On Thursday, British voters voted in favor of "Brexit" — British exit from the European Union. That means that the EU is on the verge of losing one of its largest and wealthiest members.
The consequences will be huge for the British people. Britain's economy and legal system have become deeply integrated with the European continent. Unraveling those relationships is likely to be economically and socially disruptive.
On the other side, Brexit advocates have argued that Britain will be better off in the long run outside the EU, with full sovereignty and unfettered control over immigration and economic regulations. "The risks of Britain staying in the EU far outweigh the risks of us leaving," argued British journalist Douglas Murray in an interview last week. "The eurozone has been a disaster, and it's very important for Britain to get control of our own borders."
On its own, British exit from the EU would be disruptive but not calamitous for other EU countries. The larger threat for other EU members is that Britain could become the first step toward unraveling the EU more generally. The 2008 financial crisis and the ongoing Syrian refugee crisis have put the EU’s rickety political institutions under strain. A British exit could further shake peoples’ confidence that the EU project can endure over the long run, causing other countries to eye the exits.
The campaign pitted Britain’s conservative prime minister, David Cameron, against members of his own party who were more skeptical of Britain’s EU membership. The "Leave" result will have profound consequence for the Conservative party, Great Britain, and the European Union.
1) What is the European Union?
This, as Vox’s Matt Yglesias has written, "is a bit of a complicated metaphysical question."
The European Union began its life with the 1952 European Coal and Steel Community. European leaders wanted to prevent a repeat of the two world wars by giving European powers — especially France and (West) Germany — shared economic and political institutions. This gave way to the European Economic Community in 1967, and ultimately the European Union after 1993's Maastricht Treaty.
Today, the EU includes a political and economic bureaucracy, based in Brussels, that shapes and controls many aspects of European political life. The EU has its own currency, the euro. It has a travel agreement, called Schengen, which makes most of the EU function as one giant country when it comes to travel and migration.
However, the dream of a "United States of Europe" is still quite far from reality. The EU cannot declare war and does not have an independent power to levy taxes. Most people in Europe feel greater loyalty toward their home countries than they do to the European Union as a whole.
This lack of continent-wide political solidarity has led many EU citizens to be resentful of the degree of control Brussels wields over their lives. This makes the current European equilibrium inherently unstable. If Europe doesn’t become more integrated — with a stronger central government and a shared political culture — then there’s a danger that nationalistic tensions could cause the whole system to unravel.
2) Why would Britain want to leave the EU?
British politics has always included a faction that’s skeptical of deeper integration with the rest of Europe. This faction has grown stronger in recent years as the EU has struggled with the aftermath of the 2008 financial crisis.
Britain joined the European Economic Community in 1973 and hence the EU in the 1990s. But Britain never fully accepted the legitimacy of European control over British institutions in a way that other EU members did. It refused, for example, to join either the Schengen Area, which eliminates internal border controls, or the common currency.
Since 2008, Britain’s background euroskepticism has been amplified by the poor performance of European economies.
The post-2008 recession was bad in the United States, but it was really bad in the euro area. The eurozone took a greater hit than the US did initially, and then quickly collapsed back into recession rather than experiencing a continued recovery:
There are a number of reasons why this is true, including several EU nations' embrace of austerity. But one of the biggest, if not the biggest, cause was the euro itself.
Central banks are supposed to react to recessions by expanding the money supply in order to promote economic activity. The 2008 financial crisis caught central banks flat-footed both in the United States and Europe. But America’s central bank, the Federal Reserve, ultimately responded forcefully to the economic downturn, helping to get the economy growing again starting in 2010.
In contrast, the ECB decided to raise interest rates — a contractionary policy — in 2011. The result: While the US economy started to heal, the eurozone tipped into a double-dip recession. Things got so bad, particularly in Greece, that it looked like the entire eurozone system could collapse.
This didn't affect the UK directly, as it uses the pound rather than the euro. But some Britons looked at the situation and decided that EU membership was dangerous. The EU had historically only expanded its powers, they worried. How long until Britain got roped into a euro-like disaster — or faced pressure to bail out countries whose economies were wrecked by bad eurozone economic policies?
This argument gave new potency to Britain’s long-simmering euroskepticism. By mid-2012, after three years of the eurozone crisis with no real end in sight, Prime Minister David Cameron was under significant pressure from members of his own Conservative Party to hold a referendum on whether the UK should stay in. In January 2013, Cameron gave a speech promising to hold just such a referendum if the Tories won Britain's 2015 election.
They did, and then Conservative legislators passed a bill to hold a vote before December 2017. In February, Cameron scheduled the vote for June 23, 2016 — and here we are.
3) What was the case for the UK to leave the EU?
The arguments for leaving the EU varied depending on which advocates you talked to. But the two most common arguments focused on the EU's liberal rules for internal migration and the EU's burdensome economic regulations.
Boris Johnson, a Conservative who was then mayor of London, wrote a typical case for Brexit back in February, focusing on the increasing concentration of power in the hands of unelected EU bureaucrats in Brussels:
The more the EU does, the less room there is for national decision-making. Sometimes these EU rules sound simply ludicrous, like the rule that you can’t recycle a teabag, or that children under eight cannot blow up balloons, or the limits on the power of vacuum cleaners. Sometimes they can be truly infuriating – like the time I discovered, in 2013, that there was nothing we could do to bring in better-designed cab windows for trucks, to stop cyclists being crushed. It had to be done at a European level, and the French were opposed.
On this view, the EU isn't just too meddlesome, it’s also undemocratic and unaccountable to the public.
"The issue of sovereignty of who governs you, is the most important question for any country," British journalist Douglas Murray told me in an interview last week. After two decades in which significant power resided in Brussels, Murray wants to return full authority to the peoples' elected representatives in the British Parliament.
While arguments about economic regulation and political sovereignty dominate the intellectual case for Brexit, the political appeal of Brexit relies heavily on the emotionally charged issue of immigration.
Britain refused to participate in the Schengen agreement and fully dismantle border controls with other EU countries. But EU law still requires members to admit an unlimited number of migrants from other EU countries. With the eurozone suffering from dismal economic performance, a lot of workers from less affluent EU states like Poland and Portugal have moved to the UK in search of work. There’s little Britain’s elected officials can do to stem these flows, and that rubs a lot of British voters the wrong way.
One of the most prominent critics of the EU's immigration rules was Nigel Farage, leader of the far-right UK Independence Party. He argued that large-scale migration of low-wage workers from elsewhere in Europe has depressed wages for native-born Britons. Farage also suggested that unrestricted immigration from Europe could lead to greater competition for government services and even put British women at greater risk of sexual violence.
Farage is an extreme example — something like the Pat Buchanan of the United Kingdom. But like the US, Britain is currently experiencing an upsurge of nativist sentiments, and these attitudes are providing a boost for the campaign to leave the EU.
4) What was the case for the UK to remain in the EU?
British Prime Minister David Cameron was on the other side of the debate, leading the campaign for Britain to stay in the EU. And his argument, like the argument of most supporters of continued EU membership, was largely focused on economics.
Not only does the UK experience long-term economic benefits from being part of one of the world’s largest free-trade zones, advocates argued, but the process of leaving the EU could be highly disruptive, leading to short-term economic pain.
Jacob Funk Kirkegaard, an economist at the Peterson Institute for International Economics, told me last week that the UK gains a lot of benefit from being inside the European club. For example, the harmonization of laws and regulations across the EU means that companies can maintain a single corporate headquarters for all of Europe. And because English is the world’s most widely spoken language, many foreign companies have located their European operations in London.
In addition, Cameron argued that EU membership makes Brits more secure by allowing closer coordination among European law enforcement organizations. He also argued that Britain’s EU membership amplifies the UK’s influence on the world stage, and that leaving the EU could cause Britain to become marginalized.
5) Can't the UK just negotiate favorable access to European markets after leaving the EU?
In theory, an independent Britain could negotiate a deal with the EU that grants British businesses the same kind of preferential access to the EU that they enjoy now. Indeed, Norway has just this kind of deal: It’s not a EU member, but the country has agreed to voluntarily abide by most EU rules, and in exchange it enjoys most of the economic privileges of EU membership.
One problem is that EU leaders may not be in a forgiving mood after a British vote to leave. Many European countries have domestic euroskeptical movements of their own, and European leaders are worried that a successful British exit could embolden them. So the EU may refuse to give the UK a favorable deal as a warning to other countries thinking about exiting the EU.
Another problem is that Britain may not want a Norway-style deal. To gain preferred access, Norway is required to adopt many EU regulations. A recent British government report found that "Norway has adopted three quarters of the EU’s rules and legislation."
So if the point of leaving the EU is to escape its burdensome regulations, it's not obvious that the Norwegian model will accomplish that. And while euroskeptics have complained that the EU is not sufficiently accountable to British voters, voters in Norway have no influence at all over EU laws that — in many cases — Norway’s legislature must approve without modification in order to gain access to the European common market.
To a large extent, then, unfettered access to European markets and diminished British sovereignty are a package deal. It's never going to be possible for the United Kingdom to retain full control over domestic regulation while enjoying access to EU markets on par with the access available to other EU member states.
6) Can we take a music break?
Sure! As you might know, the UK has a pretty solid musical tradition. A good musical interlude for this particular explainer is "Should I Stay or Should I Go?" It was recorded by the British band the Clash and released in 1982:
7) What has happened since Thursday's results were announced?
British voters voted for Leave by a margin of 52 percent to 48 percent. As the results were reported on Thursday evening, markets started to panic. The British pound fell from $1.50 earlier in the day to $1.35 in the early hours of Friday morning. That 10 percent drop brought the pound to its lowest value against the dollar since the 1980s.
British Prime Minister David Cameron had vowed to continue in office even if British voters opted to Leave. but by Friday morning his position had become politically untenable. He has announced plans to leave his post by October. We don't know who will succeed him. Boris Johnson, a Conservative former mayor of London and Leave supporter, is considered a leading candidate to replace Cameron. But it's also possible that the Conservative Party will become so fractured that Parliament will deadlock and be forced to call new elections.
8) What will happen next?
Leaving the EU isn't simply a matter of declaring "I quit!" Article 50, the EU constitution provision that sets exit rules, allows for the EU and the UK to negotiate over the terms of Britain's exit. At issue is whether any EU treaties and laws would continue to apply to the UK after it's gone.
After the British invoke Article 50, the parties will have a two-year window in which to cut a deal. If time runs out without a deal (or without the parties unanimously agreeing to continue negotiations), then the UK’s membership in the EU would automatically expire.
This could have dramatic consequences. At a minimum, a lot of people will have to do extra paperwork. EU citizens in Britain and Brits living in other EU nations will have to update their immigration statuses. Companies operating in both the UK and the EU will have to verify that they’re compliant with two sets of laws.
And things could get uglier if the two sides aren’t able to compromise.
"If you are Nissan or some other car producer with major production in the UK, today, the same safety standards and environmental standards allow you to sell everywhere in the European market," Kirkegaard told me. But if the UK leaves the EU, "you would no longer be able to sell into other European markets, not because you face a small tariff, but because you'd have to go through another set of safety certifications. This kind of thing would be repeated in every industry you can think of."
Critics say the economic effects could be large. The UK government estimated that exiting the EU could cause the British economy to be between 3.8 and 7.5 percent smaller by 2030 — depending on how well negotiations for access to the European market ultimately go. Other reports have found smaller, but still significant impacts.
And Kirkegaard said that Brexit could also change the United Kingdom in another fundamental way. It's called the "United" Kingdom because it's made up of four "countries" — England, Wales, Scotland, and Northern Ireland. But if the United Kingdom votes to leave the EU, it may not stay united for very long.
Polls have shown that people in Scotland and Northern Ireland broadly support remaining in the EU. And the Scots in particular have never been entirely satisfied with English domination, as shown by the 44 percent of Scottish people who voted to make Scotland an independent country in 2014. They like having the UK be part of the EU in part because it provides a counterweight to English power within the UK.
Scotland First Minister Nicola Sturgeon has already said that she wants to see a second referendum on Scottish independence. That could lead to an independent Scotland (which would most likely petition for admission to the EU in its own right). A similar process could lead to the reunification of Northern Ireland with the nation of Ireland (itself already an EU member).
9) I skipped to the end of the article. Why should Americans care about this?
British exit from the European Union could be disruptive for Britain and for the EU more generally. Even skeptics like Kirkegaard don’t expect a British exit to trigger a global recession, but turmoil in one of our most important trading partners can’t be good for the US economy.
But the more important issue from an American perspective is about geopolitics more than economics. Ever since World War II, the United States has been deeply invested in safeguarding long-term peace and prosperity in Europe. We still have thousands of troops stationed in Germany to help maintain the status quo there, and we’ve worked to build a system of alliances that helps to minimize the possibility of conflict.
A British decision to leave the EU isn't going to pose an immediate threat to this political order. But it could signal growing dissatisfaction with the status quo among European voters. That could have unpredictable results.
We've already seen the fall of David Cameron, a man whose policies have generally been friendly to the United States and the established global order. He could be replaced by a more euroskeptical leader on the right. Or if the results of British exit are as bad as critics predict, it could discredit the British right and bring the Labour Party’s far-left leader Jeremy Corbyn to power in the next election.
A win for British euroskeptics could also provide a boost to skeptics of the EU elsewhere in Europe. With many countries continuing to suffer through a euro-induced recession, that could cause other countries to seriously consider leaving the EU, ultimately causing the EU to unravel.
None of this will necessarily be bad for the United States — Europe might muddle through and ultimately emerge stronger and more prosperous. But the peace and stability of the EU era has been broadly good for Americans and the world, so turmoil in Europe is cause for worry.