IT IS too easy to be pessimistic about the future of Europe and the UK these days. The recent decision by UK voters to leave the EU will have far-reaching and devastating consequences on both sides of the channel.
The consequences are already being felt in the UK, with the pound losing value at a speed usually reserved for the rand on a sunny December morning.
The ill-begotten decision will haunt the UK for generations. It has been Europe’s financial powerhouse mainly because it benefited from the so-called passport system, which allowed London-based banks to conduct business in all EU member states. With this privilege gone after the UK is no longer a European country, many international banks will move jobs from London to Frankfurt, Paris, and Amsterdam.
British banks face substantially increased costs of doing business in the rest of Europe and it is not clear whether all of them will survive. The Royal Bank of Scotland was hammered in the hours following the decision to leave and its stock price dropped almost 30%.
Some might ask who needs bankers anyway. But the UK, home of the industrial revolution, now hinges crucially on its financial sector and is almost devoid of any real industrial base. Services account for almost 80% of GDP.
On the other side of the channel, the economic consequences will be less severe. A number of countries will painfully lose some of their exports to the UK, but the much bigger challenge is a political — and almost existential — problem for the EU.
The success of the Brexiteers is a boost to populists across Europe.
Right-wing xenophobic movements from France, the Netherlands and Hungary will carefully take notes on how to use the fears of the economically excluded and those left behind by globalisation for their short-term political gains.
The sovereign debt crisis has already highlighted the fundamental differences between northern countries — such as Germany, France and the Netherlands — and southern countries such as Greece, Italy and Spain. These fundamental differences in opinion about economic policies have not been resolved and the differences have intensified due to the refugee crisis.
Europe has always been united when there is a cake to be divided. It remains to be seen how strong it is when there is a burden to be shared.
AS PAINFUL as it is to observe Brexit from an economist’s perspective, it is almost insufferable from the perspective of a millennial born between 1980 and 2000. Ours is the generation that is most directly and most strongly affected by the UK vote.
Millennials are the generation that most emphatically voted for the UK to remain in Europe. And why wouldn’t they? They have adapted to globalisation, study and work across Europe and have friends from Europe who study and work in the UK.
The millennials will be most directly affected by the economic downturn to come. Their jobs can easily move to Europe, while they won’t be able to follow freely.
Who, then, voted to leave? The baby boomers, the generation now aged 50 and above, tilted the referendum in their favour. They will also suffer from the economic downturn, but have a different time horizon from the millennials. The full wrath of the downturn will unfold in the long run and when many baby boomers are retired.
Naturally, the baby boomers care less about education and labour mobility, and more about security and health. This is why the Brexiteers campaigned with the promise to funnel £350m a week to the chronically cash-strapped National Health Service. And why they promised to “keep Britain’s borders secure” — openly pandering to xenophobic resentments towards immigrants from eastern Europe and refugees.
The Brexit vote unveiled a deep rift between millennials and baby boomers. The two generations have fundamentally different interests, which were bound to clash eventually. What makes the Brexit vote different from other policy decisions where the two generations have opposing interests is that the clash has become evident to all.
There is at least something positive for SA in all the European gloominess: our demography is radically different from Europe. Millennials make up the bulk of the population, which provides us with a great opportunity to enforce policies that will benefit future generations. The recent protests about free education are but a small glimpse of things to come.
The big opposition parties have understood these dynamics. The DA has a relatively young leader in Mmusi Maimane and recently started a youth tour to woo younger voters. The EFF follows a much more populist approach but also targets the young as its main source of votes.
The only party that seems to not have got the memo is the ANC. Its local election posters carrying the image of a geriatric President Jacob Zuma with the slogan “Power to the People” must ring hollow in the ears of millions of young people without a job and without prospects for the future.
ZUMA has proved, time and time again, that he cares more about being secure in comfort than he cares about the future of the country.
Brexit also provides a great opportunity for SA. We should make it as easy as possible for well-educated young Europeans to come to SA. The recent decision by the Department of Home Affairs to open up a path to permanent residency for all graduates of South African universities is only a first step.
Getting a visa is still a prohibitively painstaking process. Despite SA’s rampant youth unemployment, many jobs that require a higher education cannot be filled, due to a lack of qualified applicants. More immigration from Europe and the UK will benefit the economy.
If there is something to be learnt by the dire situation in Europe it is this: young people must organise to make their voices heard and to enforce policies that benefit their generation. The South African demography will greatly help in this.
We should tell this to our friends in Britain and Europe. Perhaps they will remember it when they leave the UK and Europe in search for a better future for themselves and their children.
First appeared in Business Day Live on 29 July 2016.