17 top economists, foreign policy gurus and historians look five years into the future.
he results of the Brexit referendum are in, and it is chaos. The United Kingdom is leaving the European Union. Prime Minister David Cameron is stepping down. The Dow Jones has fallen 611 points in a day. The decision has rattled the world, and even the pro-Brexit British voters seemed stunned. “I’m a bit shocked to be honest,” one Leave voter told the BBC. “I’m shocked that we actually have voted to Leave, I didn’t think that was going to happen.”
Sure, there is a lot of hype now, but, in the long run: What does it actually mean? We rounded up some of the best minds and biggest names in foreign policy, history and economics to tell us: What are the consequences of the Brexit vote five months from now (on Election Day)—and five years from now?
Some of them think the Brexit vote is a sign of the sun setting on Europe. “Brexit could be a wake-up call, or it could be 1933 all over again,” says Danielle Pletka of the American Enterprise Institute. Dean Baker, co-director of the Center for Economic and Policy Research, is more optimistic, saying that Brexit would set Europe “back on a path of high employment and healthy growth.” As for it’s effect on the U.S. presidential election? “Brexit will have as much impact on American politics as Obama's trip to the United Kingdom had on the Brexit referendum: zero,” writes Ian Bremmer of the Eurasia Group.
Here’s what else the Brexperts have to say.
“In five years, there will no longer be a United Kingdom”
Richard Haass is the president of the Council on Foreign Relations.
Over the next five months, the UK will be poorer and we are likely to hear calls for referenda in several other EU countries. There will be a new prime minister, most likely Boris Johnson. Markets will largely have recovered elsewhere, although the slowing and weakening of the British pound will add to the economic woes of Japan, Europe, and beyond. If there is contagion that reaches the U.S., it will work against the political prospects of Hillary Clinton and in favor of those of Donald Trump.
In five years, there will no longer be a United Kingdom. Scotland will be independent and part of Europe. Less certain but quite possibly all or part of Northern Ireland will join Ireland. Several other countries will have left the European Union, which will then consist of a core Eurozone and an outer ring of countries with tailored ties to Brussels. References to the U.S.-UK “Special Relationship” will be increasingly rare and hollow, as the United States turns to partner with other countries in other regions.
“An EU that … is solidly anchored by a reinvigorated French-German partnership”
Mohamed A. El-Erian is chief economic adviser at Allianz.
In 5 months from now, the UK Conservative Party has united behind a new leader who has replaced Prime Minister Cameron, and is preparing the country for a general election. Discussions with Europe over a type of “association agreement” to replace Britain’s full EU membership are proceeding, but rather slowly as several European countries are dealing with their own anti-establishment movements.
Economic growth has slowed overall, financial market volatility has picked up, and recognition is spreading that central banks have become a lot less effective in holding everything together. The optimists hope that will serve as a wake up call for western politicians to finally step up to their economic governance responsibilities. The pessimists fear a disorderly tip into recession and financial disruption.
While I understand the argument that the British anti-establishment vote could embolden Mr. Trump’s campaign, this is too partial a view of the potential net effect on the November election in the U.S. As the realization sinks in that the UK and Europe are now looking at significantly slower growth and greater financial instability, voters are likely to pay a lot more attention to the coherence and potential impact of the economic plans announced by the two candidates. This, in turn, would help Secretary Clinton with her more serious, comprehensive and consistent economic approach.
In 5 years, the UK has regained its economic and financial footing, and is moving forward. Meanwhile, a few other countries have left an EU that, now more manageable and harmonious, is solidly anchored by a reinvigorated French-German partnership. As such, the smaller and more committed EU is able to better pursue the “ever closer union.”
Brexit could be a wake-up call, or “it could be 1933 all over again”
Danielle Pletka is senior vice president for foreign and defense policy studies at the American Enterprise Institute. You can follow her on Twitter @dpletka.
Anyone who says they know what will be in either five months or five years is lying. There are substantial risks — the United Kingdom could break up. Other EU countries could follow the Brexit lead and bail out. Or none of that could happen, and the EU could get religion, bugger out of everyone’s business and return to being a common market-plus that many of its members envisioned.
Much depends on the quality of leadership from within the EU and UK. If President Obama’s lead is taken, and punishment and threats define the chosen tone, there will be more turmoil. Thoughtful leaders will parse the Brexit’s lessons, and recognize that ankle-biting the sovereignty of member states is a bad call. Further, they will become more serious about the immigration issue — and the refugee question — that has riled so many EU citizens. That means revitalizing EU foreign policy and pushing for real solutions to the Syria nightmare.
The world is enjoying a populist moment. Like all such moments, there is a mob quality to the Brexiteers, Trumpistas and others, but their sentiments rest on real complaints. If national leaders are committed to addressing the real problems that lie beneath the populism — a growing underclass, tides of refugees, and anger at government (not necessarily in that order) — then Brexit will be a wake-up call. Otherwise, it could be 1933 all over again, with years of fractured politics, anger, dangerous decisions, isolationism and worse ahead. It’s up to those who wish for the crown of leadership to choose.
“A much more nonpolar world, with more fragmented international architecture, standards and security relations”
Ian Bremmer is president of Eurasia Group and a global research professor at New York University. You may follow him on Twitter @ianbremmer.
5 months from now: The United Kingdom will be in recession, there will be a modest hit to European and global economy, strengthened support for populist parties across a majority of European states, a weaker transatlantic relationship and no clarity on U.K. relationship with the European Union. The U.S. election will be happening around this time, but Brexit will have as much impact on American politics as Obama's trip to the United Kingdom had on the Brexit referendum: zero.
5 years from now: There will be some disintegration of the United Kingdom, a “core” Europe centered around Germany that's reasonably integrated politically and economically while the broader European Union is regarded as a failed political and economic experiment. And beyond the European Union, it will be a much more nonpolar world, with more fragmented international architecture, standards and security relations.
“Russia will take satisfaction in the fragmentation to its west”
John McLaughlin is distinguished practitioner in residence at the Merrill Center for Strategic Studies at Johns Hopkins School of Advanced International Studies, and was the United States’ acting director of Central Intelligence in 2004.
Five months from now, Britain and the EU will still be struggling to determine what all of this means. In Europe, countries such as Poland, the Czech Republic, Hungary and possibly the Netherlands, will be watching to see if the Brits can pull this off; if the damage seems manageable, pressures to take a similar path are likely to build in at least these countries.
If several other EU countries follow the British example, in five years or earlier, the 60-year-old European integration experiment—designed to dampen historic conflicts—will be in jeopardy. Germany, already the continent's largest and most influential power, will be poised to dominate economic and political trends. And Russia will take satisfaction in the fragmentation to its west, and be all the more tempted to probe at NATO's vulnerable points if it has not done so already.
In five years, the EU will be less of a global force, and the “special relationship” will be stronger.
Ambassador Dennis Ross is a distinguished fellow and counselor at the Washington Institute, and served as a foreign policy advisor to Presidents George H.W. Bush and Bill Clinton.
On one level, the consequences of the Brexit vote are not hard to foretell: over the next few months, the British economy will suffer a downturn. Scotland will probably think about a second go at a referendum on independence, and could be joined by Northern Ireland and Wales. Within the EU, pressures to lessen Brussels’ power over regulations and decision-making will grow, and calls for others to follow the British model will become stronger in France, Denmark and the Netherlands.
But the current fears that Brexit-inspired market tumult will lead to a broader economic downturn may be overblown. Over the next two years, the British will have to negotiate about what their actual relationship with the EU is going to be—which will likely temper a larger fallout. And while Vladimir Putin may see Brexit as a significant weakening of European unity—and therefore enhanced leverage for Russia—he and others should not write Europe’s obituary too quickly: The fissures in the EU today may actually serve to strengthen NATO. Not only may this be a boost to NATO as a way of preserving European security, it could bolster NATO as the forum for manifesting European weight internationally.
Five years from now, the EU is likely to still exist, but it may be less of a global force. Great Britain will have recovered its economic losses and will likely have moved closer to the U.S. The “special relationship” will likely be stronger, and the British will look to the U.S. and NATO as its vehicles for playing a role on the world stage.
Brexit’s message: Be a state. Better still, be an autocrat.
Stephen Sestanovich is the Kathryn and Shelby Cullom Davis professor of international diplomacy at Columbia University’s School of International and Public Affairs, and a senior fellow at the Council on Foreign Relations.
One reason it is hard to pick post-Brexit winners and losers is that our prognosticating has been too economic. When a key force in the global economy faces turmoil of the kind the EU may now experience, can others really benefit? Russia has been in recession for two years, in part because its biggest market, Europe, has been buying less of its biggest export, energy. Is it going to do better if that market slows further? Almost surely not. Same for China. Losers all around.
But this is too narrow a lens. The message of the Brexit vote, whether or in what fashion Britain actually leaves Europe, is simple: be a state. Better still, be an autocrat. Those who come out of this turmoil looking better are those with the capacity to make crisp, coherent political decisions and stick to them. Putin (though his crisp, coherent decisions are often bad) is a Brexit winner. The vote fortifies him and his supporters in their deepest belief: that hyper-pluralist, overly rule-bound, post-sovereign policymaking is doomed, prone to interest-group capture and stalemate, and unlikely to sustain popular loyalty over the long term. For China, the lesson is roughly the same.
And for the United States? Page one of Friday’s New York Times—with all its talk of system-wide dysfunction—offers a warning. American institutions are too much like those of the EU, which is why both the U.S. and Europe are full of people saying “give us our country back!” Worse, the U.S. is more dependent than Russia and China on its ability to craft mutually beneficial arrangements with allies and other friendly states. That ability—for reasons that have as much to do with us as with our allies and friends—may also decline.
If you want to say that the losers from Brexit are the world’s pluralist political orders, you can make a pretty good case.
“Our allies lose and our adversaries gain”
Kori Schake is a research fellow at the Hoover Institution. You can follow her on Twitter @korischake.
The Brexit vote is a turning point: the high-water mark of European integration has passed. The main consequence will be an EU that grows more protectionist and hostile to innovation, less stalwart internationally, with governments less confident in their actions, looking over their shoulders for signs of public disapproval. Friction will increase within the Eurozone as debtor countries argue their publics demand less austerity and lender countries argue their publics demand the opposite.
Moreover, both Britain and the EU will be consumed with the challenges of severance, and therefore more self-absorbed. From an American perspective, it will be an EU less intrinsically connected to us and less willing to develop and defend common approaches to global issues, and a Britain less able to affect Europe. So, our allies lose and our adversaries gain. Non-EU institutions—principally NATO, the IMF and even the UN—will gain as venues for British influence.
Britain will likely try to argue for continuity of current practices in order to to reduce capital flight, brain drain, and relocation of businesses. But the EU will probably complicate that storyline, since it is not in the EU’s interest for the rebuke dealt by Britain to be without consequence. At a minimum, the EU will certainly make it more expensive for Britain to participate on an ad hoc basis.
Scotland will probably secede from the UK, which will have major consequences for British defense policy, given the basing there of the nuclear deterrent. Advocates of Trident modernization may get a boost from the isolation that Britain will feel in departing the EU, but they will need to find other basing arrangements (perhaps co-locating on U.S. bases). I’d expect foreign assistance and defense spending to reduce as EU governments look to shift resources to domestic claims in the hopes of placating publics now understood to be exasperated with the condescension of distant elites.
“Both the EU and the United Kingdom will grow rapidly”
Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC.
I expect limited impact outside of the United Kingdom in the next five months. The initial market hysteria will soon be completely reversed, outside of the United Kingdom, and there will likely be a strong rally following Trump’s defeat in November. Within Britain, there could be a substantial impact. It is quite possible that the real estate bubble in London will burst (though the blame for that lies more on the people who allowed the housing bubble in the first place, rather than the Brexiters), leading to slow growth in the country if not an actual recession, and the UK will no longer be viewed as a safe haven for the world's rich. Furthermore, the financial sector in the UK will suffer job losses as firms seek to relocate to the countries that will remain in the European Union.
In five years I expect that the EU will have turned away from austerity and will again be back on a path of high employment and healthy growth. The Brexit vote, along with the growth of populist parties across the continent, both left and right, will have finally convinced enough of the EU elites outside of Britain that they had to take a course other than austerity in order to save the EU. Beyond the politics, the intellectual case for austerity will become ever weaker since the economy will continue to not follow in the path projected by the advocates of austerity. As a result, when the EU leadership backs away from their commitment to balanced budgets and declining debt-to-GDP ratios, both the EU and the United Kingdom will grow rapidly. The main difference is that the UK will have a much smaller financial sector, with more of its wealthy being generated from productive sectors of the economy. (Okay, this is some wishful thinking—but it's not impossible.)
“The earthquake is political”
James Galbraith is an economist and author of Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe, published June 21 by Yale University Press.
Immediate economic effects may be slight, although if sterling’s drop sticks, British exports could pick up; and if the world gets skittish, the dollar will rise and U.S. exports will suffer. The earthquake is political: With Cameron gone, UKIP's voters will fold back into the Tory Party and the far right will take over the British government. This will provoke a new referendum leading to Scottish independence. Meanwhile right-wing anti-euro parties are calling for exit referenda in Holland and France. The political division between north and south Europe—as Spain, Portugal and Italy move Left—will deepen.
Over time, as they apply to the United Kingdom, the structures of EU law, regulation, fiscal transfers, support for science, open commerce, open borders and human rights built over four decades will be eroded and ultimately, in important respects, undone. How this will happen—by what process of negotiation, by what combination of slow change and abrupt acts, leading to what relationship between the UK and Europe—is clearly unknown to the leaders of the Leave campaign. This morning they appeared on British television in equal parts triumphant and clueless.
“The U.S. might find itself with a stronger, more engaged EU partner”
Julianne Smith is director of the Strategy and Statecraft Program at the Center for a New American Security.
Five months from today, the EU and the United Kingdom will likely be occupied with their ongoing negotiations over the UK’s departure. Because no state has ever chosen to leave the European Union, navigating the political and economic consequences will be all-consuming. To the extent that the next U.S. president has hopes of encouraging Europe, particularly Brussels, to take a stronger leadership role in addressing a long list of shared, global challenges, he or she will likely be disappointed: The EU simply won’t have the will or resources to do much more. In fact, getting Europe to hold firm on the existing sanctions against Russia, maintain its current role in the counter-ISIL campaign, and tighten its counter-terrorism policies (particularly in the areas of law enforcement and intelligence sharing) will be challenging enough.
Five years from now, one can imagine a rather dark scenario in which the European Union starts to unravel as other regions or states opt to hold similar referendums. But in an effort to find a silver lining, one can also imagine a more encouraging scenario in which the European continent recovers from the UK exit, and actually moves forward with a number of measures aimed at deepening European integration. If that were to happen, the United States might find itself with a stronger, more engaged EU partner down the road.
A strong dollar, trade deficits and rising nationalism
Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities.
In the near term, the pound will likely stay down relative to the dollar and that could add a bit to our trade deficit. The stronger dollar, along with uncertainty over the impact of the Brexit, will likely lead our Federal Reserve to further hold off on any rate hikes.
I also predict that as soon as the dust clears, Scotland will consider its own referendum to get out of the UK and back into the EU, as the “remain” vote there was uniformly strong. Finally, depending on how tough the EU is on forthcoming negotiations with the UK about access to the European common market—and I expect they’ll be fairly tough—we could will see forces in other countries, especially those with rising nationalist parties like the Front National in France, pushing for similar referenda.
“Many of the short-term problems will be mitigated”
Larry Korb is a senior fellow at the Center for American Progress. Matt Wackenreuter is an intern at the Center for American Progress.
The long-term consequences of Brexit will depend upon the timing and substance of the withdrawal agreement that the United Kingdom negotiates with the EU, the content of which could take up to two years to finalize.
However, while the terms are being worked out, there will be considerable turmoil both within the United Kingdom and around the globe. The Scottish and Irish independence movements will be reinvigorated; the right wing anti-European movements will be energized; migration between the United Kingdom and other EU countries will be slowed if not stopped altogether; the value of the pound will fall; and the Conservative and Labour parties will be torn apart by divisions.
However, if the United Kingdom and EU adopt a withdrawal agreement that allows the UK to continue to be part of the European Union’s “single market,” many of the short-term problems will be mitigated. Having delivered a repudiation to the “European Project” of stunning—and perhaps world-changing—proportions, it remains to be seen whether or not such cooperation will prove possible in our new post-Brexit world.
“We could yet see European countries doing what they have done for centuries—physically attack one another”
Laurence Kotlikoff, an economist at Boston University, is running for president at www.kotlikoff2016.com.
Brexit represents a major, potentially long-lasting tragedy for the UK, the EU and the rest of the world. The fact that an otherwise sane politician could have instigated this vote for political advantage, naively convinced it would go his way, leaves one dumbstruck. David Cameron’s blunder will surely enter the Guinness Book of Records. Five months hence we may start seeing British exporters moving their businesses to the Continent to avoid EU tariffs, we may see British young people working on the Continent being sent home because they no longer have a valid work permit, we may see the rest of the EU boycott British products, and we may start to see other members of the EU heading for the exit. Looking out five years, the EU could consist of Germany, France, Holland, Denmark, Poland, Sweden, Finland and a few others. The Euro, if not history, won’t likely be of much use in Greece, Italy, Spain, and many other current Eurozone countries.
The biggest concern is not just the massive direct and indirect economic costs, which markets are valuing today at 12 percent of the British stock market, 7 percent of the German stock market, 8 percent of the French stock market, and 3 percent of the U.S. stock market. The biggest concern is geopolitical.The EU, notwithstanding all its flaws, has helped keep the peace in Europe for decades. Heaven forbid if the type of nationalism we are seeing in the Leave vote takes full hold of other EU members. We could yet see European countries doing what they have done for centuries— physically attack one another. And this says nothing of the manner in which Russia will respond to this weakening of the West.
Businesses have an incentive to lobby Brussels to make the Brexit as amicable as possible.
Kathryn Lavelle is the Ellen and Dixon Long professor of world affairs at Case Western University, and a global fellow at the Wilson Center in Washington, DC.
In five years’ time, the consequences will be less far-reaching than many are predicting today. Every corporation that does business in the UK and the EU will have an incentive to lobby Brussels to make the "divorce" as amicable as possible.
If volatility in financial markets causes job growth or other indicators to fall off significantly, both Clinton and Trump will most likely relate the performance of the American economy to Brexit.
Five months from now, it seems to me that the fallout from the Brexit it could have the effect of adding to Clinton's support as voters see the appeal of her foreign policy experience. Or it could fire up Trump's populist supporters as voters here demand radical change. Or it could have both effects simultaneously.
“A major casualty of Brexit will be the U.S. rebalance of its foreign policy toward Asia”
James Goldgeier is dean of the School of International Service at American University.
We can't know what the exact consequences of Brexit will be five months from now or five years from now, but what we do know is the vote has unleashed tremendous uncertainties regarding the EU’s ability to keep a number of its other members from voting to exit through referenda of their own, the ultimate composition of the “United” Kingdom and the future of the European Union itself.
Short-term market volatility and currency fluctuation are not the real issues; Britain's status as a major power and the EU’s role in global affairs are. Within the next five years, I expect Germany's importance to U.S. foreign policy to have increased considerably given its position as Europe's leader, and Britain will likely have a more peripheral role from an American perspective. Even if the European Union continues to muddle along, it will be weaker as a global actor thanks to Britain's departure, and it will be more divided as it confronts an increasingly assertive Russia and a further unraveling of the Middle East. And thus, a major casualty of Brexit will be the U.S. rebalance of its foreign policy toward Asia, a policy that depends on a stronger Europe to take on more responsibility in its neighborhood. That Europe was always going to be hard to find, now it will be nearly impossible.
“England's participation was never central to the experiment of integration”
Elizabeth Cobbs is a professor of American history at Texas A&M and research fellow at Stanford’s Hoover Institution.
It turns out that Charles DeGaulle was right to doubt Britain's loyalty to Europe. The United Kingdom won membership in 1973 only after the death of the French president, who might need to rise from the grave to restore unity now. England's participation was never central to the experiment of integration, though it added luster. In five months or five years, Britain's trade position is likely to have declined. It exports 44 percent of its goods to the common market, accounting for 3.3 million jobs. That privileged position is now lost.
How Europe responds is far more important. There is no doubt that union made the return of war "materially impossible," as founder Robert Schumann hoped. The smartest European response to Brexit would be a superior Gallic shrug. Charles de Gaulle had a perfect one.