NEW YORK Britain, I believe, had the best of all possible deals with the

European Union, being a member of the common market without belonging to

the euro and having secured a number of other opt-outs from EU rules. And yet
that was not enough to stop the United Kingdoms electorate from voting to leave.
Why?

The answer could be seen in opinion polls in the months leading up to the
Brexit referendum. The European migration crisis and the Brexit debate fed on
each other. The Leave campaign exploited the deteriorating refugee situation
symbolized by frightening images of thousands of asylum-seekers concentrating
in Calais, desperate to enter Britain by any means necessary to stoke fear of
uncontrolled immigration from other EU member states. And the European
authorities delayed important decisions on refugee policy in order to avoid a
negative effect on the British referendum vote, thereby perpetuating scenes of
chaos like the one in Calais.

Britains Long Goodbye

Brexits aftermath, explained through dispatches from Carmen Reinhart, Joseph
Stiglitz, Adair Turner, and other Project Syndicate contributors.

German Chancellor Angela Merkels decision to open her countrys doors wide to
refugees was an inspiring gesture, but it was not properly thought out, because it
ignored the pull factor. A sudden influx of asylum-seekers disrupted people in
their everyday lives across the EU.

The lack of adequate controls, moreover, created panic, affecting everyone: the
local population, the authorities in charge of public safety, and the refugees
themselves. It has also paved the way for the rapid rise of xenophobic anti-
European parties such as the UK Independence Party, which spearheaded the
Leave campaign as national governments and European institutions seem
incapable of handling the crisis.

Now the catastrophic scenario that many feared has materialized, making the
disintegration of the EU practically irreversible. Britain eventually may or may
not be relatively better off than other countries by leaving the EU, but its
economy and people stand to suffer significantly in the short to medium term.
The pound plunged to its lowest level in more than three decades immediately
after the vote, and financial markets worldwide are likely to remain in turmoil as
the long, complicated process of political and economic divorce from the EU is
negotiated. The consequences for the real economy will be comparable only to the
financial crisis of 2007-2008.

That process is sure to be fraught with further uncertainty and political risk,
because what is at stake was never only some real or imaginary advantage for
Britain, but the very survival of the European project. Brexit will open the
floodgates for other anti-European forces within the Union. Indeed, no sooner
was the referendums outcome announced than Frances National Front issued a
call for Frexit, while Dutch populist Geert Wilders promoted Nexit.

Moreover, the UK itself may not survive. Scotland, which voted overwhelmingly
to remain in the EU, can be expected to make another attempt to gain its
independence, and some officials in Northern Ireland, where voters also backed
Remain, have already called for unification with the Republic of Ireland.

The EUs response to Brexit could well prove to be another pitfall. European
leaders, eager to deter other member states from following suit, may be in no
mood to offer the UK terms particularly concerning access to Europes single
market that would soften the pain of leaving. With the EU accounting for half of
British trade turnover, the impact on exporters could be devastating (despite a
more competitive exchange rate). And, with financial institutions relocating their
operations and staff to eurozone hubs in the coming years, the City of London
(and Londons housing market) will not be spared the pain.

But the implications for Europe could be far worse. Tensions among member
states have reached a breaking point, not only over refugees, but also as a result
of exceptional strains between creditor and debtor countries within the eurozone.
At the same time, weakened leaders in France and Germany are now squarely
focused on domestic problems. In Italy, a 10% fall in the stock market following
the Brexit vote clearly signals the countrys vulnerability to a full-blown banking
crisis which could well bring the populist Five Star Movement, which has just
won the mayoralty in Rome, to power as early as next year.

None of this bodes well for a serious program of eurozone reform, which would
have to include a genuine banking union, a limited fiscal union, and much
stronger mechanisms of democratic accountability. And time is not on Europes
side, as external pressures from the likes of Turkey and Russia both of which
are exploiting the discord to their advantage compound Europes internal
political strife.

That is where we are today. All of Europe, including Britain, would suffer from
the loss of the common market and the loss of common values that the EU was
designed to protect. Yet the EU truly has broken down and ceased to satisfy its
citizens needs and aspirations. It is heading for a disorderly disintegration that
will leave Europe worse off than where it would have been had the EU not been
brought into existence.

But we must not give up. Admittedly, the EU is a flawed construction. After
Brexit, all of us who believe in the values and principles that the EU was designed
to uphold must band together to save it by thoroughly reconstructing it. I am
convinced that as the consequences of Brexit unfold in the weeks and months
ahead, more and more people will join us.

Brexit, Trump, and Globalizations Have-Nots

CAMBRIDGE Two political events that are attracting global attention these
days the vote in the United Kingdom to leave the European Union and Donald
Trumps presidential campaign in the United States have much in common.
Just over half of UK voters chose Brexit, a result that has cast a long
shadow over their countrys political system and economic prospects. Perhaps
understanding the parallels between the two campaigns will help US voters avoid
taking a similar path in November.

One parallel is that both campaigns were thoroughly underestimated, especially

by experts and establishment figures. Just as the possibility of Brexit was initially
dismissed, few political elites, Republican and Democratic alike, took seriously
Trumps bid for the Republican nomination.

Britains Long Goodbye

Brexits aftermath, explained through dispatches from Carmen Reinhart, Joseph
Stiglitz, Adair Turner, and other Project Syndicate contributors.

Another similarity is that both campaigns have been based largely on

implausible, even absurd, promises. In the UK, Leave campaigners assured
voters that the UK could maintain access to the single market after withdrawing
from the EU, while limiting the entry of European workers to the UK. They also
declared that the 350 million ($465 million) supposedly sent to the EU each
week would be reallocated to the cash-strapped National Health Service.

Within hours of the referendum result, the Leave campaigns leaders began to
backtrack, spurring anger among many voters, particularly those whose support
for Brexit had been driven by the desire to cut immigration. Yet Trumps own
implausible promises including his pledges to construct a wall between the US
and Mexico and bring back manufacturing jobs from overseas still seem
credible to many voters.

These parallels point to one conclusion: many working- and middle-class voters,
who feel left behind by globalization, are far angrier than establishment leaders
realized. They can no longer be dismissed; instead, leaders must figure out how
to address their concerns.

There are winners and losers in globalization. But a fundamental proposition in

economics holds that when individuals are free to engage in trade, the size of the
economic pie increases enough that the winners could, in theory, compensate the
losers, leaving everyone better off.

Globalization skeptics are right that, in practice, the compensation tends to

remain hypothetical. But the suggestion that we should try to roll back
globalization is problematic for a simple reason: globalization cant be undone.
Any effort to put the genie back in the bottle might not only trigger trade wars,
with serious consequences for economic growth, but would also fail to reduce
trade to the levels of 50 years ago. No national leader could restore, say, steel-
industry employment to what it was in 1966.

Fortunately, there is a better option. We can take globalization as a given, and

adopt measures to help compensate those who might naturally lose out.

In the US, measures that could help to achieve that include Trade Adjustment
Assistance, a program aimed specifically at helping those who have lost their jobs
due to trade. More important programs which could help those left behind by
trade, technology, or something else include an expanded Earned Income Tax
Credit and health insurance.

Democrats, including President Barack Obama and Hillary Clinton, the

presumptive Democratic nominee to succeed him, largely support these policies.
Yet Republicans have opposed them. It seems likely that Trump would reject
such efforts as well, even as he claims to be the savior of the working class.

Trumps rise reflects the extent to which political polarization in the US has
deepened during the last eight years. As political moderates have been pushed
out, policy gridlock has worsened, with presidential initiatives routinely blocked
by congressional Republicans, even when such proposals were consistent with
Republican ideas. None of this bodes well for the losers of globalization; they
need leaders of both parties, in Congress and the executive branch who can
come together to protect their interests.

Until recently, the British electoral system seemed to represent an admirably

balanced approach. The two largest parties largely operated under competent and
consistent leadership and represented relatively well-defined policy stances
center-right for the Conservatives, and center-left for Labour. In this
environment, voters could base their choices on the issues at hand. And, under
the parliamentary system, victorious prime ministers could work to carry out the
policies on which they had campaigned.

Yet even Britains competent leaders sometimes made fatefully ill-advised

decisions. From Margaret Thatchers introduction of a poll tax to Tony Blairs
support for the US-led invasion of Iraq, to David Camerons decision to hold the
Brexit referendum, such decisions have undermined the British system.

What is left now, after Cameron, is a mess. The new crop of politicians shows
little clarity or consistency. When the next election is held, voters could well be
asked to choose between parties that do not correspond in any clear way to the
relevant policy decisions that Britain must make mainly, whether to seek to
negotiate a relatively close association with the EU or to separate completely.

In this sense, American voters might still be better off than their British
counterparts. Though Trumps appearance indicates that the US political system
has also deteriorated markedly, the Democrats still favor policies like wage
insurance and universal health insurance, and the Republicans still oppose them.
So, in November, American voters are still making a choice about one of the
leading issues on their minds: whether to address the reality of globalization by
helping those who have been left behind, or to tilt at windmills, like the Brexiting
British.

The problem is that citing expert views seemed patronizing to many voters. Given
that the EU was already viewed as a project that benefited elites
disproportionately, maybe even exclusively, this is not surprising. Like a
frustrated child being scolded by an overweening schoolmaster, many Britons
decided that they would show them.

The vote for Brexit was driven by the sense that political and economic the
elites were both corrupt and wrong about the likely consequences. That
hypothesis is about to be tested and against a background of mistrust and
division, no less. The time of subsisting on criticism is over. Brexits supporters
must now prove that they made the right choice, by reaching a workable solution
that upholds British economic and political stability. Unfortunately, they may
well find that there is no better alternative to Europe.

The Brexit Revolt

LONDON With its vote to leave the European Union, the United Kingdom has
staged a revolt so forceful that it will shake and potentially even destroy the
European project. Indeed, as the UK pursues its extraordinary experiment in
applied democracy, there will undoubtedly be calls elsewhere in Europe mostly
in northern countries like Denmark, Finland, the Netherlands, and Sweden to
follow the British example. But what are those who would leave revolting against?

The EU was built in the aftermath of World War II as a way, finally, to escape
Europes centuries-long legacy of violent conflict. Following two brutal wars in
which the creation and competing ambitions of nation-states played a central
role, Europeans embraced internationalism as the foundation of a new political
order, one that had to be protected at all costs.
Britains Long Goodbye

Brexits aftermath, explained through dispatches from Carmen Reinhart, Joseph

Stiglitz, Adair Turner, and other Project Syndicate contributors.

To that end, it was crucial to construct supranational bodies that tied Europeans
to one another and, in the name of integration, imposed limits on individual
countries. European courts became responsible for protecting the rule of law, and
new institutions such as the European Central Bank asserted increasing control
over the economy.

As a result, Europe quickly came to resemble a nagging nanny, constantly telling

countries what they couldnt do, from trying to spend their way out of economic
crisis to paying their pensioners the benefits they deserve. Feeling constrained in
their capacity to manage the massive economic challenges they faced, countries
began to turn on Europe, with anti-EU campaigners, particularly in smaller
countries like Greece, claiming that they had faced unfair, even cruel, treatment.
The dream of easy prosperity through integration seemed to be dead.

Then came the worries about migration and mobility, with dynamic economies
like the UK concerned about being inundated by workers from struggling
countries. In requiring all members to remain open to migration from other
member states, the EU looked like a maniacal party host, demanding that all the
guests mingle, whether they want to or not. Many Europeans simply had no
interest in meeting new people.

Of course, unlike the value of new friendships, the importance of economic

migration is not a personal judgment. But pro-EU campaigners in Britain never
managed to address the migration issue clearly and convincingly. Prime Minister
David Cameron declared passionately that Europe was important for Britains
security, but lacked the courage to say that migration is good for Britain, and that
venerated institutions like the National Health Service depend on foreigners,
from doctors to cleaners, to function.
In any case, the most detested feature of European integration lay elsewhere.
National political establishments became so immersed in the EU that they
seemed out of touch with their own people. Finance ministers talked to other
finance ministers more than to their own colleagues, let alone the voters.

With virtually all of the mainstream parties having formed the same habit, the
electorates only means of expressing its discontent was to vote for anti-
establishment forces, many of which made opposition to the EU a central tenet of
their platform. Most recently, in May 2015, large numbers of traditional Labour
voters deserted their party in order to vote for the UK Independence Party
(UKIP), which was at the forefront of the Brexit campaign.

To be sure, establishment leaders have long been trying to save their own skins
by ramping up criticism of the EU, blaming it for demanding that national
governments pursue unpopular or failed policies. But that merely put ideas for
alternate policies out of reach, while causing the voters to direct their opposition
against the EU itself.

Though the establishment parties criticized the EU, for the most part they did not
lose sight of the benefits of membership. Indeed, in the UK referendum, both
major parties backed the Remain campaign, though they were split internally.
While most of the Labour Party actively campaigned for Europe, its leader,
Jeremy Corbyn, was less than enthusiastic. The split in the Conservative Party
ran much deeper.

So British voters entered the voting booth feeling that the EU had failed them,
and that their national leaders could not protect their interests unless the UK left.
But there was one more group against which Brexit voters were protesting: the
experts.

Almost every economist warned that Brexit would have serious consequences,
from the immediate shock and, indeed, the pound has already dropped to a 31-
year low to longer-term trade challenges. George Soros anticipates financial
meltdown. Political scientists have highlighted the security and other risks. Even
British football bosses have argued that UK clubs are better off in Europe.
A New Playbook for China and ASEAN
KUALA LUMPUR The ruling by the Permanent Court of Arbitration in The
Hague against Chinas territorial claims in the South China Sea is a watershed
moment for international law and an unmistakable warning to China about its
strategic assertiveness in Southeast Asia. China says that it does not recognize the
PCA ruling; but that doesnt mean it is undisturbed by it.

The question now is how China will respond. Will it change its often-aggressive
behavior in the region, or will it continue to view the South China Sea mainly in
terms of US-China competition? If China assumes that a war-weary and risk-
averse US will avoid conflict, it could simply assert its South China Sea claims by
force.

Britains Long Goodbye

Brexits aftermath, explained through dispatches from Carmen Reinhart, Joseph
Stiglitz, Adair Turner, and other Project Syndicate contributors.

But belligerence could backfire in several ways. First, it would force the members
of the Association of Southeast Asian Nations (ASEAN) to choose between China
and the US, a decision that all of them would prefer to avoid. Whereas ASEAN
member states particularly the Philippines, Singapore, Thailand, and Indonesia
generally have deep military ties with the US, they also value their economic
ties with China. The reality is that ASEAN states could choose to become
independent players, rather than pawns in the US-China competition, implying
that it is in Chinas interest to maintain ambiguity in US-ASEAN relations.

Second, by militarizing outcroppings and artificial islands in the South China Sea,
China is unwittingly strengthening ultra-nationalist groups in the ASEAN states.
This development forces moderate leaders in these countries to adopt a tougher
stance toward China than they otherwise would, in order to preempt attacks from
the ultra-right and assuage their generals. A case in point is Indonesian President
Joko Widodos recent visit to the Natuna Islands on a warship, a show of force in
response to incursions there by Chinese fishermen and navy vessels.

China must know that the material advantages from closer ASEAN-China
economic relations will not be enough to guarantee smooth diplomatic relations.
Most ASEAN member states are middle-income countries with educated elites
who hold diverse views. And even extremely poor and politically illiberal
Myanmar has reduced its dependence on China in response to active wooing by
the US.

China should rethink its insistence that negotiations over its territorial claims
could be conducted only with individual ASEAN states, and not with ASEAN as a
bloc a stance that creates the impression that China is committed to bringing
about the groups breakup. But China should not encourage ASEANs demise,
because that would drive several now-neutral ASEAN states further toward the
US. Moreover, because ASEAN must represent ten countries with one voice, and
must reach a consensus before it speaks, China has little reason to fear that a
common ASEAN negotiating position would be totally unacceptable
particularly given recent history.

For example, a 2012 meeting of ASEAN foreign ministers failed to produce a joint
statement, because Cambodia, a Chinese ally, would not agree to mentioning the
South China Sea. And in a meeting of the same group in Kunming, China, in June
2016, ASEAN had to withdraw a joint statement critical of Chinas actions in the
South China Sea when China, again, pressured Cambodia, as well as Laos, to
object.

What this shows is that, in dealing with ASEAN, China gets to negotiate twice
first, through its closest allies within ASEAN in the formulation of common
ASEAN positions, and then directly with an ASEAN team that could include one
of its allies. Certain ASEAN countries clearly value their relationships with China
more than their relationships with other ASEAN countries; so, unless China has
already ruled out any negotiation on the South China Sea, it should not rule out
meeting ASEAN as a bloc.
The irony in Chinas South China Sea claim is that the Communist Party has
fallen into a trap set unintentionally by the Kuomintang, which it defeated in
1949. It was the crumbling Kuomintang that in 1947 drew and promulgated the
original 11-dash line map subsequently reduced to nine dashes by Mao
Zedong, in a fraternal gesture to Vietnam in a futile effort to rally the
population to its side via imperial ambition.

There is no need for the winner of Chinas civil war to follow the path of the loser.
And if China has to press this claim in order to appease ultra-nationalist
elements, it should do so by deploying diplomats, rather than its military.

Of course, a win-win outcome from The Hague decision will also depend on
ASEAN and US actions. ASEAN and the US are highly skeptical of Chinas
repeated public promises of a non-hegemonic mode of international relations;
but they should not be blind to Chinas legitimate security concerns, which it will
never neglect. Both ASEAN and China must now exercise self-restraint and start
negotiating in good faith to resolve the territorial disputes in the South China Sea
in a way that addresses these concerns.