What Does Brexit Mean to Middle America?

Britain and the European Union (the "EU") seem very far away from the United States of America. Most of us think very little about European affairs except when we think of our nation's European origins or when American news media reports an extraordinary European event. We are experiencing that latter case in the wake of the historic Brexit referendum vote, but it is difficult for many of us to understand why this British political news should concern us.

The EU began as a post-World War II idea of European nations coming together to form what some described as a "United States of Europe," in which member nations work together as a stronger unified group than they could be as individual nations. Benefits of membership would include a unified currency, reduced trade and immigration barriers among member nations, and uniform laws that simplify trade regulations and thereby reduce business costs for companies that want to invest in the European economy and employ European workers. Detriments of membership include constant arguments about balance of unified regulation of all members versus the rights of individual countries to govern independently of EU influence.

British voters decided on June 23, 2016, that they were better off to live without the EU than remain subject to its authority. Worries about terrorist invasion within the flood of Syrian immigrants increased British motivation to exit (or "Brexit") the EU, but concerns about having to share responsibility to bail out financially troubled nations like Greece, Spain, Portugal, and Ireland added to British disdain for EU membership.

So, why should we Americans care about Brexit? First, a breakup of the EU, one of our biggest trading partners, may push Britain and the EU into recession, which will make it harder for American businesses to sell goods and services to the EU, which will force some American businesses to scale back operations and employment of American workers. Second, as Britain and the EU suffer economically, their currencies will become less valuable in relation to the US dollar, which will make American goods and services more expensive for Britons and Europeans to purchase, thereby reducing American exports and putting additional pressure on American employers. Third, the US is not completely out of the woods from the Great Recession, so Americans will probably reduce spending, which will compound pressure on American employers, thereby increasing American unemployment in a vicious, snowballing cycle. Fourth, with American interest rates still near their historic lows, the Federal Reserve cannot help prop up the US economy by reducing interest rates as effectively now as when the Federal Reserve intervened at the beginning of the Great Recession almost a decade ago.

The Great Recession introduced us to some of the harsher realities of the global economy. Brexit may give us an even more unpleasant sense of how vulnerable we have become to our global trading partners. Just as President Obama took office just weeks after the Great Recession slammed us almost eight years ago, our next president may face a similar struggle over the next four years as the EU unravels in the Brexit aftermath.

Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and Jeff is a Fellow of the American College of Trust and Estate Counsel. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator and was the 2014-15 President of the Indiana State Bar Association.