SEATTLE — The United Kingdom’s recent vote to leave the European Union has left many people wondering what the future holds for the global economy. While some people praise this event as a historical moment, many more are asking how severe the potential economic fallout may be. The impact of Brexit on global development has quickly become a chief concern.
Providing $62.5 billion in aid each year, the EU is the world’s biggest foreign assistance donor group. Its influence is global, and for years the U.K. has been a leader in the development assistance sphere.
Now, the EU and its political clout are separate from the United Kingdom and the U.K.’s influence and contributions have potentially become greatly diminished. The U.K. is widely regarded as one of the most globally-oriented members of the international development assistance community. The current concern over the impact of Brexit on global development stems from the question of what will happen now that the U.K. does not have the EU backing its initiatives, both from a financial and ideological standpoint.
The expectation is that without pressure from the globally-minded U.K., the EU will withdraw most foreign assistance and choose to provide aid to close European neighbors rather than more far-flung areas where the worlds’ poorest often live.
The U.K.’s economy has already begun to suffer as a result of Brexit and negative implications for global development are predicted. In recent years, the U.K. has committed to giving .7 percent of its GDP in foreign assistance. Yet, if the country’s economy contracts as expected, this level of aid may not be feasible. This means the impact of Brexit on global development could extend into how far aid can go and how many people can be reached.
The developing countries with particularly close economic ties to the U.K., such as South Africa and Nigeria, will experience particularly negative effects since when the British economy slows down, development assistance efforts in these countries will also wane.
Brexit’s impact on global development extends far beyond the U.K.’s capacity to give. With the value of the pound and the euro in freefall, added pressure is placed on the U.S. dollar and the Japanese yen. Thus exports from the U.S. and Japan become more expensive and their already powerful economies are tightened. A ripple effect begins as more countries feel the economic effects of the Brexit vote and begin to look for ways to cut spending – often through slashes to foreign assistance funds.
The impact of Brexit on global development does have potentially positive effects, however. While the U.K. no longer has the power of the EU, it does have the ability to reevaluate its trade and development policies.
Through the EU, the U.K. gives about $1.5 billion in development assistance. That money can now be redirected wherever the U.K. chooses without the “red tape” limitations associated with the EU.
The U.K. also has the opportunity to reevaluate its trade policies to make them friendlier to developing countries. The hope is that the U.K. will remove several trade subsidies which will allow developing countries to compete more successfully in the global market.
It is also possible that Scotland will choose to leave the U.K. If this happens, based on their track record, Scotland is likely to adopt the inclusive and progressive development policies that many of the Scandinavian countries have implemented in recent years. This would give developing countries another important ally in the fight to eradicate global poverty.
The impact of Brexit on global development has yet to be fully understood or appreciated. Yet, it is clear that the landscape of development across the globe may soon change. Whether the positives outweigh the negatives remains to be seen, but as the landscape of the British economy rapidly shifts new possibilities for global development may be on the horizon.
– Sara Christensen
Photo: Flickr