Tag Archives: Brexit

Globalization took hits in 2016; Will 2017 lead to more?

Globalization, the path that the world economy has largely followed for decades, took some hefty blows in 2016.

The election of Donald Trump as U.S. president and Britain’s decision to leave the European Union have raised questions over the future of tariff-free trade and companies’ freedom to move production to lower-cost countries.

Borders are back in vogue. Economic nationalism is paying political dividends.

“We want our country back” was the rallying cry of those backing Brexit, a sound bite that had echoes in Trump’s “Make America great again.”

The rise of Trump and the triumph of Brexit had their roots in the global financial crisis of 2008.

Eight years later, the world economy has still not yet fully gotten past that shock to its confidence — people are nervous, some are angry, and many are seeking novel solutions to their problems. Next year, there’s scope for more uncertainty with elections in France and Germany.

Here’s a look at the year’s top business stories for 2016:

BREXIT SHOCK

In what was a sign of things to come, Britain voted to leave the EU in a referendum in June. The decision came as a surprise — certainly to bookmakers and many pollsters who had consistently given the “remain” side the edge — and means Britain has to redefine itself after 43 years of EU membership. David Cameron resigned as prime minister after the vote and the new Conservative government led by Theresa May is planning to trigger the formal process by which Britain exits the EU early next year. There are many shades of potential Brexit, from an outright divorce that could put up tariffs on goods and services, to a more amicable parting that sees many of the current trading arrangements kept in place. The pound’s fall to a 31-year low below $1.20 at one point is testament to that uncertainty.

 

TRUMP CARD

Pollsters and bookmakers got it wrong again a few months later when Trump defeated Hillary Clinton in the U.S. presidential election. Whether he translates his “America First” platform into action following his inauguration in January will help shape the global economy for the next four years at least. Trump has railed against long-standing trading agreements, including the North American Free Trade Agreement, and vowed to punish China for the way it devalues its currency against the dollar and to tax U.S. firms that move jobs overseas. He has also laid out plans to bring America’s creaking infrastructure up to 21st-century standards, a new spending pitch that has the potential to boost jobs — but which could also lay the seeds of higher inflation.

MARKETS MARCH ON

Trump’s victory did not cause the bottom to fall out of the stock market rally that’s been largely in place since 2009, when the world economy started to first claw out of its deepest recession since World War II.

In fact, both the Dow and the S&P 500 rallied to hit a series of record highs. Stocks have also benefited from a raft of big corporate deals this year — executives are seeing takeovers as a fast way to generate growth in what is otherwise a low-growth global economy disrupted by non-stop technological innovations.

Notable deals in 2016 included the announcement of an $85 billion merger of Time Warner and AT&T and the $57 billion takeover of Monsanto by Germany medicine and farm-chemical maker Bayer. The $100 billion takeover of SABMiller by Budweiser maker Anheuser-Busch InBev was also completed.

FED FINALLY DELIVERS

During his campaign, Trump criticized Federal Reserve Chair Janet Yellen, saying she should be “ashamed” of the way she’s run policy since taking the helm in 2014. A year ago, the Fed appeared set to follow up its first interest rate hike in nearly a decade with three or four more in 2016. But there was no move until Dec. 14, when the U.S. central bank raised its main interest rate to a range between 0.5 percent and 0.75 percent. Many factors explained its hesitation to raise rates, including unease over the global impact of China’s economic slowdown and uncertainty surrounding the U.S. election. But with the U.S. economy continuing to do better than most developed countries — with unemployment below 5 percent and inflation on the way up — the Fed finally delivered another hike. The markets are predicting another three or four increases next year. Those expectations have helped the dollar rally, especially as other major central banks persevere with super-loose monetary policies to breathe life into their economies.

CHINA’S KEY ROLE

As the world’s second-largest economy, China is playing a bigger role in the functioning of the global economy. Nowhere was that more evident than in the early months of 2016, when jitters over the scale of the slowdown in China caused wild swings in financial markets. Stocks took a pounding while commodities tanked, with oil skidding to 13-year lows, as traders factored in lower demand from resource-hungry China. The slump in commodities weighed heavily on economies like Australia that are big exporters of raw materials. China’s economy is ending the year in relatively good health as authorities try to pivot the economy’s focus from manufacturing to more consumer spending. But Trump’s promises to take a tough stance in trade will be of concern to Beijing.

OPEC TAKES A STAND

For the first time since December 2008, at the height of the financial crisis, the Organization of Petroleum Exporting Countries cut its production levels in 2016. November’s cut, soon followed by more cuts by non-OPEC countries like Russia, helped push oil prices sharply higher. At over $50 a barrel, benchmark New York crude is markedly higher than the near 13-year lows around $30 recorded at the start of 2016, when investors focused on high supply and concerns over an economic slowdown. The oil slump helped put several crude-producing countries into severe recessions, including Brazil and Venezuela, and even saw wealthy Saudi Arabia cut back on spending. The question for 2017 is whether OPEC — and non-OPEC — countries can deliver on their production promises. If they do and higher oil prices stick, that will push up inflation in the global economy.

IT JUST GRATES

One of the major reasons why popular sentiment has turned against governments has been a growing distrust of elites. Perhaps nothing illustrated the issue more than the “Panama Papers,” a leaked trove of data on thousands of offshore accounts that helped the wealthy, the powerful and celebrities shelter their cash from the taxman, often without breaking the law. Critics say these tax schemes are the core of a system that gives an unfair advantage to big corporations and the wealthy. Outrage grew in the U.S. when it was revealed that Wells Fargo employees opened up to 2 million bank and credit card accounts fraudulently to meet sales goals. Bank employees also allegedly moved money between those accounts and created fake email addresses to sign customers up for online banking.

It just grates.

Brexit uncertainties threaten brain drain for UK science

Like many foreign scientists in Britain, Joanna Bagniewska was devastated when Britons voted to leave the European Union. The biology lecturer, a Polish migrant who found Britain a welcoming place to build her academic career over a decade, is suddenly seeing her job security and research prospects up in the air.

“I’m worried that after my current contract finishes, one of the prerequisites could be a permanent residence card,” she said. “I’d like to apply for EU grant money, but how much longer will it be available for?”

Britain’s top universities have long been among the world’s most sought-after destinations for study and research, drawing the brightest minds from all corners of the globe. But since Britons voted in June to leave the 28-nation EU, many in the science community say the U.K. risks losing the money, the international influence — and crucially, the talent — to sustain that enviable position.

More than one-tenth of research funding at British universities has come from the EU in recent years. Some fields — such as nanotechnology and cancer research — are more dependent on EU funding than others, according to a report by technology firm Digital Science. From 2007 to 2013, Britain received 8.8 billion euros ($9.4 billion) in direct EU investment in research.

Bagniewska is not just anxious about herself — she’s upset for her students’ future too, for the opportunities that both Britons and foreigners will likely miss out on when unfettered mobility between Britain and Europe can no longer be taken for granted.

“They were just getting excited about doing their masters and Ph.Ds in other countries. And then Brexit happened and they just got trampled,” she said.

Scientists and researchers argue that being part of the EU has given British science a huge boost because it allows Britain to recruit the best talent across Europe and take part in important research collaborations and student exchanges without being constrained by national boundaries. The bloc’s freedom of movement means its 500 million people can live and work visa-free in any member state.

No one knows yet what form Britain’s exit from the EU — commonly known as Brexit — is going to take, but immigration was a key issue for “Leave” voters. Many believe some limit should be put on the number of EU citizens moving to Britain.

Prime Minister Theresa May has vowed to reassert control over British borders. She has offered no firm guarantees for the rights of Europeans already living in Britain, an uncertainty that weighs heavily over the 32,000 Europeans who make up 16 percent of the academic workforce in British universities. Many universities say the rhetoric over immigration control is also jeopardizing recruitment of researchers and students from further afield.

Scientists for EU, an advocacy group, says it has received over 400 letters from researchers describing how Brexit has already impacted their life and work. Some are losing doctoral students who pulled out of studentships and job offers. Academics are putting plans to relocate to Britain on hold. One said their employer, a London university, immediately imposed a temporary hiring freeze, citing uncertainties about student recruitment and research income.

Adam Durrant, a British entrepreneur who founded an aerospace startup supplying climate data to airlines and aircraft manufacturers, says he’s now considering moving some of his business to a EU country outside of Britain. Part of the reason, he says, is that Brexit will likely make hiring the right people much harder than before.

“In the future, it probably means that people would be less interested to come to the U.K. to work,” said Durrant. “There’s a huge question mark over my company and my own personal future. I will certainly retain a U.K. presence, but my company’s focus of gravity may shift elsewhere.”

Scientists say some U.K.-based researchers are already being excluded from joint bids for EU funding to minimize the risks for their colleagues.

Paul Crowther, head of physics and astronomy at the University of Sheffield, said a researcher from his department was dropped from an EU grant proposal as a precaution following the Brexit referendum. The vote “put the U.K.-based researchers in a very awkward position” and their participation in EU-funded programs could “compromise the project,” he was told.

“The erosion of U.K. involvement in EU networks has already begun, with both the U.K. and EU science worse off,” Crowther said.

Apart from a loss of grant money, Brexit will likely cause British scientists and research centers to miss out on shared databases and infrastructure.

“Large-scale efforts like studies of rare genetic diseases, the building of large facilities, are areas that multinational collaborations do much better,” said Venki Ramakrishnan, a Nobel Prize-winning biologist and president of Britain’s prestigious Royal Society.

The EU is an important source of research funding for Britain, which lags behind many developed countries in state investment in science. In 2014, Britain’s government spent under 0.5 percent of its GDP on research — below the European average, and half that of South Korea.

May’s government is clearly aware of the jitters. She has promised to increase annual investment in research by 2 billion pounds ($2.4 billion) by 2020, in hopes her country can remain a world leader in science and innovation.

Durrant is doubtful that’s enough to make a big difference.

“Two billion a year spread across everything isn’t going to go very far,” he said.

Similar anxieties are being felt at the undergraduate level. The 125,000 European students studying at British universities now pay the same fees as locals and have access to the same government loans. Officials have promised this will not change for those applying next year — but no one knows what will happen after that.

Fewer European students appeared to be applying for some of Britain’s most competitive university courses, including medicine and places at Oxford and Cambridge. In September, the admission service UCAS reported a 9 percent drop in EU applications for British undergraduate courses starting in 2017.

Some argue that Britain could become like Switzerland, an “associate” EU state that is opting out of free movement of people while still taking part in limited European science projects.

“It’s not all doom and gloom — but it will be harder,” Ramakrishnan said. “We could make a go of it outside the EU. But for that to happen, we have to attract talent and fund science. And those two things are critical.”

Racist undercurrent fueled Brexit vote

Some leading British politicians and academics are seeing racist undercurrents beneath Britain’s choice to abandon the European Union. They describe the Brexit vote as a deliberate decision to sacrifice economic stability in exchange for the right to stop the flow of immigrants.

In a bitter campaign marked by allegations of racial prejudice, global financial leaders repeatedly warned that a departure from the 28-member European bloc would produce long-term financial uncertainty. On Friday, the pound plunged to a historic 30-year low.

“Either people discounted that or they decided that the price of sovereignty and stopping the hordes of migrants was worth the economic hit,” said Brian Klaas, a fellow in comparative politics at the London School of Economics.

“This is a global moment of fear,” Klaas said, drawing comparisons to the rise of the presumptive Republican U.S. presidential nominee, Donald Trump.

“Both the Trump voters and the disenchanted working class voters in northern England have decided they’re the victims of globalization and that the cause of their suffering is a bureaucracy far away,” he said. “This is a protest vote, even if it’s misguided.”

Last week, a leave campaigner unveiled a poster showing hundreds of non-white migrants making their way across Europe, alongside the words, “BREAKING POINT.” Critics labeled the poster as racist, but U.K. Independence Party leader Nigel Farage insisted he couldn’t “apologize for the truth.”

“There isn’t anything subtle about this sort of campaigning, it’s comparable to Nazi propaganda and just straightforwardly racist,” said David Gilborn, a race relations expert at the University of Birmingham. “The fact that people could have voted for this despite the crudest representations of racism is quite astonishing.”

Farage brushed off charges that the poster was racist and maintained that the main immigration issue is that Britain has lost control of its borders to EU bureaucracy. He said he has always believed “we should open our hearts to genuine refugees” and said that most of the people coming to the U.K. — as evidenced by the poster — are young males. “The EU has made a fundamental error that risks the security of everybody,” Farage said, adding that the EU’s acceptance of Syrian refugees makes the continent more vulnerable to terrorist attacks.

He has repeatedly denied since UKIP’s formation that the party is racist, pointing to its black and ethnic minority candidates. It has emphasized the argument that British workers are hit hard by unlimited cheap labor.

Gilborn said that right-wing parties weren’t alone and that mainstream parties have slowly adopted anti-immigrant policies. Prime Minister David Cameron’s Conservatives have repeatedly cited their determination to stem immigration, he noted. “They’ve created an atmosphere of xenophobia and were not able to pull it back.”

Labour politician and former European Commissioner Peter Mandelson argued that Britons were ultimately less concerned about the European Union itself than migration issues.

“Their passions and emotion were stirred up utterly irresponsibly by the leave campaign over immigration,” he said.

Gilborn said he hoped the leave decision would force the U.K. to confront underlying racism in society. He said even the Archbishop of Canterbury had legitimized the popular fear of migrants, when he said in March that it was “outrageous” to describe people with such worries as racist.

“In fragile communities particularly — and I’ve worked in many areas with very fragile communities over my time as a clergyman — there is a genuine fear,” Welby said. “What happens about housing? What happens about jobs? What happens about access to health services? There is a genuine fear.”

Gilborn said: “the way in which much of the EU debate was shaped was based on the idea of ‘ordinary people’ being threatened by ‘the other,’ meaning people who don’t look like you.”

 

Butt dial and manspreading | Oxford dictionary adds new words

Manspreading is so widespread it’s now a word.

The term, coined by commuters, refers to men on public transport who splay their legs wide apart and encroach on neighboring seats. It’s now been added to OxfordDictionaries.com.

The free online dictionary of current usage, created by the publishers of the venerable Oxford English Dictionary, issued its quarterly update Thursday of new words that have gained widespread currency in the English language. Here’s a sampling from the list:

  • beer o’clock, n: the appropriate time of day to start drinking beer
  • wine o’clock, n: same as above, only with wine
  • Brexit, n.: a term for the potential or hypothetical departure of the United Kingdom from the 28-nation European Union
  • Grexit, n.: a term for the potential withdrawal of Greece from the 19-nation eurozone, the countries in the European Union that use the shared euro currency.
  • butt dial, v.: calling someone accidentally with your mobile phone in a rear pocket
  • cat cafe, n.: a café or similar establishment where people pay to interact with cats housed on the premises
  • fatberg, n.: very large mass of solid waste in a sewerage system, consisting especially of congealed fat and personal hygiene products that have been flushed down toilets