THE BREXIT BENEFITS.

So Britain voted to exit Euro zone and we are throwing banter as a sign of “what a terrible mistake!” Well I do have a different opinion. I agree that the euro zone block has its advantages but do NOT underestimate the power of going it alone when you are a “big” economy. Again, do not take media hype and bloggers opinion that Britons didn’t know what they were voting for. A few people may try to make you believe that Britain suddenly wants to go back to the euro block but what else do you expect from the 48% of those who voted to stay? Well here are a few things that you might not have put into consideration.

First, countries trade with each other using bilateral agreements. These are intentional and strategic agreements to perform tasks for one party in exchange of equivalent obligations from the other party. An example could be; “your coffee is the best in the market, we need your uninterrupted supply of 10m tons per year in exchange of technology support for our roads infrastructure”. Different needs that do not necessarily carry the same weight but enough to warrant an exchange. By voting to leave, Britain will no longer need the bureaucracy of adhering to the euro block rules and agreements. Britain’s economy is among the top 10 biggest economies in the world. Freedom to make agreements with as many trading partners as possible may be better for them in the long-run. Remember, a bilateral is usually skewed against the more deficient partner. Britain will hardly find itself in a negatively skewed bilateral. They now have a journey to make new bilateral agreements with new and existing trading partners. Long run gain.

Secondly, we have gone ahead and laughed about how the GBP weakened against the major currencies. Jokes have gone round that its okay to lose a few pounds after a break-up. Well a weak currency does not mean a weak economy. It’s not dooms day! A good example is Japan that operates on a weak currency regime. News; Japan is among the top 5 top economies. Question is, are you a net importer or a net exporter? Besides other benefits, look at how attractive (in terms of cost) the products from Britain are going to be in the world market. They are cheap. So the currency has lost 15% of its value? Then your preferred product is at least 15% cheaper. This will be good for their exports. Britain has some of the most developed industries so, as far as it hurts their imports, their production and export potential is growing. Another long-run benefit.

Third, have you thought about the political card? Big economies enjoy influencing world policies. These policies are influenced using several tools like influence in major bodies like the World Bank, IMF, UN, and G8. Another tool could be military strength. The political joker that is not as documented as the above is economic power. Imagine your major customer giving you new fresh demands. Hard to refuse otherwise you are out of business. A similar situation happens when your major supplier twists your arm. Most of these super economies twist each other using their economic muscle. You can’t do that effectively if you have to adhere to block rules and agreements. Britain can now face, USA, CHINA, JAPAN and other politically strong countries eyeball to eyeball. (Who knows why Russia, Switzerland…et al are not in the EU?) Why? They can cut or increase supply to whoever they want depending on their political interests. Another long-term gain.

There are many cons of independence but for an economy as big as Britain, my bet is that the benefits far outweigh the cons. However, for a growing economy like Kenya, don’t even think of getting out of the EAC Community.