Sterling has plummeted. London’s stock market is in free fall, and investment is on hold. Prime Minister David Cameron has announced his intention to resign, and the main opposition Labour Party is in turmoil. To listen to some of the more hysterical commentary, Britain has been plunged into perpetual crisis with its decision last week to leave the European Union. It won’t be long before the British are appealing for food parcels, and the Red Cross is raising emergency funds across the world to rescue the beleaguered island.
Ignore it. In fact, Britain is a big enough country to do just fine outside the EU. Its economy will bounce back very quickly, and it will see little loss of international stature. Brexit may well be a mistake, but, rather like heading out of the house on a cloudy day without your umbrella, it will be one more of carelessness than anything else. Within five years we will have forgotten what all the fuss was about.
In the markets, Brexit is being treated as a cross between the collapse of Lehman Brothers and the start of World War III. In truth, that says more about the hysteria of investors than anything else. Britain accounts for about 3.5% of global output. Its exports to the rest of Europe account for about 14% of its GDP. So even in the worst-case scenario, in which British goods are completely banned from Europe, we are still only talking about less than 0.5% of global output. That is a rounding error. What possible difference it can make to Samsung or Apple it is hard to say.
Actually, though, Britain’s economy is fundamentally strong, and will bounce back quickly. The devaluation of the pound will strengthen its exports, and make sure its companies can easily overcome any tariffs that might be imposed in Europe. If demand dips, the Bank of England can still cut interest rates or launch another blast of quantitative easing. The United Kingdom’s real strengths these days are incredibly flexible labor markets, one of the highest rates of entrepreneurship in the developed world, and the lowest corporate tax rate of any major economy, all of which have made it a magnet for inward investment. Trade with Europe has been declining relentlessly for a decade — down from 55% of exports in 1999 to 44% in 2014 — and Brexit will only accelerate a trend that had been underway for years. As economic shocks go, leaving the EU will turn out to have been a minor one.
Britain’s standing in the world won’t suffer much damage either. In fact, it will probably rely on membership in the European Economic Area, alongside Norway, Iceland and Lichtenstein, and, under British leadership that will turn into a far more significant bloc. Don’t be surprised if the Danes, the Poles and the Czechs opt to join a more nimble EEA led by the UK rather than a German-dominated EU — which would mean that paradoxically Britain has more clout outside the EU than it ever did within it.
In reality, Britain’s standing in the world had relatively little to do with its role in the EU anyway. Maybe the U.S. secretary of state will be slightly less keen on talking to the British foreign secretary, and slightly more keen on holding discussions with the German one. But does any normal person lose sleep worrying about stuff like that? The crucial point is that the English language and British pop and serious culture do far more to enhance Britain’s global influence than anything that happens in Brussels.
At the same time, the Internet does far more to promote connectedness between people of different countries and culture than any EU initiative; offered the choice between Google and the European Union, nobody would choose the latter. Political institutions are less important with every year that passes, and the more remote they are — and none are more remote than the EU — the more that is true.
In five years’ time, we will look back at the Brexit scare and wonder what all the fuss was about. The UK will remain together, and its economy will have much the same mix of strengths and weaknesses it has always had. The eurozone will be stumbling from crisis to crisis, and the EU will remain paralyzed by indecision, stuck with painfully slow growth and declining influence.
Ultimately, the real lesson of Brexit may well be to teach us that the EU doesn’t make much difference to anything anymore. A country can leave, and hardly even notice. And that may be what is really worrying for its long-term future.