brexitJune 23rd is a big day.  Brits, including all members of the Commonwealth, will be voting on leaving or remaining in the European Union (“EU”).  It’s a big deal.  And, it’s only the tip of the iceberg regarding the future of the UK and Europe.  At this point, the expected result of the possible British exit from the EU (called Brexit) is too close to call.  Here are some of the key points:

The Ayes.  Those who favor leaving argue that the EU has changed substantially since the UK joined it in 1973 with regard to size, reach of bureaucracy, diminishing influence and sovereignty.  They also point to the failure of the euro as a common currency and recent migration debacle across Europe.   Vocal supporters of the Brexit movement are the U.K. Independence Party, half the Conservative members of Parliament, Boris Johnson, former mayor of London, a group of “Economists for Brexit” and even Marine Le Pen, president of France’s National Front party.

The Nays.  Those who favor staying believe there would be huge economic losses, particularly in London’s financial sector, as well as the need to be part of larger block of like-minded companies to have real influence and security in the world.  British Prime Minister David Cameron leads the “remain” camp; his Labour Party, the Liberal Democrats and the Scottish National Party are all on board.  President Obama, Angela Merkel and President Xi Jinping of China also want Britain to stay in.

History.  In 1957, the Treaty of Rome created the European Economic Community or Common Market.  Britain tried to join in the 60s, but its applications were vetoed by Charles De Gaulle.  De Gaulle died in 1970 and Britain finally joined in 1973.

The debate is more than Brexit.  It really is a question of more European unity or less.  While some see “more Europe” as the solution to all of Europe’s problems, others see “less Europe” as the answer. Back in 1992, Margaret Thatcher proposed an “a la carte” system which would allow governments to be able to select the quality and degree of their participation in the EU as the best strategy for the future. Many EU member countries support that view today.

The EU institutions have failed in a number of key areas. First, the euro, established without a solid program of discipline or transfer payments, has led to stagnation, high unemployment and political instability in much of Europe. Second, migrants surged across Europe last year because the EU had abolished internal borders before strengthening external ones.  Creditor nations like Germany want “more Europe” and more discipline.  Mediterrean Europe would like “Europe lite” with more help on bailouts, sharing of debt, etc.

Potential Economic Impact of Brexit.  Two weeks ago, “Economists for Brexit” published a report that Brexit would be good for Britain– estimating in 10 to 15 years that its economy would be 4% larger than if it had remained. This group of academics likened the EU to a “walled garden” that imposes punitive tariffs and regulatory barriers on goods and services produced outside its 28 member state and that leaving the EU would enable the UK to unilaterally lower trade barriers.

On the other hand, last week the Bank of England warned that a vote for Brexit would be likely to cost jobs, raise prices and see the pound sterling plummet. The financial services industry centered in London could be one of the biggest losers.   On April 30th, the Economist opined that the EU would suffer from Brexit and therefore would not be kind to Britain afterwards during the ensuing two-year period of “divorce” negotiations.

Conclusion.  There’s a lot at stake in the June 23rd referendum for both Britain and Europe.  And, for many, it’s not just economics. It’s a part of a broader movement we’re seeing across the world- the election to president last week of a brash non-establishment politician in the Philippines, the huge popularity of “Hamilton” based on the centuries old, but still omnipresent, conflict of federalism vs. states’ rights, and, certainly, the presidential primaries here in America.  Angry voters across the world are not happy with the status quo and want a change to bring their country back to the “good old days.”  Anti-Europe parties across the continent are supporting and campaigning for Brexit.  Three days after the Brexit vote, Spain will be holding its general election.  In 2017, France and Germany and likely Italy will hold national elections. No wonder this referendum is too close to call and a potential harbinger of things to come in Europe and, perhaps, the world.