If you’re wealthy, you may see the British exit from Europe’s economy as an opportunity.
If you can afford a grand tour of London, rounds of golf at St. Andrews, or a flashy new Bentley, this is your time. The battered British pound will stretch your American dollars.
Yet, if you are an everyday Rhode Islander who is relying on a 401k plan for retirement, a taxpayer concerned about the state’s public pension system or a worker at a company that exports products to Europe, you shouldn’t be cheering.
In the global economic village, Britain sneezes and even our small speck of New England can catch a cold. “This isn’t good, particularly in the short-term,’’ says John Simmons, executive director of the Rhode Island Public Expenditure Council, which monitors the Rhode Island economy.
Financial markets have tanked and rebounded since Brexit, which could be bad for Rhode Islanders who depend on 401k investments for retirement income, Simmons says. And the state’s pension system, already hurt by weak returns, will likely face headwinds.
Among the world’s nations, the United Kingdom is the ninth largest importer of goods from Rhode Island, according to data compiled by the Chafee Center for International Business at Bryant University. Ray Fogarty, executive director of the center, agrees that the near-term impact, isn’t what the state’s exporters want.
The biggest fallout is the uncertainty it creates for companies that export products to the UK, and to European markets beyond. John Hazen White Jr., president of family-owned manufacturer Taco, headquartered in Cranston, has concerns. Hazen has been building business in Europe in recent years. His company has expanded from $35 million in sales in 1992 to about $250 million this year. And his Cranston workforce has expanded from about 500 to about 600 in those years, even as other Ocean State manufacturing companies have shed thousands of jobs.
“I’m in Europe a lot,’’ says White. “This concerns me because it creates a lot of uncertainty. The question now is, what’s next.’’
Among the scenarios White is watching is how the European Union treats the UK’s decision to leave. He suspects the EU isn’t going to make it easy for Britain. “They aren’t going to want to set a precedent that would lead other countries to leave.’’
So the question may well become, White says, is who is next? His company does business in countries such as Spain and Italy, nations with weaker economies than Britain. “I just don’t know what this is going to do to me.’’
Business leaders don’t like the uncertain. It makes investing decisions tougher and can toss the best-laid plans into disarray. White says the Europeans he is familiar with say this new nationalism is linked to immigration fears.
Then there is the political fallout. The Brexit is yet another blow to the post-World War II diplomatic and economic model that drove European and American foreign policy. It harkens to the era of the Marshall Plan to rebuild war-ravaged Europe, the brainchild of Gen. George Marshall, and internationalist and American secretary of state.
Mark Stoler is the editor of Marshall’s papers. A diplomatic historian and World War II expert, he has taught at the University of Vermont, Williams College and the Naval War College. He views the Brexit and the growth of hyper-nationalist European political parties with alarm.
Stoler says he understands that workers left behind by the global economy have legitimate grievances. But he fears the European anti-immigrant and nationalist uprisings could unleash forces that contributed to the “bloodiest war in human history.’’
The search for strong leaders, Stoler says, reminds him of the roots of the 1930s unrest that gave the worlds fascist governments in Italy and Germany. “I don’t think we’re going to get a guy with a mustache this time,’’ says Stoler. “But this reminds me of the Weimar Republic in the 1920s and 30s.’’
Twenty-first century Rhode Island isn’t Europe. It’s become fashionable in the Ocean State to blame our stagnant economy and mediocre business climate on General Assembly leaders or Gov. Gina Raimondo. There isn’t anything they can do about European economic policies.
As were celebrate American independence from England, the grand irony is how dependent so many of us are on free trade and predictable world markets. Our mother country is with us still, maybe this time for worse.
Scott MacKay’s commentary can be heard every Monday on Morning Edition at 6:40 and 8:40 and on All Things Considered at 5:44. You can also follow his political reporting and analysis at our On Politics blog at RIPR.org
