in the EU has affected UK workers. Global growth simply has not recovered since the financial crisis of 2008.
So what is the great positive effect that Brexit could have? If Brexit and subsequent contagion causes a complete reorganisation of the European Union and the Eurozone, a far better Europe could result.
First, there needs to be another currency for the southern countries of Europe. With the new currency, call it the med, countries such as Italy, Spain, Greece, and Portugal can devalue the med with respect to the euro. Countries in northern Africa could be invited to join later if their finances are sound. Then there would be a trading area around the Mediterranean Sea.
Second, travel without visas could be retained for Europe, or perhaps several regions in Europe. But work permits would not be granted except under conditions which do not depress local wages.
Third, banks need to be broken up and regulations of all financial institutions need to be increased.
Brakes need to be put on short selling, derivatives need to be regulated and only traded on public exchanges, all bourses need to be nationalised, and taxes on security transactions need to be instituted to stop high-frequency trading. Exchange traded funds and mutual funds need to be eliminated because they isolate the voting rights from the person investing. Hedge funds and private equity firms need to be regulated out of existence. Their destruction of maritime needs no explanation. In short, securities ownership needs to serve businesses, not speculation. Banks from Wall Street, the City, Frankfurt, the Bahamas, Cayman Islands, etcetera, need to go away. They need to be replaced by sound retail banks and separate well-regulated investment banks, none of which approach the size of current banks.
Finally, central banks need to quit trying to repair the economy with lower interest rates at near-zero levels. They need to raise rates and scold national legislatures to abandon austerity and spend money to fund large job-creating infrastructure projects.
Brexit, if followed by a breakup of the EU, could serve as a foundation for a Europe with real growth for all. The concept of a unified Europe is a good concept. It just needs to be implemented correctly so all will benefit.
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